<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
Commission File Number 0-25370
RENTERS CHOICE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 48-1024367
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13800 Montfort Drive, Suite 300
Dallas, Texas 75240
(972) 701-0489
(Address, including zip code, and telephone
number, including area code, of registrant's
principal executive offices)
NONE
(Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of August 11, 1998:
<TABLE>
<CAPTION>
Class Outstanding
- --------------------------------------- -----------
<S> <C>
Common stock, $.01 par value per shares 25,035,058
</TABLE>
<PAGE> 2
RENTERS CHOICE, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
PART I. FINANCIAL INFORMATION PAGE NO.
--------
<S> <C> <C>
Item 1. Financial Statements
Balance Sheets as of June 30, 1998 and December 31, 1997 3
Statements of Earnings for the six months ended
June 30, 1998 and 1997 4
Statements of Earnings for the three months ended
June 30, 1998 and 1997 5
Statements of Cash Flows for the six months ended
June 30, 1998 and 1997 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosure About Market Risk 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities and Use of Proceeds 14
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 19
</TABLE>
2
<PAGE> 3
RENTERS CHOICE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- ------------
(In Thousands Of Dollars) Unaudited
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 23,347 $ 4,744
Rental merchandise, net
On rent 116,659 89,007
Held for rent 31,773 23,752
Accounts receivable, trade 1,799 2,839
Prepaid expenses and other assets 2,440 3,164
Property assets, net 21,479 17,700
Deferred income taxes 6,479 6,479
Intangible assets, net 131,862 61,183
-------- --------
$335,838 $208,868
======== ========
LIABILITIES
Revolving credit agreement $127,500 $ 26,280
Accounts payable - trade 14,193 11,935
Accrued liabilities 23,067 17,008
Other debt 735 892
-------- --------
165,495 56,115
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 5,000,000 shares authorized;
none issued -- --
Common stock, $.01 par value; 50,000,000 shares authorized;
25,020,508 and 24,850,571 shares issued and outstanding
in 1998 and 1997, respectively 250 249
Additional paid-in capital 100,585 99,381
Retained earnings 69,508 53,123
-------- --------
170,343 152,753
-------- --------
$335,838 $208,868
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
RENTERS CHOICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Six months ended June 30,
-------------------------
1998 1997
--------- ---------
(In Thousands Of Dollars, except for per share data) Unaudited
<S> <C> <C>
STORE REVENUE
Rentals and fees $ 163,443 $ 130,150
Merchandise sales 10,513 7,457
Other 281 339
--------- ---------
174,237 137,946
FRANCHISE REVENUE
Franchise merchandise sales 17,061 15,461
Royalty income and fees 2,248 1,982
--------- ---------
TOTAL REVENUE 193,546 155,389
OPERATING EXPENSES
Direct store expenses
Depreciation of rental merchandise 33,839 27,510
Cost of merchandise sold 8,301 5,607
Salaries and other expenses 95,287 77,144
Franchise operation expenses
Cost of franchise merchandise sales 16,386 14,726
--------- ---------
153,813 124,987
General and administrative expenses 7,194 6,773
Amortization of intangibles 3,271 2,649
--------- ---------
TOTAL OPERATING EXPENSES 164,278 134,409
--------- ---------
OPERATING PROFIT 29,268 20,980
INTEREST INCOME (238) (432)
INTEREST EXPENSE 1,555 1,021
--------- ---------
EARNINGS BEFORE INCOME TAXES 27,951 20,391
INCOME TAX EXPENSE 11,566 8,622
--------- ---------
NET EARNINGS $ 16,385 $ 11,769
========= =========
BASIC EARNINGS PER SHARE $ 0.66 $ 0.47
========= =========
DILUTED EARNINGS PER SHARE $ 0.65 $ 0.47
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
RENTERS CHOICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Three months ended June 30,
---------------------------
1998 1997
---------- -----------
(In Thousands Of Dollars, except for per share data) Unaudited
<S> <C> <C>
STORE REVENUE
Rentals and fees $ 88,017 $ 68,348
Merchandise sales 4,551 3,198
Other 163 168
--------- ---------
92,731 71,714
FRANCHISE REVENUE
Franchise merchandise sales 9,440 8,072
Royalty income and fees 1,142 1,017
--------- ---------
TOTAL REVENUE 103,313 80,803
OPERATING EXPENSES
Direct store expenses
Depreciation of rental merchandise 18,333 14,401
Cost of merchandise sold 3,748 2,531
Salaries and other expenses 50,790 40,021
Franchise operation expenses
Cost of franchise merchandise sales 9,043 7,646
--------- ---------
81,914 64,599
General and administrative expenses 3,969 3,644
Amortization of intangibles 1,883 1,218
--------- ---------
TOTAL OPERATING EXPENSES 87,766 69,461
--------- ---------
OPERATING PROFIT 15,547 11,342
INTEREST INCOME (124) (252)
INTEREST EXPENSE 1,105 548
--------- ---------
EARNINGS BEFORE INCOME TAXES 14,566 11,046
INCOME TAX EXPENSE 6,037 4,689
--------- ---------
NET EARNINGS $ 8,529 $ 6,357
========= =========
BASIC EARNINGS PER SHARE $ 0.34 $ 0.25
========= =========
DILUTED EARNINGS PER SHARE $ 0.34 $ 0.25
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
RENTERS CHOICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(In Thousands Of Dollars) Six months ended June 30,
-------------------------
1998 1997
--------- ---------
Unaudited
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 16,385 $ 11,769
Adjustments to reconcile net earnings to net cash provided by
operating activities
Depreciation of rental merchandise 33,839 27,510
Depreciation of property assets 3,276 2,509
Amortization of intangibles 3,271 2,649
Other -- (5)
Changes in operating assets and liabilities, net of effects of
acquisitions
Rental merchandise (43,549) (35,682)
Accounts receivable 1,040 1,325
Prepaid expenses and other assets 728 242
Accounts payable - trade 2,258 (5,056)
Accrued liabilities 6,059 5,737
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 23,307 10,998
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property assets (5,758) (4,755)
Proceeds from sale of property assets 408 129
Acquisitions of businesses (101,616) (26,349)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (106,966) (30,975)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of options 1,205 410
Proceeds from debt 162,222 48,132
Repayments of debt (61,165) (28,039)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 102,262 20,503
--------- ---------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 18,603 526
Cash and cash equivalents at beginning of period 4,744 5,920
--------- ---------
Cash and cash equivalents at end of period $ 23,347 6,446
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
RENTERS CHOICE, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
1. The interim financial statements of Renters Choice, Inc. (the "Company")
included herein have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote disclosure 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 the
Company believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these financial statements
be read in conjunction with the financial statements and notes included in
the Company's Annual Report on Form 10-K for the year ended December 31,
1997 and its Quarterly Report on Form 10-Q for the three months ended March
31, 1998. In the opinion of management, the accompanying unaudited interim
financial statements contain all adjustments, consisting only of those of a
normal recurring nature, necessary to present fairly the Company's results
of operations and cash flows for the periods presented. The results of
operations for the periods presented are not necessarily indicative of the
results to be expected for the full year.
2. On May 28, 1998, the Company completed its acquisition of 176 rent-to-own
stores from Central Rents, Inc. and certain of its affiliates for
approximately $100.0 million (the "Central Acquisition"). The Company
acquired the assets of five rent-to-own stores in three separate
transactions during the three months ended March 31, 1998 for approximately
$832,000. During 1997, the Company acquired the assets of 71 stores in
eighteen separate transactions for approximately $30.5 million in cash. All
acquisitions have been accounted for as purchases and the operating results
of the acquired stores have been included in the financial statements of
the Company since the acquisitions. The following pro forma information
combines the results of operations as if the acquisitions had been
consummated as of the beginning of each of the six and three month periods
ending June 30, 1998 and 1997, after including the impact of adjustment for
amortization of intangibles and interest expense on acquisition borrowings.
(In Thousands of Dollars, except per share data)
<TABLE>
<CAPTION>
Six months ended June 30, Three months ended June 30,
---------------------------- ----------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue $ 234,493 $ 216,344 $ 119,056 $ 109,921
Net Earnings $ 14,772 $ 12,019 $ 7,563 $ 6,468
Basic earnings per common
share $ 0.59 $ 0.48 $ 0.30 $ 0.26
Diluted earnings per common
share $ 0.59 $ 0.48 $ 0.30 $ 0.26
</TABLE>
The pro forma financial information is presented for informational purposes
only and is not necessarily indicative of operating results that would have
occurred had the acquisitions been consummated as of the above dates, nor
are they necessarily indicative of future operating results.
7
<PAGE> 8
3. EARNINGS PER SHARE
Basic and diluted earnings per common share is computed based on the
following information:
<TABLE>
<CAPTION>
(In Thousands Of Dollars, except for per share data) Three Months Ended
June 30, 1998
Net earnings Shares Per share
------------ ------ ---------
<S> <C> <C> <C>
Basic earnings per common share $ 8,529 24,987 $ 0.34
Effect of dilutive stock options -- 247
------- ------
Diluted earnings per share $ 8,529 25,234 $ 0.34
======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
June 30, 1997
Net earnings Shares Per share
------------ ------ ---------
<S> <C> <C> <C>
Basic earnings per common share $ 6,357 24,817 $ 0.25
Effect of dilutive stock options -- 326
------- ------
Diluted earnings per share $ 6,357 25,143 $ 0.25
======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1998
Net earnings Shares Per share
------------ ------ ---------
<S> <C> <C> <C>
Basic earnings per common share $16,385 24,954 $ 0.66
Effect of dilutive stock options -- 248
------- -----
Diluted earnings per share $16,385 25,202 $ 0.65
======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1997
Net earnings Shares Per share
------------ ------ ---------
<S> <C> <C> <C>
Basic earnings per common share $11,769 24,805 $ 0.47
Effect of dilutive stock options -- 287
------- ------
Diluted earnings per share $11,769 25,092 $ 0.47
======= ====== ======
</TABLE>
8
<PAGE> 9
RENTERS CHOICE, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
This report contains forward-looking statements that involve risks and
uncertainties. The actual future results of the Company could differ materially
from those statements. Factors that could cause or contribute to such
differences include, but are not limited to, uncertainties regarding (i) the
Company's ability to open new stores, (ii) the ability to acquire additional
rent-to-own stores on favorable terms, (iii) the ability to enhance the
performance of acquired stores and to integrate acquired stores into the
Company's operations, (iv) the passage of legislation adversely affecting the
rent-to-own industry, (v) interest rates, and (vi) the ability of the Company to
collect on its rental purchase agreements at the current rate.
In April 1995, the Company acquired 72 stores located in 18 states,
including nine states in which the Company previously had no operations, from
Crown Leasing Corporation and certain of its affiliates (the "Crown
Acquisition"), and in September 1995, the Company completed the acquisition of
an additional 135 stores located in 10 states, including one state in which the
Company previously had no operations, from the shareholders of the parent
company of a chain of rent-to-own stores doing business as Magic Rent-to-Own and
Kelway Rent-to-Own (the "Magic Acquisition", and together with the Crown
Acquisition, the "1995 Acquisitions"). In May 1996, the Company acquired all the
issued and outstanding stock of ColorTyme, Inc. ("ColorTyme"), a franchisor of,
at the time of closing, 313 rent-to-own stores in 40 states and 7 directly owned
rent-to-own stores (the "ColorTyme Acquisition"), one of which was sold after
the ColorTyme Acquisition to a third party and the remainder of which were
purchased by the Company. The Company acquired 88 stores between May 1 and
December 31, 1996 (exclusive of the 6 stores purchased from ColorTyme) in 23
separate transactions (together with the ColorTyme Acquisition, the "1996
Acquisitions"). The Company acquired 71 stores in 18 separate transactions
during the twelve months ended December 31, 1997 (the "1997 Acquisitions"). In
May 1998, the Company acquried 176 stores located in 20 states, including two
states in which the Company previously had no operations, from Central Rents,
Inc. and certain of its affiliates (the "Central Acquisition"). All of the
aforementioned acquisitions were accounted for as purchases and, accordingly,
the operating results of the acquired stores and ColorTyme franchisor operations
have been included in the operating results of the Company since their
respective dates of acquisition. Because of the significant growth of the
Company since its formation, the Company's historical results of operations, its
period-to-period comparisons of such results and certain financial data may not
be comparable, meaningful or indicative of future results.
RECENT DEVELOPMENTS
ACQUISITION OF THORN AMERICAS, INC. On June 16, 1998, the Company
agreed to acquire all of the outstanding stock of Thorn Americas, Inc. for an
aggregate purchase price of approximately $900 million in cash, subject to
adjustment (the "Thorn Acquisition"). In order to finance the Thorn Acquisition
and the retirement of the Company's prior credit facility, the Company obtained
commitments from (i) Apollo Management Fund IV, L.P. to purchase approximately
$250 million (originally $235 million) of the Company's preferred stock (the
"Preferred Stock Issuance"), and (ii) Chase Securities Inc. to provide financing
approximating $962 million (the "Chase Financing"). The Thorn Acquisition was
completed on August 5, 1998.
RESULTS OF OPERATIONS
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
Total revenue increased by $38.2 million, or 24.6%, to $193.5 million
for 1998 from $155.4 million for 1997. The increase in total revenue was
primarily attributable to the inclusion of the 71 stores purchased in 1997 as
well as the Central Acquisition. Same store revenues increased by $12.1 million,
or 9.3% to $143.1 million for 1998
9
<PAGE> 10
from $131.0 million in 1997. Same store revenues represent those revenues earned
in stores that were operated by the Company for the entire six-month periods
ending June 30, 1998 and 1997. This improvement was primarily attributable to an
increase in both the number of items on rent and in revenue earned per item on
rent.
Depreciation of rental merchandise increased by $6.3 million, or 23.0%,
to $33.8 million for 1998 from $27.5 million for 1997. Depreciation of rental
merchandise expressed as a percent of total store rental and fee revenue
decreased from 21.2% in 1997 to 20.7% in 1998. The decrease was primarily
attributable to higher rental rates on rental merchandise purchased after the
1995 Acquisitions and operational emphasis on increasing the rental life of
inventory items.
Salaries and other expenses expressed as a percentage of total store
revenue decreased to 54.7% for 1998 from 55.9% for 1997. This decrease is
attributable to the increase in store revenues from the Central Acquisition, as
well as the same store base, and the Company has experienced some efficiencies
in spreading costs over a larger store base, in particular advertising costs and
certain service costs. General and administrative expenses expressed as a
percent of total revenue decreased from 4.4% in 1997 to 3.7% in 1998. This
decrease was the result of increased revenues from the 1997 Acquisitions and the
Central Acquisition, allowing us to leverage our fixed and semi-fixed costs over
the larger revenue base.
Operating profit increased by $8.3 million, or 39.5%, to $29.3 million
for 1998 from $21.0 million for 1997. This improvement was primarily
attributable to an increase in both the number of items on rent and in revenue
earned per item on rent, both in stores acquired before 1995 and in stores
acquired in the 1996 and 1997 Acquisitions. Net interest expense increased from
$590 thousand of interest expense in 1997 to $1.3 million of interest expense in
1998. The increased interest expense and debt level relates primarily to the
acquisition of Central Rents in May 1998. Net earnings increased by $4.6
million, or 39.2%, to $16.4 million in 1998 from $11.8 million in 1997. The
improvement was a result of the increase in operating profit described above.
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997
Total revenue increased by $22.5 million, or 27.9%, to $103.3 million
for 1998 from $80.8 million for 1997. The increase in total revenue was
primarily attributable to the inclusion of the 71 stores acquired in 1997, as
well as the Central Acquisitions. Same store revenues increased by 9.4%, from
$70.2 million to $76.8 million. Same store revenues represents those revenues
earned in stores that were operated by the Company for the entire three-month
periods ending June 30, 1997 and 1998. This improvement was primarily
attributable to an increase in both the number of items on rent and in revenue
earned per item on rent.
Depreciation of rental merchandise increased by $3.9 million, or 27.3%,
to $18.3 million for 1998 from $14.4 million for 1997. Depreciation of rental
merchandise expressed as a percent of total store rental and fee revenue
decreased from 21.1% in 1997 to 20.8% in 1998. The decrease was primarily
attributable to higher rental rates on rental merchandise and operational
emphasis on increasing the rental life of inventory items.
Salaries and other expenses expressed as a percentage of total store
revenue decreased to 54.8% for 1998 from 55.8% for 1997 primarily as a result of
increased revenues in our 1996 Acquisitions and 1997 Acquisitions, as well as
the leveraging of our fixed and semi-fixed costs in these stores. General and
administrative expenses expressed as a percent of total revenue decreased from
4.5% in 1997 to 3.8% in 1998. This decrease was primarily the result of
increased revenues resulting from the Central Acquisition, allowing us to
leverage our fixed and semi-fixed costs over the larger revenue base.
Operating profit increased by $4.2 million, or 37.1% to $15.5 million
for 1998 from $11.3 million for 1997. This improvement was attributable to the
efficiencies discussed above and the profit contribution from ColorTyme.
Net earnings increased by $2.2 million, or 34.2%, to $8.5 million in
1998 from $6.3 million in 1997. The improvement was a result of the increase in
operating profit described above.
10
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary requirements for capital are the acquisition of
existing stores, the opening of new stores, the purchase of additional rental
merchandise and the replacement of rental merchandise which has been sold,
charged-off or is no longer suitable for rent. During the six months ended June
30, 1998, the Company acquired 182 stores for an aggregate purchase price of
$101.6, all of which was paid in cash. The Company also opened 1 new store
during the first two quarters of 1998.
The Company purchased $54.0 million and $47.9 million of rental
merchandise during the six months ended June 30, 1998 and 1997, respectively.
For the six months ended June 30, 1998, cash provided by operating
activities increased by $12.3 million, from $11.0 million in 1997 to $23.3
million in 1998, primarily due to increased net earnings and the timing of the
payment of various operating expenses. Cash used in investing activities
increased by $76.0 million from $31.0 million in 1997 to $107.0 million in 1998,
principally related to the greater number of stores acquired in 1998 as compared
to the number of stores acquired during the same period for 1997. Cash provided
by financing activities was $102.3 million for the six months ended June 30,
1998.
At June 30, 1998, the Company had in place a $140 million credit
facility (the "Credit Facility") with a group of banks. Borrowings under the
Credit Facility bore interest at a rate equal to the designated prime rate
(8-1/2% per annum at June 30, 1998) or 1.10% to 1.4% over LIBOR (5.625% at June
30, 1998) at the Company's option. At June 30, 1998, the average rate on
outstanding borrowings was 7.1%, and for the quarter the weighted average
interest rate under the Credit Facility was 6.875%. Borrowings were
collateralized by a lien on substantially all of the assets of the Company. A
commitment fee equal to .20% to .30% of the unused portion of the term loan
facility was payable quarterly. The Credit Facility included certain net worth
and fixed charge coverage requirements, as well as covenants which restrict
additional indebtedness and the disposition of assets not in the ordinary course
of business. On June 30, 1998, the outstanding borrowings under this revolving
credit agreement were $127.5 million.
As a result of the Thorn Acquisition, the Credit Facility was replaced
by a $962 million Senior Secured Credit Facility arranged by Chase Securities,
Inc. (the "Senior Credit Facility") and a $175 million Senior Subordinated
Credit Facility. The Company intends to retire the Senior Subordinated Credit
Facility with the proceeds from the pending issuance of $175 million of Senior
Subordinated Notes. The Company believes that the Senior Credit Facility, the
proceeds from the Preferred Stock Issuance, the Senior Subordinated Credit
Facility (or the proceeds from the Senior Subordinated Notes), along with its
cash flows from operations, will adequately fund the Company's operations and
expansion plans during 1998 and beyond.
During the next twelve to twenty-four months, the Company's central
business strategy is to successfully integrate the Thorn Acquisition and the
Central Acquisition into the Renters Choice system. Once completed, the Company
intends to resume its strategy to increase its store base and annual revenues
and profits through the opening of new stores, as well as opportunistic
acquisitions. The Company anticipates ample opportunities to increase its store
base through its continued participation in the industry consolidation and the
possibility for increased penetration and expansion of its existing customer
base.
After the assimilation of the Thorn Acquisition and Central
Acquisition, the Company plans to accomplish its future growth through selective
and opportunistic acquisitions, with an increasing emphasis on new store
development. Typically, a newly opened rental store is profitable on a monthly
basis in the sixth to seventh month after its initial opening. Cumulatively, the
store will achieve break-even profitability in twelfth or fifteenth month after
its initial opening. Total financing requirements of a typical new store
approximates $350,000, with roughly 80 to 85% of that amount related to the
purchase of rental merchandise inventory (both on-rent and idle). A newly opened
store will achieve results consistent with other RCI mature stores (stores that
have been operating within the system for greater than two years) by the end of
its third year of operation. There can be no assurance that the Company will be
able to acquire any additional stores, or that any stores that are acquired will
be or will become profitable, nor is there any assurance that the Company will
open any new stores in the future, or as to the number, location or
profitability thereof.
11
<PAGE> 12
Management believes that cash flow from operations and its Senior
Credit Facility, the proceeds from the Preferred Stock Issuance, the Senior
Subordinated Credit Facility (or the proceeds from the Senior Subordinated
Notes) will be adequate to fund the operations, integration and expansion plans
of the Company during 1998. In addition, to provide any additional funds
necessary for the continued pursuit of the Company's growth strategies, the
Company may incur from time to time additional short- or long-term bank
indebtedness and may issue, in public or private transactions, its equity and
debt securities. The availability and attractiveness of any outside sources of
financing will depend on a number of factors, some of which will relate to the
financial condition and performance of the Company, and some of which will be
beyond the Company's control such as prevailing interest rates and general
economic conditions. There can be no assurance such additional financing will be
available, or if available, will be on terms acceptable to the Company.
YEAR 2000 ISSUE
Year 2000 issues exist when dates are recorded using two digits
(rather than four) and are then used for arithmetic operations, comparisons or
sorting. A two-digit recording may recognize a date using "00" as 1900 rather
than 2000, which could cause the Company's computer systems to perform
inaccurate computations. The Company has received confirmation from its
management information system vendors that the Company's system is Year 2000
compliant. The Company expects that all of the Company's systems will be able
to properly handle the rollover to the year 2000 in a timely fashion. The
Company's Year 2000 issues relate not only to its own systems but also to those
of its suppliers. It is anticipated that systems replacements and modifications
will resolve the Year 2000 issue with respect to the Company's suppliers. There
is no guarantee, however, that such systems replacements and modifications or
the Company's efforts to achieve Year 2000 compliance will be completed
successfully and on time, which could have a material adverse effect on the
Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
12
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company and ColorTyme are party to various legal
proceedings arising in the ordinary course of business. Except as described
below, neither the Company nor ColorTyme is currently a party to any material
litigation. Although the ultimate outcome of any litigation matter can never be
predicted with certainty, management of the Company believes that the Company
has established sufficient reserves to cover its reasonable exposure with
respect to its outstanding litigation.
GALLAGHER V. CROWN LEASING CORPORATION
On January 3, 1996, the Company was served with a class action
complaint adding it as a defendant in this action originally filed in April 1994
against Crown and certain of its affiliates in state court in New Jersey. The
class consists of all New Jersey residents who entered into RTO contracts with
Crown Leasing Corporation ("Crown") between April 25, 1998 and April 20, 1995.
During this period, Crown operated approximately 5 stores in New Jersey. The
lawsuit alleges, among other things, that under certain RTO contracts entered
into between the plaintiff class and Crown, some of which were purportedly
acquired by the Company pursuant to the acquisition of the rent-to-own assets of
Crown by the Company in April 1995 (the "Crown Acquisition"), the defendants
failed to make the necessary disclosures and charged the plaintiffs fees and
expenses that violated the New Jersey Consumer Fraud Act and the New Jersey
Retail Installment Sales Act. The plaintiffs seek damages including, among other
things, a refund of all excessive fees and/or interest charged or collected by
the defendants in violation of such acts, state usury laws and other related
statutes and treble damages, as applicable. Pursuant to the Asset Purchase
Agreement entered into between Crown, its controlling shareholder and the
Company in connection with the Crown Acquisition, the Company did not
contractually assume any liabilities pertaining to Crown's RTO contracts for the
period prior to the Crown Acquisition. The plaintiffs have obtained class
certification and a summary judgment against Crown on the liability issues.
Subsequent to these decisions by the New Jersey state court, Crown filed for
protection from its creditors under Chapter 11 of the federal bankruptcy laws.
The bankruptcy court has allowed the lawsuit to proceed in New Jersey where the
state court recently granted summary judgement on the plaintiffs' damages
formula against Crown. The plaintiffs calculated actual damages for purposes of
their summary judgment motion at approximately $7.6 million. The court ruled
that the plaintiffs are entitled to three times actual damages. However, the
state courts ruling requires certain minor adjustments pursuant to an
accounting. Although the plaintiffs were unsuccessful in their attempt to
certify a class against the Company, the plaintiffs have attempted to assert a
theory of successor liability against the Company. Management believes there is
no basis for a claim of successor liability against the Company. The Company
will take appropriate steps to defend the successor liability issues at trial.
Due to the uncertainties associated with any litigation, the ultimate outcome of
this matter cannot presently be determined.
MICHELLE NEWHOUSE V. RENTERS CHOICE, INC./HANDY BOYKIN V. RENTERS CHOICE, INC.
On November 26, 1997 a class action complaint was filed against the
Company by Michelle Newhouse in New Jersey state court alleging, among other
things, that under certain RTO contracts entered into between the plaintiffs and
the Company, the Company failed to make the necessary disclosures and charged
the plaintiffs fees and expenses that violated the New Jersey Consumer Fraud Act
and the New Jersey Installment Sales Act. The claims arising from this action
are similar to the claims made in Gallagher v. Crown Leasing Corporation. The
proposed class consists of all residents of New Jersey who are or have been
parties to contracts to RTO merchandise from the Company within the past six
years. During this period, the Company operated approximately 17 stores in New
Jersey.
The Company removed the case to federal court on January 21, 1998, and
was then advised by the plaintiffs' attorney that Michelle Newhouse no longer
wished to serve as class representative. A motion to voluntarily dismiss the
Newhouse case filed by the plaintiffs' attorney was granted shortly thereafter.
However, on May 1, 1998, a new class action complaint against the Company made
by Handy Boykin was filed by the plaintiffs' attorney in the Newhouse matter in
New Jersey state court alleging the same causes of action with the same proposed
class as that of the Newhouse matter. This new filing essentially constitutes a
replacement of the named plaintiff in the Newhouse matter with a new named
plaintiff, Handy Boykin. Management anticipated such a replacement and intends
to defend this matter vigorously. The Company removed the Boykin case to federal
court, where Boykin's motion to remand the New Jersey state court is now
pending. No motion for class certification has been made; however, due to the
uncertainties associated with any litigation, the ultimate outcome of this
matter cannot presently be determined. An adverse decision in this case could
have a material effect on the Company.
13
<PAGE> 14
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In connection with the Preferred Stock Issuance, the proceeds of which
were utilized to retire the Company's prior credit facility agreement and to
finance a portion of the Thorn Acquisition, and are anticipated to be used for
the repurchase of $25 million of the Common Stock owned by J. Ernest Talley, the
Company filed a Certificate of Designation for each of the Series A and Series B
Preferred Stock (the "Certificates"), setting forth the designation, powers,
preferences and relative, participating, optional or other special rights and
the qualifications, limitations or restrictions of the Series A and the Series B
Preferred Stock. These Certificates contain provisions which may limit the
rights of the Company's common stockholders, as the Certificates contain certain
liquidation and preference rights that are superior to those of the Company's
common stockholders. In addition to the foregoing, the Certificates contain
provisions prohibiting the Company from taking certain actions without the
approval of the majority of the outstanding shares of the Series A and Series B
stockholders, voting separately as a class. Such actions requiring the consent
of the preferred stockholders include (i) increasing the number of authorized
shares of Series A Preferred Stock or authorizing the issuance or issuing any
shares of Series A Preferred Stock other than to existing holders of Series A
Preferred Stock or holders of Series B Preferred Stock; (ii) issuing any new
class or series of equity security; (iii) amending, altering or repealing, in
any manner whatsoever, the designations, preferences and relative rights and
limitations and restrictions of the Series A Preferred Stock or the Series B
Preferred Stock; (iv) amending, altering or repealing any of the provisions of
the Amended and Restated Certificate of Incorporation or Amended and Restated
By-Laws of the Company in a manner that would negatively impact the holders of
the Series A Preferred Stock; (v) except in certain situations, directly or
indirectly redeeming, purchasing or otherwise acquiring for value (including
through an exchange) or setting apart money or other property for any mandatory
purchase or other analogous fund for the redemption, purchase or acquisition of
any shares of common stock, declare or pay any dividend or make any distribution
(whether in cash, shares of capital stock of the Company, or other property) on
shares of common stock; (vi) causing the number of directors of the Company to
be greater than seven (7); (vii) entering into any agreement or arrangement with
or for the benefit of any person who is an affiliate of the Company with a value
in excess of $5 million in a single transaction or a series of related
transactions; (viii) effecting a voluntary liquidation, dissolution or winding
up of the Company; (ix) except in certain situations, selling or agreeing to
sell all or substantially all of the assets of the Company; or (x) except in
certain situations, entering into any merger or consolidation or other business
combination involving the Company (except a merger of a wholly-owned subsidiary
of the Company into the Company in which the Company's capitalization is
unchanged as a result of such merger). The Company anticipates issuing another
$10 million worth of Series A and Series B Preferred Stock.
14
<PAGE> 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
CURRENT REPORTS ON FORM 8-K
1. Current Report on Form 8-K dated May 28, 1998, relating to the
acquisition of Central Rents, Inc.
2. Current Report on Form 8-K/A dated May 28, 1998, filed on
August 7, 1998, filing the required financial statements of
the Company and Central Rents, Inc.
EXHIBITS
EXHIBIT NUMBER DESCRIPTION
2.1(1) - Asset Purchase Agreement dated April 20, 1995
among Renters Choice, Inc., Crown Leasing
Corporation, Robert White, individually and
Robert White Company, a sole proprietorship
owned by Robert White
2.2(2) - Stock Purchase Agreement dated as of August 27,
1995 among Renters Choice, Inc., Starla J.
Flake, Rance D. Richter, Bruce S. Johnson and
Pro Rental, Inc.
2.3(3) - Stock Purchase Agreement dated September 29,
1995 between the Company and Terry N. Worrell
2.4(4) - Partnership Interest Purchase Agreement dated
September 29, 1995 among the Company, Worrell
Investors, Inc., The Christy Ann Worrell Trust
and The Michael Neal Worrell Trust
2.5(5) - Agreement and Plan of Merger by and among
Renters Choice, Inc., Pro Rental, Inc., MRTO
Holdings, Inc. and Pro Rental II, Inc.
2.6(6) - Agreement and Plan of Reorganization dated May
15, 1996, among Renters Choice, Inc., ColorTyme,
Inc., and CT Acquisition Corporation
2.7(7) - Asset Purchase Agreement, dated May 1, 1998, by
and among Renters Choice, Inc., Central Rents,
Inc., Central Rents Holding, Inc. and Banner
Holdings, Inc.
2.8(8) - Letter Agreement, dated as of May 26, 1998, by
and among Renters Choice, Inc., Central Rents,
Inc., Central Rents Holding, Inc. and Banner
Holdings, Inc.
2.9* - Stock Purchase Agreement, dated as of June 16,
1998, among Renters Choice, Inc., Thorn
International BV and Thorn plc
2.10* - Stock Purchase Agreement, dated August 5, 1998,
among Renters Choice, Inc., Apollo Investment
Fund IV, L.P. and Apollo Overseas Partners IV,
L.P.
3.1(9) - Amended and Restated Certificate of
Incorporation of the Company
3.2(10) - Certificate of Amendment to the Amended and
Restated Certificate of Incorporation of the
Company
3.3* - Amended and Restated Bylaws of the Company
4.1(11) - Form of Certificate evidencing Common Stock
4.2* - Certificate of Designations, Preferences and
Relative Rights and Limitations of Series A
Preferred Stock of Renters Choice, Inc.
4.3* - Certificate of Designations, Preferences and
Relative Rights and Limitations of Series B
Preferred Stock of Renters Choice, Inc.
15
<PAGE> 16
EXHIBIT NUMBER DESCRIPTION
10.1(12) - Amended and Restated 1994 Renters Choice, Inc.
Long-Term Incentive Plan
10.2(13) - Revolving Credit Agreement dated as of November
27, 1996 between Comerica Bank, as agent,
Renters Choice, Inc. and certain other lenders
10.3(14) - Consulting Agreement dated April 1, 1993, by and
between Bob A. Hardesty and Brenda K. Hardesty
and Renters Choice, L.P.
10.4(15) - Non-Competition Agreement dated April 1, 1993,
by and between Bob A. Hardesty and Brenda K.
Hardesty and Renters Choice, L.P.
10.5(16) - Noncompetition Agreement dated as of April 20,
1995, between Renters Choice, Inc. and Patrick
S. White
10.6(17) - Consulting Agreement dated as of April 20, 1995
between Renters Choice, Inc. and Jeffrey W.
Smith
10.7(18) - Noncompetition Agreement dated as of August 27,
1995 between Renters Choice, Inc. and Starla J.
Flake
10.8(19) - Noncompetition Agreement dated as of August 27,
1995 between Renters Choice, Inc. and Bruce S.
Johnson
10.9(20) - Noncompetition Agreement dated as of August 27,
1995 between Renters Choice, Inc. and Rance D.
Richter
10.10(21) - Option Agreement dated August 27, 1995 between
the Company and Terry N. Worrell
10.11(22) - Option Agreement dated August 27, 1995 among the
Company, Worrell Investors, Inc., The Christy
Ann Worrell Trust and The Michael Neal Worrell
Trust
10.15(23) - Portfolio Acquisition Agreement dated May 15,
1996, by and among Renters Choice, Inc.,
ColorTyme Financial Services, Inc., and STI
Credit Corporation
10.16(24) - Employment Agreement, dated March 28, 1997, by
and between Renters Choice, Inc. and Danny Z.
Wilbanks
10.17(25) - Stock Option Agreement, dated April 1, 1997, by
and between Renters Choice, Inc. and Danny Z.
Wilbanks
10.18* - Credit Agreement, dated August 5, 1998, among
Renters Choice, Inc., Comerica Bank, as
Documentation Agent, NationsBank N.A., as
Syndication Agent, and The Chase Manhattan Bank,
as Administrative Agent, and certain other
lenders
10.19* - Guarantee and Collateral Agreement, dated August
5, 1998, made by Renters Choice, Inc., and
certain of its Subsidiaries in favor of The
Chase Manhattan Bank, as Administrative Agent
10.20* - $175,000,000 Senior Subordinated Credit
Agreement, dated as of August 5, 1998, among
Renters Choice, Inc., certain other lenders and
The Chase Manhattan Bank
10.21* - Stockholders Agreement, dated as of August 5,
1998, by and among Apollo Investment Fund IV,
L.P., Apollo Overseas Partners IV, L.P., J.
Ernest Talley, Mark E. Speese, Renters Choice,
Inc., and certain other persons
10.22* - Registration Rights Agreement, dated August 5,
1998, by and between Renters Choice, Inc.,
Apollo Investment Fund IV, L.P., and Apollo
Overseas Partners IV, L.P., related to the
Series A Convertible Preferred Stock
16
<PAGE> 17
EXHIBIT NUMBER DESCRIPTION
10.23* - Registration Rights Agreement, dated August 5,
1998, by and between Renters Choice, Inc.,
Apollo Investment Fund IV, L.P., and Apollo
Overseas Partners IV, L.P., related to the
Series B Convertible Preferred Stock
27* - Financial Data Schedule
* Filed herewith.
(1) Incorporated herein by reference to Exhibit 2.1 to the registrant's Current
Report on Form 8-K dated May 4, 1995
(2) Incorporated herein by reference to Exhibit 2.1 to the registrant's Current
Report on Form 8-K dated August 27, 1995
(3) Incorporated herein by reference to Exhibit 10.19 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(4) Incorporated herein by reference to Exhibit 10.20 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(5) Incorporated herein by reference to Exhibit 2.7 to the registrant's Annual
Report on Form 10-K for the year ended December 31, 1995
(6) Incorporated herein by reference to Exhibit 2.1 to the registrant's Current
Report on Form 8-K dated May 15, 1996
(7) Incorporated herein by reference to Exhibit 2.1 to the registrant's Current
Report on Form 8-K dated May 28, 1998
(8) Incorporated herein by reference to Exhibit 2.2 to the registrant's Current
Report on Form 8-K dated May 28, 1998
(9) Incorporated herein by reference to Exhibit 3.2 to the registrant's Annual
Report on Form 10-K for the year ended December 31, 1994
(10) Incorporated herein by reference to Exhibit 3.2 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1996
(11) Incorporated herein by reference to Exhibit 4.1 to the registrant's
Registration Statement on Form S-1 (File No. 33-86504)
(12) Incorporated herein by reference to Exhibit 10.1 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1996
(13) Incorporated herein by reference to Exhibit 10.2 to the registrant's Annual
Report on Form 10-K for the year ended December 31, 1996
(14) Incorporated herein by reference to Exhibit 10.5 to the registrant's
Registration Statement on Form S-1 (File No. 33-86504)
(15) Incorporated herein by reference to Exhibit 10.6 to the registrant's
Registration Statement on Form S-1 (File No. 33-86504)
(16) Incorporated herein by reference to Exhibit 10.7 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(17) Incorporated herein by reference to Exhibit 10.8 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(18) Incorporated herein by reference to Exhibit 10.10 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(19) Incorporated herein by reference to Exhibit 10.11 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(20) Incorporated herein by reference to Exhibit 10.12 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(21) Incorporated herein by reference to Exhibit 2.2 to the registrant's Current
Report on Form 8-K dated August 27, 1995
(22) Incorporated herein by reference to Exhibit 2.3 to the registrant's Current
Report on Form 8-K dated August 27, 1995
17
<PAGE> 18
(23) Incorporated herein by reference to Exhibit 10.1 to the registrant's
Current Report on Form 8-K dated May 15, 1996
(24) Incorporated herein by reference to Exhibit 10.16 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997
(25) Incorporated herein by reference to Exhibit 10.16 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Report to be signed on its behalf by the
undersigned duly authorized.
RENTERS CHOICE, INC.
By: /s/ DANNY Z. WILBANKS
-------------------------------------
Danny Z. Wilbanks
Senior Vice President-Finance
and Chief Financial Officer
Date: August 14, 1998
Renters Choice, Inc.
19
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<S> <C>
2.1(1) - Asset Purchase Agreement dated April 20, 1995
among Renters Choice, Inc., Crown Leasing
Corporation, Robert White, individually and
Robert White Company, a sole proprietorship
owned by Robert White
2.2(2) - Stock Purchase Agreement dated as of August 27,
1995 among Renters Choice, Inc., Starla J.
Flake, Rance D. Richter, Bruce S. Johnson and
Pro Rental, Inc.
2.3(3) - Stock Purchase Agreement dated September 29,
1995 between the Company and Terry N. Worrell
2.4(4) - Partnership Interest Purchase Agreement dated
September 29, 1995 among the Company, Worrell
Investors, Inc., The Christy Ann Worrell Trust
and The Michael Neal Worrell Trust
2.5(5) - Agreement and Plan of Merger by and among
Renters Choice, Inc., Pro Rental, Inc., MRTO
Holdings, Inc. and Pro Rental II, Inc.
2.6(6) - Agreement and Plan of Reorganization dated May
15, 1996, among Renters Choice, Inc., ColorTyme,
Inc., and CT Acquisition Corporation
2.7(7) - Asset Purchase Agreement, dated May 1, 1998, by
and among Renters Choice, Inc., Central Rents,
Inc., Central Rents Holding, Inc. and Banner
Holdings, Inc.
2.8(8) - Letter Agreement, dated as of May 26, 1998, by
and among Renters Choice, Inc., Central Rents,
Inc., Central Rents Holding, Inc. and Banner
Holdings, Inc.
2.9* - Stock Purchase Agreement, dated as of June 16,
1998, among Renters Choice, Inc., Thorn
International BV and Thorn plc
2.10* - Stock Purchase Agreement, dated August 5, 1998,
among Renters Choice, Inc., Apollo Investment
Fund IV, L.P. and Apollo Overseas Partners IV,
L.P.
3.1(9) - Amended and Restated Certificate of
Incorporation of the Company
3.2(10) - Certificate of Amendment to the Amended and
Restated Certificate of Incorporation of the
Company
3.3* - Amended and Restated Bylaws of the Company
4.1(11) - Form of Certificate evidencing Common Stock
4.2* - Certificate of Designations, Preferences and
Relative Rights and Limitations of Series A
Preferred Stock of Renters Choice, Inc.
4.3* - Certificate of Designations, Preferences and
Relative Rights and Limitations of Series B
Preferred Stock of Renters Choice, Inc.
10.1(12) - Amended and Restated 1994 Renters Choice, Inc.
Long-Term Incentive Plan
10.2(13) - Revolving Credit Agreement dated as of November
27, 1996 between Comerica Bank, as agent,
Renters Choice, Inc. and certain other lenders
10.3(14) - Consulting Agreement dated April 1, 1993, by and
between Bob A. Hardesty and Brenda K. Hardesty
and Renters Choice, L.P.
10.4(15) - Non-Competition Agreement dated April 1, 1993,
by and between Bob A. Hardesty and Brenda K.
Hardesty and Renters Choice, L.P.
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<S> <C>
10.5(16) - Noncompetition Agreement dated as of April 20,
1995, between Renters Choice, Inc. and Patrick
S. White
10.6(17) - Consulting Agreement dated as of April 20, 1995
between Renters Choice, Inc. and Jeffrey W.
Smith
10.7(18) - Noncompetition Agreement dated as of August 27,
1995 between Renters Choice, Inc. and Starla J.
Flake
10.8(19) - Noncompetition Agreement dated as of August 27,
1995 between Renters Choice, Inc. and Bruce S.
Johnson
10.9(20) - Noncompetition Agreement dated as of August 27,
1995 between Renters Choice, Inc. and Rance D.
Richter
10.10(21) - Option Agreement dated August 27, 1995 between
the Company and Terry N. Worrell
10.11(22) - Option Agreement dated August 27, 1995 among the
Company, Worrell Investors, Inc., The Christy
Ann Worrell Trust and The Michael Neal Worrell
Trust
10.15(23) - Portfolio Acquisition Agreement dated May 15,
1996, by and among Renters Choice, Inc.,
ColorTyme Financial Services, Inc., and STI
Credit Corporation
10.16(24) - Employment Agreement, dated March 28, 1997, by
and between Renters Choice, Inc. and Danny Z.
Wilbanks
10.17(25) - Stock Option Agreement, dated April 1, 1997, by
and between Renters Choice, Inc. and Danny Z.
Wilbanks
10.18* - Credit Agreement, dated August 5, 1998, among
Renters Choice, Inc., Comerica Bank, as
Documentation Agent, NationsBank N.A., as
Syndication Agent, and The Chase Manhattan Bank,
as Administrative Agent, and certain other
lenders
10.19* - Guarantee and Collateral Agreement, dated August
5, 1998, made by Renters Choice, Inc., and
certain of its Subsidiaries in favor of The
Chase Manhattan Bank, as Administrative Agent
10.20* - $175,000,000 Senior Subordinated Credit
Agreement, dated as of August 5, 1998, among
Renters Choice, Inc., certain other lenders and
The Chase Manhattan Bank
10.21* - Stockholders Agreement, dated as of August 5,
1998, by and among Apollo Investment Fund IV,
L.P., Apollo Overseas Partners IV, L.P., J.
Ernest Talley, Mark E. Speese, Renters Choice,
Inc., and certain other persons
10.22* - Registration Rights Agreement, dated August 5,
1998, by and between Renters Choice, Inc.,
Apollo Investment Fund IV, L.P., and Apollo
Overseas Partners IV, L.P., related to the
Series A Convertible Preferred Stock
10.23* - Registration Rights Agreement, dated August 5,
1998, by and between Renters Choice, Inc.,
Apollo Investment Fund IV, L.P., and Apollo
Overseas Partners IV, L.P., related to the
Series B Convertible Preferred Stock
27* - Financial Data Schedule
</TABLE>
* Filed herewith.
(1) Incorporated herein by reference to Exhibit 2.1 to the registrant's Current
Report on Form 8-K dated May 4, 1995
<PAGE> 22
(2) Incorporated herein by reference to Exhibit 2.1 to the registrant's Current
Report on Form 8-K dated August 27, 1995
(3) Incorporated herein by reference to Exhibit 10.19 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(4) Incorporated herein by reference to Exhibit 10.20 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(5) Incorporated herein by reference to Exhibit 2.7 to the registrant's Annual
Report on Form 10-K for the year ended December 31, 1995
(6) Incorporated herein by reference to Exhibit 2.1 to the registrant's Current
Report on Form 8-K dated May 15, 1996
(7) Incorporated herein by reference to Exhibit 2.1 to the registrant's Current
Report on Form 8-K dated May 28, 1998
(8) Incorporated herein by reference to Exhibit 2.2 to the registrant's Current
Report on Form 8-K dated May 28, 1998
(9) Incorporated herein by reference to Exhibit 3.2 to the registrant's Annual
Report on Form 10-K for the year ended December 31, 1994
(10) Incorporated herein by reference to Exhibit 3.2 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1996
(11) Incorporated herein by reference to Exhibit 4.1 to the registrant's
Registration Statement on Form S-1 (File No. 33-86504)
(12) Incorporated herein by reference to Exhibit 10.1 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1996
(13) Incorporated herein by reference to Exhibit 10.2 to the registrant's Annual
Report on Form 10-K for the year ended December 31, 1996
(14) Incorporated herein by reference to Exhibit 10.5 to the registrant's
Registration Statement on Form S-1 (File No. 33-86504)
(15) Incorporated herein by reference to Exhibit 10.6 to the registrant's
Registration Statement on Form S-1 (File No. 33-86504)
(16) Incorporated herein by reference to Exhibit 10.7 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(17) Incorporated herein by reference to Exhibit 10.8 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(18) Incorporated herein by reference to Exhibit 10.10 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(19) Incorporated herein by reference to Exhibit 10.11 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(20) Incorporated herein by reference to Exhibit 10.12 to the registrant's
Registration Statement on Form S-1 (File No. 33-97012)
(21) Incorporated herein by reference to Exhibit 2.2 to the registrant's Current
Report on Form 8-K dated August 27, 1995
(22) Incorporated herein by reference to Exhibit 2.3 to the registrant's Current
Report on Form 8-K dated August 27, 1995
(23) Incorporated herein by reference to Exhibit 10.1 to the registrant's
Current Report on Form 8-K dated May 15, 1996
(24) Incorporated herein by reference to Exhibit 10.16 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997
(25) Incorporated herein by reference to Exhibit 10.16 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997
<PAGE> 1
EXHIBIT 2.9
================================================================================
STOCK PURCHASE AGREEMENT
among
RENTERS CHOICE, INC.,
Buyer
and
THORN INTERNATIONAL BV,
Seller
and
THORN plc
Dated as of: June 16, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 TERMS OF THE TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Sale of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Repayment of Company Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Purchase Price and Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Purchase Price Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 2 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1 Closing; Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE SELLER AS TO THE SELLER . . . . . . . . . . . . . . . . . . . 9
3.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Title to the Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.3 Authority to Execute and Perform Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE SELLER AS TO THE COMPANY . . . . . . . . . . . . . . . . . . 13
4.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.4 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.6 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.7 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.8 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.9 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.10 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.12 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.13 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.14 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.15 Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.16 Employee Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.17 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.18 Finders and Investment Bankers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.19 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.20 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.21 Usage of Thorn Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.22 Rental Purchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
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4.23 Product Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.2 Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.3 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.4 Pending Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.5 Finders and Investment Bankers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.6 Financial Capability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 6 COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.1 Conduct of Business of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.2 Access and Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.3 Government Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.4 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.5 Indemnification of Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.6 Intercompany Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.7 Continuation of Employment Benefits and Credit For Past Service . . . . . . . . . . . . . . . . . . 44
6.8 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.9 New Zealand Asset Disposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.10 Company Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.11 Indemnification of Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.12 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.13 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.14 Change of Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.15 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.16 Employee Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
6.17 Certain Existing Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
6.18 Confidentiality, Use of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
6.19 Certain Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
6.20 Thorn Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
6.21 Replacement of Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
6.22 Replacement of Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.23 Replacement of Litigation Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.24 Covenant Not to Compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
6.25 Exclusive Dealing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
6.26 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
6.27 Certain Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
6.28 Delivery of Marketing Materials to Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
</TABLE>
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ARTICLE 7 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
7.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
ARTICLE 8 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
8.1 Obligation of the Seller to Indemnify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
8.2 Obligation of the Buyer to Indemnify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
8.3 Indemnification Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
8.4 Limitations on Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
8.5 Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
8.6 Escrow Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
8.7 Characterization of Indemnification Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
ARTICLE 9 TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
9.2 Procedure for and Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
9.3 Payments Required Upon Termination in Certain Circumstances . . . . . . . . . . . . . . . . . . . 82
ARTICLE 10 CONDITIONS PRECEDENT TO THE OBLIGATION OF BUYER TO CLOSE . . . . . . . . . . . . . . . . . . . . . 83
10.1 Accuracy of Representations and Warranties, Performance of Covenants . . . . . . . . . . . . . . . 83
10.2 No Material Judgment or Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
10.3 Delivery of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
10.4 HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
10.5 Director Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
10.6 Cancellation of Debt and Affiliate Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 84
10.7 Deed of General Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
10.8 Company Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
10.9 Thorn Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
10.10 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
10.11 Certified Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
10.12 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
10.13 Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
ARTICLE 11 CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER TO CLOSE . . . . . . . . . . . . . . . . . . . . . 87
11.1 Accuracy of Representations and Warranties, Performance of Covenants . . . . . . . . . . . . . . . 87
11.2 No Material Judgment or Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
11.3 HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
</TABLE>
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11.4 Payment of Purchase Price and Debt Repayment Amount . . . . . . . . . . . . . . . . . . . . . . . . 88
11.5 Thorn Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
11.6 Termination of Letters of Credit and Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . 88
11.7 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
11.8 Certified Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
ARTICLE 12 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
12.1 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
12.2 Consent to Jurisdiction and Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . 99
12.3 Waivers and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
12.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
12.5 Binding Effect; Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
12.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
12.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
12.8 Headings; Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
12.9 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
12.10 Usage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
12.11 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
12.13 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
12.14 Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
</TABLE>
Schedules
1.4 - Purchase Price Adjustment
3.3 - Seller Consents
4.3 - Subsidiaries
4.4 - Noncontravention
4.5 - Liabilities
4.6(a) - Owned Property
4.6(b) - Real Property Leases
4.6(d) - Eminent Domain Proceedings
4.6(e) - Maintenance of Property
4.7 - Compliance with Laws
4.8 - Permits
4.9 - Litigation
4.10 - Absence of Certain Changes or Events
4.11 - Taxes
4.12 - Environmental Matters
4.13 - Contracts
4.13(b) - Franchise Agreements
4.14 - Employee Benefit Plans
4.15 - Title to Properties
iv
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4.16 - Employee Relations
4.17(a) - Intellectual Property
4.17(b) - Intellectual Property
4.20 - Insurance
4.22 - Rental Purchase Agreements
4.23 - Warranty
5.6 - Commitment Letters
6.1 - Conduct of Business of the Company
6.1(j) - Roll Out
6.7 - Continuation of Employee Benefits
6.16 - Employee Payments
6.17 - Indemnified Litigations
6.19 - Intellectual Property
12.1.1(e) - Certain Closing Date Employees
12.1.1(g) - Distribution Centers
12.1.1(q) - Knowledge
12.1.1(t) - Certain Claims
Exhibits
A - Form of Company and Subsidiary Release
B - Form of Officer, Director and Closing Date Employee Release
C - Form of Escrow Agreement
v
<PAGE> 7
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of June 16, 1998 (the
"AGREEMENT") among Renters Choice, Inc., a Delaware corporation ("BUYER"),
Thorn International BV, a Netherlands corporation ("SELLER"), and Thorn plc, a
company incorporated under the laws of England and Wales ("THORN"), for the
purchase and sale of all of the issued and outstanding shares of capital stock
of Thorn Americas, Inc., a Delaware corporation (the "COMPANY").
The Seller is the beneficial and record owner of all of the issued
and outstanding shares of common stock, par value $1.00 per share (the "COMMON
STOCK") of the Company (the "SHARES"). The Seller wishes to sell to the Buyer,
and the Buyer wishes to purchase from the Seller, all of the Shares upon the
terms and subject to the conditions of this Agreement. Capitalized terms used
herein without definition have the meanings ascribed to them in Section 12.1.
Accordingly, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements herein contained, and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties agree as follows:
<PAGE> 8
2
ARTICLE 1
TERMS OF THE TRANSACTION
1.1 Sale of Shares. The Seller shall, on the Closing Date, sell,
transfer and assign to the Buyer all of the right, title and interest to the
Shares by delivering to the Buyer, against payment therefor as provided in
Section 1.3, certificates representing all of the Shares, duly endorsed in
blank or accompanied by stock powers duly executed in blank, in proper form for
transfer, with all necessary stock transfer stamps paid and affixed by the
Buyer.
1.2 Repayment of Company Debt. The Buyer shall, on the Closing
Date, repay on behalf of the Company, or cause the Company to repay, to Thorn
Finance plc, a company incorporated under the laws of England and Wales ("THORN
FINANCE"), as provided below, (i) all amounts outstanding on the Closing Date
under the Promissory Note dated March 31, 1998 issued by the Company in favor
of Thorn Finance in the principal amount of $710,817,697 (the "THORN NOTE"),
including accrued and unpaid interest thereon up to and including the Closing
Date and (ii) all amounts, if any, owed to Thorn Finance by the Company or any
of its Subsidiaries set forth in the certificate referred to in Section 6.6
(the amounts referred to in clauses (i) and (ii) shall be collectively referred
to herein as the "DEBT REPAYMENT AMOUNT"). The Debt Repayment Amount shall be
paid by the Buyer on behalf of the Company, or by the Company, in cash at the
Closing by wire transfer of immediately available funds to an account
designated in writing by Thorn Finance.
<PAGE> 9
3
1.3 Purchase Price and Payment. The aggregate purchase price (the
"PURCHASE PRICE") for the Shares shall be an amount equal to the sum of (x)
$900,000,000 plus (y) the amount, if any, owed to the Company or any of its
Subsidiaries by Thorn Finance set forth in the certificate referred to in
Section 6.6 minus (z) the sum of (i) the Debt Repayment Amount and (ii) the
Estimated Amount. The Purchase Price shall be paid by the Buyer at the
Closing as follows:
(a) the Buyer shall deliver to an account designated by the
Seller cash, by wire transfer of immediately available funds, in an aggregate
amount equal to the Purchase Price less the Escrow Amount, if any; and
(b) in the event the Escrow Amount is greater than zero, the
Buyer shall deliver to an escrow agent mutually satisfactory to the Buyer and
the Seller (the "ESCROW AGENT") cash, by wire transfer of immediately available
funds, in an aggregate amount equal to the Escrow Amount to be held in
accordance with the terms of the Escrow Agreement. After the Closing, the
Purchase Price shall be subject to adjustment in accordance with Section 1.4.
1.4 PURCHASE PRICE ADJUSTMENT.
(a) Determination of Net Worth. As used herein, the "NET
WORTH" of the Company and its Subsidiaries as of any particular date shall mean
an amount equal to the total assets less the total liabilities of the Company
and its Subsidiaries on a consolidated basis and shall be determined as set
forth below.
(b) Preparation of Closing Adjusted Net Worth Schedule. As
soon as practicable, but in any event within 30 days after the Closing Date,
the Seller
<PAGE> 10
4
or its designee shall prepare (based on data and financial statements supplied
by the Company) on a basis consistent with the preparation of the Balance Sheet
and as contemplated by Schedule 1.4, and deliver to Ernst & Young LLP, a
consolidated balance sheet of the Company and its Subsidiaries as of the close
of business on the day preceding the Closing Date (the "PRELIMINARY CLOSING
BALANCE SHEET"). Within 30 days after receipt thereof, the Preliminary Closing
Balance Sheet shall be audited by Ernst & Young LLP (the "AUDITED CLOSING
BALANCE SHEET") and such firm shall deliver (i) an audit opinion stating that
the Audited Closing Balance Sheet presents fairly, in all material respects,
the financial position of the Company and its Subsidiaries on a consolidated
basis at such date in accordance with GAAP consistently applied and (ii) a
procedures opinion stating that the Closing Adjusted Net Worth Schedule has
been derived from the Audited Closing Balance Sheet. The Audited Closing
Balance Sheet shall include a schedule (the "CLOSING ADJUSTED NET WORTH
SCHEDULE"), prepared by Ernst & Young LLP, calculating the Net Worth of the
Company and its Subsidiaries as of the close of business on the day preceding
the Closing Date (the "CALCULATION DATE"), as adjusted in accordance with the
provisions of Schedule 1.4 (as so adjusted and as set forth on the Closing
Adjusted Net Worth Schedule, the "CLOSING ADJUSTED NET WORTH"). The Audited
Closing Balance Sheet and the Closing Adjusted Net Worth Schedule shall be
provided to the Buyer promptly upon the availability thereof. The Buyer will
(and will cause the Company and its Subsidiaries to) provide the Seller or its
designee (and their respective representatives, including employees, officers
and directors) and Ernst & Young LLP full access to the
<PAGE> 11
5
books, ledgers, files, reports and operating records of the Company and its
Subsidiaries and the then current employees of the Company and its Subsidiaries
and will fully cooperate in preparing and reviewing the Preliminary Closing
Balance Sheet, the Audited Closing Balance Sheet and the Closing Adjusted Net
Worth Schedule.
(c) Buyer's Review. Upon receipt of the Audited Closing
Balance Sheet and the Closing Adjusted Net Worth Schedule, the Buyer and its
independent accountants shall have the right during the succeeding 30-day
period to examine the Audited Closing Balance Sheet, the Closing Adjusted Net
Worth Schedule and all books and records used to prepare the Audited Closing
Balance Sheet and the Closing Adjusted Net Worth Schedule. The Seller shall
use its commercially reasonable efforts to cause Ernst & Young LLP to provide
access to the work papers used to prepare, audit and review the Audited Closing
Balance Sheet and the Closing Adjusted Net Worth Schedule and supporting their
opinion referred to above, and the Seller shall provide the Buyer with access
to the books and records used in, and employees involved with, the preparation
of the Audited Closing Balance Sheet and the Closing Adjusted Net Worth
Schedule.
If the Buyer does not agree that the Closing Adjusted Net Worth has
been calculated on the basis set forth in Section 1.4(b), the Buyer shall so
notify the Seller in writing (such notice, the "DISAGREEMENT NOTICE") on or
before the last day of the 30-day period after delivery to the Buyer of the
Audited Closing Balance Sheet and Closing Adjusted Net Worth Schedule, setting
forth a specific description of the Buyer's objections and the amount of the
adjustment which the Buyer believes should
<PAGE> 12
6
be made to each item of its objection. If the Buyer does not deliver a
Disagreement Notice within such 30-day period, the Audited Closing Balance
Sheet, the Closing Adjusted Net Worth Schedule and the Closing Adjusted Net
Worth shall be deemed to have been accepted by Buyer.
(d) Dispute Resolution. In the event that the Buyer
delivers a Disagreement Notice in accordance with Section 1.4(c), the Seller
and the Buyer shall attempt to resolve the objections set forth therein within
30 days of the Seller's receipt of such Disagreement Notice. The objections
set forth on the Disagreement Notice that are resolved by the Buyer and the
Seller in accordance with this Section 1.4(d) shall collectively be referred to
herein as the "RESOLVED OBJECTIONS."
(e) If the Seller and the Buyer are unable to resolve all
the objections set forth on the Disagreement Notice within such 30-day period,
they shall jointly appoint Price Waterhouse LLP (or any successor thereof)
within five days of the end of such 30-day period (the "CPA FIRM"). The CPA
Firm, acting as experts and not as arbitrators, shall review the objections set
forth on the Disagreement Notice which have not been resolved prior to such
date by the Buyer and the Seller (collectively, the "DIFFERENCES") and
determine, based on the requirements set forth in Section 1.4(b) (including,
without limitation, the provisions set forth in Schedule 1.4) and only with
respect to Differences submitted to the CPA Firm, whether and to what extent
the Closing Adjusted Net Worth Schedule requires adjustments; provided,
however, that in no event shall any determination by the CPA Firm of any
Difference result in an adjustment greater than the amount of the adjustment
requested with respect
<PAGE> 13
7
to such Difference in the Disagreement Notice. The Buyer and Seller shall each
pay 50% of the fees and disbursements of the CPA Firm. The Seller and the
Buyer shall (and shall cause the Company and its Subsidiaries to) provide to
the CPA Firm full cooperation. The CPA Firm's resolution of the Differences
shall be conclusive and binding upon the parties. The Differences as resolved
by the CPA Firm in accordance with this Section 1.4(d) shall collectively be
referred to herein as the "CPA-DETERMINED DIFFERENCES."
(f) Adjustment. On the fifth Business Day following the
earliest to occur of (such fifth Business Day, the "ADJUSTMENT PAYMENT DATE")
(x) the acceptance by the Buyer of the Audited Closing Balance Sheet, Closing
Adjusted Net Worth and Closing Adjusted Net Worth Schedule, (y) the resolution
by the Buyer and the Seller of all objections set forth on the Disagreement
Notice, if any, and (z) the resolution by the CPA Firm of all Differences, as
an adjustment to the Purchase Price either (i) the Buyer shall pay to the
Seller an amount equal to the excess, if any, of the Closing Adjusted Net Worth
(as increased or decreased, as the case may be, by the Resolved Objections and,
subject to the proviso below, the CPA-Determined Differences) over $492.7
million or (ii) the Seller shall pay to the Buyer an amount equal to the
excess, if any, of $492.7 million over the Closing Adjusted Net Worth (as
increased or decreased, as the case may be, by the Resolved Objections and,
subject to the proviso below, the CPA-Determined Differences); provided,
however, that no adjustment to the Closing Adjusted Net Worth shall be made
pursuant to this Section 1.4(e) for any CPA-Determined Differences unless the
aggregate amount of
<PAGE> 14
8
such CPA-Determined Differences is greater than $3 million in which case the
adjustment shall be made for the aggregate amount of such CPA-Determined
Differences. In either case, such amount shall be payable on the Adjustment
Payment Date, with interest, based upon a year of 360 days for the actual
number of days elapsed, accrued from the Closing Date until, but not including,
the Adjustment Payment Date at a rate equal to the rate publicly announced by
The Chase Manhattan Bank N.A. as its prime rate on the Closing Date. Such
payment shall be made by wire transfer of immediately available funds to a bank
account or accounts designated by the Seller or the Buyer, as the case may be.
ARTICLE 2
CLOSING
2.1 Closing; Closing Date. The closing of the transactions
contemplated hereby (the "CLOSING") shall take place in New York City at the
offices of Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the
Americas, New York, New York 10019-6064, 10:00 a.m., New York City time on the
Designated Date; provided, that on the Designated Date all conditions to the
Closing set forth in Articles 10 and 11 have been satisfied or waived by the
party entitled to waive the same. If on the Designated Date all conditions to
the Closing set forth in Articles 10 and 11 have not been satisfied or waived
by the party entitled to waive the same, the Closing shall occur on the first
Business Day following the satisfaction or waiver by the party entitled to
waive the same of all such conditions. It being understood by the
<PAGE> 15
9
parties hereto that the date, time and place of the Closing may be at such
other date, time and place as the parties may mutually agree in writing. The
Designated Date or such other date on which the Closing occurs is hereinafter
referred to as the "CLOSING DATE."
For purposes of this Agreement, "DESIGNATED DATE" shall mean the
date (or if such date is not a Business Day, the next following Business Day)
that is the later of (x) the date that is the 45th day following the date
hereof and (y) the date that is the fifth day after the date upon which all of
the conditions to the Closing set forth in Sections 10.4, 10.9, 11.3 and 11.5
are satisfied plus a number of days equal to the lesser of (i) the Closing Date
Number and (ii) the number set forth in a written notice of the Buyer that is
delivered to the Seller on the date upon which all of the conditions set forth
in Sections 10.4, 10.9, 11.3 and 11.5 are satisfied (which shall not be less
than zero). For purposes of this Agreement, "CLOSING DATE NUMBER" means an
aggregate number (which shall not be less than zero) equal to the lesser of (A)
10 and (B) a number equal to (x) the number of days (including the first day
but excluding the last day) in the period commencing on June 17, 1998 and
ending on the date the circular referred to in Section 6.13(c) is mailed by or
on behalf of Thorn to the shareholders of Thorn minus (y) five.
<PAGE> 16
10
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
THE SELLER AS TO THE SELLER
The Seller represents and warrants to the Buyer as follows:
3.1 Corporate Organization. The Seller is a corporation duly
organized and validly existing under the laws of the Netherlands and has all
requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now conducted.
3.2 Title to the Shares. The Seller owns beneficially and of
record, free and clear of any Lien, the Shares, and, upon delivery of and
payment for the Shares at the Closing as herein provided, such Seller will
convey such Shares to the Buyer pursuant to Article 1, free and clear of any
Lien.
3.3 Authority to Execute and Perform Agreement. The Seller has
all requisite corporate power and authority required to enter into, execute and
deliver this Agreement and each and every agreement and instrument contemplated
hereby to which the Seller is or will be a party and to perform its obligations
hereunder and thereunder. This Agreement has been duly executed and delivered
by the Seller and (assuming the due execution and delivery hereof by the other
parties hereto) this Agreement constitutes a valid and binding obligation of
the Seller enforceable against the Seller in accordance with its terms. Except
for filings and other applicable requirements under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR ACT"), the execution
and delivery by the Seller of this Agreement, the consummation of
<PAGE> 17
11
the transactions contemplated hereby (the "CONTEMPLATED TRANSACTIONS") and the
performance by the Seller of this Agreement in accordance with its terms and
conditions (a) is duly authorized by the Board of Directors and, if applicable,
the Board of Supervisory Directors, of the Seller and, except as set forth on
Schedule 3.3 (collectively, the "SELLER CONSENTS"), no other corporate action
on the part of the Seller is required for the authorization, execution,
delivery and performance by the Seller of this Agreement and the consummation
of the Contemplated Transactions; and (b) will not (i) violate any provision of
the Articles of Association or any other charter document or governing document
of the Seller; (ii) require the Seller to obtain any consent, approval,
authorization or action of, or make any filing with or give any notice to, any
Governmental Entity or any other Person, except for the Seller Consents; (iii)
if the Seller Consents are obtained, violate, conflict with or result in the
breach of any of the terms and conditions of, result in a material modification
of the effect of, otherwise cause the termination of or give any other
contracting party the right to terminate, or constitute (or with notice or
lapse of time or both constitute) a default (or give rise to any right of
termination, cancellation or acceleration) under, any of the terms, conditions
or provisions of any Contracts and Other Agreements to which the Seller is a
party or by or to which the Seller or the Shares is or may be bound or subject;
(iv) if the Seller Consents are obtained, violate any Law or Order applicable
to the Seller or to the Shares; or (v) result in the creation of any Lien on
the Shares.
<PAGE> 18
12
ARTICLE 3.A
REPRESENTATIONS AND WARRANTIES OF THORN
Thorn represents and warrants to the Buyer as follows:
3.A.1 Corporate Organization. Thorn is a company duly
organized and validly existing under the laws of England and Wales and has all
requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now conducted.
3.A.2. Authority to Execute and Perform Agreement. Thorn has all
requisite corporate power and authority required to enter into, execute and
deliver this Agreement and each and every agreement and instrument contemplated
hereby to which Thorn is or will be a party and to perform its obligations
hereunder and thereunder. This Agreement has been duly executed and delivered
by Thorn and (assuming the due execution and delivery hereof by the other
parties hereto) this Agreement constitutes a valid and binding obligation of
Thorn enforceable against Thorn in accordance with its terms. Except for
filings and other applicable requirements under the HSR Act, the execution and
delivery by Thorn of this Agreement, the consummation of the Contemplated
Transactions and the performance by Thorn of this Agreement in accordance with
its terms and conditions (a) is duly authorized by the directors of Thorn and,
except for the Seller Consents, no other corporate action on the part of Thorn
is required for the authorization, execution, delivery and performance by Thorn
of this Agreement and the consummation of the Contemplated Transactions; and
(b) will not (i) violate any provision of any charter documents or other
governing
<PAGE> 19
13
documents of Thorn; (ii) require Thorn to obtain any material consent,
approval, authorization or action of, or make any filing with or give any
notice to, any Governmental Entity or any other Person, except for the Seller
Consents; (iii) if the Seller Consents are obtained, violate, conflict with or
result in the breach of any of the terms and conditions of, result in a
material modification of the effect of, otherwise cause the termination of or
give any other contracting party the right to terminate, or constitute (or with
notice or lapse of time or both constitute) a default (or give rise to any
rights of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any material Contracts and Other Agreements to
which Thorn is a party or by or to which Thorn is or may be bound or subject;
or (iv) if the Seller Consents are obtained, violate any Law or Order
applicable to Thorn.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SELLER
AS TO THE COMPANY
The Seller represents and warrants to the Buyer as follows:
4.1 Corporate Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
The Company is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary, except where the failure to
<PAGE> 20
14
be so qualified and in good standing, as the case may be, would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company. The Seller has previously delivered or made available to the Buyer
correct and complete copies of the certificate of incorporation and by-laws,
each as currently in effect, of the Company.
4.2 Capitalization. The authorized Capital Stock of the Company
consists of 1,000 shares of Common Stock, all of which shares are owned of
record by the Seller. 1,000 shares of Common Stock are issued and outstanding.
All issued and outstanding shares of Common Stock have been duly authorized and
are validly issued, fully paid and nonassessable. No other class of Capital
Stock or other ownership interests of the Company is authorized or outstanding.
There is no outstanding right, subscription, warrant, call, option or other
agreement of any kind to purchase or otherwise to receive from the Company, any
of its Subsidiaries or the Seller any shares of Capital Stock of the Company or
any of its Subsidiaries, and there is no outstanding security of any kind of
the Company or any of its Subsidiaries convertible into any such Capital Stock.
4.3 Subsidiaries. Except as described on Schedule 4.3, the
Company has no direct or indirect equity interest in any other Person. Set
forth on Schedule 4.3 is a list of all Subsidiaries of the Company, setting
forth as to each such Subsidiary its jurisdiction of incorporation or formation
and the percentage of each class of Capital Stock of such Subsidiary owned by
the Company or a Subsidiary of the Company. All of the outstanding Capital
Stock of each such Subsidiary that is a corporation has been duly authorized
and is validly issued, fully paid and non-assessable and is owned, by
<PAGE> 21
15
the Company or one or more of its Subsidiaries, free and clear of all Liens.
The Company or a Subsidiary of the Company owns the percentage of Capital Stock
listed on Schedule 4.3 of each Subsidiary that is not a corporation free and
clear of all Liens and such percentage interest has been validly issued in
accordance with such Subsidiary's operating agreement. Each such Subsidiary
(a) is a corporation or limited liability company duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or formation; (b) is duly qualified to do business and is in good
standing in each jurisdiction in which the property owned, leased or operated
by it or the nature of business conducted by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, would not have a Material Adverse Effect on the Company; and
(c) has all requisite corporate power and authority, or power under its
enabling statute and operating agreement, as the case may be, to own, lease and
operate its properties and to carry on its business as now being conducted.
The Seller has previously made available to the Buyer, correct and complete
copies of the certificate or articles of incorporation, bylaws, articles of
organization, operating agreements and organizational documents, each as in
effect as of the date hereof, of each Subsidiary of the Company.
4.4 Noncontravention. Except for filings and other applicable
requirements under the HSR Act, the execution, delivery and performance by the
Seller of this Agreement and the consummation of the Contemplated Transactions
will not (a) violate any provision of the certificate of incorporation or
by-laws (or other comparable organizational documents) of the Company or any of
its Subsidiaries;
<PAGE> 22
16
(b) except as set forth on Schedule 4.4 (the "COMPANY CONSENTS"), require the
Company or any of its Subsidiaries to obtain any consent, approval,
authorization or action of, or make any filing with or give any notice to any
Governmental Entity or any other Person, other than pursuant to any Real
Property Lease relating to a Store or any Franchise Agreement or Development
Agreement; (c) if the Company Consents are obtained, require any consent,
approval or notice under or violate, conflict with or result in the breach of
any of the terms and conditions of, result in a material modification of the
effect of or otherwise cause the termination of or give any other contracting
party the right to terminate, or constitute (or with notice or lapse of time or
both constitute) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any Contracts and Other Agreements to which the Company or any of its
Subsidiaries is a party or by or to which the Company, any of its Subsidiaries
or any of their respective assets or properties is bound or subject, other than
pursuant to any Real Property Lease relating to a Store or any Franchise and
Development Agreement; (d) if the Company Consents are obtained, violate any
Law or Order applicable to the Company or any of its Subsidiaries or their
respective assets or properties; or (e) result in the creation of any Lien upon
any of the assets or properties of the Company or any of its Subsidiaries,
other than (A) in the case of clause (b) above, any consent, approval,
authorization, action, filing or notice the absence of which, individually or
in the aggregate, would not have a Material Adverse Effect on the Company, (B)
in the case of clauses (c) and (d) above, any violation, conflict, breach,
modification, termination, default,
<PAGE> 23
17
cancellation or acceleration which, individually or in the aggregate, would not
have a Material Adverse Effect on the Company and (C) in the case of clause
(e), any Lien which, individually or in the aggregate, would not have a
Material Adverse Effect, on the Company.
4.5 Financial Statements. The Seller has furnished Buyer with a
complete and accurate copy of the audited consolidated balance sheets of the
Company as of March 31, 1998, 1997 and 1996 and the related consolidated
statements of operations, stockholder's equity and cash flows for the years
then ended (including the notes thereto), accompanied by the reports thereon of
Ernst & Young LLP (all such financial statements, including the notes thereto,
are hereinafter referred to as the "AUDITED FINANCIAL STATEMENTS"). The
Audited Financial Statements have been prepared in accordance with GAAP
consistently applied for the periods covered thereby and present fairly in all
material respects the consolidated financial position of the Company and its
Subsidiaries at March 31, 1998, March 31, 1997 and March 31, 1996 and the
consolidated results of operations and cash flows of the Company and its
Subsidiaries for the years then ended. The consolidated balance sheet of the
Company as of March 31, 1998 is hereinafter referred to as the "BALANCE SHEET"
and March 31, 1998 is hereinafter referred to as the "BALANCE SHEET DATE").
Except as set forth on Schedule 4.5, as of the date hereof, there are no
liabilities of the Company or any of its Subsidiaries of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise,
that are material to the Company and its Subsidiaries considered as a whole and
that are required to be disclosed in an audited
<PAGE> 24
18
balance sheet (or in the notes thereto) prepared in accordance with GAAP, other
than (i) liabilities reflected on the Audited Financial Statements (together
with the related notes thereto) and (ii) any liabilities that have occurred in
the ordinary course of business since the Balance Sheet Date.
4.6 Real Property.
(a) Schedule 4.6(a) hereto sets forth a complete list of all
real property owned by the Company and its Subsidiaries (each an "OWNED REAL
PROPERTY"). The Company and its Subsidiaries have good and marketable fee
title to the Owned Properties, free and clear of all mortgages, Liens,
easements, restrictive covenants, rights-of-way and other encumbrances
("ENCUMBRANCES") other than (i) Encumbrances that are disclosed on the title
insurance policies referred to in Schedule 4.6(a), copies of which have been
provided to Buyer; (ii) Liens for taxes, fees, levies, duties or other
governmental charges of any kind which are not yet delinquent or are being
contested in good faith by appropriate proceedings which suspend the collection
thereof; (iii) Liens for mechanics, material, laborers, employees, suppliers or
similar liens arising by operation of law for sums which are not yet delinquent
or which are being contested in good faith by appropriate proceedings or with
respect to which arrangements for payment and/or release have been made; (iv)
platting, subdivision, zoning, building and other similar legal requirements
which do not materially detract from the value of the real property subject
thereto or impair in any material respect the operation of the businesses of
the Company or any of its Subsidiaries; and (v) easements, restrictive
covenants, rights-of-way, reservations of
<PAGE> 25
19
mineral or oil and gas interests, encroachments and other similar encumbrances,
whether or not of record, which do not materially detract from the value of the
real property subject thereto or impair in any material respect the operation
of the businesses of the Company or any of its Subsidiaries (the Encumbrances
described in clauses (i) through (v) above are hereinafter referred to
collectively as "PERMITTED ENCUMBRANCES").
(b) Leased Properties. Schedule 4.6(b) is a true, correct
and complete schedule of all leases, subleases, licenses and other agreements
(collectively, the "REAL PROPERTY LEASES") under which the Company or any of
its Subsidiaries uses or occupies or has the right to use or occupy, now or in
the future, any real property that is not Owned Real Property (the land,
buildings and other improvements covered by the Real Property Leases being
herein called the "LEASED REAL PROPERTY"). Except as set forth in Schedule
4.6(b), each Real Property Lease is valid, binding and in full force and
effect, no notice of default or termination under any Real Property Lease is
outstanding, and no termination event or condition or uncured default on the
part of the Company, any of its Subsidiaries or, to the Knowledge of the
Seller, the landlord, exists under any Real Property Lease, except, in each
case, as would not have a Material Adverse Effect on the Company. The Company
or any of its Subsidiaries, whichever is applicable, holds the leasehold estate
and interest in each Real Property Lease free and clear of all Encumbrances
other than Permitted Encumbrances. The Seller, the Company and the Company's
Subsidiaries have no ownership, financial or other interest in the landlord
under any Real Property Lease.
<PAGE> 26
20
(c) Entire Premises. All of the land, buildings, structures
and other improvements used by the Company or any of its Subsidiaries in the
conduct of their businesses are included in the Owned Real Property and the
Leased Real Property. The Leased Real Property and the Owned Real Property
are hereinafter collectively referred to as the "REAL PROPERTY."
(d) Except as set forth on Schedule 4.6(d), to the Knowledge
of the Seller, there are no eminent domain proceedings pending or threatened
against any Real Property.
(e) (i) All the Real Property, taken as a whole, has been
reasonably maintained and (ii) with respect to the Wichita Headquarters and the
Distribution Centers only (and not the Stores), except as set forth on Schedule
4.6(e), there are no material structural defects relating to the Real Property.
4.7 Compliance with Laws. Other than with respect to
Environmental Laws, which are dealt with exclusively in Section 4.12, employee
benefit and ERISA matters, which are dealt with exclusively in Section 4.14,
Real Property matters, which are dealt with exclusively in Section 4.6, and
Taxes, which are dealt with exclusively in Section 4.11, except as set forth on
Schedule 4.7, neither the Company nor any of its Subsidiaries is in violation
of any Law or Order applicable to the Company or any of its Subsidiaries or any
of their respective properties or assets, other than violations that,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company.
<PAGE> 27
21
4.8 Permits. Except as set forth on Schedule 4.8, the Company and
its Subsidiaries have such licenses, permits, exemptions, consents, waivers,
authorizations, orders and approvals from appropriate Governmental Entities
("PERMITS") as are necessary to own, lease or operate their properties and to
conduct their businesses as currently owned and conducted and all such Permits
are valid and in full force and effect, except such Permits that the failure to
have or to be in full force and effect would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. No action by the
Company or any of its Subsidiaries outside the normal course of business is
required in order that all material Permits will remain in full force and
effect following the consummation of the Contemplated Transactions.
4.9 Litigation. Except as set forth on Schedule 4.9, as of the
date hereof, no claim, action, litigation, or legal, administrative or arbitral
proceeding or investigation ("CLAIM") is pending or, to the Knowledge of the
Seller, threatened by or before any Governmental Entity against or involving
the Company, any of its Subsidiaries or any of their respective assets or
properties other than Claims that, individually or in the aggregate, would not
have a Material Adverse Effect on the Company. Except as set forth on Schedule
4.9, as of the date hereof, neither the Company nor any of its Subsidiaries is
subject to any outstanding Order other than those that, individually or in the
aggregate, would not have a Material Adverse Effect on the Company. There is
no pending, or to the Knowledge of the Seller, threatened Claim by or before
any Governmental Entity to restrain or prevent the consummation of the
Contemplated Transactions. Except as set forth on Schedule 4.9, to the
Knowledge
<PAGE> 28
22
of the Seller, without inquiry or investigation, as of the date hereof, there
is no written Claim pending or threatened by any employee of the Company or any
of its Subsidiaries against the Company or any of its Subsidiaries other than
Claims that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company.
4.10 Absence of Certain Changes or Events. Except (x) as set forth
in Schedule 4.10 or (y) to the extent arising out of or relating to the
Contemplated Transactions, since the Balance Sheet Date, (a) the Company and
its Subsidiaries have operated their respective businesses in the ordinary
course consistent with past practice; (b) there has not been any condition,
event or occurrence that, individually or in the aggregate, would have a
Material Adverse Effect on the Company; (c) there has not been any damage to,
or destruction or loss of, any tangible property of the Company or any of its
Subsidiaries, taking into account any insurance coverage and proceeds
therefrom, that would have a Material Adverse Effect on the Company; and (d)
the Company has not made any material change in accounting methods, principles
or practices, except as required by a change in Law or in GAAP.
4.11 Taxes. Except as set forth on Schedule 4.11: (a) all United
States federal income Tax Returns required by law to be filed by the Company
and its Subsidiaries have been timely filed, and all such Tax Returns are true
and complete in all material respects, and all Taxes shown on such returns have
been timely paid; and (b) all other Tax Returns required to be filed by the
Company and its Subsidiaries pursuant to applicable federal, foreign, state,
local or other law have been filed, except
<PAGE> 29
23
insofar as the failure to file such Tax Returns would not have a Material
Adverse Effect on the Company and all such Tax Returns are true and complete in
all material respects, and all Taxes shown on such Tax Returns and all other
Taxes due or claimed to be due, whether by proposed assessment or otherwise, by
any taxing authority have been timely paid, except for such Taxes, if any, as
are being contested in good faith and as to which adequate reserves have been
provided in accordance with GAAP. The Company has not been notified of a claim
by any taxing authority in a jurisdiction where the Company does not file Tax
Returns that the Company is required to file Tax Returns in such jurisdiction.
Each of the Company and its Subsidiaries has made all required estimated Tax
payments sufficient to avoid any underpayment penalties. Except as set forth
on Schedule 4.11, there are no outstanding agreements, waivers or arrangements
extending the statutory period of limitations applicable to any claim for, or
the period for the collection or assessment of, Taxes due from the Company or
any of its Subsidiaries for any taxable period. Except as set forth on
Schedule 4.11, no audit or other proceeding by any Governmental Entity is
pending, and neither the Company nor any of its Subsidiaries have received any
notification that such an audit or proceeding may be commenced, with respect to
any Taxes due from the Company or any of its Subsidiaries. No consent to the
application of Section 341(f)(2) of the Code (or any predecessor provision) has
been made or filed by or with respect to the Company or its Subsidiaries or any
of their respective properties or assets. None of the assets of the Company or
its Subsidiaries is an asset or property that is or will be required to be
treated as being owned by any person (other than the Company or its
<PAGE> 30
24
Subsidiaries) pursuant to the provisions of Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended and in effect immediately before the enactment
of the Tax Reform Act of 1986. Except as set forth on Schedule 4.11, neither
the Company nor any of its Subsidiaries has agreed to or is required to make
any adjustment with respect to taxable periods ending after the Closing Date
pursuant to Section 481(a) of the Code (or any predecessor provision) by reason
of any change in any accounting method of such corporation or any closing
agreement as described in Section 7121 of the Code (or any corresponding
provision of state, local or foreign income tax laws), there is no application
pending with any taxing authority requesting permission for any such change in
any accounting method and the IRS has not proposed any such adjustment or
change in accounting method. The Company and each of its Subsidiaries has duly
and timely withheld from employee salaries, wages, and other compensation and
paid over to the appropriate taxing authorities all material amounts required
to be so withheld and paid over for all periods under all applicable Laws.
Except for the TENA-Remco Agreement and the TEMINAH-Thorn Americas Agreement,
neither the Company nor any of its Subsidiaries is a party to, or bound by, any
tax indemnity, tax sharing or tax allocation agreement with any other Person
that would be reasonably likely to result in liabilities to the Company or any
of its Subsidiaries in excess of $20,000 in the aggregate.
4.12 Environmental Matters. Except as set forth on Schedule 4.12,
(a) the Company and its Subsidiaries are and have been in compliance with all
applicable Laws and Orders relating to pollution or protection of the
environment
<PAGE> 31
25
(collectively, "ENVIRONMENTAL LAWS"); (b) there is no civil, criminal or
administrative Order, demand, Claim, hearing, notice of violation, notice or
demand letter pending or, to the Knowledge of the Seller, threatened against
the Company or any of its Subsidiaries pursuant to Environmental Laws; and (c)
neither the Company nor any of its Subsidiaries has any liabilities (known or
unknown) for any remediation or clean-up under any Environmental Laws; provided
that no representation or warranty is made in the foregoing clauses (a), (b)
and (c) with respect to matters that, individually or in the aggregate, would
not have a Material Adverse Effect on the Company.
4.13 Contracts.
(a) Schedule 4.13 sets forth, as of the date hereof, a list
of all of the following Contracts and Other Agreements to which the Company or
any of its Subsidiaries is a party or by which any of them or any material
portion of the properties or assets of the Company and its Subsidiaries taken
as a whole are bound or subject (other than those set forth on any other
Schedule): (i) Contracts and Other Agreements with any current officer,
director, consultant, agent or other representative or any person who was an
officer of the Company or any of its Subsidiaries within the two years
preceding the date hereof; (ii) partnership or joint venture agreements; (iii)
Contracts and Other Agreements relating to the borrowing of money in excess of
$1 million; (iv) Contracts and Other Agreements for the purchase of inventory,
supplies, merchandise or other property requiring aggregate annual payments by
the Company or any of its Subsidiaries in excess of $1 million; (v) Contracts
and Other Agreements containing covenants of the Company or any of its
Subsidiaries not to
<PAGE> 32
26
compete with any Person in any line of business or in any geographical area or
covenants of any other Person not to compete with the Company or any of its
Subsidiaries in any line of business or in any geographical area; (vi)
Contracts and Other Agreements relating to the acquisition or disposition by
the Company or any of its Subsidiaries of any operating business or the capital
stock of any other Person, which acquisition or disposition was consummated at
any time within the two years preceding the date hereof and pursuant to which
the purchase price was in excess of $1 million; and (vii) any other Contracts
and Other Agreements pursuant to the terms of which there is a current
obligation or right of the Company or any of its Subsidiaries to make annual
payments in excess of $1 million or to receive annual payments in excess of $1
million.
(b) There have been delivered or made available to the Buyer
true and complete copies of all Contracts and Other Agreements set forth on
Schedule 4.13. All of such Contracts and Other Agreements are as of the date
hereof in full force and effect and, to the Knowledge of the Seller, are valid
and binding upon the Company or its Subsidiaries, as the case may be, in
accordance with their terms. Except as set forth on Schedule 4.13, as of the
date hereof, neither the Company nor any of its Subsidiaries is, and, to the
Knowledge of the Seller, no other Person is, in default under any Contracts or
Other Agreements listed on Schedule 4.13 which default has not been cured or
waived, except for such defaults as would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. As of the date
hereof, neither the Company nor any of its Subsidiaries has waived any rights
under any
<PAGE> 33
27
Contract or Other Agreement set forth in Schedule 4.13 that would have a
Material Adverse Effect on the Company. Except as listed on Schedule 4.13(b),
the Designated Terms of the Franchise Agreements materially conform to the
Designated Terms of either the form of franchise agreement attached to the
Company's UFOC, dated September 6, 1996 or the form of franchise agreement
attached to the Company's UFOC dated July 15, 1994. Set forth on Schedule
4.13(b) is a true and complete list in all material respects, as of the date
hereof, (i) with respect to each Franchise Agreement, the Approved Location (as
defined in each Franchise Agreement) and (ii) with respect to each Development
Agreement, the Assigned Area (as defined in each Development Agreement).
4.14 Employee Benefit Plans.
(a) For purposes of this Agreement:
(i) "BENEFIT PLAN" means any employee benefit plan,
arrangement, policy or commitment, including, without limitation, any
employment, consulting, severance or deferred compensation agreement, executive
compensation, bonus, incentive, pension, profit-sharing, savings, retirement,
stock option, stock purchase or severance pay plan, any life, health,
disability or accidental death and dismemberment insurance plan, any holiday
and vacation practice or any other employee benefit plan within the meaning of
section 3(3) of ERISA, that is maintained, administered or contributed to by
the Company or any of its ERISA Affiliates.
(ii) "CODE" means the Internal Revenue Code of 1986, as
amended;
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28
(iii) "EMPLOYEE" means any individual employed by the
Company or any of its ERISA Affiliates;
(iv) "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended;
(v) "ERISA AFFILIATE" means any Person with which the
Company or any of its Subsidiaries is required to be aggregated pursuant to
Code Section 414(b), (c), (m) or (o);
(vi) "IRS" means the United States Internal Revenue
Service; and
(vii) "PBGC" means the Pension Benefit Guaranty
Corporation.
(b) Schedule 4.14 lists all Benefit Plans. With respect to
each such plan, the Company has delivered or made available to the Buyer
correct and complete copies of (i) all plan texts and agreements and related
trust agreements; (ii) all summary plan descriptions and material Employee
communications; (iii) the most recent annual report (including all schedules
thereto); (iv) the most recent annual audited financial statement; (v) if the
plan is intended to qualify under Code section 401(a) or 403(a), the most
recent determination letter, if any, received from the IRS; and (vi) all
material communications with any Governmental Entity (including, without
limitation, the PBGC and the IRS).
(c) Except as set forth on Schedule 4.14, and as
specifically indicated with respect to each of the following, there are no
Benefit Plans that (i) are
<PAGE> 35
29
subject to any of Code section 412, ERISA section 302 or Title IV of ERISA;
(ii) are intended to qualify under Code Section 401(a) or 403(a); or (iii) are
welfare plans within the meaning of and subject to ERISA section 3(1) that
provide benefits to current or former Employees beyond their retirement or
other termination of service (other than coverage mandated by Code Section
4980B and Part 6 of Title I of ERISA), or are self-insured "multiple employer
welfare arrangements," as such term is defined in Section 3(40) of ERISA.
(d) Each Benefit Plan conforms in all material respects to,
and its administration is in all material respects in compliance with, all
applicable Laws, except for such failures to conform or comply that,
individually or in the aggregate, would not result in a Material Adverse Effect
on the Company.
(e) Except as set forth on Schedule 4.14, the consummation
of the Contemplated Transactions will not (i) entitle any current or former
Employee to severance pay, unemployment compensation or any similar payment; or
(ii) accelerate the time of payment or vesting, or increase the amount of any
compensation due to, any current or former Employee.
(f) Except as set forth on Schedule 4.14, no Benefit Plan is
a "MULTIPLE EMPLOYER PLAN" or a "MULTIEMPLOYER PLAN" within the meaning of the
Code or ERISA.
(g) In the six years preceding the date hereof, (i) no
Benefit Plan that is or was subject to Title IV of ERISA has been terminated;
(ii) no reportable event within the meaning of Section 4043 of ERISA has
occurred; (iii) no filing of a
<PAGE> 36
30
notice of intent to terminate such a Benefit Plan has been made; and (iv) the
PBGC has not initiated any proceeding to terminate any such Benefit Plan.
(h) Except as set forth on Schedule 4.14(h), neither the
Company nor any of its Subsidiaries is a party to any agreement that has
resulted, or would result, in the payment of any compensation to any employee
which would constitute a "parachute payment" as defined in Section 280G of the
Code.
(i) The Company has no existing arrangements with any of its
employees providing for an excise tax gross up in respect of any excise taxes
imposed by Section 4999 of the Code.
(j) No employee of the Company or any of its Subsidiaries is
a "covered employee" within the meaning of Section 162(m) of the Code.
4.15 Title to Properties. Except as set forth on Schedule 4.15,
the Company or the Subsidiaries, as applicable, own and have good and valid
title to all of their properties, including all of the assets reflected on the
Balance Sheet (but not including, however, the Owned Real Property, which is
addressed in Section 4.6), in each case free and clear of any Lien, except for
(a) Liens specifically described in the notes to the Audited Financial
Statements; (b) properties disposed of, or subject to purchase or sales orders,
in the ordinary course of business since the Balance Sheet Date; (c) Liens
securing current Taxes, which are not yet due and payable or Taxes the validity
of which are being contested in good faith; and (d) assessments, governmental
charges or levies, or the claims of materialmen, carriers, landlords and like
persons
<PAGE> 37
31
which have arisen in the ordinary course of business and which do not involve
any substantial danger of the sale, forfeiture or loss of any assets.
4.16 Employee Relations. Except as set forth on Schedule 4.16, (a)
neither the Company nor any of its Subsidiaries is a party to, or bound by, any
collective bargaining agreement or any Contract or Other Agreement with a labor
union or labor organization; and (b) neither the Company nor any of its
Subsidiaries has at any time during the last two years had, nor to the
Knowledge of the Seller, is there now threatened any strike, picket, boycott,
work stoppage or slowdown or other labor dispute. To the Knowledge of the
Seller (without investigation or inquiry), there exists no fact or circumstance
that could reasonably be likely to give rise to any Claim by Thorn or the
Seller for willful misconduct or fraud against any officer or director or
former officer or director (in their capacity as such) of the Company or any of
its Subsidiaries, or any Person employed by the Company or any of its
Subsidiaries on the date hereof.
4.17 Intellectual Property. Schedule 4.17(a) hereto sets forth the
true and correct list of all registered patents, trademarks and copyrights (or
applications therefor) held by the Company or any of its Subsidiaries other
than the name "Thorn" or any combination of words included in the name "Thorn."
Except as set forth on Schedule 4.17(b), the Company or its Subsidiaries
possess ownership or have the right to use all patents, copyrights, trademarks,
service marks, trade secrets and other proprietary intellectual property rights
other than the name "Thorn" or any combination of words included in the name
"Thorn" (the "INTELLECTUAL PROPERTY") necessary for the
<PAGE> 38
32
operation of its business, except where the failure of the Company or its
Subsidiaries to own or have such right to use any Intellectual Property would
not have a Material Adverse Effect on the Company. Neither the Company nor any
of its Subsidiaries is (a) to the Knowledge of the Seller, infringing upon the
intellectual property rights of others in connection with its business; or (b)
has received any notice of conflict with respect to the intellectual property
rights of any other Person, except, in each case, as would not have a Material
Adverse Effect on the Company.
4.18 Finders and Investment Bankers. Except for Credit Suisse
First Boston ("CSFB"), no broker, finder, agent or similar intermediary (a
"BROKER") has acted on behalf of the Company or any of the Subsidiaries in
connection with this Agreement or the Contemplated Transactions, and that,
except for the fees and expenses of CSFB, all of which shall be borne by the
Seller, there are no brokerage commissions, finders' fees or similar fees or
commissions payable in connection therewith based on any agreement, arrangement
or understanding with the Company or any of its Subsidiaries or any action
taken by the Company or any of its Subsidiaries.
4.19 Inventory. All inventory of the Company and its Subsidiaries
was purchased, acquired or ordered in the ordinary course of business and
consistent with past practice. The Company's rental merchandise in the
aggregate is of a quality useable and merchantable, except for items of
obsolete merchandise or merchandise below standard quality, which have been in
the aggregate written down to the lower of cost or realizable market value, or
for which adequate reserves have been provided.
<PAGE> 39
33
4.20 Insurance. The Company maintains fire and casualty and
general liability, business interruption, product liability, workers
compensation and automobile policies with insurance carriers. A complete list
of such policies in effect on the date hereof is set forth on Schedule 4.20.
Neither the Company nor any of its Subsidiaries has received any notice of any
material premium increase or cancellation with respect to any such insurance
policy. During the last two years, neither the Company nor any of its
Subsidiaries has been refused any basic insurance coverage sought or applied
for.
4.21 Usage of Thorn Name. Neither the Company nor any of its
Subsidiaries use the name "Thorn" or any variant thereof or the "Thorn" logo in
the Stores, other than with respect to the operations of Thorn Leasing
Concepts.
4.22 Rental Purchase Agreements. Except as set forth on Schedule
4.22, to the Knowledge of the Seller, (i) all Rental Purchase Agreements, taken
as a whole, were entered into by the Company in the ordinary course of business
in a manner consistent with the Company's business practices and (ii) the
Rental Purchase Agreements, taken as a whole, which by their terms have not
terminated, expired or otherwise lapsed prior to the date hereof are valid and
binding upon the Company in accordance with their terms.
4.23 Product Liability. Schedule 4.23 sets forth the Company's
general warranty policy with respect to products rented or sold by the Company
or its Subsidiaries at any Store. Other than as described on Schedule 4.23,
the Company has not provided any written or, to the Knowledge of Seller,
without inquiry and
<PAGE> 40
34
investigation, oral express warranties with respect to products rented or sold
by the Company or its Subsidiaries at any Store.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Seller as follows:
5.1 Corporate Organization. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
The Buyer is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, that would not, individually or in the aggregate,
have a Material Adverse Effect on the Buyer. The Buyer has previously
delivered or made available to the Seller correct and complete copies of the
certificate of incorporation and by-laws, each as currently in effect, of the
Buyer.
5.2 Power and Authority. This Agreement has been duly authorized,
executed and delivered by the Buyer and (assuming due execution and delivery
hereof by the other parties hereto) this Agreement constitutes a valid and
binding obligation of the Buyer enforceable against the Buyer in accordance
with its terms. Except for filings and other applicable requirements under the
HSR Act, the execution and
<PAGE> 41
35
delivery by the Buyer of this Agreement, the consummation of the Contemplated
Transactions and the performance by the Buyer of this Agreement in accordance
with its terms and conditions (a) is duly authorized by the Board of Directors
of the Buyer and no other corporate action on the part of the Buyer is required
for the authorization, execution, delivery and performance by the Buyer of this
Agreement and the consummation of the Contemplated Transactions; and (b) will
not (i) violate any provision of the certificate of incorporation of the Buyer;
(ii) require the Buyer to obtain any consent, approval, authorization or action
of, or make any filing with or give any notice to, any Governmental Entity or
any other Person; (iii) violate, conflict with or result in the breach of any
of the terms and conditions of, result in a material modification of the effect
of, otherwise cause the termination of or give any other contracting party the
right to terminate, or constitute (or with notice or lapse of time or both
constitute) a default (or give rise to any right of termination, cancellation
or acceleration) under any of the terms, conditions or provisions of any
Contracts and Other Agreements to which the Buyer is a party or by or to which
the Buyer may be bound or subject; or (iv) violate any Law or Order of any
Governmental Entity applicable to the Buyer.
5.3 Investment Intent. The Buyer is purchasing the Shares for its
own account for investment and not with a view to, or for sale in connection
with, any distribution of any of the Shares. The Buyer acknowledges that the
sale of the Shares hereunder has not been registered under the Securities Act
of 1933, as amended, or any applicable state securities laws and that the
Shares may only be sold, transferred,
<PAGE> 42
36
offered for sale or otherwise disposed of under an effective registration
statement under the Securities Act of 1933, as amended, or under an exemption
therefrom and pursuant to state securities laws and regulations as applicable.
The Buyer has no contract, undertaking, agreement or arrangement with any
Person to sell, hypothecate, pledge, donate, or otherwise transfer (with or
without consideration) to any such Person any of the Shares, and the Buyer has
no present plans or intention to enter into any such contract, undertaking,
agreement, or arrangement.
5.4 Pending Actions. There is no pending or, to the knowledge of
the Buyer, threatened Claim before any Governmental Entity to restrain or
prevent the consummation of the Contemplated Transactions or which would
reasonably be expected to materially impair or delay the ability of the Buyer
to consummate the Contemplated Transactions.
5.5 Finders and Investment Bankers. Except for Bear, Stearns &
Co. Inc., no Broker has acted on behalf of the Buyer in connection with this
Agreement or the Contemplated Transactions, and, except for the fees and
expenses of Bear, Stearns & Co. Inc., all of which shall be borne by the Buyer,
there are no brokerage commissions, finders' fees or similar fees or
commissions payable in connection therewith based on any agreement, arrangement
or understanding with the Buyer, or any action taken by the Buyer.
5.6 Financial Capability. The Buyer has received commitment
letters (the "COMMITMENT LETTERS") from financing sources enabling the Buyer to
obtain financing for the Contemplated Transactions which, in accordance with
the terms
<PAGE> 43
37
thereof, are in an amount necessary to fund the Purchase Price and all fees and
expenses of the Buyer in connection with the Contemplated Transactions. True
and correct copies of the Commitment Letters have been provided to the Seller
and are set forth on Schedule 5.6. As of the date hereof, the Buyer is not
aware of any facts or circumstances with respect to the Buyer or the lenders
under the Commitment Letters that create a reasonable basis for the Buyer to
believe that the Buyer will not be able to obtain financing in accordance with
the terms of the Commitment Letters. The Buyer agrees to promptly notify the
Seller if the statements in the immediately proceeding sentence are no longer
true and correct.
ARTICLE 6
COVENANTS
6.1 Conduct of Business of the Company. Except as contemplated by
this Agreement or as set forth on Schedule 6.1, during the period from the date
hereof to the Closing Date, the Seller shall cause the Company and its
Subsidiaries to conduct their respective businesses in the ordinary course of
business consistent with past practice. Except as otherwise contemplated by
this Agreement or as set forth on Schedule 6.1, during the period from the date
hereof to the Closing Date the Seller shall cause the Company and its
Subsidiaries not to, without the prior written consent of the Buyer (which
consent shall not be unreasonably withheld or delayed):
<PAGE> 44
38
(a) amend or propose to amend its certificate of
incorporation or by-laws (or comparable organizational documents) other than to
change the name of any of its Subsidiaries;
(b) authorize for issuance, issue, sell, pledge, deliver or
agree or commit to issue, sell, pledge or deliver (whether through the issuance
or granting of any options, warrants, calls, subscriptions, stock appreciation
rights or other rights or other agreements) any Capital Stock of the Company or
any of its Subsidiaries or any securities convertible into or exchangeable for
Capital Stock of the Company or any of its Subsidiaries;
(c) split, combine, redeem or reclassify any class of
Capital Stock of the Company or any of its Subsidiaries;
(d) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its Subsidiaries;
(e) increase in any manner the compensation payable or to
become payable by the Company or any of its Subsidiaries to any of their
respective directors, officers or employees, other than in the ordinary course
of business consistent with past practice or as required under any Contract and
Other Agreement in existence on the date hereof, or grant any severance or
termination pay to any director, officer or employee of the Company or any of
its Subsidiaries, other than in accordance with existing policies or as
required under any Contract and Other Agreement in existence on the date
hereof;
<PAGE> 45
39
(f) enter into any Contracts and Other Agreements or oral
contracts and other agreements (other than Contracts and Other Agreements of
the types permitted under clauses (h) and (m) below) that are material to the
Company and its Subsidiaries taken as a whole, other than (x) in connection
with any Indemnified Litigation (provided, that (i) such Contract and Other
Agreement does not contain an admission of liability on the part of the Company
or its Subsidiaries or any restrictions on the future operations of the Buyer
or the Company or its Subsidiaries and (ii) the Buyer shall have consented
thereto, which consent shall not be unreasonably withheld or delayed) or (y) in
the ordinary course of business consistent with past practice, or otherwise
make any material change in any Contract and Other Agreement in existence on
the date hereof that is material to the Company and its Subsidiaries taken as a
whole, other than in connection with any Indemnified Litigation (provided, that
(i) such material change does not include an admission of liability on the part
of the Company or its Subsidiaries or any restrictions on the future operations
of the Buyer or the Company or its Subsidiaries and (ii) the Buyer shall have
consented thereto, which consent shall not be unreasonably withheld or
delayed);
(g) except as may be required as a result of a change in Law
or in GAAP, change any of the accounting principles or practices used by the
Company and its Subsidiaries from those set forth in the Audited Financial
Statements;
(h) except for inventory in the ordinary course of business,
sell abandon or make any other disposition of any asset that is material to the
Company
<PAGE> 46
40
and its Subsidiaries taken as a whole or purchase or otherwise acquire any
asset which would be material to the Company and its Subsidiaries taken as a
whole;
(i) enter into or amend any Contract or Other Agreement with
any Affiliate of the Company, other than any such Contract or Other Agreement
that may be terminated, without penalty or any further obligation on the part
of any party, upon no more than 10 days notice or on the Closing Date;
(j) except with respect to the scheduled roll out of
computer hardware associated with the Store point-of-sale-system (IRIS System)
consistent with Schedule 6.1(j), the Company will not make or commit to make
(i) capital expenditures for fixed assets or real property with respect to the
Company's automotive business in an aggregate amount in excess of $10,000, (ii)
other capital expenditures in aggregate amount of the product of (x) the number
of complete months since the date of this Agreement to the Closing Date and (y)
$4 million or (iii) any capital expenditures outside the ordinary course of
business;
(k) enter into any industry which the Company or any of its
Subsidiaries is not engaged in as of the date hereof or which is not reasonably
incidental to any business the Company or any of its Subsidiaries is engaged in
as of the date hereof;
(l) sell, abandon, transfer or make any other disposition of
any Store, other than any sales, transfers or other dispositions to the Company
or to any Subsidiary of the Company;
<PAGE> 47
41
(m) enter into any Contract and Other Agreement with any
Person pursuant to which such Person agrees to be employed by the Company or
any of its Subsidiaries, other than pursuant to which the Person is employed by
the Company or its Subsidiaries on "at will" basis and such Person's
entitlement, if any, to severance benefits is not greater than the severance
benefits provided under the severance policies of the Company and its
Subsidiaries in effect as of the date hereof, or amend in any material respect
any employment agreement in existence on the date hereof, with any officer,
director or employee of the Company or its Subsidiaries; or
(n) agree, commit or arrange to do any of the foregoing.
6.2 Access and Information. Between the date of this Agreement
and the Closing, the Seller shall afford the Buyer and its authorized
representatives (including its employees, officers, directors, Affiliates,
accountants, financial advisors, legal counsel and potential financing sources)
(collectively, the "BUYER REPRESENTATIVES") reasonable access during normal
business hours and upon reasonable prior notice to all of the properties,
personnel, Contracts and Other Agreements, books and records of the Company and
its Subsidiaries and shall promptly deliver or make available to the Buyer
information concerning the business, properties, assets and personnel of the
Company and its Subsidiaries as the Buyer may from time to time reasonably
request; provided, however, that nothing herein shall require the Seller, the
Company or any of its Subsidiaries to disclose any information to the Buyer or
any Buyer Representative if such disclosure would be in violation of applicable
Law or the provisions of any confidentiality agreement to which the Company or
any of its
<PAGE> 48
42
Subsidiaries is a party or otherwise bound. The Seller shall, and shall cause
the Company and each of its Subsidiaries to, use all commercially reasonable
efforts to obtain any and all necessary consents so that it may disclose any
such information without violating any applicable Law or the provisions of any
such confidentiality agreement. The Buyer shall hold, and shall cause each
Buyer Representative to hold, all Evaluation Material (as defined in the
Confidentiality Agreement dated March 10, 1998, between the Seller, Thorn and
the Buyer (the "CONFIDENTIALITY AGREEMENT") in confidence in accordance with
the terms of the Confidentiality Agreement and, in the event of the termination
of this Agreement for any reason, the Buyer promptly shall return or destroy
all Evaluation Material in accordance with the terms of the Confidentiality
Agreement. Notwithstanding the foregoing sentence, in connection with the
financings contemplated by the Commitment Letters, the Buyer may include such
information regarding the Company and its Subsidiaries in any prospectus,
offering memoranda or other documentation to the extent that the inclusion
therein is customary with financings of the type contemplated thereby;
provided, that the Seller shall consent to the inclusion of such Evaluation
Material, which consent shall not be unreasonably withheld or delayed. The
Seller shall cause the Company to deliver to the Buyer, as promptly as
practicable following the receipt thereof by Thorn, the monthly financial
reports known as the "M Reports" which the Company provides as of the date
hereof to Thorn; provided, however, that in no event shall the Company be
required to create or furnish any new report or data that the Company does not
as of the date hereof create or furnish to Thorn.
<PAGE> 49
43
6.3 Government Filings. As soon as practicable, but in any event
within seven Business Days after the date hereof, the parties shall, and shall
cause their Affiliates to, make any and all filings and submissions to any
Governmental Entity which are required to be made in connection with the
Contemplated Transactions, including all notification and report forms required
for compliance with the HSR Act.
6.4 Public Announcements. No party hereto will issue or cause the
publication of any press release or similar public announcement or
communication concerning the execution or performance of this Agreement without
the prior written consent of the other parties hereto; provided, however, that
nothing herein will prohibit any party from issuing or causing publication of
any such press release or similar public announcement or communication to the
extent that such action is required by Law, or the rules and regulations of
each stock exchange upon which the securities of one of the parties (or any
Affiliate thereof) is listed, in which case the party making such determination
will, if practicable in the circumstances, use reasonable efforts to allow the
other party reasonable time to comment on such release or announcement in
advance of its issuance.
6.5 Indemnification of Brokerage. The Buyer agrees to pay the
fees and expenses of Bear, Stearns & Co. Inc. and indemnify and hold harmless
the Seller from any Claim or demand for commission or other compensation by any
Broker claiming to have been employed by or on behalf of the Buyer, and to bear
the cost of legal expenses incurred in defending against any such Claim. The
Seller agrees to pay the fees and expenses of CSFB and indemnify and hold
harmless the Buyer and the
<PAGE> 50
44
Company from any Claim or demand for commission or other compensation by any
Broker claiming to have been employed by or on behalf of the Seller, the
Company or any Subsidiary thereof, and to bear the cost of legal expenses
incurred in defending against any such Claim.
6.6 Intercompany Accounts. At the Closing, Thorn shall cause
Thorn Finance to repay to the Company and its Subsidiaries all amounts, if any,
owed to the Company and its Subsidiaries by Thorn Finance, calculated as of the
Closing Date (immediately prior to consummation of the Contemplated
Transactions). Two Business Days prior to the Closing, the Seller shall cause
the Company to deliver to the Buyer a certificate signed by an officer of the
Company indicating the amount calculated as of the Closing Date (immediately
prior to consummation of the Contemplated Transactions) owed by the Company or
any of its Subsidiaries to Thorn Finance or owed by Thorn Finance to the
Company or any of its Subsidiaries, as the case may be.
6.7 Continuation of Employment Benefits and Credit For Past
Service.
(a) After the Closing, except the employees listed on the
Schedule 6.7, the Buyer shall cause the Company and its Subsidiaries to employ
the Closing Date Employees on terms consistent with Buyer's current employment
practices. Notwithstanding the foregoing, such employment shall be at will and
neither the Buyer, the Company nor its Subsidiaries shall be under any
obligation to employ
<PAGE> 51
45
any individual and nothing herein shall require the Company or any Subsidiary
to provide and maintain any particular benefit arrangement.
(b) The Buyer agrees that the Closing Date Employees shall
be given credit for all service with the Company or any of its Subsidiaries to
the extent credited under the Company benefit plans for purposes of
eligibility, vesting and benefit accrual under any employee benefit plans of
the Buyer or new employee benefit plans of the Company and its Subsidiaries in
which the Closing Date Employees become participants following the Closing
Date.
6.8 Transfer Taxes. The Buyer agrees to pay all sales, transfer,
recording, deed, documentary, stamp and other similar taxes due to any federal,
state or local United States jurisdiction arising from the sale of the Shares,
including, but not limited to, any Real Property transfer taxes.
6.9 New Zealand Asset Disposition. Prior to the Closing, the
Seller shall cause the Company to sell, assign or otherwise transfer all of the
assets and liabilities of Thorn Rentals Trading, Inc. relating to the business
of Thorn Rentals Trading, Inc. conducted in New Zealand (collectively, the "NEW
ZEALAND OPERATIONS") to a Person other than the Company or a Subsidiary of the
Company.
6.10 Company Consents. The Seller shall, and shall cause the
Company to, use commercially reasonable efforts, at the Seller's expense, to
obtain or make, prior to or at the Closing, all Company Consents.
6.11 Indemnification of Directors and Officers. The Buyer agrees
that all rights to indemnification for acts or omissions occurring prior to the
Closing Date
<PAGE> 52
46
now existing in favor of the current or former directors or officers of the
Company and its Subsidiaries as provided in their respective certificates of
incorporation or by-laws (or other comparable organizational documents) shall
survive the Closing Date.
6.12 Expenses. The parties to this Agreement shall, except as
otherwise specifically provided herein, bear their respective expenses incurred
in connection with the preparation, execution and performance of this Agreement
and the Contemplated Transactions, including, without limitation, all fees and
expenses of agents, representatives, counsel and accountants. Without limiting
the generality of the foregoing, (i) all legal, accounting and other fees,
costs and expenses of professional advisors (including public relations
advisors) incurred by the Company, the Seller, Thorn or any Affiliate thereof
in connection with the preparation, negotiation and execution of this
Agreement, the Contemplated Transactions or any other transaction in respect of
the sale of the Company shall be paid by the Seller and (ii) the Buyer shall
pay all filing fees under the HSR Act.
6.13 Further Assurances.
(a) General. Each of the parties shall execute such
documents, certificates, notices and other instruments and take such further
actions as may be reasonably required or desirable to carry out the provisions
hereof and the Contemplated Transactions. Each such party shall use
commercially reasonable efforts to fulfill or obtain the fulfillment of the
conditions to the Closing set forth in Articles 10 and 11.
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47
(b) Governmental Approvals. Without limiting the provisions
set forth in paragraph (a) above, (i) the Buyer, the Seller and their
respective Affiliates shall use commercially reasonable efforts to take or
cause to be taken all actions necessary, proper or advisable to obtain any
consent, waiver, approval or authorization relating to any statute, rule,
regulation, order, decree, administrative and judicial doctrine, and other Laws
which are designed or intended to prohibit, restrict or regulate actions having
the purpose or effect of monopolization or restraint of trade ("COMPETITION
LAWS") that is required for the consummation of the Contemplated Transactions,
which efforts shall include, without limitation: (x) the proffer by the Buyer
of its willingness to accept an Order that will not have a materially adverse
impact on the economics of the Contemplated Transactions providing for the
divestiture by the Buyer of such of the assets of the Company (or in lieu
thereof assets and businesses of the Buyer), the licensing of any Intellectual
Property rights of the Company and/or entry into tolling agreements by the
Company, in each case as may be necessary for the Buyer to forestall any Order
(whether preliminary, temporary or permanent) or the taking of any other action
by any Governmental Entity to restrain, enjoin or otherwise prohibit the
consummation of the Contemplated Transactions; and (y) an offer to hold
separate such assets and businesses pending such divestiture and/or the entry
into such licensing or tolling agreements, as the case may be. In the event
that despite the Buyer's compliance in all respects with the obligation in the
preceding sentence, an Order is sought to be imposed that would prevent, delay
or make unlawful the consummation of the Contemplated Transactions, the Buyer
agrees to contest and
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48
resist any action seeking to have any such Order imposed, to use commercially
reasonable efforts to take promptly any and all steps (including the appeal
thereof, the posting of a bond or the taking of the steps set forth in this
paragraph (b)) necessary to vacate, modify or suspend any such Order so as to
permit such consummation as promptly as practicable after the date hereof. In
the event that regulatory authorities require the divestiture or the holding
separate by the Buyer following the Closing of any of the assets or entities of
the Company or its Subsidiaries, or the entry into any licensing or tolling
arrangements, no adjustment shall be made to the Purchase Price and the Buyer
shall be required to hold such assets or entities separate and, if ordered,
divest them following the Closing and enter into such licensing or tolling
agreements.
The parties hereto will consult and cooperate with one another, and
consider in good faith the views of one another in connection with any
analysis, appearances, presentations, memoranda, briefs, arguments, opinions
and proposals made or submitted by or on behalf of any party hereto in
connection with a proceeding under or relating to the HSR Act or any other
Competition Law. The Buyer and the Seller agree that the other party's legal
counsel may, if such other party so wishes, participate in any meeting with any
Governmental Entity with jurisdiction over the enforcement of any applicable
Law regarding this Agreement or the Contemplated Transactions to the extent
permitted by such Governmental Entity and to advise each other in advance of
any such meeting.
(c) Thorn Shareholder Approval. Thorn will, within 21 days
after the date hereof, subject to the existence of an Event of Force Majeure,
dispatch a
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49
circular to the shareholders of Thorn so as to inform them of this Agreement
and the Contemplated Transactions and so as to convene the General Meeting of
Thorn referred to in Section 11.5 on or before the 18th day after the date such
circular was dispatched to the shareholders of Thorn, or, if such 18th day is
not a Business Day, the next following Business Day. Thorn agrees with the
Buyer that, provided it is not inconsistent with their fiduciary duties and
good faith obligation under English law, the directors of Thorn will recommend
to Thorn's shareholders approval of the resolution referred to in Section 11.5
and, if such recommendation is given and not withdrawn, will vote any shares
held beneficially by them in Thorn in favor of such resolution.
Notwithstanding the foregoing, nothing herein shall in any way prohibit any
director of Thorn from not giving, amending, withdrawing, or modifying in any
respect his recommendation with respect to this Agreement and the Contemplated
Transactions if such director, in his sole discretion, reasonably determines
that he cannot give the recommendation in good faith or that giving the
recommendation is not consistent with his fiduciary duties.
(d) Franchise Assistance. The Seller shall, and shall cause
the Company to, cooperate with the Buyer and provide such reasonable assistance
to the Buyer as it may, from time to time, reasonably request regarding the
sale, transfer or other disposition of the stores of the Company and its
Subsidiaries operated pursuant to the Franchise and Development Agreements or
the modification or amendment of any Franchise and Development Agreement;
provided, that the foregoing shall not impose any obligation on the Seller,
Thorn or the Company to incur any expense, liability or
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50
other obligation other than expenses, liabilities or other obligations, which
in the aggregate, are de minimis.
6.14 Change of Name. Within 5 Business Days following the Closing,
the Buyer shall cause the Company and each of its Subsidiaries to amend their
respective certificates of incorporation (and other organizational documents)
and take all other reasonable actions requested by the Seller, to change the
Company's or such Subsidiary's name to a name that does not include the word
"Thorn" or any variant thereof. The name "Thorn" and the "Thorn" logo shall
remain the exclusive property of the Seller and its Affiliates after the
Closing, and except as provided in the following sentence, neither the Buyer
nor the Company nor any of its respective Subsidiaries or Affiliates shall have
any right for any purpose whatsoever to the use of such name or logo or any
other form, combination or usage thereof which might reasonably be confused
with such name or logo. Notwithstanding the foregoing sentence, the Company
and its Subsidiaries may, for a period of six months following the Closing
Date, continue using the property and assets of the Company and its
Subsidiaries on which the name "Thorn" or any variant thereof or the "Thorn"
logo appears; provided, however, that the Buyer shall cause the Company and its
Subsidiaries not to expand the use of such name or logo to any property or
assets of the Company and its Subsidiaries acquired after, or which did not
bear such name or logo on, the Closing Date, and the Buyer shall cause the
Company and its Subsidiaries to use its commercially reasonable efforts to
cease using such name or logo on its respective properties and assets as soon
as possible following the Closing. Following the termination of such six month
period,
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neither the Buyer nor the Company nor any of its respective Subsidiaries or
Affiliates shall have any rights whatsoever to (i) the use of the name "Thorn"
or any variant thereof or the "Thorn" logo and (ii) the use of any property or
asset which has the name "Thorn" or any variant thereof or the "Thorn" logo
thereon.
6.15 Tax Returns.
(a) The Seller shall cause the Company and its Subsidiaries
to prepare and timely file all Tax Returns of the Company and its Subsidiaries
required to be filed by any of them for the periods ending on or prior to March
31, 1998. The Seller shall (i) prepare such Tax Returns in a manner consistent
with past practices; (ii) consult in good faith with the Buyer and its agents
as to the contents of such Tax Returns; (iii) make the relevant books, records,
other materials (including accountants' working papers) and documents available
to the Buyer or its agents; and (iv) cooperate fully with them in connection
therewith. Seller shall cause the Company and its Subsidiaries to pay when due
all Taxes payable prior to the Closing Date for periods ending on or before and
including the Closing Date.
(b) If any Tax Return described in Section 6.15(a) has not
been filed on or before the Closing Date, the Buyer shall be responsible for
the timely filing of such Tax Return. If the preparation of any such Tax
Return has not been completed by the Seller prior to the Closing Date, the
Buyer shall complete the preparation of such Tax Return in accordance with the
principles set forth in Section 6.15(a) and shall present it to the Seller no
later than 60 days before the final due date for such Tax Return (including
extensions). Thereafter, the Buyer, unless the Seller
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52
objects to any item included in such Tax Return within 30 days after receipt
thereof, shall timely file such Tax Return. If the Seller does so object to
any item, the Buyer shall not file such Tax Return without Seller's consent,
which shall not be unreasonably withheld or delayed. Buyer shall cause the
Company to pay when due all Taxes payable after the Closing Date for periods
ending on or before the Closing Date.
(c) The Buyer shall cause the Company to prepare and file
all Tax Returns of the Company and its Subsidiaries required to be filed by
them subsequent to the Closing Date for periods beginning after March 31, 1998.
With respect to periods beginning after March 31, 1998, and ending on or before
the Closing Date, the Seller shall (i) make available to the Buyer or its
agents, relevant books, records, other materials (including accountants'
working papers) and documents and (ii) cooperate fully with the Buyer and its
agents in connection with the preparation of such Tax Returns. To the extent
any such Tax Return filed subsequent to the Closing Date includes any period
prior to the Closing Date, and may give rise to any obligation of the Seller to
indemnify the Buyer under Section 8.1, the Buyer shall (i) prepare such Tax
Return in a manner consistent with past practices; (ii) consult in good faith
with the Seller and its agents as to the contents of such Tax Returns; (iii)
make the relevant books, records, other materials (including accountants'
working papers) and documents available to the Seller or its agents; (iv)
cooperate fully with them in connection therewith; and (v) shall not file such
Tax Return without the Seller's consent, which shall not be unreasonably
withheld or delayed.
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53
(d) Neither the Company nor any Subsidiary shall file any
amended Tax Return for any period ending on or before the Closing Date without
the consent of the Seller, which consent shall not be unreasonably withheld or
delayed.
(e) The Buyer will provide the Seller with such cooperation
and information as may be reasonably requested in preparing and filing the Tax
Return, amended Tax Return or claim for refund, determining a liability for
Taxes or a right to a refund of Taxes, or participating in or conducting any
audit or other proceeding in respect of Taxes. The Buyer shall make its
employees available on a basis convenient to the Seller to provide explanations
of any documents or information provided hereunder.
(f) To the extent not accrued on the Audited Closing Balance
Sheet or otherwise accounted for through any adjustment procedure under Section
1.4, any refund of Taxes for any period ending on or before the Closing Date,
other than a refund of Taxes resulting from a carryback of a loss from a
taxable year of the Company and its Subsidiaries ending after the Closing Date,
shall be for the account of the Seller.
6.16 Employee Payments.
(a) Effective as of the Closing, the Seller shall cause the
Company and the Company's Subsidiaries to terminate their respective employees'
participation in the following incentive compensation programs: (i) the Thorn
Senior Executive Share Rights Plan (sometimes referred to as the Thorn Senior
Executive Share Option Plan), (ii) the Thorn Share Option Plan, (iii) the Thorn
Share Purchase
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Plan, (iv) the Thorn Americas Inc. Middle Management Incentive Plan, (v) the
Thorn Senior Executive Incentive Plan and (vi) the Thorn Long Term Incentive
Plan (collectively, the "INCENTIVE PLANS").
(b) The Buyer shall, or shall cause the Company to, pay (i)
all amounts due to employees of the Company and its Subsidiaries in respect of
the Incentive Plans to the extent such amounts are payable in cash, at such
time as such amounts are determinable and due under the terms of the respective
Incentive Plans, and (ii) within ten (10) Business Days following the Closing,
all amounts set forth on Schedule 6.16 hereto and all amounts payable pursuant
to Section 3.4(iv) of the Employment Agreement referred to in item No. 5 on
Schedule 4.13(a)(i).
(c) The Buyer shall, or shall cause the Company to, provide
all amounts and benefits and all other severance and other payments due with
respect to any employee of the Company or any of its Subsidiaries who becomes
entitled to any payment or benefits as a result of such employee's termination
of employment on or after the Closing pursuant to the letters and agreements
listed on Schedule 4.14.
(d) The estimated aggregate amount of the payments to be
made by the Buyer or the Company pursuant to Section 6.16(b) (collectively, the
"EMPLOYEE PAYMENTS") is $28.9 million (the "ESTIMATED AMOUNT"). To the extent
the aggregate amount of the payments actually made by the Buyer or the Company
pursuant to section 6.16(b) (the "ACTUAL AMOUNT") exceeds the Estimated Amount,
the Seller shall pay to the Buyer an amount equal to the excess of the Actual
Amount over the Estimated Amount. To the extent the Estimated Amount exceeds
the Actual
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55
Amount, the Buyer shall pay to the Seller an amount equal to the excess of the
Estimated Amount over the Actual Amount. The foregoing amounts shall be
determined by Ernst & Young LLP (the "ACCOUNTING FIRM"). The determination of
the Accounting Firm will be completed as soon as practicable following the last
Employee Payment. Any amount payable under this Section 6.16(d) by the Buyer
to the Seller or the Seller to the Buyer, as the case may be, other than a
payment made in connection with a Tax Benefit (described below), shall be paid
within 10 days of such determination of the Accounting Firm. The Buyer and
Seller shall fully cooperate with the Accounting Firm to develop the
information necessary to give effect to this Section 6.16(d) and the
determination of the Accounting Firm shall be conclusive and binding on both
Buyer and Seller. If payment by the Buyer or the Company of the Actual Amount
caused, directly or indirectly, a reduction (a "TAX BENEFIT") in the amount of
the Company's or any of its Subsidiaries' liability for Taxes ("TAX LIABILITY")
in a taxable year or years ending after the Closing Date, then the Buyer shall
pay to the Seller the amount of such Tax Benefit within 30 days of the date
such reduction occurs. The Tax Benefit shall be deemed to occur, for purposes
of this Section 6.16(d), on the date on which the Company files a Tax Return,
including, without limitation, an amended Tax Return, for a taxable year ending
after the Closing Date reflecting a Tax Liability reduced by reason of the
aforesaid payment by the Buyer or the Company of the Actual Amount.
(e) If, at any time after the Closing Date, the IRS or any
other taxing authority disallows, or proposes to disallow, any Tax Benefit for
which the
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56
Buyer has paid the Seller pursuant to Section 6.16(d) hereof, the Buyer will
promptly give written notice to the Seller that such issue has been raised and
information in reasonable detail relating thereto. The Buyer shall not concede
or settle any issue with respect to any Tax Benefit without the prior written
consent of the Seller, which shall not be unreasonably withheld. If any Tax
Benefit described in this Section 6.16(e) is ultimately disallowed, or the
amount thereof is reduced by any final administrative or judicial
determination, or as a result of any settlement or agreement with respect to
the liability of the Buyer, the Company or its Subsidiaries, or if the amount
of any such Tax Benefit is otherwise reduced, then the Seller will repay to the
Buyer the amount of such Tax Benefit previously paid over to the Seller (or the
portion thereof that has been disallowed or reduced, as the case may be), with
applicable interest.
6.17 Certain Existing Claims.
(a) Subject to Sections 6.17(b) and 6.17(c), the Seller
shall indemnify, defend and hold harmless the Buyer from and against all
losses, liabilities, damages, deficiencies, judgments, assessments, fines,
settlements, costs and expenses (including without limitation interest,
penalties and reasonable fees and disbursements of external counsel, experts
and consultants) (collectively, the "INDEMNIFIED LITIGATION LOSSES") incurred
by the Company in respect of any Claim listed on Schedule 6.17 (each, an
"INDEMNIFIED LITIGATION").
(b) The Seller's indemnification obligation under Section
6.17 shall be subject to the Buyer causing the Company to (i) appropriately
defend each Indemnified Litigation, (ii) retain counsel with respect to each
Indemnified Litigation
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57
reasonably acceptable to the Seller, (iii) keep the Seller and, at the Seller's
request, its Representatives informed of all material developments with respect
to each Indemnified Litigation, (iv) provide, on a prompt and timely basis,
such information as is reasonably requested by the Seller and its
Representatives with respect to each Indemnified Litigation and (v) not settle
or compromise any Indemnified Litigation without the Seller's prior written
consent, which shall not be unreasonably withheld or delayed. Other than as
provided in the immediately prior sentence, following the Closing, the Company
shall manage and control each Indemnified Litigation.
(c) The Seller's indemnification obligation under Section
6.17 shall also be subject to the Buyer causing the Company to deliver to the
Seller documentation reasonably satisfactory to the Seller setting forth the
following information: (i) the Indemnified Litigation to which the Indemnified
Litigation Loss relates; and (ii) the aggregate amount of such Indemnified
Litigation Loss and supporting invoices and other related documentation in
connection therewith. Upon receipt by the Seller of the documentation referred
to in the immediately prior sentence in accordance therewith and fulfillment of
the Buyer's obligations under Section 6.17(b), the Seller shall fulfill its
obligations under Section 6.17(a) within ten (10) Business Days.
(d) All amounts paid by the Seller under this Section 6.17
shall be treated for all Tax purposes as adjustments to the Purchase Price.
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6.18 Confidentiality, Use of Information.
(a) Except as provided in Section 6.2, the Buyer shall and,
after the Closing, shall cause the Company, and the respective officers,
directors, employees, agents, legal counsel, financial advisors and Affiliates
(collectively, "REPRESENTATIVES") of the Buyer and the Company, to hold in
strict confidence all information concerning the business, assets, properties
and operations of Thorn and its Affiliates (other than, after the Closing, the
Company and its Subsidiaries), other than (i) information that has become
generally available to the public other than as a result of a disclosure by the
Buyer, the Company or any of their respective Representatives and (ii)
information that becomes available to the Buyer, the Company or their
respective Representatives on a nonconfidential basis from a third party having
no obligation of confidentiality to the Seller and which has not itself
received such information directly or indirectly in breach of any such
obligation of confidentiality (collectively, "THORN NON-PUBLIC INFORMATION"),
unless the Buyer, the Company or any of their respective Representatives are
required by applicable Law, judicial order or pursuant to any listing agreement
with, or the rules or regulations of, any securities exchange of which
securities of the Buyer or the Company are listed or traded to disclose such
Thorn Non-Public Information. If the Buyer, the Company or any of their
respective Representatives become legally compelled to disclose any Thorn
Non-Public Information, the Buyer or the Company shall provide the Seller with
immediate notice before such disclosure so that the Seller and its Affiliates
may seek a protective order or other appropriate remedy and the Buyer and the
Company will cooperate with the Seller
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and its Affiliates in any effort to obtain a protective order or other
appropriate remedy. If such protective order or other remedy is not obtained
and the Buyer or the Company is compelled to disclose any Thorn Non-Public
Information, the Buyer shall, and shall cause the Company to, exercise
commercially reasonable efforts to obtain reliable assurance that confidential
treatment, to the extent available, shall be accorded the information. The
Buyer shall not, and shall cause the Company not to, oppose any action by the
Seller or any of its Affiliates to obtain an appropriate protective order or
other reliable assurance that such confidential treatment will be so accorded.
Further, the Buyer shall not, and shall cause the Company and the
Representatives not to, directly or indirectly, use for any purpose whatsoever
any of the Thorn Non-Public Information.
(b) If the Closing occurs, following the Closing Date, the
Seller shall, and shall cause its Representatives to, hold in strict confidence
all information concerning the Business, the assets, properties and operations
of the Company and its Subsidiaries, other than (i) information that has become
generally available to the public other than as a result of a disclosure by the
Seller or any of its Representatives or (ii) information that becomes available
to the Seller on a nonconfidential basis from a third party having no
obligation of confidentiality to the Buyer and which has not itself received
such information directly or indirectly in breach of any such obligation of
confidentiality (collectively, "SELLER NON-PUBLIC INFORMATION"), unless the
Seller or any of its Representatives are required by applicable Law, judicial
order or pursuant to any listing agreement with, or the rules or
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regulations of, any securities exchange of which securities of the Seller or
any of its Affiliates are listed or traded to disclose such Seller Non-Public
Information. If the Seller or its Representatives become legally compelled to
disclose any Seller Non-Public Information, the Seller shall provide the Buyer
with immediate notice before such disclosure so that the Buyer may seek a
protective order or other appropriate remedy and the Seller will cooperate with
the Buyer in any effort to obtain a protective order or other appropriate
remedy. If such protective order or other remedy is not obtained and the
Seller is compelled to disclose any Seller Non-Public Information, the Seller
shall exercise commercially reasonable efforts to obtain reliable assurance
that confidential treatment, to the extent available, shall be accorded the
information. The Seller shall not oppose any action by the Buyer to obtain an
appropriate protective order or other reliable assurance that such confidential
treatment will be so accorded. Further, the Seller shall not, and shall use
its reasonable commercial efforts to cause its Representatives not to, directly
or indirectly, use, for any purpose whatsoever any Seller Non-Public
Information. The parties hereto hereby acknowledge and agree that "Seller
Non-Public Information" shall not include any information that relates,
directly or indirectly, to any business conducted by Thorn or any of its
Affiliates in any jurisdiction other than the United States or Puerto Rico.
(c) The parties hereto acknowledge and agree, without
prejudice to any other rights or remedies they may have, that (i) a breach of
any of the terms or provisions of this Section 6.18 would cause irreparable
damage to the non-breaching party for which adequate remedy at law is not
available and (ii) the
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non-breaching party will be entitled as a matter of right to obtain, without
posting any bond whatsoever, an injunction, restraining order, or other
equitable relief to restrain any threatened or further breach of this Section
6.18, which right will not be exclusive but will be cumulative and in addition
to any other rights and remedies available at law or in equity.
(d) At the Closing, the Seller will assign to the Buyer the
non-exclusive right to enforce the rights of the Seller and its Affiliates
under the confidentiality agreements entered into between CSFB, as agent for
the Seller and Thorn, and the prospective purchasers of the Company.
6.19 Certain Intellectual Property. On or prior to the Closing,
Thorn shall cause Thorn (I.P.) Ltd. to transfer to the Company all of its
right, title and interest in and to the trademarks and trademark applications
listed on Schedule 6.19.
6.20 Thorn Guaranty. Thorn hereby irrevocably, unconditionally and
completely guarantees the full and timely payment and performance of all of the
Seller's obligations under this Agreement, subject to the provisions and
limitations set forth herein. The obligations and liabilities under this
guaranty constitute primary obligations and liabilities of Thorn and shall not
be affected by the absence of any action to enforce obligations of, or
proceedings first against, the Seller.
6.21 Replacement of Letters of Credit. On or prior to the Closing,
the Buyer shall replace (a) the Letters of Credit issued by Midland Bank plc on
behalf of the Company in favor of (i) Travelers Insurance Company and (ii) TKC
III LLC, on behalf of Shaftesbury Insurance Company in favor of Chubb & Sons,
Inc., and on
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behalf of Remco America, Inc. in favor of National Union Fire Insurance
Company; (b) the Letters of Credit issued by Barclays Bank plc on behalf of
Shaftesbury Insurance Company in favor of (i) Employer's Insurance of Wausau,
(ii) Travelers Indemnity Company of Illinois and (iii) Pacific Employers
Insurance Company and (c) all other letters of credit that may be issued in
connection with the business of the Company and its Subsidiaries following the
date hereof. Such replacement letters of credit shall be satisfactory in all
respects to the beneficiaries thereof. Notwithstanding the foregoing, the
aggregate amounts under the letters of credit referred to in this Section 6.21
(other than letters of credit issued in connection with any Claim) and the
guaranties referred to in Section 6.22 (other than any guaranty issued in
connection with any Claim) shall not exceed $28 million.
6.22 Replacement of Guaranties. On or prior to the Closing, the
Buyer shall replace, or provide substitute credit support in lieu of, (a) the
guaranty dated August 2, 1996 executed by Thorn in favor of The First National
Bank of Maryland; (b) the guaranty dated July 23, 1996 executed by Thorn in
favor of The Chase Manhattan Bank; (c) the guaranty dated July 23, 1996
executed by Thorn in favor of Societe General and (d) all other guaranties that
may be issued in connection with the business of the Company and its
Subsidiaries following the date hereof. Such replacement guaranties or
substitute credit support shall be satisfactory in all respects to the
beneficiaries thereof. Notwithstanding the foregoing, the aggregate amounts
under the letters of credit referred to in Section 6.21 (other than any letters
of credit issued in
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63
connection with any Claim) and the guaranties referred to in this Section 6.22
(other than any guaranty issued in connection with any Claim) shall not exceed
$28 million.
6.23 Replacement of Litigation Bonds. On or prior to the Closing,
the Buyer shall either (i) replace the Appeal Bond No. MO80000 posted with the
Superior Court of New Jersey in connection with Robinson v. Thorn Americas et
al. (Docket No. L-O3697-94) (together with any amendments, replacements or
modifications thereof, the "NEW JERSEY BOND") with a replacement bond not to
exceed $163 million satisfactory to the Superior Court of New Jersey which does
not include a guaranty thereof by Thorn or any Affiliate of Thorn or (ii)
provide substitute credit support with respect to the New Jersey Bond such that
the Counter Indemnity dated November 26, 1997 executed by Thorn in respect
thereof and the Letter of Credit from Barclays Bank plc dated December 5, 1997
in respect thereof (together with any amendments, replacements or modifications
thereof, the "NEW JERSEY GUARANTY") may be terminated on the Closing Date. The
Seller shall not enter into any material amendment or modification to the New
Jersey Bond, other than an increase thereof up to $163 million, without the
Buyer's consent, which consent shall not be unreasonably withheld or delayed.
On or prior to the Closing, the Buyer shall also either (i) replace any bond
posted following the date hereof with respect to any Claim with a new bond
which does not include a guaranty by Thorn or any Affiliate of Thorn or (ii)
provide substitute credit support with respect to any such bond such that any
guaranty or other credit support provided by Thorn with respect thereto may be
terminated on the Closing Date. Any costs or expenses incurred by the Buyer in
fulfilling its obligations under this
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Section 6.23 shall be borne solely by the Buyer and shall not be considered
Indemnified Litigation Losses or Losses for any purposes of this Agreement.
6.24 Covenant Not to Compete.
(a) For a period of five years after the Closing Date, each
of Thorn and the Seller covenant and agree that they will not, and will not
permit any Affiliate of Thorn, without the prior written consent of the Buyer,
to directly or indirectly (i) engage in the business of renting-to-own or
renting-to-rent consumer household durable goods, including, without
limitation, televisions, video cassette recorders, stereos, furniture,
appliances, accessories or other like merchandise to the public anywhere within
the United States of America or Puerto Rico; (ii) solicit any current
renting-to-own or renting-to-rent customer of the Company in the United States
or Puerto Rico for the purpose of the activities described in (i) above; (iii)
solicit employees of the Company or any of its Subsidiaries as of the Closing
Date; (iv) have any ownership or similar economic interest in any Person,
whether as a security holder or investor, that engages in the business of
renting-to-own or renting-to-rent consumer household durable goods within the
United States of America or Puerto Rico, other than any ownership or similar
economic interest in any such Person which does not provide Thorn, the Seller
or any Affiliate of Thorn with the power, direct or indirect, to direct or
cause the direction of the management and policies of such Person whether by
contract or otherwise; (v) act as a creditor (other than a trade creditor),
consultant, advisor, representative or agent of or to any Person that engages
in the business of
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renting-to-own or renting-to-rent consumer household durable goods within the
United States of America or Puerto Rico.
(b) Thorn and the Seller acknowledge and agree, without
prejudice to any other rights or remedies the Buyer may have, that (i) a breach
of any of the terms or provisions of this Section 6.24 would cause irreparable
damage to the Buyer and the Company for which adequate remedy at law is not
available and (ii) the Buyer and the Company will be entitled as a matter of
right to obtain, without posting any bond whatsoever, an injunction,
restraining order, or other equitable relief to restrain any threatened or
further breach of this Section 6.24, which right will not be exclusive but will
be cumulative and in addition to any other rights and remedies available at law
or in equity.
6.25 Exclusive Dealing.
(a) The Seller and Thorn shall not, and shall not authorize
or permit any of their respective Representatives to, directly or indirectly,
solicit (including by way of furnishing confidential information solely
regarding the Company) or take other action to facilitate any inquiries or the
making of any proposal which constitutes an Acquisition Proposal from any
Person other than the Buyer or its Representatives (a "THIRD PARTY"), or engage
in any discussions or negotiations relating thereto or in furtherance thereof
or accept any Acquisition Proposal. The Seller shall promptly notify the Buyer
orally (which notice shall promptly be confirmed in writing) of any Acquisition
Proposal or any inquiry or request for confidential information with respect
thereto which the Seller or any of its Representatives may
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receive. For purposes of this Agreement, (x) none of the Seller, Thorn or any
of their respective Representatives shall be deemed to have engaged in
"discussions" if such Person only advises another Person that the Seller, Thorn
and their respective Representatives, as applicable, are precluded from taking
any action that would constitute a violation of this Section 6.25 and (y) none
of the Seller, Thorn or any of their respective Representatives shall be deemed
to have "furnished information" to any other Person if such information is
public information or is furnished in the ordinary course of the investor
relations program of the Seller, Thorn or any of their respective Affiliates,
is required by applicable Law, judicial order or pursuant to any listing
agreement with, or the rules or regulations of, any securities exchange of
which securities of the Seller, Thorn or any of their respective Affiliates are
listed or traded.
(b) The Seller has terminated and has caused its
Representatives to terminate, all solicitations, encouragement, activities,
discussions and negotiations with any Person conducted heretofore by the Seller
or any of its Representatives with respect to any Acquisition Proposal.
(c) As used in this Agreement, "ACQUISITION PROPOSAL" shall
mean any proposal or offer, other than a proposal or offer by the Buyer or any
of its Representatives, with respect to (i) any merger, consolidation, share
exchange, stock purchase, business combination or other similar transaction in
which the Company would be acquired by any Person, (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of the assets of the
Company, in a single transaction or series of transactions (whether related or
unrelated), other than in the ordinary course
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of business and other than in respect of the New Zealand Operations or (iii)
any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing. It being
understood that in no event shall "Acquisition Proposal" include, for any
purpose of this Agreement, any proposal or offer with respect to (i) any
merger, consolidation, share exchange, business combination, tender or exchange
offer (including a self tender offer) or other similar transaction involving
Thorn, (ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of the assets of Thorn, in a single transaction or series of
transactions, unless the assets being sold, leased, exchanged, mortgaged,
pledged or transferred in such transaction or series of transactions include
the Company and not substantially all of the other assets of Thorn, (iii) any
public announcement of a proposal, plan or intention to do any of the foregoing
or any agreement to engage in any of the foregoing.
6.26 Notification of Certain Matters. During the period from the
date hereof to the Closing Date, each party shall give prompt written notice to
the other of (a) the occurrence, or failure to occur, of any event of which it
becomes aware that has caused or that would be reasonably likely to cause any
representation or warranty of such party contained in this Agreement (other
than those representations and warranties that address matters only as of a
particular date or only with respect to a specific period of time) to be untrue
or inaccurate in any material respect, (b) the occurrence, or failure to occur,
of any event of which it becomes aware that has caused or that would be
reasonably likely to cause any representation or warranty of such party
contained in this
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Agreement that addresses matters only as of a particular date or only with
respect to a specific period of time to be untrue or inaccurate in any material
respect as of such date or with respect to such period, (c) the existence of
any Claim that, had it existed on the date hereof, would have been required to
be disclosed on Schedule 4.9 and (d) the failure of such party to comply with
or satisfy, in any material respect, any covenant, condition or agreement to be
complied with or satisfied by it hereunder. In the event the Buyer consummates
the Contemplated Transactions, (i) any information regarding any inaccuracy or
breach of any representation, warranty or covenant of the Seller or Thorn
contained in this Agreement delivered to the Buyer pursuant to this Section
6.26 or disclosed on the Seller's certificate delivered pursuant to Section
10.1, shall, for purposes of Section 8.1, be deemed not to be a breach of the
relevant representation, warranty or covenant hereunder, and (ii) the Seller
shall have no liability for any Losses arising out of or resulting from the
specified inaccuracy or breach; provided that nothing in this sentence shall,
if the Contemplated Transactions are not consummated, affect any rights the
Buyer may have pursuant to Section 9.2.
6.27 Certain Payments. (a) On the 120th day following the date
hereof (the "Trigger Date"), if the waiting period under the HSR Act has not
expired or been terminated or any investigation or other inquiry concerning the
Contemplated Transactions by any Attorney General is continuing on such 120th
day, the Buyer shall pay to the Seller $10 million by wire transfer of
immediately available funds; provided, that if such 120th day is not a Business
Day, the first Business Day thereafter.
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(b) On the seventh day of each 7-day period following the
Trigger Date, if the waiting period under the HSR Act has not expired or been
terminated or any investigation or other inquiry concerning the Contemplated
Transactions by any Attorney General is continuing on such seventh day, the
Buyer shall pay to the Seller $625,000 by wire transfer of immediately
available funds; provided, that if such seventh day is not a Business Day, the
first Business Day thereafter.
(c) In the event the Closing of the Contemplated Transaction
occurs, the Purchase Price paid pursuant to Section 1.3 shall be reduced by the
amount of the aggregate payments paid to the Seller pursuant to this Section
6.27. Any amounts paid to the Seller pursuant to this Section 6.27 shall not be
refunded to the Buyer for any reason whatsoever; provided, however, if the
Agreement is terminated by the Buyer pursuant to Section 9.1(c), the Seller
shall refund to the Buyer all amounts paid to it pursuant to this Section 6.27
within 15 days of such termination.
(d) Notwithstanding the provisions of Sections 6.27(a) and
6.27(b), in the event that the Thorn Shareholder Condition has not been
satisfied on the Trigger Date or any date on which an amount would be due and
owing by the Buyer to the Seller pursuant to Section 6.27(b) but for this
Section 6.27(d), the Buyer shall not be required to make the payment described
in Section 6.27(a) or 6.27(b), as applicable, unless and until the Thorn
Shareholder Condition has been satisfied. If, on the date that the Thorn
Shareholder Condition is satisfied, the waiting period under the HSR Act has
not expired or been terminated or any investigation or other inquiry by any
Attorney
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General concerning the Contemplated Transactions is continuing, the Buyer shall
pay to the Seller on such date the amount described in Section 6.27(a) or
6.27(b), as the case may be, by wire transfer of immediately available funds.
6.28 Delivery of Marketing Materials to Lenders. The Buyer shall
deliver to the appropriate lenders under the Commitment Letters preliminary
offering memoranda, preliminary prospectuses and other marketing materials
relating to the financings contemplated by the Commitment Letters within a time
frame reasonably satisfactory to such lenders, which offering memoranda,
prospectuses and marketing materials shall be reasonably satisfactory to such
lenders.
ARTICLE 7
SURVIVAL
7.1 Survival of Representations and Warranties.
(a) All representations and warranties of the Seller set
forth in this Agreement shall survive the Closing. The representations and
warranties of the Seller shall terminate and expire on (a) the first
anniversary of the Closing Date with respect to any General Claim based upon,
arising out of or otherwise in respect of any fact, circumstance or Claim of
which the Buyer prior to that date shall not have given a Claims Notice to the
Seller and (b) the expiration of the applicable statute of limitations,
including any extensions or waivers thereof, with respect to any Tax Claim.
(b) All representations and warranties of the Buyer set
forth in this Agreement shall survive the Closing. The representations and
warranties of the
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Buyer set forth in this Agreement shall terminate and expire on the first
anniversary of the Closing Date with respect to any Claim based upon, arising
out of or otherwise in respect of any fact, circumstance or Claim of which the
Seller prior to that date shall not have given a Claims Notice to the Buyer.
ARTICLE 8
INDEMNIFICATION
8.1 Obligation of the Seller to Indemnify. Subject to the
limitations contained in Article 7 and Section 8.4, the Seller agrees to
indemnify, defend and hold harmless the Buyer (and its directors, officers,
employees, Affiliates, successors and assigns) (collectively, the "SELLER
INDEMNIFIED PARTIES") from and against all Claims, losses, liabilities,
damages, deficiencies, judgments, assessments, fines, settlements, costs or
expenses (including interest, penalties and reasonable fees and disbursements
of external counsel, experts, and consultants incurred by the indemnified party
in any action or proceeding between the indemnified party and any third party,
or otherwise) ("LOSSES") based upon, arising out of or otherwise in respect of
(i) any inaccuracy in or any breach of any representation or warranty of the
Seller set forth in this Agreement (it being agreed that any representation or
warranty of the Seller that is subject to materiality or Material Adverse
Effect (other than with respect to Section 4.5) shall be deemed not to be so
qualified for purposes of establishing an inaccuracy or breach of such
representation or warranty pursuant to this Section 8.1(i) and any claim for
indemnification as a result of such inaccuracy or breach), (ii) any breach of
any
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covenant or agreement of the Seller set forth in this Agreement; (iii) all
Taxes of the Company and its Subsidiaries with respect to any taxable year of
the Company and its Subsidiaries ending on or before the Closing Date in excess
of the aggregate amounts provided therefor on the Audited Closing Balance
Sheet; (iv) the TENA-Remco Agreement in excess of the aggregate amounts
provided therefor on the Audited Closing Balance Sheet; (v) the TEMINAH-Thorn
Americas Agreement in excess of the aggregate amounts provided therefor on the
Audited Closing Balance Sheet; and (vi) the assets and liabilities of the New
Zealand Operations and the disposal thereof by the Company prior to the Closing
as contemplated by Section 6.1, including, without limitation, Taxes resulting
from such disposal in excess of the aggregate amounts provided therefor on the
Audited Closing Balance Sheet.
8.2 Obligation of the Buyer to Indemnify. Subject to the
limitations contained in Article 7, the Buyer agrees to indemnify, defend and
hold harmless the Seller (and its directors, officers, employees, Affiliates,
successors and assigns) (collectively, the "BUYER INDEMNIFIED PARTIES" and,
together with the Seller Indemnified Parties, the "INDEMNIFIED PARTIES") from
and against all Losses based upon, arising out of or otherwise in respect of
(i) any inaccuracy in or any breach of any representation, warranty, covenant
or agreement of the Buyer set forth in this Agreement and (ii) for greater
certainty and without in any way limiting the rights of the Seller, any Claim
listed on Schedule 4.9 (other than the Claims that are also listed on Schedule
6.17).
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8.3 Indemnification Procedures.
(a) All claims for indemnification by any Indemnified Party
hereunder shall be asserted and resolved as set forth in this Section 8.3;
provided, that the provisions of Section 8.3(b) shall apply solely to Asserted
Liabilities involving a Claim by a third Person ("THIRD PARTY ASSERTED
LIABILITIES"). Promptly, but no more than 15 days, after receipt by the
Indemnified Party of notice of a Claim or circumstances which, with the lapse
of time, would or might give rise to an indemnification obligation by a party
(the "INDEMNIFYING PARTY") under Section 8.1 or 8.2 hereof, or the commencement
(or threatened commencement) of a Claim including any action, proceeding or
investigation that may result in a Loss indemnified under Section 8.1 or 8.2
hereof (an "ASSERTED LIABILITY") the Indemnified Party shall give notice
thereof to the Indemnifying Party (the "CLAIMS NOTICE"). The Claims Notice
shall describe the Asserted Liability in reasonable detail and shall indicate
the amount (estimated, if necessary and to the extent feasible) of the Loss
that has been or may be suffered by the Indemnified Party.
(b) The Indemnifying Party shall have 30 days from the
delivery of the Claims Notice (the "NOTICE PERIOD") to notify the Indemnified
Party whether or not it desires to defend the Indemnified Party against the
Third Party Asserted Liability. All costs and expenses incurred by the
Indemnified Party in defending such claim or demand shall be considered Losses
of the Indemnified Party for purposes of Sections 8.1 and 8.2. Except as
hereinafter provided, in the event that the Indemnifying Party notifies the
Indemnified Party within the Notice Period that it
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desires to defend the Indemnified Party against such claim or demand, the
Indemnifying Party shall have the right to defend the Indemnified Party by
appropriate proceedings and shall have the sole power to direct and control
such defense. If any Indemnified Party desires to participate in any such
defense it may do so at its sole cost and expense. The Indemnified Party shall
not settle a claim or demand for which it is indemnified by the Indemnifying
Party without the written consent of the Indemnifying Party. The Indemnifying
Party shall not, without the prior written consent of the Indemnified Party,
settle, compromise or offer to settle or compromise any such claim or demand on
a basis which would result in the imposition of a consent order, injunction or
decree which would restrict the future activity or conduct of the Indemnified
Party. If the Indemnifying Party elects not to defend the Third Party Asserted
Liability, whether by failing to give the Indemnified Party timely notice as
provided above or otherwise, then the amount of such Third Party Asserted
Liability, or, if the same is contested by the Indemnified Party, then that
portion thereof as to which such defense is unsuccessful (including the
reasonable costs and expenses pertaining to such defense) shall be the
liability of the Indemnifying Party hereunder, subject to the limitations set
forth in Section 8.4 hereof. To the extent the Indemnifying Party shall
direct, control or participate in the defense or settlement of any Third Party
Asserted Liability, the Indemnified Party will provide the Indemnifying Party
and its counsel access to, during normal business hours, relevant business
records and other documents, and shall permit them to consult with the
employees and counsel of the Indemnified Party. The Indemnified Party shall
use its best efforts to defend all such
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claims. The Indemnifying Party shall have the right to participate in the
defense or settlement of any Third Party Asserted Liability.
8.4 Limitations on Indemnification. From and after the
consummation of the Contemplated Transactions, the indemnification provided for
in Section 8.1 shall be subject to the following limitations:
(a) The Seller shall not be obligated to pay any
amounts for indemnification under Section 8.1(i), until the aggregate amounts
for indemnification under Section 8.1(i) equals $5 million (the "BASKET
AMOUNT"), whereupon the Seller shall be obligated to pay in full all such
amounts for such indemnification, including, without limitation, the Basket
Amount, provided that no indemnity shall be recoverable by the Seller
Indemnified Parties with respect to any individual Loss or group of related
Losses under Section 8.1(i) unless the amount thereof exceeds $100,000 and no
such Losses shall count towards the Basket Amount.
(b) The Seller shall not be obligated to make any
payment for indemnification under this Article 8 in excess of $100 million in
the aggregate (the "CAP AMOUNT"); provided, that this Section 8.4(b) shall not
apply to indemnification payments to be made as a result of the Seller's
obligations under Section 6.17 and indemnification payments to be made as a
result of a breach of Section 3.2 or 9.3. Notwithstanding anything to the
contrary contained herein, the Cap Amount shall be reduced by all amounts
distributed to the Buyer from the Escrow Fund (as defined in the Escrow
Agreement) pursuant to the Escrow Agreement other than amounts distributed with
respect to Indemnified Litigation Losses.
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(c) If the amount of any Loss or Indemnified
Litigation Loss for which indemnification is provided by an Indemnifying Party
under Article 6, Article 8 or otherwise in this Agreement causes, directly or
indirectly, a Tax Benefit in a taxable year or years following the Closing
Date, then the Buyer shall pay to the Seller the amount of such Tax Benefit
within 30 days of the date such Tax Benefit occurs. The Tax Benefit shall be
deemed to occur, for purposes of this Section 8.4(c), on the date on which the
Company files a Tax Return for a taxable year ending after the Closing Date
reflecting a Tax Liability reduced by reason of the aforesaid Loss or
Indemnified Litigation Loss. The parties agree that Losses or Indemnified
Litigation Losses, as the case may be, hereunder shall be limited to actual
damages only and shall not include any consequential or punitive damages other
than any punitive or consequential damages that comprise part of the judgment
in a Third Party Asserted Liability.
(d) If, at any time after the Closing Date, the
IRS or any other taxing authority disallows, or proposes to disallow, any Tax
Benefit for which the Buyer has paid the Seller pursuant to Section 8.4(c)
hereof, the Buyer will promptly give written notice to the Seller that such
issue has been raised and information in reasonable detail relating thereto.
The Buyer shall not concede or settle any issue with respect to any Tax Benefit
without the prior written consent of the Seller, which shall not be
unreasonably withheld. If any Tax Benefit described in this Section 8.4(d) is
ultimately disallowed, or the amount thereof is reduced by any final
administrative or judicial determination, or as a result of any settlement or
agreement with respect to the
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liability of the Buyer, the Company or its Subsidiaries, or if the amount of
any such Tax Benefit is otherwise reduced, whether by reason of a carryforward
of any losses or credits, or otherwise, then the Seller will repay to the Buyer
the amount of such Tax Benefit previously paid over to the Seller (or the
portion thereof that has been disallowed or reduced, as the case may be), with
applicable interest.
(e) To the extent that a deduction or credit
arising out of a payment made by the Company in connection with a Loss or
Indemnified Litigation Loss for which indemnification is provided by an
Indemnifying Party results in a net operating loss or net capital loss that can
be carried back to any period ending on or before the Closing Date, the Buyer
agrees to elect to carryback such loss to such period and that any resulting
refund shall be for the account of the Seller.
8.5 Exclusive Remedy. In the event the Contemplated
Transactions are consummated, except with respect to claims under Section 6.17
and for equitable remedies or specific performance pursuant to Sections 6.18
and 6.24 and relating to actual fraud, the indemnity provided in this Article 8
as it relates to this Agreement and the Contemplated Transactions shall be the
sole and exclusive remedy of the Indemnified Parties with respect to any and
all claims for Losses sustained, incurred or suffered directly or indirectly
relating to or arising out of this Agreement and the Buyer on behalf of the
Buyer Indemnified Parties and the Seller on behalf of the Seller Indemnified
Parties waive any and all rights, legal or equitable, to pursue any other
remedies.
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8.6 Escrow Fund. Notwithstanding anything to the
contrary contained herein, during the Escrow Period (as defined in the Escrow
Agreement), the Buyer shall, with respect to any claim for Indemnified
Litigation Losses or Losses hereunder, proceed first against the Escrow Fund in
accordance with the terms of the Escrow Agreement before proceeding against the
Seller under Section 6.17 or Article 8, respectively (or Thorn pursuant to
Section 6.20). Only in the event that (i) the amount in the Escrow Fund is
insufficient to satisfy claims for Losses or Indemnified Litigation Losses or
(ii) the Escrow Fund has been terminated as provided in the Escrow Agreement,
shall the Buyer be entitled to proceed against the Seller or Thorn with respect
to any claims for Indemnified Litigation Losses or Losses hereunder in
accordance with Section 6.17 or this Article 8, respectively.
8.7 Characterization of Indemnification Payment. All
amounts paid by the Seller or the Buyer under this Article 8, including without
limitation, any amounts distributed to the Buyer or the Seller pursuant to the
Escrow Agreement, shall be treated for all Tax purposes as adjustments to the
Purchase Price.
ARTICLE 9
TERMINATION OF AGREEMENT
9.1 Termination. This Agreement and the Contemplated
Transactions may be terminated or abandoned at any time before the Closing Date
only as provided below:
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(a) the Seller and the Buyer may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(b) the Seller may terminate this Agreement if
the Buyer has materially breached any representation, warranty, covenant or
agreement contained in this Agreement and such breach is either not capable of
being cured prior to the Closing or, if such breach is capable of being cured,
is not so cured within a reasonable amount of time (and in any event prior to
the Closing);
(c) the Buyer may terminate this Agreement if the
Seller has breached a representation or warranty contained in this Agreement
that is qualified by reference to a Material Adverse Effect or breached any
other representation or warranty contained in this Agreement to the extent
reasonably likely to have a Material Adverse Effect on the Company, or
materially breached any covenant or agreement contained in this Agreement and
such breach is either not capable of being cured prior to the Closing or if
such breach is capable of being cured, is not so cured within a reasonable
amount of time (and in any event prior to the Closing);
(d) the Buyer or the Seller may terminate this
Agreement if consummation of the Closing would violate any non-appealable final
Order, or if the Federal Trade Commission or the Antitrust Division of the
United States Department of Justice or any Attorney General shall have
initiated proceedings to enjoin the Contemplated Transactions or to take any
other action to prevent the consummation thereof;
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(e) the Seller may terminate this Agreement if
the Closing has not occurred on or before December 31, 1998 (other than a
failure of the Closing to occur due to a breach of this Agreement by the
Seller);
(f) the Buyer may terminate this Agreement if the
Closing has not occurred on or before December 31, 1998 (other than a failure
of the Closing to occur due to a breach of this Agreement by the Buyer);
(g) the Seller or the Buyer may terminate this
Agreement immediately upon the resolution referred to in Section 11.5 not being
approved by the shareholders of Thorn; or
(h) the Buyer may terminate this Agreement if the
directors of Thorn (a) do not recommend to the shareholders of Thorn the
approval of the Contemplated Transactions, or withdraw, modify or amend in any
adverse respect their recommendation to the Thorn shareholders to approve the
Contemplated Transactions, (b) approve, endorse or enter into or cause to be
entered into an agreement to consummate an Acquisition Proposal, or (c) with
respect to any Acquisition Proposal, make any recommendation to the
shareholders of Thorn other than to reject such Acquisition Proposal.
9.2 Procedure for and Effect of Termination. In the
event that this Agreement is terminated and the Contemplated Transactions are
abandoned by the Seller on the one hand, or by the Buyer on the other hand,
pursuant to Section 9.1, written notice of such termination and abandonment
shall forthwith be given to the other parties and this Agreement shall
terminate and the Contemplated Transactions
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shall be abandoned without any further action. If this Agreement is terminated
as provided herein, no party hereto shall have any liability or further
obligation to any other party under the terms of this Agreement except that any
such termination shall be without prejudice to the rights of any party on
account of the nonsatisfaction of the conditions set forth in Articles 10 and
11 resulting from the willful or intentional breach of the representations,
warranties, covenants or agreements of another party under this Agreement.
Notwithstanding anything in this Agreement to the contrary, the provisions of
this Section 9.2, the third sentence of Section 6.2, the provisions of Sections
6.4, 6.5, 6.12, 6.20 and 9.3 and the provisions of Article 12 shall survive the
termination of this Agreement.
9.3 Payments Required Upon Termination in Certain
Circumstances.
(a) The Seller agrees that if this Agreement
shall be terminated pursuant to Section 9.1(g) or 9.1(h), then the Seller will
pay to the Buyer (i) a fee equal to the Break-Up Fee (provided that the Buyer
was not in material breach of any of its representations, warranties, covenants
or agreements hereunder at the time of termination) and (ii) an amount equal to
the Break-Up Expenses (provided that the Buyer was not in material breach of
any of its representations, warranties, covenants or agreements hereunder at
the time of termination). Payment of any of such amounts shall be made, as
directed by the Buyer, by wire transfer of immediately available funds
promptly, but in no event later than two Business Days after such termination.
(b) The "BREAK-UP EXPENSES" shall be an amount
equal to the lesser of (i) the Buyer's out-of-pocket expenses and fees incurred
in connection with
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this Agreement and the Contemplated Transactions and the financing thereof and
(ii) $5,000,000.
(c) The "BREAK-UP FEE" shall be an amount equal
to $25,000,000.
ARTICLE 10
CONDITIONS PRECEDENT TO THE
OBLIGATION OF BUYER TO CLOSE
The obligation of the Buyer to consummate the Contemplated
Transactions is subject to the satisfaction on or prior to the Closing Date of
the following conditions, any one or more of which may be waived by the Buyer:
10.1 Accuracy of Representations and Warranties,
Performance of Covenants. The representations and warranties of the Seller
contained in this Agreement including, without limitation, those contained in
Section 4.10, shall be true in all material respects on and as of the Closing
Date with the same force and effect as though made on and as of the Closing
Date (other than those representations and warranties that address matters only
as of a particular date or only with respect to a specific period of time,
which need only be true in all material respects as of such date or with
respect to such period). The Seller shall have performed and complied in all
material respects with all covenants and agreements required by this Agreement
to be performed or complied with by it on or prior to the Closing Date. The
Buyer shall have received a certificate, dated the Closing Date and signed by
the Seller, to the foregoing effect.
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10.2 No Material Judgment or Order. There shall not be on
the Closing Date any Orders or Law restraining, enjoining, or prohibiting the
consummation of the Contemplated Transactions.
10.3 Delivery of Shares. The Seller shall have delivered
to the Buyer certificates for the Shares, duly endorsed for transfer or with
duly executed stock powers attached.
10.4 HSR Act. The waiting period specified in the HSR
Act, including any accelerations or extensions thereof, shall have expired or
been terminated.
10.5 Director Resignations. All resignations of the
members of the Board of Directors of the Company and each of its Subsidiaries
which have been previously requested in writing by the Buyer shall have been
delivered to the Buyer.
10.6 Cancellation of Debt and Affiliate Agreements. The
Buyer shall have received evidence, in a form reasonably satisfactory to the
Buyer, that the Thorn Note, along with all other amounts, if any, owed by the
Company or any of its Subsidiaries to Thorn Finance, Thorn or any of their
respective Affiliates (other than Subsidiaries of the Company) shall have been
repaid in full. All Contracts and Other Agreements and oral contracts and
other agreements between the Company or any of its Subsidiaries, on the one
hand, and the Seller or any Affiliate of the Seller, on the other hand, shall
have been terminated. Each of the Seller, Thorn and Thorn Finance shall have
delivered to the Company a release, substantially in form of Exhibit A,
releasing any and all claims, liabilities and obligations (other than under
this Agreement or any
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Contract and Other Agreement executed in connection herewith) that each such
Person may have on the Closing Date against the Company or any of its
Subsidiaries. Each of the Seller, Thorn and Thorn Finance shall have delivered
to the Company, on behalf of the officers, directors and Closing Date
Employees, a release substantially in form of Exhibit B, releasing each of the
officers, directors and Closing Date Employees of the Company and its
Subsidiaries from such claims, liabilities and obligations that the Seller,
Thorn or Thorn Finance may have on the Closing Date against such Persons to the
extent such Persons are indemnified by the Company or its Subsidiaries pursuant
to their respective charter or bylaws (or other governing documents) for such
claims, liabilities or obligations; provided, that in no event shall such
Persons be released from fraud or willful misconduct.
10.7 Deed of General Indemnity. The Company shall have
executed the Disposed Entity Undertaking pursuant to the Deed of General
Indemnity dated July 22, 1996 among THORN EMI plc and Thorn in the form of
Schedule 5 to such Deed of General Indemnity.
10.8 Company Consents. All Company Consents shall have
been obtained and be in full force and effect, except where the failure to have
obtained any such Company Consent would not have a Material Adverse Effect on
the Company.
10.9 Thorn Shareholder Approval. The passing at a General
Meeting of Thorn of a resolution to approve the Contemplated Transactions.
10.10 Opinion of Counsel. The Buyer shall have received
the opinions, dated the Closing Date, of Paul, Weiss, Rifkind, Wharton &
Garrison, special counsel
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85
to Thorn, the Seller and the Company, and other special counsel reasonably
satisfactory to the Buyer and/or in-house counsel to Thorn, the Seller and the
Company, in each case, in form and substance reasonably satisfactory to the
Buyer.
10.11 Certified Resolutions. The Seller shall have
delivered to the Buyer, a true, correct and complete copy of the resolutions,
which shall be in full force and effect, adopted by the Board of Directors of
the Seller, authorizing and approving this Agreement and the Contemplated
Transactions certified as of the Closing Date by a Director of the Seller and
Thorn shall have delivered to the Buyer, a true, correct and complete copy of
the resolutions, which shall be in full force and effect, adopted by (i) the
Board of Directors of Thorn and (ii) the shareholders of Thorn, each
authorizing and approving this Agreement and the Contemplated Transactions and
each certified as of the Closing Date by Thorn's Company Secretary or Assistant
Company Secretary.
10.12 Financing. The Financing Sources shall have funded
amounts, to enable the Buyer to close the Contemplated Transactions in
accordance with the Commitment Letters.
10.13 Escrow Agreement. In the event the Escrow Amount is
greater than zero, the Buyer, the Seller and the Escrow Agent shall have
executed and delivered an escrow agreement, substantially in the form of
Exhibit C hereto, with such changes therein as are reasonably requested by the
Escrow Agent; provided, that such changes do not materially adversely affect
the rights of the parties thereunder (the "ESCROW AGREEMENT").
<PAGE> 92
86
ARTICLE 11
CONDITIONS PRECEDENT TO THE
OBLIGATION OF SELLER TO CLOSE
The obligation of the Seller to consummate the Contemplated
Transactions is subject to the satisfaction of the following conditions, any
one or more of which may be waived by the Seller:
11.1 Accuracy of Representations and Warranties,
Performance of Covenants. The representations and warranties of the Buyer
contained in this Agreement shall be true in all material respects on and as of
the Closing Date with the same force and effect as though made on and as of the
Closing Date (other than those representations and warranties that address
matters only as of a particular date or only with respect to a specific period
of time, which need only be true in all material respects as of such date or
with respect to such period). The Buyer shall have performed and complied
with, in all material respects, all covenants and agreements required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date. The Seller shall have received a certificate, dated the Closing Date and
signed by the Buyer, to the foregoing effect.
11.2 No Material Judgment or Order. There shall not be on
the Closing Date any Order or Law restraining, enjoining, or prohibiting the
consummation of the Contemplated Transactions.
<PAGE> 93
87
11.3 HSR Act. The waiting period specified in the HSR
Act, including any accelerations or extensions thereof, shall have expired or
been terminated.
11.4 Payment of Purchase Price and Debt Repayment Amount.
The Buyer shall have paid the Purchase Price to the Seller pursuant to Section
1.3 and the Buyer shall have paid on behalf of the Company, or caused the
Company to have paid, the Debt Repayment Amount to Thorn Finance (or its
designee) in each case in cash by wire transfer of immediately available funds
on the Closing Date.
11.5 Thorn Shareholder Approval. The passing at a General
Meeting of Thorn of a resolution to approve the Contemplated Transactions.
11.6 Termination of Letters of Credit and Guaranties. The
Buyer shall have arranged for replacement letters of credit, guaranties and
bonds or other credit support to replace the letters of credit and guaranties
described in Sections 6.21, 6.22 and 6.23, respectively. The letters of credit
and guaranties described in Sections 6.21, 6.22 and 6.23, respectively, shall
have been terminated.
11.7 Opinion of Counsel. The Seller shall have received
an opinion, dated the Closing Date, from Winstead Sechrest & Minick, P.C.,
counsel to the Buyer, in form and substance reasonably satisfactory to the
Seller.
11.8 Certified Resolutions. The Buyer shall have
delivered to the Seller, a true, correct and complete copy of the resolutions,
which shall be in full force and effect, adopted by the Board of Directors of
the Buyer, authorizing and approving
<PAGE> 94
88
this Agreement and the Contemplated Transactions certified as of the Closing
Date by the Buyer's secretary or assistant secretary.
ARTICLE 12
MISCELLANEOUS
12.1 Certain Definitions.
12.1.1 As used in this Agreement, the following
terms have the following meanings unless the context otherwise requires:
(a) "AFFILIATE" means, with respect to any
Person, any Person controlling, controlled by, or under common control with,
such other Person at the time at which the determination of affiliation is being
made. The term "CONTROL" (including, with correlative meanings, the terms
"CONTROLLED BY" and "UNDER COMMON CONTROL WITH"), as applied to any Person,
means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or other ownership interests, by contract or
otherwise.
(b) "BUSINESS DAY" means any day other than a
Saturday, Sunday or a day on which banks in New York City or London, England are
authorized or obligated by Law to close.
(c) "BUSINESS" means the businesses and
operations of the Company and its Subsidiaries as of the date hereof, other than
the New Zealand Operations.
<PAGE> 95
89
(d) "CAPITAL STOCK" means any and all shares,
interests, participations or other equivalents of or interests in (however
designated) corporate stock, partnership interests or limited liability company
interests, including, without limitation, shares of preferred stock.
(e) "CLOSING DATE EMPLOYEES" means (x) all
active employees of the Company and its Subsidiaries as of the Closing Date
(immediately prior to the consummation of the Contemplated Transactions) and (y)
upon their return to active employment, any employees of the Company or any of
its Subsidiaries who are, as of the Closing Date (immediately prior to the
consummation of the Contemplated Transactions), on disability, medical leave or
other authorized leave that are set forth on Schedule 12.1.1(e).
(f) "CONTRACTS AND OTHER AGREEMENTS" means any
written contract, indenture, note, bond, instrument, lease, mortgage, license,
commitment or other binding agreement.
(g) "DESIGNATED TERM" means, with respect to
each Franchise Agreement, (i) the territory in which the Company or any of its
Subsidiaries is restricted from operating Stores, (ii) obligations, including,
without limitation, with respect to Intellectual Property, of the Company or its
Subsidiaries upon termination thereof, (iii) any guarantee by the Company or any
of its Subsidiaries of any obligation of the franchisee and (iv) any express
right of the franchisee thereunder to a remedy of specific performance.
<PAGE> 96
90
(h) "DEVELOPMENT AGREEMENT" means any development
agreement to which the Company or any of its Subsidiaries is a party.
(i) "ESCROW AMOUNT" means $40,000,000 minus the
sum of (I) $30,000,000, if on or before the Closing Date, (i) the Seller or any
of its Affiliates has received a favorable ruling from the IRS with respect to
the ruling request submitted on behalf of the Company on April 16, 1998 (the
"FAVORABLE RULING") and (ii) with respect to the litigation described in item
No. 1 on Schedule 6.17, the Seller shall have delivered to the Buyer on or prior
to the Closing Date a certificate executed by the Seller certifying that (a) a
judgment in respect of such litigation has been satisfied and discharged or (b)
a settlement with respect to such litigation has been approved by a court of
competent jurisdiction and the amount required to be paid under such settlement
has been paid in full and (II) $10,000,000, if on or before the Closing Date,
the Company has received the Favorable Ruling and, with respect to the
litigations described in item Nos. 2, 3 and 4 on Schedule 6.17, the Seller shall
have delivered to the Buyer on or prior to the Closing Date a certificate
executed by the Seller certifying that (a) a judgment in respect of such
litigation has been satisfied and discharged or (b) a settlement with respect to
such litigation has been approved by a court of competent jurisdiction and the
amount required to be paid under such settlement has been paid in full.
(j) "DISTRIBUTION CENTERS" means the
Distribution Centers of the Company and its Subsidiaries listed on Schedule
12.1.1(j).
<PAGE> 97
91
(k) "EVENT OF FORCE MAJEURE" means Thorn's
inability to dispatch the circular referred to in Section 6.13(c) to its
shareholders within 21 days after the date hereof as a direct result of an event
that is unforeseeable and of which the occurrence and consequences cannot be
prevented or avoided, such as earthquake, typhoon, flood, fire and other natural
disasters, war, insurrection and similar military actions, civil unrest and
strikes, slowdowns, and other labor actions, embargos, injunctions or other
restraints and actions of governments, delays of carriers or failure of power or
other utilities.
(l) "FRANCHISE AGREEMENT" means any franchise
agreement to which the Company or any of its Subsidiaries is a party (other than
those agreements where the other party thereto is either the Company or any of
its Subsidiaries).
(m) "FRANCHISE AND DEVELOPMENT AGREEMENT" means
any franchise and development agreement to which the Company or any of its
Subsidiaries is a party or by or to which the Company, any of its Subsidiaries
or any of their respective assets or properties is bound or subject.
(n) "GAAP" means generally accepted accounting
principles in the United States of America then in effect, consistently applied.
(o) "GENERAL CLAIM" means any claim (other than
a Tax Claim) based upon, arising out of or otherwise in respect of any
inaccuracy in or any breach of any representation and warranty of the Seller set
forth in this Agreement.
<PAGE> 98
92
(p) "GOVERNMENTAL ENTITY" means any government
or political subdivision thereof, whether federal, state, local or foreign, or
any agency or instrumentality of any such government or political subdivision
thereof, or any federal or state court, arbitrator or other tribunal.
(q) "KNOWLEDGE," means the actual knowledge of
those persons set forth on Schedule 12.1.1(q) hereto after reasonable inquiry
and investigation.
(r) "LAW" means any law, statute, code,
ordinance, regulation or other requirement of any Governmental Entity.
(s) "LIENS" means any liens, claims, charges,
encumbrances or security interests.
(t) "MATERIAL ADVERSE EFFECT" means (a) a
material adverse effect on the consummation of the Contemplated Transactions and
(b) with respect to any Person, a material adverse effect on the business,
assets, properties, financial condition or results of operations of such Person
and its Subsidiaries taken as a whole, but shall exclude, as applicable, (i) any
change or development resulting from events adversely affecting the rent-to-own
industry generally, (ii) any change in Law applicable to the Business as
presently conducted and (iii) any change in the general economy. For purposes of
Section 10.1 only, the occurrence of any of the following events shall not be
deemed to constitute a Material Adverse Effect on the Company: (i) after the
date hereof, the filing with any Governmental Entity, or the threat thereof, of
any Claim by any Person containing allegations against the Company or any of its
<PAGE> 99
93
Subsidiaries similar or analogous to the allegations raised in any of the
Claims listed on Schedules 6.17 and 8.2 (other than item no. 3 thereon); (ii)
the entry of any interlocutory or final Order in any Claim listed on Schedules
6.17 and 8.2 (other than item no. 3 thereon), which is subject to an appeal; or
(iii) any other condition, event or occurrence regarding any Claim listed on
Schedules 6.17 and 8.2 (other than item no. 3 thereon).
(u) "ORDER" means any order, judgment,
injunction, award, decree or writ of any Governmental Entity.
(v) "PERSON" shall mean and include an
individual, a partnership, a joint venture, a limited liability company, a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
(w) "RENTAL PURCHASE AGREEMENTS" means the
Company and its Subsidiaries' customer lease contracts, including any
rent-to-own, lease-purchase and rent-to-rent contracts relating to the Business
conducted at the Stores.
(x) "STORE" means an individual retail outlet
where the Company and its Subsidiaries operate their retail rent-to-own or
rent-to-rent operations.
(y) "SUBSIDIARY," with respect to any Person,
shall mean any corporation 50% or more of the outstanding voting power of which,
or any partnership, joint venture, limited liability company or other entity 50%
or more of the total equity interest of which, is directly or indirectly owned
by such person.
<PAGE> 100
94
(z) "TAX CLAIM" means any claim based upon,
arising out of or otherwise in respect of any inaccuracy in or any breach of the
representation and warranty of the Seller contained in Section 4.11 and any
claim arising under Section 8.1(iii), (iv) or (v).
(aa) "TAXES" means any federal, state, local,
foreign or other net income, gross income, property, sales, use, license,
franchise, employment, payroll, withholding, transfer, stamp or other tax,
custom, duty or other governmental charge, together with any interest, penalty
or addition to tax with respect thereto.
(bb) "TAX RETURN" means any return, report,
statement, form or other information required to be filed with respect to any
Tax.
(cc) "TEMINAH-THORN AMERICAS AGREEMENT" means the
TEMINAH-Thorn Americas Tax Sharing and Indemnification Agreement entered into on
July 17, 1996 among THORN EMI plc, Thorn, Thorn EMI North America Holdings,
Inc., and Thorn Americas, Inc. (and its subsidiaries).
(dd) "TENA-REMCO AGREEMENT" means the TENA-Remco
Tax Sharing and Indemnification Agreement entered into on July 17, 1996 among
THORN EMI plc, Thorn, Thorn EMI North America, Inc., and Remco America, Inc.
(and its subsidiaries).
(ee) "THORN SHAREHOLDER CONDITION" means the
condition to Closing set forth in Sections 10.9 and 11.5.
(ff) "WICHITA HEADQUARTERS" means the Company's
headquarters located at 8200 East Thorn Drive, Wichita, Kansas.
<PAGE> 101
95
12.1.2
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Accounting Firm . . . . . . . . . . . . . . . . . . 6.16(d)
Acquisition Proposal 6.25(c)
Actual Amount . . . . . . . . . . . . . . . . . . . 6.16(d)
Adjustment Payment Date . . . . . . . . . . . . . . 1.4(f)
Agreement . . . . . . . . . . . . . . . . . . . . . Preamble
Asserted Liability . . . . . . . . . . . . . . . . 8.3(a)
Audited Closing Balance Sheet . . . . . . . . . . . 1.4(b)
Audited Financial Statements . . . . . . . . . . . 4.5
Balance Sheet . . . . . . . . . . . . . . . . . . . 4.5
Balance Sheet Date . . . . . . . . . . . . . . . . 4.5
Basket Amount . . . . . . . . . . . . . . . . . . . 8.4(a)
Benefit Plan . . . . . . . . . . . . . . . . . . . 4.14(a)
Break-Up Expenses . . . . . . . . . . . . . . . . . 9.3(b)
Break-Up Fee . . . . . . . . . . . . . . . . . . . 9.3(c)
Broker . . . . . . . . . . . . . . . . . . . . . . 4.18
Buyer . . . . . . . . . . . . . . . . . . . . . . . Preamble
Buyer Indemnified Parties . . . . . . . . . . . . . 8.2
Buyer Representatives . . . . . . . . . . . . . . . 6.2
Calculation Date . . . . . . . . . . . . . . . . . 1.4(b)
Cap Amount . . . . . . . . . . . . . . . . . . . . 8.4(b)
Claim . . . . . . . . . . . . . . . . . . . . . . . 4.9
Claims Notice . . . . . . . . . . . . . . . . . . . 8.3
Closing . . . . . . . . . . . . . . . . . . . . . . 2.1
Closing Adjusted Net Worth . . . . . . . . . . . . 1.4(b)
Closing Adjusted Net Worth Schedule . . . . . . . . 1.4(b)
Closing Date . . . . . . . . . . . . . . . . . . . 2.1
Closing Date Number . . . . . . . . . . . . . . . . 2.1
Code . . . . . . . . . . . . . . . . . . . . . . . 4.14(a)
</TABLE>
<PAGE> 102
96
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Commitment Letters . . . . . . . . . . . . . . . . 5.6
Common Stock . . . . . . . . . . . . . . . . . . . Preamble
Company . . . . . . . . . . . . . . . . . . . . . . Preamble
Company Consents . . . . . . . . . . . . . . . . . 4.4
Competition Laws . . . . . . . . . . . . . . . . . 6.13(b)
Confidentiality Agreement . . . . . . . . . . . . . 6.2
Contemplated Transactions . . . . . . . . . . . . . 3.3
CPA-Determined Differences . . . . . . . . . . . . 1.4(e)
CPA Firm . . . . . . . . . . . . . . . . . . . . . 1.4(e)
CSFB . . . . . . . . . . . . . . . . . . . . . . . 4.18
Debt Repayment Amount . . . . . . . . . . . . . . . 1.2
Designated Date . . . . . . . . . . . . . . . . . . 2.1
Differences . . . . . . . . . . . . . . . . . . . . 1.4(e)
Disagreement Notice . . . . . . . . . . . . . . . . 1.4(c)
Employee . . . . . . . . . . . . . . . . . . . . . 4.14(a)
Employee Payments . . . . . . . . . . . . . . . . . 6.16
Encumbrances . . . . . . . . . . . . . . . . . . . 4.6
Environmental Laws . . . . . . . . . . . . . . . . 4.12
ERISA . . . . . . . . . . . . . . . . . . . . . . . 4.14
ERISA Affiliate . . . . . . . . . . . . . . . . . . 4.14(a)
Escrow Agent . . . . . . . . . . . . . . . . . . . 1.3(b)
Escrow Agreement . . . . . . . . . . . . . . . . . 10.13
Estimated Amount . . . . . . . . . . . . . . . . . 6.16(d)
HSR Act . . . . . . . . . . . . . . . . . . . . . . 3.3
Incentive Plans . . . . . . . . . . . . . . . . . . 6.16(a)
Indemnified Litigation . . . . . . . . . . . . . . 6.17(a)
Indemnified Litigation Losses . . . . . . . . . . . 6.17(a)
Indemnified Parties . . . . . . . . . . . . . . . . 8.2
Indemnifying Party . . . . . . . . . . . . . . . . 8.3(a)
</TABLE>
<PAGE> 103
97
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Intellectual Property . . . . . . . . . . . . . . . 4.17
IRS . . . . . . . . . . . . . . . . . . . . . . . . 4.14(a)
Leased Real Property . . . . . . . . . . . . . . . 4.6(b)
Losses . . . . . . . . . . . . . . . . . . . . . . 8.1
Net Worth . . . . . . . . . . . . . . . . . . . . . 1.4(a)
New Jersey Bond . . . . . . . . . . . . . . . . . . 6.23
New Jersey Guarantee . . . . . . . . . . . . . . . 6.23
New Zealand Operations . . . . . . . . . . . . . . 6.9
Notice Period . . . . . . . . . . . . . . . . . . . 8.3(b)
Owned Real Property . . . . . . . . . . . . . . . . 4.6(a)
PBGC . . . . . . . . . . . . . . . . . . . . . . . 4.14(a)
Permits . . . . . . . . . . . . . . . . . . . . . . 4.8
Permitted Encumbrances . . . . . . . . . . . . . . 4.6(a)
Preliminary Closing Balance Sheet . . . . . . . . . 1.4(b)
Purchase Price . . . . . . . . . . . . . . . . . . 1.3
Real Property . . . . . . . . . . . . . . . . . . . 4.6(c)
Real Property Leases . . . . . . . . . . . . . . . 4.6(b)
Representatives . . . . . . . . . . . . . . . . . . 6.18(a)
Resolved Objections . . . . . . . . . . . . . . . . 1.4(d)
Seller . . . . . . . . . . . . . . . . . . . . . . Preamble
Seller Consents . . . . . . . . . . . . . . . . . . 3.3
Seller Indemnified Parties . . . . . . . . . . . . 8.1
Seller Non-Public Information . . . . . . . . . . . 6.18(b)
Service Agent . . . . . . . . . . . . . . . . . . . 12.2
Shares . . . . . . . . . . . . . . . . . . . . . . Preamble
Tax Benefit . . . . . . . . . . . . . . . . . . . . 6.16(d)
Tax Liability . . . . . . . . . . . . . . . . . . . 6.16(d)
Third Party . . . . . . . . . . . . . . . . . . . . 6.25(a)
Third Party Asserted Liabilities . . . . . . . . . 8.3(a)
</TABLE>
<PAGE> 104
98
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Thorn . . . . . . . . . . . . . . . . . . . . . . . Preamble
Thorn Finance . . . . . . . . . . . . . . . . . . . 1.2
Thorn Non-Public Information . . . . . . . . . . . 6.18(a)
Thorn Note . . . . . . . . . . . . . . . . . . . . 1.2
Trigger Date . . . . . . . . . . . . . . . . . . . 6.27(a)
</TABLE>
12.2 Consent to Jurisdiction and Service of Process. Any
Claim arising out of or relating to this Agreement or the Contemplated
Transactions may be instituted in any Federal court of the Southern District of
New York or any state court located in New York County, State of New York, and
each party agrees not to assert, by way of motion, as a defense or otherwise,
in any such Claim, any Claim that it is not subject personally to the
jurisdiction of such court, that the Claim is brought in an inconvenient forum,
that the venue of the Claim is improper or that this Agreement or the subject
matter hereof or thereof may not be enforced in or by such court. Each party
further irrevocably submits to the jurisdiction of such court in any such
Claim. Each party hereby appoints NCR-National Research, Ltd. (the "SERVICE
AGENT"), at the Service Agent's offices at 225 West 34th Street, Suite 2110,
New York, NY 10122-0032 or its office at such other address in New York, New
York, as it hereafter furnishes to the other parties, as such party's
authorized agent to accept and acknowledge on such party's behalf service of
any and all process that may be served in any such Claim. Any and all service
of process and any other notice in any such Claim shall be effective against
any party if given personally or by registered or certified mail,
<PAGE> 105
99
return receipt requested, or by any other means of mail that requires a signed
receipt, postage prepaid, mailed to such party as herein provided or by
personal service on the Service Agent with a copy of such process mailed to
such party by first class mail or registered or certified mail, return receipt
requested, postage prepaid. Nothing herein contained shall be deemed to affect
the right of any party to serve process in any manner permitted by law or to
commence legal proceedings or otherwise proceed against any other party in any
other jurisdiction.
12.3 Waivers and Amendments. This Agreement may be
amended, superseded, canceled, renewed or extended, and the terms hereof may be
waived, only by a written instrument signed by the parties hereto or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any such
right, power or privilege, nor any single or partial exercise of any such
right, power or privilege, preclude any further exercise thereof or the
exercise of any other such right, power or privilege. The rights and remedies
herein provided are cumulative and are not exclusive of any rights or remedies
that any party may otherwise have at law or in equity.
12.4 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given when
delivered in person, by telecopier (with a confirmed receipt thereof) or
registered or certified mail (postage prepaid, return receipt requested), and
on the next business day when sent by overnight
<PAGE> 106
100
courier service, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to the Buyer, to:
Renters Choice, Inc.
13800 Montfort Drive
Suite 300
Dallas, Texas 75240
Attention: J. Ernest Talley, Chief Executive Officer
Telecopier: (214) 385-1625
with a copy to:
Winstead Sechrest & Minick P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270-2199
Attention: Thomas W. Hughes
Telecopier: (214) 745-5390
(b) if to the Seller, to:
Thorn International BV
"Rivierstaete" Building
Amsteldijk 166
1079 LH Amsterdam
The Netherlands
Attention: Managing Director
Telecopier: 011-3120-404-1881
with copies to:
Thorn plc
Thorn House
124 Bridge Road
Chertsey, Surrey KT16 8L2
United Kingdom
Attention: Company Secretary
Telecopier: 011-44-193-257-3729
<PAGE> 107
101
and
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Peter L. Felcher
Valerie E. Radwaner
Telecopier: (212) 757-3990
12.5 Binding Effect; Assignment. This Agreement and all
of the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but
neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto without the prior
written consent of the other parties; provided, however, the Buyer may assign
its rights and/or obligations hereunder (i) to a wholly-owned direct or
indirect Subsidiary of the Buyer without the Seller's or Thorn's consent if the
Buyer irrevocably and unconditionally guarantees the performance of all of the
assignee's obligations under this Agreement and (ii) to any lenders or agents
thereof to the Buyer as security for obligations to such lenders or agents
thereof pursuant to the financing agreements referred to in the Commitment
Letters pursuant to documentation in form and substance reasonably satisfactory
to the Seller.
12.6 Governing Law. This Agreement shall be governed by
the laws of the State of New York, applicable to agreements made and to be
performed entirely within such State without regard to conflict of law
principles; provided, however, that the fiduciary and other obligations of the
directors of Thorn set forth in this Agreement shall be governed by and
interpreted solely in accordance with the laws of England.
<PAGE> 108
102
12.7 Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
12.8 Headings; Disclosure. The Article and Section
headings contained in this Agreement are solely for the purpose of reference,
are not part of the agreement of the parties and shall not in any way affect
the meaning or interpretation of this Agreement. The disclosure of any item on
any Schedule to this Agreement or in any other Section of this Agreement shall
constitute disclosure of such item in respect of all Sections of this Agreement
to which it is relevant. The inclusion of any item in any Schedule to this
Agreement shall not be deemed nor construed as an admission or concession that
such item is material or would have a Material Adverse Effect on the Company or
the Seller.
12.9 Entire Agreement. This Agreement (including the
Schedules, exhibits, documents or instruments referred to herein) and the
Confidentiality Agreement embody the entire agreement and understanding of the
parties hereto in respect of the subject matter hereof and thereof and
supersede all prior agreements and understandings, both written and oral, among
the parties, or between any of them, with respect to the subject matter hereof
and thereof.
12.10 Usage. All pronouns and any variations thereof refer
to the masculine, feminine or neuter, singular or plural, as the context may
require. All terms defined in this Agreement in their singular or plural forms
have correlative meanings when used herein in their plural or singular forms,
respectively. Unless otherwise
<PAGE> 109
103
expressly provided, the words "include," "includes" and "including" do not
limit the preceding words or terms and shall be deemed to be followed by the
words "without limitation."
12.11 Interpretation. The parties acknowledge and agree
that: (a) each party and its counsel reviewed and negotiated the terms and
provisions of this Agreement and have contributed to its revision; (b) the rule
of construction to the effect that any ambiguities are resolved against the
drafting party shall not be employed in the interpretation of this Agreement;
and (c) the terms and provisions of this Agreement shall be construed fairly as
to all parties hereto, regardless of which party was generally responsible for
the preparation of this Agreement.
12.12 Severability of Provisions.
(a) If any provision or any portion of any
provision of this Agreement shall be held invalid or unenforceable, the
remaining portion of such provision and the remaining provisions of this
Agreement shall not be affected thereby.
(b) If the application of any provision or any
portion of any provision of this Agreement to any person or circumstance shall
be held invalid or unenforceable, the application of such provision or portion
of such provision to persons or circumstances other than those as to which it
is held invalid or unenforceable shall not be affected thereby.
12.13 No Third Party Beneficiaries. This Agreement is not
intended to, and does not, create any rights or benefits of any Person other
than the parties hereto except the Indemnified Parties.
<PAGE> 110
104
12.14 Withholding. Any payments made hereunder that are
subject to withholding tax shall be made net of such withheld amounts.
<PAGE> 111
IN WITNESS WHEREOF, the Buyer and Seller have caused this
Agreement to be duly executed as of the date first above written.
Buyer:
RENTERS CHOICE, INC.
By
----------------------------------
Name:
Title:
Seller:
THORN INTERNATIONAL BV
By
----------------------------------
Name:
Title:
THORN plc
By
----------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 2.10
STOCK PURCHASE AGREEMENT
among
RENTERS CHOICE, INC.,
a Delaware corporation
and
APOLLO INVESTMENT FUND IV, L.P.,
a Delaware limited partnership
and
APOLLO OVERSEAS PARTNERS IV, L.P.,
an exempted limited partnership
registered in the Cayman Islands
Dated
August 5, 1998
<PAGE> 2
TABLE OF CONTENTS
(Not Part of Agreement)
<TABLE>
<CAPTION>
Page
<S> <C>
I DEFINITIONS 1
II SALE AND PURCHASE 6
2.1. Sale and Issuance of Shares 6
2.2. Closing 6
III REPRESENTATIONS AND WARRANTIES OF THE COMPANY 7
3.1. Organization and Standing 7
3.2. Capital Stock 7
3.3. Subsidiaries 8
3.4. Authorization; Enforceability 9
3.5. No Violation; Consents 9
3.6. Permits 10
3.7. Litigation 10
3.8. SEC Documents; Financial Statements 10
3.9. Change in Condition 11
3.10. Employee Benefit Plans and Labor Matters 12
3.11. Interests in Real Property 14
3.12. Leases 15
3.13. Compliance with Law 15
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
3.14. Representations and Warranties in the Acquisition Documents 16
3.15. Tax Matters 16
3.16. Environmental Matters 18
3.17. Intellectual Property 19
3.18. Registration Rights 20
3.19. Insurance 20
3.20. Contracts 20
3.22. Ordinances, Regulations and Condition of Stores 25
3.23. Inventory 25
3.24. Product Liability 25
3.25. Questionable Payments 25
3.26. Solvency 25
3.27. Use of Financing 26
3.28. Accuracy of Information 26
3.29. HSR Act Filings 26
3.30. Private Offering 26
3.31. Related Party Transactions 26
IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS 27
4.1. Authorization; Enforceability; No Violations 27
4.2. Consents 27
4.3. Private Placement 27
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
V COVENANTS OF THE COMPANY 28
5.1. Amendment or Modification of or Waivers under Acquisition
Agreement 28
5.2. Notices Under the Acquisition Agreement 28
5.3. Agreement to Take Necessary and Desirable Actions 28
5.4. Compliance with Conditions; Best Efforts 29
5.5. Consents and Approvals 29
5.6. Stockholder Approval 29
5.7. Rights of Holders of Preferred Stock. 30
5.8. Other Activities of Purchasers 30
5.9. HSR Act Filings 30
VI COVENANTS OF THE PURCHASERS 30
6.1. Agreement to Take Necessary and Desirable Actions 30
6.2. Compliance with Conditions; Best Efforts 30
6.3. HSR Act Filings 30
VII CONDITIONS PRECEDENT TO CLOSING 30
7.1. Conditions to the Company's Obligations 31
7.2. Conditions to Purchasers' Obligations 31
VIII MISCELLANEOUS 35
8.1. Survival; Indemnification 35
8.2. Notices 38
8.3. Governing Law 39
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
8.4. Entire Agreement 40
8.5. Modifications and Amendments 40
8.6. Waivers and Extensions 40
8.7. Titles and Headings 40
8.8. Exhibits and Schedules 40
8.9. Expenses; Brokers 40
8.10. Press Releases and Public Announcements 41
8.11. Assignment; No Third Party Beneficiaries 41
8.12. Severability 41
8.13. Counterparts 41
8.14. Further Assurances 41
8.15. Remedies Cumulative 42
</TABLE>
iv
<PAGE> 6
SCHEDULES
Schedule 2.1 Allocation of Shares / Purchase Price
Schedule 3.2 Capital Stock
Schedule 3.3 Subsidiaries
Schedule 3.5 No Violation; Consents
Schedule 3.7 Litigation
Schedule 3.8 SEC Documents; Financial Statements
Schedule 3.9 Change in Condition
Schedule 3.10 Employee Benefit Plans and Labor Matters
Schedule 3.11 Interests in Real Property
Schedule 3.12 Leases
Schedule 3.13 Compliance with Law
Schedule 3.15 Taxes
Schedule 3.16 Environmental
Schedule 3.17 Intellectual Property
Schedule 3.18 Registration Rights
Schedule 3.21 Franchise Matters
Schedule 3.24 Product Liability
Schedule 3.31 Related Party Transactions
EXHIBITS
Exhibit A Registration Rights Agreement - Series A Preferred Stock
Exhibit B Registration Rights Agreement - Series B Preferred Stock
Exhibit C Stockholders Agreement
Exhibit D Certificate of Designations - Series A Preferred Stock
Exhibit E Certificate of Designations - Series B Preferred Stock
Exhibit F Opinion of Morgan, Lewis & Bockius LLP
Exhibit G Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
Exhibit H Opinion of W.S. Walker & Company
Exhibit I Opinion of Winstead Sechrest & Minick, P.C.
Exhibit J Opinion of Arnold & Porter
v
<PAGE> 7
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of August
5, 1998, by and between Renters Choice, Inc., a Delaware corporation (the
"Company"), and Apollo Investment Fund IV, L.P., a Delaware limited
partnership, and Apollo Overseas Partners IV, L.P., an exempted limited
partnership registered in the Cayman Islands acting through its general partner
(each a "Purchaser," and together the "Purchasers").
NOW, THEREFORE, the parties hereto hereby agree as follows.
ARTICLE I
DEFINITIONS
(a) As used in this Agreement, the following terms shall have the
following meanings:
"Acquisition" means the acquisition of the stock of Thorn Americas
pursuant to the Acquisition Agreement.
"Acquisition Agreement" means the Stock Purchase Agreement, dated
as of June 16, 1998, by and among Thorn International, Thorn and the Company.
"Acquisition Documents" shall mean (i) the Commitment Letter, (ii)
this Agreement, (iii) the Acquisition Agreement, (iv) the Financing Documents
and (v) all other documents and agreements referred to in Section 7.2(j) that
have been executed on or prior to the date hereof.
"Affiliate" with respect to any person means any other person,
directly or indirectly, controlling or controlled by or under direct or
indirect common control with such person. For the purposes of this definition,
"control" when used with respect to any person means the power to direct the
management and policies of such person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agreement" shall have the meaning set forth in the Preamble.
"Applicable Law" means, with respect to any person, any law,
statute, rule, regulation, order, writ, injunction, judgment or decree of any
Governmental Authority to which such person or any of its subsidiaries is bound
or to which any of their respective properties is subject.
"Certificate" means the Amended and Restated Certificate of
Incorporation,
1
<PAGE> 8
as amended, of the Company in the form attached as Exhibit A to the
Stockholders Agreement.
"Charter" with respect to any corporation means the certificate of
incorporation or articles of incorporation of such corporation.
"Commission" means the United States Securities and Exchange
Commission.
"Commitment Letter" means the letter agreement, dated June 15,
1998, by and between Apollo Management IV, L.P. and the Company.
"Common Stock" means the Common Stock, par value $.01 per share,
of the Company.
"Company" shall have the meaning set forth in the Preamble.
"Credit Facilities" means the Senior Secured Credit Facility, the
Revolving Credit Facility, the Letter of Credit and the Subordinated Facility.
"Designated Term" means, with respect to each Franchise Agreement,
(i) the territory in which the Renters Choice Entity is restricted from
operating Stores, (ii) obligations, including, without limitation, with respect
to Intellectual Property, of the applicable Renters Choice Entity upon
termination thereof, (iii) any guarantee by any Renters Choice Entity of any
obligation of the franchisee and (iv) any express right of the franchisee
thereunder to a remedy of specific performance.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" means with respect to any person (within the
meaning of section 3(9) of ERISA) any other person that would be regarded
together with such person as a single employer under section 414(b), (c), (m)
or (o) of the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Financing" means (i) the extension of credit under the Senior
Secured Credit Facility , (ii) the extension of credit under the Revolving
Credit Facility, (iii) the extension of credit under the Letter of Credit and
(iv) the issuance of notes or extension of credit, as applicable, under the
Subordinated Facility.
"Financing Documents" means the agreements relating to the
Financing including, without limitation, (i) the Senior Secured Credit
Facility, (ii) the Revolving Credit Facility, (iii) the Letter of Credit and
(iv) the Subordinated Facility.
"GAAP" means generally accepted accounting principles consistently
applied.
2
<PAGE> 9
"Governmental Authority" means any Federal, state or local court
or governmental or regulatory authority.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and applicable rules and regulations and any similar state
acts.
"Letter of Credit" means that certain letter of credit facility in
the amount of One Hundred Sixty-Three Million Dollars ($163,000,000) to support
obligations relating to the New Jersey judgment with respect to Robinson vs.
Thorn Americas, Inc.
"Lien" means any pledge, lien, claim, restriction, charge or
encumbrance of any kind.
"Material Adverse Effect" means, a material adverse effect (i) on
the business, operations, prospects, properties, earnings, assets, liabilities
or condition (financial or other) of the Company and its Subsidiaries and the
Thorn Entities, taken as a whole, or (ii) on the ability of the Company or any
of its Subsidiaries to perform its obligations hereunder or under any of the
Acquisition Documents, or (iii) on the value of the Purchasers' investment in
the Shares.
"Permitted Liens" means any Liens arising as a result of the
Credit Facilities.
"person" means any individual, partnership, corporation, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof, or other entity.
"Preferred Stock" shall mean the preferred stock, par value $.01
per share, of the Company.
"Preliminary Offering Memorandum" means that certain Renters
Choice, Inc. Preliminary Offering Memorandum with respect to $200,000,000
Senior Subordinated Notes due 2008.
"Purchasers" shall have the meaning set forth in the Preamble.
"Renters Choice Entities" means the Company and its Subsidiaries.
"Revolving Credit Facility" means that certain revolving credit
facility in the amount of One Hundred Twenty Million Dollars ($120,000,000)
available for general corporate purposes.
"Senior Secured Credit Facility" means that/those certain term
loan(s) in the amount of Seven Hundred Twenty Million Dollars ($720,000,000).
"Series A Preferred Stock" means the Series A Preferred Stock, $.01
par value
3
<PAGE> 10
per share, of the Company.
"Series B Preferred Stock" means the Series B Preferred Stock,
$.01 par value per share, of the Company.
"Series A Registration Rights Agreement" means the Registration
Rights Agreement relating to the Series A Preferred Stock to be entered into by
and among the Company, the Purchasers and certain other stockholders of the
Company concurrently with the Closing, substantially in the form attached as
Exhibit A hereto.
"Series B Registration Rights Agreement" means the Registration
Rights Agreement relating to the Series B Preferred Stock to be entered into by
and among the Company, the Purchasers and certain other stockholders of the
Company concurrently with the Closing, substantially in the form attached as
Exhibit B hereto.
"Shares" means the shares of Series A Preferred Stock and Series B
Preferred Stock to be issued and sold by the Company to the Purchasers under
Section 2.1(b) hereof.
"Stockholders Agreement" means the Stockholders Agreement to be
entered into among the Company and its stockholders concurrently with the
Closing, together with the exhibits thereto, substantially in the form attached
as Exhibit C hereto.
"Stores" means all of the individual retail outlets where the
Company and its Subsidiaries operate their retail rent-to-own or rent-to-rent
operations.
"Subordinated Facility" means either of (i) senior subordinated
unsecured notes of the Company issued in a public offering or Rule 144A private
placement in the amount of One Hundred Seventy-Five Million Dollars
($175,000,000) or (ii) a subordinated credit facility in the amount of One
Hundred Seventy-Five Million Dollars ($175,000,000).
"subsidiary" means, with respect to any person (a) a corporation a
majority of whose capital stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such person, by a subsidiary of such person, or by such person and one or
more subsidiaries of such person, (b) a partnership in which such person or a
subsidiary of such person is, at the date of determination, a general partner
of such partnership, or (c) any other person (other than a corporation) in
which such person, a subsidiary of such person or such person and one or more
subsidiaries of such person, directly or indirectly, at the date of
determination thereof, has (i) at least a majority ownership interest or (ii)
the power to elect or direct the election of the directors or other governing
body of such person.
"Subsidiary" means a subsidiary of the Company as of the time
immediately before the closing of the Acquisition.
"Taxes" means all taxes, however denominated, including any
interest,
4
<PAGE> 11
penalties or additions to tax that may become payable in respect thereof,
imposed by any governmental body, which taxes shall include, without limiting
the generality of the foregoing, all income taxes, payroll and employee
withholding taxes, unemployment insurance, social security, sales and use
taxes, excise taxes, franchise taxes, gross receipts taxes, occupation taxes,
real and personal property taxes, stamp taxes, transfer taxes, workmen's
compensation taxes and other obligations of the same or a similar nature,
whether arising before, on or after the Closing Date.
"Tax Returns" means any return, report, information return or
other document (including any related or supporting information) filed or
required to be filed with any governmental body in connection with the
determination, assessment, collection or administration of any Taxes.
"Thorn" means Thorn plc, a company incorporated under the laws of
England and Wales.
"Thorn Americas" means Thorn Americas, Inc., a Delaware
corporation.
"Thorn Entities" means Thorn Americas and its subsidiaries.
"Thorn International" means Thorn International BV, a Netherlands
corporation
"WARN Act" means the Worker Adjustment and Retraining Notification
Act of 1988, as amended, and any applicable state or local law with regard to
"plant closings" or mass layoffs" as such terms are defined in the WARN Act or
applicable state or local law.
(b) As used in this Agreement, the following terms shall have the
meanings given thereto in the Sections set forth opposite such
terms:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Bankruptcy Code 3.26
Benefit Plan 3.10
Closing 2.2
Closing Date 2.2
Code 3.10
Commitment 3.20
Development Agreement 3.21
Dow 7.2
Employee 3.10
Environmental Laws 3.16
Financial Statements 3.8
Franchise Agreement 3.21
Indemnified Party 8.1
Indemnifying Party 8.1
</TABLE>
5
<PAGE> 12
<TABLE>
<S> <C>
Intellectual Property 3.17
Leases 3.12
Multiemployer Plan 3.10
Notices 8.2
Opening Dow 7.2
PBGC 3.10
SEC Documents 3.8
Securities Act 3.18
Series A Certificate of Designations 2.1
Series B Certificate of Designations 2.1
</TABLE>
ARTICLE II
SALE AND PURCHASE
SECTION 1. Sale and Issuance of Shares.
(a) On or before the Closing, the Company shall adopt and file
with the Secretary of State of Delaware (i) the Certificate of
Designations, Preferences, and Relative Rights and Limitations
relating to the Series A Preferred Stock ("Series A Certificate of
Designations"), substantially in the form attached as Exhibit D
hereto, and (ii) the Certificate of Designations, Preferences,
and Relative Rights and Limitations relating to the Series B
Preferred Stock ("Series B Certificate of Designations"),
substantially in the form attached as Exhibit E hereto.
(b) On the Closing Date, and upon the terms and subject to the
conditions set forth in this Agreement, the Company shall issue
and sell to Purchasers, and Purchasers shall purchase and accept
from the Company in the relative amounts set forth on Schedule 2.1
hereto, (i) One Hundred Thirty Four Thousand Four Hundred Fourteen
(134,414) shares of the Company's Series A Preferred Stock, par
value $.01 per share and (ii) One Hundred Fifteen Thousand Five
Hundred Eighty Six (115,586) shares of the Company's Series B
Preferred Stock, par value $.01 per share, for the aggregate
purchase price of Two Hundred Fifty Million Dollars
($250,000,000).
SECTION 2. Closing. The closing of the purchase and sale
of the Series A Preferred Stock and the Series B
Preferred Stock (the "Closing") shall take place
at 8:00 a.m., local time, on August 5, 1998, or
such other date as promptly thereafter as of
which all of the conditions set forth in Article
VII hereof shall have been satisfied or duly
waived or at such other time and date as the
6
<PAGE> 13
parties hereto shall agree in writing (the
"Closing Date"), at the offices of Paul Weiss,
Rifkind, Wharton & Garrison, 1285 Avenue of the
Americas, New York, NY or at such other place as
the parties hereto shall agree in writing.
On the Closing Date (i) each of the Purchasers shall deposit into
a bank account designated by the Company, by wire transfer of immediately
available funds, an amount equal to its share of the aggregate purchase price
of the Shares, and (ii) the Company shall deliver to the Purchasers, against
payment of the purchase price therefor, certificates representing, in the
aggregate, One Hundred Thirty Four Thousand Four Hundred Fourteen (134,414)
shares of the Company's Series A Preferred Stock and One Hundred Fifteen
Thousand Five Hundred Eighty Six (115,586) shares of the Company's Series B
Preferred Stock.
The Shares shall be in definitive form and registered in the name
of the respective Purchaser or its nominee or designee and in such
denominations (including fractional shares) as each Purchaser shall request not
later than one business day prior to the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company hereby represents and warrants to Purchasers as
follows:
SECTION 1. Organization and Standing. The Company is duly
incorporated, validly existing and in good
standing as a domestic corporation under the laws
of the State of Delaware and has all requisite
corporate power and authority to own its
properties and assets and to carry on its
business as it is now being conducted and as
proposed to be conducted. The Company is duly
qualified to transact business as a foreign
corporation and is in good standing in each
jurisdiction in which the character of the
properties owned or leased by it or the nature of
its business makes such qualification necessary,
except where the failure to so qualify or be in
good standing could not, individually or in the
aggregate, reasonably be expected to have a
Material Adverse Effect.
SECTION 2. Capital Stock. Immediately following the
Closing, (a) the authorized capital stock of the
Company will
7
<PAGE> 14
consist solely of (i) Fifty Million (50,000,000)
shares of Common Stock, of which (A) Twenty Five
Million Thirty Three Thousand Three Hundred Eight
(25,033,308) shares will be issued and
outstanding and (B) Sixteen Million (16,000,000)
will be reserved for issuance upon the conversion
of the Series A Preferred Stock and the Series B
Preferred Stock and (ii) Five Million (5,000,000)
shares of Preferred Stock, of which (A) One
Hundred Thirty Four Thousand Four Hundred
Fourteen (134,414) shares of Series A Preferred
Stock will be issued and outstanding, (B) One
Hundred Fifteen Thousand Five Hundred Eighty Six
(115,586) shares of Series B Preferred Stock will
be issued and outstanding, (C) Four Hundred
Thousand (400,000) will be reserved for issuance
of the Series A Preferred Stock and (D) Four
Hundred Thousand (400,000) will be reserved for
issuance of the Series B Preferred Stock, and (b)
each share of capital stock of the Company that
is issued and outstanding will be duly
authorized, validly issued, fully paid and
nonassessable. Upon conversion of the Series A
Preferred Stock and the Series B Preferred Stock
in accordance with their terms, all of the Common
Stock and the Non-Voting Common Stock (as defined
in the Series B Certificate of Designations), as
the case may be, will be duly authorized, validly
issued, fully paid and nonassessable. Except as
set forth on Schedule 3.2, at the date hereof
there are and immediately following the Closing
there will be (i) no outstanding options,
warrants, agreements, conversion rights,
preemptive rights or other rights to subscribe
for, purchase or acquire any issued or unissued
shares of capital stock of the Company and (ii)
no restrictions upon the voting or transfer of
any shares of capital stock of the Company
pursuant to its Charter, By-Laws or other
governing documents or any agreement or other
instruments to which it is a party or by which it
is bound.
The holders of the Series A Preferred Stock will, upon issuance
thereof, have the rights set forth in the Series A Certificate of Designations.
The holders of the Series B Preferred Stock will, upon issuance thereof, have
the rights set forth in the Series B Certificate of Designations.
8
<PAGE> 15
SECTION 3. Subsidiaries.
(a) Schedule 3.3 sets forth a complete and correct list of each
Subsidiary, including the respective percentage of the fully
diluted capital stock of each such Subsidiary owned, directly or
indirectly, by the Company. Immediately following the
Acquisition, Thorn Americas shall be a direct wholly-owned
subsidiary of the Company.
(b) Each of the Subsidiaries is duly incorporated, validly
existing and in good standing under the laws of its jurisdiction
of incorporation and has all requisite corporate power and
authority to own its properties and assets and to conduct its
business as now conducted and as proposed to be conducted. Each
Subsidiary is duly qualified to do business as a foreign
corporation in every jurisdiction in which the character of the
properties owned or leased by it or the nature of the business
conducted by it makes such qualification necessary, except where
the failure to so qualify could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
(c) The outstanding shares of capital stock of each of the
Subsidiaries and of each of the Thorn Entities have been duly
authorized and validly issued and are fully paid and
nonassessable. Except as set forth on Schedule 3.3, immediately
following the Acquisition, (i) all of the shares of each of the
Subsidiaries and, to the best knowledge of the Company after due
inquiry, of each of the Thorn Entities will be owned of record and
beneficially, directly or indirectly, by the Company, free and
clear of all Liens (other than Permitted Liens) and (ii) there
will be no outstanding options, warrants, agreements, conversion
rights, preemptive rights or other rights to subscribe for,
purchase or otherwise acquire any issued or unissued shares of
capital stock of the Subsidiaries (or, to the best knowledge of
the Company, after due inquiry, any of the Thorn Entities).
SECTION 4. Authorization; Enforceability. Each of the
Company and its Subsidiaries has the corporate
power to execute, deliver and perform the terms
and provisions of each of the Acquisition
Documents to which it is a party and has taken
all necessary corporate action to authorize the
execution, delivery and performance by it of each
of the Acquisition Documents to which it is a
party and to consummate the transactions
contemplated hereby and thereby. No other
corporate proceedings on the part of the Company
or any Subsidiary is necessary therefor. The
Company has duly executed and delivered this
Agreement and each of the Renters Choice Entities
has duly executed and
9
<PAGE> 16
delivered each of the Acquisition Documents to
which it is a party. This Agreement constitutes,
and each of the Acquisition Documents to which
the Company or any Subsidiary is a party, when
executed and delivered by each of the Renters
Choice Entities which is a party thereto and,
assuming due execution by the other parties
hereto and thereto, constitute legal, valid and
binding obligations of the each of the Renters
Choice Entities enforceable against each of them
in accordance with their terms, except as
enforceability may be limited by applicable
bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the
enforcement of creditors' rights generally and by
general principles of equity (regardless of
whether enforcement is sought in a proceeding in
equity or at law).
SECTION 5. No Violation; Consents.
(a) The execution, delivery and performance by the each of the
Renters Choice Entities of each of the Acquisition Documents to
which it is a party and the consummation of the transactions
contemplated hereby and thereby does not and will not contravene
any Applicable Law, except for any such contraventions that could
not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. Except as set forth on Schedule
3.5, the execution, delivery and performance by each of the
Renters Choice Entities of each of the Acquisition Documents to
which it is a party and the consummation of the transactions
contemplated hereby and thereby (i) will not (after giving effect
to all amendments or waivers obtained on or prior to the Closing
Date) (x) violate, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any contract,
lease, loan agreement, mortgage, security agreement, trust
indenture or other agreement or instrument to which any of them is
a party or by which any of them is bound or to which any of their
respective properties or assets is subject (except with respect to
any indebtedness that will be repaid in full at the Closing),
except for such violations, breaches or defaults that could not
individually or in the aggregate reasonably be expected to have a
Material Adverse Effect, or (y) result in the creation or
imposition of any Lien (other than Permitted Liens) upon any of
the properties or assets of any of them, except for any such
defaults or Liens that could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect, and (ii) will not violate any provision of the Charter or
By-Laws of any of them.
(b) Except as set forth on Schedule 3.5, no consent, authorization
or order
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of, or filing or registration with, any Governmental Authority or
other person is required to be obtained or made by any of the
Renters Choice Entities for the execution, delivery and
performance of any of the Acquisition Documents to which any of
them is a party, or the consummation of any of the transactions
contemplated hereby or thereby, except (i) for those consents or
authorizations that will have been obtained or made on or prior to
the Closing Date or (ii) where the failure to obtain such
consents, authorizations or orders, or make such filings or
registrations, could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
SECTION 6. Permits. Each of the Company and its
Subsidiaries has such licenses, permits,
exemptions, consents, waivers, authorizations,
orders and approvals from appropriate
Governmental Authorities ("Permits") as are
necessary to own, lease or operate their
properties and to conduct their businesses as
currently owned and conducted and all such
Permits are valid and in full force and effect,
except such Permits that the failure to have or
to be in full force and effect would not,
individually or in the aggregate, have a Material
Adverse Effect on the Company. No action by the
Company or any of its Subsidiaries outside the
normal course of business is required in order
that all material Permits shall remain in full
force and effect following the consummation of
the Acquisition Agreement and this Agreement.
SECTION 7. Litigation. Except as set forth on Schedule
3.7, there are no pending or, to the best
knowledge of the Renters Choice Entities,
threatened claims, actions, suits, labor
disputes, grievances, administrative or
arbitration or other proceedings or, to the best
knowledge of the Renters Choice Entities,
investigations against the Renters Choice
Entities or their respective assets or properties
before or by any Governmental Authority or before
any arbitrator that could, individually or in the
aggregate, reasonably be expected to have a
Material Adverse Effect. None of the transactions
contemplated by any of the Acquisition Documents
is restrained or enjoined (either temporarily,
preliminarily or permanently), and no material
adverse conditions have been imposed thereon by
any Governmental Authority or arbitrator. None
of the Renters Choice Entities or any of their
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respective assets or properties, is subject to
any order, writ, judgment, award, injunction or
decree of any Governmental Authority or
arbitrator, that could, individually or in the
aggregate, reasonably be expected to have a
Material Adverse Effect.
SECTION 8. SEC Documents; Financial Statements.
(a) The Company has provided to the Purchasers copies of the
audited consolidated balance sheets of the Company and its
consolidated Subsidiaries as of December 31, 1997, together with
the related audited consolidated statements of operations,
stockholders' equity and cash flows for the fiscal year then
ended, and the notes thereto, accompanied by the reports thereon
of Grant Thornton LLP (the "Financial Statements"). Each of the
Financial Statements, including the respective notes thereto, were
prepared in accordance with GAAP and present fairly the
consolidated financial position of the Company as of such dates
and for the periods then ended.
(b) Except as set forth on Schedule 3.8, as of the date hereof the
Company has no assets or liabilities that would have been required
to be reflected in consolidated financial statements of the
Company prepared in accordance with GAAP, including notes thereto
and that are not reflected in the Financial Statements.
(c) The Company has filed all required forms, reports and
documents with the Commission since August 1, 1996, including all
exhibits thereto (collectively, the "SEC Documents"), each of
which complied in all material respects with all applicable
requirements of the Securities Act and, the Exchange Act as in
effect on the dates so filed. None of (i) the SEC Documents (as
of their respective filing dates) contained or will contain any
untrue statement of a material fact or omitted or will omit to
state a material fact required to be stated therein or necessary
in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The
Company has heretofore furnished to the Purchasers copies of each
of the SEC Documents.
(d) The pro forma financial statements contained in the SEC
Documents have been prepared on a basis consistent with the
Financial Statements and in accordance with the applicable
requirements of Regulation S-X promulgated under the Exchange Act
and 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 contemplated by the Acquisition Documents and all
other transactions and circumstances referred to therein. The
other pro forma
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financial information included in the SEC Documents has been
derived from such pro forma financial statements. Such pro forma
financial statements fairly present, on a pro forma basis, the
financial position and results of operations of the Company on the
dates and for the periods specified therein, assuming that the
events and assumptions specified therein had actually occurred or
been true, as the case may be.
(e) No representation or warranty of the Renters Choice Entities
contained in any document, certificate or written statement
furnished to the Purchasers by or at the direction of any Renters
Choice Entity for use in connection with the transactions
contemplated by this Agreement, including, without limitation, the
Preliminary Offering Memorandum, contains any untrue statement of
a material fact or omits to state any material fact (known to any
of the Renters Choice Entities, in the case of information not
furnished by them) necessary in order to make the statements
contained herein or therein not misleading in light of the
circumstances in which the same were made. There are no facts
known (or which should upon the reasonable exercise of diligence
be known) to any of the Company or its Subsidiaries (other than
matters of a general economic nature) that could, individually or
in the aggregate, reasonably be expected to have a Material
Adverse Effect and that have not been disclosed in the SEC
Documents, this Agreement or in such other documents, certificates
and statements furnished to the Purchasers for use in connection
with the transactions contemplated by the Acquisition Documents.
SECTION 9. Change in Condition.
(a) Since March 31, 1998, there has been no material adverse
change in the business, operations, properties, prospects or
condition (financial or other) of the Company or any Subsidiary,
whether or not arising in the ordinary course of business except
as contemplated by the Acquisition Documents (including the
schedules hereto or thereto).
(b) Except as set forth on Schedule 3.9, to the best knowledge of
the Renters Choice Entities, there is no event, condition,
circumstance or prospective development which could, individually
or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
SECTION 10. Employee Benefit Plans and Labor Matters.
(a) For purposes of this Agreement:
(i) "Benefit Plan" means any employee benefit plan,
arrangement, policy or commitment, including, without limitation, any
employment,
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consulting, severance or deferred compensation agreement, executive
compensation, bonus, incentive, pension, profit-sharing, savings,
retirement, stock option, stock purchase or severance pay plan, any
life, health, disability or accidental death and dismemberment
insurance plan, any holiday and vacation practice or any other
employee benefit plan within the meaning of section 3(3) of ERISA,
that is maintained, administered or contributed to by the Company or
any of its ERISA Affiliates;
(ii) "Code" means the Internal Revenue Code of 1986,
as amended;
(iii) "Employee" means any individual employed by the
Company or any of its ERISA Affiliates;
(iv) "IRS" means the United States Internal Revenue
Service; and
(v) "PBGC" means the Pension Benefit Guaranty
Corporation.
(b) Schedule 3.10 lists all Benefit Plans. With respect to each
such plan, the Company has delivered or made available to the
Buyer correct and complete copies of (i) all plan texts and
agreements and related trust agreements; (ii) all summary plan
descriptions and material Employee communications; (iii) the most
recent annual report (including all schedules thereto); (iv) the
most recent annual audited financial statement; (v) if the plan is
intended to qualify under Code section 401(a) or 403(a), the most
recent determination letter, if any, received from the IRS; and
(vi) all material communications with any Governmental Authority
(including, without limitation, the PBGC and the IRS).
(c) Except as set forth on Schedule 3.10, and as specifically
indicated with respect to each of the following, there are no
Benefit Plans that (i) are subject to any of Code section 412,
ERISA section 302 or Title IV of ERISA; (ii) are intended to
qualify under Code section 401(a) or 403(a); or (iii) are welfare
plans within the meaning of and subject to ERISA section 3(1) that
provide benefits to current or former Employees beyond their
retirement or other termination of service (other than coverage
mandated by Code section 4980B and Part 6 of Title I of ERISA), or
are self-insured "multiple employer welfare arrangements," as such
term is defined in section 3(40) of ERISA.
(d) Each Benefit Plan conforms in all material respects to, and
its administration is in all material respects in compliance with,
all Applicable Law, except for such failures to conform or comply
that, individually or in the aggregate, would not result in
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<PAGE> 21
a Material Adverse Effect on the Company.
(e) Except as set forth on Schedule 3.10, the consummation of the
transactions contemplated by this Agreement will not (i) entitle
any current or former Employee to severance pay, unemployment
compensation or any similar payment; or (ii) accelerate the time
of payment or vesting, or increase the amount of any compensation
due to, any current or former Employee.
(f) Except as set forth on Schedule 3.10, no Benefit Plan is a
"multiple employer plan" or a "multiemployer plan" within the
meaning of the Code or ERISA.
(g) In the six years preceding the date hereof, (i) no Benefit
Plan that is or was subject to Title IV of ERISA has been
terminated; (ii) no reportable event within the meaning of section
4043 of ERISA has occurred; (iii) no filing of a notice of intent
to terminate such a Benefit Plan has been made; and (iv) the PBGC
has not initiated any proceeding to terminate any such Benefit
Plan.
(h) Except as set forth on Schedule 3.10, neither the Company nor
any of its Subsidiaries is a party to any agreement that has
resulted, or would result, in the payment of any compensation to
any Employee which would constitute a "parachute payment" as
defined in section 280G of the Code.
(i) Neither the Company nor any of its Subsidiaries has any
existing arrangement with any of its Employees providing for an
excise tax gross up in respect of any excise taxes imposed by
section 4999 of the Code.
(j) No Employee of the Company or any of its Subsidiaries is a
"covered employee" within the meaning of section 162(m) of the
Code.
(k) No material labor dispute exists with any of the Renters
Choice Entities and, to the best knowledge of the Renters Choice
Entities, none is threatened. No Renters Choice Entity has
experienced any concerted work stoppages during the preceding five
years that, individually or in the aggregate, had or could
reasonably be expected to have a Material Adverse Effect.
(ii) To the best knowledge of the
Renters Choice Entities, there are
no union organizing activities or
questions of representation taking
place
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<PAGE> 22
that could, individually or in the
aggregate, reasonably be expected to
have a Material Adverse Effect.
(iii) There is no unfair labor practice charge or complaint
against any of the Renters Choice Entities which is served
and pending, or to the best knowledge of the Renters
Choice Entities, otherwise pending or threatened before
the National Labor Relations Board that could,
individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
(iv) To the best knowledge of the Renters Choice Entities,
there are no charges or investigations with respect to or
relating to any Renters Choice Entity pending before the
Equal Employment Opportunity Commission or any state or
local agency responsible for the prevention of unlawful
employment practices that could, individually or in the
aggregate, reasonably be expected to have a Material
Adverse Effect.
(v) To the best knowledge of the Renters Choice Entities,
there exists no fact or circumstances that could reasonably
be likely to give rise to any claim by the Company for
willful misconduct or fraud against any officer or director
or former officer or director (in their capacity as such)
of the Company or any Subsidiary, or any person employed by
the Company or any Subsidiary on the date hereof.
(vi) The Renters Choice Entities have complied with the
WARN Act and any similar state or local law. No employee
of any Renters Choice Entity has suffered an "employment
loss" as that term is defined in the WARN Act since six
(6) months prior to the Closing Date.
SECTION 11. Interests in Real Property.
(a) Schedule 3.11 sets forth a true and complete list of all real
properties owned and all material real property leased by each of
the Renters Choice Entities. Each Renters Choice Entity has good
and marketable title in fee simple to all real properties owned by
it and valid and enforceable leasehold interests in all real
estate leased by it, except where the lack of such title or the
invalidity or unenforceability of such leasehold interests could
not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
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<PAGE> 23
(b) Immediately following the Acquisition, none of the real
properties owned by or the leasehold estates of any Renters Choice
Entity will be subject to (i) any Liens other than Permitted Liens
or (ii) any easements, rights of way, licenses, grants, building
or use restrictions, exceptions, reservations, limitations or
other impediments that, in either case (i) or (ii), will
materially adversely affect the value thereof for their present
use, taken as a whole, or that interfere with or impair the
present and continued use thereof, taken as a whole, in the usual
and normal conduct of the business of any such person.
(c) To the best knowledge of the Renters Choice Entities, all
improvements on such real properties and the operations therein
conducted conform in all material respects to all applicable
health, fire, environmental, safety, zoning and building laws,
ordinances and administrative regulations (whether through
grandfathering provisions, permitted use exceptions, variances or
otherwise), except for possible nonconforming uses or violations
that do not and will not interfere with the present use, operation
or maintenance thereof as now used, operated or maintained or
access thereto, and that do not and will not materially affect the
value thereof for their present use. No Renters Choice Entity has
received notice of any violation of or noncompliance with any such
laws, ordinances or administrative regulations from any applicable
governmental or regulatory authority, except for notices of
violations or failures so to comply, if any, that could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(d) Immediately following the Closing and the Acquisition, the
Shares will not be a "United States real property interest" within
the meaning of section 897 of the Code.
SECTION 12. Leases.
(a) No Renters Choice Entity is in breach of or default (and no
event has occurred which, with due notice or lapse of time or
both, may constitute a material breach or default) under any lease
of the leased real property required to be set forth on Schedule
3.11 (the "Leases") and (ii) no party to any Lease has given any
Renters Choice Entity written notice of or made a claim with
respect to any breach or default, the consequences of which, in
either case (i) or (ii) could, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(b) Except as set forth on Schedule 3.12, after taking into
account the exercise of any options (which are exercisable solely
at the discretion of one of the Renters Choice Entities), none of
the Leases terminates by its terms
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<PAGE> 24
before January 1, 2000.
(c) None of the Leases require a consent to be obtained for the
execution, delivery and performance of any of the Acquisition
Documents or the consummation of any of the transactions
contemplated hereby or thereby.
(d) None of the Renters Choice Entities have ownership, financial
or other interests in the landlords under any of the Leases.
SECTION 13. Compliance with Law. The operations of the
Renters Choice Entities have been conducted in
accordance with all Applicable Laws, including,
without limitation, all such Applicable Laws
relating to consumer protection, currency
exchange, employment (including, without
limitation, equal opportunity and wage and hour),
safety and health, environmental protection,
conservation, wetlands, architectural barriers to
the handicapped, fire, zoning and building,
occupation safety, pension and securities, except
for violations or failures so to comply, if any,
that could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse
Effect. No Renters Choice Entity has received
notice of any violation of or noncompliance with
any Applicable Laws except as set forth on
Schedule 3.13 and except for notices of
violations or failures so to comply, if any, that
could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse
Effect.
SECTION 14. Representations and Warranties in the
Acquisition Documents. The representations and
warranties of the Company in the Acquisition
Agreement and the other Acquisition Documents
(including, without limitation, those made on the
Closing Date both immediately before and
immediately after giving effect to the
Acquisition and regardless of whether any such
representations or warranties survive beyond the
Closing Date) were (or will be) true in all
material respects as of the date thereof and are
true in all material respects on the Closing Date
(after giving effect to the Acquisition). To the
best knowledge of the Company after due inquiry,
the representations and warranties of the Thorn
Entities in the Acquisition
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<PAGE> 25
Agreement and the other Acquisition Documents
(including, without limitation, those made on the
Closing Date both immediately before and
immediately after giving effect to the
Acquisition and regardless of whether any such
representations or warranties survive beyond the
Closing Date) were (or will be) true in all
material respects as of the date thereof and are
true in all material respects on the Closing Date
(after giving effect to the Acquisition).
SECTION 15. Tax Matters.
(a) Except as set forth on Schedule 3.15, the Renters Choice
Entities have duly and properly filed, or will duly and properly
file, on a timely basis, all Tax Returns which were or will be
required to be filed by them for all periods ending on or before
the Closing Date or including the Closing Date. All such Tax
Returns of the Renters Choice Entities were (or will be) true,
correct and complete in all material respects when filed. The
Renters Choice Entities have paid all Taxes required to be paid by
them in respect of the periods covered by such filed Tax Returns,
whether or not shown as due, other than (i) those being contested
in good faith or those currently payable without penalty or
interest, in each case for which an adequate reserve or accrual
has been established in the Financial Statements in accordance
with GAAP, or (ii) where failure so to pay could not, individually
or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(b) All Taxes payable with respect to Tax Returns for periods
ending on or before the Closing Date, or, with respect to the
period that ends after the Closing Date, the portion of such
period up to and including the Closing Date, have been properly
reserved or accrued on the books of the appropriate persons. All
Taxes that the Renters Choice Entities are or were required by law
to withhold or collect through the Closing Date have been duly
withheld or collected and, to the extent required, have been paid
to the proper governmental body. There are no Liens with respect
to Taxes upon any of the properties or assets, real or personal,
tangible or intangible, of any Renters Choice Entity except for
statutory liens for Taxes not yet due or delinquent.
(c) Except as set forth on Schedule 3.15, no Renters Choice Entity
is currently the beneficiary of any waivers or extensions with
respect to any Tax Returns and no such Tax Returns for any taxable
year are currently under audit.
(d) The Company and each of its Subsidiaries has duly and timely
withheld from employee salaries, wages and other compensation and
paid
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<PAGE> 26
over to the appropriate taxing authorities all material amounts
required to be so withheld and paid over for all periods under
applicable laws.
(e) None of the Renters Choice Entities are party to, are bound by
or have an obligation under any Tax allocation or Tax sharing
agreement or similar contract arrangement. None of the Renters
Choice Entities (i) have been a member of an affiliated group
filing a consolidated Tax Return (other than a group the common
parent of which was the Company) nor (ii) have any liability for
the Taxes of any person (other than the Company and its
Subsidiaries) under Treasury Regulation 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or
successor, by contract, agreement to indemnify or otherwise. None
of the Renters Choice Entities have any obligation by contract,
agreement, arrangement or otherwise to permit any person, other
than the Renters Choice Entities, to use the benefit of a refund,
credit or offset of Tax of any of the Renters Choice Entities.
(f) No consent to the application of section 341(f)(2) of the Code
(or any predecessor provision) has been made or filed by or with
respect to any of the Renters Choice Entities or any of their
assets or properties.
(g) None of the Renters Choice Entities is obligated to make any
payments nor are any of the Renters Choice Entities a party to any
written or oral agreement or understanding that obligates or could
obligate any of the Renters Choice Entities to make payments under
section 280G of the Code.
(h) None of the Renters Choice Entities has been a United States
real property holding company within the meaning of section
897(c)(2) of the Code during the period specified in section
897(c)(1)(A)(ii) of the Code.
(i) The unpaid Taxes of the Renters Choice Entities (i) did not,
as of the most recent fiscal month end, exceed by a material
amount the reserve for Tax liability (rather than any reserve for
deferred taxes established to reflect timing differences between
book and tax income) set forth on the fact of the most recent
balance sheet (rather than in any notes thereto) and (ii) will not
exceed by any material amount that reserve as adjusted for
operations and transactions through the date of this Agreement, as
set forth in the preamble, in accordance with the past custom and
practice of the Renters Choice Entities in filing their Tax
Returns.
SECTION 16. Environmental Matters.
(a) Each Renters Choice Entity and its operations has obtained and
maintained in effect all licenses, permits and other
authorizations required under all Applicable Laws relating to
pollution or to the protection of the
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environment ("Environmental Laws") and is in compliance with all
Environmental Laws and with all such licenses, permits and
authorizations, except where the failure to obtain and maintain
such licenses, permits and other authorizations or any such
noncompliance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(b) Except as set forth on Schedule 3.16:
(i) no Renters Choice Entity has (A) performed or suffered any
act which could give rise to, or has otherwise incurred or
expressly assumed by contract or operation of law, liability
to any person (governmental or not) under the Comprehensive
Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601 et seq. or any other Environmental Laws,
or (B) received notice of any such liability or any claim
therefor or submitted notice pursuant to section 103 of such
Act to any governmental agency with respect to any of their
respective assets, except for such liability as could not,
individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect;
(ii) no hazardous substance, hazardous waste, contaminant,
pollutant or toxic substance (as such terms are defined in
any applicable Environmental Law) and no asbestos
containing material has been released, placed, dumped or
otherwise come to be located on, at, beneath or near any
of the assets or properties owned, leased or otherwise
operated by any Renters Choice Entity or any surface
waters or groundwaters thereon or thereunder, except as
could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect;
(iii) no Renters Choice Entity owns or operates an
underground storage tank containing a regulated substance,
as such term is defined in Subchapter IX of the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6991 et
seq. except as in accordance with Applicable Law; and
(iv) no Renters Choice Entity has Treated, Stored or
Disposed of any Hazardous Waste (as such capitalized terms
are respectively defined in (A) the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901 et seq. or (B)
Chapter 6.5 (Hazardous Waste Control) of the California
Health and Safety Code).
SECTION 17. Intellectual Property.
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(a) Immediately following the Closing, the Renters Choice Entities
will own or be licensed or have the right to use, free and clear
of all Liens (other than Permitted Liens), (i) all letters patent,
patent applications, inventions on which patent applications have
not been filed, trademarks, service marks, trade names (whether
registered or unregistered) and the registrations or applications
for registration therefor, logos, symbols, brands, copyrights
(whether registered or unregistered) and registrations therefor,
both United States and foreign, and all renewals, renewal rights,
reissues, modifications or extensions thereof, and know-how, trade
secrets, formulae, research and development data, new product
research data and manufacturing processes that are material to
their business as currently conducted (collectively, the
"Intellectual Property"), and (ii) all computer software presently
utilized in the operation of their businesses, except where the
absence of such software could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
(b) To the best knowledge of the Renters Choice Entities all state
registrations, renewals and other filings relating to any of the
Intellectual Property (other than the Intellectual Property
registered in the United States Patent and Trademark Office) that
is material to the business of any Renters Choice Entity each as
currently conducted, have been filed in all appropriate state
offices.
(c) Except as set forth on Schedule 3.17, to the best knowledge of
the Renters Choice Entities (i) no claim has been asserted by any
person challenging or questioning the validity or the right of any
Renters Choice Entity to use the Intellectual Property, nor is
there any valid basis for any such claim, (ii) the use of any item
of Intellectual Property by any Renters Choice Entity does not
infringe and will not infringe on any right, title or interest
held by any other entity or person in any intellectual property
and (iii) the use of any intellectual property by any other person
or entity does not infringe on the Intellectual Property or on the
rights of any Renters Choice Entity in any of the Intellectual
Property.
(d) No Renters Choice Entity is a party to any license agreement
or any other agreement to use, sell, assign or encumber any of the
Intellectual Property that is material to its business as
currently conducted except those agreements set forth on Schedule
3.17. Such agreements set forth on Schedule 3.17 are in full force
and effect, and, to the best knowledge of the Renters Choice
Entities, each party to such agreements has complied with the
requirements of such agreements. No notice of termination has
been given pursuant to any of such agreements. As of the Closing,
(i) all notices required by such agreements in order to renew, or
to extend the term of, such agreements have been properly given in
accordance with any requirements
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relating thereto set forth in such agreements and (ii) to the best
knowledge of the Renters Choice Entities (A) there are no existing
or threatened bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other similar proceedings
relating to any of the parties to any of such agreements, (B)
there are no defaults by any party to such agreements and (C)
there exist no events, or failures to act, which, with the passage
of time or the giving of notice, or both, will constitute an event
of default under any of such agreements.
(e) All Intellectual Property in the form of computer software
that is utilized by any Renters Choice Entity or any Thorn Entity
in the operation of its respective business is capable of
processing date data between and within the twentieth and twenty-
first centuries.
SECTION 18. Registration Rights. Except as set forth on
Schedule 3.18, no Renters Choice Entity is under
any obligation to register any of its outstanding
securities pursuant to the Securities Act of
1933, as amended (the "Securities Act").
SECTION 19. Insurance. The Renters Choice Entities
maintain, with reputable insurers, insurance in
such amounts, including deductible arrangements,
and of such a character as is usually maintained
by reasonably prudent managers of companies
engaged in the same or similar business. All
policies of title, fire, liability, casualty,
business interruption, workers' compensation and
other forms of insurance including, but not
limited to, directors and officers insurance,
held by the Renters Choice Entities as of the
date hereof, are in full force and effect in
accordance with their terms. No Renters Choice
Entity is in default under any provisions of any
such policy of insurance and no Renters Choice
Entity has received notice of cancellation of any
such insurance.
SECTION 20. Contracts. All contracts and other instruments
to which any Renters Choice Entity is a party
that are material to the business, operations,
properties, prospects or financial condition of
any of them (collectively, the "Commitments") are
in full force and effect on the date hereof. No
Renters Choice Entity is in default in respect of
any Commitment, and no event has occurred which,
with due notice or lapse
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<PAGE> 30
of time or both, would constitute such a default,
except for any such defaults that could not,
individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. To
the best knowledge of the Renters Choice
Entities, after due inquiry, no other party to
any Commitment is in default in respect thereof,
and no event has occurred which, with due notice
or lapse of time or both, would constitute such a
default.
SECTION 21. Franchising Matters.
(a) The Designated Terms of all franchise agreements to which any
Renters Choice Entity is a party ("Franchise Agreements")
materially conform to the Designated Terms of the form of
franchise agreement attached to the applicable Renters Choice
Entity's Uniform Franchise Offering Circular. Set forth on
Schedule 3.21 is a true and complete list in all material
respects, as of the date hereof, (i) with respect to each
Franchise Agreement, the Approved Location (as defined in each
Franchise Agreement) and (ii) with respect to each development
agreement to which any Renters Choice Entity is a party
("Development Agreement"), the Assigned Area (as defined in each
Development Agreement).
(b) Disclosure Documents. Each Renters Choice Entities' past and
present franchise disclosure documents and/or franchise offering
circulars (collectively "FOCs") for any area franchises,
individual franchises, any other type of franchise the Renters
Choice Entities offer, and/or, if applicable, any licenses: (i)
materially comply with all applicable Federal Trade Commission
("FTC") franchise disclosure regulations, any other applicable
foreign or federal laws and regulations, state franchise and
business opportunity sales laws and regulations, and local laws
and regulations; (ii) include and accurately state all material
information (including but not limited to the discussion of
litigation matters) set forth in them; (iii) do not omit any
required material information; (iv) accurately state the
applicable Renters Choice Entity's position that it does not
provide to prospective area or individual franchisees "earnings
claims" information (as that term is defined in the FTC's
franchise disclosure regulations and the North American Securities
Administrators Association's current Uniform Franchise Offering
Circular Guidelines); (v) have been timely revised to reflect any
material changes or developments in the applicable Renters Choice
Entity's franchise system, agreements, operations, financial
condition, litigation matters, or other matters requiring
disclosure under any applicable foreign, federal, state, and/or
local law; and (vi) include all material documents (including but
not limited to audited financial statements for the applicable
Renters Choice
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Entity) required by any applicable foreign, federal, state, and/or
local law to be provided to prospective area franchisees,
individual franchisees and/or, if applicable, any licensees.
(c) Franchise and License Agreements. The Renters Choice
Entities' past and present agreements with their area franchisees,
individual franchisees, and licenses: (i) materially comply with
applicable foreign, federal, state, and/or local laws and
regulations; (ii) do not include provisions that would prevent or
otherwise impair the applicable Renters Choice Entity's ability to
undergo a change in ownership or control or require the applicable
Renters Choice Entity to notify any area franchisees, individual
franchisees, and/or licensees of such a change in ownership or
control; (iii) do not obligate the Renters Choice Entities to buy
back or otherwise acquire the stock, assets, or contractual rights
of area franchisees, individual franchisees, and/or licensees;
(iv) do not impose on the Renters Choice Entities an obligation to
guarantee the lease obligations, third party financing
obligations, or other material obligations to third parties of the
area franchisees, individual franchisees, and/or licensees; (v)
impose on area franchisees, individual franchisees, and licensees
an obligation to comply with all applicable federal, state, and
local laws and regulations; and (vi) impose on area franchisees,
individual franchisees, and licensees an obligation to maintain
commercially reasonable insurance that names the applicable
Renters Choice Entity as an additional insured, requires the
insurer to notify the applicable Renters Choice Entity before it
terminates any such insurance policy for nonpayment, and permits
the applicable Renters Choice Entity to make such payments to
maintain such insurance coverage on behalf of any non-paying area
franchisee, individual franchisee, or licensee.
(d) Registration and Disclosure Compliance. All of the area
franchises, individual franchises, and licenses of the Renters
Choice Entities have been sold in material compliance with
applicable foreign, federal, state, and/or local franchise
disclosure and registration requirements. As a result,
(i) each prospective area franchisee, individual franchisee,
and, if applicable, licensee was provided with any required
FOC at the earlier of (A) the first personal face-to-face
meeting between the applicable Renters Choice Entity and the
then prospect for the purposes of discussing the acquisition
of an area franchise, individual franchise, or, if applicable,
license, (B) at least ten business days before the execution
of any agreement with the applicable Renters Choice Entity or
the payment of any funds to the applicable Renters Choice
Entity by the prospective area franchisee, individual
franchisee, or, if applicable, licensee, or (C) within any
other minimum time period imposed by law;
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(ii) at least five business days before execution of any
agreements with the Renters Choice Entities, each
prospective area franchisee, individual franchisee, and,
if applicable, licensee was provided with a completed
execution copy of the applicable Renters Choice Entity's
area franchise agreement, individual franchise agreement,
or, if applicable, license agreement, respectively,
together with any related documents (e.g., spousal consent
form, phone transfer agreement, software license, security
agreement, equipment lease, national account agreement)
with all pertinent specific information for such
prospective area franchisee, individual franchisee, or, if
applicable, licensee set forth in those agreements and
documents;
(iii) each FOC provided to a prospective area franchisee,
individual franchisee, or, if applicable, licensee
complied in all material respects at the time of the
delivery of such FOC with applicable foreign, federal,
state, and/or local laws regarding such franchise offering
circulars;
(iv) each of the Renters Choice Entities' required FOCs
were either properly registered with appropriate franchise
regulatory authorities, covered by a proper notice filing
with appropriate franchise regulatory authorities, or
qualified for an exemption from such registration or
notice filing requirements;
(v) each of the Renters Choice Entities' offerings were,
where applicable, either properly registered with
appropriate business opportunity sales authorities or
qualified for an exemption from such registration
requirements;
(vi) the Renters Choice Entities obtained signed
acknowledgments of receipt for the delivery of each FOC to
prospective area franchisees, individual franchisees, and,
if applicable, licensees;
(vii) to the extent that any of the Renters Choice Entities
may have experienced lapses in one or more jurisdictions
for its registrations for area franchise offerings,
individual franchise offerings, and/or, if applicable,
license offerings, the applicable Renters Choice Entity
did not offer or sell during the period of any such lapses
any such area franchises, individual franchises, or, if
applicable, licenses for franchises (A) in those
jurisdictions, (B) to be operated outside those
jurisdictions by residents of those jurisdictions, or (C)
the sale of which might otherwise have triggered the
application of the franchise registration laws of those
jurisdictions during the periods of any such
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lapse;
(viii) to the extent required by foreign, federal, state,
and/or local law, the Renters Choice Entities have
complied with all applicable franchise advertising filing
requirements;
(ix) to the best of its knowledge, the Renters Choice
Entities are not aware of any instances in which any of
their employees, sales agents, or sales brokers for area
franchises, individual franchises, or, if applicable,
licenses provided information to prospective area
franchisees, individual franchisees, or, if applicable,
individual licensees, that materially differed from the
information contained in the FOCs provided to such
prospects (including but not limited to "earnings claim"
information);
(x) where required, the Renters Choice Entities properly
filed with appropriate franchise regulatory authorities
amendments to their FOCs to reflect any material changes or
developments in the applicable Renters Choice Entity's
franchise system, agreements, operations, financial
condition, litigation or other matters requiring
disclosure;
(xi) where required, the Renters Choice Entities complied
with foreign, federal, state, and/or local laws (including
in particular those of California and North Dakota)
requiring registration, disclosure, and/or other
compliance activities associated with any "material
modifications" made to the applicable Renters Choice
Entity's then current area franchises, individual
franchises, or, if applicable, licenses; and
(xii) the Renters Choice Entities properly and timely
converted the format of their FOCs from the prior format
prescribed by the Uniform Franchise Offering Circular
guidelines to the so-called "plain English" guidelines
currently in effect for FOCs prepared in accordance with
Uniform Franchise Offering Circular guidelines.
(e) Franchise and Related Litigation. The
Renters Choice Entities' April 1997 FOCs for
their universal area franchise agreement and
universal individual franchise agreement set
forth accurate summary information about
(i) any governmental regulatory, criminal, and/or material
civil actions pending against the applicable Renters Choice
Entity alleging
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a violation of a foreign and/or United States franchise,
antitrust or securities law, fraud, unfair or deceptive
practices, or comparable allegations as well as actions
other than ordinary routine litigation incidental to the
applicable Renters Choice Entity's business which are
significant in the context of the number of the applicable
Renters Choice Entity's franchisees and the size, nature or
financial condition of the franchise system or its business
operations;
(ii) any convictions of a felony, nolo contendre pleas to
a felony charge, and adverse final judgments in a civil
action in foreign countries and/or the United States since
April 1987 as well as all material actions since April
1987 involving violation of a franchise, antitrust or
securities law, fraud, unfair or deceptive practices, or
comparable allegations; and
(iii) all currently effective injunctive or restrictive
orders or decrees relating to the franchise area under a
foreign, federal, state, or local franchise, securities,
antitrust, trade regulation, or trade practices law
resulting from a concluded or pending action or proceeding
brought by a public agency.
In addition, the Renters Choice Entities have not received notice of any
threatened administrative, criminal and/or material civil action against them
and/or any persons disclosed in Item II of the Renters Choice Entities' April
1997 FOCs for their Universal Area Franchise Agreement and Universal Individual
Franchise Agreement where such threatened administrative, criminal and/or
material civil action alleges a violation of a foreign and/or United States
franchise, antitrust law, or securities law, fraud, unfair or deceptive
practices, or comparable allegations as well as actions other than ordinary
routine litigation incidental to the applicable Renters Choice Entity's
business which are significant in the context of the number of the applicable
Renters Choice Entity's franchisees and the size, nature, or financial
condition of the franchise system or its business operations.
(f) Franchisee Relations and Operations. In
each of the Renters Choice Entities'
communications with its area franchisees,
individual franchisees, licensees, and
representative groups of those area franchisees,
individual franchisees, and/or licensees, the
applicable Renters Choice Entity is not aware of
any material misstatements regarding its
operations, franchise system, agreements,
financial condition, litigation matters, or plans
that could be used as a basis for a successful
fraud, misrepresentation, or franchise law
violation
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claim against the applicable Renters Choice
Entity. Each of the Renters Choice Entities have
taken and continue to take commercially
reasonable efforts to protect the confidentiality
of their current Operations Manual.
(g) Franchise Terminations. The Renters Choice Entities'
termination of or effort to terminate or refusal to renew any area
franchisee, individual franchisee, or, if applicable, licensee,
has complied with applicable federal, state, and/or local
franchise termination laws and regulations including, in
particular, but not limited to, having provided any such area
franchisee, individual franchisee, or, if applicable, licensee
involved in such a nonrenewal or termination any statutorily
required notice and opportunity to cure. The Renters Choice
Entities have complied with all other applicable foreign, federal,
state, and/or local laws and/or regulations relating to ongoing
franchise relationships, the termination of such relationships,
and/or the non-renewal of such relationships.
SECTION 22. Ordinances, Regulations and Condition of
Stores. The Stores and the operation and
maintenance thereof, as now operated or
maintained, do not contravene any material zoning
ordinances or other administrative regulations
(either because the Store is in compliance with
such material zoning ordinances or other
administrative regulations or because compliance
with such material zoning ordinances or other
administrative regulations is not required due to
a prior nonconforming use) or violate in any
material respect any existing restrictive
covenant or any provision of existing and
applicable law, the effect of which in any
respect would have a Material Adverse Effect on
(i) the continued use of the properties for the
purposes for which they are now being used or
(ii) the value of the properties. The Stores and
other facilities, taken as a whole, are in good
condition and repair, ordinary wear and tear
excepted.
SECTION 23. Inventory. All inventory of the Renters Choice
Entities was purchased, acquired or ordered in
the ordinary course of business and consistent
with past practice. The Renters Choice Entities'
rental merchandise in the aggregate is of a
quality useable and merchantable, except for
items of obsolete merchandise or merchandise
below standard quality,
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which have been in the aggregate written down to
the lower of cost or realizable market value, or
for which adequate reserves have been provided.
SECTION 24. Product Liability. Schedule 3.24 sets forth
the Company's general warranty policy with
respect to products rented or sold by the Company
or its Subsidiaries at any Stores. Other than as
described on Schedule 3.24, none of the Company
or the Subsidiaries have provided any written or,
to the knowledge of the Company, oral express
warranties with respect to products rented or
sold by the Company or its Subsidiaries at any
Stores. No Renters Choice Entity has knowledge
of any fact or event forming the basis of a claim
against any Renters Choice Entity for product
liability on account of any express warranty
which is not fully covered by insurance.
SECTION 25. Questionable Payments. No Renters Choice
Entity nor to the Company's knowledge any
employee, agent, representative or shareholder of
any Renters Choice Entity has, directly or
indirectly, made any bribes, kickbacks, illegal
payments or illegal political contributions using
corporate funds of any Renters Choice Entity or
made any illegal payments to obtain or retain
business using corporate funds of any Renters
Choice Entity.
SECTION 26. Solvency. No Renters Choice Entity is, or
after giving effect to the transactions
contemplated by the Acquisition Documents and
other obligations in connection therewith, will
be, (a) "insolvent" (as defined in section
101(31) of the Bankruptcy Code of 1978, as
amended (the "Bankruptcy Code")), (b) engaged in
business with unreasonably small capital or
assets (as contemplated by the Bankruptcy Code,
the Uniform Fraudulent Conveyance Act, as
amended, the Uniform Fraudulent Transfer Act, as
amended, or other similar laws) or (c) unable to
pay or provide for the payment of such
liabilities and obligations as and when due.
SECTION 27. Use of Financing. The proceeds received under
or as
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a result of the Acquisition Documents will solely
be used directly or indirectly for the
consummation of the transactions contemplated by
the Acquisition Documents, including the payment
of related fees and expenses, and for working
capital of the Renters Choice Entities.
SECTION 28. Accuracy of Information. None of the
representations, warranties or statements of the
Company contained in this Agreement or in the
exhibits hereto contains any untrue statement of
a material fact or, taken as a whole together
with the SEC Documents, omits to state any
material fact necessary in order to make any of
such representations, warranties or statements
not misleading. All information relating to the
Renters Choice Entities that may be material to a
purchaser for value of the Shares has been
disclosed to the Purchasers and any such
information arising on or before the Closing Date
will forthwith be disclosed to the Purchasers.
SECTION 29. HSR Act Filings. With respect to the
Acquisition, each of the Company and its
Subsidiaries has filed all reports and documents
as may be necessary to comply with the HSR Act
and the Company is in full compliance with
Section 6.3 of the Acquisition Agreement. The
HSR waiting period with respect to the
Acquisition has expired.
SECTION 30. Private Offering. Based, in part, on the
Purchasers' representations in Section 4.3, the
sale of the Shares by the Company to the
Purchasers is exempt from the registration and
prospectus delivery requirements of the
Securities Act. None of the Renters Choice
Entities, nor anyone acting on their respective
behalf, has offered or sold or will offer or sell
any securities, or has taken or will take any
other action, which would subject the offer,
issuance or sale of the Shares or Common Stock as
contemplated hereby to the registration
provisions of the Securities Act.
SECTION 31. Related Party Transactions. Except as set
forth on Schedule 3.31, no Renters Choice Entity
or Thorn
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Entity is, or immediately following the Closing
and the Acquisition will be, a party to any
agreement or arrangement (which will continue to
be in effect after giving effect to the
transactions contemplated by the Acquisition
Documents) with or for the benefit of any person
who is a holder of 5% or more of the outstanding
equity securities of the Company (other than
employees who are not Affiliates of the Company)
or any officer, director, partner or Affiliate of
any such person.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser severally as to itself only, and not jointly,
hereby represents and warrants to the Company as follows:
SECTION 1. Authorization; Enforceability; No Violations.
(a) Each Purchaser is duly organized and validly existing, in each
case, in good standing as a partnership under the laws of its
jurisdiction of organization or registration and has all requisite
corporate or partnership power and authority to own its properties
and assets and to carry on its business as it is now being
conducted. Each Purchaser has the partnership power to execute,
deliver and perform the terms and provisions of the Acquisition
Documents to which it is a party and has taken all necessary
partnership action to authorize the execution, delivery and
performance by it of such Acquisition Documents and to consummate
the transactions contemplated hereby and thereby. No other
partnership proceedings on the part of any such Purchaser is
necessary therefor.
(b) The execution, delivery and performance by such Purchaser of
the terms and provisions of the Acquisition Documents to which it
is a party and the consummation of the transactions contemplated
hereby and thereby do not and will not violate, in any material
respect, any provision of the partnership agreement or other
governing documents of such Purchaser, or of any other agreement
or instrument to which such Purchaser is a party or by which it is
bound, or to which any of its properties or assets is subject, or
of any Applicable Law. Each such Purchaser has duly executed and
delivered this Agreement and, at the Closing, will have duly
executed and delivered the Acquisition Documents to which it is a
party. This Agreement constitutes, and the Acquisition Documents
to which each such Purchaser is a party when
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executed and delivered by such Purchaser, and, assuming the due
execution by the other parties hereto and thereto, will constitute
the legal, valid and binding obligations of such Purchaser,
enforceable against such Purchaser in accordance with their terms,
except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought
in a proceeding in equity or at law).
SECTION 2. Consents. No consent, authorization or order
of, or filing or registration with, any
Governmental Authority or other person is
required to be obtained or made by such Purchaser
for the execution, delivery and performance by
such Purchaser of this Agreement or any
Acquisition Documents to it is a party or the
consummation of any of the transactions
contemplated hereby or thereby other than those
that will have been made or obtained on or prior
to the Closing Date.
SECTION 3. Private Placement.
(a) Such Purchaser understands that (i) the offering and sale of
the Shares by the Company to the Purchasers are intended to be
exempt from registration under the Securities Act pursuant to
section 4(2) thereof, and (ii) there is no existing public or
other market for the Shares.
(b) The Shares to be acquired by such Purchaser pursuant to this
Agreement are being acquired for its own account and without a
view to making a distribution thereof in violation of the
Securities Act.
(c) Such Purchaser has sufficient knowledge and experience in
financial and business matters so as to be capable of evaluating
the merits and risks of its investment in the Shares and such
Purchaser is capable of bearing the economic risks of such
investment, including a complete loss of its investment in the
Shares.
(d) Such Purchaser is an "accredited investor" as such term is
defined in Regulation D under the Securities Act.
(e) Such Purchaser acknowledges that the Company and, for purposes
of the opinions to be delivered to the Purchasers pursuant to
Section 7.2(t) hereof, Winstead Sechrest & Minick P.C. will rely
on the accuracy and truth of its representations in this Section
4.3, and such Purchaser hereby consents
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to such reliance.
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 1. Amendment or Modification of or Waivers under
Acquisition Agreement. The Company agrees that,
without the prior written consent of the
Purchasers, it will not consent to any amendment
or modification to, or waive any of its rights
under, the Acquisition Agreement, which
amendment, modification or waiver would have a
Material Adverse Effect on the rights of the
Company or the Purchasers with respect to the
business, assets, operations and properties of
the Company, the Subsidiaries and the Thorn
Entities.
SECTION 2. Notices Under the Acquisition Agreement. The
Company shall promptly provide the Purchasers
with such notices and reports as any Renters
Choice Entity may send to or receive from Thorn
Americas or Thorn International pursuant to the
terms of or relating to the Acquisition
Agreement.
SECTION 3. Agreement to Take Necessary and Desirable
Actions. The Company shall, and shall cause each
Subsidiary, to execute and deliver the
Acquisition Documents to which each shall be a
party and such other documents, certificates,
agreements and other writings and to take such
other actions as may be necessary, desirable or
reasonably requested by the Purchasers in order
to consummate or implement expeditiously the
transactions contemplated hereby.
SECTION 4. Compliance with Conditions; Best Efforts. The
Company shall use its best efforts to cause all
of the obligations imposed upon it in this
Agreement to be duly complied with and to cause
all conditions precedent to the obligations of
the Company and the Purchasers to be satisfied.
Upon the terms and subject to the conditions of
this Agreement, the Company shall use its best
efforts to take, or cause to be taken,
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all action, and to do, or cause to be done, all
things necessary, proper or advisable consistent
with applicable law to consummate and make
effective in the most expeditious manner
practicable the transactions contemplated hereby.
SECTION 5. Consents and Approvals. The Company (a) shall
use its best efforts to obtain all necessary
consents, waivers, authorizations and approvals
of all Governmental Authorities and of all other
persons, firms or corporations required in
connection with the execution, delivery and
performance by them of this Agreement, any other
Acquisition Document or any of the transactions
contemplated hereby or thereby, and (b) shall
diligently assist and cooperate with the
Purchasers in preparing and filing all documents
required to be submitted by the Purchasers to any
Governmental Authority in connection with such
transactions and in obtaining any governmental
consents, waivers, authorizations or approvals
which may be required to be obtained by the
Purchasers in connection with such transactions
(which assistance and cooperation shall include,
without limitation, timely furnishing to the
Purchasers all information concerning the Renters
Choice Entities that counsel to the Purchasers
determines is required to be included in such
documents or would be helpful in obtaining any
such required consent, waiver, authorization or
approval).
SECTION 6. Stockholder Approval. The Company shall (i) on
or before the twentieth (20) day following the
Closing, file a proxy statement with the
Commission with respect to the holding of a
special stockholders' meeting for the purpose of
obtaining stockholder approval of a proposal to
allow the Series B Preferred Stock to be
converted into shares of the Series A Preferred
Stock, (ii) promptly notice such a meeting
following the Commission's clearance of such
proxy statement and (iii) on or before the
fortieth (40) day following the Commission's
clearance of such proxy statement, hold such
meeting. The Company shall use its best efforts
to obtain such stockholder approval, including,
but not limited to, recommending the
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transactions contemplated by this Agreement to
the stockholders of the Company and responding
promptly to the Commission's comments in order to
obtain clearance.
SECTION 7. Rights of Holders of Preferred Stock. The
Company covenants and agrees that, unless
otherwise agreed to by a majority of the holders
of the Series A Preferred Stock, the
designations, powers, preferences, rights,
qualifications, limitations and restrictions of
the Series A Preferred Stock shall be as set
forth in the Series A Certificate of
Designations, and the Company covenants and
agrees not to amend, without the consent of a
majority of the holders of Series A Preferred
Stock, (i) the Company's Certificate or By-laws
in a manner that would impact the holders of the
Series A Preferred Stock, or (ii) the Series A
Certificate of Designations. The Company
covenants and agrees that, unless otherwise
consented to by a majority of the holders of the
Series B Preferred Stock, the designations,
powers, preferences, rights, qualifications,
limitations and restrictions of the Series B
Preferred Stock shall be as set forth in the
Series B Certificate of Designations, and the
Company covenants and agrees not to amend,
without the consent of a majority of the holders
of Series B Preferred Stock, (i) the Company's
Certificate or By-laws in a manner that would
impact the holders of the Series B Preferred
Stock, or (ii) the Series B Certificate of
Designations.
SECTION 8. Other Activities of Purchasers. Nothing
contained in this Agreement or any other
agreement of the Company shall be deemed to
prohibit the Purchasers or any of their
respective Affiliates from forming or investing
in other entities engaged in activities similar
to those of the Company.
SECTION 9. HSR Act Filings. The Company has filed, or
caused to be filed, all reports and documents as
may be necessary to comply with the HSR Act.
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ARTICLE VI
COVENANTS OF THE PURCHASERS
SECTION 1. Agreement to Take Necessary and Desirable
Actions. Each of the Purchasers agrees to
execute and deliver each of the Acquisition
Documents to which it shall be a party and such
other documents, certificates, agreements and
other writings and to take such other actions as
may be necessary, desirable or reasonably
requested by the Company in order to consummate
or implement expeditiously the transactions
contemplated hereby.
SECTION 2. Compliance with Conditions; Best Efforts. Each
of the Purchasers will use its best efforts to
cause all of the obligations imposed upon it in
this Agreement to be duly complied with, and to
cause all conditions precedent to the obligations
of the Company and the Purchasers to be
satisfied. Upon the terms and subject to the
conditions of this Agreement, each of the
Purchasers shall use its best efforts to take, or
cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or
advisable consistent with applicable law to
consummate and make effective in the most
expeditious manner practicable the transactions
contemplated hereby.
SECTION 3. HSR Act Filings. Each of the Purchasers has
filed, or caused to be filed, all reports and
documents as may be necessary to comply with the
HSR Act.
ARTICLE VII
CONDITIONS PRECEDENT TO CLOSING
SECTION 1. Conditions to the Company's Obligations. The
obligations of the Company hereunder required to
be performed on the Closing Date shall be
subject, at its election, to the satisfaction or
waiver (which waiver, if so requested by the
Purchasers, shall be made in writing), at or
prior to the Closing, of the following
conditions:
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(a) The representations and warranties of the Purchasers contained
in this Agreement shall be true and correct in all material
respects on and as of the Closing Date.
(b) The Purchasers shall have performed in all material respects
all obligations and agreements, and complied in all material
respects with all covenants, contained in this Agreement, to be
performed and complied with by the Purchasers at or prior to the
Closing Date.
(c) All conditions precedent to the consummation of the
transactions contemplated by the Acquisition Documents shall have
been satisfied or waived.
(d) The Purchasers shall have delivered to the Company a
certificate, executed by each Purchaser or on its behalf by a duly
authorized representative, dated as of the Closing Date,
certifying that each of the conditions specified in this Section
7.1 has been satisfied with respect to the Purchasers.
(e) Morgan, Lewis & Bockius LLP, counsel to the Purchasers, shall
have delivered to the Company an opinion, dated the Closing Date,
addressed to the Company, substantially in the form attached as
Exhibit F hereto.
(f) Akin, Gump, Strauss, Hauer & Feld, L.L.P., counsel to the
Purchasers, shall have delivered to the Company an opinion, dated
the Closing Date, addressed to the Company, substantially in the
form attached as Exhibit G hereto.
(g) W.S. Walker & Company, counsel to the Purchasers, shall have
delivered to the Company an opinion, dated the Closing Date,
addressed to the Company, substantially in the form attached as
Exhibit H hereto.
SECTION 2. Conditions to Purchasers' Obligations. The
obligations of the Purchasers hereunder required
to be performed at the Closing shall be subject,
at their joint election, to the satisfaction or
waiver (which waiver, if so requested by the
Company, shall be made in writing), at or prior
to the Closing, of the following conditions:
(a) The representations and warranties of the Company contained in
this Agreement shall be true and correct in all material respects
on and as of the Closing Date (after giving effect to the
transactions contemplated hereby). Any waiver by the Purchasers of
this condition to the Purchasers' obligations
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shall be solely for the purposes of effecting the Closing and
shall not constitute a waiver of the Purchasers' or any other
Indemnified Party's right to indemnification for the Company's
failure to satisfy this condition.
(b) The Company shall have performed in all material respects all
obligations and agreements, and complied in all material respects
with all covenants, contained in this Agreement, to be performed
and complied with by it at or prior to the Closing Date.
(c) All conditions precedent to the transactions contemplated by
the Acquisition Documents shall have been satisfied; provided that
no waiver of any of the conditions of, or amendment to, any of the
Acquisition Documents shall have occurred except such as shall
have been consented to in writing by the Purchasers, and, with
respect to any conditions thereunder the fulfillment of which is
or may be determined in the judgment or discretion of any party to
an Acquisition Document other than the Purchasers, such conditions
shall not be deemed fulfilled unless each of the Purchasers, in
its sole judgment, shall also be satisfied that such conditions
are fulfilled.
(d) The Company, Thorn and Thorn International shall have
executed the Acquisition Agreement, and the consummation of the
Acquisition contemplated thereby shall occur concurrently with the
Closing.
(e) The Company and Chase Securities, Inc., The Chase Manhattan
Bank, NationsBank, N.A., NationsBanc Montgomery Securities LLC,
Comerica Bank and/or NationsBridge, L.L.C. shall have entered into
definitive agreements with respect to the Credit Facilities in
form and substance reasonably satisfactory to the Purchasers, and
all amounts shall have been funded to the Company pursuant to the
terms of the Credit Facilities as described herein.
(f) Simultaneously with the receipt of the proceeds of the sale of
the Shares hereunder, the Renters Choice Entities shall receive
proceeds under or as a result of the Credit Facilities which shall
be sufficient to consummate the Acquisition, including payment of
fees and expenses in respect thereof.
(g) In connection with the issuance of the Series A Preferred
Stock and the Series B Preferred Stock, (i) the charter and
By-laws and other governing documents of the Company shall have
been amended as the Purchasers deem appropriate to effect the
understandings described in the Commitment Letter, (ii) each of
such agreements and documents shall be in full force and effect
and (iii) all existing shareholders' agreements or similar
agreement relating to the Company or Thorn Americas shall have
been terminated.
39
<PAGE> 46
(h) The Purchasers and the Company shall have entered into or
caused to become effective the Stockholders Agreement.
(i) [intentionally omitted]
(j) All documents, instruments, agreements and arrangements
relating to the transactions contemplated by the Acquisition
Documents shall be satisfactory to the Purchasers, shall have been
executed and delivered by the parties thereto and no party to any
of the foregoing shall have breached any of its material
obligations thereunder.
(k) (i) Since March 31, 1998, no change, occurrence or development
shall have occurred, been threatened or become known to the
Purchasers that could reasonably be expected to have a Material
Adverse Effect on the business, operations, prospects, properties
or condition (financial or other) of the Company, Thorn Americas
and their subsidiaries, taken as a whole which, in the reasonable
judgment of the Purchasers, is or may be materially adverse to the
Company, Thorn Americas and their respective subsidiaries, taken
as a whole, and (ii) the Purchasers shall not have become aware of
any information or other matter that in its sole judgement was
inconsistent in a material and adverse manner with any information
or other matter disclosed to the Purchasers prior to June 15,
1998; provided, however, that the following events shall not be
deemed to constitute a materially adverse change, occurrence or
development (all defined terms in the remainder of this paragraph
are as set forth in the Acquisitions Agreement): (i) transactions
contemplated by the Acquisition Documents; (ii) following the
closing of the Acquisition Agreement, the filing with any
Governmental Entity, or the threat thereof, of any Claim by any
Person containing allegations against the Company or any of its
Subsidiaries similar or analogous to the allegations raised in any
of the Claims listed on Schedules 6.17 and 8.2 (other than item
no. 3 thereon) to the Acquisition Agreement, (ii) the entry of
any interlocutory or final Order in any Claims listed on Schedules
6.17 and 8.2 (other than item no. 3 thereon) to the Acquisition
Agreement, which is subject to any appeal, or (iii) any other
condition, event or occurrence regarding any Claim listed on
Schedules 6.17 and 8.2 (other than item no. 3 thereon) to the
Acquisition Agreement.
(l) Since March 31, 1998, the business of the Company shall have
been operated in compliance with all federal, state and local laws
and other regulations, except where the failure to do so would
have a Material Adverse Effect on the Company and their
subsidiaries taken as a whole.
(m) The Purchasers shall have received a copy of the letter
delivered in connection with the Acquisition and the Financing
with respect to the
40
<PAGE> 47
solvency and financial condition of Thorn Americas after giving
effect to the Acquisition and the transactions contemplated by the
Acquisition Documents and other obligations in connection
therewith, which letter need not be addressed to the Purchasers.
(n) There shall be no action continuing, and no statute, rule,
regulation, judgment, administrative interpretation, order or
injunction shall have been enacted, promulgated, entered or
enforced, and there shall be no action deemed applicable to the
sale of the Shares to the Purchasers, which would (i) make illegal
or otherwise restrict or prohibit the consummation of the sale of
the Shares to the Purchasers or the Acquisition, (ii) result in a
significant delay in the consummation of the Acquisition or (iii)
materially restrict the ability of the Purchasers, or render the
Purchasers unable, to effect the purchase of the Shares from the
Company.
(o) There shall be no litigation, proceeding or other action
(including, without limitation, relating to environmental and
pension matters) pending or threatened against the Company, Thorn
Americas or their respective subsidiaries which could,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(p) (i) During the seven-calendar-day period ending on the Closing
Date, (A) trading in securities generally on the New York Stock
Exchange or the American Stock Exchange or the over-the-counter
market shall not have been suspended and minimum prices shall not
have been established on either of such exchanges or such market
by such exchange or by the Commission, (B) a general banking
moratorium shall not have been declared by Federal or New York or
California authorities, and (C) no change (or any condition, event
or development involving a prospective change) shall have occurred
or be threatened that, in the reasonable judgment of the
Purchasers, has had or could, individually or in the aggregate,
reasonably be expected to have a material adverse effect upon the
prices or trading of securities generally traded on financial
markets in the United States, and (ii) the Dow Jones Industrial
Average (the "Dow") on the business day immediately preceding the
Closing Date shall not be more than 20% lower than the Dow on the
date of this Agreement (the "Opening Dow") and the Dow on any
business day between the date of this Agreement and the Closing
Date shall not have been more than 20% lower than the Opening Dow.
(q) All corporate and other proceedings taken or to be taken by
the parties to the Acquisition Documents in connection with the
transactions contemplated thereby shall be in form and substance
reasonably satisfactory to the Purchasers as being consistent with
satisfaction of the foregoing conditions.
41
<PAGE> 48
(r) All governmental and regulatory approvals and clearances and
all third-party consents necessary for the consummation of the
transactions contemplated by the Acquisition Documents shall have
been obtained and shall be in full force and effect, including
(without limitation) expiration of the applicable waiting periods
under the HSR Act, and the Purchasers and the Company shall be
reasonably satisfied that the consummation of such transactions
does not and will not contravene any Applicable Law, except to the
extent any contravention or contraventions, individually or in the
aggregate, could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
(s) The Company shall have delivered to the Purchasers a
certificate, executed by it or on its behalf by a duly authorized
representative, dated as of the Closing Date, certifying that each
of the conditions (other than any condition the fulfillment of
which is subject to the reasonable satisfaction of the Purchasers)
specified in this Section 7.2 has been satisfied.
(t) Winstead Sechrest & Minick P.C., counsel to the Company, shall
have delivered to the Purchasers an opinion, dated the Closing
Date, addressed to the Purchasers, substantially in the form
attached as Exhibit I hereto.
(u) Arnold & Porter, counsel to the Company, shall have delivered
to the Purchasers an opinion, dated the Closing Date, addressed to
the Purchasers, substantially in the form attached as Exhibit J
hereto.
(v) The Purchasers shall have received copies of in form and
substance reasonably satisfactory to each of the Purchasers, dated
the Closing Date, addressed to the Purchasers with respect to:
(i) opinion of Winstead Sechrest & Minick P.C. delivered
pursuant to Section 11.7 of the Acquisition Agreement;
(ii) opinion of Paul, Weiss, Rifkind, Wharton & Garrison
and any additional legal opinions of special and/or in
house counsel to Thorn and Thorn International delivered
pursuant to Section 10.10 of the Acquisition Agreement;
and
(iii) any opinions of legal counsel delivered pursuant to
any of the Credit Facilities.
(w) All proceeds received by the Company
42
<PAGE> 49
on the Closing Date under or as a result of the
transactions contemplated by the Acquisition
Documents shall be used (or shall be usable)
solely to consummate the transactions
contemplated by the Acquisition Documents,
including payment of fees and expenses thereof,
and to provide working capital to the Renters
Choice Entities.
(x) The Purchasers shall have received delivery of the Shares as
set forth hereunder.
(y) The Purchasers shall have received such other certificates,
instruments and documents in furtherance of the transactions
contemplated by this Agreement as it may reasonably request.
ARTICLE VIII
MISCELLANEOUS
SECTION 1. Survival; Indemnification.
(a) All representations, warranties, covenants and agreements
(except covenants and agreements which are expressly required to
be performed and are performed in full on or before the Closing
Date) contained in this Agreement shall be deemed made at the
Closing as if made at such time and shall survive the Closing for
two years, except that (i) with respect to claims asserted
pursuant to this Section 8.1 before the expiration of the
applicable representation or warranty, such claims shall survive
until the date they are finally liquidated or otherwise resolved,
(ii) Sections 3.15 and 3.16 shall survive until the end of the
applicable statute of limitations, and (iii) Section 3.2 and this
Section 8.1 shall survive indefinitely. All statements as to
factual matters contained in any certificate executed and
delivered by the parties pursuant hereto shall be deemed to be
representations, warranties and covenants by such party hereunder.
No claim may be commenced under this Section 8.1 (or otherwise)
following expiration of the applicable period of survival, and
upon such expiration the Indemnifying Party shall be released from
all liability with respect to claims under each such section not
theretofore made by the Indemnified Party. No right of indemnity
against any claim of a third party shall arise from any
representation, warranty or covenant of an Indemnifying Party
herein contained, unless such third-party claim is filed or lodged
against the Indemnified Party on or prior to the expiration of the
applicable period of survival provided above, and all other
conditions hereunder are satisfied. A claim shall be made or
commenced
43
<PAGE> 50
hereunder by the Indemnified Party delivering to the Indemnifying
Party a written notice specifying in reasonable detail the nature
of the claim, the amount claimed (if known or reasonably
estimable), and the factual basis for the claim.
(b) (i) The Company agrees to indemnify and hold harmless
each of the Purchasers and its respective partners, affiliates,
officers, directors, employees and duly authorized agents and each
of their affiliates and each other person controlling such
Purchaser or any of their affiliates within the meaning of either
section 15 of the Securities Act or section 20 of the Exchange Act
and any partner of any of them from and against all losses,
claims, damages or liabilities resulting from any claim, lawsuit
or other proceeding by any person to which any party indemnified
under this clause may become subject which is related to or arises
out of (A) any breach or failure of any of the representations,
warranties, covenants or agreements made in any of the Acquisition
Documents by the Company or (B) any action or omission of the
Company or in connection with the transactions contemplated
hereby or by the other Acquisition Documents, and will reimburse
each of the Purchasers and any other party indemnified under this
clause for all reasonable out-of-pocket expenses (including
reasonable counsel fees and disbursements) incurred by the
Purchasers or any such other party indemnified under this clause
and further agrees that the indemnification and reimbursements
commitments herein shall apply whether or not the Purchasers or
any such other party indemnified under this clause is a formal
party to any such lawsuits, claims or other proceedings. The
foregoing provisions are expressly intended to cover reimbursement
of legal and other expenses incurred in a deposition or other
discovery proceeding.
(ii) Notwithstanding the foregoing clause (i), the
Company shall not be liable to any party otherwise entitled to indemnification
pursuant thereto: (A) in respect of any loss, claim, damage, liability or
expense to the extent the same is determined, in final judgment by a court
having jurisdiction, to have resulted primarily from the gross negligence or
willful misconduct of such party or (B) for any settlement effected by such
party without the written consent of the Company, which consent shall not be
unreasonably withheld.
(c) (i) The Purchasers agree to indemnify and hold harmless each
of the Company and its partners, affiliates, officers, directors,
employees and duly authorized agents and each of their affiliates
and each other person controlling the Company or any of their
affiliates within the meaning of either section 15 of the
Securities Act or section 20 of the Exchange Act and any partner
of any of them from and against all losses, claims, damages or
liabilities resulting from any claim, lawsuit or other proceeding
by any person to which any party indemnified under this clause may
become subject which is related to or arises out of (A) any breach
or failure of any of the
44
<PAGE> 51
representations, warranties, covenants or agreements made in any
of the Acquisition Documents by such Purchaser, or (B) any action
or omission of such Purchaser in connection with the transactions
contemplated hereby or by the other Acquisition Documents, and
will reimburse the Company and any other party indemnified under
this clause for all reasonable out-of-pocket expenses (including
reasonable counsel fees and disbursements) incurred by the Company
or any such other party indemnified under this clause and further
agrees that the indemnification and reimbursements commitments
herein shall apply whether or not the Company or any such other
party indemnified under this clause is a formal party to any such
lawsuits, claims or other proceedings. The foregoing provisions
are expressly intended to cover reimbursement of legal and other
expenses incurred in a deposition or other discovery proceeding.
(ii) Notwithstanding the foregoing clause (i), the
Purchasers shall not be liable to any party otherwise entitled to
indemnification pursuant thereto: (A) in respect of any loss, claim,
liability, cost, expense or damage to the extent the same is determined, in
final judgment by a court having jurisdiction, to have resulted primarily from
the gross negligence or willful misconduct of such party or (B) for any
settlement effected by such party without the written consent of the
Purchasers, which consent shall not be unreasonably withheld.
(d) If a person entitled to indemnity hereunder (an "Indemnified
Party") asserts that any party hereto (the "Indemnifying Party")
has become obligated to the Indemnified Party pursuant to Section
8.1(b) or (c), or if any suit, action, investigation, claim or
proceeding is begun, made or instituted as a result of which the
Indemnifying Party may become obligated to the Indemnified Party
hereunder, the Indemnified Party agrees to notify the Indemnifying
Party promptly and to cooperate with the Indemnifying Party, at
the Indemnifying Party's expense, to the extent reasonably
necessary for the resolution of such claim or in the defense of
such suit, action or proceeding, including making available any
information, documents and things in the possession of the
Indemnified Party which are reasonably necessary therefor.
Notwithstanding the foregoing notice requirement, the right to
indemnification hereunder shall not be affected by any failure to give, or
delay in giving, notice unless, and only to the extent that, the rights and
remedies of the Indemnifying Party shall have been prejudiced as a result of
such failure or delay.
(e) In fulfilling its obligations under this Section 8.1, after
providing each Indemnified Party with a written acknowledgment of
any liability under this Section 8.1 as between such Indemnified
Party and the Indemnifying Party, the Indemnifying Party shall
have the right to investigate, defend, settle or otherwise handle,
with the aforesaid cooperation, any claim, suit, action or
45
<PAGE> 52
proceeding brought by a third party in such manner as the
Indemnifying Party may in its sole discretion deem appropriate;
provided, however, that (i) counsel retained by the Indemnifying
Party is reasonably satisfactory to the Indemnified Party and (ii)
the Indemnifying Party will not consent to any settlement imposing
any material obligations on any other party hereto other than
financial obligations for which such party will be indemnified
hereunder, unless such party has consented in writing to such
settlement. Notwithstanding anything to the contrary contained
herein, the Indemnifying Party may retain one firm of counsel to
represent all Indemnified Parties in such claim, action or
proceeding; provided, however, that in the event that the
defendants in, or targets of, any such claim, action or proceeding
include more than one Indemnified Party, and any Indemnified Party
shall have reasonably concluded, based on the opinion of its own
counsel, that there may be one or more legal defenses available to
it which are in conflict with those available to any other
Indemnified Party, then such Indemnified Party may employ separate
counsel to represent or defend it or any other person entitled to
indemnification and reimbursement hereunder with respect to any
such claim, action or proceeding in which it or such other person
may become involved or is named as defendant and the Indemnifying
Party shall pay the reasonable fees and disbursement of such
counsel. Notwithstanding the Indemnifying Party's election to
assume the defense or investigation of such claim, action or
proceeding, the Indemnified Party shall have the right to employ
separate counsel and to participate in the defense or
investigation of such claim, action or proceeding at the expense
of the Indemnifying Party, if (i) in the written opinion of
counsel to the Indemnified Party use of counsel of the
Indemnifying Party's choice could reasonably be expected to give
rise to a conflict of interest, (ii) the Indemnifying Party shall
not have employed counsel reasonably satisfactory to the
Indemnified Party to represent the Indemnified Party within a
reasonable time after notice of the assertion of any such claim or
institution of any such action or proceeding or (iii) if the
Indemnifying Party shall authorize the Indemnified Party to employ
separate counsel at the Indemnifying Party's expense.
(f) If for any reason (other than the gross negligence or willful
misconduct referred to in subclause (b)(ii) above) the foregoing
indemnification by the Company is unavailable to any Indemnified
Party or is insufficient to hold it harmless as and to the extent
contemplated by subclauses (b), (d) and (e) above, then the
Company shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the
relative benefits received by the Company and its affiliates, on
the one hand, and the Purchasers and any other applicable
Indemnified Party, as the case may be, on the other hand, as well
as any other relevant equitable considerations.
46
<PAGE> 53
SECTION 2. Notices. All notices, demands, requests,
consents, approvals or other communications
(collectively, "Notices") required or permitted
to be given hereunder or which are given with
respect to this Agreement shall be in writing and
shall be personally served, delivered by
reputable air courier service with charges
prepaid, or transmitted by hand delivery,
telegram, telex or facsimile, addressed as set
forth below, or to such other address as such
party shall have specified most recently by
written notice. Notice shall be deemed given on
the date of service or transmission if personally
served or transmitted by telegram, telex or
facsimile. Notice otherwise sent as provided
herein shall be deemed given on the next business
day following delivery of such notice to a
reputable air courier service.
To the Company:
Renters Choice, Inc.
13800 Montfort Drive, Suite 300
Dallas, Texas 75240
Attention: J. Ernest Talley, Chief Executive Officer
Facsimile: (214)385-1625
with a copy (which shall not constitute notice) to:
Winstead Sechrest & Minick P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270-2199
Attn: Thomas W. Hughes, Esq.
Facsimile: (214)745-5390
To the Purchasers:
Apollo Investment Fund IV, L.P. and/or
Apollo Overseas Partners IV, L.P.
c/o Apollo Management IV, L.P.
1999 Avenue of the Stars, Suite 1900
Los Angeles, California 90067
Attn: Michael D. Weiner
Facsimile: (310)201-4166
47
<PAGE> 54
with a copy (which shall not constitute notice) to:
Morgan, Lewis & Bockius LLP
300 South Grand Avenue
Suite 2200
Los Angeles, California 90071
Attn: John F. Hartigan, Esq.
Facsimile: (213) 612-2554
SECTION 3. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, INTERPRETED UNDER, AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED WITHIN THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO THE CHOICE-OF-LAW PROVISIONS
THEREOF, AND EACH PARTY HERETO SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF THE STATE AND
FEDERAL COURTS WITHIN THE STATE OF NEW YORK.
SECTION 4. Entire Agreement. This Agreement (including
all agreements entered into pursuant hereto and
all certificates and instruments delivered
pursuant hereto and thereto) constitutes the
entire agreement of the parties with respect to
the subject matter hereof and supersedes all
prior and contemporaneous agreements,
representations, understandings, negotiations and
discussions between the parties, whether oral or
written, with respect to the subject matter
hereof other than the provisions set forth in
Sections 6, 8 and 9 of the Commitment Letter
which remain in full force and effect.
SECTION 5. Modifications and Amendments. No amendment,
modification or termination of this Agreement
shall be binding upon any other party unless
executed in writing by the parties hereto
intending to be bound thereby.
SECTION 6. Waivers and Extensions. Any party to this
Agreement may waive any right, breach or default
which such party has the right to waive, provided
that such waiver will not be effective against
the waiving party unless it is in writing, is
signed by such party,
48
<PAGE> 55
and specifically refers to this Agreement.
Waivers may be made in advance or after the right
waived has arisen or the breach or default waived
has occurred. Any waiver may be conditional. No
waiver of any breach of any agreement or
provision herein contained shall be deemed a
waiver of any preceding or succeeding breach
thereof nor of any other agreement or provision
herein contained. No waiver or extension of time
for performance of any obligations or acts shall
be deemed a waiver or extension of the time for
performance of any other obligations or acts.
SECTION 7. Titles and Headings. Titles and headings of
sections of this Agreement are for convenience
only and shall not affect the construction of any
provision of this Agreement.
SECTION 8. Exhibits and Schedules. Each of the annexes,
exhibits and schedules referred to herein and
attached hereto is an integral part of this
Agreement and is incorporated herein by
reference.
SECTION 9. Expenses; Brokers. The Company shall pay or
cause to be paid all reasonable out-of-pocket
fees and expenses incurred by the Purchasers and
their respective Affiliates on or after April 1,
1998, in connection with the transactions
contemplated by this Agreement, the Commitment
Letter, the Acquisition Documents and all matters
related thereto (including, without limitation,
HSR Act filing fees, and reasonable fees and
disbursements of counsel and consultants). In
addition, if the event that the Company is paid
any Break-Up Fee (as defined in the Acquisition
Agreement), the Company shall promptly pay to the
Purchasers an amount equal to Three Million Five
Hundred Thousand Dollars ($3,500,000). Each of
the parties represents to the others that neither
it nor any of its affiliates has used a broker or
other intermediary, in connection with the
transactions contemplated by this Agreement for
whose fees or expenses any other party will be
liable and respectively agrees to indemnify and
hold the others harmless from and against any and
all claims, liabilities or obligations with
respect to any such fees
49
<PAGE> 56
or expenses asserted by any person on the basis
of any act or statement alleged to have been made
by such party or any of its affiliates.
SECTION 10. Press Releases and Public Announcements. All
public announcements or disclosures relating to
the transactions contemplated by the Acquisition
Documents shall be made only if mutually agreed
upon by the Company and the Purchasers, except to
the extent that such disclosure is, in the
opinion of counsel, required by law or by stock
exchange regulation, provided that any such
required disclosure shall only be made, to the
extent consistent with law, after consultation
with the Purchasers.
SECTION 11. Assignment; No Third Party Beneficiaries. This
Agreement and the rights, duties and obligations
hereunder may not be assigned or delegated by
either the Company or the Purchasers without the
prior written consent of the other; provided that
either of the Purchasers may assign or delegate
its rights, duties and obligations hereunder to a
Permitted Transferee (as defined in the
Stockholder Agreement). Except as provided in
the preceding sentence, any assignment or
delegation of rights, duties or obligations
hereunder made without the prior written consent
of the other party hereto shall be void and of no
effect. This Agreement and the provisions hereof
shall be binding upon and shall inure to the
benefit of each of the parties and their
respective successors and permitted assigns.
This Agreement is not intended to confer any
rights or benefits on any persons that are not
party hereto other than as expressly set forth in
Sections 8.1 and 8.12.
SECTION 12. Severability. This Agreement shall be deemed
severable, and the invalidity or unenforceability
of any term or provision hereof shall not affect
the validity or enforceability of this Agreement
or of any other term or provision hereof.
Furthermore, in lieu of any such invalid or
unenforceable term or provision, the parties
hereto intend that there shall be added as a part
of this Agreement a provision as similar in terms
to such invalid or unenforceable provision as may
be possible
50
<PAGE> 57
and be valid and enforceable.
SECTION 13. Counterparts. This Agreement may be executed
in multiple counterparts, each of which shall be
deemed an original, and all of which taken
together shall constitute one and the same
instrument.
SECTION 14. Further Assurances. Each party hereto, upon
the request of any other party hereto, shall do
all such further acts and execute, acknowledge
and deliver all such further instruments and
documents as may be necessary or desirable to
carry out the transactions contemplated by this
Agreement, including, in the case of the Company,
such acts, instruments and documents as may be
necessary or desirable to convey and transfer to
each Purchaser the Shares to be purchased by it
hereunder.
SECTION 15. Remedies Cumulative. The remedies provided
herein shall be cumulative and shall not preclude
the assertion by any party hereto of any other
rights or the seeking of any remedies against the
other party hereto.
* * *
51
<PAGE> 58
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
COMPANY RENTERS CHOICE, INC.
a Delaware corporation
By: __________________________________
Name: ______________________________
Title: ______________________________
PURCHASERS APOLLO INVESTMENT FUND IV., L.P.
a Delaware limited partnership
By: Apollo Advisors IV, L.P.
its General Partner
By: Apollo Capital Management IV, Inc.
its General Partner
By: _____________________________
Name: ________________________
Title: ________________________
APOLLO OVERSEAS PARTNERS IV, L.P.
an exempted limited partnership registered
in the Cayman Islands
By: Apollo Advisors IV, L.P.
its General Partner
By: Apollo Capital Management IV, Inc.
its Managing General Partner
By: _____________________________
Name: ________________________
Title: ________________________
<PAGE> 59
SCHEDULE 2.1
ALLOCATION OF SHARES/PURCHASE PRICE
<TABLE>
<CAPTION>
Series A Series B
Preferred Stock Preferred Stock
--------------- ---------------
<S> <C> <C>
Apollo Investment Fund IV, L.P. 127,569 shares 109,700 shares
Apollo Overseas Partners IV, L.P. 6,845 shares 5,886 shares
=====================================
Total 134,414 shares 115,586 shares
</TABLE>
53
<PAGE> 1
EXHIBIT 3.3
RENTERS CHOICE, INC.
AMENDED AND RESTATED BYLAWS
ARTICLE I.
MEETINGS OF STOCKHOLDERS
SECTION 1. Annual Meetings of Stockholders. The annual meeting of
the stockholders of the Corporation shall be held on such day as may be
designated from time to time by the Board of Directors and stated in the notice
of the meeting, and on any subsequent day or days to which such meeting may be
adjourned, for the purposes of electing directors and of transacting such other
business as may properly come before the meeting. The Board of Directors shall
designate the place and time for the holding of such meeting, and not less than
ten days nor more than sixty days notice shall be given to the stockholders of
the time and place so fixed. If the day designated therein is a legal holiday,
the annual meeting shall be held on the first succeeding day which is not a
legal holiday. ff for any reason the annual meeting shall not be held on the
day designated therein, the Board of Directors shall cause the annual meeting
to be held as soon thereafter as may be convenient.
At the annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the annual meeting. To be
properly brought before the annual meeting of stockholders, business must be
(i) specified in the notice of meeting (or any supplement thereto) given by or
at the direction of the Board of Directors, (ii) otherwise properly brought
before the meeting by or at the direction of the Board of Directors, or (iii)
otherwise properly brought before the meeting by a stockholder of the
Corporation who is a stockholder of record at the time of giving notice
provided for in this Section 1 of Article I, who shall be entitled to vote at
such meeting and who complies with the notice procedures set forth in this
Section 1 of Article I. For business to be properly brought before an annual
meeting by a stockholder, the stockholder, in addition to any other applicable
requirements, must have given timely notice thereof in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice must be delivered to
or mailed and received at the principal executive offices of the Corporation
not less than 90 days prior to the anniversary date of the immediately
preceding annual meeting of stockholders of the Corporation. A stockholder's
notice to the Secretary shall set forth as to each matter the stockholder
proposes to bring before the annual meeting: (a) a brief description of the
business desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (b) the name and address, as
they appear on the Corporation's books, of the stockholder proposing such
business, (c) the class and number of shares of voting stock of the Corporation
that are beneficially owned by the stockholder; (d) a representation that the
stockholder intends to appear in person or by proxy at the meeting to bring the
proposed business before the annual meeting, and (e) a description of any
material interest of the stockholder in such business. Notwithstanding
anything in these Bylaws to the contrary, no business shall be conducted at an
annual meeting except in accordance with the procedures set forth in this
Section 1 of Article I The presiding officer of an annual meeting shall, if the
facts warrant, determine and declare to the meeting that the business was not
properly brought
<PAGE> 2
before the meeting in accordance with the provisions of this Section 1 of
Article I, and if he should so determine, he shall so declare to the meeting
and any such business not properly brought before the meeting shall not be
transacted.
Notwithstanding the foregoing provisions of this Section 1 of Article
I, a stockholder shall also comply with all applicable requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder with respect to the matters set forth in this Section 1 of Article
I.
SECTION 2. Special Meetings of Stockholders. Special meetings of
the stockholders may be called at any time by the Board of Directors pursuant
to a resolution approved by a majority of the entire Board of Directors or the
majority of an entire committee of such Board. Upon written request of the
persons who have duly called a special meeting, it shall be the duty of the
Secretary of the Corporation to fix the date of the meeting to be held not less
than ten nor more than sixty days after the receipt of the request and to give
due notice thereof. ff the Secretary shall neglect or refuse to fix the date
of the meeting and give notice thereof, the persons calling the meeting may do
so.
SECTION 3. Place of Meetings. Every annual or special meeting of
the stock-holders shall be held at such place within or without the State of
Delaware as the Board of Directors may designate, or, in the absence of such
designation, at the registered office of the Corporation in the State of
Delaware.
SECTION 4. Notice of Meetings. Written notice of every meeting of
the stockholders shall be given by the Secretary of the Corporation to each
stockholder of record entitled to vote at the meeting, by placing such notice
in the mail not less than ten nor more than sixty days, prior to the day named
for the meeting addressed to each stockholder at his address appearing on the
books of the Corporation or supplied by him to the Corporation for the purpose
of notice.
SECTION 5. Record Date. The Board of Directors may fix a date, not
less than ten or more than sixty days preceding the date of any meeting of
stockholders, as a record date for the determination of stockholders entitled
to notice of, or to vote at, any such meeting. The Board of Directors shall
not close the books of the Corporation against transfers of shares during the
whole or any part of such period.
SECTION 6. Proxies. The notice of every meeting of the stockholders
may be accompanied by a form of proxy approved by the Board of Directors in
favor of such person or persons as the Board of Directors may select.
SECTION 7. Quorum and Voting. A majority of the outstanding shares
of stock of the Corporation entitled to vote, present in person or represented
by proxy, shall constitute a quorum at any meeting of the stockholders, and the
stockholders present at any duly convened meeting may continue to do business
until adjournment notwithstanding any withdrawal from the meeting of holders of
shares counted in determining the existence of a quorum. Directors shall be
elected by
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a plurality of the votes cast in the election. For all matters as to which no
other voting requirement is specified by the General Corporation Law of the
State of Delaware, as amended (the "General Corporation Law"), the Restated
Certificate of Incorporation of the Corporation, as amended (the "Certificate
of Incorporation") or these Bylaws, the affirmative vote required for
stockholder action shall be that of a majority of the shares present in person
or represented by proxy at the meeting (as counted for purposes of determining
the existence of a quorum at the meeting). In the case of a matter submitted
for a vote of the stockholders as to which a stockholder approval requirement
is applicable under the stockholder approval policy of the Nasdaq National
Market or any other exchange or quotation system on which the capital stock of
the Company is quoted or traded, the requirements of Rule 16b-3 under the
Securities Exchange Act of 1934 or any provision of the Internal Revenue Code,
in each case for which no higher voting requirement is specified by the General
Corporation Law, the Certificate of Incorporation or these Bylaws, the vote
required for approval shall be the requisite vote specified in such stockholder
approval policy, Rule 16b-3 or Internal Revenue Code provision, as the case may
be (or the highest such requirement if more than one is applicable). For the
approval of the appointment of independent public accountants (if submitted for
a vote of the stockholders), the vote required for approval shall be a majority
of the votes cast on the matter.
SECTION 8. Adjournment. Any meeting of the stockholders may be
adjourned from time to time, without notice other than by announcement at the
meeting at which such adjournment is taken, and at any such adjourned meeting
at which a quorum shall be present any action may be taken that could have been
taken at the meeting originally called; provided that if the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the adjourned meeting.
SECTION 9. Nominations for Election as a Director. Only persons who
are nominated in accordance with the procedures set forth in these Bylaws shall
be eligible for election as, and to serve as, directors. Nominations of
persons for election to the Board of Directors of the Corporation may be made
at a meeting of stockholders (a) by or at the direction of the Board of
Directors or (b) by any stockholder of the Corporation who is a stockholder of
record at the time of giving of notice provided for in this Section 9 of
Article I, who shall be entitled to vote for the election of directors at the
meeting and who complies with the notice procedures set forth in this Section 9
of Article I Such nominations, other than those made by or at the direction of
the Board of Directors, shall be made pursuant to timely notice in writing to
the Secretary of the Corporation. To be timely, a stockholder's notice shall
be delivered or mailed and received at the principal executive offices of the
Corporation (i) with respect to an election to be held at the annual meeting of
the stockholders of the Corporation, not less than 90 days prior to the
anniversary date of the immediately preceding annual meeting of stockholders of
the Corporation, and (ii) with respect to an election to be held at a special
meeting of stockholders of the Corporation for the election of directors, not
later than the close of business on the tenth day following the day on which
notice of the date of the special meeting was mailed to stockholders of the
Corporation as provided in Section 4 of Article I or public disclosure of the
date of the special meeting was made, whichever first occurs. Such
stockholder's
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<PAGE> 4
notice to the Secretary shall set forth (x) as to each person whom the
stockholder proposes to nominate for election or re-election as a director, 0
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required,
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (including such person's written consent to being named in the proxy
statement as a nominee and to serve as a director if elected), and (y) as to
the stockholder giving the notice (i) the name and address, as they appear on
the Corporation's books, of such stockholder and (ii) the class and number of
shares of voting stock of the Corporation which are beneficially owned by such
stockholder. At the request of the Board of Directors, any person nominated by
the Board of Directors for election as a director shall furnish to the
Secretary of the Corporation that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee. Other than
directors chosen pursuant to the provisions of Section 2 of Article II, no
person shall be eligible to serve as a director of the Corporation unless
nominated in accordance with the procedures set forth in this Section 9 of
Article I. The presiding officer of the meeting of stockholders shall, if the
facts warrant determine and declare to the meeting that a nomination was not
made in accordance with the procedures prescribed by these Bylaws, and if he
should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded. Notwithstanding the foregoing provisions of
this Section 9 of Article I, a stockholder shall also comply with all
applicable requirements of the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder with respect to the matters set forth in
this Section 9 of Article I.
ARTICLE II.
BOARD OF DIRECTORS
SECTION 1. Number of Directors. The business, affairs and property
of the Corporation shall be managed by a board of directors divided into three
classes as provided in the Certificate of Incorporation of the Corporation.
The Board of Directors of the Corporation shall consist of seven directors.
Each director shall hold office for the full term to which he shall have been
elected and until his successor is duly elected and shall qualify, or until his
earlier death, resignation or removal. A director need not be a resident of
the State of Delaware or a stockholder of the Corporation.
SECTION 2. Vacancies. Except as provided in the Certificate of
Incorporation of the Corporation, newly created directorships resulting from
any increase in the number of directors and any vacancies on the Board of
Directors resulting from death, resignation, disqualification, removal or other
cause shall be filled by the affirmative vote of a majority of the remaining
directors then in office, even though less than a quorum of the Board of
Directors. Any director elected in accordance with the preceding sentence
shall hold office for the remainder of the full term of the class of directors
in which the new directorship was created or the vacancy occurred and until
such director's successor shall have been elected and qualified. No decrease
in the number of directors constituting the Board of Directors shall shorten
the term of any incumbent director.
SECTION 3. Removal by Stockholders. No director of the Corporation
shall be removed from his office as a director by vote or other action of
stockholders or otherwise except for cause.
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<PAGE> 5
SECTION 4. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such place or places within or without the State of
Delaware, at such hour and on such day as may be fixed by resolution of the
Board of Directors, without further notice of such meetings. The time or place
of holding regular meetings of the Board of Director may be changed by the
Chairman of the Board or the President by giving written notice thereof as
provided in Section 6 of this Article II.
SECTION 5. Special Meeting. Special meetings of the Board of
Directors shall be held, whenever called by the Chairman of the Board, the
President, by a majority of the directors or by resolution adopted by the Board
of Directors, at such place or places within or without the State of Delaware
as may be stated in the notice of the meeting.
SECTION 6. Notice. Written notice of the time and place of, and
general nature of the business to be transacted at, all special meetings of the
Board of Directors, and written notice of any change in the time or place of
holding the regular meetings of the Board of Directors, shall be given to each
director personally or by mail or by telegraph, telecopier or similar
communication at least one day before the day of the meeting; provided,
however, that notice of any meeting need not be given to any director if waived
by him in writing, or if he shall be present at such meeting.
SECTION 7. Quorum. A majority of the directors in office shall
constitute a quorum of the Board of Directors for the transaction of business;
but a lesser number may adjourn from day to day until a quorum is present.
SECTION 7A. Voting. Except as otherwise provided herein or in the
Amended and Restated Certificate of Incorporation of the Corporation, all
decisions of the Corporation's Board of Directors shall require the affirmative
vote of a majority of the directors of the Corporation then in office, or a
majority of the members of the Executive Committee of the Board of Directors,
to the extent such decisions may be lawfully delegated to the Executive
Committee.
SECTION 8. Action by Written Consent. Any action which may be taken
at a meeting of the directors or of any committee thereof may be taken without
a meeting if consent in writing setting forth the action so taken shall be
signed by all of the directors or members of such committee as the case may be
and shall be filed with the Secretary of the Corporation.
SECTION 9. Chairman. The Board of Directors may designate one or
more of its number to be Chairman of the Board and chairman of any committees
of the Board and to hold such other positions on the Board as the Board of
Directors may designate.
ARTICLE III.
COMMITTEES
SECTION 1. The Board of Directors may, by resolution adopted by a
majority of the full Board of Directors of the Corporation, designate from
among its members one or more committees, each of which shall be comprised of
one or more of its members, and may designate one or more of
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<PAGE> 6
its members as alternate members of any committee, who may, subject to any
limitations by the Board of Directors of the Corporation, replace absent or
disqualified members at any meeting of the committee. Any such committee, to
the extent provided in such resolution or in the Certificate of Incorporation
or these Bylaws, shall have and may exercise all of the authority of the Board
of Directors of the Corporation to the extent permitted by the Delaware General
Corporation Law.
SECTION 2. The Board of Directors of the Corporation shall have the
power at any time to change the membership of any such committee and to fill
vacancies in it. A majority of the number of members of any such committee
shall constitute a quorum for the transaction of business unless a greater
number of members is required by a resolution adopted by the Board of Directors
of the Corporation. The act of the majority of the members of a committee
present at any meeting at which a quorum is present shall be the act of the
Committee, unless the act of a greater number is required by a resolution
adopted by the Board of Directors of the Corporation. Each such committee may
elect a chairman and appoint such subcommittees and assistants as it may deem
necessary. Except as otherwise provided by the Board of Directors of the
Corporation, meetings of any committee shall be conducted in accordance with
these Bylaws. Any member of any such committee elected or appointed by the
Board of Directors of the Corporation may be removed by the Board of Directors
of the Corporation whenever in its judgment the best interests of the
Corporation will be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed. Election or
appointment of a member of a committee shall not itself create contract rights.
SECTION 3. Any action taken by any committee of the Board of
Directors shall be promptly recorded in the minutes and filed with the
Secretary of the Corporation.
ARTICLE IV.
OFFICERS
SECTION 1. Designation and Removal. The officers of the Corporation
shall consist of a Chairman of the Board, President, Vice President-Finance,
Regional Vice Presidents, Secretary, Treasurer, Chief Operating Officer, Chief
Financial Officer, and such other officers as may be named by the Board of
Directors. Any number of offices may be held by the same person. All officers
shall hold office until their successors are elected or appointed, except that
the Board of Directors may remove any officer at any time at its discretion.
SECTION 2. Towers and Duties. The officers of the Corporation shall
have such powers and duties as generally pertain to their offices, except as
modified herein or by the Board of Directors, as well as such powers and duties
as from time to time may be confer-red by the Board of Directors. The Chairman
of the Board shall have such duties as may be assigned to him by the Board of
Directors and shall preside at meetings of the Board and at meetings of the
stockholders. The Chairman of the Board shall also be the Chief Executive
Officer of the Corporation and shall have general supervision over the
business, affairs, and property of the Corporation.
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ARTICLE V.
SEAL
The seal of the Corporation shall be in such form as the Board of
Directors shall prescribe.
ARTICLE VI.
CERTIFICATES OF STOCK
The shares of stock of the Corporation shall be represented by
certificates of stock, signed by the President or such Vice President or other
officer designated by the Board of Directors, countersigned by the Treasurer or
the Secretary or an Assistant Treasurer or an Assistant Secretary; and such
signature of the President, Vice President, or other officer, such
countersignature of the Treasurer or Secretary or Assistant Treasurer or
Assistant Secretary, and such seal, or any of them, may be executed in
facsimile, engraved or printed. In case any officer who has signed or whose
facsimile signature has been placed upon any share certificate shall have
ceased to be such officer because of death, resignation or otherwise before the
certificate is issued, it may be issued by the Corporation with the same effect
as if the officer had not ceased to be such at the date of its issue. Said
certificates of stock shall be in such form as the Board of Directors may from
time to time prescribe.
ARTICLE VII.
INDEMNIFICATION
SECTION 1. General. The Corporation shall indemnify, and advance
Expenses (as this and a other capitalized words not otherwise defined herein
are defined in Section 14 of this Article) to, Indemnitee to the fullest extent
permitted by applicable law in effect on the date of effectiveness of these
Bylaws, and to such greater extent as applicable law may thereafter permit.
The rights of Indemnitee provided under the preceding sentence shall include,
but not be limited to, the right to be indemnified to the fullest extent
permitted by Section 145(b) of the Delaware General Corporation Law in
Proceedings by or in the right of the Corporation and to the fullest extent
permitted by Section 145(a) of the Delaware General Corporation Law in all
other Proceedings.
SECTION 2. Expenses Related to Proceedings. If Indemnitee is, by
reason of his Corporate Status, a witness in or a party to and is successful,
on the merits or otherwise, in any Proceeding, he shall be indemnified against
all Expenses actually and reasonably incurred by him or on his behalf in
connection therewith. If Indemnitee is not wholly successful in such
Proceeding but is successful, on the merits or otherwise, as to any Matter in
such Proceeding, the Corporation shall indemnify Indemnitee against all
Expenses actually and reasonably incurred by him or on his behalf relating to
each Matter. The termination of any Matter in such a Proceeding by dismissal,
with or without prejudice, shall be deemed to be a successful result as to such
Matter.
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<PAGE> 8
SECTION 3. Advancement of Expenses. Indemnitee shall be advanced
Expenses within ten days after requesting them to the fullest extent permitted
by Section 145(e) of the Delaware General Corporation Law.
SECTION 4. Request for Indemnification. To obtain indemnification
Indemnitee shall submit to the Corporation a written request with such
information as is reasonably available to Indemnitee. The Secretary of the
Corporation shall promptly advise the Board of Directors of such request.
SECTION 5. Determination of Entitlement; No Change of Control. If
there has been no Change of Control at the time the request for indemnification
is sent, Indemnitee's entitlement to indemnification shall be determined in
accordance with Section 145(d) of the Delaware General Corporation Law. If
entitlement to indemnification is to be determined by Independent Counsel, the
Corporation shall furnish notice to Indemnitee within ten days after receipt of
the request for indemnification, specifying the identity and address of
Independent Counsel. The Indemnitee may, within fourteen days after receipt of
such written notice of selection, deliver to the Corporation a written
objection to such selection. Such objection may be asserted only on the ground
that the Independent Counsel so selected does not meet the requirements of
Independent Counsel and the objection shall set forth with particularity the
factual basis of such assertion. If there is an objection to the selection of
Independent Counsel, either the Corporation or Indemnitee may petition the
Court of Chancery of the State of Delaware or any other court of competent
jurisdiction for a determination that the objection is without a reasonable
basis and/or for the appointment of Independent Counsel selected by the Court.
SECTION 6. Determination of Entitlement; Change of Control. If
there has been a Change of Control at the time the request for indemnification
is sent, Indemnitee's entitlement to indemnification shall be determined in a
written opinion by Independent Counsel selected by Indemnitee. Indemnitee
shall give the Corporation written notice advising of the identity and address
of the Independent Counsel so selected. 'Me Corporation may, within seven days
after receipt of such written notice of selection, deliver to the Indemnitee a
written objection to such selection. Indemnitee may, within five days after
the receipt of such objection from the Corporation, submit the name of another
Independent Counsel and the Corporation may, within seven days after receipt of
such written notice of selection, deliver to the Indemnitee a written objection
to such selection.
Any objection is subject to the limitations in Section 5 of this Article.
Indemnitee may petition the Court of Chancery of the State of Delaware or any
other Court of competent jurisdiction for a determination that the
Corporation's objection to the first and/or second selection of Independent
Counsel is without a reasonable basis and/or for the appointment as Independent
Counsel of a person selected by the Court.
SECTION 7. Procedures of Independent Counsel. If a Change of
Control shall have occurred before the request for indemnification is sent by
Indemnitee, Indemnitee shall be presumed (except as otherwise expressly
provided in this Article) to be entitled to indemnification upon
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submission of a request for indemnification in accordance with Section 4 of
this Article, and thereafter the Corporation shall have the burden of proof to
overcome the presumption in reaching a determination contrary to the
presumption- The presumption shall be used by Independent Counsel as a basis
for a determination of entitlement to indemnification unless the Corporation
provides information sufficient to overcome such presumption by clear and
convincing evidence or the investigation, review and analysis of Independent
Counsel convinces him by clear and convincing evidence that the presumption
should not apply.
Except in the event that the determination of entitlement to
indemnification is to be made by Independent Counsel, if the person or persons
empowered under Section 5 or 6 of this Article to determine entitlement to
indemnification shall not have made and furnished to Indemnitee in writing a
determination within sixty days after receipt by the Corporation of the request
therefor, the requisite determination of entitlement to indemnification shall
be deemed to have been made and Indemnitee shall be entitled to such
indemnification unless Indemnitee knowingly misrepresented a material fact in
connection with the request for indemnification or such indemnification is
prohibited by law. The termination of any proceeding or of any matter therein
by judgment, order, settlement or conviction, or upon a plea of nolo contendere
or its equivalent, shall not (except as otherwise expressly provided in this
Article) of itself adversely affect the right of Indemnitee to indemnification
or create a presumption that Indemnitee did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, or with respect to any criminal Proceeding, that
Indemnitee had reasonable cause to believe that his conduct was unlawful.
SECTION 8. Independent Counsel Expenses. The Corporation shall pay
any and all reasonable fees and expenses of Independent Counsel incurred acting
pursuant to this Article and in any proceeding to which it is a party or
witness in respect of its investigation and written report and shall pay all
reasonable fees and expenses incident to the procedures in which such
Independent Counsel was selected or appointed. No Independent Counsel may
serve if a timely objection has been made to his selection until a Court has
determined that such objection is without a reasonable basis.
SECTION 9. Adjudication. In the event that (i) a determination is
made pursuant to Section 5 or 6 that Indemnitee is not entitled to
indemnification under this Article, (ii) advancement of Expenses is not timely
made pursuant to Section 3 of this Article, (iii) Independent Counsel has not
made and delivered a written opinion determining the request for
indemnification (a) within 90 days after being appointed by the Court, or (b)
within 90 days after objections to his selection have been overruled by the
Court, or (c) within 90 days after the time for the Corporation or Indemnitee
to object to his selection, or (iv) payment of indemnification is not made
within 5 days after a determination of entitlement to indemnification has been
made or deemed to have been made pursuant to Section 5, 6 or 7 of this Article,
Indemnitee shall be entitled to an adjudication in an appropriate court of the
State of Delaware, or in any other court of competent jurisdiction, of his
entitlement to such indemnification or advancement of Expenses. In the event
that a determination shall have been made that Indemnitee is not entitled to
indemnification, any judicial proceeding or
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arbitration commenced pursuant to this Section shall be conducted in all
respects as a de novo trial on the merits and Indemnitee shall not be
prejudiced by reason of that adverse determination. If a Change of Control
shall have occurred, in any judicial proceeding commenced pursuant to this
Section, the Corporation shall have the burden of proving that Indemnitee is
not entitled to indemnification or advancement of Expenses, as the case may be.
If a determination shall have been made or deemed to have been made that
Indemnitee is entitled to indemnification, the Corporation shall be bound by
such determination in any judicial proceeding commenced pursuant to this
Section 9, or otherwise, unless Indemnitee knowingly misrepresented a material
fact in connection with the request for indemnification, or such
indemnification is prohibited by law.
The Corporation shall be precluded from asserting in any judicial
proceeding commenced pursuant to this Section 9 that the procedures and
presumptions of this Article are not valid, binding and enforceable and shall
stipulate in any such court that the Corporation is bound by all provisions of
this Article. In the event that Indemnitee, pursuant to this Section 9, seeks
a judicial adjudication to enforce his rights under, or to recover damages for
breach of, this Article, Indemnitee shall be entitled to recover from the
Corporation, and shall be indemnified by the Corporation against, any and all
Expenses actually and reasonably incurred by him in such judicial adjudication,
but only if he prevails therein. If it shall be determined in such judicial
adjudication that Indemnitee is entitled to receive part but not all of the
indemnification or advancement of Expenses sought, the Expenses incurred by
Indemnitee in connection with such judicial adjudication or arbitration shall
be appropriately prorated.
SECTION 10. Nonexclusivity of Rights. The rights of indemnification
and advancement of Expenses as provided by this Article shall not be deemed
exclusive of any other rights to which Indemnitee may at any time be entitled
under applicable law, the Certificate of Incorporation, the Bylaws, any
agreement, a vote of stockholders or a resolution of directors, or otherwise.
No amendment, alteration or repeal of this Article or any provision thereof
shall be effective as to any Indemnitee for acts, events and circumstances that
occurred, in whole or in part, before such amendment, alteration or repeal.
The provisions of this Article shall continue as to an Indemnitee whose
Corporate Status has ceased and shall inure to the benefit of his heirs,
executors and administrators.
SECTION 11. Insurance and Subrogation. To the extent the
Corporation maintains an insurance policy or policies providing liability
insurance for directors or officers of the Corporation or of any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise which such person serves at the request of the Corporation,
Indemnitee shall be covered by such policy or policies in accordance with its
or their terms to the maximum extent of coverage available for any such
director or officer under such policy or policies.
In the event of any payment hereunder, the Company shall be subrogated
to the extent of such payment to all the rights of recovery of Indemnitee, who
shall execute all papers required and take all action necessary to secure such
rights, including execution of such documents as are necessary to enable the
Company to bring suit to enforce such rights.
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The Company shall not be liable under this Article to make any payment
of amounts otherwise indemnifiable hereunder if, and to the extent that,
Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.
SECTION 12. Severability. If any provision or provisions of this
Article shall be held to be invalid, illegal or unenforceable for any reason
whatsoever, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby; and, to the
fullest extent possible, the provisions of this Article shall be construed so
as to give effect to the intent manifested by the provision held invalid,
illegal or unenforceable.
SECTION 13. Certain Persons Not Entitled to Indemnification.
Notwithstanding any other provision of this Article, no person shall be
entitled to indemnification or advancement of Expenses under this Article with
respect to any Proceeding, or any Matter therein, brought or made by such
person against the Corporation.
SECTION 14. Definitions. For purposes of this Article:
"Change of Control" means a change in control of the Corporation after
the date of adoption of these Bylaws in any one of the following circumstances:
(i) there shall have occurred an event required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item
on any similar schedule or form) promulgated under the Securities Exchange Act
of 1934 (the "Act"), whether or not the Corporation is then subject to such
reporting requirement; (ii) any "person" (as such term is used in Section 13(d)
and 14(d) of the Act) shall have become the "beneficial owner" (as defined in
Rule 13d-3 under the Act), directly or indirectly, of securities of the
Corporation representing 40% or more of the combined voting power of the
Corporation's then outstanding voting securities without prior approval of at
least two-thirds of the members of the Board of Directors in office immediately
prior to such person attaining such percentage interest; (iii) the Corporation
is a party to a merger, consolidation, sale of assets or other reorganization,
or a proxy contest, as a consequence of which members of the Board of Directors
in office immediately prior to such transaction or event constitute less than a
majority of the Board of Directors thereafter; (iv) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors (including for this purpose any new director whose
election or nomination for election by the Corporation's stockholders was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of such period) cease for any reason to
constitute at least a majority of the Board of Directors.
"Corporate Status" describes the status of a person who is or was a
director, officer, employee, agent or fiduciary of the Corporation or of any
other corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise which such per son is or was serving i the request of the
Corporation.
"Disinterested Director" means a director of the Corporation who is
not and was not a party to the Proceeding in respect of which indemnification
is sought by Indemnitee.
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<PAGE> 12
"Expenses" shall include all reasonable attorneys' fees, retainers,
court costs, transcript costs, fees of experts, witness fees, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service fees, and all other disbursements or expenses of the types
customarily incurred in connection with prosecuting, defending, preparing to
prosecute or defend, investigating, or being or preparing to be a witness in a
Proceeding.
"Indemnitee" includes any person who is, or is threatened to be made,
a witness in or a party to any Proceeding as described in Section 1 or 2 of
this Article by reason of his Corporate Status.
"Independent Counsel" means a law firm, or a member of a law firm,
that is experienced in matters of corporation law and neither presently is, nor
in the five years previous to his selection or appointment has been, retained
to represent: (i) the Corporation or Indemnitee in any matter material to
either such party, or (ii) any other party to the Proceeding giving rise to a
claim for indemnification hereunder.
"Matter" is a claim, a material issue, or a substantial request for
relief.
"Proceeding" includes any action, suit, arbitration, alternate dispute
resolution mechanism, investigation, administrative hearing or any other
proceeding whether civil, criminal, administrative or investigative, except one
initiated by an Indemnitee pursuant to Section 9 of this Article to enforce his
rights under this Article.
SECTION 15. Notices. Any communication required or permitted to the
Corporation shall be addressed to the Secretary of the Corporation and any such
communication to Indemnitee shall be addressed to his home address unless he
specifies otherwise and shall be personally delivered or delivered by overnight
mail delivery.
SECTION 16. Contractual Rights. The right to be indemnified or to
the advancement or reimbursement of Expenses (i) is a contract right based upon
good and valuable consideration, pursuant to which Indemnitee may sue as if
these provisions were set forth in a separate written contract between him or
her and the Corporation, (ii) is and is intended to be retroactive and shall be
available as to events occurring prior to the adoption of these provisions, and
(iii) shall continue after any rescission or restrictive modification of such
provisions as to events occurring prior thereto.
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<PAGE> 1
EXHIBIT 4.2
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE RIGHTS AND LIMITATIONS
OF
SERIES A PREFERRED STOCK
OF
RENTERS CHOICE, INC.
------------------
Pursuant to Section 151
of the General Corporation Law of the State of Delaware
------------------
Renters Choice, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware, does by its Assistant
Secretary hereby certify that pursuant to the provisions of Section 151 of the
General Corporation Law of the State of Delaware, its Board of Directors, at a
meeting held on August 4, 1998, duly adopted the following resolution
establishing, the rights, preferences, privileges and restrictions of a series
of preferred stock of the corporation which resolution remains in full force and
effect as of the date hereof:
"WHEREAS, the Board of Directors of Renters Choice, Inc. (the
"Corporation") is authorized, within the limitations and restrictions stated in
its Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation"), to fix by resolution or resolutions adopted prior to the
issuance of any shares of each particular series of preferred stock and
incorporated in a certificate of designation filed with the Secretary of State
of the State of Delaware, the designation, powers (including voting powers and
voting rights), preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions thereof, as
may be fixed from time to time by the Board of the Directors in the resolution
or resolutions adopted pursuant to the authority granted under the Certificate
of Incorporation; and
<PAGE> 2
WHEREAS, it is the desire of the Board of Directors of the Corporation,
pursuant to its authority as aforesaid, to authorize and fix the terms of a
series of preferred stock and the number of shares constituting such series;
NOW, THEREFORE, BE IT RESOLVED, that pursuant to Paragraph Fourth, Section
1 of the Certificate of Incorporation, there is hereby authorized such series of
preferred stock on the terms and with the provisions herein set forth:
1. Certain Definitions.
Unless the context otherwise requires, the terms defined in this
Section 1 shall have, for all purposes of this resolution, the meanings
specified (with terms defined in the singular having comparable meanings when
used in the plural).
Affiliate. The term "Affiliate" shall mean, with respect to any Person,
any other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person and, in the case of
a Person who is an individual, shall include (i) members of such specified
Person's immediate family (as defined in Instruction 2 of Item 404(a) of
Regulation S-K under the Securities Act) and (ii) trusts, the trustee and all
beneficiaries of which are such specified Person or members of such Person's
immediate family as determined in accordance with the foregoing clause (i). For
the purposes of this definition, control when used with respect to any person
means the power to direct the management and policies of such person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing. Notwithstanding the foregoing, the
Initial Holders and their Affiliates shall not be deemed Affiliates of the
Corporation.
Change of Control. The term "Change of Control" shall mean the
occurrence of any one of the following events: (I) the acquisition after the
Initial Issue Date, in one or more transactions, of beneficial ownership (within
the meaning of Rule 13d-3 under the Exchange Act) by (i) any person or entity
(other than any Permitted Holder) or (ii) any group of persons or entities
(excluding any Permitted Holders) who constitute a group (within the meaning of
Section 13(d)(3) of the Exchange Act), in either case, of any securities of the
Corporation such that, as a result
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<PAGE> 3
of such acquisition, such person, entity or group beneficially owns (within the
meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, 40% or
more of the then outstanding voting securities entitled to vote on a regular
basis for a majority of the Board of Directors of the Corporation (but only to
the extent that such beneficial ownership is not shared with any Permitted
Holder who has the power to direct the vote thereof), provided, however, that no
such Change of Control shall be deemed to have occurred if (A) the Permitted
Holders beneficially own, in the aggregate, at such time, a greater percentage
of such voting securities than such other person, entity or group or (B) at the
time of such acquisition, the Permitted Holders (or any of them) possess the
ability (by contract or otherwise) to elect, or cause the election of, a
majority of the members of the Corporation's Board of Directors; (II) the
acquisition by any person of all or substantially all of the assets of the
Corporation; (III) the determination by the Corporation's Board of Directors to
recommend the acceptance of any proposal set forth in a tender offer statement
or proxy statement filed by any person with the Securities and Exchange
Commission which indicates the intention on the part of that person to acquire,
or acceptance of which would otherwise have the effect of that person acquiring,
control of the Corporation; or (IV) upon, other than as a result of the death or
disability of one or more of the directors within a three-month period, a
majority of the members of the Board of Directors of the Corporation for any
period of three consecutive months not being persons who (a) had been directors
of the Corporation for at least the preceding 24 consecutive months or were
elected by the holders of the Series A Preferred Stock, voting separately as a
class, or (b) when they initially were elected to the Board of Directors of the
Corporation, (x) were nominated (if they were elected by the stockholders) or
elected (if they were elected by the directors) with the affirmative concurrence
of 66-2/3% of the directors who were Continuing Directors at the time of the
nomination or election by the Board of Directors of the Corporation and (y) were
not elected as a result of an actual or threatened solicitation of proxies or
consents by a person other than the Board or an agreement intended to avoid or
settle such a proxy solicitation (the directors described in clauses (a) and (b)
of this subsection (IV) being "Continuing Directors"); provided, however, that
no Change of Control shall be deemed to have occurred by virtue of any merger of
the Corporation with any wholly owned subsidiary of the Corporation or any
merger of two wholly owned subsidiaries of the
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<PAGE> 4
Corporation if, in any such merger, the proportionate ownership interests of the
stockholders of the Corporation remain unchanged.
Common Stock. The term "Common Stock" shall mean the common stock, par
value $.01 per share, of the Corporation.
Conversion Date. The term "Conversion Date" shall have the meaning set
forth in Sections 8(c) below, as applicable.
Conversion Price. The term "Conversion Price" shall have the meaning
set forth in Section 8(d) below.
Convertible Preferred Nominees. The term "Convertible Preferred
Nominees" shall have the meaning set forth in Section 4(b)(i) below.
Convertible Securities. The term "Convertible Securities" shall have
the meaning set forth in Section 8(f)(iii).
Corporation Notice. The term "Corporation Notice" shall have the
meaning set forth in Section 5(b)(ii)(A) below.
Current Market Price. The term "Current Market Price" shall mean the
current market price of the Common Stock as computed in accordance with Section
8(f)(xi) below.
Dividend Payment Date. The term "Dividend Payment Date" shall have the
meaning set forth in Section 3(a) below.
Dividend Rate. The term "Dividend Rate" shall have the meaning set
forth in Section 3(a) below.
Exchange Act. The term "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.
Initial Holders. The term "Initial Holders" shall mean those holders of
Series A Preferred Stock as of the Initial Issue Date.
Initial Issue Date. The term "Initial Issue Date" shall mean the date
that shares of Series A Preferred Stock are first issued by the Corporation.
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<PAGE> 5
Initial Series A Preferred Shares. The term "Initial Series A Preferred
Shares" shall have the meaning set forth in Section 4(b)(i)(B) below.
IRR. The term "IRR" shall have the meaning set forth in Section
4(c)(ix) below.
Junior Stock. The term "Junior Stock" shall mean any stock of the
Corporation, other than the Common Stock, ranking junior to the Series A
Preferred Stock as to dividends and upon liquidation. Junior Stock shall not
include the Series B Preferred Stock.
Liquidation. The term "Liquidation" shall mean any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary;
provided, that neither the voluntary sale, conveyance, exchange or transfer (for
cash, shares of stock, securities or other consideration) of all or
substantially all of the property or assets of the Corporation, nor the
consolidation or merger of the Corporation with one or more other entities,
shall, by itself, be deemed a Liquidation.
Liquidation Preference Amount. The term "Liquidation Preference Amount"
shall mean an amount equal to the sum of (i) $1,000 per share of Series A
Preferred Stock, plus (ii) all accrued and unpaid dividends thereon calculated
in accordance with Sections 3(a) and 3(b) hereof.
Permitted Holder. The term "Permitted Holder" shall mean (i) Apollo
Investment Fund IV, L.P., Apollo Overseas Partners IV, L.P., or any entity
controlled by either of the foregoing or any of the partners of the foregoing,
(ii) an employee benefit plan of the Corporation or any subsidiary of the
Corporation, or any participant therein, (iii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Corporation or any of
its subsidiaries or (iv) any Permitted Transferee of any of the foregoing
persons.
Permitted Transferee. The term "Permitted Transferee" shall mean, with
respect to any Person, (i) any officer, director or partner of, or Person
controlling, such Person, (ii) any other Person that is (x) an Affiliate of the
general partner(s), investment manager(s) or investment advisor(s) of such
Person, (y) an Affiliate of such Person or a Permitted Transferee of an
Affiliate or (z) an investment fund, investment account or investment entity
whose investment manager, investment advisor or general partner thereof is such
Person or
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<PAGE> 6
a Permitted Transferee of such Person or (iii) if a Permitted Transferee of a
Person set forth in the foregoing clauses (i) and (ii) is an individual, (x) any
spouse or issue of such individual, or any trust solely for the benefit of such
individual, spouse or issue, and (y) upon such individual's death, any Person to
whom Shares are transferred in accordance with the laws of descent and/or
testamentary distribution, in each case in a bona fide distribution or other
transaction not intended to avoid the provisions of this Agreement.
Person. The term "Person" shall mean an individual or a corporation,
limited liability company, partnership, trust, or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
Quarterly Dividend Period. The term "Quarterly Dividend Period" shall
have the meaning set forth in Section 3(a) below.
Redemption Date. The term "Redemption Date" shall have the meaning set
forth in Section 5(a)(ii) below.
Redemption Event. A Redemption Event will be deemed to occur at the
earliest of (i) the date upon which there is a Change of Control of the
Corporation, (ii) the date upon which the Corporation's Common Stock is not
listed for trading on a United States national securities exchange or the NASDAQ
National Market System, or (iii) the eleventh anniversary of the Initial Issue
Date.
Redemption Percentage. The term "Redemption Percentage" shall have the
meaning set forth in Section 5(a)(i) below.
Redemption Price. The term "Redemption Price" shall have the meaning
set forth in Section 5(a)(i) below.
Repurchase Date. The term "Repurchase Date" shall have the meaning set
forth in Section 5(b)(i) below.
Repurchase Price. The term "Repurchase Price" shall have the meaning
set forth in Section 5(b)(i) below.
Securities Act. The term "Securities Act" shall mean the Securities Act
of 1933, as amended, and the rules and regulations promulgated thereunder.
Series A Preferred Stock. The term "Series A Preferred Stock" shall
mean the Series A Preferred Stock authorized hereby.
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<PAGE> 7
Series B Preferred Stock. The term "Series B Preferred Stock" shall
mean the Series B Preferred Stock, par value $.01 per share, of the Corporation.
Stockholders Agreement. The term "Stockholders Agreement" shall mean
that certain stockholders agreement of the Corporation dated as of August 5,
1998, as in effect on the Initial Issue Date, a copy of which shall be
maintained by the Secretary of the Corporation and which shall be available to
any stockholder of the Corporation upon request.
Trading Days. The term "Trading Days" shall have the meaning set forth
in Section 8(f)(xi) below.
2. Designation.
The series of preferred stock authorized hereby shall be designated as
the "Series A Convertible Preferred Stock." The number of shares constituting
such series shall initially be Four Hundred Thousand (400,000). The par value of
the Series A Preferred Stock shall be $.01 per share.
3. Dividends.
(a) The holders of the shares of Series A Preferred Stock shall be
entitled to receive cumulative quarterly dividends at a dividend rate
equal to 3 3/4% per annum (the "Dividend Rate") computed on the basis
of $1,000 per share, when and as declared by the Board of Directors of
the Corporation, out of funds legally available for the payment of
dividends; provided, however, for the five-year period commencing with
the Initial Issue Date, payments of dividends may be made, at the
election of the Corporation, either (i) in cash or (ii) by issuing a
number of additional fully paid and nonassessable shares (and/or
fractional shares) of Series A Preferred Stock for each such share (or
fractional share) of Series A Preferred Stock then outstanding
determined by dividing (x) the dividend then payable on each such share
(or fractional share) of Series A Preferred Stock (expressed as a
dollar amount) by (y) 1,000. Quarterly dividend periods (each a
"Quarterly Dividend Period") shall commence on January 1, April 1, July
1 and October 1, in each year, except that the first Quarterly Dividend
Period shall commence on the date of issuance of the Series A Preferred
Stock, and shall end on and include the day immediately preceding the
first day of the next Quarterly Dividend Period. Dividends on the
shares of Series A Preferred Stock shall be payable on March 31, June
30, September 30, December 31 of each year (a "Dividend Payment Date"),
commencing September 30, 1998. Each such dividend shall be paid to the
holders of record of the Series A Preferred
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<PAGE> 8
Stock as they shall appear on the stock register of the Corporation on
such record date, not exceeding 45 days nor less than 10 days preceding
such Dividend Payment Date, as shall be fixed by the Board of Directors
of the Corporation or a duly authorized committee thereof.
Notwithstanding the foregoing paragraph, (A) for the four Quarterly
Dividend Periods commencing with the ninth Quarterly Divided Period following
the Initial Issue Date, no dividend shall be paid or accrued for any Quarterly
Dividend Period in which the Current Market Price as of the related Dividend
Payment Date is equal to or greater than two (2) times the Conversion Price and
(B) for each Quarterly Dividend Period commencing with the thirteenth Quarterly
Dividend Period following the Initial Issue Date, no dividend shall be paid or
accrued for any Quarterly Dividend Period in which the Current Market Price as
of the related Dividend Payment Date is equal to or greater than the Conversion
Price accumulated forward to the payment date at a compound annual growth rate
of Twenty-Five Percent (25%) per annum compounded quarterly.
If, on any Dividend Payment Date, the full dividends provided for in
this Section 3(a) are not declared or paid to the holders of the Series A
Preferred Stock, whether in cash or in additional shares of Series A Preferred
Stock, then such dividends shall cumulate, with additional dividends thereon,
compounded quarterly, at the dividend rate applicable to the Series A Preferred
Stock as provided in this Section 3(a), for each succeeding full Quarterly
Dividend Period during which such dividends shall remain unpaid. In the event
the Corporation elects to pay dividends in additional shares of Series A
Preferred Stock, the Corporation shall on the Dividend Payment Date deliver to
the holders certificates representing such shares.
Notwithstanding anything to the contrary herein, in the event any
conversion, redemption or liquidation occurs as of a date other than on a
Dividend Payment Date, the holders of Series A Preferred Stock shall be paid a
pro rata dividend equal to the dividend payable for that Quarterly Dividend
Period multiplied by a fraction, the numerator of which is the number of days
that have elapsed since the last Dividend Payment Date and the denominator of
which is the number of days in the Quarterly Dividend Period in which the
conversion, redemption or liquidation occurs.
(b) The amount of any dividends accrued on any share of the Series A
Preferred Stock on any Dividend Payment Date shall be deemed to be the
amount of any unpaid dividends accumulated thereon to and including
such Dividend Payment Date, whether or not earned or declared. The
amount of dividends accrued on any share of the Series A Preferred
Stock on any date other than a Dividend Payment Date shall be deemed to
be the sum of (i) the amount of any unpaid dividends accumulated
thereon to and including the last preceding Dividend Payment Date,
whether or not earned or declared, and (ii) an amount determined by
multiplying (x) the Dividend Rate by (y) a fraction, the numerator of
which shall be the number of days from the last preceding Dividend
Payment Date to and including the date on which such calculation is
made and the denominator of which shall be the full number of days in
such Quarterly Dividend Period.
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<PAGE> 9
(c) Immediately prior to authorizing or making any distribution in
redemption or liquidation with respect to the Series A Preferred Stock
(other than a purchase or acquisition of Series A Preferred Stock
pursuant to a purchase or exchange offer made on the same terms to
holders of all outstanding Series A Preferred Stock), the Board of
Directors shall, to the extent of any funds legally available therefor,
declare a dividend in cash on the Series A Preferred Stock payable on
the distribution date in an amount equal to any accrued and unpaid
dividends on the Series A Preferred Stock as of such date.
4. Voting Rights.
(a) Except as otherwise required by law, the shares of Series A
Preferred Stock shall be entitled to vote together with the shares of
voting Common Stock as one class at all annual and special meetings of
stockholders of the Corporation, and to act by written consent in the
same manner as the Common Stock, upon the following basis: each holder
of Series A Preferred Stock shall be entitled to such number of votes
for the Series A Preferred Stock held by the holder on the record date
fixed for such meeting, or on the effective date of such written
consent, as shall be equal to the number of whole shares of Common
Stock into which all of such holder's shares of Series A Preferred
Stock are convertible immediately after the close of business on the
record date fixed for such meeting or the effective date of such
written consent.
(b) (i) The holders of Series A Preferred Stock, voting as a separate
class shall have the right to elect such number of directors (the
"Convertible Preferred Nominees") of the Corporation as set forth
below, in addition to such holders' rights to vote for the election
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<PAGE> 10
of directors, generally, in accordance with Section 4(a):
(A) Subject to Section 4(b)(i) (B) below, the number of Convertible
Preferred Nominees shall be two (2). One Convertible Preferred Nominee shall be
classified as a Class I Director of the Corporation, and the other Convertible
Preferred Nominee shall be classified as a Class II Director of the Corporation.
Each of the Finance Committee , the Audit Committee and the Compensation
Committee of the Board of Directors shall have one Convertible Preferred Nominee
as a member; and, in the event the Corporation establishes an Executive
Committee of the Board of Directors, at least one Convertible Preferred Nominee
shall be a member of such Executive Committee.
(B) At such time as the Initial Holders together with any and all of
their Permitted Transferees cease to hold in aggregate 50% or more of the number
of the Initial Series A Preferred Shares, the holders of Series A Preferred
Stock shall be entitled to elect one Convertible Preferred Nominee under this
Certificate; and, at such time as the Initial Holders cease to hold in aggregate
10 % or more of the number of the Initial Series A Preferred Shares, the holders
of Series A Preferred Stock shall no longer be entitled to elect any Convertible
Preferred Nominees under this Certificate.
(ii) The holders of the Series A Preferred Stock may exercise any right
under Section 4(b)(i) to elect directors at a special meeting of the holders of
the Series A Preferred Stock, at an annual meeting of the stockholders of the
Corporation held for the purpose of electing directors, and in each written
consent executed in lieu of any such meetings.
(iii) A director elected in accordance with Section 4(b)(i) will serve
until the next annual meeting of stockholders of the Corporation at which other
directors of the Corporation of the same class shall be elected and until his or
her successor is elected and qualified by the holders of the Series A Preferred
Stock, except as otherwise provided in the Corporation's Amended and Restated
Certificate of Incorporation or Amended and Restated Bylaws.
(iv) Notwithstanding anything to the contrary contained herein, the
provisions of this Section 4(b) shall inure
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<PAGE> 11
only to the benefit of the Initial Holders and their Permitted
Transferees, and any shares of Series A Preferred Stock subsequently
transferred by the Initial Holders to any Person other than one of
their Permitted Transferees shall not be entitled to the benefits of
this Section 4(b).
(c) While any shares of Series A Preferred Stock are outstanding, the
Corporation will not, directly or indirectly, including through a
merger or consolidation with any other corporation or otherwise,
without approval of holders of at least a majority of the outstanding
shares of Series A Preferred Stock, voting separately as a class, (i)
increase the number of authorized shares of Series A Preferred Stock or
authorize the issuance or issue of any shares of Series A Preferred
Stock other than to existing holders of Series A Preferred Stock or
holders of Series B Preferred Stock, (ii) issue any new class or series
of equity security, (iii) amend, alter or repeal, in any manner
whatsoever, the designations, preferences and relative rights and
limitations and restrictions of the Series A Preferred Stock or the
Series B Preferred Stock; (iv) amend, alter or repeal any of the
provisions of the Amended and Restated Certificate of Incorporation or
Amended and Restated ByLaws of the Corporation in a manner that would
negatively impact the holders of the Series A Preferred Stock,
including (but not limited to) any amendment that is in conflict with
the approval rights set forth in this Section 4; (v) directly or
indirectly, redeem, purchase or otherwise acquire for value (including
through an exchange), or set apart money or other property for any
mandatory purchase or other analogous fund for the redemption, purchase
or acquisition of any shares of Common Stock or Junior
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Stock, except for the repurchase by the Corporation of up to
$25,000,000 in Common Stock from J. Ernest Talley, declare or pay any
dividend or make any distribution (whether in cash, shares of capital
stock of the Corporation, or other property) on shares of Common Stock
or Junior Stock; (vi) cause the number of directors of the Corporation
to be greater than seven (7); (vii) enter into any agreement or
arrangement with or for the benefit of any Person who is an Affiliate
of the Corporation with a value in excess of $5 million in a single
transaction or a series of related transactions; (viii) effect a
voluntary liquidation, dissolution or winding up of the Corporation;
(ix) sell or agree to sell all or substantially all of the assets of
the Corporation, unless such transaction (1) occurs after the fourth
anniversary of the Initial Issue Date, (2) is a sale for cash and (3)
results in an internal rate of return ("IRR") of 30% compounded
quarterly or greater to the holder of the Series A Preferred Stock with
respect to each share of Series A Preferred Stock issued on the Initial
Issue Date; or (x) enter into any merger or consolidation or other
business combination involving the Corporation (except a merger of a
wholly-owned subsidiary of the Corporation into the Corporation in
which the Corporation's capitalization is unchanged as a result of such
merger) unless such transaction (1) occurs after the fourth anniversary
of the Initial Issue Date, (2) is for cash and (3) results in an IRR of
30% compounded quarterly or greater to the holder of the Series A
Preferred Stock with respect to each share of Series A Preferred Stock
issued on the Initial Issue Date.
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(d) While any shares of Series A Preferred Stock are outstanding, the
Corporation will not, directly or indirectly, without the majority
affirmative vote of the Finance Committee, issue debt securities of the
Corporation with a value in excess of $10 million (including any
refinancing of existing indebtedness).
(e) While any shares of Series A Preferred Stock are outstanding, the
Corporation will not, directly or indirectly, without the unanimous
affirmative vote of the Finance Committee, issue equity securities of
the Corporation with a value in excess of $10 million (including any
refinancing of existing indebtedness); provided, however, that the
following equity issuances shall require only a majority affirmative
vote of the Finance Committee: (A) a Common Stock offering within 24
months of the Initial Issue Date that is equal to or less than $75
million of gross proceeds to the Corporation and the selling price is
equal to or greater than the Conversion Price, (B) a Common Stock
offering in which the selling price (1) at any time prior to the third
anniversary of the Initial Issue Date is equal to or greater than two
times the Conversion Price and (2) thereafter, equal to or greater than
the price that would imply a 25% or greater IRR compounded quarterly on
the Conversion Price and (C) an issuance of equity in connection with
an acquisition if the issuance is equal to or less than 10% of the
outstanding Common Stock (calculated post-issuance of such shares of
Common Stock).
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5. Redemption
(a) Optional Redemption.
(i) Optional Redemption by the Corporation. (A) The Series A
Preferred Stock may not be redeemed, in whole or in part, at
the election of the Corporation prior to the fourth
anniversary of the Initial Issue Date. The Corporation by
resolution of its Board of Directors may redeem the Series A
Preferred Stock, in whole or in part, at any time after the
fourth anniversary of the Initial Issue Date. The redemption
price per share (the "Redemption Price") for such shares of
Series A Preferred Stock so redeemed shall equal 105% of the
Liquidation Preference Amount on the Redemption Date (as
defined below).
(B) Notwithstanding the forgoing Section 5(a)(i)(A), an Initial Holder
shall be entitled to reserve from redemption by the Corporation pursuant to
Section 5(a)(i)(A) one share of the Series A Preferred Stock until such time as
the Initial Holders and their Permitted Transferees collectively shall own less
than 33 1/3% of the Shares issued to the Initial Holders on the Initial Issuance
Date as defined below. For the purposes of this Section 5(a)(i)(B), "Shares"
shall mean shares of the Common Stock, the Series A Preferred Stock and the
Series B Preferred Stock, and the preceding percentage shall be calculated as if
each of the Shares had been exchanged or converted into shares of Common Stock
immediately prior to each such calculation regardless of the existence of any
restrictions on such exchange or conversion.
(C) In the event that at any time less than all of the Series A
Preferred Stock outstanding is to be redeemed, the shares to be redeemed will be
selected pro rata. Notwithstanding anything to the contrary, the Corporation may
not redeem less than all of the Series A Preferred Stock outstanding unless all
accrued and unpaid dividends have been paid on all then outstanding shares of
Series A Preferred Stock.
(ii) Notice of Redemption. Notice of any redemption pursuant to
this
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Section 5(a) shall be mailed, postage prepaid, at least 30 days but not
more than 60 days prior to the date of redemption specified in such
notice (the "Redemption Date") to each holder of record of the Series A
Preferred Stock to be redeemed at its address as the same shall appear
on the stock register of the Corporation. Each such notice shall state:
(A) the Redemption Date, (B) the place or places where certificates for
such shares of Series A Preferred Stock are to be surrendered for
payment, (C) the Redemption Price and (D) that unless the Corporation
defaults in making the redemption payment, dividends on the shares of
Series A Preferred Stock called for redemption shall cease to accrue on
and after the Redemption Date. If less than all the shares of the
Series A Preferred Stock owned by such holder are then to be redeemed,
such notice shall also specify the number of shares thereof which are
to be redeemed and the numbers of the certificates representing such
shares.
(iii) No Preclusion of Conversion. Nothing in this Section 5(a)
shall be construed to preclude a holder of Series A Preferred
Stock from converting any or all of its shares of Series A
Preferred Stock in accordance with Section 8 at any time prior
to the Redemption Date.
(b) Mandatory Redemption.
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<PAGE> 16
(i) Right to Require Redemption. If at any time there shall occur
any Redemption Event of the Corporation, then each holder of
Series A Preferred Stock shall have the right, at such
holder's option, to require the Corporation to redeem, and
upon the exercise of such right the Corporation shall redeem,
all or any part of such holder's Series A Preferred Stock on
the date (the "Repurchase Date") that is 45 days after the
date of the Corporation Notice (as defined below). The
redemption price per share (the "Repurchase Price") for such
shares of Series A Preferred Stock so redeemed shall equal the
Liquidation Preference Amount on the Repurchase Date.
(ii) Notices; Method of Exercising Redemption Right, etc.
(A) Unless the Corporation shall have theretofore called for redemption
all the Series A Preferred Stock then outstanding pursuant to Section 5(a)
hereof, within 15 days after the occurrence of a Redemption Event, the
Corporation shall mail to all holders of record of the Series A Preferred Stock
a notice (the "Corporation Notice") of the occurrence of the Redemption Event
and of the redemption right set forth herein arising as a result thereof. Each
Corporation Notice of a redemption right shall state: (I) the Repurchase Date;
(II) the date by which the redemption right must be exercised; (III) the
Repurchase Price; (IV) a description of the procedure which a holder must follow
to exercise a redemption right including a form of the irrevocable written
notice referred to in Section 5(b)(ii)(B) hereof; and (V) the place or places
where such Series A Preferred Stock may be surrendered for redemption.
No failure of the Corporation to give the foregoing notices or any
defect therein shall limit any holder's right to exercise a redemption right or
affect the validity of the proceedings for the redemption of Series A Preferred
Stock.
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<PAGE> 17
(B) To exercise a redemption right, a holder must deliver to the
Corporation on or before the 15th day after the date of the Corporation Notice
(i) irrevocable written notice of the holder's exercise of such rights, which
notice shall set forth the name of the holder, the amount of the Series A
Preferred Stock to be redeemed, a statement that an election to exercise the
redemption right is being made thereby, and (ii) the Series A Preferred Stock
with respect to which the redemption right is being exercised, duly endorsed for
transfer to the Corporation. Such written notice shall be irrevocable. Subject
to the provisions of paragraph (D) below, Series A Preferred Stock surrendered
for redemption together with such irrevocable written notice shall cease to be
convertible from the date of delivery of such notice. If the Repurchase Date
falls after the record date and before the following Dividend Payment Date, any
Series A Preferred Stock to be redeemed must be accompanied by payment of an
amount equal to the dividends thereon which the registered holder thereof is to
receive on such Dividend Payment Date, and, notwithstanding such redemption,
such dividend payment will be made by the Corporation to the registered holder
thereof on the applicable record date; provided that any quarterly payment of
dividends becoming due on the Repurchase Date shall be payable to the holders of
such Series A Preferred Stock registered as such on the relevant record date
subject to the terms of Section 3(b) hereof.
(C) In the event a redemption right shall be exercised in accordance
with the terms hereof, the Corporation shall pay or cause to be paid the
Repurchase Price in cash, to the holder on the Repurchase Date.
(D) If any Series A Preferred Stock surrendered for redemption shall
not be so redeemed on the Repurchase Date, such Series A Preferred Stock shall
be convertible at any time from the Repurchase Date until redeemed and, until
redeemed, continue to accrue dividends to the extent permitted by applicable law
from the Repurchase Date at the same rate borne by such Series A Preferred
Stock. The Corporation shall pay to the holder of such Series A Preferred Stock
the additional amounts arising from this Section 5(b)(ii)(D) hereof at the time
that it pays the Repurchase Price, and if applicable such Series A Preferred
Stock shall remain convertible into Common Stock until the Repurchase Price plus
any additional amounts owing on such Series A Preferred Stock shall have been
paid or duly provided for.
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<PAGE> 18
(E) Any Series A Preferred Stock which is to be redeemed only in part
shall be surrendered at any office or agency of the Corporation designated for
that purpose pursuant to Section 5(b)(ii)(A)(V) hereof and the Corporation shall
execute and deliver to the holder of such Series A Preferred Stock without
service charge, a new certificate or certificates representing the Series A
Preferred Stock, of any authorized denomination as requested by such holder, in
aggregate amount equal to and in exchange for the unredeemed portion of the
Series A Preferred Stock so surrendered.
6. Priority.
(a) Priority as to Dividends. Holders of shares of the Series A
Preferred Stock shall be entitled to receive the dividends provided for
in Section 3 hereof in preference to and in priority over any dividends
upon any Junior Stock or Common Stock.
(b) Series B Preferred Stock. The Corporation's Series A Preferred
Stock shall rank on parity with the Series B Preferred Stock with
respect to dividends and redemption.
7. Liquidation Preference.
(a) In the event of any Liquidation, holders of the Series A Preferred
Stock will be entitled to receive out of the assets of the Corporation
whether such assets are capital or surplus and whether or not any
dividends as such are declared, the Liquidation Preference Amount to
the date fixed for distribution, and no more, before any distribution
shall be made to the holders of Junior Stock or Common Stock with
respect to the distribution of assets. If the assets of the Corporation
are not sufficient to pay in full the Liquidation Preference Amount to
the holders of outstanding shares of the Series A Preferred Stock, then
the holders of all such shares shall share ratably in such distribution
of assets in accordance with the amount which would be otherwise
payable on such distribution to the holders of Series A Preferred Stock
were such Liquidation Preference Amount paid in full. Except as
provided, in this Section 7(a), in the event of any Liquidation of the
Corporation, the holders of shares of Series A Preferred Stock shall
not be entitled to any additional payments.
(b) The consolidation or merger of the Corporation with or into such
corporation or corporations shall not itself be deemed to be a
Liquidation of the Corporation within the meaning of this Section 7.
(c) Written notice of any Liquidation of the Corporation, stating a
payment date and the place where the distributive amounts shall be
payable, shall be given by mail,
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<PAGE> 19
postage prepaid, not less than 30 days prior to the payment date stated
therein, to the holders of record of the Series A Preferred Stock at
their respective addresses as the same shall appear on the books of the
Corporation.
(d) The Series A Preferred Stock shall rank on parity with the Series B
Preferred Stock with respect to liquidation.
8. Conversion.
(a) Each share of Series A Preferred Stock shall be convertible at any
time and from time to time, at the option of the holder thereof into
validly issued, fully paid and nonassessable shares of Common Stock, in
an amount determined in accordance with Section 8(d) below.
(b) Immediately following the conversion of Series A Preferred Stock
into Common Stock on the Conversion Date (i) such converted shares of
Series A Preferred Stock shall be deemed no longer outstanding and (ii)
the Persons entitled to receive the Common Stock upon the conversion of
such converted Series A Preferred Stock shall be treated for all
purposes as having become the owners of record of such Common Stock.
Upon the issuance of shares of Common Stock upon conversion of Series A
Preferred Stock pursuant to this Section 8, such shares of Common Stock
shall be deemed to be duly authorized, validly issued, fully paid and
nonassessable. Notwithstanding anything to the contrary in this Section
8, any holder of Series A Preferred Stock may convert shares of such
Series A Preferred Stock into Common Stock in accordance with Section 8
on a conditional basis, such that such conversion will not take effect
unless conditions set forth in Section 8(c) are satisfied, and the
Corporation shall make such arrangements as may be necessary or
appropriate to allow such conditional conversion and to enable the
holder to satisfy such other conditions.
(c) To convert Series A Preferred Stock into Common Stock at the option
of the holder pursuant to Section 8(a), a holder must give written
notice to the Corporation at its principal office that such holder
elects to convert Series A Preferred Stock into Common Stock, and the
number of shares to be converted. Such
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<PAGE> 20
conversion, to the extent permitted by law, regulation, rule or other
requirement of any governmental authority (collectively, "Laws") and
the provisions hereof, including but not limited to Section 5(a)(iii),
shall be deemed to have been effected as of the close of business on
the date on which the holder delivers such notice to the Corporation
(such date is referred to herein as the "Conversion Date" for purposes
of any conversion of Series A Preferred Stock pursuant to Section
8(a)). Promptly thereafter the holder shall (i) surrender the
certificate or certificates evidencing the shares of Series A Preferred
Stock to be converted, duly endorsed in a form reasonably satisfactory
to the Corporation, at the office of the Corporation or of the transfer
agent for the Series A Preferred Stock, (ii) state in writing the name
or names in which the certificate or certificates for shares of Common
Stock are to be issued, (iii) provide evidence reasonably satisfactory
to the Corporation that such holder has satisfied any conditions,
contained in any agreement or any legend on the certificates
representing the Series A Preferred Stock, relating to the transfer
thereof, if shares of Common Stock are to be issued in a name or names
other than the holder's, and (iv) pay any transfer or similar tax if
required as provided in Section 8(k) below. As soon as practical
following receipt of the foregoing, the Corporation shall deliver to
such former holder of Series A Preferred Stock, a certificate
representing the shares of Common Stock issued upon the conversion,
together with a new certificate representing the unconverted portion,
if any, of the shares of Series A Preferred Stock formerly represented
by the certificate or certificates surrendered for conversion.
(d) For the purposes of the conversion of Series A Preferred Stock into
Common Stock pursuant to Section 8(a), each share of Series A Preferred
Stock shall be convertible into the number of shares of Common Stock
equal to the Liquidation Preference Amount divided by the Conversion
Price in effect on the Conversion Date. The number of full shares of
Common Stock issuable to a single holder upon conversion of the Series
A Preferred Stock shall be based on the aggregate Liquidation
Preference Amount of all shares of Series A Preferred
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<PAGE> 21
Stock owned by such holder. The Conversion Price initially shall equal
$27.935. In order to prevent dilution of the conversion rights granted
hereunder, the Conversion Price shall be subject to adjustment from
time to time in accordance with Sections 8(f) and 8(i) below.
(e) If the Corporation shall at any time subdivide, by stock split,
reclassification or otherwise, the outstanding shares of Common Stock
or shall issue a dividend on its outstanding Common Stock payable in
capital stock, the Conversion Price in effect immediately prior to such
subdivision or the issuance of such dividend shall be proportionately
decreased, and in case the Corporation shall at any time combine, by
stock split, reclassification or otherwise, the outstanding shares of
Common Stock, the Conversion Price in effect immediately prior to such
combination shall be proportionately increased, effective at the close
of business on the date of such subdivision, dividend, combination or
other event, as the case may be.
(f) The number of shares issuable upon conversion and the Conversion
Price (and each component thereof) are subject to adjustment by the
Corporation from time to time upon the occurrence of the events
enumerated in this Section 8.
(i) Changes in Capital Stock.
(A) If the Corporation (i) pays a dividend or makes a distribution on
its Common Stock in shares of its Common Stock, (ii) subdivides its outstanding
shares of Common Stock into a greater number of shares, (iii) combines its
outstanding shares of Common Stock into a smaller number of shares, (iv) makes a
distribution on its Common Stock in shares of its capital stock other than
Common Stock or (v) issues by reclassification of its Common Stock any shares of
its capital stock, then the Conversion Price (and each component thereof) in
effect immediately prior to such action shall be proportionately adjusted so
that each holder of shares of Series A Preferred Stock may receive the aggregate
number and kind of shares of capital stock of the Corporation which such holder
would have owned immediately following such action if such holder had converted
all of his shares of Series A Preferred Stock into Common Stock immediately
prior to such action.
(B) The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
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<PAGE> 22
(C) If after an adjustment a holder of shares of Series A Preferred
Stock upon conversion may receive shares of two or more classes of capital stock
of the Corporation, the Corporation shall determine the allocation of the
adjusted Conversion Price between the classes of capital stock. After such
allocation, the conversion privilege and the Conversion Price of each class of
capital stock shall thereafter be subject to adjustment on terms comparable to
those applicable to Common Stock in this Section 8(f)(i).
(D) Any adjustments made pursuant to this Section 8(f)(i) shall be made
successively.
(ii) Common Stock Issue.
(A) If the Corporation issues any additional shares of Common Stock for
a consideration per share less than the Current Market Price (as hereinafter
defined) on the date the Corporation fixes the offering price of such additional
shares, the Conversion Price shall be adjusted as set forth below, such that a
holder of shares of Series A Preferred Stock, upon conversion of his shares of
Series A Preferred Stock into shares of Common Stock, shall have the right to
receive that number of shares of Common Stock which, after giving effect to the
following adjustment, such holder would receive if such holder elected to
convert his shares of Series A Preferred Stock into Common Stock. The Conversion
Price shall be adjusted to the number determined by multiplying the Conversion
Price in effect immediately prior to such issuance or sale by a fraction, the
numerator of which shall be the sum of (i) the number of shares of Common Stock
outstanding immediately prior to the issuance or sale of such additional shares
of Common Stock plus (ii) the number of such additional shares which the
aggregate consideration received (or by express provision hereof deemed to have
been received) by the Corporation for such additional shares so issued or sold
would purchase at a consideration per share equal to the Current Market Price,
and the denominator of which shall be the number of shares of Common Stock
outstanding immediately after the issuance or sale of such additional shares of
Common Stock. For the purposes of this Section 8(f)(ii), the date as of which
the Current Market Price shall be determined shall be the date of the actual
issuance or sale of such shares.
(B) The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
(C) This Section 8(f)(ii) does not apply to: (i) any of the
transactions described in Section 8(f)(iii) and 8(f)(iv); (ii) the conversion of
the shares of Series A Preferred Stock; and (iii) any shares issued under the
Corporation's Amended and Restated 1994 Long-Term Incentive Plan, and any other
such plans adopted by the Board of Directors.
(iii) Rights Issue.
(A) If the Corporation issues or sells any warrants or options or other
rights entitling the holders of Common Stock to subscribe for or purchase either
any additional shares of Common Stock or evidences of indebtedness, shares of
stock or other securities which are
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<PAGE> 23
convertible into or exchangeable, with or without payment of additional
consideration in cash or property, for additional shares of Common Stock (such
convertible or exchangeable evidence of indebtedness, shares of stock or other
securities hereinafter being called "Convertible Securities"), and the
consideration per share for which additional shares of Common Stock may at any
time thereafter be issuable pursuant to such warrants, options or other rights
or pursuant to the terms of such Convertible Securities (when added to the
consideration per share of Common Stock, if any, received for such warrants,
options or other rights), shall be less than the Current Market Price at the
time of the issuance of the warrants, options or other rights, then the
Conversion Price shall be adjusted as provided below, such that a holder of
shares of the Series A Preferred Stock, upon conversion of his shares of Series
A Preferred Stock into shares of Common Stock, shall have the right to receive
that number of shares of Common Stock which, after giving effect to the
following adjustment, such holder would receive if such holder elected to
convert his shares of Series A Preferred Stock into Common Stock. The Conversion
Price shall be adjusted to the number determined by multiplying the current
Conversion Price by a fraction, (A) the numerator of which shall be the sum of
(i) the number of shares of Common Stock outstanding on the record date plus
(ii) the quotient of (x) the number of additional shares of Common Stock covered
by such warrants, options or rights, multiplied by the sales price per share of
additional shares covered by such warrants, options or other rights, divided by
(y) the Current Market Price per share of Common Stock on the record date, and
(B) the denominator of which shall be the sum of (i) the number of shares of
Common Stock outstanding on the record date and (ii) the number of additional
shares of Common Stock covered by such warrants, options or other rights. For
purposes of this Section 8(f)(iii), the foregoing adjustment shall be made on
the basis that (i) the maximum number of additional shares of Common Stock
issuable pursuant to all such warrants, options or other rights or necessary to
effect the conversion or exchange of all such Convertible Securities shall be
deemed to have been issued and (ii) the aggregate consideration for such maximum
number of additional shares shall be deemed to be the minimum consideration
received and receivable by the Corporation for the issuance of such additional
shares (plus the consideration, if any, received for such warrants, options or
other rights) pursuant to such warrants, options or other rights or pursuant to
the terms of such Convertible Securities.
(B) The adjustment shall be made successively whenever any such
warrants, options or other rights are issued and shall become effective
immediately after the record date for the determination of shareholders entitled
to receive the warrants, options or other rights.
(C) This Section 8(f)(iii) does not apply to: (i) the conversion of the
shares of Series A Preferred Stock; and (ii) any shares issued under the
Corporation's Amended and Restated 1994 Long-Term Incentive Plan, and any other
such plans adopted by the Board of Directors.
(iv) Convertible Securities Issue.
(A) If the Corporation issues Convertible Securities (other than
securities issued in transactions described in Section 8(f)(iii)) and the
consideration per share for which additional shares of Common Stock may at any
time thereafter be issuable pursuant to the
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<PAGE> 24
terms of such Convertible Securities is less than the Current Market Price on
the date of issuance of such securities, the Conversion Price shall be adjusted
as provided below, such that a holder of shares of Series A Preferred Stock,
upon conversion of his shares of Series A Preferred Stock into shares of Common
Stock, shall have the right to receive that number of shares of Common Stock
which, after giving effect to the following formula, such holder would receive
if such holder elected to convert his shares of Series A Preferred Stock into
Common Stock. The Conversion Price shall be adjusted to the number determined by
multiplying the current Conversion Price by a fraction, (A) the numerator of
which shall be the sum of (i) the number of shares of Common Stock outstanding
immediately prior to the issuance of such securities and (ii) the quotient of
(x) the aggregate consideration received for the issuance of such securities,
divided by (y) the Current Market Price per share on the date of issuance of
such securities and (B) the denominator of which shall be the sum of (i) the
number of shares of Common Stock outstanding immediately prior to the issuance
of such securities and (ii) the maximum number of shares deliverable upon
conversion or in exchange for such securities at the initial conversion or
exchange rate. The adjustment shall be made on the basis that (i) the maximum
number of additional shares of Common Stock necessary to effect the conversion
or exchange of all such Convertible Securities shall be deemed to have been
issued and (ii) the aggregate consideration for such maximum number of
additional shares of Common Stock shall be deemed to be the minimum
consideration received and receivable by the Corporation for the issuance of
such additional shares pursuant to the terms of such Convertible Securities. No
adjustment of the Conversion Price shall be made under this Section 8(f)(iv)
upon the issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights therefor, if
such adjustment shall previously have been made upon the issuance of such
warrants or other rights pursuant to Section 8(f)(iii).
(B) The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
(C). This Section 8(f)(iv) does not apply to: (i) the conversion of the
shares of Series A Preferred Stock and (ii) any shares issued under the
Corporation's Amended and Restated 1994 Long-Term Incentive Plan, and any other
such plans adopted by the Board of Directors.
(v) Conversion Price Date. For purposes of Sections
8(f)(iii) and 8(f)(iv), the date as of which the
Conversion Price shall be computed shall be the
earliest of (i) the date on which the Corporation
shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive
any warrants or other rights referred to in Section
8(f)(iii) or to receive any Convertible Securities,
(ii) the date on which the Corporation shall enter
into a firm contract for the issuance of such
warrants or other rights or Convertible Securities or
(iii) the date of the actual
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issuance of such warrants or other rights or
Convertible Securities.
(vi) No Compound Adjustment. No adjustment of the
Conversion Price shall be made under Section 8(f)(ii)
upon the issuance of any additional shares of Common
Stock which are issued pursuant to the exercise of
any warrants or other subscription or purchase rights
or pursuant to the exercise of any conversion or
exchange rights in any Convertible Securities, if
such adjustment shall previously have been made upon
the issuance of such warrants or other rights or upon
the issuance of such Convertible Securities (or upon
the issuance of any warrants or other rights
therefor), pursuant to Sections 8(f)(iii).
(vii) Readjustment. If any warrants or other rights (or any
portions thereof) which shall have given rise to an
adjustment pursuant to Section 8(f)(iii) or
conversion rights pursuant to Convertible Securities
which shall have given rise to an adjustment pursuant
to Section 8(f)(iv) shall have expired or terminated
without the exercise thereof and/or if by reason of
the terms of such warrants or other rights or
Convertible Securities there shall have been an
increase or increases, with the passage of time
otherwise, in the price payable upon the exercise or
conversion thereof, then the Conversion Price
hereunder shall be readjusted (but to no greater
extent than originally adjusted), taking into account
all transactions described in Sections 8(f)(i)
through 8(f)(iv) hereof that have occurred in the
interim, on the basis of (i) eliminating from the
computation any additional shares of Common Stock
corresponding to such warrants or other rights or
conversion rights as shall have expired or
terminated, (ii) treating the additional shares of
Common Stock, if any, actually issued or issuable
pursuant to the previous exercise of such warrants or
other rights or of conversion rights pursuant to any
Convertible Securities as having been issued for the
consideration actually received and receivable
therefor and (iii) treating any of such warrants or
other rights or conversion rights pursuant to any
Convertible Securities which remain
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outstanding as being subject to exercise or
conversion on the basis of such exercise or
Conversion Price as shall be in effect at the time;
provided, however, that any consideration which was
actually received by the Corporation in connection
with the issuance or sale of such warrants or other
rights shall form part of the readjustment
computation even though such warrants or other rights
shall have expired or terminated without the exercise
thereof.
(viii) Consideration Received. To the extent that any
additional shares of Common Stock, any warrants,
options or other rights to subscribe for or purchase
any additional shares of Common Stock, or any
Convertible Securities shall be issued for cash
consideration, the consideration received by the
Corporation therefor shall be deemed to be the amount
of the cash received by the Corporation therefor, or,
if such additional shares, warrants, options or other
rights or Convertible Securities are sold to
underwriters or dealers for public offering without a
subscription offering, the initial public offering
price, in any such case excluding any amounts paid or
receivable for accrued interest or accrued dividends
and without deduction of any compensation, discounts
or expenses paid or incurred by the Corporation for
and in the underwriting of, or otherwise in
connection with, the issuance thereof. If and to the
extent that such issuance shall be for a
consideration other than cash, then, except as herein
otherwise expressly provided, the amount of such
consideration shall be deemed to be the fair value of
such consideration at the time of such issuance as
determined by the Board of Directors of the
Corporation. If additional shares of Common Stock
shall be issued as part of a unit with warrants or
other rights, then the amount of consideration for
the warrant or other right shall be deemed to be the
amount determined at the time of issuance by the
Board of Directors of the Corporation. If the Board
of Directors of the Corporation shall not make any
such determination, the consideration for the
warrant, option or other right shall be deemed to be
zero.
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<PAGE> 27
(ix) Other Conversions. If a state of facts shall occur
which, without being specifically controlled by the
provisions of this Section 8, would not fairly
protect the conversion rights of the holders of
shares of Series A Preferred Stock in accordance with
the essential intent and principles of such
provisions, then the Board of Directors of the
Corporation shall make an adjustment in the
application of such provisions, in accordance with
such essential intent and principles, so to protect
such conversion rights.
(x) De Minimis Adjustment. Anything herein to the
contrary notwithstanding, no adjustment in the
Conversion Price shall be required unless such
adjustment, either by itself or with other
adjustments not previously made, would require a
change of at least one percent (1%) in the Conversion
Price; provided, however, that any adjustment which
by reason of this Section 8(f)(x) is not required to
be made shall be carried forward and taken into
account in any subsequent adjustment. All
calculations under this Section 8 shall be made to
the nearest one-tenth of a cent ($.001) (rounded to
the nearest cent ($.01) with respect to any monetary
amount to be actually paid) or to the nearest one
hundredth (0.01) of a share, as the case may be.
(xi) Current Market Price. For the purpose of any
computation hereunder, the "Current Market Price" on
any date will be the average of the last reported
sale prices per share (the "Quoted Price") of the
Common Stock on each of the fifteen consecutive
Trading Days (as defined below) preceding the date of
the computation. The Quoted Price of the Common Stock
on each day will be (A) the last reported sales price
of the Common Stock on the principal stock exchange
on which the Common Stock is listed, or (B) if the
Common Stock is not listed on a stock exchange, the
last reported sales price of the Common Stock on the
principal automated securities price quotation system
on which sale prices of the Common Stock are
reported, or (C) if the Common Stock is not listed on
a stock exchange and sale prices of the Common Stock
are not reported on an automated
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<PAGE> 28
quotation system, the mean of the high bid and low
asked price quotations for the Common Stock as
reported by National Quotation Bureau Incorporated if
at least two securities dealers have inserted both
bid and asked quotations for the Common Stock on a
day will be the Quoted Price of the Common Stock on
that day as determined by a member firm of the New
York Stock Exchange, Inc. selected by the Board of
Directors. If no two securities dealers have inserted
such bid and ask quotations, or such Quoted Prices
otherwise are not available, the Current Market Price
means the fair market value of the Common Stock as of
the date prior to the date on which the Current
Market Price is determined, which such fair market
value shall be determined by the Board of Directors
of the Corporation. As used with regard to the Series
A Preferred Stock, the term "Trading Day" means (x)
if the Common Stock is listed on at least one stock
exchange, a day on which there is trading on the
principal stock exchange on which the Common Stock is
listed, (y) if the Common Stock is not listed on a
stock exchange, but sale prices of the Common Stock
are reported on an automated quotation system, a day
on which trading is reported on the principal
automated quotation system on which sales of the
Common Stock are reported, or (z) if the Common Stock
is not listed on a stock exchange and sale prices of
the Common Stock are not reported on an automated
quotation system, a day on which quotations are
reported by National Quotation Bureau Incorporated.
(g) No fractional shares of Common Stock shall be issued upon the
conversion of Series A Preferred Stock. If any fractional interest in a
share of Common Stock would, except for the provisions of this
subparagraph (g), be deliverable upon the conversion of any Series A
Preferred Stock, the Corporation shall, in lieu of delivering the
fractional share therefor, adjust such fractional interest by payment
to the holder of such converted Series A Preferred Stock of an amount
in cash equal (computed to the nearest cent) to the Current
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<PAGE> 29
Market Price of such fractional interest as of the end of the
Corporation's last fiscal year as determined in good faith in the sole
discretion of the Board of Directors of the Corporation.
(h) Whenever the Conversion Price is adjusted, as herein provided, the
Corporation shall promptly mail a notice of the adjustment to holders
of Series A Preferred Stock by first class mail. The Corporation shall
forthwith maintain at its principal executive office and file with the
transfer agent, if any, for Series A Preferred Stock, a statement,
signed by the Chairman of the Board, or the President, or a Vice
President of the Corporation and by its chief financial officer or an
Assistant Treasurer, showing in reasonable detail the facts requiring
such adjustment and the Conversion Price after such adjustment. Such
transfer agent shall be under no duty or responsibility with respect to
any such statement except to exhibit the same from time to time to any
holder of Series A Preferred Stock desiring an inspection thereof.
(i) If there shall occur any capital reorganization or any
reclassification of the capital stock of the Corporation, consolidation
or merger of the Corporation with or into another entity, or the
conveyance of all or substantially all of the assets of the Corporation
to another person or entity, each share of Series A Preferred Stock
shall thereafter be convertible into the number of shares or other
securities or property to which a holder of the number of shares of
Common Stock of the Corporation deliverable upon conversion of such
Series A Preferred Stock would have been entitled upon such
reorganization, reclassification, consolidation, merger or conveyance;
and, in any such case, appropriate adjustment (as determined in good
faith in the sole discretion of the Board of Directors of the
Corporation) shall be made in the application of the provisions herein
set forth with respect to the rights and interests thereafter of the
holders of the Series A Preferred Stock, to the end that the provisions
set forth herein (including provisions with respect to changes in and
other adjustments of the Conversion Price) shall be
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<PAGE> 30
applicable, as nearly as reasonably may be, in relation to any shares
or other property thereafter deliverable upon the conversion of the
Series A Preferred Stock.
(j) The Corporation shall at all times reserve and keep available, out
of its authorized but unissued shares of Common Stock or treasury
shares thereof, solely for the purpose of issuance upon the conversion
of Series A Preferred Stock, the full number of shares of Common Stock
deliverable upon the conversion of all Series A Preferred Stock from
time to time outstanding. The Corporation shall from time to time, in
accordance with the laws of the State of Delaware, increase the
authorized amount of its Common Stock if at any time the authorized
number of shares of Common Stock remaining unissued shall not be
sufficient to permit the conversion of all of the Series A Preferred
Stock at the time outstanding.
(k) The Corporation shall pay any documentary, stamp or similar issue
or transfer tax due on the issue of shares of Common Stock upon
conversion of the Series A Preferred Stock into Common Stock. The
Corporation shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issue and delivery
of any security in a name other than that in which the Series A
Preferred Stock so converted was registered, and no such issue or
delivery shall be made unless and until the person requested such issue
has paid to the Corporation the amount of any such tax, or has
established to the satisfaction of the Corporation that such tax has
been paid.
9. Exclusion of Other Rights.
Except as otherwise required by law, shares of Series A Preferred Stock
shall not have any preferences or relative, participating, optional or other
special rights, other than those specifically set forth in this resolution and
in the Certificate of Designations filed pursuant hereto (as such Certificate
may be amended from time to time) and in the Certificate of Incorporation. No
shares of Series A Preferred Stock shall have any rights of preemption or
subscription whatsoever as to any securities of the Corporation, except as
expressly provided in any written agreement
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<PAGE> 31
among the Corporation and any holder or holders of Series A Preferred Stock.
10. Reissuance of Preferred Stock.
Shares of Series A Preferred Stock that have been issued and reacquired
in any manner, including shares purchased or redeemed or exchanged, shall (upon
compliance with any applicable provisions of the General Corporation Law of the
State of Delaware) be canceled and shall not be reissued.
11. Headings of Subdivisions.
The headings of the various subdivisions hereof are for convenience of
reference only and shall not affect the interpretation of any of the provisions
hereof.
12. Severability of Provisions.
If any right, preference or limitation of the Series A Preferred Stock
set forth in this resolution and in the Certificate of Designations for the
Series A Preferred Stock (as such Certificate may be amended from time to time)
is invalid, unlawful or incapable of being enforced by reason of any rule or law
or public policy, all other rights, preferences and limitations set forth in
such Certificate of Designations (as so amended) which can be given effect
without the invalid, unlawful or unenforceable right, preference or limitation
shall, nevertheless, remain in full force and effect, and no right, preference
or limitation herein set forth shall be deemed dependent upon any other such
right, preference or limitation unless so expressed herein.
13. Notice.
All notices and other communications required or permitted to be given
to the Corporation hereunder shall be made by hand delivery or registered or
certified mail, return receipt requested, to the Corporation at its principal
executive offices (currently located on the date of the adoption of these
resolutions at 13800 Montfort Drive, Suite 300, Dallas, Texas 75240, Attention:
Secretary. Minor imperfections in any such notice shall not affect the validity
thereof.
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<PAGE> 32
IN WITNESS WHEREOF, Renters Choice, Inc. has caused this certificate to
be signed by _______________________, its __________________, this ____ day of
August, 1998.
RENTERS CHOICE, INC.
a Delaware corporation
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
<PAGE> 1
EXHIBIT 4.3
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE RIGHTS AND LIMITATIONS
OF
SERIES B PREFERRED STOCK
OF
RENTERS CHOICE, INC.
--------------------
Pursuant to Section 151
of the General Corporation Law of the State of Delaware
--------------------
Renters Choice, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware, does by its Assistant
Secretary hereby certify that pursuant to the provisions of Section 151 of the
General Corporation Law of the State of Delaware, its Board of Directors, at a
meeting on August 4, 1998, duly adopted the following resolution establishing,
the rights, preferences, privileges and restrictions of a series of preferred
stock of the corporation which resolution remains in full force and effect as
of the date hereof:
WHEREAS, the Board of Directors of Renters Choice, Inc. (the
"Corporation") is authorized, within the limitations and restrictions stated in
its Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation"), to fix by resolution or resolutions adopted prior to the
issuance of any shares of each particular series of preferred stock and
incorporated in a certificate of designation filed with the Secretary of State
of the State of Delaware, the designation, powers (including voting powers and
voting rights), preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions thereof, as
may be fixed from time to time by the Board of the Directors in the resolution
or resolutions adopted pursuant to the authority granted under the Certificate
of Incorporation; and
<PAGE> 2
WHEREAS, it is the desire of the Board of Directors of the
Corporation, pursuant to its authority as aforesaid, to authorize and fix the
terms of a series of preferred stock and the number of shares constituting such
series;
NOW, THEREFORE, BE IT RESOLVED, that pursuant to Paragraph Fourth,
Section 1 of the Certificate of Incorporation, there is hereby authorized such
series of preferred stock on the terms and with the provisions herein set
forth:
1. Certain Definitions.
Unless the context otherwise requires, the terms defined in
this Section 1 shall have, for all purposes of this resolution, the meanings
specified (with terms defined in the singular having comparable meanings when
used in the plural).
Affiliate. The term "Affiliate" shall mean, with respect to
any Person, any other Person directly or indirectly controlling or controlled
by or under direct or indirect common control with such specified Person and,
in the case of a Person who is an individual, shall include (i) members of such
specified Person's immediate family (as defined in Instruction 2 of Item 404(a)
of Regulation S-K under the Securities Act) and (ii) trusts, the trustee and
all beneficiaries of which are such specified Person or members of such
Person's immediate family as determined in accordance with the foregoing clause
(i). For the purposes of this definition, control when used with respect to
any person means the power to direct the management and policies of such
person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "affiliated," "controlling"
and "controlled" have meanings correlative to the foregoing. Notwithstanding
the foregoing, the holders of the Series B Preferred Shares and their
Affiliates shall not be deemed Affiliates of the Corporation.
Change of Control. The term "Change of Control" shall mean the
occurrence of any one of the following events (i) the acquisition after the
Initial Issue Date, in one or more transactions, of beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act) by (i) any person or
entity (other than any Permitted Holder) or (ii) any group of persons or
entities (excluding any Permitted Holders) who constitute a group (within the
meaning of Section 13(d)(3) of the Exchange Act), in either
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<PAGE> 3
case, of any securities of the Corporation such that, as a result of such
acquisition, such person, entity or group beneficially owns (within the meaning
of Rule 13d-3 under the Exchange Act), directly or indirectly, 40% or more of
the then outstanding voting securities entitled to vote on a regular basis for
a majority of the Board of Directors of the Corporation (but only to the extent
that such beneficial ownership is not shared with any Permitted Holder who has
the power to direct the vote thereof); provided, however, that no such Change
of Control shall be deemed to have occurred if (A) the Permitted Holders
beneficially own, in the aggregate, at such time, a greater percentage of such
voting securities than such other person, entity or group or (B) at the time of
such acquisition, the Permitted Holders (or any of them) possess the ability
(by contract or otherwise) to elect, or cause the election of, a majority of
the members of the Corporation's Board of Directors; (II) the acquisition by
any person of all or substantially all of the assets of the Corporation; (III)
the determination by the Corporation's Board of Directors to recommend the
acceptance of any proposal set forth in a tender offer statement or proxy
statement filed by any person with the Securities and Exchange Commission which
indicates the intention on the part of that person to acquire, or acceptance of
which would otherwise have the effect of that person acquiring, control of the
Corporation; or (IV) upon, other than as a result of the death or disability of
one or more of the directors within a three-month period, a majority of the
members of the Board of Directors of the Corporation for any period of three
consecutive months not being persons who (a) had been directors of the
Corporation for at least the preceding 24 consecutive months or were elected by
the holders of the Series B Preferred Stock, voting separately as a class, or
(b) when they initially were elected to the Board of Directors of the
Corporation, (x) were nominated (if they were elected by the stockholders) or
elected (if they were elected by the directors) with the affirmative
concurrence of 66-2/3% of the directors who were Continuing Directors at the
time of the nomination or election by the Board of Directors of the Corporation
and (y) were not elected as a result of an actual or threatened solicitation of
proxies or consents by a person other than the Board or an agreement intended
to avoid or settle such a proxy solicitation (the directors described in
clauses (a) and (b) of this subsection (IV) being "Continuing Directors");
provided, however, that no Change of Control shall be deemed to have occurred
by virtue of any merger of the Corporation with any wholly-owned subsidiary of
the Corporation or any merger of two wholly-owned subsidiaries of the
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<PAGE> 4
Corporation if, in any such merger, the proportionate ownership interests of
the stockholders of the Corporation remain unchanged.
Common Stock. The term "Common Stock" shall mean the voting
common stock, par value $.01 per share, of the Corporation.
Conversion Date. The term "Conversion Date" shall have the
meaning set forth in Sections 3(c) and 9(c) below, as applicable.
Conversion Price. The term "Conversion Price" shall mean the
"Conversion Price" as set forth in the Series A Certificate of Designations as
adjusted in accordance with Sections 9(d) and 9(e) hereof.
Conversion Release Date. The term "Conversion Release Date"
shall have the meaning set forth in Section 9(a) below.
Corporation Notice. The term "Corporation Notice" shall have
the meaning set forth in Section 6(a)(ii)(A) below.
Current Market Price. The term "Current Market Price" on any
date shall be the average of the last reported sale prices per share (the
"Quoted Price") of the Common Stock on each of the fifteen consecutive Trading
Days (as defined below) preceding the date of the computation. The Quoted Price
of the Common Stock on each day will be (A) the last reported sales price of
the Common Stock on the principal stock exchange on which the Common Stock is
listed, or (B) if the Common Stock is not listed on a stock exchange, the last
reported sales price of the Common Stock on the principal automated securities
price quotation system on which sale prices of the Common Stock are reported,
or (C) if the Common Stock is not listed on a stock exchange and sale prices of
the Common Stock are not reported on an automated quotation system, the mean of
the high bid and low asked price quotations for the Common Stock as reported by
National Quotation Bureau Incorporated if at least two securities dealers have
inserted both bid and asked quotations for the Common Stock on a day will be
the Quoted Price of the Common Stock on that day as determined by a member firm
of the New York Stock Exchange, Inc. selected by the Board of Directors. If no
two securities dealers have inserted such bid and ask quotations, or such
Quoted Prices otherwise are not available, the Current Market Price means the
fair market value of the Common Stock as of the date prior to the date on which
the Current Market
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<PAGE> 5
Price is determined, which such fair market value shall be determined by the
Board of Directors of the Corporation. As used herein the term "Trading Day"
means (x) if the Common Stock is listed on at least one stock exchange, a day
on which there is trading on the principal stock exchange on which the Common
Stock is listed, (y) if the Common Stock is not listed on a stock exchange, but
sale prices of the Common Stock are reported on an automated quotation system,
a day on which trading is reported on the principal automated quotation system
on which sales of the Common Stock are reported, or (z) if the Common Stock is
not listed on a stock exchange and sale prices of the Common Stock are not
reported on an automated quotation system, a day on which quotations are
reported by National Quotation Bureau Incorporated.
Dividend Payment Date. The term "Dividend Payment Date" shall
have the meaning set forth in Section 4(a) below.
Dividend Rate. The term "Dividend Rate" shall have the
meaning set forth in Section 4(a) below.
Exchange Act. The term "Exchange Act" shall mean the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
Initial Issue Date. The term "Initial Issue Date" shall mean
the date that shares of Series B Preferred Stock are first issued by the
Corporation.
IRR. The term "IRR" shall have the meaning set forth in
Section 5(a)(vi) below.
Junior Stock. The term "Junior Stock" shall mean any stock of
the Corporation, other than the Common Stock, ranking junior to the Series B
Preferred Stock as to dividends and upon liquidation. Junior Stock shall not
include the Series A Preferred Stock.
Liquidation. The term "Liquidation" shall mean any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary; provided, that neither the voluntary sale, conveyance, exchange or
transfer (for cash, shares of stock, securities or other consideration) of all
or substantially all of the property or assets of the Corporation, nor the
consolidation or
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<PAGE> 6
merger of the Corporation with one or more other entities, shall, by itself, be
deemed a Liquidation.
Liquidation Preference Amount. The term "Liquidation
Preference Amount" shall mean at any date a number equal to the product of (i)
$1,050 per share of Series B Preferred Stock, plus all accrued and unpaid
dividends thereon calculated in accordance with Sections 4(a) and 4(b) hereof,
multiplied by (ii) a fraction, the numerator of which shall be the number equal
to the Current Market Price as of such date, and the denominator of which shall
be the number equal to the Current Market Price as of the Initial Issue Date
(adjusted for stock splits, reorganizations, recapitalizations or similar
events); provided, however, that in no case shall the Liquidation Preference
Amount be an amount less than $1,050 per share of Series B Preferred Stock,
plus all accrued and unpaid dividends thereon calculated in accordance with
Sections 4(a) and 4(b) hereof.
Non-Voting Common Stock. The term "Non-Voting Common Stock"
shall mean the non-voting common stock, par value $.01 per share, of the
Corporation.
Permitted Holder. The term "Permitted Holder" shall mean (i)
Apollo Investment Fund IV, L.P., Apollo Overseas Partners IV, L.P., or any
entity controlled by either of the foregoing or any of the partners of the
foregoing, (ii) an employee benefit plan of the Corporation or any subsidiary
of the Corporation, or any participant therein, (iii) a trustee or other
fiduciary holding securities under an employee benefit plan of the Corporation
or any of its subsidiaries or (iv) any Permitted Transferee of any of the
foregoing persons.
Permitted Transferee. The term "Permitted Transferee" shall
mean, with respect to any Person, (i) any officer, director or partner of, or
Person controlling, such Person, (ii) any other Person that is (x) an Affiliate
of the general partner(s), investment manager(s) or investment advisor(s) of
such Person, (y) an Affiliate of such Person or a Permitted Transferee of an
Affiliate or (z) an investment fund, investment account or investment entity
whose investment manager, investment advisor or general partner thereof is such
Person or a Permitted Transferee of such Person or (iii) if a Permitted
Transferee of a Person set forth in the foregoing clauses (i) and (ii) is an
individual, (x) any spouse or issue of such individual, or any trust solely for
the benefit of such individual, spouse or issue, and (y) upon such individual's
death, any Person to whom Shares are transferred in accordance with the laws of
descent and/or testamentary distribution, in each case in a bona fide
distribution or other transaction not intended to avoid the provisions of this
Agreement.
6
<PAGE> 7
Person. The term "Person" shall mean an individual or a
corporation, limited liability company, partnership, trust, or any other entity
or organization, including a government or political subdivision or an agency
or instrumentality thereof.
Quarterly Dividend Period. The term "Quarterly Dividend
Period" shall have the meaning set forth in Section 4(a) below.
Redemption Event. A Redemption Event will be deemed to occur
at the earliest of (i) the date upon which there is a Change of Control of the
Corporation, (ii) the date upon which the Corporation's Common Stock is not
listed for trading on a United States national securities exchange or the
NASDAQ National Market System, or (iii) the eleventh anniversary of the Initial
Issue Date.
Repurchase Date. The term "Repurchase Date" shall have the
meaning set forth in Section 6(a)(i) below.
Repurchase Price. The term "Repurchase Price" shall have the
meaning set forth in Section 6(a)(i) below.
Securities Act. The term "Securities Act" shall mean the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder.
Series A Certificate of Designations. The term "Series A
Certificate of Designations" shall mean the Certificate of Designations,
Preferences, and Relative Rights and Limitations relating to the Series A
Preferred Stock, in the form filed with the Delaware Secretary of State.
Series A Preferred Stock. The term "Series A Preferred Stock"
shall mean the Series A Preferred Stock, par value $.01 per share, of the
Corporation.
Series B Preferred Stock. The term "Series B Preferred Stock"
shall mean the Series B Preferred Stock authorized hereby.
Stockholders Agreement. The term "Stockholders Agreement"
shall mean that certain stockholders agreement of the Corporation dated as of
August 5, 1998, as in effect on the Initial Issue Date, a copy of which shall
be maintained by the Secretary of the Corporation and which shall be available
to any stockholder of the Corporation upon request.
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<PAGE> 8
2. Designation.
The series of preferred stock authorized hereby shall be
designated as the "Series B Preferred Stock." The number of shares constituting
such series shall initially be Four Hundred Thousand (400,000). The par value
of the Series B Preferred Stock shall be $.01 per share.
3. Conversion to Series A Preferred Stock.
(a) If the stockholders of the Corporation shall on or
before the day that is 120 calendar days following the Initial
Issue Date approve the proposal to allow the Series B
Preferred Stock to be converted into shares of the Series A
Preferred Stock (the "Series A-to-B Conversion"), then each
outstanding share of Series B Preferred Stock shall, without
any action on the part of the holder thereof or the
Corporation, be automatically converted into one fully-paid
and non-assessable share of Series A Preferred Stock.
ii. If the stockholders of the
Corporation shall approve the Series
A-to-B Conversion during the period
commencing on the date that is 121
calendar days following the Initial
Issue Date and continuing up to and
including the date that is 150
calendar days following the Initial
Issue Date, then each outstanding
share of Series B Preferred Stock
shall, without any action on the
part of the holder thereof or the
Corporation, be automatically
converted into 1.15 fully-paid and
non-assessable shares of Series A
Preferred Stock.
iii. If the stockholders of the
Corporation shall approve the Series
A-to-B Conversion on or after the
date that is 151 days following the
Initial Issue Date, the conversion
of the shares of Series B Preferred
Stock into shares of Series A
Preferred Stock shall be at the sole
option and discretion of each holder
of the Series B Preferred Stock, and
each outstanding share of Series B
Preferred Stock shall be convertible
into 1.2 fully-paid and
non-assessable shares of Series A
Preferred Stock.
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<PAGE> 9
(b) Promptly following the conversion of Series B
Preferred Stock to Series A Preferred Stock pursuant to
Sections 3(a)(i) and (ii) above, the holder of the Series B
Preferred Stock shall (i) surrender the certificates or
certificates evidencing the shares of Series B Preferred
Stock, duly endorsed in a form reasonably satisfactory to the
Corporation, at the office of the Corporation or of the
transfer agent for the Series B Preferred Stock and (ii) state
in writing the name or names in which the certificate or
certificates for shares of Series A Preferred Stock are to be
issued. As soon as practical following receipt of the
foregoing, the Corporation shall deliver to such former holder
of Series B Preferred Stock, a certificate or certificates in
denominations acceptable to the holders representing the
shares of Series A Preferred Stock. Such conversion shall be
deemed to have been effected as of the close of business on
the date on which the stockholders of the Corporation approved
the Series A-to-B Conversion.
(c) To convert Series B Preferred Stock into Series A
Preferred Stock at the option of the holder pursuant to
Section 3(a)(iii) above, a holder must give written notice to
the Corporation at such office that such holder elects to
convert Series B Preferred Stock into Series A Preferred
Stock, and the number of shares to be converted. Such
conversion shall be deemed to have been effected as of the
close of business on the date on which the holder delivers
such notice to the Corporation (such date is referred to
herein as the "Conversion Date" for purposes of any conversion
of Series B Preferred Stock pursuant to Section 3(a)(iii)).
Promptly thereafter, the holder of the Series B Preferred
Stock shall (i) surrender the certificate or certificates
evidencing the shares of Series B Preferred Stock to be
converted, duly endorsed in a form reasonably satisfactory to
the Corporation, at the office of the Corporation or of the
transfer agent for the Series B Preferred Stock and (ii) state
in writing the name or names in which the certificate or
certificates for shares of Series A Preferred Stock are to be
issued. As soon as practical
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<PAGE> 10
following receipt of the foregoing, the Corporation shall
deliver to such former holder of Series B Preferred Stock, a
certificate representing the shares of Series A Preferred
Stock, together with a new certificate representing the
unconverted portion, if any, of the shares of Series B
Preferred Stock formerly represented by the certificate or
certificates surrendered for conversion.
4. Dividends.
(a) The holders of the shares of Series B Preferred Stock
shall be entitled to receive cumulative quarterly dividends at
a dividend rate equal to 3 3/4% per annum (the "Dividend
Rate") computed on the basis of $1,000 per share, when and as
declared by the Board of Directors of the Corporation, out of
funds legally available for the payment of dividends;
provided, however, on and after the earlier of the day that is
121 calendar days following the Initial Issue Date or the date
of a stockholders meeting convened for the purpose of
obtaining the approval described in Section 3(a) of this
Certificate of Designations, the dividend rate shall be equal
to 7% per annum computed on the basis of $1,000 per share.
Notwithstanding the foregoing, for the five-year period
commencing with the Initial Issue Date, payments of dividends
shall be made, at the election of the Corporation, either (i)
in cash or (ii) by issuing a number of additional fully paid
and nonassessable shares (and/or fractional shares) of Series
B Preferred Stock for each such share (or fractional share) of
Series B Preferred Stock then outstanding equal to the
dividend then payable on each such share (or fractional share)
of Series B Preferred Stock (expressed as a dollar amount)
divided by 1,000. Quarterly dividend periods (each a
"Quarterly Dividend Period") shall commence on January 1,
April 1, July 1 and October 1, in each year, except that the
first Quarterly Dividend Period shall commence on the date of
issuance of the Series B Preferred Stock, and shall end on and
include the day immediately preceding the first day of the
next Quarterly Dividend Period. Dividends on the shares of
Series B Preferred Stock shall be payable on March 31, June
30, September 30, December 31 of each year (a "Dividend
Payment Date"), commencing September 30, 1998. Each such
dividend shall be paid to the holders of record of the Series
B Preferred Stock as they shall appear on the stock register
of the Corporation on such record date, not exceeding 45 days
nor less than 10 days preceding such Dividend Payment Date, as
shall be fixed by the Board of Directors of the Corporation or
a duly authorized committee thereof.
If, on any Dividend Payment Date, the full dividends provided
for in this Section 4(a) are not declared and paid to the holders of the Series
B Preferred Stock, whether in cash or in additional shares of Series B
Preferred Stock, then such dividends shall cumulate with additional dividends
thereon, compounded quarterly, at the dividend rate applicable to the Series B
Preferred Stock as provided in this Section 4(a), for each succeeding full
Quarterly Dividend Period during
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<PAGE> 11
which such dividends shall remain unpaid. In the event the Corporation elects
to pay dividends in additional shares of Series B Preferred Stock, the
Corporation shall on the Dividend Payment Date deliver to the holders
certificates representing such shares.
Notwithstanding anything to the contrary in this Certificate
of Designations, in the event any conversion (including into Series A Preferred
Stock or Non-Voting Common Stock), redemption or liquidation occurs as of a
date other than on a Dividend Payment Date, the holder of Series B Preferred
Stock shall be paid a pro rata dividend equal to the dividend payable for that
Quarterly Dividend Period multiplied by a fraction, the numerator of which is
the number of days that have elapsed since the last Dividend Payment Date and
the denominator of which is the number of days in the Quarterly Dividend Period
in which the conversion, redemption or liquidation occurs.
(b) The amount of any dividends accrued on any share of
the Series B Preferred Stock on any Dividend Payment Date
shall be deemed to be the amount of any unpaid dividends
accumulated thereon to and including such Dividend Payment
Date, whether or not earned or declared. The amount of
dividends accrued on any share of the Series B Preferred Stock
on any date other than a Dividend Payment Date shall be deemed
to be the sum of (i) the amount of any unpaid dividends
accumulated thereon to and including the last preceding
Dividend Payment Date, whether or not earned or declared, and
(ii) an amount determined by multiplying (x) the Dividend Rate
by (y) a fraction, the numerator of which shall be the number
of days from the last preceding Dividend Payment Date to and
including the date on which such calculation is made and the
denominator of which shall be the full number of days in such
Quarterly Dividend Period.
(c) Immediately prior to authorizing or making any
distribution in redemption or liquidation with respect to the
Series B Preferred Stock (other than a purchase or acquisition
of Series B Preferred Stock pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding
Series B Preferred Stock), the Board of Directors shall, to
the extent of any funds legally available therefor, declare a
dividend in cash on the Series B Preferred Stock payable on
the distribution date in an amount equal to any accrued and
unpaid dividends on the Series B Preferred Stock as of such
date.
5. Consent Rights.
(a) Commencing on the day that is 121 calendar days
following the Initial Issue Date and for so long as any shares
of Series B Preferred Stock are outstanding, the Corporation
will not, directly or indirectly, including through a merger
or consolidation with any other corporation or otherwise,
without the consent of
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<PAGE> 12
holders of at least a majority of the outstanding shares of
Series B Preferred Stock, (i) increase the number of
authorized shares of Series B Preferred Stock or authorize the
issuance or issue of any shares of Series B Preferred Stock
other than to existing holders of Series B Preferred Stock,
(ii) amend, alter or repeal, in any manner whatsoever, the
designations, preferences and relative rights and limitations
and restrictions of the Series B Preferred Stock or the Series
A Preferred Stock; (iii) amend, alter or repeal any of the
provisions of the Certificate of Incorporation or By-Laws of
the Corporation in a manner that would negatively impact the
holders of the Series B Preferred Stock, including (but not
limited to) any amendment that is in conflict with the consent
rights set forth in this Section 5; (iv) directly or
indirectly, redeem, purchase or otherwise acquire for value
(including through an exchange), or set apart money or other
property for any mandatory purchase or other analogous fund
for the redemption, purchase or acquisition of any shares of
Common Stock or Junior Stock, except for the repurchase by the
Corporation of up to $25,000,000 in Common Stock from J.
Ernest Talley, declare or pay any dividend or make any
distribution (whether in cash, shares of capital stock of the
Corporation, or other property) on shares of Common Stock or
Junior Stock; (v) effect a voluntary liquidation, dissolution
or winding up of the Corporation; (vi) sell or agree to sell
all or substantially all of the assets of the Corporation,
unless such transaction (1) occurs after the fourth
anniversary of the Initial Issue Date, (2) is a sale for cash
and (3) results in an internal rate of return ("IRR") of 30%
12
<PAGE> 13
compounded quarterly or greater to the holder of the Series B
Preferred Stock with respect to each share of Series B
Preferred Stock issued on the Initial Issue Date, or (vii)
enter into any merger or consolidation or other business
combination involving the Corporation (except a merger of a
wholly-owned subsidiary of the Corporation into the
Corporation in which the Corporation's capitalization is
unchanged as a result of such merger) unless such transaction
(1) occurs after the fourth anniversary of the Initial Issue
Date, (2) is for cash and (3) results in an IRR of 30%
compounded quarterly or greater to the holder of the Series B
Preferred Stock with respect to each share of Series B
Preferred Stock issued on the Initial Issue Date.
(b) While any shares of Series B Preferred Stock are
outstanding, the Corporation will not, directly or indirectly,
without the majority affirmative vote of the Finance
Committee, issue debt securities of the Corporation with a
value in excess of $10 million (including any refinancing of
existing indebtedness).
(c) While any shares of Series B Preferred Stock are
outstanding, the Corporation will not, directly or indirectly,
without the unanimous affirmative vote of the Finance
Committee, issue equity securities of the Corporation with a
value in excess of $10 million (including any refinancing of
existing indebtedness); provided, however, that the following
equity issuances shall require only a majority affirmative vote
of the Finance Committee: (A) a Common Stock offering within
24 months of the Initial Issue Date that is equal to
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<PAGE> 14
or less than $75 million of gross proceeds to the Corporation
and the selling price is equal to or greater than the
Conversion Price, (B) a Common Stock offering in which the
selling price (1) at any time prior to the third anniversary
of the Initial Issue Date is equal to or greater than two
times the Conversion Price and (2) thereafter, equal to or
greater than the price that would imply a 25% or greater IRR
compounded quarterly on the Conversion Price and (C) an
issuance of equity in connection with an acquisition if the
issuance is equal to or less than 10% of the outstanding
Common Stock (calculated post-issuance of such shares of
Common Stock).
6. Redemption
(a) Mandatory Redemption.
(i) Right to Require Redemption.
If at any time there shall occur any
Redemption Event of the Corporation, then
each holder of Series B Preferred Stock shall
have the right, at such holder's option, to
require the Corporation to redeem, and upon
the exercise of such right the Corporation
shall redeem, all or any part of such
holder's Series B Preferred Stock on the date
(the "Repurchase Date") that is 45 days after
the date of the Corporation Notice (as
defined below). The redemption price per
share (the "Repurchase Price") for such
shares of Series B Preferred Stock so
redeemed shall equal the Liquidation
Preference Amount on the Repurchase Date.
14
<PAGE> 15
(ii) Notices; Method of Exercising
Redemption Right, etc.
(A) Within 15 days after the occurrence
of a Redemption Event, the Corporation shall mail to all holders of record of
the Series B Preferred Stock a notice (the "Corporation Notice") of the
occurrence of the Redemption Event and of the redemption right set forth herein
arising as a result thereof. Each Corporation Notice of a redemption right
shall state: (i) the Repurchase Date; (II) the date by which the redemption
right must be exercised; (III) the Repurchase Price; (IV) a description of the
procedure which a holder must follow to exercise a redemption right including a
form of the irrevocable written notice referred to in Section 6(a)(ii)(B)
hereof; and (V) the place or places where such Series B Preferred Stock may be
surrendered for redemption.
No failure of the Corporation to give the
foregoing notices or any defect therein shall limit any holder's right to
exercise a redemption right or affect the validity of the proceedings for the
redemption of Series B Preferred Stock.
(B) To exercise a redemption right, a
holder must deliver to the Corporation on or before the 15th day after the date
of the Corporation Notice (i) irrevocable written notice of the holder's
exercise of such rights, which notice shall set forth the name of the holder,
the amount of the Series B Preferred Stock to be redeemed, a statement that an
election to exercise the redemption right is being made thereby, and (ii) the
Series B Preferred Stock with respect to which the redemption right is being
exercised, duly endorsed for transfer to the Corporation. Such written notice
shall be irrevocable. Subject to the provisions of Section 6(a)(ii)(D) below,
Series B Preferred Stock surrendered for redemption together with such
irrevocable written notice shall cease to be convertible from the date of
delivery of such notice. If the Repurchase Date falls after the record date
and before the following Dividend Payment Date, any Series B Preferred Stock to
be redeemed must be accompanied by payment of an amount equal to the dividends
thereon which the registered holder thereof is to receive on such Dividend
Payment Date, and, notwithstanding such redemption, such dividend payment will
be made by the Corporation to the registered holder thereof on the applicable
record date; provided that any quarterly payment of dividends becoming due on
the Repurchase Date shall be payable to the holders of such Series
15
<PAGE> 16
B Preferred Stock registered as such on the relevant record date subject to the
terms of Section 4(b) hereof.
(C) In the event a redemption right
shall be exercised in accordance with the terms hereof, the Corporation shall
pay or cause to be paid the Repurchase Price in cash, to the holder on the
Repurchase Date.
(D) If any Series B Preferred Stock
surrendered for redemption shall not be so redeemed on the Repurchase Date,
such Series B Preferred Stock shall be convertible at any time from the
Repurchase Date until redeemed and, until redeemed, continue to accrue
dividends to the extent permitted by applicable law from the Repurchase Date at
the same rate borne by such Series B Preferred Stock. The Corporation shall
pay to the holder of such Series B Preferred Stock the additional amounts
arising from this Section 6(a)(ii)(D) at the time that it pays the Repurchase
Price, and if applicable such Series B Preferred Stock shall remain convertible
into Non-Voting Common Stock until the Repurchase Price plus any additional
amounts owing on such Series B Preferred Stock shall have been paid or duly
provided for.
(E) Any Series B Preferred Stock which
is to be redeemed only in part shall be surrendered at any office or agency of
the Corporation designated for that purpose pursuant to Section 6(a)(ii)(A)(V)
hereof and the Corporation shall execute and deliver to the holder of such
Series B Preferred Stock without service charge, a new certificate or
certificates representing the Series B Preferred Stock, of any authorized
denomination as requested by such holder, in aggregate amount equal to and in
exchange for the unredeemed portion of the Series B Preferred Stock so
surrendered.
7. Priority.
(a) Priority as to Dividends. Holders of the
shares of the Series B Preferred Stock shall be
entitled to receive the dividends provided for in
Section 4 hereof in preference to and in priority
over any Junior Stock or Common Stock.
(b) Series A Preferred Stock. The Series B
Preferred Stock shall rank on parity with the Series
A Preferred Stock with respect to dividends and
redemption.
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<PAGE> 17
8. Liquidation Preference.
(a) In the event of any Liquidation, holders of
the Series B Preferred Stock will be entitled to
receive out of the assets of the Corporation whether
such assets are capital or surplus and whether or not
any dividends as such are declared, the Liquidation
Preference Amount to the date fixed for distribution,
and no more, (i) pari passu with any distribution to
the holders of Series A Preferred Stock with respect
to the distribution of assets and (ii) before any
distribution shall be made to the holders of Junior
Stock or Common Stock with respect to the
distribution of assets. If the assets of the
Corporation are not sufficient to pay in full the
Liquidation Preference Amount payable to the holders
of outstanding shares of the Series B Preferred
Stock, then the holders of all such shares shall
share ratably in such distribution of assets in
accordance with the amount which would be otherwise
payable on such distribution to the holders of Series
B Preferred Stock were such Liquidation Preference
Amount paid in full. Except as provided, in this
Section 8(a), in the event of any Liquidation of the
Corporation, the holders of shares of Series B
Preferred Stock shall not be entitled to any
additional payments.
(b) The consolidation or merger of the
Corporation with or into such corporation or
corporations shall not itself be deemed to be a
Liquidation of the Corporation within the meaning of
this Section 8.
(c) Written notice of any Liquidation of the
Corporation, stating a payment date and the place
where the distributive amounts shall be payable,
shall be given by mail, postage prepaid, not less
than 30 days prior to the payment date stated
therein, to the holders of record of the Series B
Preferred Stock at their respective addresses as the
same shall appear on the books of the Corporation.
(d) The Series B Preferred Stock shall rank on
parity with the Series A Preferred Stock with respect
to liquidations.
9. Conversion.
(a) The Series B Preferred Stock shall not be
convertible into any other class or series of stock
of the Corporation until the earlier to occur of the
day that is 121 calendar days following the Initial
Issue Date or the date of the first stockholders
meeting following the Initial Issue Date, the earlier
date of which shall constitute the "Conversion
Release Date." After the Conversion Release Date,
each share of Series B Preferred Stock shall be
convertible at any time and from time to time, at the
option of the holder thereof into validly issued,
fully paid and nonassessable shares of Non-Voting
Common Stock, in an amount determined in accordance
with
17
<PAGE> 18
Section 9(d) below; provided, however, if after the
Conversion Release Date any holder of Series B
Preferred Stock elects to convert but it is
determined that the Corporation cannot issue
Non-Voting Common Stock, such holder shall be
entitled to receive Common Stock in lieu of
Non-Voting Common Stock.
(b) Immediately following the conversion of
Series B Preferred Stock into Non-Voting Common Stock
on the Conversion Date (i) such converted shares of
Series B Preferred Stock shall be deemed no longer
outstanding and (ii) the Persons entitled to receive
the Non-Voting Common Stock upon the conversion of
such converted Series B Preferred Stock shall be
treated for all purposes as having become the owners
of record of such Non-Voting Common Stock. Upon the
issuance of shares of Non-Voting Common Stock upon
conversion of Series B Preferred Stock pursuant to
this Section 9, such shares of Non-Voting Common
Stock shall be deemed to be duly authorized, validly
issued, fully paid and nonassessable.
Notwithstanding anything to the contrary in this
Section 9, any holder of Series B Preferred Stock may
convert shares of such Series B Preferred Stock into
Non-Voting Common Stock in accordance with Section 9
on a conditional basis, such that such conversion
will not take effect unless the conditions set forth
in Section 9(c) are satisfied, and the Corporation
shall make such arrangements as may be necessary or
appropriate to allow such conditional conversion and
to enable the holder to satisfy such other
conditions.
(c) To convert Series B Preferred Stock into
Non-Voting Common Stock at the option of the holder
pursuant to Section 9(a), a holder must give written
notice to the Corporation at such office that such
holder elects to convert Series B Preferred Stock
into Non-Voting Common Stock, and the number of
shares to be converted. Such conversion, to the
extent permitted by law, regulation, rule or other
requirement of any governmental authority
(collectively, "Laws") and the provisions hereof,
shall be deemed to have been effected as of the close
of business on the date on which the holder delivers
such notice to the Corporation (such date is
referred to herein as the "Conversion Date" for
purposes of any
18
<PAGE> 19
conversion of Series B Preferred Stock pursuant to
Section 9(a)). Promptly thereafter the holder shall
(i) surrender the certificates or certificates
evidencing the shares of Series B Preferred Stock to
be converted, duly endorsed in a form reasonably
satisfactory to the Corporation, at the office of the
Corporation or of the transfer agent for the Series B
Preferred Stock, (ii) state in writing the name or
names in which the certificate or certificates for
shares of Non-Voting Common Stock are to be issued,
(iii) provide evidence reasonably satisfactory to the
Corporation that such holder has satisfied any
conditions, contained in any agreement or any legend
on the certificates representing the Series B
Preferred Stock, relating to the transfer thereof, if
shares of Non-Voting Common Stock are to be issued in
a name or names other than the holder's, and (iv) pay
any transfer or similar tax if required as provided
in Section 9(j) below. As soon as practical following
receipt of the foregoing, the Corporation shall
deliver to such former holder of Series B Preferred
Stock, a certificate representing the shares of
Non-Voting Common Stock issued upon the conversion,
together with a new certificate representing the
unconverted portion, if any, of the shares of Series
B Preferred Stock formerly represented by the
certificate or certificates surrendered for
conversion.
(d) For the purposes of the conversion of Series
B Preferred Stock into Non-Voting Common Stock
pursuant to Section 9(a), the number of shares of
Non-Voting Common Stock issuable upon conversion for
each share of Series B Preferred Stock shall be
determined by dividing (i) the number of shares of
Common Stock issuable as if the Series B Preferred
Stock had been first converted into Series A
Preferred Stock pursuant to Section 3(a)(iii) hereof
(whether or not the stockholder approval referenced
therein has actually occurred) and then converted
into Common Stock by (ii) (A) 1.00, in the event the
shares of Series B Preferred Stock are converted
during the period commencing on the date that is 121
calendar days following the Initial Issue Date and
continuing up to and including the date that is 150
calendar days following the Initial Issue Date, or
(B) .75, in the event the shares of Series B
Preferred Stock
19
<PAGE> 20
are converted on or after the date that is 151
calendar days following the Initial Issue Date.
(e) In order to prevent dilution of the
conversion rights granted hereunder, the number of
shares of Non-Voting Common Stock issuable upon
conversion and the Conversion Price shall each be
adjusted from time to time in the same manner as the
number of shares of Common Stock issuable upon
conversion of the Series A Preferred Stock and the
"Conversion Price" as set forth in the Series A
Certificate of Designations are adjusted pursuant to
the Series A Certificate of Designations.
(f) No fractional shares of Non-Voting Common
Stock shall be issued upon the conversion of Series B
Preferred Stock. If any fractional interest in a
share of Non-Voting Common Stock would, except for
the provisions of this Section 9(f), be deliverable
upon the conversion of any Series B Preferred Stock,
the Corporation shall, in lieu of delivering the
fractional share therefor, adjust such fractional
interest by payment to the holder of such converted
Series B Preferred Stock of an amount in cash equal
(computed to the nearest cent) to the Current Market
Price of such fractional interest as of the end of
the Corporation's last fiscal year as determined in
good faith in the sole discretion of the Board of
Directors of the Corporation.
(g) Whenever the Conversion Price is adjusted,
as herein provided, the Corporation shall promptly
mail a notice of the adjustment to holders of Series
B Preferred Stock by first class mail. The
Corporation shall forthwith maintain at its principal
executive office and file with the transfer agent, if
any, for Series B Preferred Stock, a statement,
signed by the Chairman of the Board, or the
President, or a Vice President of the Corporation and
by its chief financial officer or an Assistant
Treasurer, showing in reasonable detail the facts
requiring such adjustment and the Conversion Price
after such adjustment. Such transfer agent shall be
under no duty or responsibility with respect to any
such statement except to exhibit the same from time
to time to any holder of Series B Preferred Stock
desiring an inspection thereof.
20
<PAGE> 21
(h) If there shall occur any capital
reorganization or any reclassification of the capital
stock of the Corporation, consolidation or merger of
the Corporation with or into another entity, or the
conveyance of all or substantially all of the assets
of the Corporation to another person or entity, each
share of Series B Preferred Stock shall thereafter be
convertible into the number of shares or other
securities or property to which a holder of the
number of shares of Non-Voting Common Stock of the
Corporation deliverable upon conversion of such
Series B Preferred Stock would have been entitled
upon such reorganization, reclassification,
consolidation, merger or conveyance; and, in any such
case, appropriate adjustment (as determined in good
faith in the sole discretion of the Board of
Directors of the Corporation) shall be made in the
application of the provisions herein set forth with
respect to the rights and interests thereafter of the
holders of the Series B Preferred Stock, to the end
that the provisions set forth herein (including
provisions with respect to changes in and other
adjustments of the Conversion Price) shall be
applicable, as nearly as reasonably may be, in
relation to any shares or other property thereafter
deliverable upon the conversion of the Series B
Preferred Stock.
(i) The Corporation shall at all times reserve
and keep available, out of its authorized but
unissued shares of Series A Preferred Stock and
Non-Voting Common Stock or treasury shares thereof,
solely for the purpose of issuance upon the
conversion of Series B Preferred Stock, the full
number of shares of Series A Preferred Stock and
Non-Voting Common Stock deliverable upon the
conversion of all Series B Preferred Stock from time
to time outstanding. In addition, the Corporation
shall at all times reserve and keep available, out of
its authorized but unissued shares of Common Stock or
treasury shares thereof, solely for the purpose of
issuance upon the conversion of Series A Preferred
Stock, the full number of shares of Common Stock
deliverable upon the conversion of those shares of
Series A Preferred Stock deliverable upon the
conversion of all Series B Preferred Stock from time
to time outstanding. The Corporation shall from time
to time, in accordance with the laws of the State of
21
<PAGE> 22
Delaware, increase the authorized amount of its
Series A Preferred Stock or Non-Voting Common Stock
if at any time the authorized number of shares of
Series A Preferred Stock or Non-Voting Common Stock
remaining unissued shall not be sufficient to permit
the conversion of all of the Series B Preferred Stock
at the time outstanding.
(j) The Corporation shall pay any documentary,
stamp or similar issue or transfer tax due on the
issue of (i) shares of Series A Preferred Stock upon
conversion of the Series B Preferred Stock into
Series A Preferred Stock and (ii) shares of
Non-Voting Common Stock upon conversion of the Series
B Preferred Stock into Non-Voting Common Stock. The
Corporation shall not, however, be required to pay
any tax which may be payable in respect of any
transfer involved in the issue and delivery of any
security in a name other than that in which the
security so converted was registered, and no such
issue or delivery shall be made unless and until the
person requested such issue has paid to the
Corporation the amount of any such tax, or has
established to the satisfaction of the Corporation
that such tax has been paid.
10. Exclusion of Other Rights.
Except as otherwise required by law, shares of Series
B Preferred Stock shall not have any preferences or relative, participating,
optional or other special rights, other than those specifically set forth in
this resolution and in the Certificate of Designations filed pursuant hereto
(as such Certificate may be amended from time to time) and in the Certificate
of Incorporation. No shares of Series B Preferred Stock shall have any rights
of preemption or subscription whatsoever as to any securities of the
Corporation, except as expressly provided in any written agreement among the
Corporation and any holder or holders of Series B Preferred Stock.
11. Reissuance of Preferred Stock.
Shares of Series B Preferred Stock that have been
issued and reacquired in any manner, including shares purchased or redeemed or
exchanged, shall (upon compliance with any applicable
22
<PAGE> 23
provisions of the General Corporation Law of the State of Delaware) be canceled
and shall not be reissued.
12. Headings of Subdivisions.
The headings of the various subdivisions hereof are for
convenience of reference only and shall not affect the interpretation of any of
the provisions hereof.
13. Severability of Provisions.
If any right, preference or limitation of the Series B
Preferred Stock set forth in this resolution and in the Certificate of
Designations for the Series B Preferred Stock (as such Certificate may be
amended from time to time) is invalid, unlawful or incapable of being enforced
by reason of any rule or law or public policy, all other rights, preferences
and limitations set forth in such Certificate of Designations (as so amended)
which can be given effect without the invalid, unlawful or unenforceable right,
preference or limitation shall, nevertheless, remain in full force and effect,
and no right, preference or limitation herein set forth shall be deemed
dependent upon any other such right, preference or limitation unless so
expressed herein.
14. Notice.
All notices and other communications required or permitted to
be given to the Corporation hereunder shall be made by hand delivery or
registered or certified mail, return receipt requested, to the Corporation at
its principal executive offices (currently located on the date of the adoption
of these resolutions at 13800 Montfort Drive, Suite 300, Dallas, Texas 75240,
Attention: Secretary. Minor imperfections in any such notice shall not affect
the validity thereof.
23
<PAGE> 24
IN WITNESS WHEREOF, Renters Choice, Inc. has caused this certificate
to be signed by _____________________, its __________________, this ____ day of
August, 1998.
RENTERS CHOICE, INC.
a Delaware corporation
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
24
<PAGE> 1
EXHIBIT 10.18
EXECUTION COPY
================================================================================
RENTERS CHOICE, INC.
----------------------------------------
$175,000,000
SENIOR SUBORDINATED
CREDIT AGREEMENT
dated as of August 5, 1998
----------------------------------------
THE CHASE MANHATTAN BANK,
as Administrative Agent
----------------------------------------
CHASE SECURITIES INC.,
as Arranger
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Definitional Provisions . . . . . . . . . . . . . . 28
SECTION 2. AMOUNT AND TERMS OF LOANS . . . . . . . . . . . . . . . . . . . 28
2.1 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.2 Procedure for Borrowing and Conversion . . . . . . . . . 29
2.3 Maturity and Exchange Notes . . . . . . . . . . . . . . . 29
2.4 Repayment of Loans . . . . . . . . . . . . . . . . . . . 29
2.5 Optional and Mandatory Prepayments . . . . . . . . . . . 29
2.6 Interest Rates and Payment Dates . . . . . . . . . . . . 31
2.7 Computation of Interest and Fees . . . . . . . . . . . . 32
2.8 Pro Rata Treatment and Payments . . . . . . . . . . . . . 32
2.9 Requirements of Law . . . . . . . . . . . . . . . . . . . 34
2.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 35
2.11 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . 37
2.12 Change of Lending Office . . . . . . . . . . . . . . . . 37
2.13 Replacement Lenders . . . . . . . . . . . . . . . . . . . 37
SECTION 3. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 38
3.1 Financial Condition . . . . . . . . . . . . . . . . . . . 38
3.2 No Change . . . . . . . . . . . . . . . . . . . . . . . . 39
3.3 Corporate Existence; Compliance with Law . . . . . . . . 39
3.4 Corporate Power; Authorization; Enforceable
Obligations . . . . . . . . . . . . . . . . . . . . . . . 39
3.5 No Legal Bar . . . . . . . . . . . . . . . . . . . . . . 39
3.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . 39
3.7 No Default . . . . . . . . . . . . . . . . . . . . . . . 40
3.8 Ownership of Property; Liens . . . . . . . . . . . . . . 40
3.9 Intellectual Property . . . . . . . . . . . . . . . . . . 40
3.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 40
3.11 Federal Regulations . . . . . . . . . . . . . . . . . . . 40
3.12 Labor Matters . . . . . . . . . . . . . . . . . . . . . . 40
3.13 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . 40
3.14 Investment Company Act; Other Regulations . . . . . . . . 41
3.15 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 41
3.16 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . 41
3.17 Environmental Matters . . . . . . . . . . . . . . . . . . 41
3.18 Accuracy of Information, etc . . . . . . . . . . . . . . 42
3.19 Solvency . . . . . . . . . . . . . . . . . . . . . . . . 42
3.20 Year 2000 Matters . . . . . . . . . . . . . . . . . . . . 42
SECTION 4. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . 43
SECTION 5. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . 45
5.1 Financial Statements . . . . . . . . . . . . . . . . . . 45
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C>
5.2 Certificates; Other Information . . . . . . . . . . . . . 46
5.3 Payment of Obligations . . . . . . . . . . . . . . . . . 47
5.4 Maintenance of Existence; Compliance . . . . . . . . . . 47
5.5 Maintenance of Property; Insurance . . . . . . . . . . . 47
5.6 Books and Records . . . . . . . . . . . . . . . . . . . . 47
5.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.8 Environmental Laws . . . . . . . . . . . . . . . . . . . 48
5.9 Take-Out Financing . . . . . . . . . . . . . . . . . . . 48
5.10 Exchange Notes . . . . . . . . . . . . . . . . . . . . . 48
5.11 Use of Proceeds of the Take-Out Debt . . . . . . . . . . 49
5.12 Future Subsidiary Guarantors . . . . . . . . . . . . . . 49
5.13 Further Assurances . . . . . . . . . . . . . . . . . . . 49
SECTION 6. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . 49
6.1 Limitation on Indebtedness . . . . . . . . . . . . . . . 50
6.2 Limitation on Restricted Payments . . . . . . . . . . . . 51
6.3 Limitation on Restrictions on Distributions from
Restricted Subsidiaries . . . . . . . . . . . . . . . . . 53
6.4 Limitation on Asset Dispositions . . . . . . . . . . . . 54
6.5 Limitation on Liens . . . . . . . . . . . . . . . . . . . 55
6.6 Limitation on Affiliate Transactions . . . . . . . . . . 55
6.7 Change of Control . . . . . . . . . . . . . . . . . . . . 56
6.8 Merger, Consolidation, etc . . . . . . . . . . . . . . . 57
6.9 Limitation on Lines of Business . . . . . . . . . . . . . 58
6.10 Limitation on Sale/Leaseback Transactions . . . . . . . . 58
SECTION 7. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 8. SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.1 Agreement To Subordinate . . . . . . . . . . . . . . . . 60
8.2 Liquidation; Dissolution; Bankruptcy . . . . . . . . . . 60
8.3 Default on Senior Indebtedness . . . . . . . . . . . . . 60
8.4 Acceleration of Payment of Loans . . . . . . . . . . . . 61
8.5 When Distribution Must Be Paid Over . . . . . . . . . . . 61
8.6 Subrogation . . . . . . . . . . . . . . . . . . . . . . . 61
8.7 Relative Rights . . . . . . . . . . . . . . . . . . . . . 62
8.8 Subordination May Not Be Impaired By the Borrower . . . . 62
8.9 Rights of Administrative Agent . . . . . . . . . . . . . 62
8.10 Distribution or Notice to Representative . . . . . . . . 62
8.11 Section 8 Not To Prevent Events of Default or Limit
Right To Accelerate . . . . . . . . . . . . . . . . . . . 62
8.12 Administrative Agent Entitled to Rely . . . . . . . . . . 62
8.13 Administrative Agent to Effectuate Subordination . . . . 63
8.14 Administrative Agent Not Fiduciary for Lenders of
Senior Indebtedness . . . . . . . . . . . . . . . . . . . 63
8.15 Reliance by Lenders of Senior Indebtedness on
Subordination Provisions . . . . . . . . . . . . . . . . 63
SECTION 9. THE ADMINISTRATIVE AGENT . . . . . . . . . . . . . . . . . . . 63
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C>
9.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . 63
9.2 Delegation of Duties . . . . . . . . . . . . . . . . . . 64
9.3 Exculpatory Provisions . . . . . . . . . . . . . . . . . 64
9.4 Reliance by Administrative Agent . . . . . . . . . . . . 64
9.5 Notice of Default . . . . . . . . . . . . . . . . . . . . 64
9.6 Non-Reliance on Administrative Agent and Other
Lenders . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.7 Indemnification . . . . . . . . . . . . . . . . . . . . . 65
9.8 Administrative Agent in Its Individual Capacity . . . . . 65
9.9 Successor Administrative Agent . . . . . . . . . . . . . 66
SECTION 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 66
10.1 Amendments and Waivers . . . . . . . . . . . . . . . . . 66
10.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 67
10.3 No Waiver; Cumulative Remedies . . . . . . . . . . . . . 68
10.4 Survival of Representations and Warranties . . . . . . . 68
10.5 Payment of Expenses and Taxes . . . . . . . . . . . . . . 68
10.6 Successors and Assigns; Participations and
Assignments . . . . . . . . . . . . . . . . . . . . . . . 69
10.7 Adjustments; Set-off . . . . . . . . . . . . . . . . . . 71
10.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . 72
10.9 Severability . . . . . . . . . . . . . . . . . . . . . . 72
10.10 Integration . . . . . . . . . . . . . . . . . . . . . . . 72
10.11 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . 72
10.12 Submission To Jurisdiction; Waivers . . . . . . . . . . . 72
10.13 Acknowledgements . . . . . . . . . . . . . . . . . . . . 73
10.14 WAIVERS OF JURY TRIAL . . . . . . . . . . . . . . . . . . 73
10.15 Confidentiality . . . . . . . . . . . . . . . . . . . . . 73
</TABLE>
- iii -
<PAGE> 5
SCHEDULES:
1.1 Commitments
3.4 Consents
3.6 Litigation
3.15 Subsidiaries
EXHIBITS:
EXHIBIT A Form of Subsidiary Guarantee
EXHIBIT B Form of Indenture
EXHIBIT C Form of Warrant Agreement
EXHIBIT D Form of Closing Certificate
EXHIBIT E Form of Assignment and Acceptance
EXHIBIT F-1 Form of Initial Loan Note
EXHIBIT F-2 Form of Term Note
EXHIBIT G-1 Form of Legal Opinion of Winstead Sechrest & Minick
EXHIBIT G-2 Form of Legal Opinion of Arnold & Porter
EXHIBIT G-3 Form of Legal Opinion of Stinson, Mag & Fizzell, P.C.
EXHIBIT H Form of Exemption Certificate
EXHIBIT I Form of Compliance Certificate
EXHIBIT J Form of Lender Addendum
- iv -
<PAGE> 6
SENIOR SUBORDINATED CREDIT AGREEMENT, dated as of August 5, 1998,
among RENTERS CHOICE, INC., a Delaware corporation (the "Borrower"), the
several lenders from time to time parties hereto (collectively, the "Lenders";
each, individually, a "Lender"), and THE CHASE MANHATTAN BANK, a New York
banking corporation, as administrative agent for the Lenders hereunder (in such
capacity, the "Administrative Agent").
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"ABR Borrowing": a Borrowing comprised of ABR Loans.
"ABR Loan": a Loan bearing interest at a rate determined by
reference to the Alternate Base Rate in accordance with the provisions
of Section 2.
"Accepting Holder": as defined in Section 2.5(d).
"Acquired Company": Thorn Americas, Inc., a Delaware
corporation.
"Acquisition": as defined in Section 4(d)(i).
"Acquisition Agreement": the Stock Purchase Agreement, dated
as of June 16, 1998, among the Borrower, the Seller and Thorn plc, in
each case as amended, supplemented or otherwise modified from time to
time.
"Acquisition Documentation": collectively, the Acquisition
Agreement and all schedules, exhibits and annexes thereto and all side
letters and agreements affecting the terms thereof or entered into in
connection therewith, in each case as amended, supplemented or
otherwise modified from time to time.
"Administrative Agent": as defined in the preamble hereto.
"Adjusted LIBO Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, a rate per annum
determined for such day in accordance with the following formula
(rounded upward to the nearest 1/100th of 1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Adjusted Margin": with respect to any Loan, 0 basis points
during the three month period commencing on the Initial Maturity Date
and shall increase by an additional 50 basis points at the beginning
of each subsequent three-month period.
"Adjusted Rate": the rate equal to the greatest of (i) 50
basis points plus the interest rate borne by the Loans on the day
immediately preceding the Initial Maturity Date, (ii) 600 basis points
plus the Treasury Rate (as defined below) on the Initial Maturity
Date, (iii) 200
<PAGE> 7
2
basis points plus the CSI High Yield Index Rate on the Initial
Maturity Date and (iv) 10% per annum; for purposes hereof, the
"Treasury Rate" means (x) the rate borne by direct obligations of the
United States maturing on the tenth anniversary of the Closing Date or
(y) if there are no such obligations, the rate determined by linear
interpolation between the rates borne by the two direct obligations of
the United States maturing closest to, but straddling, the tenth
anniversary of the Closing Date, in each case as published by the
Board of Governors.
"Affiliate": as to any Person, any other Person that,
directly or indirectly, is in control of, is controlled by, or is
under common control with, such Person. For purposes of this
definition, "control" of a Person means the power, directly or
indirectly, either to (a) vote 10% or more of the securities having
ordinary voting power for the election of directors (or persons
performing similar functions) of such Person or (b) direct or cause
the direction of the management and policies of such Person, whether
by contract or otherwise.
"Affiliate Transaction": as defined in Section 6.6.
"Agreement": this Senior Subordinated Credit Agreement, as
amended, supplemented or otherwise modified from time to time.
"Alternate Base Rate": for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the greater of
(a) the Prime Rate in effect on such day and (b) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. For purposes
hereof: "Prime Rate" shall mean the rate of interest per annum
publicly announced from time to time by the Administrative Agent as
its prime rate in effect at its principal office in New York City;
and "Federal Funds Effective Rate" shall mean, for any day, 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 on the next succeeding 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
the day of such transactions received by the Administrative Agent from
three federal funds brokers of recognized standing selected by it.
Any change in the Alternate Base Rate due to a change in the Prime
Rate or the Federal Funds Effective Rate shall be effective as of the
opening of business on the effective day of such change in the Prime
Rate or the Federal Funds Effective Rate, respectively.
"Applicable Margin": with respect to any Loan, 550 basis
points during the six (6) month period commencing on the Closing Date
and shall increase by (i) 100 basis points commencing on the date
which is six months following the Closing Date and (ii) an additional
50 basis points at the end of each successive three month period
thereafter until (but excluding) the Initial Maturity Date.
"Apollo Preferred Stock": as defined in Section 4(d)(ii).
"Asset Disposition": any sale, lease, transfer or other
disposition of shares of Capital Stock of a Restricted Subsidiary
(other than directors' qualifying shares), property or other assets
(each referred to for the purposes of this definition as a
"disposition") by the Borrower or any of its Restricted Subsidiaries
(including any disposition by means of a merger, consolidation or
similar transaction) other than (i) a disposition by a Restricted
Subsidiary to the Borrower or by the Borrower or a Restricted
Subsidiary to a Restricted Subsidiary, (ii) a disposition of
inventory, equipment, obsolete assets or surplus personal property in
the ordinary
<PAGE> 8
3
course of business, (iii) the sale of Temporary Cash Investments or
Cash Equivalents in the ordinary course of business, (iv) the sale or
discount (with or without recourse, and on commercially reasonable
terms) of accounts receivable or notes receivable arising in the
ordinary course of business, or the conversion or exchange of accounts
receivable for notes receivable, (v) the licensing of intellectual
property in the ordinary course of business, (vi) for purposes of
Section 6.4 only, a disposition subject to Section 6.2, (vii) a
disposition of property or assets that is governed by Section 6.8, or
(vii) an RTO Facility Swap.
"Assignee": as defined in Section 10.6(c).
"Assignor": as defined in Section 10.6(c).
"Attributable Debt": in respect of a Sale/Leaseback
Transaction means, as at the time of determination, the present value
(discounted at the interest rate assumed in making calculations in
accordance with FAS 13) of the total obligations of the lessee for
rental payments during the remaining term of the lease included in
such Sale/Leaseback Transaction (including any period for which such
lease has been extended).
"Average Life": as of any date of determination, with respect
to any Indebtedness or Preferred Stock, the quotient obtained by
dividing (i) the sum of the products of the numbers of years from the
date of determination to the dates of each successive scheduled
principal payment of such Indebtedness or redemption or similar
payment with respect to such Indebtedness or Preferred Stock
multiplied by the amount of such payment by (ii) the sum of all such
payments.
"Bank Indebtedness": any and all amounts, whether outstanding
on the Closing Date or thereafter incurred, payable under or in
respect of the Senior Credit Facility, including, without limitation,
principal, premium (if any), interest (including interest accruing on
or after the filing of any petition in bankruptcy or for
reorganization relating to the Borrower or any Restricted Subsidiary
whether or not a claim for postfiling interest is allowed in such
proceedings), fees, charges, expenses, reimbursement obligations,
guarantees, other monetary obligations of any nature and all other
amounts payable thereunder or in respect thereof.
"Benefitted Lender": as defined in Section 10.7(a).
"Blockage Notice": as defined in Section 8.3.
"Board of Directors": as to any Person the board of directors
of such Person or any committee thereof duly authorized to act on
behalf of such board.
"Board of Governors": the Board of Governors of the Federal
Reserve System (or any successor thereto).
"Borrowing": a group of Loans of a single Type made or
continued by the Lenders on a single date and as to which a single
Interest Period is in effect.
"Business": as defined in Section 3.17(b).
<PAGE> 9
4
"Business Day": a day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or
required by law to close, provided, that with respect to notices and
determinations in connection with, and payments of principal and
interest on, Eurodollar Loans, such day is also a day for trading by
and between banks in Dollar deposits in the interbank eurodollar
market.
"Capital Stock": as to any Person, any and all shares,
interests, rights to purchase, warrants, options, participations or
other equivalents of or interests in (however designated) equity of
such Person, including any Preferred Stock, but excluding any debt
securities convertible into such equity.
"Capitalized Lease Obligations": an obligation that is
required to be classified and accounted for as a capitalized lease for
financial reporting purposes in accordance with GAAP; and the amount
of Indebtedness represented by such obligation shall be the
capitalized amount of such obligation determined in accordance with
GAAP; and the Stated Maturity thereof shall be the date of the last
payment of rent or any other amount due under such lease.
"Cash Equivalents": any of the following: (a) securities
issued or fully guaranteed or insured by the United States Government
or any agency or instrumentality thereof, (b) time deposits,
certificates of deposit or bankers' acceptances of (i) any lender
under the Senior Credit Agreement or (ii) any commercial bank having
capital and surplus in excess of $500,000,000 and the commercial paper
of the holding company of which is rated at least "A-2" or the
equivalent thereof by S&P or at least P-2 or the equivalent thereof by
Moody's (or if at such time neither is issuing ratings, then a
comparable rating of another nationally recognized rating agency), (c)
commercial paper rated at least "A-1" or the equivalent thereof by S&P
or at least "P-1" or the equivalent thereof by Moody's (or if at such
time neither is issuing ratings, then a comparable rating of another
nationally recognized rating agency), (d) investments in money market
funds complying with the risk limiting conditions of Rule 2a-7 or any
successor rule of the Securities and Exchange Commission under the
Investment Company Act, (e) repurchase obligations of any Lender or of
any commercial bank satisfying the requirements of clause (b) of this
definition, having a term of not more than 30 days, with respect to
securities issued or fully guaranteed or insured by the United States
government; (f) securities with maturities of one year or less from
the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States, by any political
subdivision or taxing authority of any such state, commonwealth or
territory or by any foreign government, the securities of which state,
commonwealth, territory, political subdivision, taxing authority or
foreign government (as the case may be) are rated at least A by S&P or
A by Moody's; and (g) securities with maturities of six months or less
from the date of acquisition backed by standby letters of credit
issued by any Lender or any commercial bank satisfying the
requirements of clause (b) of this definition.
"Central Acquisition": the Borrower's acquisition of
substantially all of the assets of Central Rents, Inc.
"Change in Law": with respect to any Lender, the adoption of
any law, rule, regulation, policy, guideline, or directive (whether or
not having the force of law) or any change therein or in the
interpretation or application thereof by any Governmental Authority
having jurisdiction over such Lender, in each case after the Closing
Date.
<PAGE> 10
5
"Change of Control" means the occurrence of any of the
following events:
(i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act), other than one
or more Permitted Holders, is or becomes the beneficial owner
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have "beneficial
ownership" of all shares that any such Person has the right to
acquire within one year), directly or indirectly, of more than
50% of the Voting Stock of the Borrower or a Successor Company
(including, without limitation, through a merger or
consolidation or purchase of Voting Stock of the Borrower);
provided that the Permitted Holders do not have the right or
ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors;
or
(ii) during any period of two consecutive years,
individuals who at the beginning of such period constituted
the Board of Directors (together with any new directors whose
election by such Board of Directors or whose nomination for
election by the shareholders of the Borrower was approved by a
vote of a majority of the directors of the Borrower 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 the Board of Directors then in office; or
(iii) the sale, lease, transfer, conveyance or
other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of
all or substantially all of the assets of the Borrower and its
Restricted Subsidiaries taken as a whole to any Person or
group of related Persons (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) (a "Group") other than a
Permitted Holder; or
(iv) the adoption by the stockholders of a plan
for the liquidation or dissolution of the Borrower; or
(v) any event described in Section 8(k) of the
Senior Credit Agreement.
"Chase": The Chase Manhattan Bank, a New York banking
corporation.
"Closing Date": the date on which the conditions precedent
set forth in Section 4 shall be satisfied or waived.
"Code": the Internal Revenue Code of 1986, as amended from
time to time.
"Commitment": as to any Lender, its obligation to make a Loan
to the Borrower on the Closing Date in an amount equal to the amount
set forth opposite such Lender's name in Schedule 1.1 under the
heading "Commitment"; collectively, as to all such Lenders, the
"Commitments," which aggregate $175,000,000 on the Closing Date.
"Commitment Percentage": as to any Lender at any time, the
percentage of the aggregate Commitments then constituted by such
Lender's Commitment (or, after the Loans are made on the Closing Date,
the percentage of the aggregate Loans then constituted by such
Lender's Loans).
<PAGE> 11
6
"Commonly Controlled Entity": an entity, whether or not
incorporated, that is under common control with the Borrower within
the meaning of Section 4001 of ERISA or is part of a group that
includes the Borrower and that is treated as a single employer under
Section 414 of the Code.
"Compliance Certificate": a certificate duly executed by a
Responsible Officer substantially in the form of Exhibit I.
"Consolidated Coverage Ratio": as of any date of
determination means the ratio of (i) the aggregate amount of EBITDA of
the Borrower and its Restricted Subsidiaries for the period of the
most recent four consecutive fiscal quarters ending prior to the date
of such determination for which consolidated financial statements of
the Borrower are available to (ii) Consolidated Interest Expense for
such four fiscal quarters (in each case, determined, for each fiscal
quarter (or portion thereof) of the four fiscal quarters ending prior
to or including the Closing Date, on a pro forma basis to give effect
to the Central Acquisition and the Transactions (including the
anticipated disposition of any non-rent-to-own businesses under
contract for sale or held for sale following the Closing Date), the
offering of the Take- Out Debt and the application of the proceeds
thereof as if they had occurred at the beginning of such four-quarter
period); provided, however, that (1) if the Borrower or any Restricted
Subsidiary (x) has Incurred any Indebtedness since the beginning of
such period that remains outstanding on such date of determination or
if the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both,
EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the first
day of such period (except that in making such computation, the amount
of Indebtedness under any revolving credit facility outstanding on the
date of such calculation shall be computed based on (A) the average
daily balance of such Indebtedness during such four fiscal quarters or
such shorter period for which such facility was outstanding or (B) if
such facility was created after the end of such four fiscal quarters,
the average daily balance of such Indebtedness during the period from
the date of creation of such facility to the date of such calculation)
and the discharge of any other Indebtedness repaid, repurchased,
defeased or otherwise discharged with the proceeds of such new
Indebtedness as if such discharge had occurred on the first day of
such period, or (y) has repaid, repurchased, defeased or otherwise
discharged any Indebtedness since the beginning of the period that is
no longer outstanding on such date of determination or if the
transaction giving rise to the need to calculate the Consolidated
Coverage Ratio involves a discharge of Indebtedness (in each case
other than Indebtedness Incurred under any revolving credit facility
unless such Indebtedness has been permanently repaid), EBITDA and
Consolidated Interest Expense for such period shall be calculated
after giving effect on a pro forma basis to such discharge of such
Indebtedness, including with the proceeds of such new Indebtedness, as
if such discharge had occurred on the first day of such period, (2) if
since the beginning of such period the Borrower or any Restricted
Subsidiary shall have made any Asset Disposition of any company or any
business or any group of assets, the EBITDA for such period shall be
reduced by an amount equal to the EBITDA (if positive) directly
attributable to the assets which are the subject of such Asset
Disposition for such period or increased by an amount equal to the
EBITDA (if negative) directly attributable thereto for such period and
Consolidated Interest Expense for such period shall be reduced by an
amount equal to the Consolidated Interest Expense directly
attributable to any Indebtedness of the Borrower or any Restricted
Subsidiary repaid, repurchased, defeased or otherwise discharged with
respect to the Borrower and its continuing Restricted Subsidiaries in
connection with such Asset Disposition
<PAGE> 12
7
for such period (and, if the Capital Stock of any Restricted
Subsidiary is sold, the Consolidated Interest Expense for such period
directly attributable to the Indebtedness of such Restricted
Subsidiary to the extent the Borrower and its continuing Restricted
Subsidiaries are no longer liable for such Indebtedness after such
sale), (3) if since the beginning of such period the Borrower or any
Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Person that thereby becomes a Restricted Subsidiary,
or otherwise acquired any company or any business or any group of
assets, including any such acquisition of assets occurring in
connection with a transaction causing a calculation to be made
hereunder, EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving pro forma effect thereto (including
the Incurrence of any Indebtedness and including the pro forma
expenses and cost reductions calculated on a basis consistent with
Regulation S-X under the Act) as if such Investment or acquisition
occurred on the first day of such period and (4) if since the
beginning of such period any Person (that subsequently became a
Restricted Subsidiary or was merged with or into the Borrower or any
Restricted Subsidiary since the beginning of such period) shall have
made any Asset Disposition or any Investment or acquisition of assets
that would have required an adjustment pursuant to clause (2) or (3)
above if made by the Borrower or a Restricted Subsidiary during such
period, EBITDA and Consolidated Interest Expense for such period shall
be calculated after giving pro forma effect thereto as if such Asset
Disposition, Investment or acquisition of assets occurred on the first
day of such period. For purposes of this definition, whenever pro
forma effect is to be given to an Asset Disposition, Investment or
acquisition of assets, or any transaction governed by Section 6.8, or
the amount of income or earnings relating thereto and the amount of
Consolidated Interest Expense associated with any Indebtedness
Incurred or repaid, repurchased, defeased or otherwise discharged in
connection therewith, the pro forma calculations in respect thereof
shall be determined in good faith by a responsible financial or
accounting officer of the Borrower, based on reasonable assumptions.
If any Indebtedness bears a floating rate of interest and is being
given pro forma effect, the interest expense on such Indebtedness
shall be calculated at a fixed rate as if the rate in effect on the
date of determination had been the applicable rate for the entire
period (taking into account any Interest Rate Agreement applicable to
such Indebtedness if such Interest Rate Agreement has a remaining term
as at the date of determination in excess of 12 months). If any
Indebtedness bears, at the option of the Borrower or a Restricted
Subsidiary, a fixed or floating rate of interest and is being given
pro forma effect, the interest expense on such Indebtedness shall be
computed by applying, at the option of the Borrower or such Restricted
Subsidiary, either a fixed or floating rate. If any Indebtedness
which is being given pro forma effect was Incurred under a revolving
credit facility, the interest expense on such Indebtedness shall be
computed based upon the average daily balance of such Indebtedness
during the applicable period.
"Consolidated Interest Expense": as to any Person, for any
period, the total consolidated interest expense of such Person and its
Subsidiaries determined in accordance with GAAP, minus, to the extent
included in such interest expense, amortization or write-off of
financing costs plus, to the extent incurred by such Person and its
Subsidiaries in such period but not included in such interest expense,
without duplication, (i) interest expense attributable to Capitalized
Lease Obligations and the interest component of rent expense
associated with Attributable Debt in respect of the relevant lease
giving rise thereto, determined as if such lease were a capitalized
lease, in accordance with GAAP, (ii) amortization of debt discount,
(iii) interest in respect of Indebtedness of any other Person that has
been Guaranteed by such Person or any Subsidiary, but only to the
extent that such interest is actually paid by such Person or any
Restricted Subsidiary, (iv) non-cash interest expense, (v) net costs
associated with Hedging
<PAGE> 13
8
Obligations, (vi) the product of (A) mandatory Preferred Stock cash
dividends in respect of all Preferred Stock of Subsidiaries of such
Person and Disqualified Stock of such Person held by Persons other
than such Person or a Subsidiary multiplied by (B) a fraction, the
numerator of which is one and the denominator of which is one minus
the then current combined federal, state and local statutory tax rate
of such Person, expressed as a decimal, in each case, determined on a
consolidated basis in accordance with GAAP; and (vii) the cash
contributions to any employee stock ownership plan or similar trust to
the extent such contributions are used by such plan or trust to pay
interest to any Person (other than the referent Person or any
Subsidiary thereof) in connection with Indebtedness Incurred by such
plan or trust; provided, however, that as to the Borrower, there shall
be excluded therefrom any such interest expense of any Unrestricted
Subsidiary to the extent the related Indebtedness is not Guaranteed or
paid by the Borrower or any Restricted Subsidiary. For purposes of
the foregoing, gross interest expense shall be determined after giving
effect to any net payments made or received by such Person and its
Subsidiaries with respect to Interest Rate Agreements.
"Consolidated Net Income": as to any Person, for any period,
the consolidated net income (loss) of such Person and its Subsidiaries
before preferred stock dividends, determined in accordance with GAAP;
provided, however, that there shall not be included in such
Consolidated Net Income: (a) any net income (loss) of any Person if
such Person is not (as to the Borrower) a Restricted Subsidiary and
(as to any other Person) an unconsolidated Person, except that (A)
subject to the limitations contained in clause (d) below, the referent
Person's equity in the net income of any such Person for such period
shall be included in such Consolidated Net Income up to the aggregate
amount of cash actually distributed by such Person during such period
to the referent Person or a Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution
to a Subsidiary, to the limitations contained in clause (c) below) and
(B) the net loss of such Person shall be included to the extent of the
aggregate Investment of the referent Person or any of its Subsidiaries
in such Person; (b) any net income (loss) of any Person acquired in a
pooling of interests transaction for any period prior to the date of
such acquisition; (c) any net income (loss) of any Restricted
Subsidiary (as to the Borrower) or of any Subsidiary (as to any other
Person) if such Subsidiary is subject to restrictions, directly or
indirectly, on the payment of dividends or the making of distributions
by such Subsidiary, directly or indirectly, to the Borrower, except
that (A) subject to the limitations contained in (d) below, such
Person's equity in the net income of any such Subsidiary for such
period shall be included in Consolidated Net Income up to the
aggregate amount of cash that could have been distributed by such
Subsidiary during such period to such Person or another Subsidiary as
a dividend (subject, in the case of a dividend that could have been
made to another Restricted Subsidiary, to the limitation contained in
this clause) and (B) the net loss of such Subsidiary shall be included
in determining Consolidated Net Income; (d) any charges for costs and
expenses associated with the Transactions; (e) any extraordinary gain
or loss; and (f) the cumulative effect of a change in accounting
principles.
"Consolidated Tangible Assets": as of any date of
determination, the total assets, less goodwill and other intangibles
(other than patents, trademarks, copyrights, licenses and other
intellectual property), shown on the balance sheet of the Borrower and
its Restricted Subsidiaries as of the most recent date for which such
a balance sheet is available, determined on a consolidated basis in
accordance with GAAP, less all write-ups (other than write-ups in
connection with acquisitions) subsequent to the Closing Date in the
book value of any asset (except any such intangible assets) owned by
the Borrower or any of its Restricted Subsidiaries.
<PAGE> 14
9
"Contractual Obligation": as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
other undertaking to which such Person is a party or by which it or
any of its property is bound.
"Control Investment Affiliate": as to any Person, any other
Person that (a) directly or indirectly, is in control of, is
controlled by, or is under common control with, such Person and (b) is
organized by such Person primarily for the purpose of making equity or
debt investments in one or more companies. For purposes of this
definition, "control" of a Person means the power, directly or
indirectly, to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise.
"CSI": Chase Securities Inc., a Delaware corporation.
"CSI High Yield Index Rate": means the average yield to worst
of the CSI High Yield Index as published in the Chase High Yield
Research Weekly Update Report as published by Chase.
"Currency Agreement": in respect of a Person, any foreign
exchange contract, currency swap agreement or other similar agreement
or arrangement (including derivative agreements or arrangements) as to
which such Person is a party or a beneficiary.
"Default": any event or condition that is, or after notice or
passage of time or both would be, an Event of Default.
"Designated Senior Indebtedness": (i) the Bank Indebtedness
and (ii) any other Senior Indebtedness which, at the date of
determination, has an aggregate principal amount outstanding of, or
under which, at the date of determination, the holders thereof are
committed to lend up to, at least $50,000,000 and is specifically
designated by the Borrower in the instrument evidencing or governing
such Senior Indebtedness as "Designated Senior Indebtedness" for
purposes of this Agreement.
"Disposition": with respect to any property, any sale, lease,
sale and leaseback, assignment, conveyance, transfer or other
disposition thereof. The terms "Dispose" and "Disposed of" shall have
correlative meanings.
"Disqualified Stock": with respect to any Person, any Capital
Stock, excluding Apollo Preferred Stock (so long as the terms thereof
are not materially less favorable to the Lenders than those in effect
on the Closing Date), that by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable
or exercisable) or upon the happening of any event (i) matures or is
mandatorily redeemable pursuant to a sinking fund obligation or
otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder
thereof, in whole or in part, in the case of clauses (i), (ii) or
(iii), on or prior to the 91st day after the Final Maturity Date,
provided that only the portion of Capital Stock which so matures or is
mandatorily redeemable, is so convertible or exchangeable or is so
redeemable at the option of the holder thereof prior to such Final
Maturity Date shall be deemed to be Disqualified Stock.
"Dollars" and "$": dollars in lawful currency of the United
States of America.
<PAGE> 15
10
"EBITDA": as to any Person, for any period, the Consolidated
Net Income for such period, plus the following to the extent included
in calculating such Consolidated Net Income: (i) income tax expense,
(ii) Consolidated Interest Expense, (iii) depreciation expense (other
than depreciation expense relating to rental merchandise), (iv)
amortization of intangibles and (v) other non-cash charges or non-cash
losses, and minus any gain (but not loss) realized upon the sale or
other disposition of any asset of the Borrower or its Restricted
Subsidiaries (including pursuant to any Sale/Leaseback Transaction)
that is not sold or otherwise disposed of in the ordinary course of
business.
"Environmental Laws": any and all foreign, Federal, state,
local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees, requirements of any Governmental Authority
or other Requirements of Law (including common law) regulating,
relating to or imposing liability or standards of conduct concerning
protection of human health or the environment, as now or may at any
time hereafter be in effect.
"Eurocurrency Reserves Requirements": for any day as applied
to a Eurodollar Loan, the aggregate (without duplication) of the
maximum rates (expressed as a decimal fraction) of reserve
requirements in effect on such day (including, without limitation,
basic, supplemental, marginal and emergency reserves under any
regulations of the Board of Governors or other Governmental Authority
having jurisdiction with respect thereto) dealing with reserve
requirements prescribed for eurocurrency funding (currently referred
to as "Eurocurrency Liabilities" in Regulation D of the Board of
Governors) maintained by a member bank of such system.
"Eurodollar Base Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum
determined by the Administrative Agent to be the offered rate for
deposits in Dollars with a term comparable to such Interest Period
that appears on the applicable Telerate Page at approximately 11:00
A.M., London time, two Business Days prior to the beginning of such
Interest Period; provided, however, that if at any time for any reason
such offered rate does not appear on the applicable Telerate Page,
"Eurodollar Base Rate" shall mean, with respect to each day during
each Interest Period pertaining to a Eurodollar Loan, such other
comparable publicly available service for displaying eurodollar rates
as may be selected by the Administrative Agent, or, in the absence of
such availability, by the rate per annum equal to the rate at which
the Administrative Agent is offered Dollar deposits at or about 11:00
A.M., New York City time, two Business Days prior to the beginning of
such Interest Period in the interbank eurodollar market where the
eurodollar and foreign currency and exchange operations in respect of
its Eurodollar Loans are then being conducted for delivery on the
first day of such Interest Period for the number of days comprised
therein.
"Eurodollar Borrowing": a Borrowing comprised of Eurodollar
Loans.
"Eurodollar Loan": a Loan bearing interest at a rate
determined by reference to the Adjusted LIBO Rate in accordance with
the provisions of Section 2.
"ERISA": the Employee Retirement Income Security Act of 1974,
as amended from time to time.
<PAGE> 16
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"Event of Default": any of the events specified in Section 7,
provided that all requirements for the giving of notice, the lapse of
time, or both, and any other conditions, have been satisfied.
"Exchange Act": the Securities Exchange Act of 1934, as
amended.
"Exchange Note": each note issued under the Indenture
delivered pursuant to Section 2.3 and 5.10; collectively, the
"Exchange Notes".
"Exchange Request": as defined in Section 5.10(b).
"Existing Credit Agreement": that certain Credit Agreement,
dated as of November 27, 1996, as amended, among the Borrower,
Comerica Bank, as administrative agent, and others.
"FDIC": the Federal Deposit Insurance Corporation and any
Governmental Authority which succeeds to the powers and functions
thereof.
"Final Maturity Date": the tenth anniversary of the Closing
Date.
"Foreign Subsidiary": any Restricted Subsidiary of the
Borrower that is not organized under the laws of the United States of
America or any state thereof or the District of Columbia.
"GAAP": generally accepted accounting principles in the
United States of America in effect on the date of this Agreement,
including those 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 entity
as are approved by a significant segment of the accounting profession.
"Governmental Authority": any nation or government, any
state, province or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Guarantee": any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other
nonfinancial obligation of any other Person, including any such
obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or such other obligation of
such other Person (whether arising by virtue of partnership
arrangements, or by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes
of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part); provided,
however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a correlative meaning.
"Guarantee Obligation": as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another
Person (including any bank under any letter of credit) to induce the
creation of which the guaranteeing person has issued a reimbursement,
<PAGE> 17
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counterindemnity or similar obligation, in either case guaranteeing or
in effect guaranteeing any Indebtedness, leases, dividends or other
obligations (the "primary obligations") of any other third Person (the
"primary obligor") in any manner, whether directly or indirectly,
including any obligation of the guaranteeing person, whether or not
contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to
advance or supply funds (1) for the purchase or payment of any such
primary obligation or (2) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth
or solvency of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (iv) otherwise to assure
or hold harmless the owner of any such primary obligation against loss
in respect thereof; provided, however, that the term Guarantee
Obligation shall not include endorsements of instruments for deposit
or collection in the ordinary course of business. The amount of any
Guarantee Obligation of any guaranteeing person shall be deemed to be
the lower of (a) an amount equal to the stated or determinable amount
of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such
guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person
may be liable are not stated or determinable, in which case the amount
of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as
determined by the Borrower in good faith.
"Guarantor Senior Indebtedness" means, with respect to a
Subsidiary Guarantor, the following obligations, whether outstanding
on the Closing Date or thereafter issued, without duplication: (i) any
Guarantee of the Senior Credit Facility by such Subsidiary Guarantor
and all other Guarantees by such Subsidiary Guarantor of Senior
Indebtedness of the Borrower or Guarantor Indebtedness for any other
Subsidiary Guarantor; and (ii) all obligations consisting of the
principal of and premium, if any, and accrued and unpaid interest
(including interest accruing on or after the filling of any petition
in bankruptcy or for reorganization relating to the Subsidiary
Guarantor regardless of whether post filing interest is allowed in
such proceeding) on, and fees and other amounts owing in respect of,
all other Indebtedness of the Subsidiary Guarantor, unless, in the
instrument creating or evidencing the same or pursuant to which the
same is outstanding, it is expressly provided that the obligations in
respect of such Indebtedness are not senior in right of payment to the
obligations of such Subsidiary Guarantor under the Subsidiary
Guarantee; provided, however, that Guarantor Senior Indebtedness will
not include (1) any obligations of such Subsidiary Guarantor to
another Subsidiary Guarantor or any other Affiliate of the Subsidiary
Guarantor or any such Affiliate's Subsidiaries, (2) any liability for
Federal, state, local, foreign or other taxes owed or owing by such
Subsidiary Guarantor, (3) any accounts payable or other liability to
trade creditors arising in the ordinary course of business (including
Guarantees thereof or instruments evidencing such liabilities) or
other current liabilities (other than current liabilities which
constitute Bank Indebtedness or the current portion of any long-term
Indebtedness which would constitute Senior Indebtedness but for the
operation of this clause (3), (4) any Indebtedness, Guarantee or
obligation of such Subsidiary Guarantor that is expressly subordinate
or junior to any other Indebtedness, Guarantee or obligation of such
Subsidiary Guarantor, including any Guarantor Senior Subordinated
Indebtedness and Guarantor Subordinated Obligations of such Subsidiary
Guarantor (5) Indebtedness which is represented by redeemable Capital
Stock or (6) that portion of any Indebtedness that is incurred in
violation of this Agreement. If any Designated Senior Indebtedness is
disallowed, avoided or subordinated pursuant to the provisions of
<PAGE> 18
13
Section 548 of Title 11 of the United States Code or any applicable
state fraudulent conveyance law, such Designated Senior Indebtedness
nevertheless will constitute Senior Indebtedness.
"Guarantor Senior Subordinated Indebtedness" means with
respect to a Subsidiary Guarantor, the obligations of such Subsidiary
Guarantor under the Subsidiary Guarantee and any other Indebtedness of
such Subsidiary Guarantor (whether outstanding on the Closing Date or
thereafter incurred) that specifically provides that such Indebtedness
is to rank pari passu in right of payment with the obligations of such
Subsidiary Guarantor under the Subsidiary Guarantee and is not
expressly subordinated by its terms in right of payment to any
Indebtedness of such Subsidiary Guarantor which is not Guarantor
Senior Indebtedness of such Subsidiary Guarantor.
"Guarantor Subordinated Obligation" means, with respect to a
Subsidiary Guarantor, any Indebtedness of such Subsidiary Guarantor
(whether outstanding on the Closing Date or thereafter incurred) which
is expressly subordinate in right of payment to the obligations of
such Subsidiary Guarantor under its Subsidiary Guarantee pursuant to a
written agreement.
"Hedging Obligations": of any Person means the obligations of
such Person pursuant to any Interest Rate Agreement or Currency
Agreement.
"Holder" or "Noteholder": the Person in whose name a Loan
(and any corresponding Note(s)) is registered.
"Incur": issue, assume, Guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock
of a Person existing at the time such Person becomes a Restricted
Subsidiary (whether by merger, consolidation, acquisition or
otherwise) shall be deemed to be Incurred by such Restricted
Subsidiary at the time it becomes a Restricted Subsidiary. Any
Indebtedness issued at a discount (including Indebtedness on which
interest is payable through the issuance of additional Indebtedness)
shall be deemed incurred at the time of original issuance of the
Indebtedness at the initial accreted amount thereof.
"Indebtedness": with respect to any Person on any date of
determination (without duplication):
(i) the principal of Indebtedness of such Person for borrowed money, (ii) the
principal of obligations of such Person evidenced by bonds, debentures, notes
or other similar instruments, (iii) all reimbursement obligations of such
Person, including reimbursement obligations in respect of letters of credit or
other similar instruments (the amount of such obligations being equal at any
time to the aggregate then undrawn and unexpired amount of such letters of
credit or other instruments plus the aggregate amount of drawings thereunder
that have not then been reimbursed), (iv) all obligations of such Person to pay
the deferred and unpaid purchase price of property or services (except Trade
Payables), which purchase price is due more than one year after the date of
placing such property in final service or taking final delivery and title
thereto or the completion of such services, (v) all Capitalized Lease
Obligations and Attributable Debt of such Person, (vi) the redemption,
repayment or other repurchase amount of such Person with respect to any
Disqualified Stock or (if such Person is a Subsidiary of the Borrower) any
Preferred Stock of such Subsidiary, but excluding, in each case, any accrued
dividends (the amount of such obligation to be equal at any time to the maximum
fixed involuntary redemption, repayment or repurchase price for such Capital
Stock, or if such Capital Stock has no fixed price, to the involuntary
redemption, repayment or repurchase price therefor calculated in accordance
with the terms thereof as if then redeemed, repaid or repurchased, and if such
price is based upon or measured
<PAGE> 19
14
by the fair market value of such Capital Stock, such fair market value shall be
as determined in good faith by the Board of Directors or the board of directors
of the issuer of such Capital Stock), (vii) all Indebtedness of other Persons
secured by a Lien on any asset of such Person, whether or not such Indebtedness
is assumed by such Person; provided, however, that the amount of Indebtedness
of such Person shall be the lesser of (A) the fair market value of such asset
at such date of determination and (B) the amount of such Indebtedness of such
other Persons, (viii) all Indebtedness of other Persons to the extent
Guaranteed by such Person, and (ix) to the extent not otherwise included in
this definition, net Hedging Obligations of such Person (such obligations to be
equal at any time to the termination value of such agreement or arrangement
giving rise to such Hedging Obligation that would be payable by such Person at
such time).
The amount of Indebtedness of any Person at any date
shall be determined as set forth above or otherwise provided in this
Agreement, or otherwise in accordance with GAAP.
"Indenture": the Indenture, substantially in the form of
Exhibit B hereto (with such changes therein as the Borrower may
request and Administrative Agent may approve, such approval not to be
unreasonably withheld), if and when executed and delivered by the
Borrower and a trustee thereunder, as amended, waived, supplemented or
otherwise modified from time to time.
"Initial Loan": as defined in Section 2.1(a).
"Initial Maturity Date": the first anniversary of the Closing
Date.
"Initial Note": as defined in Section 10.6(f).
"Insolvency": with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section
4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intellectual Property": the collective reference to all
rights, priorities and privileges relating to intellectual property,
whether arising under United States, multinational or foreign laws or
otherwise, including copyrights, copyright licenses, patents, patent
licenses, trademarks, trademark licenses, technology, know-how and
processes, and all rights to sue at law or in equity for any
infringement or other impairment thereof, including the right to
receive all proceeds and damages therefrom.
"Interest Payment Date": with respect to any Loan, the last
day of the Interest Period applicable to the Loan, and in addition,
the date of any prepayment of such Loan.
"Interest Period": (i) prior to the Initial Maturity Date,
(a) as to any Eurodollar Borrowing, the periods commencing on the date
of such Eurodollar Borrowing and ending on the earlier of (A) the
numerically corresponding day (or, if there is no numerically
corresponding day, on the last day) in the calendar month that is one
month thereafter and (B) the Initial Maturity Date, and (b) as to any
ABR Borrowing, the period commencing on the date of such ABR Borrowing
and ending on the earlier of (A) the last day of each consecutive
calendar month following the Closing Date, (B) the Initial Maturity
Date, and (C) the date of
<PAGE> 20
15
any conversion thereof to a Eurodollar Borrowing and (ii) following
the Initial Maturity Date, the period commencing on the Initial
Maturity Date and ending on the last day of each consecutive fiscal
quarter of the Borrower following the Initial Maturity Date, and the
period ending on the Final Maturity Date; provided, however, that if
any Interest Period would end on a day other than a Business Day, such
Interest Period shall be extended to the next succeeding Business Day
unless, in the case of a Eurodollar Borrowing only, such next
succeeding Business Day would fall in the next calendar month, in
which case such Interest Period shall end on the next preceding
Business Day. Interest shall accrue from and including the first day
of an Interest Period to but excluding the last day of such Interest
Period.
"Interest Rate Agreement": with respect to any Person, any
interest rate protection agreement, interest rate future agreement,
interest rate option agreement, interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement, interest rate
hedge agreement or other similar agreement or arrangement (including
derivative agreements or arrangements) as to which such Person is
party or a beneficiary; provided, however, any such agreement entered
into in connection with the Loans shall not be included.
"Investment": in any Person by any other Person means any
direct or indirect advance, loan (other than advances to customers in
the ordinary course of business) or other extension of credit
(including by way of Guarantee or similar arrangement, but excluding
any debt or extension of credit represented by a bank deposit other
than a time deposit) 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 of Capital Stock, Indebtedness or other
similar instruments issued by, such Person. If the Borrower or any
Restricted Subsidiary of the Borrower sells or otherwise disposes of
any Capital Stock of any direct or indirect Restricted Subsidiary of
the Borrower such that, after giving effect to any such sale or
disposition, the Borrower no longer owns, directly or indirectly, 100%
of the outstanding Capital Stock of such Restricted Subsidiary, the
Borrower 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 Capital
Stock of such Restricted Subsidiary not sold or disposed of.
"Lenders": as defined in the preamble to this Agreement.
"Lien": any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge or
other security interest or any preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including any conditional sale or other title retention agreement and
any capital lease having substantially the same economic effect as any
of the foregoing).
"Loans": as defined in Section 2.1.
"Loan Documents": this Agreement, the Warrant Agreement, the
Warrant Escrow Agreement, the Loan Notes, and the Subsidiary
Guarantees.
"Loan Notes": the collective reference to the Term Notes and
the Initial Notes.
"Loan Participants": as defined in Section 10.6(b).
<PAGE> 21
16
"Loan Parties": the collective reference to the Borrower and
each of its Subsidiaries which from time to time is a party to any
Loan Document.
"Material Adverse Effect": a material adverse effect on (a)
the business, property, operations, condition (financial or otherwise)
or prospects of the Borrower and its Subsidiaries taken as a whole or
(b) the validity or enforceability of this Agreement or any of the
other Loan Documents or the rights or remedies of the Administrative
Agent or the Lenders hereunder or thereunder.
"Materials of Environmental Concern": any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum
products or any hazardous or toxic substances, materials or wastes,
defined or regulated as such in or under any Environmental Law,
including asbestos, polychlorinated biphenyls and urea-formaldehyde
insulation.
"Moody's": Moody's Investors Service, Inc., and its
successors.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Available Cash": from an Asset Disposition means cash
payments received (including any cash payments received by way of
deferred payment of principal pursuant to a note or installment
receivable or otherwise, but only as and when received, but excluding
any other consideration received in the form of assumption by the
acquiring person of Indebtedness or other obligations relating to the
properties or assets that are the subject of such Asset Disposition or
received in any other noncash form) therefrom, in each case net of (i)
all legal, accounting, investment banking, title and recording tax
expenses, commissions and other fees and expenses Incurred (including,
without limitation, fees and expenses of legal counsel, accountants
and financial advisors), and all Federal, state, provincial, foreign
and local taxes required to be paid or accrued as a liability under
GAAP as a consequence of such Asset Disposition, (ii) all payments
made on any Indebtedness that is secured by any assets subject to such
Asset Disposition, in accordance with the terms of any Lien upon such
assets, or that must by its terms, or in order to obtain a necessary
consent to such Asset Disposition, or by applicable law be repaid out
of the proceeds from such Asset Disposition, (iii) all distributions
and other payments required to be made to minority interest holders in
Subsidiaries or joint ventures as a result of such Asset Disposition
or to any other Person (other than the Borrower or any Restricted
Subsidiary) owning a beneficial interest in the assets disposed of in
such Asset Disposition, and (iv) the deduction of appropriate amounts
to be provided by the seller as a reserve, in accordance with GAAP,
against any liabilities associated with the assets disposed of in such
Asset Disposition and retained by the Borrower or any Restricted
Subsidiary after such Asset Disposition.
"Net Cash Proceeds": with respect to any issuance or sale of
Capital Stock or Indebtedness, the cash proceeds of such issuance or
sale net of attorneys' fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage,
consultant and other fees actually Incurred in connection with such
issuance or sale and net of taxes paid or payable as a result of such
issuance or sale.
"Non-Excluded Taxes": as defined in Section 2.10(a).
<PAGE> 22
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"Non-Recourse Debt": Indebtedness (i) as to which neither the
Borrower nor any Restricted Subsidiary (a) provides any Guarantee or
credit support of any kind (including any undertaking, Guarantee,
indemnity, agreement or instrument that would constitute Indebtedness)
or (b) is directly or indirectly liable (as a guarantor or otherwise)
and (ii) no default with respect to which (including any rights that
the holders thereof may have to take enforcement action against an
Unrestricted Subsidiary) would permit (upon notice, lapse of time or
both) any holder of any other Indebtedness of the Borrower or any
Restricted Subsidiary to declare a default under such other
Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity.
"Notes": the Loan Notes and the Exchange Notes, as originally
executed or as subsequently amended from time to time pursuant to the
applicable provisions hereof.
"Officer" means the Chief Executive Officer, President, Chief
Financial Officer, any Vice President, Controller, Secretary or
Treasurer of the Borrower.
"Officer's Certificate" means a certificate signed by one
Officer.
"Original Initial Note": as defined in Section 10.6(f).
"Original Term Note": as defined in Section 10.6(g).
"Other Taxes": any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or
similar levies arising from any payment made hereunder or from the
execution, delivery or enforcement of, or otherwise with respect to,
this Agreement or any other Loan Document.
"Payment Blockage Period": as defined in Section 8.3.
"Payment Sharing Notice": a written notice from the Borrower
or any Lender informing the Administrative Agent that an Event of
Default has occurred and is continuing and directing the
Administrative Agent to allocate payments thereafter received from or
on behalf of the Borrower in accordance with the provisions of Section
2.8.
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA (or any successor
thereto).
"Permitted Holders": the collective reference to (i) the
Sponsor, (ii) the Talley Persons and (iii) the Speese Persons.
"Permitted Investment": an Investment by the Borrower or any
Restricted Subsidiary in (i) a Restricted Subsidiary, the Borrower or
a Person which will, upon the making of such Investment, become a
Restricted Subsidiary; provided, however, that the primary business of
such Restricted Subsidiary is a Related Business; (ii) another Person
if as a result of such Investment such other Person is merged or
consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Borrower or a Restricted
Subsidiary; provided, however, that such Person's primary business is
a Related Business; (iii) Cash Equivalents and Temporary Cash
Investments; (iv) receivables owing to the Borrower or any Restricted
Subsidiary, if created or acquired in the ordinary course of business
and payable or
<PAGE> 23
18
dischargeable in accordance with customary trade terms; provided,
however, that such trade terms may include such concessionary trade
terms as the Borrower or any such Restricted Subsidiary deems
reasonable under the circumstances; (v) securities or other
Investments received as consideration in connection with RTO Facility
Swaps or in sales or other dispositions of property or assets made in
compliance with Section 6.4, (vi) securities or other Investments
received in settlement of debts created in the ordinary course of
business and owing to the Borrower or any Restricted Subsidiary, or as
a result of foreclosure, perfection or enforcement of any Lien, or in
satisfaction of judgments, including in connection with any bankruptcy
proceeding or other reorganization of another Person; (vii)
Investments in existence or made pursuant to legally binding written
commitments in existence on the Closing Date; (viii) Currency
Agreements, Interest Rate Agreements and related Hedging Obligations,
which obligations are Incurred in compliance with Section 6.1; and
(ix) pledges or deposits (A) with respect to leases or utilities
provided to third parties in the ordinary course of business or (B)
otherwise described in the definition of "Permitted Liens".
"Permitted Liens":
(i) Liens for taxes, assessments or other
governmental charges not yet delinquent or the nonpayment of
which in the aggregate would not be reasonably expected to
have a Material Adverse Effect, or that are being contested in
good faith and by appropriate proceedings if adequate reserves
with respect thereto are maintained on the books of the
Borrower or the relevant Subsidiary, as the case may be, in
accordance with GAAP;
(ii) carriers', warehousemen's, mechanics',
landlords', materialmen's, repairmen's or other like Liens
arising in the ordinary course of business in respect of
obligations that are not overdue for a period of more than 60
days or that are bonded or that are being contested in good
faith and by appropriate proceedings;
(iii) pledges, deposits or Liens in connection with
workers' compensation, unemployment insurance and other social
security legislation and/or similar legislation or other
insurance-related obligations (including, without limitation,
pledges or deposits securing liability to insurance carriers
under insurance or self-insurance arrangements);
(iv) pledges, deposits or Liens to secure the
performance of bids, tenders, trade, government or other
contracts (other than for borrowed money), obligations for or
under or in respect of utilities, leases, licenses, statutory
obligations, surety, judgment and appeal bonds, performance
bonds and other obligations of a like nature incurred in the
ordinary course of business;
(v) easements (including reciprocal easement
agreements), rights-of-way, building, zoning and similar
restrictions, utility agreements, covenants, reservations,
restrictions, encroachments, changes, and other similar
encumbrances or title defects incurred, or leases or subleases
granted to others, in the ordinary course of business, which
do not in the aggregate materially interfere with the ordinary
conduct of the business of the Borrower and its Subsidiaries,
taken as a whole;
(vi) Liens existing on, or provided for under written
arrangements existing on, the Closing Date, or (in the case of
any such Liens securing Indebtedness of the
<PAGE> 24
19
Borrower or any of its Subsidiaries existing or arising under
written arrangements existing on the Closing Date) securing
any Refinancing Indebtedness in respect of such Indebtedness
so long as the Lien securing such Refinancing Indebtedness is
limited to all or part of the same property or assets (plus
improvements, accessions, proceeds or dividends or
distributions in respect thereof) that secured (or under such
written arrangements could secure) the original Indebtedness;
(vii) Liens securing Hedging Obligations incurred in
compliance with Section 6.1;
(viii) Liens arising out of judgments, decrees,
orders or awards in respect of which the Borrower shall in
good faith be prosecuting an appeal or proceedings for review
which appeal or proceedings shall not have been finally
terminated, or the period within which such appeal or
proceedings may be initiated shall not have expired;
(ix) Liens securing (A) Indebtedness incurred in
compliance with clause (i), (ii) or (v) of Section 6.1(b) or
clause (iv) of Section 6.1(b) (other than Refinancing
Indebtedness Incurred in respect of Indebtedness permitted by
Section 6.1(a) thereof) or (B) Bank Indebtedness;
(x) Liens on properties or assets of the Borrower
securing Senior Indebtedness;
(xi) Liens existing on property or assets of a Person
at the time such Person becomes a Subsidiary of the Borrower
(or at the time the Borrower or a Restricted Subsidiary
acquires such property or assets); provided, however, that
such Liens are not created in connection with, or in
contemplation of, such other Person becoming such a Subsidiary
(or such acquisition of such property or assets), and that
such Liens are limited to all or part of the same property or
assets (plus improvements, accessions, proceeds or dividends
or distributions in respect thereof) that secured (or, under
the written arrangements under which such Liens arose, could
secure) the obligations to which such Liens relate;
(xii) Liens on Capital Stock of an Unrestricted
Subsidiary that secure Indebtedness or other obligations of
such Unrestricted Subsidiary;
(xiii) Liens securing the Loans; and
(xiv) Liens securing Refinancing Indebtedness
Incurred in respect of any Indebtedness secured by, or
securing any refinancing, refunding, extension, renewal or
replacement (in whole or in part) of any other obligation
secured by, any other Permitted Liens, provided that any such
new Lien is limited to all or part of the same property or
assets (plus improvements, accessions, proceeds or dividends
or distributions in respect thereof) that secured (or, under
the written arrangements under which the original Lien arose,
could secure) the obligations to which such Liens relate.
"Person": an individual, partnership, corporation, limited
liability company, association, business trust, joint stock company,
trust, unincorporated association, joint venture, Governmental
Authority or other entity of whatever nature.
<PAGE> 25
20
"PIK Interest Amount": the aggregate amount equal to the
amount of interest borne by an Initial Loan or a Term Loan in excess
of 15% per annum.
"Plan": at a particular time, any employee benefit plan which
is covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"Preferred Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however
designated) which is preferred as to the payment of dividends, or as
to the distribution of assets upon any voluntary or involuntary
liquidation or dissolution of such corporation, over shares of Capital
Stock of any other class of such corporation.
"Projections": as defined in Section 5.2(c).
"Properties": as defined in Section 3.17(a).
"Purchase Money Obligations": any Indebtedness of the
Borrower or any Restricted Subsidiary incurred to finance the
acquisition, construction or capital improvement of any property or
business (including Indebtedness incurred within 90 days following
such acquisition or construction), including Indebtedness of a Person
existing at the time such Person becomes a Restricted Subsidiary or
assumed by the Borrower or a Restricted Subsidiary in connection with
the acquisition of assets from such Person; provided, however, that
any Lien on such Indebtedness shall not extend to any property other
than the property so acquired or constructed.
"Refinancing Indebtedness": Indebtedness that is Incurred to
refund, refinance, replace, renew, repay or extend (including pursuant
to any defeasance or discharge mechanism) (collectively, "refinances,"
and "refinanced" shall have a correlative meaning) any Indebtedness
existing on the Closing Date or Incurred in compliance with this
Agreement (including Indebtedness of the Borrower that refinances
Indebtedness of any Restricted Subsidiary (to the extent permitted in
this Agreement) and Indebtedness of any Restricted Subsidiary that
refinances Indebtedness of another Restricted Subsidiary) including
Indebtedness that refinances Refinancing Indebtedness; provided,
however, that (i) the Refinancing Indebtedness has a Stated Maturity
no earlier than the Stated Maturity of the Indebtedness being
refinanced, (ii) the Refinancing Indebtedness has an Average Life at
the time such Refinancing Indebtedness is Incurred that is equal to or
greater than the Average Life of the Indebtedness being refinanced and
(iii) such Refinancing Indebtedness is Incurred in an aggregate
principal amount (or if issued with original issue discount, an
aggregate issue price) that is equal to or less than the aggregate
principal amount (or if issued with original issue discount, the
aggregate accreted value) then outstanding of the Indebtedness being
refinanced, plus fees, underwriting discounts, premiums and other
costs and expenses incurred in connection with such Refinancing
Indebtedness; provided further, however, that Refinancing Indebtedness
shall not include (x) Indebtedness of a Restricted Subsidiary that
refinances Indebtedness of the Borrower or (y) Indebtedness of the
Borrower or a Restricted Subsidiary that refinances Indebtedness of an
Unrestricted Subsidiary.
"Register": as defined in Section 10.6(d).
<PAGE> 26
21
"Regulation U": Regulation U of the Board of Governors as in
effect from time to time.
"Regulation X": Regulation X of the Board of Governors as in
effect from time to time.
"Related Business": any business which is the same as or
related, ancillary or complementary to any of the businesses in which
the Borrower or any of its Restricted Subsidiaries is primarily
engaged on the Closing Date.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section
4043(b) of ERISA and the regulations thereunder, other than those
events as to which the thirty day notice period is waived under
subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg.
Section 4043.
"Representative": the trustee, agent or representative (if
any) for an issue of Senior Indebtedness.
"Required Lenders": at any time, Lenders holding more than
50% in principal amount of outstanding Loans (or, prior to the Closing
Date, more than 50% of the Commitments).
"Requirement of Law": as to any Person, the certificate of
incorporation and by-laws or other organizational or governing
documents of such Person, and any treaty, statute, rule, regulation,
or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its property or to which such Person or any of its property is
subject.
"Responsible Officer": the chief executive officer, the
president, chief financial officer or treasurer of the Borrower, but
in any event, with respect to financial matters, the chief financial
officer or president of the Borrower.
"Restricted Payments": as defined in Section 6.2(a).
"Restricted Subsidiary": any Subsidiary of the Borrower other
than an Unrestricted Subsidiary.
"RTO Facility": any facility through which the Borrower or any
of its Subsidiaries conducts the business of renting merchandise to
its customers and any facility through which a franchise of the
Borrower or any of its Subsidiaries conducts the business of renting
merchandise to customers.
"RTO Facility Swap": an exchange of assets (including Capital
Stock of a Subsidiary or the Borrower) of substantially equivalent
fair market value, as conclusively determined in good faith by the
Board of Directors, by the Borrower or a Restricted Subsidiary for one
or more RTO Facilities or for cash, Capital Stock, Indebtedness or
other securities of any Person owning or operating one or more RTO
Facilities and primarily engaged in a Related Business; provided,
however, that any Net Cash Proceeds received by the Borrower or any
Restricted
<PAGE> 27
22
Subsidiary in connection with any such transaction must be applied in
accordance with the covenant in Section 6.4.
"Sale/Leaseback Transaction": an arrangement relating to
property now owned or hereafter acquired by the Borrower or a
Restricted Subsidiary whereby the Borrower or such Restricted
Subsidiary transfers such property to a Person and the Borrower or
such Restricted Subsidiary leases it from such Person, other than
leases (x) between the Borrower and a Restricted Subsidiary or (y)
required to be classified and accounted for as capitalized leases for
financial reporting purposes in accordance with GAAP.
"SEC": the Securities and Exchange Commission or any
Governmental Authority which succeeds to the powers and functions
thereof.
"Securities": any stock, shares, partnership interests,
voting trust certificates, certificates of interest or participation
in any profit sharing agreement or arrangement, bonds, debentures,
options, warrants, notes, or other evidences of indebtedness, secured
or unsecured, convertible, subordinated or otherwise, or in general
any instruments commonly known as "securities" or any certificates of
interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to
subscribe to, purchase or acquire, any of the foregoing.
"Securities Act": the Securities Act of 1933, as amended from
time to time.
"Seller": Thorn International BV.
"Senior Credit Agreement": (i) the Credit Agreement to be
entered into among the Borrower, Comerica Bank, as documentation
agent, NationsBank, N.A., as syndication agent, The Chase Manhattan
Bank, as Administrative Agent, and the Lenders parties thereto from
time to time, as the same may be amended, supplemented or otherwise
modified from time to time and any guarantees issued thereunder and
(ii) any renewal, extension, refunding, restructuring, replacement, or
refinancing thereof (whether with the original administrative agent or
other agents and Lenders or another administrative agent or agents or
other lenders and whether provided under the original Senior Credit
Agreement or any other agreement or indenture), provided that any such
renewal, extension, refunding, restructuring, replacement, or
refinancing shall be on terms that permit the Borrower to apply the
proceeds of any issuance of Specified Subordinated Indebtedness or
issuance of Capital Stock to prepay the Loans and the Exchange Notes.
"Senior Credit Documents": the Loan Documents (as defined in
the Senior Credit Agreement).
"Senior Credit Facility": the collective reference to the
Senior Credit Agreement, the Senior Credit Documents, any notes and
letters of credit issued pursuant thereto and any guarantee and
collateral agreement, patent and trademark security agreement,
mortgages, letter of credit applications and other security agreements
and collateral documents, and other instruments and documents,
executed and delivered pursuant to or in connection with any of the
foregoing, in each case as the same may be amended, supplemented,
waived or otherwise modified from time to time, or refunded,
refinanced, restructured, replaced, renewed, repaid, increased or
extended from time to time (whether in whole or in part, whether with
the original
<PAGE> 28
23
agent and lenders or other agents and lenders or otherwise, and
whether provided under the original Senior Credit Agreement or
otherwise) (any such refunding, refinancing, restructuring,
replacement, renewal, repayment or increase, a "Refinancing").
Without limiting the generality of the foregoing, the term "Senior
Credit Facility" shall include any agreement (i) changing the maturity
of any Indebtedness incurred thereunder or contemplated thereby, (ii)
adding Subsidiaries of the Borrower as additional borrowers or
guarantors thereunder, (iii) increasing the amount of Indebtedness
incurred thereunder or available to be borrowed thereunder or (iv)
otherwise altering the terms and conditions thereof. Notwithstanding
the foregoing, "Senior Credit Facility" shall not include any
Refinancing or other modification of the Senior Credit Agreement
unless such Refinancing or other modification shall be on terms that
permit the Borrower to apply the proceeds of any issuance of Specified
Subordinated Indebtedness or issuance of Capital Stock to prepay the
Loans and the Exchange Notes.
"Senior Indebtedness": whether outstanding on the Closing
Date or thereafter issued, without duplication, (i) all obligations
consisting of Bank Indebtedness; and (ii) all obligations consisting
of the principal of and premium, if any, and accrued and unpaid
interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Borrower
regardless of whether postfiling interest is allowed in such
proceeding) on, and fees and other amounts owing in respect of, all
other Indebtedness of the Borrower, unless, in the instrument creating
or evidencing the same or pursuant to which the same is outstanding,
it is provided that the obligations in respect of such Indebtedness
are not superior in right of payment to the Loans; provided, however,
that Senior Indebtedness shall not include (1) any obligation of the
Borrower to any Subsidiary or any other Affiliate of the Borrower, or
any such Affiliate's Subsidiaries, (2) any liability for Federal,
state, foreign, local or other taxes owed or owing by the Borrower,
(3) any accounts payable or other liability to trade creditors arising
in the ordinary course of business (including Guarantees thereof or
instruments evidencing such liabilities) or other current liabilities
(other than current liabilities which constitute Bank Indebtedness or
the current portion of any long-term Indebtedness which would
constitute Senior Indebtedness but for the operation of this clause
(3)), (4) any Indebtedness, Guarantee or obligations of the Borrower
that is expressly subordinate or junior to any other Indebtedness,
Guarantee or obligation of the Borrower, (5) Indebtedness which is
represented by Capital Stock or (6) that portion of any Indebtedness
that is incurred in violation of this Agreement. If any Designated
Senior Indebtedness is disallowed, avoided or subordinated pursuant to
the provisions of Section 548 of Title 11 of the United States Code or
any applicable state fraudulent conveyance law, such Designated Senior
Indebtedness nevertheless will constitute Senior Indebtedness.
"Senior Subordinated Indebtedness": the Loans, the Exchange
Notes, and any other Indebtedness of the Borrower that (i)
specifically provides that such Indebtedness is to rank pari passu
with the Loans in right of payment or is otherwise entitled Senior
Subordinated Indebtedness and (ii) is not subordinated by its terms in
right of payment by its terms to any Indebtedness or other obligation
of the Borrower which is not Senior Indebtedness.
"Senior Subordinated Note Indenture": the Indenture entered
into by the Borrower and certain of its Subsidiaries in connection
with the issuance of the Senior Subordinated Notes, together with all
instruments and other agreements entered into by the Borrower or such
Subsidiaries in connection therewith, as the same may be amended,
supplemented or otherwise modified from time to time.
<PAGE> 29
24
"Senior Subordinated Notes": the subordinated notes of the
Borrower issued pursuant to the Senior Subordinated Note Indenture.
"Single Employer Plan": any Plan which is covered by Title IV
of ERISA, but which is not a Multiemployer Plan.
"Solvent" and "Solvency": when used with respect to any
Person, means that, as of any date of determination, (a) the amount of
the "present fair saleable value" of the assets of such Person will,
as of such date, exceed the amount of all "liabilities of such Person,
contingent or otherwise", as of such date, as such quoted terms are
determined in accordance with applicable federal and state laws
governing determinations of the insolvency of debtors, (b) the present
fair saleable value of the assets of such Person will, as of such
date, be greater than the amount that will be required to pay the
liability of such Person on its debts as such debts become absolute
and matured, (c) such Person will not have, as of such date, an
unreasonably small amount of capital with which to conduct its
business, and (d) such Person will be able to pay its debts as they
mature. For purposes of this definition, (i) "debt" means liability
on a "claim", and (ii) "claim" means any (x) right to payment, whether
or not such a right is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal,
equitable, secured or unsecured or (y) right to an equitable remedy
for breach of performance if such breach gives rise to a right to
payment, whether or not such right to an equitable remedy is reduced
to judgment, fixed, contingent, matured or unmatured, disputed,
undisputed, secured or unsecured.
"Specified Subordinated Indebtedness": Indebtedness of the
Borrower that is subordinated to the Borrower's obligations under the
Senior Credit Facility.
"Speese Persons": the collective reference to Mark E. Speese,
any person having a relationship with Mark E. Speese by blood,
marriage or adoption not more remote than first cousin and any trust
established for the benefit of any such person.
"Sponsor": Apollo Management IV, L.P., Apollo Investment Fund
IV, L.P., Apollo Overseas Partners IV, L.P. and their Control
Investment Affiliates.
"S&P": Standard & Poor's Ratings Service, a division of The
McGraw-Hill Companies, Inc., and its successors.
"Stated Maturity": with respect to any Security, the date
specified in such Security as the fixed date on which the payment of
principal of such Security is due and payable, including pursuant to
any mandatory redemption provision (but excluding any provision
providing for the repurchase of such security at the option of the
holder thereof upon the happening of any contingency beyond the
control of the issuer unless such contingency has occurred).
"Subordinated Obligation": any Indebtedness of the Borrower
(whether outstanding on the date of this Agreement or thereafter
Incurred) which is subordinate or junior in right of payment to the
Loans pursuant to a written agreement.
"Subsequent Initial Note": as defined in Section 10.6(f).
"Subsequent Term Note": as defined in Section 10.6(g).
<PAGE> 30
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"Subsidiary": as to any Person, a corporation, partnership,
limited liability company or other entity of which shares of stock or
other ownership interests having ordinary voting power (other than
stock or such other ownership interests having such power only by
reason of the happening of a contingency) to elect a majority of the
board of directors or other managers of such corporation, partnership
or other entity are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by such Person. Unless otherwise qualified,
all references to a "Subsidiary" or to "Subsidiaries" in this
Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower.
"Subsidiary Guarantee" means the Guarantee of the Loans and
Notes by a Subsidiary Guarantor substantially in the form of Exhibit A
hereto.
"Subsidiary Guarantor" means any Restricted Subsidiary which
guarantees the Bank Indebtedness after the Closing Date.
"Successor Company": as defined in Section 6.8.
"Take-Out Banks": one or more investment banks which may be
engaged by the Borrower to publicly sell or privately place the Take-
Out Debt in accordance with Section 5.10.
"Take-Out Debt": unsecured notes or debentures of the
Borrower, subordinated to the prior payment of the Bank Indebtedness
that may be issued by the Borrower after the Closing Date to refinance
the Loans or Exchange Notes.
"Talley Persons": the collective reference to J. Ernest
Talley, any person having a relationship with J. Ernest Talley by
blood, marriage or adoption not more remote than first cousin (other
than his children) and any trust established for the benefit of any
person having a relationship with J. Ernest Talley by blood, marriage
or adoption not more remote than first cousin.
"Telerate Page" means the display designated as Page 3750 on
the Dow Jones Markets screen (or such other page as may replace such
page on such service for the purpose of displaying the rates at which
Dollar deposits are offered by leading banks in the London interbank
deposit market).
"Temporary Cash Investments" means any of the following: (i)
any investment in direct obligations (x) of the United States of
America or any agency thereof or obligations Guaranteed by the United
States of America or any agency thereof or (y) of any foreign country
recognized by the United States of America rated at least "A" by S&P
or "A1" by Moody's, (ii) investments in time deposit accounts,
certificates of deposit and money market deposits maturing within 180
days of the date of acquisition thereof issued by a bank or trust
company that is organized under the laws of the United States of
America, any state thereof or any foreign country recognized by the
United States of America having capital and surplus aggregating in
excess of $250 million (or the foreign currency equivalent thereof)
and whose long-term debt is rated "A" by S&P or "A-1" by Moody's,
(iii) repurchase obligations with a term of not more than 180 days for
underlying securities of the types described in clause (i) or (ii)
above entered into with a bank meeting the qualifications described in
clause (ii) above, (iv) Investments in commercial paper, maturing not
more than 180 days after the date of
<PAGE> 31
26
acquisition, issued by a corporation (other than an Affiliate of the
Borrower) organized and in existence under the laws of the United
States of America or any foreign country recognized by the United
States of America with a rating at the time as of which any Investment
therein is made of "P-1" (or higher) according to Moody's or "A-1" (or
higher) according to S&P, (v) Investments in securities with
maturities of six months or less from the date of acquisition issued
or fully guaranteed by any state, commonwealth or territory of the
United States of America, or by any political subdivision or taxing
authority thereof, and rated at least "A" by S&P or "A" by Moody's,
(vi) any money market deposit accounts issued or offered by a domestic
commercial bank or a commercial bank organized and located in a
country recognized by the United States of America, in each case,
having capital and surplus in excess of $250 million (or the foreign
currency equivalent thereof), or investments in money market funds
complying with the risk limiting conditions of Rule 2a-7 (or any
short-term successor rule) of the SEC, under the Investment Company
Act of 1940, as amended, and (vii) similar short-term investments
approved by the Board of Directors in the ordinary course of business.
"Term Note": as defined in Section 10.6(g).
"Term Loan": as defined in Section 2.1(b).
"Trade Payables": with respect to any Person, any accounts
payable or any indebtedness or monetary obligation to trade creditors
created, assumed or Guaranteed by such Person arising in the ordinary
course of business in connection with the acquisition of goods or
services.
"Transaction Documents": the collective reference to the Loan
Documents, the Senior Credit Documents, the Indenture and the Exchange
Notes.
"Transactions": the collective reference to the Acquisition,
the initial borrowings under this Agreement and the Senior Credit
Facility, and all other transactions relating to the Acquisition or
the financing thereof.
"Transferee": as defined in Section 10.6(f).
"Trustee": as defined in Section 2.5(d).
"Type", when used in respect of any Loan or Borrowing, shall
refer to the Rate by reference to which interest on such Loan or
Borrowing is determined. For purposes hereof, the term "Rate" shall
include the Adjusted LIBO Rate and the Alternate Base Rate.
"Unrestricted Subsidiary": (i) any Subsidiary of the Borrower
that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and
(ii) any Subsidiary of an Unrestricted Subsidiary. At any time after
the Initial Maturity Date, the Board of Directors may designate any
Subsidiary of the Borrower (including any newly acquired or newly
formed Subsidiary of the Borrower) to be an Unrestricted Subsidiary
unless such Subsidiary or any of its Subsidiaries owns any Capital
Stock or Indebtedness of, or owns or holds any Lien on any property
of, the Borrower or any Restricted Subsidiary of the Borrower that is
not a Subsidiary of the Subsidiary to be so designated; provided,
however, that either (A) the Subsidiary to be so designated has total
<PAGE> 32
27
consolidated assets of $10,000 or less or (B) if such Subsidiary has
consolidated assets greater than $10,000, then such designation would
be permitted under Section 6.2.
The Board of Directors of the Borrower may designate any
Restricted Subsidiary to be an Unrestricted Subsidiary if such
designation would not cause a Default. For purposes of making such
determination, all outstanding Investments by the Borrower and its
Restricted Subsidiaries (except to the extent repaid in cash) in the
Subsidiary so designated will be deemed to be Restricted Payments at
the time of such designation and will reduce the amount available for
Restricted Payments under paragraph (3) of Section 6.2(b). All such
outstanding Investments will be deemed to constitute Investments in an
amount equal to the greater of the fair market value or the book value
of such Subsidiary at the time of such designation. Such designation
will only be permitted if such Restricted Payment would be permitted
at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, however, that
immediately after giving effect to such designation (x) the Borrower
could Incur at least $1.00 of additional Indebtedness under Section
6.1 and (y) 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 Administrative Agent by promptly filing with the
Administrative Agent a copy of the resolution of the Borrower's Board
of Directors giving effect to such designation and an Officer's
Certificate certifying that such designation complied with the
foregoing provisions.
"Voting Stock": of an entity, all classes of Capital Stock of
such entity then outstanding and normally entitled to vote in the
election of directors or all interests in such entity with the ability
to control the management or actions of such entity.
"Warrants": the warrants of the Borrower as described in the
Warrant Agreement.
"Warrant Agreement": the Warrant Agreement, substantially in
the form of Exhibit C, to be executed and delivered by the Borrower.
"Warrant Escrow Agreement": the warrant escrow agreement
dated as of the date hereof between the Borrower and The Chase
Manhattan Bank, as escrow agent with respect to the Warrants.
"Wholly Owned Subsidiary": a Restricted Subsidiary of the
Borrower all the Capital Stock of which (other than directors'
qualifying shares) is owned by the Borrower or another Wholly Owned
Subsidiary.
1.2 Other Definitional Provisions. Unless otherwise
specified therein, all terms defined in this Agreement shall have the defined
meanings when used in any Notes, any other Loan Document or any certificate or
other document made or delivered pursuant hereto.
(a) As used herein and in any Notes and any other Loan
Document, and any certificate or other document made or delivered pursuant
hereto or thereto, accounting terms relating to the Borrower and its
Subsidiaries not defined in Section 1.1 and accounting terms partly defined in
Section 1.1, to the extent not defined, shall have the respective meanings
given to them under GAAP.
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28
(b) The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
Section, subsection, Schedule, Annex and Exhibit references are to this
Agreement unless otherwise specified.
(c) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF LOANS
2.1 Loans. (a) Subject to the terms and conditions
hereof, each Lender severally agrees to make a loan (individually, an "Initial
Loan", and collectively, the "Initial Loans") to the Borrower on the Closing
Date, in an aggregate principal amount equal to such Lender's Commitment. Any
Commitments not drawn on the Closing Date automatically shall terminate. The
Initial Loans shall initially be ABR Loans, and may be converted into
Eurodollar Loans upon three Business Days' notice to the Administrative Agent.
(b) Subject to the terms and conditions hereof, each
Lender severally agrees, if the Initial Loans have not been repaid or exchanged
for Exchange Notes on the Initial Maturity Date, to convert the then
outstanding principal amount of its Initial Loans into a loan (individually, a
"Term Loan", and collectively, the "Term Loans"; the Initial Loans and the Term
Loans, collectively, the "Loans") to the Borrower, on the Initial Maturity
Date, in an aggregate principal amount equal to the then outstanding principal
amount of the Initial Loans held by such Lender. Upon the making by such
Lender of such Term Loan, each Lender shall cancel on its records a principal
amount of the Initial Loans held by such Lender corresponding to the principal
amount of Term Loans made by such Lender, which corresponding principal amount
of the Initial Loans shall be satisfied by the conversion thereof into Term
Loans in accordance with Section 2.2(b).
(c) Each Lender may at its option make any Eurodollar
Loan by causing any domestic or foreign branch or Affiliate of such Lender to
make such Loan; provided that any exercise of such option shall not affect the
obligation of the Borrower to repay such Loan in accordance with the terms of
this Agreement. Borrowings of more than one Type may be outstanding at the
same time in the event that the Administrative Agent gives notice as provided
in Section 2.6(c). For purposes of the foregoing, Borrowings having different
Interest Periods, regardless of whether they commence on the same date, shall
be considered separate Borrowings.
(d) The failure of any Lender to make the Initial Loan to
be made by it shall not relieve any other Lender of its obligation, if any, to
make its Initial Loan hereunder, but no Lender shall be responsible for the
failure of any other Lender to make the Initial Loan to be made by such other
Lender hereunder.
2.2 Procedure for Borrowing and Conversion. (a) Unless
otherwise agreed by the Administrative Agent, the Borrower shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 10:00 A.M., New York City time, two Business Days
prior to the anticipated Closing Date) requesting that the Lenders make the
Initial Loans on the Closing Date and specifying the amount to be borrowed.
Upon receipt of such notice the Administrative Agent shall promptly notify each
Lender thereof. Not later than 12:00 Noon, New York City time, on the Closing
Date each Lender shall make available to the Administrative Agent at
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29
its office specified in Section 10.2 an amount in immediately available funds
equal to the Initial Loans to be made by such Lender. The Administrative Agent
shall credit the account of the Borrower on the books of such office of the
Administrative Agent with the aggregate of the amounts made available to the
Administrative Agent by the Lenders in immediately available funds.
(b) If the Borrower has not repaid the Initial Loans in
full on or prior to the Initial Maturity Date, then, subject to the right of
any Lender to exchange its Initial Loans for Exchange Notes on the Initial
Maturity Date pursuant to Section 2.3(c), each Lender shall convert the then
outstanding principal amount of the Initial Notes into Term Loans under this
Section 2.2.
2.3 Maturity and Exchange Notes. (a) All the Initial
Loans will mature on the Initial Maturity Date.
(b) All the Term Loans will mature on the Final Maturity
Date.
(c) Each Lender will have the option on or after the
Initial Maturity Date at any time or from time to time to receive Exchange
Notes in exchange for the Term Notes or, on the Initial Maturity Date, the
Initial Loans, of such Lender then outstanding in accordance with Section 5.10
of this Agreement. The principal amount of the Exchange Notes will equal
100.0% of the aggregate principal amount (including any accrued and unpaid
interest not required to be paid in cash) of the Loans for which they are
exchanged. If a Default (but not an Event of Default) shall have occurred and
be continuing on the date of such exchange, any notices given or cure periods
commenced while the Loan was outstanding shall be deemed given or commenced (as
of the actual dates thereof) for all purposes with respect to the Exchange Note
(with the same effect as if the Exchange Note had been outstanding as of the
actual dates thereof).
2.4 Repayment of Loans. The Borrower hereby
unconditionally promises to pay to the Administrative Agent for the account of
each Lender the then due and unpaid principal amount of each Loan in accordance
with the terms hereof and of the Loan Notes. The Borrower hereby further
agrees to pay to the Administrative Agent for the account of each Lender
interest on the unpaid principal amount of the Loans from time to time
outstanding from the date hereof until payment in full thereof at the rates per
annum, and on the dates, set forth in Section 2.6.
2.5 Optional and Mandatory Prepayments. (a) The
Borrower may at any time and from time to time prepay the Loans, in whole or in
part, without premium or penalty, upon irrevocable notice delivered to the
Administrative Agent at least ten Business Days prior thereto, which notice
shall specify the date and amount of prepayment; provided, that if a Loan is
prepaid on any day earlier than the last day of the Interest Period applicable
thereto, the Borrower shall also pay any amounts owing pursuant to Section
2.11, and provided, further, that on or after the Initial Maturity Date, any
prepayment shall be applied pro rata among the Loans and Exchange Notes as
provided in Section 2.5(d) below. Upon receipt of any such notice the
Administrative Agent shall promptly notify each relevant Lender thereof. If
any such notice is given, the amount specified in such notice shall be due and
payable on the date specified therein, together with accrued interest to such
date on the amount prepaid. Partial prepayments of the Loans and the Exchange
Notes shall be in an aggregate principal amount equal to the lesser of (A)
$1,000,000, or a whole multiple thereof, and (B) the aggregate unpaid principal
amount of the Loans and Exchange Notes, as the case may be. Prepayments of the
Loans and Exchange Notes pursuant to this Section 2.5(a) shall be applied to
the outstanding principal amounts of the Loans and Exchange Notes ratably
according to the outstanding principal amounts of such Loans and Exchange Notes
as provided in Section 2.5(d) below.
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(b) (i) If, subsequent to the Closing Date, the Borrower
or any of its Subsidiaries shall issue any Indebtedness (other than, subject to
Section 5.11, the Take-Out Debt) or Capital Stock, an amount equal to 100% of
the Net Cash Proceeds thereof shall be promptly applied toward the prepayment
of the Loans and the Exchange Notes as provided in Section 2.5(d) below;
provided, however, that such Net Cash Proceeds need not be applied to the
prepayment of the Loans and the Exchange Notes to the extent that such Net Cash
Proceeds are applied pursuant to the Senior Credit Agreement.
(ii) If, subsequent to the Closing Date, the Borrower
or any of its Subsidiaries shall be required to apply any Net Available Cash
pursuant to Section 6.4(a)(iii)(B), an amount equal to the Net Available Cash to
be applied pursuant thereto shall be promptly applied toward the prepayment of
the Loans and the Exchange Notes as provided in Section 2.5(d) below.
(iii) The Borrower shall give the Administrative Agent
(which shall promptly notify each Lender) at least three Business Days' prior
written notice of each prepayment in whole or in part pursuant to this
Agreement setting forth the date and amount thereof.
(c) Accrued and unpaid interest on the amount of any
principal of the Loans prepaid under this Section 2.5 shall be paid to and on
the date of such prepayment.
(d) As promptly as practicable after the Administrative
Agent receives notice of a prepayment pursuant to Section 2.5(b)(iii), the
Administrative Agent, in cooperation with any trustee under the Indenture (the
"Trustee"), shall give notice to each holder of an Exchange Note of the pro
rata amount that would be payable to such holder in respect of such holder's
Exchange Note and the expected date of such prepayment. Any holder of
noncallable Exchange Notes that wishes to accept such prepayment (each, an
"Accepting Holder") shall promptly notify the Trustee and the Administrative
Agent in writing. Payments and offers to prepay the Loans and Exchange Notes
shall be made ratably among the Loans and Exchange Notes. After the
Administrative Agent receives the prepayment amount, such prepayment amount
shall be distributed by the Administrative Agent, in cooperation with the
Trustee, subject to Section 2.8(b), in the following order, with appropriate
adjustments being made to account for the receipt by the Trustee of any
prepayment in respect of the Exchange Notes: First, to the payment of all
amounts described in clauses "First" and "Second" of Section 2.8(b)(i); Second,
to the payment of interest then due and payable on the Loans, Exchange Notes of
Accepting Holders and callable Exchange Notes, ratably among the Lenders, the
Accepting Holders and Holders of callable Exchange Notes in accordance with the
aggregate amount of interest owed to each such Lender, Accepting Holder and
Holder; and Third, to the payment of the principal amount of the Loans, the
Exchange Notes of Accepting Holders and the callable Exchange Notes that is
then due and payable, ratably among the Lenders, the Accepting Holders and
Holders of callable Exchange Notes in accordance with the aggregate principal
amount owed to each such Lender, Accepting Holder and Holder. Amounts offered
to and rejected by any Exchange Note holder shall be ratably applied to prepay
the Loans, the Exchange Notes held by Accepting Holders and callable Exchange
Notes. Any offers to prepay non-callable Exchange Notes shall be made in
accordance with the provisions relating thereto in the Indenture, and with
applicable law, and the distribution of the relevant prepayment amount
hereunder shall be made promptly after the expiration of such offer.
2.6 Interest Rates and Payment Dates. (a) Subject to
the provisions of Section 2.6(c), Initial Loans comprising each Eurodollar
Borrowing shall bear interest for the period from and including the date such
Borrowings are made to, but excluding, the Initial Maturity Date on the unpaid
principal thereof at a rate per annum equal to the Adjusted LIBO Rate for the
Interest Period in effect for such Borrowing plus the Applicable Margin;
provided that, in the event of conditions described in
<PAGE> 36
31
clause (c) below, affected Initial Loans shall accrue interest from and
including the date of such event to, but excluding, the Initial Maturity Date
on the unpaid principal thereof at a rate per annum equal to the Alternate Base
Rate from time to time in effect plus the Applicable Margin, less 1%. Initial
Loans comprising ABR Borrowing shall bear interest for the period from and
including the date such Borrowings are made to, but excluding, the Initial
Maturity Date on the unpaid principal thereof at a rate per annum equal to the
Alternate Base Rate from time to time in effect plus the Applicable Margin,
less 1%.
(b) Term Loans shall bear interest for the period from
and including the Initial Maturity Date to, but excluding, the Final Maturity
Date or date of exchange for an Exchange Note on the unpaid principal thereof
at a rate per annum equal to the Adjusted Rate plus the Adjusted Margin.
(c) In the event, and on each occasion, that on the day
prior to the first day of any Interest Period for a Eurodollar Borrowing:
(i) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that,
by reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Adjusted LIBO Rate
for such Interest Period, or
(ii) the Administrative Agent shall have received notice from
the Required Lenders that the Adjusted LIBO Rate determined or to be
determined for such Interest Period will not adequately and fairly
reflect the cost to such Lenders (as conclusively certified by such
Lenders) of making or maintaining their affected Loans during such
Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to
the Borrower and the relevant Lenders as soon as practicable thereafter. In
the event of any such determination, until the Administrative Agent shall have
advised the Borrower and the Lenders that the circumstances giving rise to such
notice no longer exist, each Borrowing shall, on the last day of the current
Interest Periods therefor shall be converted to an ABR Borrowing. Each
determination by the Administrative Agent hereunder shall be conclusive absent
manifest error.
(d) Notwithstanding the foregoing clauses (a), (b), and
(c), the interest rate borne by the Loans shall not exceed 18% per annum. To
the extent the interest on any Loan exceeds a rate of 15% per annum, the
Borrower may elect to pay such excess interest (or portion thereof) by paying
the appropriate PIK Interest Amount through the increase in the principal
amount of the applicable Loans. If requested by any Lender, the Borrower shall
issue Subsequent Initial Notes or Subsequent Term Notes, as the case may be, in
an aggregate principal amount equal to all or a portion of such excess interest
to be paid.
(e) If all or a portion of (i) the principal amount of
any of the Loans, (ii) any interest payable thereon, or (iii) any commitment
fee or other amount payable hereunder shall not be paid when due (whether at
the stated maturity, by acceleration or otherwise, but taking into account any
applicable grace period under Section 7(a)), such Loan and any such overdue
amount shall, without limiting the rights of the Lenders under Section 7, bear
interest at a rate per annum which is (x) in the case of overdue principal, the
rate that would otherwise be applicable thereto pursuant to the foregoing
provisions of this subsection plus 2% or (y) in the case of overdue interest,
commitment fees or other amounts due and payable hereunder, the applicable rate
hereunder for any Loan (but without giving effect to the foregoing clause (x))
plus 2%.
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32
(f) Interest shall be payable in arrears on each Interest
Payment Date and upon the maturity date of the Loan in respect of which any
such interest is accruing, provided that interest accruing pursuant to Section
2.6(e) shall be payable from time to time on demand.
2.7 Computation of Interest and Fees. (a) Interest, fees
and commissions payable pursuant hereto shall be calculated on the basis of a
360-day year for the actual days elapsed, except that, with respect to ABR
Loans the rate of interest on which is calculated on the basis of the Prime
Rate, the interest thereon shall be calculated on the basis of a 365- (or 366-,
as the case may be) day year for the actual days elapsed. The Administrative
Agent shall as soon as practicable notify the Borrower and the relevant Lenders
of each determination of a Eurodollar Rate. Any change in the interest rate on
a Loan resulting from a change in the Alternate Base Rate or the Adjusted LIBO
Rate shall become effective as of the opening of business on the day on which
such change becomes effective. The Administrative Agent shall as soon as
practicable notify the Borrower and the relevant Lenders of the effective date
and the amount of each such change in interest rate.
(b) Each determination of an interest rate by the
Administrative Agent pursuant to any provision of this Agreement shall be
conclusive and binding on the Borrower and the Lenders in the absence of
manifest error. The Administrative Agent shall, at the request of the
Borrower, deliver to the Borrower a statement showing the quotations used by
the Administrative Agent in determining any interest rate pursuant to Section
2.6(a).
2.8 Pro Rata Treatment and Payments. (a) Except to the
extent otherwise provided herein, each borrowing of Loans by the Borrower from
the Lenders and any reduction of the Commitments of the Lenders hereunder shall
be made pro rata according to the relevant Commitment Percentages of the
Lenders with respect to the Loans borrowed or the Commitments to be reduced.
(b) Whenever any payment received by the Administrative
Agent under this Agreement or any Note or any Loan Document is insufficient to
pay in full all amounts then due and payable to the Administrative Agent and
the Lenders under this Agreement:
(i) if the Administrative Agent has not received a
Payment Sharing Notice (or, if the Administrative Agent has received a
Payment Sharing Notice but the Event of Default specified in such
Payment Sharing Notice has been cured or waived in accordance with the
provisions of this Agreement), subject to Section 8, such payment
shall be distributed by the Administrative Agent, in cooperation with
the Trustee, and applied by the Administrative Agent and the Lenders
in the following order, with appropriate adjustment being made to
account for any payment received by the Trustee in respect of the
Exchange Notes: First, to the payment of reasonable fees and expenses
due and payable to the Administrative Agent under and in connection
with this Agreement or any Note Guarantee or due and payable to the
Trustee under the Indenture; Second, to the payment of all reasonable
expenses due and payable under Section 10.5 and any equivalent section
of the Indenture, ratably among the Lenders and the Exchange Note
Holders in accordance with the aggregate amount of such payments owed
to each such Lender or Holder; Third, to the payment of accrued and
unpaid interest then due and payable on the Loans and the Exchange
Notes ratably among the Lenders and the Exchange Note Holders in
accordance with the aggregate amount of interest owed to each Lender
and Exchange Note Holder; and Fourth, to the payment of the principal
amount of the Loans and the Exchange Notes that is then due and
payable, ratably among the Lenders and the Exchange Note Holders in
accordance with the aggregate principal amount owed to each
<PAGE> 38
33
such Lender and Exchange Note Holder (and in the case of any Exchange
Notes that are not prepayable, subject to the provisions of Section
2.5(d)); or
(ii) if the Administrative Agent has received a Payment
Sharing Notice that remains in effect, subject to Section 8, all
payments received by the Administrative Agent under this Agreement or
any Note shall be distributed by the Administrative Agent and applied
by the Administrative Agent, in cooperation with the Trustee, and the
Lenders in the following order, with appropriate adjustment being made
to account for any payment received by the Trustee in respect of the
Exchange Notes: First, to the payment of all amounts described in
clauses "First" and "Second" of the foregoing clause (i), in the order
set forth therein; Second, to the payment of the interest accrued and
unpaid on all Loans and Exchange Notes, regardless of whether any such
amount is then due and payable, ratably among the Lenders and the
Exchange Note Holders in accordance with the aggregate accrued
interest plus the aggregate principal amount owed to such Lender and
the Exchange Note Holders; and Third, to the payment of the principal
amount of all Loans and Exchange Notes, regardless of whether any such
amount is then due and payable, ratably among the Lenders and the
Exchange Note Holders in accordance with the aggregate principal
amount owed to each Lender and Exchange Note Holder (and in the case
of any Exchange Notes that are not prepayable, subject to the
provisions of Section 2.5(d)).
(c) All payments (including prepayments) to be made by
the Borrower on account of principal, interest and fees shall be made without
setoff or counterclaim and shall be made prior to 12:00 Noon, New York City
time, on the due date thereof to the Administrative Agent, for the account of
the Lenders at the Administrative Agent's office located at 270 Park Avenue,
New York, New York 10017, in Dollars and in immediately available funds. The
Administrative Agent shall distribute such payments to the Lenders promptly
upon receipt in like funds as received. If any payment hereunder (other than
payments on the Eurodollar Loans) becomes due and payable on a day other than a
Business Day, such payment shall be extended to the next succeeding Business
Day. If any payment on a Eurodollar Loan becomes due and payable on a day
other than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day unless the result of such extension would be to extend
such payment into another calendar month, in which event such payment shall be
made on the immediately preceding Business Day. In the case of any extension
of any payment of principal pursuant to the preceding two sentences, interest
thereon shall be payable at the then applicable rate during such extension.
(d) Unless the Administrative Agent shall have been
notified in writing by any Lender prior to a borrowing that such Lender will
not make the amount that would constitute its share of such borrowing available
to the Administrative Agent, the Administrative Agent may assume that such
Lender is making such amount available to the Administrative Agent, and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower a corresponding amount. If such amount is not made available to
the Administrative Agent by the required time on the Borrowing Date therefor,
such Lender shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate equal to the daily average Federal Funds Effective
Rate for the period until such Lender makes such amount immediately available
to the Administrative Agent. A certificate of the Administrative Agent
submitted to any Lender with respect to any amounts owing under this Section
2.8(d) shall be conclusive in the absence of manifest error. If such Lender's
share of such borrowing is not made available to the Administrative Agent by
such Lender within three Business Days of such Borrowing Date, the
Administrative Agent shall also be entitled to recover such amount with
interest thereon at the rate per annum applicable to ABR Loans, on demand, from
the Borrower.
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34
2.9 Requirements of Law. (a) If the adoption of or any
change in any Requirement of Law or in the interpretation or application
thereof or compliance by any Lender with any request or directive (whether or
not having the force of law) from any central bank or other Governmental
Authority made subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind
whatsoever with respect to this Agreement, any Letter of Credit, any
Application or any Eurodollar Loan made by it, or change the basis of
taxation of payments to such Lender in respect thereof (except for
Taxes covered by Section 2.10 and changes in the rate of tax on the
overall net income of such Lender);
(ii) shall impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar requirement
against assets held by, deposits or other liabilities in or for the
account of, advances, loans or other extensions of credit by, or any
other acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurodollar Rate
hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting
into, continuing or maintaining Eurodollar Loans, or to reduce any amount
receivable hereunder in respect thereof, then, in any such case, the Borrower
shall promptly pay such Lender, upon its demand, any additional amounts
necessary to compensate such Lender for such increased cost or reduced amount
receivable; provided that the Borrower shall not be required to compensate a
Lender pursuant to this paragraph for any amounts Incurred more than six months
prior to the date that such Lender notifies the Borrower of such Lender's
intention to claim compensation therefor. If any Lender becomes entitled to
claim any additional amounts pursuant to this Section 2.9, it shall promptly
notify (no more frequently than quarterly) the Borrower (with a copy to the
Administrative Agent) of the event by reason of which it has become so
entitled.
(b) If any Lender shall have determined that the adoption
of or any change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder to a level below that which such
Lender or such corporation could have achieved but for such change or
compliance (taking into consideration such Lender's or such corporation's
policies with respect to capital adequacy) by an amount deemed by such Lender
to be material, then from time to time, after submission by such Lender to the
Borrower (with a copy to the Administrative Agent) of a written request
therefor (which may be submitted no more frequently than quarterly), the
Borrower shall pay to such Lender such additional amount or amounts as will
compensate such Lender for such reduction; provided that the Borrower shall not
be required to compensate a Lender pursuant to this paragraph for any amounts
Incurred more than six months prior to the date that such Lender notifies the
Borrower of such Lender's intention to claim compensation therefor; and
provided further that, if the circumstances giving rise to such claim have a
retroactive effect, then such six-month period shall be extended to include the
period of such retroactive effect.
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35
(c) In determining any additional amounts payable
pursuant to this Section 2.9, each Lender will act reasonably and in good faith
and will use averaging and attribution methods which are reasonable, provided
that such Lender's determination of compensation owing under this Section 2.9
shall, absent manifest error, be final and conclusive and binding on all the
parties hereto. Each Lender, upon determining that any additional amounts will
be payable pursuant to this Section 2.9, shall give prompt written notice of
such determination to the Borrower, which notice shall show the basis for
calculation of such additional amounts. The obligations of the Borrower
pursuant to this Section 2.9 shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.
2.10 Taxes. (a) Subject to the last proviso of this
paragraph (a), all payments made by the Borrower under this Agreement shall be
made free and clear of, and without deduction or withholding for or on account
of, any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any Governmental Authority,
excluding net income taxes and franchise taxes (imposed in lieu of net income
taxes) imposed on the Administrative Agent or any Lender as a result of a
present or former connection between the Administrative Agent or such Lender
and the jurisdiction of the Governmental Authority imposing such tax or any
political subdivision or taxing authority thereof or therein (other than any
such connection arising solely from the Administrative Agent or such Lender
having executed, delivered or performed its obligations or received a payment
under, or enforced, this Agreement or any other Loan Document). If any such
non-excluded taxes, levies, imposts, duties, charges, fees, deductions or
withholdings ("Non-Excluded Taxes") or Other Taxes are required to be withheld
from any amounts payable to the Administrative Agent or any Lender hereunder,
the amounts so payable to the Administrative Agent or such Lender shall be
increased to the extent necessary to yield to the Administrative Agent or such
Lender (after payment of all Non-Excluded Taxes and Other Taxes) interest or
any such other amounts payable hereunder at the rates or in the amounts
specified in this Agreement, provided, however, that the Borrower shall not be
required to increase any such amounts payable to any Lender with respect to any
Non-Excluded Taxes (i) that are attributable to such Lender's failure to comply
with the requirements of paragraph (d) or (e) of this Section or (ii) that are
United States withholding taxes imposed on amounts payable to such Lender at
the time the Lender becomes a party to this Agreement, except to the extent
that such Lender's assignor (if any) was entitled, at the time of assignment,
to receive additional amounts from the Borrower with respect to such Non-
Excluded Taxes pursuant to this paragraph.
(b) In addition, the Borrower shall pay any Other Taxes
to the relevant Governmental Authority in accordance with applicable law.
(c) Whenever any Non-Excluded Taxes or Other Taxes are
payable by the Borrower, as promptly as possible thereafter the Borrower shall
send to the Administrative Agent for its own account or for the account of the
relevant Lender, as the case may be, a certified copy of an original official
receipt received by the Borrower showing payment thereof. If the Borrower
fails to pay any Non-Excluded Taxes or Other Taxes when due to the appropriate
taxing authority or fails to remit to the Administrative Agent the required
receipts or other required documentary evidence, the Borrower shall indemnify
the Administrative Agent and the Lenders for any incremental taxes, interest or
penalties that may become payable by the Administrative Agent or any Lender as
a result of any such failure.
(d) Each Lender (or Transferee) that is not a citizen or
resident of the United States of America, a corporation, partnership or other
entity created or organized in or under the laws of the
<PAGE> 41
36
United States of America (or any state thereof), or any estate or trust that is
subject to federal income taxation regardless of the source of its income (a
"Non-U.S. Lender") shall deliver to the Borrower and the Administrative Agent
(or, in the case of a Participant, to the Lender from which the related
participation shall have been purchased) two copies of either U.S. Internal
Revenue Service Form 1001 or Form 4224, or, in the case of a Non-U.S. Lender
claiming exemption from U.S. federal withholding tax under Section 871(h) or
881(c) of the Code with respect to payments of "portfolio interest", a
statement substantially in the form of Exhibit H and a Form W-8, or any
subsequent versions thereof or successors thereto, properly completed and duly
executed by such Non-U.S. Lender claiming complete exemption from, or a reduced
rate of, U.S. federal withholding tax on all payments by the Borrower under
this Agreement and the other Loan Documents. Such forms shall be delivered by
each Non-U.S. Lender on or before the date it becomes a party to this Agreement
(or, in the case of any Participant, on or before the date such Participant
purchases the related participation). In addition, each Non-U.S. Lender shall
deliver such forms promptly upon the request of the Borrower as a result of the
obsolescence, inaccuracy or invalidity of any form previously delivered by such
Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify the Borrower at
any time it determines that it is no longer qualified to provide or capable of
providing any previously delivered certificate to the Borrower (or any other
form of certification adopted by the U.S. taxing authorities for such purpose).
Notwithstanding any other provision of this paragraph, a Non-U.S. Lender shall
not be required to deliver any form pursuant to this paragraph that such
Non-U.S. Lender is not legally able to deliver.
(e) A Lender that is entitled to an exemption from or
reduction of non-U.S. withholding tax under the law of the jurisdiction in
which the Borrower is located, or any treaty to which such jurisdiction is a
party, with respect to payments under this Agreement shall deliver to the
Borrower (with a copy to the Administrative Agent), at the time or times
prescribed by applicable law or reasonably requested by the Borrower, such
properly completed and executed documentation prescribed by applicable law as
will permit such payments to be made without withholding or at a reduced rate,
provided that such Lender is legally entitled to complete, execute and deliver
such documentation and in such Lender's judgment such completion, execution or
submission would not materially prejudice the legal position of such Lender.
(f) If any Lender receives a refund of any Non-Excluded
Taxes or Other Taxes paid or indemnified by the Borrower under this Section
2.10, such Lender shall pay the amount of such refund to the Borrower within 15
days of the date it received such refund.
(g) The agreements in this Section shall survive the
termination of this Agreement and the payment of the Loans and all other
amounts payable hereunder.
2.11 Indemnity. The Borrower agrees to indemnify each
Lender and to hold each Lender harmless from any loss or expense that such
Lender may sustain or incur as a consequence of (a) default by the Borrower in
making a borrowing of, conversion into or continuation of Eurodollar Loans
after the Borrower has given a notice requesting the same in accordance with
the provisions of this Agreement, (b) default by the Borrower in making any
prepayment of or conversion from Eurodollar Loans after the Borrower has given
a notice thereof in accordance with the provisions of this Agreement or (c) the
making of a prepayment of Eurodollar Loans on a day that is not the last day of
an Interest Period with respect thereto. Such indemnification may include an
amount equal to the excess, if any, of (i) the amount of interest that would
have accrued on the amount so prepaid, or not so borrowed, converted or
continued, for the period from the date of such prepayment or of such failure
to borrow, convert or continue to the last day of such Interest Period (or, in
the case of a failure to borrow, convert or continue, the Interest Period that
would have commenced on the date of such
<PAGE> 42
37
failure) in each case at the applicable rate of interest for such Loans
provided for herein (excluding, however, the Applicable Margin included
therein, if any) over (ii) the amount of interest (as reasonably determined by
such Lender) that would have accrued to such Lender on such amount by placing
such amount on deposit for a comparable period with leading banks in the
interbank eurodollar market. A certificate as to any amounts payable pursuant
to this Section submitted to the Borrower by any Lender shall be conclusive in
the absence of manifest error. This covenant shall survive the termination of
this Agreement and the payment of the Loans and all other amounts payable
hereunder.
2.12 Change of Lending Office. Each Lender agrees that,
upon the occurrence of any event giving rise to the operation of Section 2.9 or
2.10(a) with respect to such Lender, it will use reasonable efforts (subject to
overall policy considerations of such Lender) to designate another lending
office for any Loans affected by such event with the object of avoiding the
consequences of such event; provided, that such designation is made on terms
that, in the sole judgment of such Lender, cause such Lender and its lending
office(s) to suffer no economic, legal or regulatory disadvantage, and
provided, further, that nothing in this Section 2.12 shall affect or postpone
any of the obligations of any Borrower or the rights of any Lender pursuant to
Section 2.9 or 2.10(a).
2.13 Replacement Lenders. The Borrower shall be permitted
to replace any Lender which (a) requests reimbursement for amounts owing
pursuant to Section 2.9 or 2.10 or (b) defaults in its obligation to make loans
hereunder, with a replacement financial institution; provided that (i) such
replacement does not conflict with any Requirement of Law, (ii) no Event of
Default shall have occurred and be continuing at the time of such replacement,
(iii) prior to any such replacement, such Lender shall not have eliminated the
continued need for payment of amounts owing pursuant to Section 2.9 or 2.10,
(iv) the replacement financial institution shall purchase, at par, all Loans
and other amounts owing to such replaced Lender on or prior to the date of
replacement, (v) the Borrower shall be liable to such replaced Lender under
Section 2.11 if any Eurodollar Loan owing to such replaced Lender shall be
purchased other than on the last day of the Interest Period relating thereto,
(vi) the replacement financial institution, if not already a Lender, shall be
reasonably satisfactory to the Administrative Agent, (vii) the replaced Lender
shall be obligated to make such replacement in accordance with the provisions
of Section 10.6 (provided that the Borrower shall be obligated to pay the
registration and processing fee referred to therein), (viii) until such time as
such replacement shall be consummated, the Borrower shall pay all additional
amounts (if any) required pursuant to Section 2.9 or 2.10, as the case may be,
and (ix) any such replacement shall not be deemed to be a waiver of any rights
which the Borrower, the Administrative Agent or any other Lender shall have
against the replaced Lender.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter
into this Agreement and to make the Loans, the Borrower hereby represents and
warrants to the Administrative Agent and each Lender as of the Closing Date
that:
3.1 Financial Condition. (a) The unaudited pro forma
consolidated balance sheet and statement of operations of the Borrower and its
consolidated Subsidiaries as at, or for the period of four consecutive fiscal
quarters ended, March 31, 1998 (the "Pro Forma Financial Statements"), copies
of which have heretofore been furnished to each Lender, have been prepared
giving effect (as if such events had occurred on such date or at the beginning
of such period, as the case may be) to (i) the consummation of the Acquisition,
(ii) the Loans to be made, the loans under the Senior Credit
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38
Agreement to be made and the Preferred Stock to be issued on the Closing Date
and the use of proceeds thereof and (iii) the payment of fees and expenses in
connection with the foregoing. The Pro Forma Financial Statements have been
prepared based on the best information available to the Borrower as of the date
of delivery thereof, and present fairly on a pro forma basis the estimated
financial position of Borrower and its consolidated Subsidiaries as at, or for
the period of four consecutive fiscal quarters ended, March 31, 1998, assuming
that the events specified in the preceding sentence had actually occurred at
such date or at the beginning of such period, as the case may be.
(b) The audited consolidated balance sheets of the
Borrower as at December 31, 1995, December 31, 1996 and December 31, 1997, and
the related consolidated statements of operations, stockholder's equity and
cash flows for the fiscal years ended on such dates, reported on by and
accompanied by an unqualified report from Grant Thornton LLP, present fairly
the consolidated financial condition of the Borrower as at such date, and the
consolidated results of its operations and its consolidated cash flows for the
respective fiscal years then ended. The unaudited consolidated balance sheet
of the Borrower as at March 31, 1998, and the related unaudited consolidated
statements of operations, stockholder's equity and cash flows for the three-
month period ended on such date, present fairly the consolidated financial
condition of the Borrower as at such date, and the consolidated results of its
operations and its consolidated cash flows for the three-month period then
ended (subject to normal year-end audit adjustments). All such financial
statements have been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as approved by the aforementioned firm
of accountants and disclosed therein). The Borrower and its Subsidiaries do
not have any material Guarantee Obligations, contingent liabilities and
liabilities for taxes, or any long-term leases or unusual forward or long-term
commitments, including any interest rate or foreign currency swap or exchange
transaction or other obligation in respect of derivatives, that are not
reflected in the most recent financial statements referred to in this
paragraph. During the period from December 31, 1997 to and including the date
hereof there has been no Disposition by the Borrower or any of its Subsidiaries
of any material part of its business or property.
(c) The Borrower has provided to the Lenders the audited
consolidated balance sheets of the Acquired Company as at March 31, 1996, March
31, 1997 and March 31, 1998, and the related consolidated statements of
operations, stockholder's equity and cash flows for the fiscal years ended on
such dates, reported on by and accompanied by an unqualified report from Ernst
& Young LLP (the "Audited Acquired Company Financials"), as adjusted in certain
respects by the Borrower in order to achieve consistency with the Borrower's
customary presentation of financial information. Such adjustments do not
unfairly present the consolidated financial condition of the Acquired Company
as at such date, and the consolidated results of its operations and its
consolidated cash flows for the respective fiscal years then ended, in each
case as reflected in the Audited Acquired Company Financials.
3.2 No Change. Since March 31, 1998 there has been no
development or event that has had or could reasonably be expected to have a
Material Adverse Effect.
3.3 Corporate Existence; Compliance with Law. Each of
the Borrower and its Subsidiaries (a) is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization, (b)
has the corporate power and authority, and the legal right, to own and operate
its property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification, except to the extent that the failure to be so
qualified and in good
<PAGE> 44
39
standing could not, in the aggregate, reasonably be expected to have a Material
Adverse Effect, and (d) is in compliance with all Requirements of Law except to
the extent that the failure to comply therewith could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect.
3.4 Corporate Power; Authorization; Enforceable
Obligations. Each Loan Party has the corporate power and authority, and the
legal right, to make, deliver and perform the Loan Documents to which it is a
party and, in the case of the Borrower, to borrow hereunder. Each Loan Party
has taken all necessary corporate action to authorize the execution, delivery
and performance of the Loan Documents to which it is a party and, in the case
of the Borrower, to authorize the borrowings on the terms and conditions of
this Agreement. No consent or authorization of, filing with, notice to or
other act by or in respect of, any Governmental Authority or any other Person
is required in connection with the Acquisition and the borrowings hereunder or
with the execution, delivery, performance, validity or enforceability of this
Agreement or any of the Loan Documents, except consents, authorizations,
filings and notices described in Schedule 3.4, which consents, authorizations,
filings and notices have been obtained or made and are in full force and
effect. Each Loan Document has been duly executed and delivered on behalf of
each Loan Party party thereto. This Agreement constitutes, and each other Loan
Document upon execution will constitute, a legal, valid and binding obligation
of each Loan Party party thereto, enforceable against each such Loan Party in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).
3.5 No Legal Bar. The execution, delivery and
performance of this Agreement and the other Loan Documents, the borrowings
hereunder and the use of the proceeds thereof will not violate any Requirement
of Law or any material Contractual Obligation of the Borrower or any of its
Subsidiaries and will not result in, or require, the creation or imposition of
any Lien on any of their respective properties or revenues pursuant to any
Requirement of Law or any such Contractual Obligation. No Requirement of Law
or Contractual Obligation applicable to the Borrower or any of its Subsidiaries
could reasonably be expected to have a Material Adverse Effect.
3.6 Litigation. Except as set forth on Schedule 3.6, no
litigation, investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the knowledge of the Borrower,
threatened by or against the Borrower or any of its Subsidiaries or against any
of their respective properties or revenues (a) with respect to any of the Loan
Documents or any of the transactions contemplated hereby or thereby, or (b)
that could reasonably be expected to have a Material Adverse Effect.
3.7 No Default. Neither the Borrower nor any of its
Subsidiaries is in default under or with respect to any of its Contractual
Obligations in any respect that could reasonably be expected to have a Material
Adverse Effect. No Default or Event of Default has occurred and is continuing.
3.8 Ownership of Property; Liens. Each of the Borrower
and its Subsidiaries has title in fee simple to, or a valid leasehold interest
in, all its material real property, and good title to, or a valid leasehold
interest in, all its other material property, and none of such property is
subject to any Lien except as permitted by Section 6.5.
3.9 Intellectual Property. The Borrower and each of its
Subsidiaries owns, or is licensed to use, all Intellectual Property necessary
for the conduct of its business as currently
<PAGE> 45
40
conducted. No material claim has been asserted and is pending by any Person
challenging or questioning the use of any Intellectual Property or the validity
or effectiveness of any Intellectual Property, nor does the Borrower know of
any valid basis for any such claim. The use of Intellectual Property by the
Borrower and its Subsidiaries does not infringe on the rights of any Person in
any material respect.
3.10 Taxes. Each of the Borrower and each of its
Subsidiaries has filed or caused to be filed all Federal, state and other
material tax returns that are required to be filed and has paid all taxes shown
to be due and payable on said returns or on any assessments made against it or
any of its property and all other taxes, fees or other charges imposed on it or
any of its property by any Governmental Authority to the extent due and payable
(other than any the amount or validity of that are currently being contested in
good faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided on the books of the Borrower or its
Subsidiaries, as the case may be); no material tax Lien has been filed, and, to
the knowledge of the Borrower, no claim is being asserted, with respect to any
such tax, fee or other charge.
3.11 Federal Regulations. No part of the proceeds of any
Loans will be used for "buying" or "carrying" any "margin stock" within the
respective meanings of each of the quoted terms under Regulation U as now and
from time to time hereafter in effect or for any purpose that violates the
provisions of the Regulations of the Board. If requested by any Lender or the
Administrative Agent, the Borrower will furnish to the Administrative Agent and
each Lender a statement to the foregoing effect in conformity with the
requirements of FR Form G-3 or FR Form U-1, as applicable, referred to in
Regulation U.
3.12 Labor Matters. Except as set forth on Schedule 3.6
and as, in the aggregate, could not reasonably be expected to have a Material
Adverse Effect: (a) there are no strikes or other labor disputes against the
Borrower or any of its Subsidiaries pending or, to the knowledge of the
Borrower, threatened; (b) hours worked by and payment made to employees of the
Borrower and its Subsidiaries have not been in violation of the Fair Labor
Standards Act or any other applicable Requirement of Law dealing with such
matters; and (c) all payments due from the Borrower or any of its Subsidiaries
on account of employee health and welfare insurance have been paid or accrued
as a liability on the books of the Borrower or the relevant Subsidiary.
3.13 ERISA. Neither a Reportable Event nor an
"accumulated funding deficiency" (within the meaning of Section 412 of the Code
or Section 302 of ERISA) has occurred during the five-year period prior to the
date on which this representation is made or deemed made with respect to any
Plan, and each Plan has complied in all material respects with the applicable
provisions of ERISA and the Code. No termination of a Single Employer Plan has
occurred, and no Lien against the Borrower or any Commonly Controlled Entity
and in favor of the PBGC or a Plan has arisen, during such five-year period.
The present value of all accrued benefits under each Single Employer Plan
(based on those assumptions used to fund such Plans) did not, as of the last
annual valuation date prior to the date on which this representation is made or
deemed made, exceed the value of the assets of such Plan allocable to such
accrued benefits by a material amount. Neither the Borrower nor any Commonly
Controlled Entity has had a complete or partial withdrawal from any
Multiemployer Plan that has resulted or could reasonably be expected to result
in a material liability under ERISA, and neither the Borrower nor any Commonly
Controlled Entity would become subject to any material liability under ERISA if
the Borrower or any such Commonly Controlled Entity were to withdraw completely
from all Multiemployer Plans as of the valuation date most closely preceding
the date on
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41
which this representation is made or deemed made. No such Multiemployer Plan
is in Reorganization or Insolvent.
3.14 Investment Company Act; Other Regulations. No Loan
Party is an "investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended.
No Loan Party is subject to regulation under any Requirement of Law (other than
Regulation X of the Board) that limits its ability to incur Indebtedness.
3.15 Subsidiaries. Except as disclosed to the
Administrative Agent by the Borrower in writing from time to time after the
Closing Date, (a) Schedule 3.15 sets forth the name and jurisdiction of
incorporation of each Subsidiary and, as to each such Subsidiary, the
percentage of each class of Capital Stock owned by any Loan Party and (b) there
are no outstanding subscriptions, options, warrants, calls, rights or other
agreements or commitments (other than stock options granted to employees or
directors and directors' qualifying shares) of any nature relating to any
Capital Stock of the Borrower or any Subsidiary, except as created by the Loan
Documents.
3.16 Use of Proceeds. The proceeds of the Loans shall be
used to finance a portion of the Acquisition, to repay certain existing
Indebtedness of the Borrower and its Subsidiaries and to pay related fees and
expenses.
3.17 Environmental Matters. Except as, in the aggregate,
could not reasonably be expected to have a Material Adverse Effect:
(a) the facilities and properties owned, leased or operated
by the Borrower or any of its Subsidiaries (the "Properties") do not
contain, and have not previously contained, any Materials of
Environmental Concern in amounts or concentrations or under
circumstances that constitute or constituted a violation of, or could
give rise to liability under, any Environmental Law;
(b) neither the Borrower nor any of its Subsidiaries has
received or is aware of any notice of violation, alleged violation,
non-compliance, liability or potential liability regarding
environmental matters or compliance with Environmental Laws with
regard to any of the Properties or the business operated by the
Borrower or any of its Subsidiaries (the "Business"), nor does the
Borrower have knowledge or reason to believe that any such notice will
be received or is being threatened;
(c) Materials of Environmental Concern have not been
transported or disposed of from the Properties in violation of, or in
a manner or to a location that could give rise to liability under, any
Environmental Law, nor have any Materials of Environmental Concern
been generated, treated, stored or disposed of at, on or under any of
the Properties in violation of, or in a manner that could give rise to
liability under, any applicable Environmental Law;
(d) no judicial proceeding or governmental or administrative
action is pending or, to the knowledge of the Borrower, threatened,
under any Environmental Law to which the Borrower or any Subsidiary is
or will be named as a party with respect to the Properties or the
Business, nor are there any consent decrees or other decrees, consent
orders, administrative orders or other orders, or other administrative
or judicial requirements outstanding under any Environmental Law with
respect to the Properties or the Business;
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42
(e) there has been no release or threat of release of
Materials of Environmental Concern at or from the Properties, or
arising from or related to the operations of the Borrower or any
Subsidiary in connection with the Properties or otherwise in
connection with the Business, in violation of or in amounts or in a
manner that could give rise to liability under Environmental Laws;
(f) the Properties and all operations at the Properties are
in compliance, and have in the last five years been in compliance,
with all applicable Environmental Laws, and there is no contamination
at, under or about the Properties or violation of any Environmental
Law with respect to the Properties or the Business; and
(g) neither the Borrower nor any of its Subsidiaries has
assumed any liability of any other Person under Environmental Laws.
3.18 Accuracy of Information, etc. No statement or
information contained in this Agreement, any other Loan Document or any other
document, certificate or statement furnished by or on behalf of any Loan Party
to the Administrative Agent or the Lenders, or any of them, for use in
connection with the transactions contemplated by this Agreement or the other
Loan Documents, contained as of the date such statement, information, document
or certificate was so furnished, any untrue statement of a material fact or
omitted to state a material fact necessary to make the statements contained
herein or therein not misleading. The projections and pro forma financial
information contained in the materials referenced above are based upon good
faith estimates and assumptions believed by management of the Borrower to be
reasonable at the time made, it being recognized by the Lenders that such
financial information as it relates to future events is not to be viewed as
fact and that actual results during the period or periods covered by such
financial information may differ from the projected results set forth therein
by a material amount. As of the date hereof, the representations and
warranties made by the Borrower and, to the Borrower's knowledge, made by the
Seller and Thorn plc, in the Acquisition Documentation are true and correct in
all material respects. There is no fact known to any Loan Party that could
reasonably be expected to have a Material Adverse Effect that has not been
expressly disclosed herein, in the other Loan Documents or in any other
documents, certificates and statements furnished to the Administrative Agent
and the Lenders for use in connection with the transactions contemplated hereby
and by the other Loan Documents.
3.19 Solvency. Each Loan Party is, and after giving
effect to the Acquisition and the incurrence of all Indebtedness and
obligations being incurred in connection herewith and therewith will be and
will continue to be, Solvent.
3.20 Year 2000 Matters. Any reprogramming required to
permit the proper functioning (but only to the extent that such proper
functioning would otherwise be impaired by the occurrence of the year 2000) in
and following the year 2000 of computer systems and other equipment containing
embedded microchips, in either case owned or operated by the Borrower or any of
its Subsidiaries or used or relied upon in the conduct of their business
(including any such systems and other equipment supplied by others), and the
testing of all such systems and other equipment as so reprogrammed, will be
completed by June 30, 1999. The costs to the Borrower and its Subsidiaries
that have not been incurred as of the date hereof for such reprogramming and
testing and for the other reasonably foreseeable consequences to them of any
improper functioning of other computer systems and equipment containing
embedded microchips due to the occurrence of the year 2000 could not reasonably
be expected to result in a Default or Event of Default or to have a Material
Adverse Effect. Except for any reprogramming referred to above, the computer
systems of the Borrower and its
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43
Subsidiaries are and, with ordinary course upgrading and maintenance, will
continue for the term of this Agreement to be, sufficient for the conduct of
their business as currently conducted.
SECTION 4. CONDITIONS PRECEDENT
The agreement of each Lender to make the Initial Loan
requested to be made by it is subject to the satisfaction, immediately prior to
or concurrently with the making of such Loan on the Closing Date, of the
following conditions precedent:
(a) Loan Documents. The Administrative Agent shall have
received (i) this Agreement, executed and delivered by a duly
authorized officer of the Borrower with a counterpart for each Lender,
(ii) for the account of each Lender requesting the same, a Loan Note
conforming to the requirements hereof and executed by a duly
authorized officer of the Borrower (iii) the Warrant Agreement
(including the registration rights agreement attached thereto) and the
Warrant Escrow Agreement, each executed and delivered by a duly
authorized officer of the Borrower and the Borrower shall have
executed and placed in escrow under the Warrant Escrow Agreement
Warrants representing 2% of the Borrower's outstanding common equity
on a fully diluted basis and (iv) the Subsidiary Guarantees, each
executed and delivered by a duly authorized officer of the respective
Subsidiary Guarantors.
(b) Senior Credit Agreement. The Lenders shall have
received a complete and correct copy of the Senior Credit Agreement,
in form and substance satisfactory to the Lenders, and such agreement
shall be in full force and effect and none of the provisions thereof
shall have been amended, waived, supplemented, or otherwise modified
without the prior written consent of the Administrative Agent.
(c) Financings. All conditions precedent for the funding
of the Senior Credit Agreement shall have been satisfied or waived
contemporaneously with the satisfaction of the conditions hereunder
and such funding shall occur contemporaneously with the funding of the
Initial Loans, in each case on terms and conditions satisfactory to
the Administrative Agent, and none of the material terms and
conditions of the Transaction Documents shall have been waived without
the consent of the Administrative Agent.
(d) Acquisition, etc. The following transactions shall
have been consummated prior to or concurrently with the funding of the
initial Loans hereunder:
(i) the Borrower shall have acquired 100% of the
outstanding Capital Stock of the Acquired Company in
accordance with the terms and conditions of the Acquisition
Agreement (the "Acquisition") for a purchase price (including
approximately $27,000,000 of change of control bonuses paid on
the Closing Date on behalf of Thorn plc) not exceeding
$900,000,000;
(ii) the Borrower shall have received at least
$235,000,000 in gross cash proceeds from the issuance of
preferred stock (the "Apollo Preferred Stock") to the Sponsor;
(iii) the transaction fees and expenses to be
incurred in connection with the Acquisition and the financing
thereof shall not exceed $40,000,000; and
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44
(iv) (i) the Administrative Agent shall have
received satisfactory evidence that the Existing Credit
Agreement shall have been terminated and all amounts
thereunder shall have been paid in full and (ii) satisfactory
arrangements shall have been made for the termination of all
Liens granted in connection therewith.
(e) Pro Forma Financial Statements; Financial Statements.
The Lenders shall have received (i) the Pro Forma Financial Statements
and (ii) the consolidated financial statements of the Borrower and the
Acquired Company referred to in Sections 3.1(b) and 3.1(c).
(f) Approvals. All governmental and material third party
approvals necessary in connection with the Acquisition, the continuing
operations of the Borrower and its Subsidiaries and the transactions
contemplated hereby shall have been obtained and be in full force and
effect, and all applicable waiting periods shall have expired without
any action being taken by any competent authority that would restrain,
prevent or otherwise impose materially adverse conditions on the
Acquisition or the financing contemplated hereby.
(g) Closing Certificate. The Administrative Agent shall
have received, with a counterpart for each Lender, a certificate of
each Loan Party, dated the Closing Date, substantially in the form of
Exhibit D, with appropriate insertions and attachments.
(h) Legal Opinions. The Administrative Agent shall have
received the following executed legal opinions:
(i) the legal opinion of Winstead Sechrest & Minick
P.C., counsel to the Borrower and its Subsidiaries;
(ii) the legal opinion of Arnold & Porter, New York
counsel to the Borrower and its Subsidiaries;
(iii) the legal opinion of Stinson, Mag & Fizzell,
P.C., Kansas counsel of the Borrower and its Subsidiaries; and
(iv) to the extent consented to by the relevant
counsel, each legal opinion, if any, delivered in connection
with the Acquisition Agreement, accompanied by a reliance
letter in favor of the Lenders.
Each such legal opinion shall cover such matters incident to the
transactions contemplated by this Agreement as the Administrative
Agent may reasonably require.
(i) Solvency Opinion. The Administrative Agent shall
have received a solvency opinion from Valuation Research Corporation.
(j) Take-Out Debt. The Borrower shall have delivered to
the Administrative Agent a substantially complete initial draft of a
registration statement or a Rule 144A offering memorandum relating to
the Take-Out Debt (including audited financial statements or draft
audited financial statements for the three preceding years, pro forma
financial information and such other financial information as may be
required by applicable law).
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45
(k) Representations and Warranties. Each of the
representations and warranties made in or pursuant to Section 3 or
that are contained in any other Loan Document shall be true and
correct in all material respects on and as of the date of such Loan as
if made on and as of such date (unless stated to related to a specific
earlier date, in which case, such representations and warranties shall
be true and correct in all material respects as of such earlier date).
(l) No Default. No Default or Event of Default shall
have occurred and be continuing on the Closing Date or after giving
effect to the Initial Loans to be made on the Closing Date.
SECTION 5. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments
remain in effect, any Loan or Loan Note remains outstanding and unpaid, or any
other amount is owing to any Lender or the Administrative Agent hereunder or
under any of the other Loan Documents (other than the Exchange Notes or the
Indenture), the Borrower shall and shall cause each of its Subsidiaries to:
5.1 Financial Statements. Furnish to the Administrative
Agent with sufficient copies for each Lender:
(a) as soon as available, but in any event within 90 days
after the end of each fiscal year of the Borrower, a copy of the
audited consolidated balance sheet of the Borrower and its
consolidated Subsidiaries as at the end of such year and the related
audited consolidated statements of income and of cash flows for such
year, setting forth in each case in comparative form the figures for
the previous year, reported on without a "going concern" or like
qualification or exception, or qualification arising out of the scope
of the audit, by Grant Thornton LLP or other independent certified
public accountants of nationally recognized standing; and
(b) as soon as available, but in any event not later than
45 days after the end of each of the first three quarterly periods of
each fiscal year of the Borrower, the unaudited consolidated balance
sheet of the Borrower and its consolidated Subsidiaries as at the end
of such quarter and the related unaudited consolidated statements of
income and of cash flows for such quarter and the portion of the
fiscal year through the end of such quarter, setting forth in each
case in comparative form the figures for the previous year, certified
by a Responsible Officer as being fairly stated in all material
respects (subject to normal year-end audit adjustments and the absence
of notes thereto).
All such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
5.2 Certificates; Other Information. Furnish to the
Administrative Agent with sufficient copies for each Lender (or, in the case of
clause (g), to the relevant Lender):
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46
(a) concurrently with the delivery of the financial
statements referred to in Section 5.1(a), a certificate of the
independent certified public accountants reporting on such financial
statements stating that in making the examination necessary therefor
no knowledge was obtained of any Default or Event of Default, except
as specified in such certificate;
(b) concurrently with the delivery of any financial
statements pursuant to Section 5.1, (i) a certificate of a Responsible
Officer stating that, to the best of each such Responsible Officer's
knowledge, each Loan Party during such period has observed or
performed all of its covenants and other agreements, and satisfied
every condition, contained in this Agreement and the other Loan
Documents to which it is a party to be observed, performed or
satisfied by it, and that such Responsible Officer has obtained no
knowledge of any Default or Event of Default except as specified in
such certificate and (ii) in the case of quarterly or annual financial
statements, (x) a Compliance Certificate containing all information
and calculations necessary for determining compliance by the Borrower
and its Subsidiaries with the provisions of this Agreement referred to
therein as of the last day of the fiscal quarter or fiscal year of the
Borrower, as the case may be, and (y) to the extent not previously
disclosed to the Administrative Agent, a listing of each new
Subsidiary of any Loan Party;
(c) as soon as available, and in any event no later than
45 days after the end of each fiscal year of the Borrower, a detailed
consolidated budget for the following fiscal year (including a
projected consolidated balance sheet of the Borrower and its
Subsidiaries as of the end of the following fiscal year, the related
consolidated statements of projected cash flow, projected changes in
financial position and projected income and a description of the
underlying assumptions applicable thereto), and, as soon as available,
significant revisions, if any, of such budget and projections with
respect to such fiscal year (collectively, the "Projections"), which
Projections shall in each case be accompanied by a certificate of a
Responsible Officer stating that such Projections are based on
reasonable estimates, information and assumptions and that such
Responsible Officer has no reason to believe that such Projections are
incorrect or misleading in any material respect;
(d) within 45 days after the end of each of the first
three fiscal quarters of each fiscal year of the Borrower, a narrative
discussion and analysis of the financial condition and results of
operations of the Borrower and its Subsidiaries for such fiscal
quarter and for the period from the beginning of the then current
fiscal year to the end of such fiscal quarter, as compared to the
portion of the Projections covering such periods and to the comparable
periods of the previous year; provided that delivery of the Report on
Form 10-Q filed with the SEC with respect to such fiscal quarter shall
be deemed to satisfy the foregoing requirement;
(e) no later than five Business Days prior to the
effectiveness thereof, copies of substantially final drafts of any
proposed amendment, supplement, waiver or other modification with
respect to the Acquisition Documentation;
(f) within five Business Days after the same are sent,
copies of all financial statements and reports that the Borrower sends
to the holders of any class of its debt securities or public equity
securities and, within five Business Days after the same are filed,
copies of all financial statements and reports that the Borrower may
make to, or file with, the SEC; and
(g) promptly, such additional financial and other
information as any Lender may from time to time reasonably request.
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5.3 Payment of Obligations. Pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all its material obligations of whatever nature, except where the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP with respect thereto have been
provided on the books of the Borrower or its Subsidiaries, as the case may be.
5.4 Maintenance of Existence; Compliance. (a) (i)
Preserve, renew and keep in full force and effect its corporate existence and
(ii) take all reasonable action to maintain all rights, privileges and
franchises necessary or desirable in the normal conduct of its business,
except, in each case, as otherwise permitted by Section 6.8 and except, in the
case of clause (ii) above, to the extent that failure to do so could not
reasonably be expected to have a Material Adverse Effect; and (b) comply with
all Contractual Obligations and Requirements of Law except to the extent that
failure to comply therewith could not, in the aggregate, reasonably be expected
to have a Material Adverse Effect.
5.5 Maintenance of Property; Insurance. (a) Keep all
property useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted, and (b) maintain with financially
sound and reputable insurance companies insurance on all its property in at
least such amounts and against at least such risks (but including in any event
public liability, product liability and business interruption expense coverage)
as are usually insured against in the same general area by companies engaged in
the same or a similar business.
5.6 Books and Records. Keep proper books of records and
account in which full, true and correct entries in conformity with GAAP and all
Requirements of Law shall be made of all dealings and transactions in relation
to its business and activities.
5.7 Notices. Promptly give notice to the Administrative
Agent with sufficient copies for each Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any
Contractual Obligation of the Borrower or any of its Subsidiaries or
(ii) litigation, investigation or proceeding that may exist at any
time between the Borrower or any of its Subsidiaries and any
Governmental Authority, that in either case, if not cured or if
reasonably expected to be adversely determined, as the case may be,
could reasonably be expected to have a Material Adverse Effect;
(c) any litigation or proceeding affecting the Borrower
or any of its Subsidiaries in which the amount claimed is $5,000,000
or more and not covered by insurance or in which injunctive or similar
relief is sought which could reasonably be expected to be granted and
which, if granted, could reasonably be expected to have a Material
Adverse Effect;
(d) the following events, as soon as possible and in any
event within 30 days after the Borrower knows or has reason to know
thereof: (i) the occurrence of any Reportable Event with respect to
any Plan, a failure to make any required contribution to a Plan, the
creation of any Lien in favor of the PBGC or a Plan or any withdrawal
from, or the termination, Reorganization or Insolvency of, any
Multiemployer Plan or (ii) the institution of proceedings or the
taking of any other action by the PBGC or the Borrower or any Commonly
Controlled
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48
Entity or any Multiemployer Plan with respect to the withdrawal from,
or the termination, Reorganization or Insolvency of, any Single
Employer Plan or Multiemployer Plan; and
(e) any development or event that has had or could
reasonably be expected to have a Material Adverse Effect.
Each notice pursuant to this Section 5.7 shall be accompanied by a statement of
a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action the Borrower or the relevant Subsidiary
proposes to take with respect thereto.
5.8 Environmental Laws. Except as could not reasonably
be expected to have a Material Adverse Effect:
(a) Comply in with, and contractually require compliance by
all tenants and subtenants, if any, with, all applicable Environmental Laws,
and obtain and comply with and maintain, and contractually require that all
tenants and subtenants obtain and comply with and maintain, any and all
licenses, approvals, notifications, registrations or permits required by
applicable Environmental Laws.
(b) Conduct and complete all investigations, studies,
sampling and testing, and all remedial, removal and other actions required
under Environmental Laws and promptly comply with all lawful orders and
directives of all Governmental Authorities regarding Environmental Laws.
5.9 Take-Out Financing. Use its commercially reasonable
best efforts to cause to be declared effective a registration statement with
respect to the Take-Out Debt or to effect a private placement thereof pursuant
to Rule 144A or Regulation S of the Securities Act as soon as reasonably
practicable after the Closing Date, provided, that if any Warrants have been
released from escrow, the Borrower's obligations under this sentence may be
satisfied only by causing to be declared effective a registration statement.
The Borrower will give the Administrative Agent prior notice of its intention
to file the registration statement or to effect a private placement of the
Take-Out Debt. The Borrower will notify the Administrative Agent promptly upon
the receipt of any comments from the SEC in connection with the registration
statement, will furnish the Administrative Agent with a copy of any written
comments from the SEC, will respond in a reasonably prompt manner and
appropriately to any such comments and will furnish a copy to the
Administrative Agent of any such response to the SEC.
5.10 Exchange Notes. (a) The Borrower shall, as promptly
as practicable after being requested to do so by the Administrative Agent at
any time after the nine-month anniversary of the Closing Date and in any event
prior to the Initial Maturity Date, select a trustee meeting the requirements
of Section 5.10(c) and enter into the Indenture. The bank or trust company
acting as trustee under the Indenture shall at all times be a corporation
organized and doing business under the laws of the United States of America or
any state thereof, in good standing, which is authorized under such laws to
exercise corporate trust powers and is subject to supervision or examination by
Federal or state authority and which has a combined capital and surplus of not
less than $50,000,000. The Borrower shall cause the Subsidiary Guarantors in
respect of the Subsidiary Guarantees then in effect to execute and deliver
senior subordinated guarantees of the Exchange Notes on terms similar to those
contained in such Subsidiary Guarantees.
(b) The Borrower shall, on or prior to the third Business
Day following the written request (the "Exchange Request") of any Lender,
execute and deliver to such Lender in accordance
<PAGE> 54
49
with the Indenture an Exchange Note bearing interest as set forth therein in
exchange for such Lender's Loan dated the date of the issuance of such Exchange
Note, payable to the order of such Lender, in a principal amount equal to 100%
of the aggregate principal amount (including any accrued and unpaid interest
not required to be paid in cash) of the Loans for which they are exchanged.
Each Exchange Request shall specify the principal amount of the Loans to be
exchanged pursuant to this Section 5.10, which shall be at least $1,000,000 and
in integral multiples of $100,000 in excess thereof and, if such Lender holds
Loan Notes, be accompanied by the Loan Notes to be exchanged for Exchange
Notes. No Exchange Request shall be made more than thirty (30) days prior to
the Initial Maturity Date. Any Loan Notes delivered to Borrower under this
Section 5.10 in exchange for Exchange Notes shall be canceled by the Borrower
and the corresponding amount of the Lender's Loan deemed repaid and the
Exchange Notes shall be governed by and construed in accordance with the terms
of the Indenture.
(c) If Exchange Notes are issued pursuant to the terms
hereof, then the holders of such Exchange Notes shall have the registration
rights set forth in Exhibit E to the Indenture.
5.11 Use of Proceeds of the Take-Out Debt. The Borrower
will use the net proceeds received by it from the sale of the Take-Out Debt to
repay the Loans and the Exchange Notes pursuant to Section 2.5(d).
5.12 Future Subsidiary Guarantors. The Borrower will
cause each Restricted Subsidiary acquired or created by the Borrower that
guarantees payment of the Bank Indebtedness to execute and deliver to the
Administrative Agent a Subsidiary Guarantee pursuant to which such Subsidiary
Guarantor will Guarantee payment of the Loans and Notes on a senior
subordinated basis. Each Subsidiary Guarantee will be limited to an amount not
to exceed the maximum amount that can be Guaranteed by that Subsidiary without
rendering the Subsidiary Guarantee, as it relates to such Subsidiary, voidable
under applicable law relating to fraudulent conveyance or fraudulent transfer
or similar laws affecting the rights of creditors generally.
5.13 Further Assurances. Upon the reasonable request of
the Administrative Agent, execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out the
purpose of this Agreement.
SECTION 6. NEGATIVE COVENANTS
So long as any Loan or Loan Note remains outstanding and
unpaid, or any other amount is owing to any Lender or the Administrative Agent
hereunder or under any other Loan Document:
6.1 Limitation on Indebtedness. (a) The Borrower shall
not, and shall not permit any of its Restricted Subsidiaries to, Incur any
Indebtedness; provided, however, that on or after the Initial Maturity Date the
Borrower and its Restricted Subsidiaries may Incur Indebtedness if on the date
thereof the Consolidated Coverage Ratio of the Borrower and its Restricted
Subsidiaries would be greater than (i) 2.25: 1.00, if such Indebtedness is
Incurred on or prior to the first anniversary of the Initial Maturity Date and
(ii) 2.50: 1.00, if such Indebtedness is Incurred thereafter.
(b) Notwithstanding Section 6.1(a), the Borrower and its
Restricted Subsidiaries may Incur the following Indebtedness:
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(i) Indebtedness Incurred pursuant to the Senior Credit
Facility (or, subject to the last sentence of the definition thereof,
any refinancing thereof) in a maximum principal amount not to exceed
$1,003,000,000;
(ii) The Subsidiary Guarantees and Guarantees of
Indebtedness incurred pursuant to paragraph (a) or clause (i) of this
paragraph (b) and Guarantee Obligations of the Borrower in respect of
Indebtedness of franchisees not to exceed $50,000,000 at any one time
outstanding;
(iii) Indebtedness (A) of the Borrower to any Restricted
Subsidiary and (B) of any Wholly Owned Subsidiary to the Borrower or
any Restricted Subsidiary; provided, however, that any subsequent
issuance or transfer of any Capital Stock or any other event that
results in any such Wholly Owned Subsidiary ceasing to be a Wholly
Owned Subsidiary or any other subsequent transfer of any such
Indebtedness (except to the Borrower or a Wholly Owned Subsidiary)
will be deemed, in each case, an Incurrence of Indebtedness by the
Borrower or such Restricted Subsidiary, as the case may be, in the
amount that remains outstanding following such issuance or transfer of
such securities;
(iv) Indebtedness represented by the Take-Out Debt, any
Indebtedness (other than the Indebtedness described in clauses (i),
(ii) or (iii) above) outstanding on the Closing Date and any
Refinancing Indebtedness Incurred in respect of any Indebtedness
described in this clause (iv) or Incurred pursuant to Section 6.1(a);
(v) Indebtedness of the Borrower or any Restricted
Subsidiary in the form of Capitalized Lease Obligations, Purchase
Money Obligations or Attributable Debt, and any Refinancing
Indebtedness with respect thereto, in an aggregate amount not in
excess of 7.5% of Consolidated Tangible Assets at any one time
outstanding;
(vi) Indebtedness under Hedging Obligations; provided,
however, that such Hedging Obligations are entered into for bona fide
hedging purposes of the Borrower or any Restricted Subsidiary and are
in the ordinary course of business or are required by the Senior
Credit Facility;
(vii) Indebtedness evidenced by letters of credit assumed
in the Transactions or issued in the ordinary course of business to
secure workers' compensation and other insurance coverages; and
(viii) Indebtedness (which may comprise Bank Indebtedness)
in an aggregate principal amount at any one time outstanding not in
excess of $75,000,000.
(c) Notwithstanding the foregoing, neither the Borrower
nor any Restricted Subsidiary shall Incur any Indebtedness under Section 6.1(b)
that permits Refinancing Indebtedness in respect of Indebtedness constituting
Subordinated Obligations if the proceeds thereof are used, directly or
indirectly, to refinance such Subordinated Obligations, unless such Refinancing
Indebtedness shall be subordinated to the Loans at least to the same extent as
such Subordinated Obligations. No Subsidiary Guarantor shall incur any
Indebtedness pursuant to the foregoing paragraph (b) that permits Refinancing
Indebtedness in respect of Indebtedness constituting Guarantor Subordinated
Obligations if the proceeds of such Refinancing Indebtedness are used, directly
or indirectly, to refinance such Guarantor Subordinated Obligations of such
Subsidiary Guarantor unless such Refinancing
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Indebtedness will be subordinated to the obligations of such Subsidiary
Guarantor under its Subsidiary Guarantee to at least the same extent as such
Guarantor Subordinated Obligations.
(d) For purposes of determining compliance with, and the
outstanding principal amount of any particular Indebtedness Incurred pursuant
to and in compliance with, this covenant, (i) in the event that Indebtedness
meets the criteria of more than one of the types of Indebtedness described in
paragraph (b) above, the Borrower, in its sole discretion, shall classify such
item of Indebtedness and only be required to include the amount and type of
such Indebtedness in one of such clauses; and (ii) the amount of Indebtedness
issued at a price that is less than the principal amount thereof shall be equal
to the amount of the liability in respect thereof determined in accordance with
GAAP.
(e) The Borrower shall not permit any Unrestricted
Subsidiary to Incur any Indebtedness other than Non-Recourse Debt; provided,
however, if any such Indebtedness ceases to be Non-Recourse Debt, such event
shall be deemed to constitute an incurrence of Indebtedness by the Borrower or
a Restricted Subsidiary.
(f) The Borrower shall not Incur any Indebtedness that is
expressly subordinate in right of payment to any Senior Indebtedness unless
such Indebtedness is Senior Subordinated Indebtedness or is contractually
subordinated in right of payment to Senior Subordinated Indebtedness. No
Subsidiary Guarantor shall Incur any Indebtedness that is expressly subordinate
in right of payment to any Senior Indebtedness of such Subsidiary Guarantor
unless such Indebtedness is Senior Subordinated Indebtedness of such Subsidiary
Guarantor or is contractually subordinated in right of payment to Senior
Subordinated Indebtedness of such Subsidiary Guarantor. Unsecured Indebtedness
is not deemed to be subordinate or junior to Secured Indebtedness merely
because it is unsecured, and Indebtedness that is not guaranteed by a
particular person is not deemed to be subordinate or junior to Indebtedness
that is so guaranteed merely because it is not so guaranteed.
6.2 Limitation on Restricted Payments. (a) On or prior
to the Initial Maturity Date, the Borrower shall not, and shall not permit any
Restricted Subsidiary, directly or indirectly, to (i) declare or pay any
dividend or make any distribution on or in respect of its Capital Stock
(including any payment in connection with any merger or consolidation involving
the Borrower) except (1) dividends or distributions payable in its Capital
Stock (other than Disqualified Stock) and (2) dividends or distributions
payable to the Borrower or any Restricted Subsidiary (and if such Restricted
Subsidiary is not a Wholly Owned Subsidiary, to its other holders of Capital
Stock on no more than a pro rata basis measured by value), (ii) purchase,
redeem, retire or otherwise acquire for value any Capital Stock of the Borrower
held by Persons other than a Restricted Subsidiary or any Capital Stock of a
Restricted Subsidiary held by any Affiliate of the Borrower, other than another
Restricted Subsidiary, in either case other than in exchange for its Capital
Stock (other than Disqualified Stock), (iii) purchase, repurchase, redeem,
defease or otherwise acquire or retire for value, prior to scheduled maturity,
scheduled repayment or scheduled sinking fund payment any Subordinated
Obligations (other than the purchase, repurchase, redemption or other
acquisition of Subordinated Obligations in anticipation of satisfying a sinking
fund obligation, principal installment or final maturity, in each case due
within one year of the date of acquisition) or (iv) make any Investment (other
than a Permitted Investment) in any Person (any such dividend, distribution,
purchase, redemption, repurchase, defeasance, other acquisition, retirement or
Investment being herein referred to as a "Restricted Payment").
(b) After the Initial Maturity Date, the Borrower shall
not, and shall not permit any of its Restricted Subsidiaries, directly or
indirectly, to make any Restricted Payment if at the time the
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Borrower or such Restricted Subsidiary makes such Restricted Payment: (1) a
Default shall have occurred and be continuing (or would result therefrom); or
(2) the Borrower is not able to Incur an additional $1.00 of Indebtedness
pursuant to Section 6.1; or (3) the aggregate amount of such Restricted Payment
and all other Restricted Payments (the amount so expended, if other than in
cash, to be determined in good faith by the Borrower's Board of Directors,
whose determination shall be conclusive and evidenced by a resolution of the
Borrower's Board of Directors) declared or made on or after the Initial
Maturity Date would exceed 25% of the Consolidated Net Income accrued during
the period (treated as one accounting period) from (but excluding) the Closing
Date to (but excluding) the date of such Restricted Payment (or, in case such
Consolidated Net Income shall be a deficit, minus 100% of such deficit).
(c) The provisions of Section 6.2(a) (in the case of
clause (v) and clause (vi) below only) and Section 6.2(b) shall not prohibit:
(i) any purchase, redemption, repurchase, defeasance,
retirement or other acquisition of Capital Stock or Subordinated
Obligations of the Borrower made by exchange for, or out of the
proceeds of the substantially concurrent sale of, Capital Stock of the
Borrower (other than Disqualified Stock and other than Capital Stock
issued or sold to a Subsidiary or an employee stock ownership plan or
other trust established by the Borrower or any of its Subsidiaries);
provided, however, that such purchase, redemption, repurchase,
defeasance, retirement or other acquisition shall be excluded in
subsequent calculations of the amount of Restricted Payments;
(ii) any purchase, redemption, repurchase, defeasance,
retirement or other acquisition of Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially concurrent
sale of, Subordinated Obligations of the Borrower that is permitted to
be Incurred pursuant to Section 6.1; provided, however, that such
purchase, redemption, repurchase, defeasance, retirement or other
acquisition shall be excluded in subsequent calculations of the amount
of Restricted Payments;
(iii) any purchase, redemption, repurchase, defeasance,
retirement or other acquisition of Subordinated Obligations from Net
Available Cash to the extent permitted by Section 6.4; provided,
however, that such purchase, redemption, repurchase, defeasance,
retirement or other acquisition shall be excluded in subsequent
calculations of the amount of Restricted Payments;
(iv) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividend would
have complied with this Section 6.2; provided, however, that such
dividend shall be included in subsequent calculations of the amount of
Restricted Payments;
(v) any purchase or redemption of any shares of Capital
Stock of the Borrower from employees of the Borrower and its
Subsidiaries pursuant to the repurchase provisions under employee
stock option or stock purchase agreements or other agreements to
compensate management employees in an aggregate amount after the
Closing Date not in excess of $1,000,000 in any fiscal year, plus any
unused amounts under this clause (v) from prior fiscal years;
provided, however, that such purchases or redemptions shall be
excluded in subsequent calculations of the amount of Restricted
Payments; and
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(vi) the repurchase of the Borrower's common stock in an
aggregate amount not to exceed the amount by which the proceeds from
the issuance of the Apollo Preferred Stock exceeds $235,000,000;
provided, however, the aggregate amount of repurchases made pursuant
to this clause (vi) shall not exceed $25,000,000.
6.3 Limitation on Restrictions on Distributions from
Restricted Subsidiaries. The Borrower shall not, and shall not permit any of
its Restricted Subsidiaries to, create or otherwise cause or permit to exist or
become effective any consensual encumbrance or restriction on the ability of
any such Restricted Subsidiary to (i) pay dividends or make any other
distributions on its Capital Stock or pay any Indebtedness or other obligations
owed to the Borrower, (ii) make any loans or advances to the Borrower or (iii)
transfer any of its property or assets to the Borrower, except:
(a) any encumbrance or restriction pursuant to an
agreement in effect at or entered into on the Closing Date (including,
without limitation, the Senior Credit Facility);
(b) any encumbrance or restriction with respect to a
Restricted Subsidiary (x) pursuant to an agreement relating to any
Indebtedness Incurred by a Restricted Subsidiary prior to the date on
which such Restricted Subsidiary was acquired by the Borrower, or of
another Person that is assumed by the Borrower or a Restricted
Subsidiary in connection with the acquisition of assets from, or
merger or consolidation with, such Person (other than Indebtedness
Incurred as consideration in, or to provide all or any portion of the
funds or credit support utilized to consummate, the transaction or
series of related transactions pursuant to which such Restricted
Subsidiary became a Restricted Subsidiary or was acquired by the
Borrower, or such acquisition of assets, merger or consolidation) and
outstanding on the date of such acquisition, merger or consolidation
or (y) pursuant to any agreement (not relating to any Indebtedness) in
existence when a Person becomes a Subsidiary of the Borrower or when
such agreement is acquired by the Borrower or any Subsidiary thereof,
that is not created in contemplation of such Person becoming such a
Subsidiary or such acquisition (for purposes of this paragraph (b), if
another Person is the Successor Company, any Subsidiary or agreement
thereof shall be deemed acquired or assumed, as the case may be, by
the Borrower when such Person becomes the Successor Company);
(c) any encumbrance or restriction with respect to a
Restricted Subsidiary pursuant to an agreement (a "Refinancing
Agreement") effecting a refinancing of Indebtedness Incurred pursuant
to, or that otherwise extends, renews, refinances or replaces, an
agreement referred to in Section 6.3(a) or (b) or this Section 6.3(c)
or contained in any amendment to an agreement referred to in Section
6.3(a) or (b) or this Section 6.3(c) (an "Initial Agreement") or
contained in any amendment to an Initial Agreement; provided, however,
that the encumbrances and restrictions contained in any such
Refinancing Agreement or amendment are no less favorable to the
Lenders taken as a whole than encumbrances and restrictions contained
in the Initial Agreement or Agreements to which such Refinancing
Agreement or amendment relates;
(d) any encumbrance or restriction (A) that restricts in
a customary manner the subletting, assignment or transfer of any
property or asset that is subject to a lease, license or similar
contract, or the assignment or transfer of any lease, license or other
contract, (B) by virtue of any transfer of, agreement to transfer,
option or right with respect to, or Lien on, any property or assets of
the Borrower or any Restricted Subsidiary not otherwise prohibited by
this Agreement, (C) contained in mortgages, pledges or other security
agreements securing Indebtedness of a Restricted Subsidiary to the
extent such encumbrance or restrictions restrict
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the transfer of the property subject to such mortgages, pledges or
other security agreements or (D) pursuant to customary provisions
restricting dispositions of real property interests set forth in any
reciprocal easement agreements of the Borrower or any Restricted
Subsidiary;
(e) any restriction with respect to a Restricted
Subsidiary (or any of its property or assets) imposed pursuant to an
agreement entered into for the direct or indirect sale or disposition
of all or substantially all the Capital Stock or assets of such
Restricted Subsidiary (or the property or assets that are subject to
such restriction) pending the closing of such sale or disposition; and
(f) any encumbrance or restriction on the transfer of
property or assets required by any regulatory authority having
jurisdiction over the Borrower or any Restricted Subsidiary or any of
their businesses.
6.4 Limitation on Asset Dispositions. (a) The Borrower
shall not, and shall not permit any of its Restricted Subsidiaries to, make any
Asset Disposition unless: (i) the Borrower or such Restricted Subsidiary
receives consideration at the time of such Asset Disposition at least equal to
the fair market value, as determined in good faith by the Borrower's senior
management or the Board of Directors, whose determination shall be conclusive
(including as to the value of all non-cash consideration), of the shares and
assets subject to such Asset Disposition; (ii) prior to the Initial Maturity
Date, at least 90%, and on or after the Initial Maturity Date, at least 75% of
the consideration therefor received by the Borrower or such Restricted
Subsidiary is in the form of cash or Cash Equivalents; and (iii) an amount
equal to 100% of the Net Available Cash from such Asset Disposition is applied
by the Borrower (or such Restricted Subsidiary, as the case may be) (A) first,
pursuant to the Senior Credit Agreement and, to the extent the Borrower or any
Restricted Subsidiary is required by the terms of any other Senior
Indebtedness, to prepay, repay or purchase such Senior Indebtedness; and (B)
second, to the extent of the balance of such Net Available Cash after
application in accordance with clause (A), to prepay or redeem the Loans and
Exchange Notes at par plus accrued and unpaid interest, if any, thereon in
accordance with Section 2.5(d); provided, however, that, in connection with any
prepayment, repayment or purchase of Indebtedness pursuant to clause (iii) (A),
the Borrower or such Restricted Subsidiary shall retire such Indebtedness and
shall cause the related loan commitment (if any) to be permanently reduced in
an amount equal to the principal amount so prepaid, repaid or purchased.
(b) Notwithstanding the foregoing provisions, the
Borrower and its Restricted Subsidiaries shall not be required to apply any Net
Available Cash in accordance herewith except to the extent that the aggregate
Net Available Cash from all Asset Dispositions which are not applied in
accordance with this covenant exceeds (i) on or prior to the Initial Maturity
Date, $1,000,000 and (ii) after the Initial Maturity Date, $2,000,000.
(c) For the purposes of this Section 6.4, the following
will be deemed to be cash: (w) the assumption of Indebtedness of the Borrower
(other than Disqualified Stock of the Borrower) or any Restricted Subsidiary
and the release of the Borrower or such Restricted Subsidiary from all
liability on such Indebtedness in connection with such Asset Disposition, (x)
Indebtedness of any Restricted Subsidiary that is no longer a Restricted
Subsidiary as a result of such Asset Disposition, to the extent that the
Borrower and each other Restricted Subsidiary is released from any Guarantee of
such Indebtedness in connection with such Asset Disposition, (y) securities
received by the Borrower or any Restricted Subsidiary from the transferee that
are promptly converted by the Borrower or such
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Restricted Subsidiary into cash, and (z) consideration consisting of
Indebtedness of the Borrower or any Restricted Subsidiary.
6.5 Limitation on Liens. The Borrower will not, and will
not permit any of its Restricted Subsidiaries to, create, Incur, assume or
suffer to exist any Liens of any kind against or upon any of its property or
assets, or any proceeds therefrom, unless (i) in the case of Liens securing
Indebtedness that is expressly subordinate or junior in right of payment to the
Loans, the Loans 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 Loans
are equally and ratably secured, except for (A) Liens existing as of the
Closing Date and any extensions, renewals or replacements thereof, (B) Liens
securing Senior Indebtedness, (C) Liens securing the Loans, (D) Liens of the
Borrower or a Wholly Owned Subsidiary of the Borrower on assets of any
Subsidiary of the Borrower, (E) Liens securing Indebtedness which is Incurred
to refinance Indebtedness which has been secured by a Lien permitted under this
Agreement and which has been Incurred in accordance with the provisions of this
Agreement; provided, however, that such Liens do not extend to or cover any
property or assets of the Borrower or any of its Restricted Subsidiaries not
securing the Indebtedness so refinanced, and (F) Permitted Liens.
6.6 Limitation on Affiliate Transactions. (a) The
Borrower will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, enter into or conduct any transaction or series of
transactions (including the purchase, sale, lease or exchange of any property
or the rendering of any service) with any Affiliate of the Borrower (an
"Affiliate Transaction") on terms (i) that taken as a whole are less favorable
to the Borrower or such Restricted Subsidiary, as the case may be, than those
that could be obtained at the time of such transaction in arm's-length dealings
with a Person who is not such an Affiliate and (ii) that, in the event such
Affiliate Transaction involves an aggregate amount in excess of $1,000,000, are
not in writing and have not been approved by a majority of the members of the
Board of Directors having no material personal financial interest in such
Affiliate Transaction or, in the event there are no such members, as to which
the Borrower has not obtained a Fairness Opinion (as hereinafter defined). In
addition, any such transaction involving aggregate payments or other transfers
by the Borrower and its Restricted Subsidiaries (i) on or prior to the Initial
Maturity Date in excess of $2,500,000 and (ii) after the Initial Maturity Date
in excess of $5,000,000 will also require an opinion (a "Fairness Opinion")
from an independent investment banking firm or appraiser, as appropriate, of
national prominence, to the effect that the terms of such transaction are fair
to the Borrower or such Restricted Subsidiary, as the case may be, from a
financial point of view.
(b) The foregoing provisions of Section 6.6(a) shall not
prohibit (i) any Restricted Payment permitted to be made pursuant to Section
6.2 or any Permitted Investment, (ii) the performance of the Borrower's or any
Restricted Subsidiary's obligations under any employment contract, collective
bargaining agreement, agreement for the provision of services, employee benefit
plan, related trust agreement or any other similar arrangement heretofore or
hereafter entered into in the ordinary course of business, (iii) payment of
compensation, performance of indemnification or contribution obligations, or
any issuance, grant or award of stock, options or other securities, to
employees, officers or directors in the ordinary course of business, (iv) any
transaction between the Borrower and a Restricted Subsidiary or between
Restricted Subsidiaries, (v) the Transactions and the incurrence and payment of
all fees and expenses payable in connection therewith as contemplated by
Section 4(d)(iv), (vi) any other transaction arising out of agreements in
existence on the Closing Date, and (vii) transactions with suppliers or other
purchasers or sellers of goods or services, in each case in the ordinary course
of business and on terms no less favorable to the Borrower or the Restricted
Subsidiary, as the case may be, than those that could be obtained at such time
in arm's-length dealings with a Person who is not an Affiliate.
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6.7 Change of Control. (a) Upon a Change of Control on
or after the Initial Maturity Date, each Holder shall have the right to require
the Borrower to repurchase all or any part of such Holder's Loans at a purchase
price in cash equal to 101% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of purchase (subject to the right of
Holders of record on the relevant record date to receive interest on the
relevant interest payment date), such repurchase to be made in accordance with
Section 6.7(b).
(b) Within thirty days following any Change of Control on
or after the Initial Maturity Date, the Borrower shall mail a notice to each
Holder with a copy to the Administrative Agent stating:
(i) that a Change of Control has occurred and that such
Holder has the right to require the Borrower to purchase such Holder's
Loans at a purchase price in cash equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date
of purchase (subject to the right of Holders of record on a record
date to receive interest on the relevant interest payment date);
(ii) the circumstances, facts and relevant financial
information related thereto;
(iii) the repurchase date (which shall be no earlier than
thirty days nor later than ninety days from the date such notice is
mailed); and
(iv) the procedures determined by the Borrower, consistent
with this Section, that a Holder must follow in order to have its
Loans purchased.
(c) Holders electing to have a Loan purchased will be
required to give notice in writing to the Borrower at the address specified in
Section 10.2 at least three Business Days prior to the purchase date. Each
Holder will be entitled to withdraw its election if the Borrower receives, not
later than one Business Day prior to the purchase date, a telegram, telex,
facsimile transmission or letter from such Holder setting forth the name of
such Holder, the principal amount of the Loan which was to be purchased and a
statement that such Holder is withdrawing its election to have such Loan
purchased.
(d) On the purchase date, the Borrower shall pay the
purchase price plus accrued and unpaid interest, if any, to the Holders
entitled thereto upon surrender of any Loan Notes for the Loans to be
purchased.
(e) The Borrower shall comply, to the extent applicable,
with the requirements of Section 14(e) of the Exchange Act and any other
securities laws or regulations in connection with the repurchase of Loans and
Notes pursuant to this Section. To the extent that the provisions of any
securities laws or regulations conflict with provisions of this Section, the
Borrower shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under this Section by
virtue thereof.
6.8 Merger, Consolidation, etc. (a) Prior to the Initial
Maturity Date, neither the Borrower nor any of its Subsidiaries may merge into
or consolidate with any other Person, or permit any other Person to merge into
or consolidate with it, or sell, transfer, lease or otherwise dispose of (in
one transaction or in a series of transactions) all or any substantial part of
its assets (whether now owned or hereafter acquired) or purchase, lease or
otherwise acquire (in one transaction or a series of transactions) all or any
substantial part of the assets of any other Person, except that if at the time
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thereof and immediately after giving effect thereto no Default or Event of
Default shall have occurred and be continuing or would result therefrom, (i)
any Wholly Owned Subsidiary may merge into or consolidate with the Borrower in
a transaction in which the Borrower is the surviving corporation, (ii) any
Wholly Owned Subsidiary may merge into or consolidate with any other Wholly
Owned Subsidiary in a transaction in which the surviving entity is a Wholly
Owned Subsidiary and no Person other than the Borrower or a Wholly Owned
Subsidiary receives any consideration and (iii) the Borrower may make any
Permitted Investment, except that, if any Permitted Investment is structured as
a merger with or into the Borrower, the Borrower shall be the continuing or
surviving corporation, or structured as a merger with or into any Wholly Owned
Subsidiary, such Wholly Owned Subsidiary shall be the continuing or surviving
corporation.
(b) After the Initial Maturity Date, the Borrower shall not
consolidate with or merge with or into, or convey, transfer or lease all or
substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the
"Successor Company") shall be a corporation, partnership, trust, or
limited liability company organized and existing under the laws of the
United States of America, any State thereof or the District of
Columbia and the Successor Company (if not the Borrower) shall
expressly assume, by an assumption agreement supplemental hereto,
executed by the Successor Company and delivered to the Administrative
Agent, in form satisfactory to the Administrative Agent, all the
obligations of the Borrower under the Notes, the Loans and this
Agreement;
(ii) immediately after giving effect to such transaction
(and treating any Indebtedness which becomes an obligation of the
Successor Company or any Subsidiary as a result of such transaction as
having been Incurred by the Successor Company or such Restricted
Subsidiary at the time of such transaction), no Default or Event of
Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction,
the Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to Section 6.1; and
(iv) the Borrower shall have delivered to the
Administrative Agent a certificate of a Responsible Officer and an
opinion of counsel to Borrower, each stating that such consolidation,
merger, transfer or lease and such assumption agreement (if any)
comply with this Agreement.
The Successor Company shall succeed to, and be substituted
for, and may exercise every right and power of, the Borrower under this
Agreement, but in the case of a lease of all or substantially all its assets,
the Borrower shall not be released from the obligation to pay the principal of
and interest on the Loans and the Notes.
Notwithstanding clauses (ii) and (iii) of the first sentence
of this Section 6.8(b): (1) any Restricted Subsidiary of the Borrower may
consolidate with, merge into or transfer all or part of its properties and
assets to the Borrower; and (2) the Borrower may merge with an Affiliate
incorporated solely for the purpose of reincorporating the Borrower in another
jurisdiction to realize tax or other benefits.
6.9 Limitation on Lines of Business. The Borrower shall
not, and shall not permit any Restricted Subsidiary to, engage in any business
other than a Related Business.
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6.10 Limitation on Sale/Leaseback Transactions. The
Borrower shall not, and shall not permit any Restricted Subsidiary to, enter
into any Sale/Leaseback Transaction with respect to any property unless (i) the
Borrower or such Restricted Subsidiary would be entitled to Incur Indebtedness
in an amount equal to the Attributable Debt with respect to such Sale/Leaseback
Transaction pursuant to Section 6.1, (ii) the net proceeds received by the
Borrower or such Restricted Subsidiary in connection with such Sale/Leaseback
Transaction are at least equal to the fair value (as determined in good faith
by the Board of Directors) of such property and (iii) the transfer of such
property is permitted by, and the Borrower or such Restricted Subsidiary
applies the proceeds of such transaction in compliance with, Section 6.4.
SECTION 7. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) the Borrower shall fail to pay any principal of any
Loan when due in accordance with the terms thereof or hereof, or shall
fail to redeem or purchase Loans when required pursuant to this
Agreement or any Note, in each case whether or not such payment,
redemption or purchase shall be prohibited by Section 8; or the
Borrower shall fail to pay any interest on any Loan, or any other
amount payable hereunder, within five days after any such interest or
other amount becomes due in accordance with the terms thereof or
hereof, in each case, whether or not such payment shall be prohibited
by Section 8; or
(b) any representation or warranty made or deemed made by
the Borrower or any other Loan Party herein or in any other Loan
Document or which is contained in any certificate, document, or
financial or other statement furnished by it at any time under or in
connection with this Agreement or any such other Loan Document shall
prove to have been inaccurate in any material respect on or as of the
date made or deemed made; or
(c) the Borrower or any other Loan Party shall default in
the observance or performance of any agreement contained in clause (a)
or (b) of Section 5.1 (with respect to the Borrower only), Section
5.7(a), 5.9, 5.10, 5.11 or Section 6; or
(d) the Borrower or any other Loan Party shall default in
the observance or performance of any other agreement contained in this
Agreement or any other Loan Document (other than as provided in
paragraphs (a) through (c) of this Section 7) and such default shall
continue unremedied for a period of 30 days after notice to the
Borrower from the Administrative Agent or the Required Lenders; or
(e) Indebtedness of the Borrower or any Loan Party is not
paid within any applicable grace period after maturity or is
accelerated by the holders thereof because of a default or other event
or condition thereunder prior to its stated maturity and the total
amount of such Indebtedness unpaid or accelerated exceeds $5,000,000
or its foreign currency equivalent at the time; or
(f) (i) the Borrower or any of its Subsidiaries shall
commence any case, proceeding or other action (A) under any existing
or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking
to have an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent,
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or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to
it or its debts, or (B) seeking appointment of a receiver, trustee,
custodian, conservator or other similar official for it or for all or
any substantial part of its assets, or the Borrower or any of its
Subsidiaries shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against the Borrower or
any of its Subsidiaries any case, proceeding or other action of a
nature referred to in clause (i) above that (A) results in the entry
of an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged or unbonded for a period of 60 days;
or (iii) there shall be commenced against the Borrower or any of its
Subsidiaries any case, proceeding or other action seeking issuance of
a warrant of attachment, execution, distraint or similar process
against all or any substantial part of its assets that results in the
entry of an order for any such relief that shall not have been
vacated, discharged, or stayed or bonded pending appeal within 60 days
from the entry thereof; or (iv) the Borrower or any of its
Subsidiaries shall take any action in furtherance of, or indicating
its consent to, approval of, or acquiescence in, any of the acts set
forth in clause (i), (ii), or (iii) above; or (v) the Borrower or any
of its Subsidiaries shall generally not, or shall be unable to, or
shall admit in writing its inability to, pay its debts as they become
due; or
(g) (i) any Person shall engage in any non-exempt
"prohibited transaction" (as defined in Section 406 and 408 of ERISA
or Section 4975 of the Code) involving any Plan, (ii) any "accumulated
funding deficiency" (as defined in Section 302 of ERISA), whether or
not waived, shall exist with respect to any Plan or any Lien in favor
of the PBGC or a Plan shall arise on the assets of the Borrower or any
Commonly Controlled Entity, (iii) a Reportable Event shall occur with
respect to, or proceedings shall commence under Title IV of ERISA to
have a trustee appointed, or a trustee shall be appointed under Title
IV of ERISA, to administer or to terminate, any Single Employer Plan,
which Reportable Event or commencement of proceedings or appointment
of a trustee is, in the reasonable opinion of the Required Lenders,
likely to result in the termination of such Plan for purposes of Title
IV of ERISA, (iv) any Single Employer Plan shall terminate in a
"distress termination: or "involuntary termination", as such terms are
defined in Title IV of ERISA, (v) the Borrower or any Commonly
Controlled Entity shall, or in the reasonable opinion of the Required
Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a
Multiemployer Plan or (vi) any other event or condition shall occur or
exist with respect to a Plan; and in each case in clauses (i) through
(vi) above, such event or condition, together with all other such
events or conditions, if any, could, in the sole judgment of the
Required Lenders, reasonably be expected to have a Material Adverse
Effect; or
(h) one or more judgments or decrees shall be entered
against the Borrower or any of its Subsidiaries involving in the
aggregate a liability (not paid or fully covered by insurance as to
which the relevant insurance company has acknowledged coverage) of
$5,000,000 or more, and all such judgments or decrees shall not have
been vacated, discharged, stayed or bonded pending appeal within 30
days from the entry thereof; or
(i) there shall have occurred a Change in Control prior
to the Initial Maturity Date; or
(j) any Subsidiary Guarantee shall cease, for any reason
(other than, (i) as a result of a merger of such Subsidiary into the
Borrower in accordance with the terms of this Agreement or (ii) as a
result of a release pursuant to Section 3 of the Subsidiary
Guarantee), to
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be in full force and effect (other than pursuant to the terms hereof
or thereof) or any Subsidiary Guarantor shall so assert in writing;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i), (ii) or (iii) of paragraph (f) of this Section with respect to
the Borrower, the Loans (with accrued interest thereon) and all other amounts
owing under this Agreement shall immediately become due and payable, and (B) if
such event is any other Event of Default, with the consent of the Required
Lenders, the Administrative Agent may, or upon the request of the Required
Lenders, the Administrative Agent shall, by notice to the Borrower declare the
Loans hereunder (with accrued interest thereon) and all other amounts owing
under this Agreement to be due and payable forthwith, whereupon the same shall
immediately become due and payable. Except as expressly provided above in this
Section, presentment, demand, protest and all other notices of any kind (other
than notices expressly required pursuant to this Agreement and any other Loan
Document) are hereby expressly waived by the Borrower.
SECTION 8. SUBORDINATION
8.1 Agreement To Subordinate. The Borrower agrees, and
each Lender agrees, that the Loans and Indebtedness evidenced by the Notes are
subordinated in right of payment, to the extent and in the manner provided in
this Section 8, to the prior payment in full in cash or Cash Equivalents of all
Senior Indebtedness and that the subordination is for the benefit of and
enforceable by the holders of Senior Indebtedness. The Loans shall in all
respects rank pari passu with all other Senior Subordinated Indebtedness of the
Borrower and only indebtedness of the Borrower that is Senior Indebtedness
shall rank senior to the Loans in accordance with the provisions set forth
herein.
8.2 Liquidation; Dissolution; Bankruptcy. Upon any
payment or distribution of the assets of the Borrower to creditors upon a total
or partial liquidation or a total or partial dissolution of the Borrower or in
a bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Borrower or its property:
(1) holders of Senior Indebtedness shall be entitled to
receive payment in full in cash or Cash Equivalents of the Senior
Indebtedness (including interest after, or which would accrue but for,
the commencement of any proceeding at the rate specified in the
applicable Senior Indebtedness, whether or not a claim for such
interest would be allowed) before Lenders shall be entitled to receive
any payment of principal of, or premium, if any, or interest on the
Loans; and
(2) until the Senior Indebtedness is paid in full in cash
or Cash Equivalents, any payment or distribution to which Lenders
would be entitled but for this Section 8 shall be made to holders of
Senior Indebtedness as their interests may appear.
8.3 Default on Senior Indebtedness. The Borrower may not
pay the principal of, premium, if any, or interest on, the Loans or make any
deposit pursuant to any defeasance provision or otherwise purchase or retire
any Loans (collectively, "pay the Loans") if (i) any Senior Indebtedness is not
paid when due or (ii) any other default on Senior Indebtedness occurs and the
maturity of such Senior Indebtedness is accelerated in accordance with its
terms unless, in either case, (x) the default has been cured or waived in
writing and any such acceleration has been rescinded in writing or (y) such
Senior Indebtedness has been paid in full in cash or Cash Equivalents;
provided, however, that the
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Borrower may pay the Loans without regard to the foregoing if the Borrower and
the Administrative Agent receive written notice approving such payment from the
Representative of the Designated Senior Indebtedness with respect to which
either of the events set forth in (i) or (ii) above has occurred and is
continuing. During the continuance of any default (other than a default
described in clause (i) or (ii) of the preceding sentence) with respect to any
Designated Senior Indebtedness pursuant to which the maturity thereof may be
accelerated immediately without further notice (except such notice as may be
required to effect such acceleration) or the expiration of any applicable grace
periods, the Borrower may not pay the Loans for a period (a "Payment Blockage
Period") commencing upon the receipt by the Borrower and the Administrative
Agent of written notice (a "Blockage Notice") of such default from the
Representative of such Designated Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter (or earlier if
such Payment Blockage Period is terminated (i) by written notice to the
Administrative Agent and the Borrower from the Person or Persons who gave such
Blockage Notice, (ii) by repayment in full of such Designated Senior
Indebtedness or (iii) because the default giving rise to such Blockage Notice
is no longer continuing). Notwithstanding the provisions described in the
immediately preceding sentence (but subject to the provisions contained in the
first sentence of this Section), unless the holders of such Designated Senior
Indebtedness or the Representative of such holders shall have accelerated the
maturity of such Designated Senior Indebtedness, the Borrower may resume
payments on the Loans after such Payment Blockage Period. Not more than one
Blockage Notice may be given in any consecutive 360-day period, irrespective of
the number of defaults with respect to Designated Senior Indebtedness during
such period; provided, however, that if any Blockage Notice within such 360-day
period is given by or on behalf of any holders of Designated Senior
Indebtedness (other than the Bank Indebtedness), the Representative of the Bank
Indebtedness may give another Blockage Notice within such period; provided
further, however, that in no event may the total number of days during which
any Payment Blockage Period or Periods is in effect exceed 179 days in the
aggregate during any 360 consecutive day period.
8.4 Acceleration of Payment of Loans. If payment of the
Loans is accelerated because of an Event of Default, the Borrower and the
Administrative Agent shall promptly notify the holders of the Designated Senior
Indebtedness of the acceleration. If any Designated Senior Indebtedness is
outstanding, the Borrower may not pay the Loans until five Business Days after
the Representative of the Designated Senior Indebtedness receives notice of
such acceleration and, thereafter, may pay the Loans only if this Section 8
otherwise permits the payment at that time.
8.5 When Distribution Must Be Paid Over. If a
distribution is made to the Lenders that because of this Section 8 should not
have been made to them, the Lenders who receive the distribution shall hold it
in trust for holders of Senior Indebtedness and pay it over to them as their
interests may appear.
8.6 Subrogation. After all Senior Indebtedness is paid
in full and until the Loans are paid in full, the Lenders shall be subrogated
to the rights of holders of Senior Indebtedness to receive distributions
applicable to Senior Indebtedness. A distribution made under this Section 8 to
holders of Senior Indebtedness that otherwise would have been made to the
Lenders is not, as between the Borrower and the Lenders, a payment by the
Borrower on Senior Indebtedness.
8.7 Relative Rights. This Section 8 defines the relative
rights of the Lenders and holders of Senior Indebtedness. Nothing in this
Agreement shall:
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(1) impair, as between the Borrower and the Lenders, the
obligation of the Borrower, which is absolute and unconditional, to
pay principal of, premium, if any, and interest on the Loans in
accordance with the terms of this Agreement; or
(2) prevent the Administrative Agent or any Lender from
exercising its available remedies upon a Default, subject to the
rights of holders of Senior Indebtedness to receive distributions
otherwise payable to Lenders.
8.8 Subordination May Not Be Impaired By the Borrower.
No right of any holder of Senior Indebtedness to enforce the subordination of
the Loans and the Indebtedness evidenced by the Notes shall be impaired by any
act or failure to act by the Borrower or by its failure to comply with this
Agreement.
8.9 Rights of Administrative Agent. Notwithstanding
Section 8.3, the Administrative Agent may continue to make payments on the
Loans and shall not be charged with knowledge of the existence of facts that
would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, a Responsible Officer of the
Administrative Agent receives notice to it that payments may not be made under
this Section 8. The Borrower, a Representative or a holder of Senior
Indebtedness may give the notice; provided, however, that, if an issue of
Senior Indebtedness has a Representative, only the Representative may give the
notice.
The Administrative Agent in its individual or any other
capacity may hold Senior Indebtedness with the same rights it would have if it
were not the Administrative Agent. The Administrative Agent shall be entitled
to all the rights set forth in this Section 8 with respect to any Senior
Indebtedness that may at any time be held by it, to the same extent as any
other holder of Senior Indebtedness; and nothing in Section 9 shall deprive the
Administrative Agent of any of its rights as such holder. Nothing in this
Section 8 shall apply to claims of, or payments to, the Administrative Agent
under or pursuant to Section 9.7.
8.10 Distribution or Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness,
the distribution may be made and the notice given to their Representative (if
any).
8.11 Section 8 Not To Prevent Events of Default or Limit
Right To Accelerate. The failure to make a payment pursuant to the Loans by
reason of any provision in this Section 8 shall not be construed as preventing
the occurrence of a Default. Nothing in this Section 8 shall have any effect
on the right of the Lenders or the Administrative Agent to accelerate the
maturity of the Loans, subject to Section 8.4.
8.12 Administrative Agent Entitled to Rely. Upon any
payment or distribution pursuant to this Section 8, the Administrative Agent
and the Lenders shall be entitled to rely (i) upon any order or decree of a
court of competent jurisdiction in which any proceedings of the nature referred
to in Section 8.2 are pending, (ii) upon a certificate of the liquidating
trustee or agent or other Person making such payment or distribution to the
Administrative Agent or to the Lenders or (iii) upon the Representatives for
the holders of Senior Indebtedness for the purpose of ascertaining the Persons
entitled to participate in such payment or distribution, the holders of the
Senior Indebtedness and other Indebtedness of the Borrower, the amount thereof
or payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Section 8. In the event that the
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Administrative Agent determines, in good faith, that evidence is required with
respect to the right of any Person as a holder of Senior Indebtedness to
participate in any payment or distribution pursuant to this Section 8, the
Administrative Agent may request such Person to furnish evidence to the
reasonable satisfaction of the Administrative Agent as to the amount of Senior
Indebtedness held by such Person, the extent to which such Person is entitled
to participate in such payment or distribution and other facts pertinent to the
rights of such Person under this Section 8, and, if such evidence is not
furnished, the Administrative Agent may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment. The provisions of Section 9 shall be applicable to all actions or
omissions of actions by the Administrative Agent pursuant to this Section 8.
8.13 Administrative Agent to Effectuate Subordination.
Each Lender hereby authorizes and directs the Administrative Agent on such
Lender's behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination between the Lenders and the holders
of Senior Indebtedness as provided in this Section 8 and appoints the
Administrative Agent as attorney-in-fact for any and all such purposes.
8.14 Administrative Agent Not Fiduciary for Lenders of
Senior Indebtedness. The Administrative Agent shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness and shall not be liable to
any such holders if it shall mistakenly pay over or distribute to the Lenders
or the Borrower or any other Person, money or assets to which any holders of
Senior Indebtedness shall be entitled by virtue of this Section 8 or otherwise.
8.15 Reliance by Lenders of Senior Indebtedness on
Subordination Provisions. Each Lender acknowledges and agrees, that the
foregoing subordination provisions are, and are intended to be, an inducement
and a consideration to each holder of any Senior Indebtedness, whether such
Senior Indebtedness was created or acquired before or after the issuance of the
Loans, to acquire and continue to hold, or to continue to hold, such Senior
Indebtedness and such holder of Senior Indebtedness shall be deemed
conclusively to have relied on such subordination provisions in acquiring and
continuing to hold, or in continuing to hold, such Senior Indebtedness.
SECTION 9. THE ADMINISTRATIVE AGENT
9.1 Appointment. Each Lender hereby irrevocably
designates and appoints the Administrative Agent as the agent of such Lender
under the Loan Documents, and each such Lender irrevocably authorizes the
Administrative Agent, in such capacity, to take such action on its behalf under
the provisions of the Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to the Administrative Agent by the terms
of the Loan Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere
in this Agreement, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the
Administrative Agent.
9.2 Delegation of Duties. The Administrative Agent may
execute any of its duties under this Agreement and the other Loan Documents by
or through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Administrative
Agent shall not be responsible for the negligence or misconduct of any agents
or attorneys-in-fact selected by it with reasonable care.
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9.3 Exculpatory Provisions. Neither the Administrative
Agent nor any of its officers, directors, employees, agents, attorneys-in-fact
or Affiliates shall be (i) liable for any action lawfully taken or omitted to
be taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except to the extent that any of the foregoing result from
its or such Person's own gross negligence or willful misconduct) or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Borrower or any officer thereof
contained in this Agreement or any other Loan Document or in any certificate,
report, statement or other document referred to or provided for in, or received
by the Administrative Agent under or in connection with, this Agreement or any
other Loan Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document or
for any failure of the Borrower to perform its obligations hereunder or
thereunder. The Administrative Agent shall not be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Borrower.
9.4 Reliance by Administrative Agent. The Administrative
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any Note, writing, resolution, notice, consent, certificate, affidavit, letter,
telecopy, telex or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Borrower),
independent accountants and other experts selected by the Administrative Agent.
The Administrative Agent may deem and treat the payee of any Loans as the owner
thereof for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with the Administrative Agent. The
Administrative Agent shall be fully justified in failing or refusing to take
any action under this Agreement or any other Loan Document unless it shall
first receive such advice or concurrence of the Required Lenders (or, if so
specified by this Agreement, all Lenders) as it deems appropriate or it shall
first be indemnified to its satisfaction by the Lenders against any and all
liability and expense which may be Incurred by it by reason of taking or
continuing to take any such action. The Administrative Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement and the other Loan Documents in accordance with a request of the
Required Lenders (or, if so specified by this Agreement, all Lenders), and such
request and any action taken or failure to act pursuant thereto shall be
binding upon all the Lenders and all future holders of the Loans.
9.5 Notice of Default. The Administrative Agent shall
not be deemed to have knowledge or notice of the occurrence of any Default or
Event of Default hereunder unless the Administrative Agent has received notice
from a Lender or the Borrower referring to this Agreement, describing such
Default or Event of Default and stating that such notice is a "notice of
default". In the event that the Administrative Agent receives such a notice,
the Administrative Agent shall give notice thereof to the Lenders. The
Administrative Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Lenders (or,
if so specified by this Agreement, all Lenders); provided that unless and until
the Administrative Agent shall have received such directions, the
Administrative Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of the Lenders.
9.6 Non-Reliance on Administrative Agent and Other
Lenders. Each Lender expressly acknowledges that neither the Administrative
Agent nor any of its officers, directors, employees, agents, attorneys-in-fact
or Affiliates has made any representations or warranties to it and
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that no act by the Administrative Agent hereinafter taken, including any review
of the affairs of the Borrower or any Affiliate of the Borrower, shall be
deemed to constitute any representation or warranty by the Administrative Agent
to any Lender. Each Lender represents to the Administrative Agent that it has,
independently and without reliance upon the Administrative Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of the
Borrower and its Affiliates and made its own decision to make its Loans
hereunder and enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon the Administrative Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and the other
Loan Documents, and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, financial and other condition
and creditworthiness of the Borrower and its Affiliates. Except for notices,
reports and other documents expressly required to be furnished to the Lenders
by the Administrative Agent hereunder, the Administrative Agent shall not have
any duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, condition (financial
or otherwise), prospects or creditworthiness of the Borrower or any Affiliate
of the Borrower which may come into the possession of the Administrative Agent
or any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
9.7 Indemnification. The Lenders agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Borrower and without limiting the obligation of the Borrower to do so),
ratably according to their respective Commitment Percentages in effect on the
date on which indemnification is sought under this Section 9.7 (or, if
indemnification is sought after the date upon which the Commitments shall have
terminated and the Loans shall have been paid in full, ratably in accordance
with their Commitment Percentages immediately prior to such date), from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever which may at any time (including, without limitation, at any time
following the payment of the Loans) be imposed on, Incurred by or asserted
against the Administrative Agent in any way relating to or arising out of, the
Commitments, this Agreement, any of the other Loan Documents or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the
Administrative Agent under or in connection with any of the foregoing; provided
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements which result from the Administrative
Agent's gross negligence or willful misconduct. The Administrative Agent shall
have the right to deduct any amount owed to it by any Lender under this
subsection from any payment made by it to such Lender hereunder. The
agreements in this subsection shall survive the payment of the Loans and all
other amounts payable hereunder.
9.8 Administrative Agent in Its Individual Capacity. The
Administrative Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower as though the
Administrative Agent were not the Administrative Agent hereunder. With respect
to the Loans made or renewed by it, the Administrative Agent shall have the
same rights and powers under this Agreement and the other Loan Documents as any
Lender and may exercise the same as though it were not the Administrative
Agent, and the terms "Lender" and "Lenders" shall include the Administrative
Agent in its individual capacity.
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9.9 Successor Administrative Agent. The Administrative
Agent may resign as Administrative Agent upon ten days' notice to the Lenders
and the Borrower. If the Administrative Agent shall resign as Administrative
Agent under this Agreement and the other Loan Documents, then the Required
Lenders shall appoint from among the Lenders a successor agent for the Lenders,
which successor agent shall (unless an Event of Default under Section 7(a) or
Section 7(f) with respect to the Borrower shall have occurred and be
continuing) be subject to the approval of the Borrower (which approval shall
not be unreasonably withheld or delayed), whereupon such successor agent shall
succeed to the rights, powers and duties of the Administrative Agent, and the
term "Administrative Agent" shall mean such successor agent effective upon such
appointment and approval, and the former Administrative Agent's rights, powers
and duties as Administrative Agent shall be terminated, without any other or
further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement or any holders of the Loans. If no successor
agent has accepted appointment as Administrative Agent by the date that is 30
days following a retiring Administrative Agent's notice of resignation, the
retiring Administrative Agent's resignation shall nevertheless thereupon become
effective and the Lenders shall assume and perform all of the duties of the
Administrative Agent hereunder until such time, if any, as the Required Lenders
appoint a successor agent as provided for above. After any retiring
Administrative Agent's resignation as Administrative Agent, the provisions of
this Section 9 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Administrative Agent under this Agreement and the
other Loan Documents.
SECTION 10. MISCELLANEOUS
10.1 Amendments and Waivers. Neither this Agreement nor
any Loan Note, nor any Subsidiary Guarantee, nor any terms hereof or thereof,
may be amended, supplemented or modified except in accordance with the
provisions of this Section 10.1. The Required Lenders may, or, with the
written consent of the Required Lenders, the Administrative Agent may, from
time to time, (a) enter into with the Borrower and each Loan Party which is a
party to the relevant Loan Documents written amendments, supplements or
modifications hereto and to the Loan Documents for the purpose of adding any
provisions to this Agreement or the other Loan Documents or changing in any
manner the rights of the Lenders or of any Loan Party hereunder or thereunder
or (b) waive, on such terms and conditions as the Required Lenders or the
Administrative Agent, as the case may be, may specify in such instrument, any
of the requirements of this Agreement or the other Loan Documents or any
Default or Event of Default and its consequences; provided, however, that no
such waiver and no such amendment, supplement, or modification shall (i) (A)
forgive the principal amount or extend the final scheduled date of maturity of
any Loan or extend the scheduled date of any amortization payment in respect of
any Loan, (B) reduce the stated rate of any interest or fee payable hereunder
or extend the scheduled date of any payment thereof or increase the aggregate
amount or extend the expiration date of any Lender's Commitment, (C) restrict
the right of each Lender to exchange Term Loans, or Initial Loans on the
Initial Maturity Date, for Exchange Notes or amend the rate of such exchange or
(D) make any change to the subordination provisions of this Agreement that
adversely affects the rights of any Lender, in each case without the written
consent of each Lender directly affected thereby, (ii) (A) amend, modify, or
waive any provision of this Section 10.1, (B) reduce the percentage specified
in the definition of Required Lenders, (C) consent to the assignment or
transfer by the Borrower of any of its rights and obligations under the Loan
Documents except as expressly permitted hereby, (D) amend, modify or waive any
provision in the Exchange Notes that requires (or would, if any Exchange Notes
were outstanding, require) the approval of all holders of Exchange Notes, or
(E) release all or substantially all of the Subsidiary Guarantors from their
obligations under their respective Subsidiary Guarantees, in each case without
the consent of all of the Lenders, or (iii) amend, modify or waive any
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provision of Section 9 without the written consent of the then Administrative
Agent. Any such waiver and any such amendment, supplement or modification
shall apply equally to each of the Lenders and shall be binding upon the
Borrower and the other Loan Parties, the Lenders, the Administrative Agent, and
all future holders of the Loans. In the case of any waiver, the Borrower and
the other Loan Parties, the Lenders and the Administrative Agent shall be
restored to their former positions and rights hereunder and under the other
Loan Documents, and any Default or Event of Default waived shall be deemed to
be cured and not continuing; no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereon.
10.2 Notices. All notices, requests and demands to or
upon the respective parties hereto to be effective shall be in writing
(including by facsimile transmission), and, unless otherwise expressly provided
herein, shall be deemed to have been duly given or made when delivered, or
three days after being deposited in the mail, postage prepaid, or, in the case
of telecopy notice, when received, addressed as follows in the case of the
Borrower and the Administrative Agent, and as set forth in an administrative
questionnaire furnished to the Administrative Agent in the case of the other
parties hereto, or to such other address as may be hereafter notified by the
respective parties hereto:
the Borrower: Renters Choice, Inc.
13800 Montfort Drive
Suite 300
Dallas, Texas 75240
Attention: J. Ernest Talley
Telecopy: (972) 701-0360
Telephone: (972) 419-2611
with a copy to: Winstead Sechrest & Minick P.C.
1201 Elm Street
5400 Renaissance Tower
Dallas, Texas 75270
Attention: Thomas W. Hughes
Telecopy: (214) 745-5390
Telephone: (214) 745-5201
The Administrative
Agent: The Chase Manhattan Bank
One Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Attention: Agency Services,
Janet Belden
Telecopy: (212) 552-5658
Telephone: (212) 552-1687
with copies to: Chase Securities Inc.
270 Park Avenue, 4th Floor
New York, New York 10017
Attention: Kathy Duncan
Telecopy: (212) 972-0009
Telephone: (212) 270-5808
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provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to Section 2.2 or 2.5 shall not be effective until
received.
10.3 No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Administrative Agent or
any Lender, any right, remedy, power or privilege hereunder or under the Loan
Notes and Subsidiary Guarantees shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
10.4 Survival of Representations and Warranties. All
representations and warranties made hereunder, in the Loan Notes and Subsidiary
Guarantees and in any document, certificate or statement delivered pursuant
hereto or in connection herewith shall survive the execution and delivery of
this Agreement and the making of the Loans hereunder.
10.5 Payment of Expenses and Taxes. The Borrower agrees
(a) to pay or reimburse the Administrative Agent for all reasonable
out-of-pocket costs and expenses Incurred in connection with the development,
preparation and execution of, and any amendment, supplement or modification to,
the Loan Documents and any other documents prepared in connection herewith or
therewith, and the consummation and administration of the transactions
contemplated hereby and thereby, including, without limitation, the reasonable
fees and disbursements of counsel to the Administrative Agent, (b) to pay or
reimburse each Lender and the Administrative Agent (in the case of each Lender,
after an Event of Default has occurred and is continuing) for all its
reasonable out-of-pocket costs and expenses Incurred in connection with the
enforcement or preservation of any rights under the Loan Documents and any such
other documents, including, without limitation, the reasonable fees and
disbursements of counsel to the Administrative Agent and the Lenders, and (c)
to pay, indemnify, and hold each Lender and the Administrative Agent (and their
respective directors, officers, employees and agents) harmless from, any and
all recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp, excise and other similar taxes, if
any, which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, the Loan Documents and any
such other documents, and (d) to pay, indemnify, and hold each Lender and the
Administrative Agent (and their respective Affiliates, directors, officers,
employees and agents) harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever with respect to the
execution, delivery, enforcement, performance and administration of the
Transaction Documents or the use of the proceeds of the Loans in connection
with the Acquisition and the transactions contemplated by this Agreement and
any such other documents (all the foregoing in this clause (d), collectively,
the "indemnified liabilities"), provided that the Borrower shall have no
obligation hereunder to the Administrative Agent, or any Lender (or their
respective Affiliates, directors, officers, employees and agents) with respect
to indemnified liabilities to the extent such indemnified liabilities arise
from the gross negligence or wilful misconduct of the indemnified party or, in
the case of indemnified liabilities arising under the Loan Documents, from
material breach by the indemnified party of the Loan Documents, as the case may
be. The agreements in this subsection shall survive repayment of the Loans and
all other amounts payable hereunder.
10.6 Successors and Assigns; Participations and
Assignments. (a) This Agreement shall be binding upon and inure to the
benefit of the Borrower the Lenders, the Administrative Agent
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and their respective successors and assigns, except that the Borrower may not
assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of each Lender and any assignment or transfer
by any Lender of its rights or obligations under the Loan Documents must be
made in compliance with this Section 10.6 (and any purported assignment in
violation of this subsection shall be null and void).
(b) Any Lender may, in the ordinary course of its lending
or investment business and in accordance with applicable law, at any time sell
to one or more financial institutions or other entities ("Loan Participants")
participating interests in any Loan owing to such Lender, any Commitment of
such Lender or any other interest of such Lender under the Loan Documents. In
the event of any such sale by a Lender of a participating interest to a Loan
Participant, (i) such Lender's obligations under this Agreement to the other
parties to this Agreement shall remain unchanged, (ii) such Lender shall remain
solely responsible for the performance thereof, (iii) such Lender shall remain
the holder of any such Loan (and any Note evidencing such Loan) for all
purposes under the Loan Documents, (iv) the Borrower and the Administrative
Agent shall continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under the Loan Documents, and (v) no
Loan Participant under any participation shall have any right to approve any
amendment or waiver of any provision of any Loan Document, or any consent to
any departure by any Loan Party therefrom, except with respect to the matters
described in clauses (i) and (ii) of the proviso to the second sentence of
Section 10.1. The Borrower agrees that each Loan Participant shall be entitled
to the benefits of Sections 2.9 and 2.10 with respect to its participation in
the Commitments and the Loans outstanding from time to time as if it was a
Lender; provided that, in the case of Section 2.10 such Loan Participant shall
have complied with the requirements of said Section and provided, further, that
no Loan Participant shall be entitled to receive any greater amount pursuant to
any such Section than the transferor Lender would have been entitled to receive
in respect of the amount of the participation transferred by such transferor
Lender to such Loan Participant had no such transfer occurred.
(c) Any Lender (an "Assignor") may, in the ordinary
course of its lending or investment business and in accordance with applicable
law, at any time and from time to time assign to any other Lender or any
affiliate thereof or, with the consent of the Administrative Agent (which shall
not be unreasonably withheld or delayed), to an additional bank or financial
institution (an "Assignee"), all or any part of its rights and obligations
under the Loan Documents pursuant to an Assignment and Acceptance,
substantially in the form of Exhibit E, executed by such Assignee, such
Assignor and, if required by this paragraph, the Administrative Agent, and
delivered to the Administrative Agent for its acceptance and recording in the
Register, provided that no such assignment to an Assignee (other than any
Lender or any affiliate thereof) shall be in an aggregate principal amount of
less than $5,000,000 (other than in the case of an assignment of all of a
Lender's interests under this Agreement), unless otherwise agreed by the
Administrative Agent. Upon such execution, delivery, acceptance and recording,
from and after the effective date determined pursuant to such Assignment and
Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the
extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder with a Commitment as set forth therein, and
(y) the Assignor thereunder shall, to the extent provided in such Assignment
and Acceptance, be released from its obligations under this Agreement (and, in
the case of an Assignment and Acceptance covering all or the remaining portion
of an assigning Lender's rights and obligations under this Agreement, such
assigning Lender shall cease to be a party hereto).
(d) The Administrative Agent, which for purposes of this
Section 10.6(d) only shall be deemed an agent of the Borrower, shall maintain
at the address of the Administrative Agent referred to in Section 10.2 a copy
of each Assignment and Acceptance delivered to it and a register (the
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"Register") for the recordation of the names and addresses of the Lenders and
the Commitments of, and principal amounts of the Loans owing to, each Lender
from time to time. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrower, the Administrative Agent and the
Lenders, shall treat each Person whose name is recorded in the Register as the
owner of a Loan or other obligation hereunder as the owner thereof for all
purposes of the Loan Documents.
(e) Upon its receipt of an Assignment and Acceptance
executed by an Assignor, an Assignee and, if required by Section 10.6(c), the
Administrative Agent, together with payment to the Administrative Agent of a
registration and processing fee of $4,000, the Administrative Agent shall (i)
promptly accept such Assignment and Acceptance and (ii) on the effective date
determined pursuant thereto record the information contained therein in the
Register and give notice of such acceptance and recordation to the Lenders and
the Borrower. On or prior to such effective date, the assigning Lender shall
surrender any outstanding Loan Notes held by it all or a portion of which are
being assigned, and the Borrower, at its own expense, shall, upon a request to
the Administrative Agent by the assigning Lender or the Assignee, as
applicable, execute and deliver to the Administrative Agent (in exchange for
outstanding Loan Notes of the assigning Lender, if any) a new Loan Note to the
order of such Assignee in an amount equal to the amount of such Assignee's
Loans after giving effect to such Assignment and Acceptance and, if the
assigning Lender has retained a Loan hereunder, a new Loan Note, to the order
of the assigning Lender in an amount equal to the amount of such Lender's Loans
after giving effect to such Assignment and Acceptance. Any such new Loan Notes
shall be dated the Closing Date and shall otherwise be in the form of the Loan
Note replaced thereby. Any Loan Notes surrendered by the assigning Lender
shall be returned by the Administrative Agent to the Borrower marked
"cancelled."
(f) To the extent requested by any Lender, the Borrower
shall execute and deliver to such Lender an Initial Note dated the Closing Date
substantially in the form of Exhibit F-1 hereto to evidence the portion of the
Initial Loan made by such Lender and with appropriate insertions ("Original
Initial Notes"). On each Interest Payment Date, to the extent requested by any
Lender, the Borrower shall execute and deliver to such Lender on such Interest
Payment Date a note dated such Interest Payment Date substantially in the form
of Exhibit F-1 hereto in a principal amount equal to such Lender's pro rata
portion of such PIK Interest Amount and with other appropriate insertions (each
a "Subsequent Initial Note" and, together with the Original Initial Notes, the
"Initial Notes"). A Subsequent Initial Note shall bear interest from the date
of its issuance at the same rate borne by all Initial Notes at the date of
issuance and from time to time thereafter.
(g) Unless converted to an Exchange Note and, to the
extent requested by any Lender, the Borrower shall execute and deliver to such
Lender a Term Note dated the Initial Maturity Date substantially in the form of
Exhibit F-2 hereto to evidence the Term Loan made on such date, in the
principal amount of the Initial Notes held by such Lender on such date and with
other appropriate insertions (collectively, the "Original Term Notes"). On or
after the Initial Maturity Date, on each Interest Payment Date, to the extent
requested by any Lender, the Borrower shall execute and deliver to such Lender
on such Interest Payment Date a Term Note dated such Interest Payment Date
substantially in the form of Exhibit F-2 hereto in a principal amount equal to
such Lender's pro rata portion of such PIK Interest Amount and with other
appropriate insertions (each a "Subsequent Term Note" and, together with the
Original Term Notes, the "Term Notes"). A Subsequent Term Note shall bear
interest from the date of its issuance at the same rate borne by all Term Notes
at the date of issuance and from time to time thereafter.
(h) The Borrower authorizes each Lender to disclose to
any Loan Participant or Assignee (each, a "Transferee") and any prospective
Transferee (to the extent such Persons agree to be
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bound by the provisions of Section 10.15 hereof) any and all financial
information in such Lender's possession concerning the Borrower and its
Affiliates which has been delivered to such Lender by or on behalf of the
Borrower pursuant to this Agreement or which has been delivered to such Lender
by or on behalf of the Borrower in connection with such Lender's credit
evaluation of the Borrower and its Affiliates prior to becoming a party to this
Agreement.
(i) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this subsection concerning assignments of
Loans and Notes relate only to absolute assignments and that such provisions do
not prohibit assignments creating security interests, including, without
limitation, any pledge or assignment by a Lender of any Loan or Note to any
Federal Reserve Bank in accordance with applicable law, provided that no such
assignment, whether to a Federal Reserve Bank or other entity, shall release a
Lender from any of its obligations hereunder or substitute any such Federal
Reserve Bank or other entity for such Lender as a party hereto or permit an
absolute assignment to occur other than in accordance with such provisions of
this subsection.
10.7 Adjustments; Set-off. (a) If any Lender (a
"Benefitted Lender") shall at any time receive any payment of all or part of
its Loans or interest thereon, or receive any collateral in respect thereof
(whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in Section 7(f), or otherwise), in a
greater proportion than any such payment to or collateral received by any other
Lender, if any, in respect of such other Lender's Loans or interest thereon,
such Benefitted Lender shall purchase for cash from the other Lenders a
participating interest in such portion of each such other Lender's Loan, or
shall provide such other Lenders with the benefits of any such collateral, or
the proceeds thereof, as shall be necessary to cause such Benefitted Lender to
share the excess payment or benefits of such collateral or proceeds ratably
with each of the Lenders; provided, however, that if all or any portion of such
excess payment or benefits is thereafter recovered from such Benefitted Lender,
such purchase shall be rescinded, and the purchase price and benefits returned,
to the extent of such recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right, without prior notice to the
Borrower, any such notice being expressly waived by the Borrower to the extent
permitted by applicable law, upon any amount becoming due and payable by the
Borrower hereunder to set-off and appropriate and apply against such amount any
and all deposits (general or special, time or demand, provisional or final), in
any currency, and any other credits, indebtedness or claims, in any currency,
in each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by such Lender or any branch or agency
thereof to or for the credit or the account of the Borrower. Each Lender
agrees promptly to notify the Borrower and the Administrative Agent after any
such set-off and application made by such Lender, provided that the failure to
give such notice shall not affect the validity of such set-off and application.
10.8 Counterparts. This Agreement may be executed by one
or more of the parties to this Agreement on any number of separate counterparts
(including by facsimile transmission), and all of said counterparts taken
together shall be deemed to constitute one and the same instrument. A set of
the copies of this Agreement signed by all the parties shall be lodged with the
Borrower and the Administrative Agent.
10.9 Severability. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without, to the extent permitted by law, invalidating the
remaining
<PAGE> 77
72
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not, to the extent permitted by law, invalidate or render
unenforceable such provision in any other jurisdiction.
10.10 Integration. This Agreement and the other Loan
Documents represent the agreement of the Borrower, the Administrative Agent and
the Lenders with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to the subject matter hereof not expressly set
forth or referred to herein or in the other Loan Documents.
10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.
10.12 Submission To Jurisdiction; Waivers. The Borrower
hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal
action or proceeding relating to this Agreement and the other Loan
Documents to which it is a party, or for recognition and enforcement
of any judgement in respect thereof, to the non-exclusive general
jurisdiction of the Courts of the State of New York, the courts of the
United States of America for the Southern District of New York, and
appellate courts from any thereof;
(b) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an
inconvenient court or forum and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the Borrower, at the address specified in Section 10.2 or
at such other address of which the Administrative Agent shall have
been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or
shall limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law,
any right it may have to claim or recover in any legal action or
proceeding referred to in this subsection any special, exemplary,
punitive or consequential damages.
10.13 Acknowledgements. The Borrower hereby acknowledges
that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of the Loan Documents;
(b) neither the Administrative Agent nor any Lender has
any fiduciary relationship with or duty to the Borrower arising out of
or in connection with the Loan Documents, and the
<PAGE> 78
73
relationship between Administrative Agent and Lenders, on one hand,
and the Borrower, on the other hand, in connection herewith or
therewith is solely that of creditor and debtor; and
(c) no joint venture is created hereby or by the other
Loan Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Lenders or among the Borrower and the
Lenders.
10.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE
ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
10.15 Confidentiality. The Administrative Agent and each
Lender shall hold all non-public information obtained pursuant to the
requirements of this Agreement which has been identified as confidential by the
Borrower in accordance with such Lender's customary procedures for handling
confidential information of this nature, it being understood and agreed by the
Borrower that in any event a Lender may make disclosures reasonably required by
any bona fide assignee, transferee or participant in connection with the
contemplated assignment or transfer by such Lender of any Loans or any
participation therein (to the extent such Persons agree to be bound by the
provisions of this Section) or as required or requested by any governmental
agency or representative thereof or pursuant to legal process or by the
National Association of Insurance Commissioners or in connection with the
exercise of any remedy under the Loan Documents; provided that, unless
specifically prohibited by applicable law or court order, each Lender shall
notify the Borrower of any request by any governmental agency or representative
thereof (other than any such request in connection with any examination of the
financial condition of such Lender by such governmental agency) for disclosure
of any such non-public information prior to disclosure of such information; and
provided, further that in no event shall any Lender be obligated or required to
return any materials furnished by the Borrower or any of its Subsidiaries.
<PAGE> 79
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
RENTERS CHOICE, INC.
By:
-------------------------------------
Title:
THE CHASE MANHATTAN BANK,
as Administrative Agent and as Lender
By:
-------------------------------------
Title:
<PAGE> 80
SCHEDULE 1.1 TO
SENIOR SUBORDINATED
CREDIT AGREEMENT
COMMITMENTS
<TABLE>
<CAPTION>
LENDERS Commitments
- ------- -----------
<S> <C>
THE CHASE MANHATTAN BANK $64,625,000
BEAR, STEARNS & CO., INC. $20,625,000
NATIONSBANK $16,500,000
CREDIT SUISSE FIRST BOSTON $8,250,000
FUJI BANK, LIMITED $20,000,000
KZH - IV CORPORATION $30,000,000
MASSMUTUAL HIGH YIELD PARTNERS II L.L.C. $ 5,000,000
MASSMUTUAL CORPORATE VALUE PARTNERS LTD. $ 5,000,000
PARIBAS CAPITAL FUNDING L.L.C. $ 5,000,000
TOTAL $175,000,000
</TABLE>
<PAGE> 1
EXHIBIT 10.19
EXECUTION COPY
================================================================================
GUARANTEE AND COLLATERAL AGREEMENT
made by
RENTERS CHOICE, INC.
and certain of its Subsidiaries
in favor of
THE CHASE MANHATTAN BANK,
as Administrative Agent
Dated as of August 5, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
SECTION 1. DEFINED TERMS 1
1.1 Definitions 1
1.2 Other Definitional Provisions 5
SECTION 2. GUARANTEE 5
2.1 Guarantee 5
2.2 Right of Contribution 6
2.3 No Subrogation 6
2.4 Amendments, etc. with respect to the Borrower Obligations 6
2.5 Guarantee Absolute and Unconditional 7
2.6 Reinstatement 7
2.7 Payments 8
SECTION 3. GRANT OF SECURITY INTEREST 8
SECTION 4. REPRESENTATIONS AND WARRANTIES 8
4.1 Title; No Other Liens 9
4.2 Perfected First Priority Liens 9
4.3 Chief Executive Office 9
4.4 Inventory and Equipment 9
4.5 Farm Products 9
4.6 Investment Property 9
4.7 Receivables 10
4.8 Contracts 10
4.9 Intellectual Property 10
SECTION 5. COVENANTS 11
5.1 Delivery of Instruments, Certificated Securities and Chattel Paper 11
5.2 Maintenance of Insurance 11
5.3 Payment of Obligations 11
5.4 Maintenance of Perfected Security Interest; Further Documentation 12
5.5 Changes in Locations, Name, etc. 12
5.6 Notices 12
5.7 Investment Property 13
5.8 Receivables 14
</TABLE>
1
<PAGE> 3
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
5.9 Contracts 14
5.10 Intellectual Property 14
SECTION 6. REMEDIAL PROVISIONS 15
6.1 Certain Matters Relating to Receivables 15
6.2 Communications with Obligors; Grantors Remain Liable 16
6.3 Pledged Stock 16
6.4 Proceeds to be Turned Over To Administrative Agent 17
6.5 Application of Proceeds 17
6.6 Code and Other Remedies 18
6.7 Registration Rights 18
6.8 Waiver; Deficiency 19
SECTION 7. THE ADMINISTRATIVE AGENT 19
7.1 Administrative Agent's Appointment as Attorney-in-Fact, etc 20
7.2 Duty of Administrative Agent 21
7.3 Execution of Financing Statements 21
7.4 Authority of Administrative Agent 22
SECTION 8. MISCELLANEOUS 22
8.1 Amendments in Writing 22
8.2 Notices 22
8.3 No Waiver by Course of Conduct; Cumulative Remedies 22
8.4 Enforcement Expenses; Indemnification 22
8.5 Successors and Assigns 23
8.6 Set-Off 23
8.7 Counterparts 23
8.8 Severability 23
8.9 Section Headings 23
8.10 Integration 24
8.11 GOVERNING LAW 24
8.12 Submission To Jurisdiction; Waivers 24
8.13 Acknowledgements 24
8.14 Additional Grantors 25
8.15 Releases 25
8.16 WAIVER OF JURY TRIAL 25
</TABLE>
2
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
SCHEDULES
Schedule 1 Notice Addresses
Schedule 2 Investment Property
Schedule 3 Perfection Matters
Schedule 4 Jurisdictions of Organization and Chief Executive Offices
Schedule 5 Inventory and Equipment Locations
Schedule 6 Intellectual Property
Schedule 7 Contracts
</TABLE>
3
<PAGE> 5
GUARANTEE AND COLLATERAL AGREEMENT, dated as of August 5,
1998, made by each of the signatories hereto (together with any other entity
that may become a party hereto as provided herein, the "Grantors"), in favor of
THE CHASE MANHATTAN BANK, as Administrative Agent (in such capacity, the
"Administrative Agent") for the banks and other financial institutions (the
"Lenders") from time to time parties to the Credit Agreement, dated as of August
5, 1998 (as amended, waived, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among Renters Choice, Inc. (the "Borrower"), the
Lenders, the Documentation Agent and Syndication Agent named therein and the
Administrative Agent.
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make extensions of credit to the Borrower upon the terms and
subject to the conditions set forth therein;
WHEREAS, the Borrower is a member of an affiliated group of
companies that includes each other Grantor;
WHEREAS, the proceeds of the extensions of credit under the
Credit Agreement will be used in part to enable the Borrower to make valuable
transfers to one or more of the other Grantors in connection with the operation
of their respective businesses;
WHEREAS, the Borrower and the other Grantors are engaged in
related businesses, and each Grantor will derive substantial direct and indirect
benefit from the making of the extensions of credit under the Credit Agreement;
and
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective extensions of credit to the Borrower under the
Credit Agreement that the Grantors shall have executed and delivered this
Agreement to the Administrative Agent for the ratable benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce
the Administrative Agent and the Lenders to enter into the Credit Agreement and
to induce the Lenders to make their respective extensions of credit to the
Borrower thereunder, each Grantor hereby agrees with the Administrative Agent,
for the ratable benefit of the Lenders, as follows:
SECTION 1 .DEFINED TERMS
1.1 Definitions. Unless otherwise defined herein,
terms defined in the Credit Agreement and used
herein shall have the meanings given to them in
the Credit Agreement, and the following terms are
used herein as defined in the New York UCC:
Accounts, Certificated Security, Chattel Paper,
Documents, Equipment, Farm Products, Instruments
and Inventory.
<PAGE> 6
(b) The following terms shall have the
following meanings:
"Agreement": this Guarantee and Collateral Agreement, as the
same may be amended, supplemented or otherwise modified from time to
time.
"Borrower Obligations": the collective reference to the unpaid
principal of and interest on the Loans and Reimbursement Obligations
and all other obligations and liabilities of the Borrower (including,
without limitation, interest accruing at the then applicable rate
provided in the Credit Agreement after the maturity of the Loans and
Reimbursement Obligations and interest accruing at the then applicable
rate provided in the Credit Agreement after the filing of any petition
in bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding, relating to the Borrower, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding) to
the Administrative Agent or any Lender (or, in the case of any Lender
Hedge Agreement, any Affiliate of any Lender), whether direct or
indirect, absolute or contingent, due or to become due, or now existing
or hereafter incurred, which may arise under, out of, or in connection
with, the Credit Agreement, this Agreement, the other Loan Documents,
any Letter of Credit, any Lender Hedge Agreement or any other document
made, delivered or given in connection with any of the foregoing, in
each case whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel
to the Administrative Agent or to the Lenders that are required to be
paid by the Borrower pursuant to the terms of any of the foregoing
agreements).
"Collateral": as defined in Section 3.
"Collateral Account": any collateral account established by
the Administrative Agent as provided in Section 6.1 or 6.4.
"Contracts": the contracts and agreements listed in Schedule
7, as the same may be amended, supplemented or otherwise modified from
time to time, including, without limitation, (i) all rights of any
Grantor to receive moneys due and to become due to it thereunder or in
connection therewith, (ii) all rights of any Grantor to damages arising
thereunder and (iii) all rights of any Grantor to perform and to
exercise all remedies thereunder.
"Copyrights": (i) all copyrights arising under the laws of the
United States, any other country or any political subdivision thereof,
whether registered or unregistered and whether published or unpublished
(including, without limitation, those listed in Schedule 6), all
registrations and recordings thereof, and all applications in
connection therewith, including, without limitation, all registrations,
recordings and applications in the United States Copyright Office, and
(ii) the right to obtain all renewals thereof.
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<PAGE> 7
"Copyright Licenses": any written agreement naming any Grantor
as licensor or licensee (including, without limitation, those listed in
Schedule 6), granting any right under any Copyright, including, without
limitation, the grant of rights to manufacture, distribute, exploit and
sell materials derived from any Copyright.
"Deposit Account": as defined in the Uniform Commercial Code
of any applicable jurisdiction and, in any event, including, without
limitation, any demand, time, savings, passbook or like account
maintained with a depositary institution.
"Foreign Subsidiary": any Subsidiary organized under the laws
of any jurisdiction outside the United States of America.
"Foreign Subsidiary Voting Stock": the voting Capital Stock of
any Foreign Subsidiary.
"General Intangibles": all "general intangibles" as such term
is defined in Section 9-106 of the New York UCC and, in any event,
including, without limitation, with respect to any Grantor, all
contracts, agreements, instruments and indentures in any form, and
portions thereof, to which such Grantor is a party or under which such
Grantor has any right, title or interest or to which such Grantor or
any property of such Grantor is subject, as the same may from time to
time be amended, supplemented or otherwise modified, including, without
limitation, (i) all rights of such Grantor to receive moneys due and to
become due to it thereunder or in connection therewith, (ii) all rights
of such Grantor to damages arising thereunder and (iii) all rights of
such Grantor to perform and to exercise all remedies thereunder, in
each case to the extent the grant by such Grantor of a security
interest pursuant to this Agreement in its right, title and interest in
such contract, agreement, instrument or indenture is not prohibited by
such contract, agreement, instrument or indenture without the consent
of any other party thereto, would not give any other party to such
contract, agreement, instrument or indenture the right to terminate its
obligations thereunder, or is permitted with consent if all necessary
consents to such grant of a security interest have been obtained from
the other parties thereto (it being understood that the foregoing shall
not be deemed to obligate such Grantor to obtain such consents);
provided, that the foregoing limitation shall not affect, limit,
restrict or impair the grant by such Grantor of a security interest
pursuant to this Agreement in any Receivable or any money or other
amounts due or to become due under any such contract, agreement,
instrument or indenture.
"Guarantor Obligations": with respect to any Guarantor, all
obligations and liabilities of such Guarantor which may arise under or
in connection with this Agreement (including, without limitation,
Section 2) or any other Loan Document to which such Guarantor is a
party, in each case whether on account of guarantee obligations,
reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including, without limitation, all fees and disbursements of
counsel to the Administrative Agent or to the Lenders that are required
to
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<PAGE> 8
be paid by such Guarantor pursuant to the terms of this Agreement or
any other Loan Document).
"Guarantors": the collective reference to each Grantor other
than the Borrower.
"Intellectual Property": the collective reference to all
rights, priorities and privileges relating to intellectual property,
whether arising under United States, multinational or foreign laws or
otherwise, including, without limitation, the Copyrights, the Copyright
Licenses, the Patents, the Patent Licenses, the Trademarks and the
Trademark Licenses, and all rights to sue at law or in equity for any
infringement or other impairment thereof, including the right to
receive all proceeds and damages therefrom.
"Intercompany Note": any promissory note evidencing loans made
by any Grantor to the Borrower or any of its Subsidiaries.
"Investment Property": the collective reference to (i) all
"investment property" as such term is defined in Section 9-115 of the
New York UCC (other than any Foreign Subsidiary Voting Stock excluded
from the definition of "Pledged Stock") and (ii) whether or not
constituting "investment property" as so defined, all Pledged Notes and
all Pledged Stock.
"Issuers": the collective reference to each issuer of any
Investment Property.
"Lender Hedge Agreements": all interest rate swaps, caps or
collar agreements or similar arrangements entered into by the Borrower
with any Lender (or any Affiliate of any Lender) providing for
protection against fluctuations in interest rates or currency exchange
rates or the exchange of nominal interest obligations, either generally
or under specific contingencies, for the purposes set forth in Section
6.9 of the Credit Agreement.
"New York UCC": the Uniform Commercial Code as from time to
time in effect in the State of New York.
"Obligations": (i) in the case of the Borrower, the Borrower
Obligations, and (ii) in the case of each Guarantor, its Guarantor
Obligations.
"Patents": (i) all letters patent of the United States, any
other country or any political subdivision thereof, all reissues and
extensions thereof and all goodwill associated therewith, including,
without limitation, any of the foregoing referred to in Schedule 6,
(ii) all applications for letters patent of the United States or any
other country and all divisions, continuations and
continuations-in-part thereof, including, without limitation, any of
the foregoing referred to in Schedule 6, and (iii) all rights to obtain
any reissues or extensions of the foregoing.
-4-
<PAGE> 9
"Patent License": all agreements, whether written or oral,
providing for the grant by or to any Grantor of any right to
manufacture, use or sell any invention covered in whole or in part by a
Patent, including, without limitation, any of the foregoing referred to
in Schedule 6.
"Pledged Notes": all promissory notes listed on Schedule 2,
all Intercompany Notes at any time issued to any Grantor and all other
promissory notes issued to or held by any Grantor (other than
promissory notes issued in connection with extensions of trade credit
by any Grantor in the ordinary course of business).
"Pledged Stock": the shares of Capital Stock listed on
Schedule 2, together with any other shares, stock certificates, options
or rights of any nature whatsoever in respect of the Capital Stock of
any Person that may be issued or granted to, or held by, any Grantor
while this Agreement is in effect; provided that in no event shall more
than 66% of the total outstanding Foreign Subsidiary Voting Stock of
any Foreign Subsidiary be required to be pledged hereunder.
"Proceeds": all "proceeds" as such term is defined in Section
9-306(1) of the New York UCC and, in any event, shall include, without
limitation, all dividends or other income from the Investment Property,
collections thereon or distributions or payments with respect thereto.
"Receivable": any right to payment for goods sold or leased or
for services rendered, whether or not such right is evidenced by an
Instrument or Chattel Paper and whether or not it has been earned by
performance (including, without limitation, any Account).
"Securities Act": the Securities Act of 1933, as amended.
"Specified Collateral": all Collateral other than Collateral
referred to in Section 3(l) and the Proceeds and products thereof.
"Trademarks": (i) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade
styles, service marks, logos and other source or business identifiers,
and all goodwill associated therewith, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, whether in the United States
Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political
subdivision thereof, or otherwise, and all common-law rights related
thereto, including, without limitation, any of the foregoing referred
to in Schedule 6, and (ii) the right to obtain all renewals thereof.
-5-
<PAGE> 10
"Trademark License": any agreement, whether written or oral,
providing for the grant by or to any Grantor of any right to use any
Trademark, including, without limitation, any of the foregoing referred
to in Schedule 6.
1.2 Other Definitional Provisions. The words "hereof,"
"herein", "hereto" and "hereunder" and words of
similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any
particular provision of this Agreement, and
Section and Schedule references are to this
Agreement unless otherwise specified.
(b) The meanings given to terms defined herein
shall be equally applicable to both the
singular and plural forms of such terms.
(c) Where the context requires, terms relating
to the Collateral or any part thereof, when
used in relation to a Grantor, shall refer
to such Grantor's Collateral or the
relevant part thereof.
SECTION 2 .GUARANTEE
2.1 Guarantee. Each of the Guarantors hereby, jointly
and severally, unconditionally and irrevocably,
guarantees to the Administrative Agent, for the
ratable benefit of the Lenders and their
respective successors, indorsees, transferees and
assigns, the prompt and complete payment and
performance by the Borrower when due (whether at
the stated maturity, by acceleration or otherwise)
of the Borrower Obligations.
(b) Anything herein or in any other Loan
Document to the contrary notwithstanding,
the maximum liability of each Guarantor
hereunder and under the other Loan
Documents shall in no event exceed the
amount which can be guaranteed by such
Guarantor under applicable federal and
state laws relating to the insolvency of
debtors (after giving effect to the right
of contribution established in Section
2.2).
(c) Each Guarantor agrees that the Borrower
Obligations may at any time and from time
to time exceed the amount of the liability
of such Guarantor hereunder without
impairing the guarantee contained in this
Section 2 or affecting the rights and
remedies of the Administrative Agent or any
Lender hereunder.
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<PAGE> 11
(d) The guarantee contained in this Section 2
shall remain in full force and effect until
all the Borrower Obligations and the
obligations of each Guarantor under the
guarantee contained in this Section 2 shall
have been satisfied by payment in full, no
Letter of Credit shall be outstanding and
the Commitments shall be terminated,
notwithstanding that from time to time
during the term of the Credit Agreement the
Borrower may be free from any Borrower
Obligations.
(e) No payment made by the Borrower, any of the
Guarantors, any other guarantor or any
other Person or received or collected by
the Administrative Agent or any Lender from
the Borrower, any of the Guarantors, any
other guarantor or any other Person by
virtue of any action or proceeding or any
set-off or appropriation or application at
any time or from time to time in reduction
of or in payment of the Borrower
Obligations shall be deemed to modify,
reduce, release or otherwise affect the
liability of any Guarantor hereunder which
shall, notwithstanding any such payment
(other than any payment made by such
Guarantor in respect of the Borrower
Obligations or any payment received or
collected from such Guarantor in respect of
the Borrower Obligations), remain liable
for the Borrower Obligations up to the
maximum liability of such Guarantor
hereunder until the Borrower Obligations
are paid in full, no Letter of Credit shall
be outstanding and the Commitments are
terminated.
2.2 Right of Contribution. Each Guarantor hereby
agrees that to the extent that a Guarantor shall
have paid more than its proportionate share of any
payment made hereunder, such Guarantor shall be
entitled to seek and receive contribution from and
against any other Guarantor hereunder which has
not paid its proportionate share of such payment.
Each Guarantor's right of contribution shall be
subject to the terms and conditions of Section
2.3. The provisions of this Section 2.2 shall in
no respect limit the obligations and liabilities
of any Guarantor to the Administrative Agent and
the Lenders, and each Guarantor shall remain
liable to the Administrative Agent and the Lenders
for the full amount guaranteed by such Guarantor
hereunder.
2.3 No Subrogation. Notwithstanding any payment made
by any Guarantor hereunder or any set-off or
application of funds of any Guarantor by the
Administrative Agent or any Lender, no Guarantor
shall be entitled to be subrogated to any of the
rights of the
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<PAGE> 12
Administrative Agent or any Lender against the
Borrower or any other Guarantor or any collateral
security or guarantee or right of offset held by
the Administrative Agent or any Lender for the
payment of the Borrower Obligations, nor shall any
Guarantor seek or be entitled to seek any
contribution or reimbursement from the Borrower or
any other Guarantor in respect of payments made by
such Guarantor hereunder, until all amounts owing
to the Administrative Agent and the Lenders by the
Borrower on account of the Borrower Obligations
are paid in full, no Letter of Credit shall be
outstanding and the Commitments are terminated. If
any amount shall be paid to any Guarantor on
account of such subrogation rights at any time
when all of the Borrower Obligations shall not
have been paid in full, such amount shall be held
by such Guarantor in trust for the Administrative
Agent and the Lenders, segregated from other funds
of such Guarantor, and shall, forthwith upon
receipt by such Guarantor, be turned over to the
Administrative Agent in the exact form received by
such Guarantor (duly indorsed by such Guarantor to
the Administrative Agent, if required), to be
applied against the Borrower Obligations, whether
matured or unmatured, in such order as the
Administrative Agent may determine.
2.4 Amendments, etc. with respect to the Borrower
Obligations. Each Guarantor shall remain obligated
hereunder notwithstanding that, without any
reservation of rights against any Guarantor and
without notice to or further assent by any
Guarantor, any demand for payment of any of the
Borrower Obligations made by the Administrative
Agent or any Lender may be rescinded by the
Administrative Agent or such Lender and any of the
Borrower Obligations continued, and the Borrower
Obligations, or the liability of any other Person
upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset
with respect thereto, may, from time to time, in
whole or in part, be renewed, extended, amended,
modified, accelerated, compromised, waived,
surrendered or released by the Administrative
Agent or any Lender, and the Credit Agreement and
the other Loan Documents and any other documents
executed and delivered in connection therewith may
be amended, modified, supplemented or terminated,
in whole or in part, as the Administrative Agent
(or the Required Lenders or all Lenders, as the
case may be) may deem advisable from time to time,
and any collateral security, guarantee or right of
offset at any time held by the Administrative
Agent or any Lender for the payment of the
Borrower Obligations may be sold, exchanged,
waived, surrendered or released. Neither the
Administrative Agent nor any Lender shall have any
obligation to
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<PAGE> 13
protect, secure, perfect or insure any Lien at any
time held by it as security for the Borrower
Obligations or for the guarantee contained in this
Section 2 or any property subject thereto.
2.5 Guarantee Absolute and Unconditional. Each
Guarantor waives any and all notice of the
creation, renewal, extension or accrual of any of
the Borrower Obligations and notice of or proof of
reliance by the Administrative Agent or any Lender
upon the guarantee contained in this Section 2 or
acceptance of the guarantee contained in this
Section 2; the Borrower Obligations, and any of
them, shall conclusively be deemed to have been
created, contracted or incurred, or renewed,
extended, amended or waived, in reliance upon the
guarantee contained in this Section 2; and all
dealings between the Borrower and any of the
Guarantors, on the one hand, and the
Administrative Agent and the Lenders, on the other
hand, likewise shall be conclusively presumed to
have been had or consummated in reliance upon the
guarantee contained in this Section 2. Each
Guarantor waives diligence, presentment, protest,
demand for payment and notice of default or
nonpayment to or upon the Borrower or any of the
Guarantors with respect to the Borrower
Obligations. Each Guarantor understands and agrees
that the guarantee contained in this Section 2
shall be construed as a continuing, absolute and
unconditional guarantee of payment without regard
to (a) the validity or enforceability of the
Credit Agreement or any other Loan Document, any
of the Borrower Obligations or any other
collateral security therefor or guarantee or right
of offset with respect thereto at any time or from
time to time held by the Administrative Agent or
any Lender, (b) any defense, set-off or
counterclaim (other than a defense of payment or
performance) which may at any time be available to
or be asserted by the Borrower or any other Person
against the Administrative Agent or any Lender, or
(c) any other circumstance whatsoever (with or
without notice to or knowledge of the Borrower or
such Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal
discharge of the Borrower for the Borrower
Obligations, or of such Guarantor under the
guarantee contained in this Section 2, in
bankruptcy or in any other instance. When making
any demand hereunder or otherwise pursuing its
rights and remedies hereunder against any
Guarantor, the Administrative Agent or any Lender
may, but shall be under no obligation to, make a
similar demand on or otherwise pursue such rights
and remedies as it may have against the Borrower,
any other Guarantor or any other Person or against
any collateral security or guarantee for the
Borrower Obligations or any right of offset with
respect thereto, and any failure
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by the Administrative Agent or any Lender to make
any such demand, to pursue such other rights or
remedies or to collect any payments from the
Borrower, any other Guarantor or any other Person
or to realize upon any such collateral security or
guarantee or to exercise any such right of offset,
or any release of the Borrower, any other
Guarantor or any other Person or any such
collateral security, guarantee or right of offset,
shall not relieve any Guarantor of any obligation
or liability hereunder, and shall not impair or
affect the rights and remedies, whether express,
implied or available as a matter of law, of the
Administrative Agent or any Lender against any
Guarantor. For the purposes hereof "demand" shall
include the commencement and continuance of any
legal proceedings.
2.6 Reinstatement. The guarantee contained in this
Section 2 shall continue to be effective, or be
reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the
Borrower Obligations is rescinded or must
otherwise be restored or returned by the
Administrative Agent or any Lender upon the
insolvency, bankruptcy, dissolution, liquidation
or reorganization of the Borrower or any
Guarantor, or upon or as a result of the
appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for,
the Borrower or any Guarantor or any substantial
part of its property, or otherwise, all as though
such payments had not been made.
2.7 Payments. Each Guarantor hereby guarantees that
payments hereunder will be paid to the
Administrative Agent without set-off or
counterclaim in Dollars at the office of the
Administrative Agent located at 270 Park Avenue,
New York, New York 10017.
SECTION 3 . GRANT OF SECURITY
INTEREST
Each Grantor hereby collaterally assigns and transfers to the
Administrative Agent, and hereby grants to the Administrative Agent, for the
ratable benefit of the Lenders, a security interest in, all of the following
property now owned or at any time hereafter acquired by such Grantor or in which
such Grantor now has or at any time in the future may acquire any right, title
or interest (collectively, the "Collateral"), as collateral security for the
prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of such Grantor's Obligations,:
(a) all Accounts;
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<PAGE> 15
(b) all Chattel Paper;
(c) all Contracts;
(d) all Deposit Accounts;
(e) all Documents;
(f) all Equipment;
(g) all General Intangibles;
(h) all Instruments;
(i) all Intellectual Property;
(j) all Inventory;
(k) all Investment Property;
(l) all other property not otherwise described
above;
(m) all books and records pertaining to the
Collateral; and
(n) to the extent not otherwise included, all
Proceeds and products of any and all of the
foregoing and all collateral security and
guarantees given by any Person with respect
to any of the foregoing.
SECTION 4 . REPRESENTATIONS AND
WARRANTIES
To induce the Administrative Agent and the Lenders to enter
into the Credit Agreement and to induce the Lenders to make their respective
extensions of credit to the Borrower thereunder, each Grantor hereby represents
and warrants to the Administrative Agent and each Lender that:
4.1 Title; No Other Liens. Except for the security
interest granted to the Administrative Agent for
the ratable benefit of the Lenders pursuant to
this Agreement and the other Liens permitted to
exist on the Collateral by the Credit Agreement,
such Grantor owns each item of the Specified
Collateral free and clear of any and all Liens or
claims
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<PAGE> 16
of others. No financing statement or other public
notice with respect to all or any part of the
Specified Collateral is on file or of record in
any public office, except such as have been filed
in favor of the Administrative Agent, for the
ratable benefit of the Lenders, pursuant to this
Agreement or as are permitted by the Credit
Agreement.
4.2 Perfected First Priority Liens. The security
interests granted pursuant to this Agreement upon
completion of the filings and other actions
specified on Schedule 3 (which, in the case of all
filings and other documents referred to on said
Schedule, have been delivered to the
Administrative Agent in completed and duly
executed form) will constitute valid perfected
security interests in all of the Specified
Collateral (other than Deposit Accounts and the
Proceeds thereof) in favor of the Administrative
Agent, for the ratable benefit of the Lenders, as
collateral security for such Grantor's
Obligations, enforceable in accordance with the
terms hereof against all creditors of such Grantor
and any Persons purporting to purchase any
Specified Collateral (other than Deposit Accounts
and the Proceeds thereof) from such Grantor and
are prior to all other Liens on the Specified
Collateral (other than Deposit Accounts and the
Proceeds thereof) in existence on the date hereof
except for unrecorded Liens permitted by the
Credit Agreement which have priority over the
Liens on such Specified Collateral by operation of
law.
4.3 Chief Executive Office. On the date hereof, such
Grantor's jurisdiction of organization and the
location of such Grantor's chief executive office
or sole place of business are specified on
Schedule 4.
4.4 Inventory and Equipment. On the date hereof, the
Inventory and the Equipment (other than mobile
goods) are kept at the locations listed on
Schedule 5.
4.5 Farm Products. None of the Collateral constitutes,
or is the Proceeds of, Farm Products.
4.6 Investment Property. The shares of Pledged Stock
pledged by such Grantor hereunder constitute all
the issued and outstanding shares of all classes
of the Capital Stock of each Issuer owned by such
Grantor or, in the case of Foreign Subsidiary
Voting Stock, if less, 66% of the outstanding
Foreign Subsidiary Voting Stock of each relevant
Issuer.
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<PAGE> 17
(b) All the shares of the Pledged Stock have
been duly and validly issued and are fully
paid and nonassessable.
(c) Each of the Pledged Notes constitutes the
legal, valid and binding obligation of the
obligor with respect thereto, enforceable
in accordance with its terms, subject to
the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization,
moratorium and other similar laws relating
to or affecting creditors' rights
generally, general equitable principles
(whether considered in a proceeding in
equity or at law) and an implied covenant
of good faith and fair dealing.
(d) Such Grantor is the record and beneficial
owner of, and has good and marketable title
to, the Investment Property pledged by it
hereunder, free of any and all Liens or
options in favor of, or claims of, any
other Person, except the security interest
created by this Agreement and any Liens in
favor of a "securities intermediary"
pursuant to and as defined in Article 8 of
the New York UCC.
4.7 Receivables. No amount payable to such Grantor
under or in connection with any Receivable is
evidenced by any Instrument or Chattel Paper which
has not been delivered to the Administrative
Agent.
(b) None of the obligors on any Receivables is
a Governmental Authority.
(c) The amounts represented by such Grantor to
the Lenders from time to time as owing to
such Grantor in respect of the Receivables
will at such times be accurate.
4.8 Contracts. No consent of any party (other than
such Grantor) to any Contract is required, or
purports to be required, in connection with the
execution, delivery and performance of this
Agreement.
(b) Each Contract is in full force and effect
and constitutes a valid and legally
enforceable obligation of the parties
thereto, subject to the effects of
bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and
other similar laws relating to or affecting
creditors' rights generally, general
equitable principles (whether considered in
a proceeding in
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<PAGE> 18
equity or at law) and an implied covenant
of good faith and fair dealing.
(c) No consent or authorization of, filing with
or other act by or in respect of any
Governmental Authority is required in
connection with the execution, delivery,
performance, validity or enforceability of
any of the Contracts by any party thereto
other than those which have been duly
obtained, made or performed, are in full
force and effect and do not subject the
scope of any such Contract to any material
adverse limitation, either specific or
general in nature.
(d) Neither such Grantor nor (to the best of
such Grantor's knowledge) any of the other
parties to the Contracts is in default in
the performance or observance of any of the
terms thereof in any manner that, in the
aggregate, could reasonably be expected to
have a Material Adverse Effect.
(e) The right, title and interest of such
Grantor in, to and under the Contracts are
not subject to any defenses, offsets,
counterclaims or claims that, in the
aggregate, could reasonably be expected to
have a Material Adverse Effect.
(f) Such Grantor has delivered to the
Administrative Agent a complete and correct
copy of each Contract, including all
amendments, supplements and other
modifications thereto.
(g) No amount payable to such Grantor under or
in connection with any Contract is
evidenced by any Instrument or Chattel
Paper which has not been delivered to the
Administrative Agent.
(h) None of the parties to any Contract is a
Governmental Authority.
4.9 Intellectual Property. Schedule 6 lists all
Intellectual Property owned by such Grantor in its
own name on the date hereof.
(b) On the date hereof, all material
Intellectual Property is valid, subsisting,
unexpired and enforceable, has not been
abandoned and does not materially infringe
the intellectual property rights of any
other Person.
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<PAGE> 19
(c) Except as set forth in Schedule 6, on the
date hereof, none of the Intellectual
Property is the subject of any licensing or
franchise agreement pursuant to which such
Grantor is the licensor or franchisor.
(d) No holding, decision or judgment has been
rendered by any Governmental Authority
which would limit, cancel or question the
validity of, or such Grantor's rights in,
any Intellectual Property in any respect
that could reasonably be expected to have a
Material Adverse Effect.
(e) No action or proceeding is pending, or, to
the knowledge of such Grantor, threatened,
on the date hereof (i) seeking to limit,
cancel or question the validity of any
material Intellectual Property or such
Grantor's ownership interest therein, or
(ii) which, if adversely determined, would
have a material adverse effect on the value
of any Intellectual Property.
SECTION 5 . COVENANTS
Each Grantor covenants and agrees with the Administrative
Agent and the Lenders that, from and after the date of this Agreement until the
Obligations shall have been paid in full, no Letter of Credit shall be
outstanding and the Commitments shall have terminated:
5.1 Delivery of Instruments, Certificated Securities
and Chattel Paper. If any material amount payable
under or in connection with any of the Collateral
shall be or become evidenced by any Instrument,
Certificated Security or Chattel Paper, such
Instrument, Certificated Security or Chattel Paper
shall be immediately delivered to the
Administrative Agent, duly indorsed in a manner
satisfactory to the Administrative Agent, to be
held as Collateral pursuant to this Agreement.
5.2 Maintenance of Insurance. Such Grantor will
maintain, with financially sound and reputable
companies, insurance policies (i) insuring the
Inventory and Equipment against loss by fire,
explosion, theft and such other casualties as may
be reasonably satisfactory to the Administrative
Agent and (ii) insuring such Grantor and, to the
extent requested by the Administrative Agent, the
Administrative Agent and the Lenders, against
liability for personal injury and property damage
relating to such Inventory and Equipment, such
policies to be in such form and amounts and having
such coverage as
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may be reasonably satisfactory to the
Administrative Agent and the Lenders.
(b) All such insurance shall (i) provide that
no cancellation, material reduction in
amount or material change in coverage
thereof shall be effective until at least
30 days after receipt by the Administrative
Agent of written notice thereof, (ii) name
the Administrative Agent as insured party
or loss payee and (iii) be reasonably
satisfactory in all other respects to the
Administrative Agent.
(c) The Borrower shall deliver annually to the
Administrative Agent and the Lenders a
certificate of a reputable insurance broker
with respect to such insurance as promptly
as practicable upon receipt thereof from
such insurance broker and such supplemental
reports with respect thereto as the
Administrative Agent may from time to time
reasonably request.
5.3 Payment of Obligations. Such Grantor will pay and
discharge or otherwise satisfy at or before
maturity or before they become delinquent, as the
case may be, all material taxes, assessments and
governmental charges or levies imposed upon the
Collateral or in respect of income or profits
therefrom, as well as all material claims of any
kind (including, without limitation, claims for
labor, materials and supplies) against or with
respect to the Collateral, except that no such
charge need be paid if the amount or validity
thereof is currently being contested in good faith
by appropriate proceedings, reserves in conformity
with GAAP with respect thereto have been provided
on the books of such Grantor and such proceedings
could not reasonably be expected to result in the
sale, forfeiture or loss of any material portion
of the Collateral or any material interest in the
Collateral.
5.4 Maintenance of Perfected Security Interest;
Further Documentation. Such Grantor shall maintain
the security interest created by this Agreement as
a perfected security interest having at least the
priority described in Section 4.2 and shall defend
such security interest against the claims and
demands of all Persons whomsoever.
(b) Such Grantor will furnish to the
Administrative Agent from time to time
statements and schedules further
identifying and describing the assets and
property of such Grantor and such other
reports in connection therewith as the
Administrative Agent may reasonably
request, all in reasonable detail.
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(c) At any time and from time to time, upon the
written request of the Administrative
Agent, and at the sole expense of such
Grantor, such Grantor will promptly and
duly execute and deliver, and have
recorded, such further instruments and
documents and take such further actions as
the Administrative Agent may reasonably
request for the purpose of obtaining or
preserving the full benefits of this
Agreement and of the rights and powers
herein granted, including, without
limitation, (i) filing any financing or
continuation statements under the Uniform
Commercial Code (or other similar laws) in
effect in any jurisdiction with respect to
the security interests created hereby, (ii)
in the case of Investment Property (other
than the Investment Property purchased with
the amounts referred to in clause (b) of
the definition of "Funded Debt" contained
in Section 1.1 of the Credit Agreement) and
any other relevant Collateral, taking any
actions necessary to enable the
Administrative Agent to obtain "control"
(within the meaning of the applicable
Uniform Commercial Code) with respect
thereto and (iii) in the case of Deposit
Accounts, taking any actions necessary to
enable the Administrative Agent to obtain a
perfected security interest in Deposit
Accounts.
5.5 Changes in Locations, Name, etc. Such Grantor will
not, except upon 15 days' prior written notice to
the Administrative Agent and delivery to the
Administrative Agent of (a) all additional
executed financing statements and other documents
reasonably requested by the Administrative Agent
to maintain the validity, perfection and priority
of the security interests provided for herein and
(b) if applicable, a written supplement to
Schedule 5 showing any additional location at
which Inventory or Equipment shall be kept:
(i) permit any material portion of the Inventory or Equipment
to be kept at a location other than those listed on Schedule 5;
(ii) change its jurisdiction of organization or the location
of its chief executive office or sole place of business from that
referred to in Section 4.3; or
(iii) change its name, identity or corporate structure to such
an extent that any financing statement filed by the Administrative
Agent in connection with this Agreement would become misleading.
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<PAGE> 22
5.6 Notices. Such Grantor will advise the
Administrative Agent promptly, in reasonable
detail, of:
(a) any Lien (other than security interests
created hereby or Liens permitted under the
Credit Agreement) on any material portion
of the Collateral which would adversely
affect the ability of the Administrative
Agent to exercise any of its remedies
hereunder; and
(b) of the occurrence of any other event which
could reasonably be expected to have a
material adverse effect on the aggregate
value of the Collateral or on the security
interests created hereby.
5.7 Investment Property. If such Grantor shall become
entitled to receive or shall receive any stock
certificate (including, without limitation, any
certificate representing a stock dividend or a
distribution in connection with any
reclassification, increase or reduction of capital
or any certificate issued in connection with any
reorganization), option or rights in respect of
the Capital Stock of any Issuer, whether in
addition to, in substitution of, as a conversion
of, or in exchange for, any shares of the Pledged
Stock, or otherwise in respect thereof, such
Grantor shall accept the same as the agent of the
Administrative Agent and the Lenders, hold the
same in trust for the Administrative Agent and the
Lenders and deliver the same forthwith to the
Administrative Agent in the exact form received,
duly indorsed by such Grantor to the
Administrative Agent, if required, together with
an undated stock power covering such certificate
duly executed in blank by such Grantor and with,
if the Administrative Agent so requests, signature
guaranteed, to be held by the Administrative
Agent, subject to the terms hereof, as additional
collateral security for the Obligations. Any sums
paid upon or in respect of the Investment Property
upon the liquidation or dissolution of any Issuer
shall be paid over to the Administrative Agent to
be held by it hereunder as additional collateral
security for the Obligations, and in case any
distribution of capital shall be made on or in
respect of the Investment Property or any property
shall be distributed upon or with respect to the
Investment Property pursuant to the
recapitalization or reclassification of the
capital of any Issuer or pursuant to the
reorganization thereof, the property so
distributed shall, unless otherwise subject to a
perfected security interest in favor of the
Administrative Agent, be delivered to the
Administrative Agent to be held by it hereunder as
additional collateral security for the
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Obligations. If any sums of money or property so
paid or distributed in respect of the Investment
Property shall be received by such Grantor, such
Grantor shall, until such money or property is
paid or delivered to the Administrative Agent,
hold such money or property in trust for the
Lenders, segregated from other funds of such
Grantor, as additional collateral security for the
Obligations.
(b) Without the prior written consent of the
Administrative Agent, such Grantor will not
(i) vote to enable, or take any other
action to permit, any Issuer of Pledged
Stock to issue any stock or other equity
securities of any nature or to issue any
other securities convertible into or
granting the right to purchase or exchange
for any stock or other equity securities of
any nature of any Issuer, (ii) sell,
assign, transfer, exchange, or otherwise
dispose of, or grant any option with
respect to, the Investment Property or
Proceeds thereof (except pursuant to a
transaction expressly permitted by the
Credit Agreement), (iii) create, incur or
permit to exist any Lien or option in favor
of, or any claim of any Person with respect
to, any of the Investment Property or
Proceeds thereof, or any interest therein,
except for the security interests created
or permitted by this Agreement or the
Credit Agreement or (iv) enter into any
agreement or undertaking restricting the
right or ability of such Grantor or the
Administrative Agent to sell, assign or
transfer any of the Investment Property or
Proceeds thereof.
(c) In the case of each Grantor which is an
Issuer, such Issuer agrees that (i) it will
be bound by the terms of this Agreement
relating to the Investment Property issued
by it and will comply with such terms
insofar as such terms are applicable to it,
(ii) it will notify the Administrative
Agent promptly in writing of the occurrence
of any of the events described in Section
5.7(a) with respect to the Investment
Property issued by it and (iii) the terms
of Sections 6.3(c) and 6.7 shall apply to
it, mutatis mutandis, with respect to all
actions that may be required of it pursuant
to Section 6.3(c) or 6.7 with respect to
the Investment Property issued by it.
5.8 Receivables. Other than in the ordinary course of
business consistent with its past practice, such
Grantor will not (i) grant any extension of the
time of payment of any Receivable, (ii) compromise
or settle any Receivable for less than the full
amount thereof, (iii)
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release, wholly or partially, any Person liable
for the payment of any Receivable, (iv) allow any
credit or discount whatsoever on any Receivable or
(v) amend, supplement or modify any Receivable in
any manner that could adversely affect the value
thereof.
(b) Such Grantor will deliver to the
Administrative Agent a copy of each demand,
notice or document received by it that
questions or calls into doubt the validity
or enforceability of any outstanding
Receivables constituting a material portion
of the Collateral.
5.9 Contracts. Such Grantor will perform and comply in
all material respects with all its obligations
under the Contracts.
(b) Such Grantor will not amend, modify,
terminate or waive any provision of any
Contract in any manner which could
reasonably be expected to materially
adversely affect the value of such Contract
as Collateral.
(c) Such Grantor will exercise promptly and
diligently each and every material right
which it may have under each Contract
(other than any right of termination).
(d) Such Grantor will deliver to the
Administrative Agent a copy of each
material demand, notice or document
received by it relating in any way to any
Contract that questions the validity or
enforceability of such Contract.
5.10 Intellectual Property. Such Grantor (either itself
or through licensees) will (i) continue to use
each material Trademark on each and every
trademark class of goods applicable to its current
line as reflected in its current catalogs,
brochures and price lists in order to maintain
such Trademark in full force free from any claim
of abandonment for non-use, (ii) maintain as in
the past the quality of products and services
offered under such Trademark, (iii) use such
Trademark with the appropriate notice of
registration and all other notices and legends
required by applicable Requirements of Law, (iv)
not adopt or use any mark which is confusingly
similar or a colorable imitation of such Trademark
unless the Administrative Agent, for the ratable
benefit of the Lenders, shall obtain a perfected
security interest in such mark pursuant to this
Agreement, and (v) not (and not permit any
licensee or sublicensee thereof to) do any act or
knowingly
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<PAGE> 25
omit to do any act whereby such Trademark may
become invalidated or impaired in any way.
(b) Such Grantor (either itself or through
licensees) will not do any act, or omit to
do any act, whereby any material Patent may
become forfeited, abandoned or dedicated to
the public.
(c) Such Grantor (either itself or through
licensees) (i) will employ each material
Copyright and (ii) will not (and will not
permit any licensee or sublicensee thereof
to) do any act or knowingly omit to do any
act whereby any material portion of the
Copyrights may become invalidated or
otherwise impaired. Such Grantor will not
(either itself or through licensees) do any
act whereby any material portion of the
Copyrights may fall into the public domain.
(d) Such Grantor (either itself or through
licensees) will not do any act that
knowingly uses any material Intellectual
Property to infringe the intellectual
property rights of any other Person.
(e) Such Grantor will notify the Administrative
Agent as promptly as practicable if it
knows, or has reason to know, that any
application or registration relating to any
material Intellectual Property may become
forfeited, abandoned or dedicated to the
public, or of any adverse determination or
development (including, without limitation,
the institution of, or any such
determination or development in, any
proceeding in the United States Patent and
Trademark Office, the United States
Copyright Office or any court or tribunal
in any country) regarding such Grantor's
ownership of, or the validity of, any
material Intellectual Property or such
Grantor's right to register the same or to
own and maintain the same.
(f) Whenever such Grantor, either by itself or
through any agent, employee, licensee or
designee, shall file an application for the
registration of any Intellectual Property
with the United States Patent and Trademark
Office, the United States Copyright Office
or any similar office or agency in any
other country or any political subdivision
thereof, such Grantor shall report such
filing to the Administrative Agent within
five Business Days after the last day of
the fiscal quarter in which such filing
occurs. Upon request of the Administrative
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Agent, such Grantor shall execute and
deliver, and have recorded, any and all
agreements, instruments, documents, and
papers as the Administrative Agent may
request to evidence the Administrative
Agent's and the Lenders' security interest
in any Copyright, Patent or Trademark and
the goodwill and general intangibles of
such Grantor relating thereto or
represented thereby.
(g) Such Grantor will take all reasonable and
necessary steps, including, without
limitation, in any proceeding before the
United States Patent and Trademark Office,
the United States Copyright Office or any
similar office or agency in any other
country or any political subdivision
thereof, to maintain and pursue each
application (and to obtain the relevant
registration) and to maintain each
registration of the material Intellectual
Property, including, without limitation,
filing of applications for renewal,
affidavits of use and affidavits of
incontestability.
(h) In the event that any material Intellectual
Property is infringed, misappropriated or
diluted by a third party, such Grantor
shall (i) take such actions as such Grantor
shall reasonably deem appropriate under the
circumstances to protect such Intellectual
Property and (ii) if such Intellectual
Property is of material economic value,
promptly notify the Administrative Agent
after it learns thereof and take such
actions as are reasonably appropriate under
the circumstances, including, as
appropriate, to sue for infringement,
misappropriation or dilution, to seek
injunctive relief where appropriate and to
recover any and all damages for such
infringement, misappropriation or dilution.
SECTION 6 .REMEDIAL PROVISIONS
6.1 Certain Matters Relating to Receivables. The
Administrative Agent shall have the right to make
test verifications of the Receivables in any
manner and through any medium that it reasonably
considers advisable, and each Grantor shall
furnish all such assistance and information as the
Administrative Agent may require in connection
with such test verifications. After an Event of
Default shall have occurred and be continuing, at
any time and from time to time, upon the
Administrative Agent's request and at the
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expense of the relevant Grantor, such Grantor
shall cause independent public accountants or
others satisfactory to the Administrative Agent to
furnish to the Administrative Agent reports
showing reconciliations, aging and test
verifications of, and trial balances for, the
Receivables.
(b) At any time after the occurrence and during
the continuance of an Event of Default, the
Administrative Agent may curtail or
terminate the authority of each Grantor to
collect such Grantor's Receivables. If
required by the Administrative Agent at any
time after the occurrence and during the
continuance of an Event of Default, any
payments of Receivables, when collected by
any Grantor, (i) shall be forthwith (and,
in any event, within two Business Days)
deposited by such Grantor in the exact form
received, duly indorsed by such Grantor to
the Administrative Agent if required, in a
Collateral Account maintained under the
sole dominion and control of the
Administrative Agent, subject to withdrawal
by the Administrative Agent for the account
of the Lenders only as provided in
Section , and (ii) until so turned over,
shall be held by such Grantor in trust for
the Administrative Agent and the Lenders,
segregated from other funds of such
Grantor. Each such deposit of Proceeds of
Receivables shall be accompanied by a
report identifying in reasonable detail the
nature and source of the payments included
in the deposit.
(c) At the Administrative Agent's request, at
any time after the occurrence and during
the continuance of an Event of Default,
each Grantor shall deliver to the
Administrative Agent (to the extent such
Grantor has possession thereof) all
documents evidencing, and relating to, the
agreements and transactions which gave rise
to the Receivables, including, without
limitation, all original orders, invoices
and shipping receipts.
6.2 Communications with Obligors; Grantors Remain
Liable. The Administrative Agent in its own name
or in the name of others may at any time during
reasonable business hours after the occurrence and
during the continuance of an Event of Default
communicate with obligors under the Receivables
and parties to the Contracts to verify with them
to the Administrative Agent's satisfaction the
existence, amount and terms of any Receivables or
Contracts.
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(b) Upon the request of the Administrative
Agent at any time after the occurrence and
during the continuance of an Event of
Default, each Grantor shall notify obligors
on the Receivables and parties to the
Contracts that the Receivables and the
Contracts have been collaterally assigned
to the Administrative Agent for the ratable
benefit of the Lenders and that payments in
respect thereof shall be made directly to
the Administrative Agent.
(c) Anything herein to the contrary
notwithstanding, each Grantor shall remain
liable under each of the Receivables and
Contracts to observe and perform all the
conditions and obligations to be observed
and performed by it thereunder, all in
accordance with the terms of any agreement
giving rise thereto. Neither the
Administrative Agent nor any Lender shall
have any obligation or liability under any
Receivable (or any agreement giving rise
thereto) or Contract by reason of or
arising out of this Agreement or the
receipt by the Administrative Agent or any
Lender of any payment relating thereto, nor
shall the Administrative Agent or any
Lender be obligated in any manner to
perform any of the obligations of any
Grantor under or pursuant to any Receivable
(or any agreement giving rise thereto) or
Contract, to make any payment, to make any
inquiry as to the nature or the sufficiency
of any payment received by it or as to the
sufficiency of any performance by any party
thereunder, to present or file any claim,
to take any action to enforce any
performance or to collect the payment of
any amounts which may have been assigned to
it or to which it may be entitled at any
time or times.
6.3 Pledged Stock. Unless an Event of Default shall
have occurred and be continuing and the
Administrative Agent shall have given notice to
the relevant Grantor of the Administrative Agent's
intent to exercise its corresponding rights
pursuant to Section 6.3(b), each Grantor shall be
permitted to receive all cash dividends paid in
respect of the Pledged Stock and all payments made
in respect of the Pledged Notes, in each case paid
in the normal course of business of the relevant
Issuer and consistent with past practice, to the
extent permitted in the Credit Agreement, and to
exercise all voting and corporate rights with
respect to the Investment Property; provided,
however, that no vote shall be cast or corporate
right exercised or other action taken which, in
the Administrative Agent's reasonable
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judgment, would impair the Collateral or which
would be inconsistent with or result in any
violation of any provision of the Credit
Agreement, this Agreement or any other Loan
Document.
(b) If an Event of Default shall occur and be
continuing and the Administrative Agent
shall give notice of its intent to exercise
such rights to the relevant Grantor or
Grantors, (i) the Administrative Agent
shall have the right to receive any and all
cash dividends, payments or other Proceeds
paid in respect of the Investment Property
and make application thereof to the
Obligations in such order as the
Administrative Agent may determine, and
(ii) any or all of the Investment Property
shall be registered in the name of the
Administrative Agent or its nominee, and
the Administrative Agent or its nominee may
thereafter exercise (x) all voting,
corporate and other rights pertaining to
such Investment Property at any meeting of
shareholders of the relevant Issuer or
Issuers or otherwise and (y) any and all
rights of conversion, exchange and
subscription and any other rights,
privileges or options pertaining to such
Investment Property as if it were the
absolute owner thereof (including, without
limitation, the right to exchange at its
discretion any and all of the Investment
Property upon the merger, consolidation,
reorganization, recapitalization or other
fundamental change in the corporate
structure of any Issuer, or upon the
exercise by any Grantor or the
Administrative Agent of any right,
privilege or option pertaining to such
Investment Property, and in connection
therewith, the right to deposit and deliver
any and all of the Investment Property with
any committee, depositary, transfer agent,
registrar or other designated agency upon
such terms and conditions as the
Administrative Agent may determine), all
without liability except to account for
property actually received by it, but the
Administrative Agent shall have no duty to
any Grantor to exercise any such right,
privilege or option and shall not be
responsible for any failure to do so or
delay in so doing.
(c) Each Grantor hereby authorizes and
instructs each Issuer of any Investment
Property pledged by such Grantor hereunder
to (i) comply with any instruction received
by it from the Administrative Agent in
writing that (x) states that an Event of
Default has occurred and is continuing and
(y) is otherwise in accordance with the
terms of this Agreement, without any
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other or further instructions from such
Grantor, and each Grantor agrees that each
Issuer shall be fully protected in so
complying, and (ii) unless otherwise
expressly permitted hereby, pay any
dividends or other payments with respect to
the Investment Property directly to the
Administrative Agent.
6.4 Proceeds to be Turned Over To Administrative
Agent. In addition to the rights of the
Administrative Agent and the Lenders specified in
Section 6.1 with respect to payments of
Receivables, if an Event of Default shall occur
and be continuing, all Proceeds received by any
Grantor consisting of cash, checks and other
near-cash items shall be held by such Grantor in
trust for the Administrative Agent and the
Lenders, segregated from other funds of such
Grantor, and shall, forthwith upon receipt by such
Grantor, be turned over to the Administrative
Agent in the exact form received by such Grantor
(duly indorsed by such Grantor to the
Administrative Agent, if required). All Proceeds
received by the Administrative Agent hereunder
shall be held by the Administrative Agent in a
Collateral Account maintained under its sole
dominion and control. All Proceeds while held by
the Administrative Agent in a Collateral Account
(or by such Grantor in trust for the
Administrative Agent and the Lenders) shall
continue to be held as collateral security for all
the Obligations and shall not constitute payment
thereof until applied as provided in Section .
6.5 Application of Proceeds. At such intervals as may
be agreed upon by the Borrower and the
Administrative Agent, or, if an Event of Default
shall have occurred and be continuing, at any time
at the Administrative Agent's election, the
Administrative Agent may apply all or any part of
Proceeds held in any Collateral Account in payment
of the then due and owing Obligations in such
order as the Administrative Agent may elect, and
any part of such funds which the Administrative
Agent elects not so to apply and deems not
required as collateral security for the
Obligations shall be paid over from time to time
by the Administrative Agent to the Borrower or to
whomsoever may be lawfully entitled to receive the
same. Any balance of such Proceeds remaining after
the Obligations shall have been paid in full, no
Letters of Credit shall be outstanding and the
Commitments shall have terminated shall be paid
over to the Borrower or to whomsoever may be
lawfully entitled to receive the same.
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6.6 Code and Other Remedies. If an Event of Default
shall occur and be continuing, the Administrative
Agent, on behalf of the Lenders, may exercise, in
addition to all other rights and remedies granted
to them in this Agreement and in any other
instrument or agreement securing, evidencing or
relating to the Obligations, all rights and
remedies of a secured party under the New York UCC
or any other applicable law. Without limiting the
generality of the foregoing, the Administrative
Agent, without demand of performance or other
demand, presentment, protest, advertisement or
notice of any kind (except any notice expressly
required by this Agreement or the other Loan
Documents or by law referred to below) to or upon
any Grantor or any other Person (all and each of
which demands, defenses, advertisements and
notices are hereby waived), may in such
circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or
any part thereof, and/or may forthwith sell,
lease, assign, give option or options to purchase,
or otherwise dispose of and deliver the Collateral
or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or
private sale or sales, at any exchange, broker's
board or office of the Administrative Agent or any
Lender or elsewhere upon such terms and conditions
as it may deem advisable and at such prices as it
may deem best, for cash or on credit or for future
delivery without assumption of any credit risk.
The Administrative Agent or any Lender shall have
the right upon any such public sale or sales, and,
to the extent permitted by law, upon any such
private sale or sales, to purchase the whole or
any part of the Collateral so sold, free of any
right or equity of redemption in any Grantor,
which right or equity is hereby waived and
released. Each Grantor further agrees, at the
Administrative Agent's request, to assemble the
Collateral and make it available to the
Administrative Agent at places which the
Administrative Agent shall reasonably select,
whether at such Grantor's premises or elsewhere.
The Administrative Agent shall apply the net
proceeds of any action taken by it pursuant to
this Section 6.6, after deducting all reasonable
costs and expenses of every kind incurred in
connection therewith or incidental to the care or
safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the
Administrative Agent and the Lenders hereunder,
including, without limitation, reasonable
attorneys' fees and disbursements, to the payment
in whole or in part of the then due and owing
Obligations, in such order as the Administrative
Agent may elect, and only after such application
and after the payment by the Administrative Agent
of any other amount required by any provision of
law, including, without limitation, Section
9-504(1)(c) of the New York UCC, need
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the Administrative Agent account for the surplus,
if any, to any Grantor. To the extent permitted by
applicable law, each Grantor waives all claims,
damages and demands it may acquire against the
Administrative Agent or any Lender arising out of
the exercise by them of any rights hereunder. If
any notice of a proposed sale or other disposition
of Collateral shall be required by law, such
notice shall be deemed reasonable and proper if
given at least 10 days before such sale or other
disposition.
6.7 Registration Rights. If the Administrative Agent
shall determine to exercise its right to sell any
or all of the Pledged Stock pursuant to Section
6.6, and if in the opinion of the Administrative
Agent it is necessary or advisable to have the
Pledged Stock, or that portion thereof to be sold,
registered under the provisions of the Securities
Act, the relevant Grantor will cause the Issuer
thereof to (i) execute and deliver, and cause the
directors and officers of such Issuer to execute
and deliver, all such instruments and documents,
and do or cause to be done all such other acts as
may be, in the opinion of the Administrative
Agent, necessary or advisable to register the
Pledged Stock, or that portion thereof to be sold,
under the provisions of the Securities Act, (ii)
use its best efforts to cause the registration
statement relating thereto to become effective and
to remain effective for a period of one year from
the date of the first public offering of the
Pledged Stock, or that portion thereof to be sold,
provided, that the Administrative Agent shall
furnish to the relevant Grantor such information
regarding the Administrative Agent as shall be
required in connection with such registration and
requested by such Grantor in writing, and (iii)
make all amendments thereto and/or to the related
prospectus which, in the opinion of the
Administrative Agent, are necessary or advisable,
all in conformity with the requirements of the
Securities Act and the rules and regulations of
the Securities and Exchange Commission applicable
thereto. Each Grantor agrees to cause such Issuer
to comply with the provisions of the securities or
"Blue Sky" laws of any and all jurisdictions which
the Administrative Agent shall designate and to
make available to its security holders, as soon as
practicable, an earnings statement (which need not
be audited) which will satisfy the provisions of
Section 11(a) of the Securities Act.
(b) Each Grantor recognizes that the
Administrative Agent may be unable to
effect a public sale of any or all the
Pledged Stock, by reason of certain
prohibitions contained in the Securities
Act and applicable state securities laws or
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otherwise, and may be compelled to resort
to one or more private sales thereof to a
restricted group of purchasers which will
be obliged to agree, among other things, to
acquire such securities for their own
account for investment and not with a view
to the distribution or resale thereof. Each
Grantor acknowledges and agrees that any
such private sale may result in prices and
other terms less favorable than if such
sale were a public sale and,
notwithstanding such circumstances, agrees
that any such private sale shall be deemed
to have been made in a commercially
reasonable manner. The Administrative Agent
shall be under no obligation to delay a
sale of any of the Pledged Stock for the
period of time necessary to permit the
Issuer thereof to register such securities
for public sale under the Securities Act,
or under applicable state securities laws,
even if such Issuer would agree to do so.
(c) Each Grantor agrees to use its best efforts
to do or cause to be done all such other
acts as may be necessary to make such sale
or sales of all or any portion of the
Pledged Stock pursuant to this Section 6.7
valid and binding and in compliance with
any and all other applicable Requirements
of Law. Each Grantor further agrees that a
breach of any of the covenants contained in
this Section 6.7 will cause irreparable
injury to the Administrative Agent and the
Lenders, that the Administrative Agent and
the Lenders have no adequate remedy at law
in respect of such breach and, as a
consequence, that each and every covenant
contained in this Section 6.7 shall be
specifically enforceable against such
Grantor, and such Grantor hereby waives and
agrees not to assert any defenses against
an action for specific performance of such
covenants except for a defense that no
Event of Default has occurred and is
continuing under the Credit Agreement.
6.8 Waiver; Deficiency. Each Grantor waives and agrees
not to assert any rights or privileges which it
may acquire under Section 9-112 of the New York
UCC. Each Grantor shall remain liable for any
deficiency if the proceeds of any sale or other
disposition of the Collateral are insufficient to
pay its Obligations and the fees and disbursements
of any attorneys employed by the Administrative
Agent or any Lender to collect such deficiency.
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SECTION 7 .THE ADMINISTRATIVE AGENT
7.1 Administrative Agent's Appointment as
Attorney-in-Fact, etc. Each Grantor hereby
irrevocably constitutes and appoints the
Administrative Agent and any officer or agent
thereof, with full power of substitution, as its
true and lawful attorney-in-fact with full
irrevocable power and authority in the place and
stead of such Grantor and in the name of such
Grantor or in its own name, for the purpose of
carrying out the terms of this Agreement, to take
any and all appropriate action and to execute any
and all documents and instruments which may be
necessary or desirable to accomplish the purposes
of this Agreement, and, without limiting the
generality of the foregoing, each Grantor hereby
gives the Administrative Agent the power and
right, on behalf of such Grantor, without notice
to or assent by such Grantor, to do any or all of
the following:
(i) in the name of such Grantor or its own name, or otherwise,
take possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under
any Receivable or Contract or with respect to any other Collateral and
file any claim or take any other action or proceeding in any court of
law or equity or otherwise deemed appropriate by the Administrative
Agent for the purpose of collecting any and all such moneys due under
any Receivable or Contract or with respect to any other Collateral
whenever payable;
(ii) in the case of any Intellectual Property, execute and
deliver, and have recorded, any and all agreements, instruments,
documents and papers as the Administrative Agent may request to
evidence the Administrative Agent's and the Lenders' security interest
in such Intellectual Property and the goodwill and general intangibles
of such Grantor relating thereto or represented thereby;
(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance
called for by the terms of this Agreement and pay all or any part of
the premiums therefor and the costs thereof;
(iv) execute, in connection with any sale provided for in
Section 6.6 or 6.7, any indorsements, assignments or other instruments
of conveyance or transfer with respect to the Collateral; and
(v) (i) direct any party liable for any payment
under any of the Collateral to make payment
of any and all moneys due or to become due
thereunder directly to the Administrative
Agent or as the Administrative Agent shall
direct; ask or demand for, collect, and
receive payment of and receipt for, any and
all moneys,
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claims and other amounts due or to become
due at any time in respect of or arising
out of any Collateral; sign and indorse any
invoices, freight or express bills, bills
of lading, storage or warehouse receipts,
drafts against debtors, assignments,
verifications, notices and other documents
in connection with any of the Collateral;
commence and prosecute any suits, actions
or proceedings at law or in equity in any
court of competent jurisdiction to collect
the Collateral or any portion thereof and
to enforce any other right in respect of
any Collateral; defend any suit, action or
proceeding brought against such Grantor
with respect to any Collateral; settle,
compromise or adjust any such suit, action
or proceeding and, in connection therewith,
give such discharges or releases as the
Administrative Agent may deem appropriate;
assign any Copyright, Patent or Trademark
(along with the goodwill of the business to
which any such Copyright, Patent or
Trademark pertains), throughout the world
for such term or terms, on such conditions,
and in such manner, as the Administrative
Agent shall in its sole discretion
determine; and generally, sell, transfer,
pledge and make any agreement with respect
to or otherwise deal with any of the
Collateral as fully and completely as
though the Administrative Agent were the
absolute owner thereof for all purposes,
and do, at the Administrative Agent's
option and such Grantor's expense, at any
time, or from time to time, all acts and
things which the Administrative Agent deems
necessary to protect, preserve or realize
upon the Collateral and the Administrative
Agent's and the Lenders' security interests
therein and to effect the intent of this
Agreement, all as fully and effectively as
such Grantor might do.
Anything in this Section 7.1(a) to the contrary notwithstanding, the
Administrative Agent agrees that it will not exercise any rights under the power
of attorney provided for in this Section 7.1(a) unless an Event of Default shall
have occurred and be continuing.
(b) If any Grantor fails to perform or comply
with any of its agreements contained
herein, the Administrative Agent, at its
option, but without any obligation so to
do, may perform or
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comply, or otherwise cause performance or
compliance, with such agreement.
(c) The expenses of the Administrative Agent
incurred in connection with actions
undertaken as provided in this Section 7.1,
together with interest thereon at a rate
per annum equal to the highest rate per
annum at which interest would then be
payable on any category of past due ABR
Loans under the Credit Agreement, from the
date of payment by the Administrative Agent
to the date reimbursed by the relevant
Grantor, shall be payable by such Grantor
to the Administrative Agent on demand.
(d) Each Grantor hereby ratifies all that said
attorneys shall lawfully do or cause to be
done by virtue hereof. All powers,
authorizations and agencies contained in
this Agreement are coupled with an interest
and are irrevocable until this Agreement is
terminated and the security interests
created hereby are released.
7.2 Duty of Administrative Agent. The Administrative
Agent's sole duty with respect to the custody,
safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207
of the New York UCC or otherwise, shall be to deal
with it in the same manner as the Administrative
Agent deals with similar property for its own
account. Neither the Administrative Agent, any
Lender nor any of their respective officers,
directors, employees or agents shall be liable for
failure to demand, collect or realize upon any of
the Collateral or for any delay in doing so or
shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of any
Grantor or any other Person or to take any other
action whatsoever with regard to the Collateral or
any part thereof. The powers conferred on the
Administrative Agent and the Lenders hereunder are
solely to protect the Administrative Agent's and
the Lenders' interests in the Collateral and shall
not impose any duty upon the Administrative Agent
or any Lender to exercise any such powers. The
Administrative Agent and the Lenders shall be
accountable only for amounts that they actually
receive as a result of the exercise of such
powers, and neither they nor any of their
officers, directors, employees or agents shall be
responsible to any Grantor for any act or failure
to act hereunder, except for their own gross
negligence or willful misconduct.
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7.3 Execution of Financing Statements. Pursuant to
Section 9-402 of the New York UCC and any other
applicable law, each Grantor authorizes the
Administrative Agent to file or record financing
statements and other filing or recording documents
or instruments with respect to the Collateral
without the signature of such Grantor in such form
and in such offices as the Administrative Agent
determines appropriate to perfect the security
interests of the Administrative Agent under this
Agreement. A photographic or other reproduction of
this Agreement shall be sufficient as a financing
statement or other filing or recording document or
instrument for filing or recording in any
jurisdiction.
7.4 Authority of Administrative Agent. Each Grantor
acknowledges that the rights and responsibilities
of the Administrative Agent under this Agreement
with respect to any action taken by the
Administrative Agent or the exercise or
non-exercise by the Administrative Agent of any
option, voting right, request, judgment or other
right or remedy provided for herein or resulting
or arising out of this Agreement shall, as between
the Administrative Agent and the Lenders, be
governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from
time to time among them, but, as between the
Administrative Agent and the Grantors, the
Administrative Agent shall be conclusively
presumed to be acting as agent for the Lenders
with full and valid authority so to act or refrain
from acting, and no Grantor shall be under any
obligation, or entitlement, to make any inquiry
respecting such authority.
SECTION 8 .MISCELLANEOUS
8.1 Amendments in Writing. None of the terms or
provisions of this Agreement may be waived,
amended, supplemented or otherwise modified except
in accordance with Section 10.1 of the Credit
Agreement.
8.2 Notices. All notices, requests and demands to or
upon the Administrative Agent or any Grantor
hereunder shall be effected in the manner provided
for in Section 10.2 of the Credit Agreement;
provided that any such notice, request or demand
to or upon any Guarantor shall be addressed to
such Guarantor at its notice address set forth on
Schedule 1.
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8.3 No Waiver by Course of Conduct; Cumulative
Remedies. Neither the Administrative Agent nor any
Lender shall by any act (except by a written
instrument pursuant to Section 8.1), delay,
indulgence, omission or otherwise be deemed to
have waived any right or remedy hereunder or to
have acquiesced in any Default or Event of
Default. No failure to exercise, nor any delay in
exercising, on the part of the Administrative
Agent or any Lender, any right, power or privilege
hereunder shall operate as a waiver thereof. No
single or partial exercise of any right, power or
privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any
other right, power or privilege. A waiver by the
Administrative Agent or any Lender of any right or
remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which
the Administrative Agent or such Lender would
otherwise have on any future occasion. The rights
and remedies herein provided are cumulative, may
be exercised singly or concurrently and are not
exclusive of any other rights or remedies provided
by law.
8.4 Enforcement Expenses; Indemnification. Each
Guarantor agrees to pay or reimburse each Lender
and the Administrative Agent (in the case of each
Lender, after the occurrence and during the
continuance of an Event of Default) for all its
costs and expenses incurred in collecting against
such Guarantor under the guarantee contained in
Section 2 or otherwise enforcing or preserving any
rights under this Agreement and the other Loan
Documents to which such Guarantor is a party,
including, without limitation, the fees and
disbursements of counsel (including the allocated
fees and expenses of in-house counsel (but not
both outside and in-house counsel)) to each Lender
and of counsel to the Administrative Agent.
(b) Each Guarantor agrees to pay, and to save
the Administrative Agent and the Lenders
harmless from, any and all liabilities with
respect to, or resulting from any delay in
paying, any and all stamp, excise, sales or
other taxes which may be payable or
determined to be payable with respect to
any of the Collateral or in connection with
any of the transactions contemplated by
this Agreement.
(c) Each Guarantor agrees to pay, and to save
the Administrative Agent and the Lenders
harmless from, any and all liabilities,
obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses
or disbursements of any kind or nature
whatsoever with respect to the execution,
delivery,
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enforcement, performance and administration
of this Agreement to the extent the
Borrower would be required to do so
pursuant to Section 10.5 of the Credit
Agreement.
(d) The agreements in this Section 8.4 shall
survive repayment of the Obligations and
all other amounts payable under the Credit
Agreement and the other Loan Documents.
8.5 Successors and Assigns. This Agreement shall be
binding upon the successors and assigns of each
Grantor and shall inure to the benefit of the
Administrative Agent and the Lenders and their
successors and assigns; provided that no Grantor
may assign, transfer or delegate any of its rights
or obligations under this Agreement without the
prior written consent of the Administrative Agent.
8.6 Set-Off. Each Grantor hereby irrevocably
authorizes the Administrative Agent and each
Lender at any time and from time to time while an
Event of Default shall have occurred and be
continuing, without notice to such Grantor or any
other Grantor, any such notice being expressly
waived by each Grantor, to set-off and appropriate
and apply any and all deposits (general or
special, time or demand, provisional or final), in
any currency, and any other credits, indebtedness
or claims, in any currency, in each case whether
direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by
the Administrative Agent or such Lender to or for
the credit or the account of such Grantor, or any
part thereof in such amounts as the Administrative
Agent or such Lender may elect, against and on
account of the obligations and liabilities of such
Grantor to the Administrative Agent or such Lender
hereunder and claims of every nature and
description of the Administrative Agent or such
Lender against such Grantor, in any currency,
whether arising hereunder, under the Credit
Agreement, any other Loan Document or otherwise,
as the Administrative Agent or such Lender may
elect, whether or not the Administrative Agent or
any Lender has made any demand for payment and
although such obligations, liabilities and claims
may be contingent or unmatured. The Administrative
Agent and each Lender shall notify such Grantor
promptly of any such set-off and the application
made by the Administrative Agent or such Lender of
the proceeds thereof, provided that the failure to
give such notice shall not affect the validity of
such set-off and application. The rights of the
Administrative Agent and each Lender under this
Section 8.6 are in addition to other rights and
remedies (including,
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without limitation, other rights of set-off) which
the Administrative Agent or such Lender may have.
8.7 Counterparts. This Agreement may be executed by
one or more of the parties to this Agreement on
any number of separate counterparts (including by
telecopy), and all of said counterparts taken
together shall be deemed to constitute one and the
same instrument.
8.8 Severability. Any provision of this Agreement
which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or
unenforceability without invalidating the
remaining provisions hereof, and any such
prohibition or unenforceability in any
jurisdiction shall not invalidate or render
unenforceable such provision in any other
jurisdiction.
8.9 Section Headings. The Section headings used in
this Agreement are for convenience of reference
only and are not to affect the construction hereof
or be taken into consideration in the
interpretation hereof.
8.10 Integration. This Agreement and the other Loan
Documents represent the agreement of the Grantors,
the Administrative Agent and the Lenders with
respect to the subject matter hereof and thereof,
and there are no promises, undertakings,
representations or warranties by the
Administrative Agent or any Lender relative to
subject matter hereof and thereof not expressly
set forth or referred to herein or in the other
Loan Documents.
8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK.
8.12 Submission To Jurisdiction; Waivers. Each Grantor
hereby irrevocably and unconditionally:
(a) submits for itself and its property in any
legal action or proceeding relating to this
Agreement and the other Loan Documents to
which it is a party, or for recognition and
enforcement of any judgment in respect
thereof, to the non-exclusive general
jurisdiction of the Courts of the State of
New York, the courts of the United States
of America for the
-36-
<PAGE> 41
Southern District of New York, and
appellate courts from any thereof;
(b) consents that any such action or proceeding
may be brought in such courts and waives
any objection that it may now or hereafter
have to the venue of any such action or
proceeding in any such court or that such
action or proceeding was brought in an
inconvenient court and agrees not to plead
or claim the same;
(c) agrees that service of process in any such
action or proceeding may be effected by
mailing a copy thereof by registered or
certified mail (or any substantially
similar form of mail), postage prepaid, to
such Grantor at its address referred to in
Section 8.2 or at such other address of
which the Administrative Agent shall have
been notified pursuant thereto;
(d) agrees that nothing herein shall affect the
right to effect service of process in any
other manner permitted by law or shall
limit the right to sue in any other
jurisdiction; and
(e) waives, to the maximum extent not
prohibited by law, any right it may have to
claim or recover in any legal action or
proceeding referred to in this Section any
special, exemplary, punitive or
consequential damages.
8.13 Acknowledgements. Each Grantor hereby acknowledges
that:
(a) it has been advised by counsel in the
negotiation, execution and delivery of this
Agreement and the other Loan Documents to
which it is a party;
(b) neither the Administrative Agent nor any
Lender has any fiduciary relationship with
or duty to any Grantor arising out of or in
connection with this Agreement or any of
the other Loan Documents, and the
relationship between the Grantors, on the
one hand, and the Administrative Agent and
Lenders, on the other hand, in connection
herewith or therewith is solely that of
debtor and creditor; and
(c) no joint venture is created hereby or by
the other Loan Documents or otherwise
exists by virtue of the transactions
-37-
<PAGE> 42
contemplated hereby among the Lenders or
among the Grantors and the Lenders.
8.14 Additional Grantors. Each Subsidiary of the
Borrower that is required to become a party to
this Agreement pursuant to Section 6.10 of the
Credit Agreement shall become a Grantor for all
purposes of this Agreement upon execution and
delivery by such Subsidiary of an Assumption
Agreement in the form of Annex 1 hereto.
8.15 Releases. (a) At such time as the Loans, the
Reimbursement Obligations and the other
Obligations shall have been paid in full, the
Commitments have been terminated and no Letters of
Credit shall be outstanding, the Collateral shall
be released from the Liens created hereby, and
this Agreement and all obligations (other than
those expressly stated to survive such
termination) of the Administrative Agent and each
Grantor hereunder shall terminate, all without
delivery of any instrument or performance of any
act by any party, and all rights to the Collateral
shall revert to the Grantors. At the request and
sole expense of any Grantor following any such
termination, the Administrative Agent shall
deliver to such Grantor any Collateral held by the
Administrative Agent hereunder, and execute and
deliver to such Grantor such documents as such
Grantor shall reasonably request to evidence such
termination.
(b) If any of the Collateral shall be sold, transferred or
otherwise disposed of by any Grantor in a transaction permitted by the Credit
Agreement, then the Administrative Agent, at the request and sole expense of
such Grantor, shall execute and deliver to such Grantor all releases or other
documents reasonably necessary or desirable for the release of the Liens created
hereby on such Collateral. At the request and sole expense of the Borrower, a
Subsidiary Guarantor shall be released from its obligations hereunder in the
event that all the Capital Stock of such Subsidiary Guarantor shall be sold,
transferred or otherwise disposed of in a transaction permitted by the Credit
Agreement; provided that the Borrower shall have delivered to the Administrative
Agent, at least ten Business Days prior to the date of the proposed release, a
written request for release identifying the relevant Subsidiary Guarantor and
the terms of the sale or other disposition in reasonable detail, including the
price thereof and any expenses in connection therewith, together with a
certification by the Borrower stating that such transaction is in compliance
with the Credit Agreement and the other Loan Documents.
8.16 WAIVER OF JURY TRIAL. EACH GRANTOR HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR
ANY COUNTERCLAIM THEREIN.
-38-
<PAGE> 43
IN WITNESS WHEREOF, each of the undersigned has caused this
Guarantee and Collateral Agreement to be duly executed and delivered as of the
date first above written.
RENTERS CHOICE, INC.
By:
Title:
COLORTYME, INC.
By:
Title:
RENT-A-CENTER, INC.
By:
Title:
RAC RENTALS TRADING, INC.
By:
Title:
REMCO AMERICA, INC.
By:
Title:
ADVANTAGE COMPANIES, INC.
By:
Title:
-39-
<PAGE> 44
RAC USA, INC.
By:
Title:
RAC FINANCE SERVICES, INC.
By:
Title:
RAC CHECK CASHING, INC.
By:
Title:
ADVANTEDGE AUTO, INC.
By:
Title:
ADVANTEDGE QUALITY CARS, L.L.C.
By:
Title:
-40-
<PAGE> 45
Schedule 1
NOTICE ADDRESSES OF GUARANTORS
-41-
<PAGE> 46
Schedule 2
DESCRIPTION OF INVESTMENT PROPERTY
PLEDGED STOCK:
<TABLE>
<CAPTION>
Issuer Class of Stock Certificate No. of
Stock No. Shares
<S> <C> <C> <C>
</TABLE>
PLEDGED NOTES:
<TABLE>
<CAPTION>
Issuer Payee Principal Amount
<S> <C> <C>
</TABLE>
* Stock is assumed to be common stock unless otherwise indicated.
<PAGE> 47
Schedule 3
FILINGS AND OTHER ACTIONS
REQUIRED TO PERFECT SECURITY INTERESTS
Uniform Commercial Code Filings
[List each office where a financing statement is to be filed]
Patent and Trademark Filings
[List all filings]
Actions with respect to Pledged Stock
Other Actions
[Describe other actions to be taken]
* Stock is assumed to be common stock unless otherwise indicated.
<PAGE> 48
Schedule 4
LOCATION OF JURISDICTION OF ORGANIZATION AND CHIEF EXECUTIVE OFFICE
Grantor Location
* Stock is assumed to be common stock unless otherwise indicated.
<PAGE> 49
Schedule 5
LOCATION OF INVENTORY AND EQUIPMENT
Grantor Location
* Stock is assumed to be common stock unless otherwise indicated.
<PAGE> 50
Schedule 6
COPYRIGHTS AND COPYRIGHT LICENSES
PATENTS AND PATENT LICENSES
TRADEMARKS AND TRADEMARK LICENSES
* Stock is assumed to be common stock unless otherwise indicated.
<PAGE> 51
Schedule 7
CONTRACTS
* Stock is assumed to be common stock unless otherwise indicated.
<PAGE> 52
ACKNOWLEDGEMENT AND CONSENT(1)
The undersigned hereby acknowledges receipt of a copy of the Guarantee
and Collateral Agreement dated as of August __, 1998 (the "Agreement"), made by
the Grantors parties thereto for the benefit of The Chase Manhattan Bank, as
Administrative Agent. The undersigned agrees for the benefit of the
Administrative Agent and the Lenders as follows:
1 . The undersigned will be bound by the terms of the Agreement
and will comply with such terms insofar as such terms are
applicable to the undersigned.
2 . The undersigned will notify the Administrative Agent promptly in
writing of the occurrence of any of the events described in Section
5.7(a) of the Agreement.
3 . The terms of Sections 6.3(c) and 6.7 of the Agreement shall apply to
it, mutatis mutandis, with respect to all actions that may be required
of it pursuant to Section 6.3(c) or 6.7 of the Agreement.
[NAME OF ISSUER]
By
--------------------------------------
Name:
Title:
Address for Notices:
----------------------------------------
----------------------------------------
----------------------------------------
Fax:
- ----------
1 This consent is necessary only with respect to any Issuer which is not
also a Grantor.
* Stock is assumed to be common stock unless otherwise indicated.
<PAGE> 53
1
Annex 1 to
Guarantee and Collateral Agreement
ASSUMPTION AGREEMENT, dated as of ________________, 199_, made
by ______________________________, a ______________ corporation (the "Additional
Grantor"), in favor of THE CHASE MANHATTAN BANK, as administrative agent (in
such capacity, the "Administrative Agent") for the banks and other financial
institutions (the "Lenders") parties to the Credit Agreement referred to below.
All capitalized terms not defined herein shall have the meaning ascribed to them
in such Credit Agreement.
W I T N E S S E T H :
WHEREAS, Renters Choice, Inc. (the "Borrower"), the Lenders
and the Administrative Agent have entered into a Credit Agreement, dated as of
August 5, 1998 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement");
WHEREAS, in connection with the Credit Agreement, the Borrower
and certain of its Affiliates (other than the Additional Grantor) have entered
into the Guarantee and Collateral Agreement, dated as of August 5, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Guarantee
and Collateral Agreement") in favor of the Administrative Agent for the benefit
of the Lenders;
WHEREAS, the Credit Agreement requires the Additional Grantor
to become a party to the Guarantee and Collateral Agreement; and
WHEREAS, the Additional Grantor has agreed to execute and
deliver this Assumption Agreement in order to become a party to the Guarantee
and Collateral Agreement;
NOW, THEREFORE, IT IS AGREED:
1. Guarantee and Collateral Agreement. By executing and
delivering this Assumption Agreement, the Additional Grantor, as provided in
Section 8.14 of the Guarantee and Collateral Agreement, hereby becomes a party
to the Guarantee and Collateral Agreement as a Grantor thereunder with the same
force and effect as if originally named therein as a Grantor and, without
limiting the generality of the foregoing, hereby expressly assumes all
obligations and liabilities of a Grantor thereunder. The information set forth
in Annex 1-A hereto is hereby added to the information set forth in the
Schedules to the Guarantee and Collateral Agreement. The Additional Grantor
hereby represents and warrants that each of the representations and
<PAGE> 54
2
warranties contained in Section 4 of the Guarantee and Collateral Agreement is
true and correct on and as the date hereof (after giving effect to this
Assumption Agreement) as if made on and as of such date.
2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
NEW YORK.
IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.
[ADDITIONAL GRANTOR]
By:
----------------------------------------
Name:
Title:
* Stock is assumed to be common stock unless otherwise indicated.
<PAGE> 55
1
Annex 1-A to
Assumption Agreement
Supplement to Schedule 1
Supplement to Schedule 2
Supplement to Schedule 3
Supplement to Schedule 4
Supplement to Schedule 5
Supplement to Schedule 6
Supplement to Schedule 7
<PAGE> 1
EXHIBIT 10.20
EXECUTION COPY
$962,250,000
CREDIT AGREEMENT
among
RENTERS CHOICE, INC.,
as Borrower,
The Several Lenders
from Time to Time Parties Hereto,
COMERICA BANK,
as Documentation Agent,
NATIONSBANK, N.A.,
as Syndication Agent,
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
Dated as of August 5, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. DEFINITIONS 1
1.1 Defined Terms 1
1.2 Other Definitional Provisions 23
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS 23
2.1 Term Commitments and LC/MD Commitments 23
2.2 Revolving Commitments 24
2.3 Swingline Commitment 24
2.4 Procedure for A/B/C Term Loan Borrowing 24
2.5 Procedure for LC/MD Term Loan and Revolving Loan Borrowing 25
2.6 Procedure for Swingline Borrowing; Refunding of Swingline Loans 25
2.7 Repayment of Loans; Scheduled Commitment Reductions 27
2.8 Commitment Fees, etc. 28
2.9 Termination or Reduction of Commitments 28
2.10 Optional Prepayments 29
2.11 Mandatory Prepayments 29
2.12 Conversion and Continuation Options 30
2.13 Limitations on Eurodollar Tranches 31
2.14 Interest Rates and Payment Dates 31
2.15 Computation of Interest and Fees 31
2.16 Inability to Determine Interest Rate 32
2.17 Pro Rata Treatment and Payments 32
2.18 Requirements of Law 34
2.19 Taxes 35
2.20 Indemnity 36
2.21 Change of Lending Office 37
2.22 Replacement of Lenders 37
SECTION 3. LETTERS OF CREDIT 37
3.1 LC Commitment 37
3.2 Procedure for Issuance of Letter of Credit 38
3.3 Fees and Other Charges 38
3.4 LC Participations 39
3.5 Reimbursement Obligation of the Borrower 40
3.6 Obligations Absolute 40
3.7 Letter of Credit Payments 41
3.8 Applications 41
SECTION 4. REPRESENTATIONS AND WARRANTIES 41
4.1 Financial Condition 41
4.2 No Change 42
4.3 Corporate Existence; Compliance with Law 42
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
4.4 Corporate Power; Authorization; Enforceable Obligations 42
4.5 No Legal Bar 42
4.6 Litigation 43
4.7 No Default 43
4.8 Ownership of Property; Liens 43
4.9 Intellectual Property 43
4.10 Taxes 43
4.11 Federal Regulations 43
4.12 Labor Matters 43
4.13 ERISA 44
4.14 Investment Company Act; Other Regulations 44
4.15 Subsidiaries 44
4.16 Use of Proceeds 44
4.17 Environmental Matters 45
4.18 Accuracy of Information, etc 45
4.19 Security Documents 46
4.20 Solvency 46
4.21 Senior Indebtedness 46
4.22 Year 2000 Matters 46
4.23 Regulation H 47
SECTION 5. CONDITIONS PRECEDENT 47
5.1 Conditions to Initial Extension of Credit 47
5.2 Conditions to Each Extension of Credit 49
SECTION 6. AFFIRMATIVE COVENANTS 50
6.1 Financial Statements 50
6.2 Certificates; Other Information 50
6.3 Payment of Obligations 51
6.4 Maintenance of Existence; Compliance. 52
6.5 Maintenance of Property; Insurance 52
6.6 Inspection of Property; Books and Records; Discussions 52
6.7 Notices 52
6.8 Environmental Laws 53
6.9 Interest Rate Protection 53
6.10 Additional Collateral, etc 53
6.11 Permitted Acquisitions 54
6.12 Real Estate Matters 55
SECTION 7. NEGATIVE COVENANTS 56
7.1 Financial Condition Covenants 56
7.2 Indebtedness 57
7.3 Liens 58
7.4 Fundamental Changes 59
7.5 Disposition of Property 59
7.6 Restricted Payments 60
</TABLE>
- 2 -
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
7.7 Capital Expenditures 60
7.8 Investments 61
7.9 Payments and Modifications of Certain Debt Instruments and Preferred Stock. 61
7.10 Transactions with Affiliates 62
7.11 Sales/Leaseback Transactions 62
7.12 Changes in Fiscal Periods 62
7.13 Negative Pledge Clauses 62
7.14 Clauses Restricting Subsidiary Distributions 62
7.15 Lines of Business 62
7.16 Amendments to Acquisition Documents 62
SECTION 8. EVENTS OF DEFAULT 63
SECTION 9. THE AGENTS 66
9.1 Appointment 66
9.2 Delegation of Duties 66
9.3 Exculpatory Provisions 66
9.4 Reliance by Administrative Agent 66
9.5 Notice of Default 67
9.6 Non-Reliance on Agents and Other Lenders 67
9.7 Indemnification 67
9.8 Agent in Its Individual Capacity 68
9.9 Successor Administrative Agent 68
9.10 Authorization to Release Guarantees and Liens 68
9.11 Documentation Agent and Syndication Agent 68
SECTION 10. MISCELLANEOUS 68
10.1 Amendments and Waivers 68
10.2 Notices 69
10.3 No Waiver; Cumulative Remedies 70
10.4 Survival of Representations and Warranties 70
10.5 Payment of Expenses and Taxes 70
10.6 Successors and Assigns; Participations and Assignments 71
10.7 Adjustments; Setoff 73
10.8 Counterparts 73
10.9 Severability 74
10.10 Integration 74
10.11 GOVERNING LAW 74
10.12 Submission To Jurisdiction; Waivers 74
10.13 Acknowledgements 74
10.14 Confidentiality 75
10.15 WAIVERS OF JURY TRIAL 76
</TABLE>
- 3 -
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ANNEX:
A Pricing Grid
SCHEDULES:
1.1A Commitments
1.1B Mortgaged Property
4.4 Consents, Authorizations, Filings and Notices
4.6 Litigation
4.15 Subsidiaries
4.19(a) UCC and Other Filings / Jurisdictions and Offices
4.19(b) Mortgage Filing Jurisdictions
7.2(d) Existing Indebtedness
7.3(f) Existing Liens
7.14 Existing Restrictions
EXHIBITS:
A Form of Guarantee and Collateral Agreement
B Form of Compliance Certificate
C Form of Closing Certificate
D Form of Mortgage
E Form of Assignment and Acceptance
F-1 Form of Legal Opinion of Winstead Sechrest & Minick P.C.
F-2 Form of Legal Opinion of Arnold & Porter
F-3 Form of Legal Opinion of Stinson, Mag & Fizzell, P.C.
G Form of Addendum
H Form of Prepayment Option Notice
I Form of Exemption Certificate
</TABLE>
- 4 -
<PAGE> 6
CREDIT AGREEMENT, dated as of August 5, 1998, among RENTERS CHOICE,
INC., a Delaware corporation (the "Borrower"), the several banks and other
financial institutions or entities from time to time parties to this Agreement
(the "Lenders"), COMERICA BANK, as documentation agent (in such capacity, the
"Documentation Agent"), NATIONSBANK, N.A., as syndication agent (in such
capacity, the "Syndication Agent"), and THE CHASE MANHATTAN BANK ("Chase"), as
administrative agent.
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms listed in
this Section 1.1 shall have the respective meanings set forth
in this Section 1.1.
"A/B/C Term Loans": the collective reference to the Tranche A Term
Loans, the Tranche B Term Loans and the Tranche C Term Loans.
"ABR": for any day, a rate per annum (rounded upwards, if necessary, to
the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on
such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal
Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof:
"Prime Rate" shall mean the rate of interest per annum publicly announced from
time to time by the Reference Lender as its prime rate in effect at its
principal office in New York City (the Prime Rate not being intended to be the
lowest rate of interest charged by the Reference Lender in connection with
extensions of credit to debtors); "Base CD Rate" shall mean the sum of (a) the
product of (i) the Three-Month Secondary CD Rate and (ii) a fraction, the
numerator of which is one and the denominator of which is one minus the C/D
Reserve Percentage and (b) the C/D Assessment Rate; and "Three-Month Secondary
CD Rate" shall mean, for any day, the secondary market rate for three-month
certificates of deposit reported as being in effect on such day (or, if such day
shall not be a Business Day, the next preceding Business Day) by the Board
through the public information telephone line of the Federal Reserve Bank of New
York (which rate will, under the current practices of the Board, be published in
Federal Reserve Statistical Release H.15(519) during the week following such
day), or, if such rate shall not be so reported on such day or such next
preceding Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New York City
received at approximately 10:00 A.M., New York City time, on such day (or, if
such day shall not be a Business Day, on the next preceding Business Day) by the
Reference Lender from three New York City negotiable certificate of deposit
dealers of recognized standing selected by it. Any change in the ABR due to a
change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds
Effective Rate shall be effective as of the opening of business on the effective
day of such change in the Prime Rate, the Three-Month Secondary CD Rate or the
Federal Funds Effective Rate, respectively.
"ABR Loans": Loans the rate of interest applicable to which is based
upon the ABR.
<PAGE> 7
"Acquired Company": Thorn Americas, Inc., a Delaware corporation.
"Acquired Vehicles": the vehicles acquired by the Borrower pursuant to
the Acquisition.
"Acquisition": as defined in Section 5.1(b)(i).
"Acquisition Agreement": the Stock Purchase Agreement, dated as of June
16, 1998, among the Borrower, the Seller and Thorn plc, in each case as amended,
supplemented or otherwise modified from time to time in accordance with Section
7.16.
"Acquisition Documentation": collectively, the Acquisition Agreement
and all schedules, exhibits and annexes thereto and all side letters and
agreements affecting the terms thereof or entered into in connection therewith,
in each case as amended, supplemented or otherwise modified from time to time in
accordance with Section 7.16.
"Addendum": an Addendum, substantially in the form of Exhibit G,
pursuant to which each Lender becomes a party to this Agreement effective as of
the Closing Date.
"Adjustment Date": as defined in the Pricing Grid.
"Administrative Agent": The Chase Manhattan Bank, together with its
affiliates, as the arranger of the Commitments and as the administrative agent
for the Lenders under this Agreement and the other Loan Documents, together with
any of its successors.
"Affiliate": as to any Person, any other Person that, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. For purposes of this definition, "control" of a Person means the
power, directly or indirectly, either to (a) vote 10% or more of the securities
having ordinary voting power for the election of directors (or persons
performing similar functions) of such Person or (b) direct or cause the
direction of the management and policies of such Person, whether by contract or
otherwise.
"Agents": the collective reference to the Syndication Agent, the
Documentation Agent and the Administrative Agent.
"Aggregate Exposure": with respect to any Lender at any time, an amount
equal to (a) until the Closing Date, the aggregate amount of such Lender's
Commitments at such time and (b) thereafter, the sum of (i) the aggregate then
unpaid principal amount of such Lender's A/B/C Term Loans, (ii) the amount of
such Lender's Revolving Commitment then in effect or, if the Revolving
Commitments have been terminated, the amount of such Lender's Revolving
Extensions of Credit then outstanding and (iii) the amount of such Lender's
LC/MD Commitment then in effect or, if the LC/MD Commitments have been
terminated, the amount of such Lender's LC/MD Extensions of Credit then
outstanding.
-2-
<PAGE> 8
"Aggregate Exposure Percentage": with respect to any Lender at any
time, the ratio (expressed as a percentage) of such Lender's Aggregate Exposure
at such time to the Aggregate Exposure of all Lenders at such time.
"Agreement": this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
"Applicable Margin": for each Type of Loan, the rate per annum set
forth under the relevant column heading in the Pricing Grid.
"Application": an application, in such form as the Issuing Lender may
specify from time to time, requesting the Issuing Lender to open a Letter of
Credit.
"Approved Fund": with respect to any Lender that is a fund that invests
in commercial loans, any other fund that invests in commercial loans and is
managed or advised by the same investment advisor as such Lender or by an
Affiliate of such investment advisor.
"Asset Sale": any Disposition of property or series of related
Dispositions of property (excluding any such Disposition permitted by clause
(a), (b), (c), (d) or (f) of Section 7.5 and any Disposition of Cash
Equivalents) that yields gross proceeds to the Borrower or any of its
Subsidiaries (valued at the initial principal amount thereof in the case of
non-cash proceeds consisting of notes or other debt securities and valued at
fair market value in the case of other non-cash proceeds) in excess of $500,000.
"Assignee": as defined in Section 10.6(c).
"Assignment and Acceptance": an Assignment and Acceptance,
substantially in the form of Exhibit E.
"Assignor": as defined in Section 10.6(c).
"Assumed Indebtedness": Indebtedness assumed in connection with a
Permitted Acquisition, provided that (a) such Indebtedness is outstanding at the
time of such acquisition and was not incurred in connection therewith or in
contemplation thereof and (b) in the event that such Permitted Acquisition
constitutes an acquisition of property other than Capital Stock, such
Indebtedness was incurred in order to acquire or improve such property.
"Available Revolving Commitment": as to any Revolving Lender at any
time, an amount equal to the excess, if any, of (a) such Lender's Revolving
Commitment then in effect over (b) such Lender's Revolving Extensions of Credit
then outstanding; provided, that in calculating any Lender's Revolving
Extensions of Credit for the purpose of determining such Lender's Available
Revolving Commitment pursuant to Section 2.8(a), the aggregate principal amount
of Swingline Loans then outstanding shall be deemed to be zero.
-3-
<PAGE> 9
"Benefitted Lender": as defined in Section 10.7(a).
"Board": the Board of Governors of the Federal Reserve System of the
United States (or any successor).
"Borrower": as defined in the preamble hereto.
"Borrowing Date": any Business Day specified by the Borrower as a date
on which the Borrower requests the relevant Lenders to make Loans hereunder.
"Business": as defined in Section 4.17(b).
"Business Day": a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
close, provided, that with respect to notices and determinations in connection
with, and payments of principal and interest on, Eurodollar Loans, such day is
also a day for trading by and between banks in Dollar deposits in the interbank
eurodollar market.
"Capital Expenditures": for any period, with respect to any Person, the
aggregate of all expenditures (other than those made pursuant to Permitted
Acquisitions) by such Person and its Subsidiaries for the acquisition or leasing
(pursuant to a capital lease) of fixed or capital assets or additions to
equipment (including replacements, capitalized repairs and improvements during
such period but excluding merchandise inventory acquired during such period)
that should be capitalized under GAAP on a consolidated balance sheet of such
Person and its Subsidiaries.
"Capital Expenditures (Expansion)": for any period, with respect to any
Person, any Capital Expenditures made by such Person in connection with the
opening of new stores to be operated by such Person.
"Capital Expenditures (Maintenance)": for any period, with respect to
any Person, any Capital Expenditures which do not constitute Capital
Expenditures (Expansion) of such Person.
"Capital Lease Obligations": as to any Person, the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP and, for the purposes of
this Agreement, the amount of such obligations at any time shall be the
capitalized amount thereof at such time determined in accordance with GAAP.
"Capital Stock": any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation) and any
and all warrants, rights or options to purchase any of the foregoing.
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"Cash/Debt Consideration": with respect to any Permitted Acquisition,
the portion of the Purchase Price with respect thereto that is payable in the
forms referred to in clauses (a) and (d) of the definition of "Purchase Price"
set forth in Section 1.1.
"Cash Equivalents": (a) 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; (b)
certificates of deposit, time deposits, eurodollar time deposits or overnight
bank deposits having maturities of six months or less from the date of
acquisition issued by any Lender or by any commercial bank organized under the
laws of the United States or any state thereof having combined capital and
surplus of not less than $500,000,000; (c) commercial paper of an issuer rated
at least A-1 by Standard & Poor's Ratings Services ("S&P") or P-1 by Moody's
Investors Service, Inc. ("Moody's"), or carrying an equivalent rating by a
nationally recognized rating agency, if both of the two named rating agencies
cease publishing ratings of commercial paper issuers generally, and maturing
within six months from the date of acquisition; (d) repurchase obligations of
any Lender or of any commercial bank satisfying the requirements of clause (b)
of this definition, having a term of not more than 30 days, with respect to
securities issued or fully guaranteed or insured by the United States
government; (e) securities with maturities of one year or less from the date of
acquisition issued or fully guaranteed by any state, commonwealth or territory
of the United States, by any political subdivision or taxing authority of any
such state, commonwealth or territory or by any foreign government, the
securities of which state, commonwealth, territory, political subdivision,
taxing authority or foreign government (as the case may be) are rated at least A
by S&P or A by Moody's; (f) securities with maturities of six months or less
from the date of acquisition backed by standby letters of credit issued by any
Lender or any commercial bank satisfying the requirements of clause (b) of this
definition; or (g) shares of money market mutual or similar funds which invest
exclusively in assets satisfying the requirements of clauses (a) through (f) of
this definition.
"C/D Assessment Rate": for any day as applied to any ABR Loan, the
annual assessment rate in effect on such day that is payable by a member of the
Bank Insurance Fund maintained by the Federal Deposit Insurance Corporation (the
"FDIC") classified as well-capitalized and within supervisory subgroup "B" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. ss. 327.4 (or any successor provision) to the FDIC (or any successor) for
the FDIC's (or such successor's) insuring time deposits at offices of such
institution in the United States.
"C/D Reserve Percentage": for any day as applied to any ABR Loan, that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board, for determining the maximum reserve requirement for a
Depositary Institution (as defined in Regulation D of the Board as in effect
from time to time) in respect of new non-personal time deposits in Dollars
having a maturity of 30 days or more.
"Closing Date": the date on which the conditions precedent set forth in
Section 5.1 shall have been satisfied, which date is August 5, 1998.
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"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral": all property of the Loan Parties, now owned or hereafter
acquired, upon which a Lien is purported to be created by any Security Document.
"Commitment": as to any Lender, the sum of the Tranche A Term
Commitment, the Tranche B Term Commitment, the Tranche C Term Commitment, the
LC/MD Commitment and the Revolving Commitment of such Lender.
"Commitment Fee Rate": the rate per annum set forth under the relevant
column heading in the Pricing Grid.
"Commonly Controlled Entity": an entity, whether or not incorporated,
that is under common control with the Borrower within the meaning of Section
4001 of ERISA or is part of a group that includes the Borrower and that is
treated as a single employer under Section 414 of the Code.
"Compliance Certificate": a certificate duly executed by a Responsible
Officer substantially in the form of Exhibit B.
"Confidential Information Memorandum": the Confidential Information
Memorandum regarding the Borrower dated July 1998 and furnished to the Lenders.
"Consolidated Current Assets": at any date, (a) all amounts (other than
cash and Cash Equivalents) that would, in conformity with GAAP, be set forth
opposite the caption "total current assets" (or any like caption) on a
consolidated balance sheet of the Borrower and its Subsidiaries at such date and
(b) without duplication of clause (a) above, the book value of all rental
merchandise inventory of the Borrower and its Subsidiaries at such date.
"Consolidated Current Liabilities": at any date, all amounts that
would, in conformity with GAAP, be set forth opposite the caption "total current
liabilities" (or any like caption) on a consolidated balance sheet of the
Borrower and its Subsidiaries at such date, but excluding (a) the current
portion of any Funded Debt of the Borrower and its Subsidiaries and (b) without
duplication of clause (a) above, all Indebtedness consisting of Revolving Loans
or Swingline Loans to the extent otherwise included therein.
"Consolidated EBITDA": for any period, Consolidated Net Income for such
period plus, without duplication and to the extent reflected as a charge or
reduction in the statement of such Consolidated Net Income for such period, the
sum of (a) income tax expense, (b) interest expense, amortization or writeoff of
debt discount and debt issuance costs and commissions and other fees and charges
associated with Indebtedness (including the Loans), (c) depreciation (excluding
depreciation of rental merchandise) and amortization expense, including, without
limitation, amortization of intangibles (including, but not limited to,
goodwill) and organization costs, (d) any
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extraordinary, unusual or non-recurring non-cash expenses or losses (including,
whether or not otherwise includable as a separate item in the statement of such
Consolidated Net Income for such period, non-cash losses on sales of assets
outside of the ordinary course of business) and (e) any other non-cash charges,
and minus, to the extent included in the statement of such Consolidated Net
Income for such period, the sum of (a) interest income, (b) any extraordinary,
unusual or non-recurring income or gains (including, whether or not otherwise
includable as a separate item in the statement of such Consolidated Net Income
for such period, gains on the sales of assets outside of the ordinary course of
business) and (c) any other non-cash income earned outside the ordinary course
of business, all as determined on a consolidated basis; provided that, (i) in
determining Consolidated EBITDA for the fiscal quarters ending December 31,
1998, March 31, 1999, June 30, 1999 and September 30, 1999, $16,800,000,
$12,275,000, $7,750,000 and $3,875,000, respectively, shall be added to the
amounts otherwise determined as set forth above, in order to take into account
certain quantifiable synergies with respect to the Acquisition and the
acquisition of Central Rents, Inc., and (ii) in determining Consolidated EBITDA,
the portion thereof attributable to the operations of the Acquired Company and
its Subsidiaries prior to the Closing Date shall include only the rent-to-own
businesses of the Acquired Company and its Subsidiaries. For the purposes of
calculating Consolidated EBITDA for any Reference Period pursuant to any
determination of the Consolidated Leverage Ratio, if during such Reference
Period the Borrower or any Subsidiary shall have made a Material Disposition or
Material Acquisition, Consolidated EBITDA for such Reference Period shall be
calculated after giving pro forma effect thereto as if such Material Disposition
or Material Acquisition occurred on the first day of such Reference Period. As
used in this definition, "Material Acquisition" means any acquisition of
property or series of related acquisitions of property that (a) constitutes
assets comprising all or substantially all of an operating unit of a business or
constitutes all or substantially all of the common stock of a Person and (b)
involves the payment of consideration by the Borrower and its Subsidiaries in
excess of $15,000,000 (or such lesser amount as the Borrower may determine in
its discretion); and "Material Disposition" means any Disposition of property or
series of related Dispositions of property that yields gross proceeds to the
Borrower or any of its Subsidiaries in excess of $15,000,000 (or such lesser
amount as the Borrower may determine in its discretion).
"Consolidated Fixed Charge Coverage Ratio": for any period, the ratio
of (a) the sum of Consolidated EBITDA for such period and, to the extent
reducing Consolidated Net Income for such period, Consolidated Lease Expense for
such period, less the aggregate amount actually paid by the Borrower and its
Subsidiaries during such period on account of Capital Expenditures (Maintenance)
to (b) Consolidated Fixed Charges for such period.
"Consolidated Fixed Charges": for any period, the sum (without
duplication) of (a) Consolidated Interest Expense for such period, (b)
Consolidated Lease Expense for such period and (c) regular, scheduled payments
made during such period on account of principal of Indebtedness of the Borrower
or any of its Subsidiaries (including scheduled principal payments in respect of
the Term Loans but excluding prepayments thereof); provided, that for the
purposes of determining the Consolidated Fixed Charge Coverage Ratio for the
fiscal quarters of the Borrower ending December 31, 1998, March 31, 1999 and
June 30, 1999, Consolidated Interest Expense for the relevant period
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<PAGE> 13
shall be deemed to equal Consolidated Interest Expense for such fiscal quarter
(and, in the case of the latter two such determinations, each previous fiscal
quarter commencing after the Closing Date) multiplied by 4, 2 and 4/3,
respectively.
"Consolidated Funded Debt": at any date, the aggregate principal amount
of all Funded Debt (which, for purposes of the calculation of Consolidated
Funded Debt, shall be deemed to include any unfunded portion of the NJ Letter of
Credit (but not other Letters of Credit)) of the Borrower and its Subsidiaries
at such date, determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Coverage Ratio": for any period, the ratio of
(a) Consolidated EBITDA for such period to (b) Consolidated Interest Expense for
such period.
"Consolidated Interest Expense": for any period, total cash interest
expense (including that attributable to Capital Lease Obligations), net of cash
interest income, of the Borrower and its Subsidiaries for such period with
respect to all outstanding Indebtedness of the Borrower and its Subsidiaries
(including all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing, commitment fees
payable pursuant to Section 2.8(a) and net costs under Hedge Agreements in
respect of such Indebtedness to the extent such net costs are allocable to such
period in accordance with GAAP); provided, that for the purposes of determining
the Consolidated Interest Coverage Ratio for the fiscal quarters of the Borrower
ending December 31, 1998, March 31, 1999 and June 30, 1999, Consolidated
Interest Expense for the relevant period shall be deemed to equal Consolidated
Interest Expense for such fiscal quarter (and, in the case of the latter two
such determinations, each previous fiscal quarter commencing after the Closing
Date) multiplied by 4, 2 and 4/3, respectively.
"Consolidated Lease Expense": for any period, the aggregate amount of
fixed and contingent rentals payable by the Borrower and its Subsidiaries for
such period with respect to leases of real and personal property (other than
certain properties associated with operations to be discontinued in connection
with the restructuring related to the Acquisition), determined on a consolidated
basis in accordance with GAAP.
"Consolidated Leverage Ratio": as at the last day of any period, the
ratio of (a) Consolidated Funded Debt on such day to (b) Consolidated EBITDA for
such period.
"Consolidated Net Income": for any period, the consolidated net income
(or loss) of the Borrower and its Subsidiaries, determined on a consolidated
basis in accordance with GAAP; provided that there shall be excluded (a) the
income (or deficit) of any Person accrued prior to the date it becomes a
Subsidiary of the Borrower or is merged into or consolidated with the Borrower
or any of its Subsidiaries, (b) the income (or deficit) of any Person (other
than a Subsidiary of the Borrower) in which the Borrower or any of its
Subsidiaries has an ownership interest, except to the extent that any such
income is actually received by the Borrower or such Subsidiary in the form of
dividends or similar distributions and (c) the undistributed earnings of any
Subsidiary of the
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<PAGE> 14
Borrower to the extent that the declaration or payment of dividends or similar
distributions by such Subsidiary is not at the time permitted by the terms of
any Contractual Obligation (other than under any Loan Document) or Requirement
of Law applicable to such Subsidiary.
"Consolidated Net Worth": at any date, all amounts that would, in
conformity with GAAP, be included on a consolidated balance sheet of the
Borrower and its Subsidiaries under stockholders' equity at such date.
"Consolidated Working Capital": at any date, the excess of Consolidated
Current Assets on such date over Consolidated Current Liabilities on such date.
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Control Investment Affiliate": as to any Person, any other Person that
(a) directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person and (b) is organized by such Person primarily
for the purpose of making equity or debt investments in one or more companies.
For purposes of this definition, "control" of a Person means the power, directly
or indirectly, to direct or cause the direction of the management and policies
of such Person whether by contract or otherwise.
"Default": any of the events specified in Section 8, whether or not any
requirement for the giving of notice, the lapse of time, or both, has been
satisfied (including, in any event, a "Default" under and as defined in the
Senior Subordinated Note Indenture).
"Disposition": with respect to any property, any sale, lease, sale and
leaseback, assignment, conveyance, transfer or other disposition thereof. The
terms "Dispose" and "Disposed of" shall have correlative meanings.
"Documentation Agent": as defined in the preamble hereto.
"Dollars" and "$": dollars in lawful currency of the United States.
"Domestic Subsidiary": any Subsidiary of the Borrower organized under
the laws of any jurisdiction within the United States.
"Environmental Laws": any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements of Law
(including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the environment,
as now or may at any time hereafter be in effect.
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"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the maximum rates
(expressed as a decimal fraction) of reserve requirements in effect on such day
(including basic, supplemental, marginal and emergency reserves under any
regulations of the Board or other Governmental Authority having jurisdiction
with respect thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Board) maintained by a member bank of the Federal Reserve
System.
"Eurodollar Base Rate": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, the rate per annum determined on the
basis of the rate for deposits in Dollars for a period equal to such Interest
Period commencing on the first day of such Interest Period appearing on Page
3750 of the Dow Jones Markets screen as of 11:00 A.M., London time, two Business
Days prior to the beginning of such Interest Period. In the event that such rate
does not appear on Page 3750 of the Dow Jones Markets screen (or otherwise on
such screen), the "Eurodollar Base Rate" shall be determined by reference to
such other comparable publicly available service for displaying eurodollar rates
as may be selected by the Administrative Agent or, in the absence of such
availability, by reference to the rate at which the Administrative Agent is
offered Dollar deposits at or about 11:00 A.M., New York City time, two Business
Days prior to the beginning of such Interest Period in the interbank eurodollar
market where its eurodollar and foreign currency and exchange operations are
then being conducted for delivery on the first day of such Interest Period for
the number of days comprised therein.
"Eurodollar Loans": Loans the rate of interest applicable to which is
based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest Period
pertaining to a Eurodollar Loan, a rate per annum determined for such day in
accordance with the following formula (rounded upward to the nearest 1/100th of
1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Eurodollar Tranche": the collective reference to Eurodollar Loans the
then current Interest Periods with respect to all of which begin on the same
date and end on the same later date (whether or not such Loans shall originally
have been made on the same day).
"Event of Default": any of the events specified in Section 8, provided
that any requirement for the giving of notice, the lapse of time, or both, has
been satisfied (including, in any event, an "Event of Default" under and as
defined in the Senior Subordinated Note Indenture).
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"Excess Cash Flow": for any fiscal year of the Borrower, the excess, if
any, of (a) the sum, without duplication, of (i) Consolidated Net Income for
such fiscal year, (ii) an amount equal to the amount of all non-cash charges
(including depreciation (other than depreciation of rental merchandise) and
amortization) deducted in arriving at such Consolidated Net Income, (iii)
decreases in Consolidated Working Capital for such fiscal year, and (iv) an
amount equal to the aggregate net non-cash loss on the Disposition of property
by the Borrower and its Subsidiaries during such fiscal year (other than sales
of inventory in the ordinary course of business), to the extent deducted in
arriving at such Consolidated Net Income, over (b) the sum, without duplication,
of (i) an amount equal to the amount of all non-cash credits included in
arriving at such Consolidated Net Income, (ii) the aggregate amount actually
paid by the Borrower and its Subsidiaries in cash during such fiscal year on
account of Capital Expenditures (excluding the principal amount of Indebtedness
incurred in connection with such expenditures and any such expenditures financed
with the proceeds of any Reinvestment Deferred Amount), (iii) the aggregate
amount actually paid by the Borrower in cash during such fiscal year on account
of Permitted Acquisitions, (iv) the aggregate amount of all prepayments of
Revolving Loans and Swingline Loans during such fiscal year to the extent
accompanying permanent optional reductions of the Revolving Commitments and all
optional prepayments of the Term Loans during such fiscal year, (v) the
aggregate amount of all regularly scheduled principal payments of Funded Debt
(including the Term Loans) of the Borrower and its Subsidiaries made during such
fiscal year, (vi) increases in Consolidated Working Capital for such fiscal
year, and (vii) an amount equal to the aggregate net non-cash gain on the
Disposition of property by the Borrower and its Subsidiaries during such fiscal
year (other than sales of inventory in the ordinary course of business), to the
extent included in arriving at such Consolidated Net Income.
"Excess Cash Flow Application Date": as defined in Section 2.11(d).
"Excess Senior Subordinated Note Amount": as defined in Section
2.11(b)(ii).
"Excluded Foreign Subsidiary": any Foreign Subsidiary in respect of
which either (a) the pledge of all of the Capital Stock of such Subsidiary as
Collateral or (b) the guaranteeing by such Subsidiary of the Obligations, would,
in the good faith judgment of the Borrower, result in adverse tax consequences
to the Borrower.
"Existing Credit Agreement": that certain Credit Agreement, dated as of
November 27, 1996, as amended, among the Borrower, Comerica Bank, as
administrative agent, and others.
"Facility": each of (a) the Tranche A Term Commitments and the Tranche
A Term Loans made thereunder (the "Tranche A Term Facility"), (b) the Tranche B
Term Commitments and the Tranche B Term Loans made thereunder (the "Tranche B
Term Facility"), (c) the Tranche C Term Commitments and the Tranche C Term Loans
made thereunder (the "Tranche C Term Facility"), (d) the Revolving Commitments
and the extensions of credit made thereunder (the "Revolving Facility") and (e)
the LC/MD Commitments and the extensions of credit thereunder (the "LC/MD
Facility").
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"Federal Funds Effective Rate": for any day, 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 on the next
succeeding 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 the day of such transactions received by the Reference Lender
from three federal funds brokers of recognized standing selected by it.
"Foreign Subsidiary": any Subsidiary of the Borrower that is not a
Domestic Subsidiary.
"Funded Debt": as to any Person, on any date, (a) all Indebtedness of
such Person that matures more than one year from the date of its creation or
matures within one year from such date but is renewable or extendible, at the
option of such Person, to a date more than one year from such date or arises
under a revolving credit or similar agreement that obligates the lender or
lenders to extend credit during a period of more than one year from such date,
including all current maturities and current sinking fund payments in respect of
such Indebtedness whether or not required to be paid within one year from the
date of its creation and, in the case of the Borrower, Indebtedness in respect
of the Loans and the Reimbursement Obligations (but excluding, in the case of
the Borrower, any Guarantee Obligations of the Borrower in respect of
Indebtedness of franchisees, to the extent permitted by Section 7.2(h)), minus
(b) (i) for purposes of calculating the Consolidated Leverage Ratio in order to
determine the Applicable Margin or the Commitment Fee Rate as set forth on the
Pricing Grid, the sum of (x) the $30,000,000 of cash on the consolidated balance
sheet of the Borrower and its Subsidiaries on the Closing Date, to the extent
remaining on the balance sheet on such date (plus any interest earned thereon,
to the extent remaining on the balance sheet on such date), and (y) 50% of the
Net Cash Proceeds of any Excess Senior Subordinated Note Amount received by the
Borrower since the Closing Date, to the extent remaining on the balance sheet on
such date (plus any interest earned thereon, to the extent remaining on the
balance sheet on such date), and (ii) otherwise, the aggregate amount of cash
and Cash Equivalents on the consolidated balance sheet of the Borrower and its
Subsidiaries on such date, but in no event exceeding the sum of (x) $30,000,000
and (y) 50% of the Net Cash Proceeds of any Excess Senior Subordinated Note
Amount received by the Borrower since the Closing Date.
"Funding Office": the office of the Administrative Agent specified in
Section 10.2 or such other office as may be specified from time to time by the
Administrative Agent as its funding office by written notice to the Borrower and
the Lenders.
"GAAP": generally accepted accounting principles in the United States
as in effect from time to time, except that for purposes of Section 7.1, GAAP
shall be determined on the basis of such principles in effect on the date hereof
and consistent with those used in the preparation of the most recent audited
financial statements delivered pursuant to Section 4.1(b). In the event that any
"Accounting Change" (as defined below) shall occur and such change results in a
change in the method of calculation of financial covenants, standards or terms
in this Agreement, then the Borrower and the Administrative Agent agree to enter
into negotiations in order to amend such
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<PAGE> 18
provisions of this Agreement so as to equitably reflect such Accounting Changes
with the desired result that the criteria for evaluating the Borrower's
financial condition shall be the same after such Accounting Changes as if such
Accounting Changes had not been made. Until such time as such an amendment shall
have been executed and delivered by the Borrower, the Administrative Agent and
the Required Lenders, all financial covenants, standards and terms in this
Agreement shall continue to be calculated or construed as if such Accounting
Changes had not occurred. "Accounting Changes" refers to changes in accounting
principles required by the promulgation of any rule, regulation, pronouncement
or opinion by the Financial Accounting Standards Board of the American Institute
of Certified Public Accountants or, if applicable, the SEC.
"Governmental Authority": any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any self-regulatory
organization (including the National Association of Insurance Commissioners).
"Guarantee and Collateral Agreement": the Guarantee and Collateral
Agreement to be executed and delivered by the Borrower and each Subsidiary
Guarantor, substantially in the form of Exhibit A, as the same may be amended,
supplemented or otherwise modified from time to time.
"Guarantee Obligation": as to any Person (the "guaranteeing person"),
any obligation of (a) the guaranteeing person or (b) another Person (including
any bank under any letter of credit) to induce the creation of which the
guaranteeing person has issued a reimbursement, counterindemnity or similar
obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations (the "primary obligations")
of any other third Person (the "primary obligor") in any manner, whether
directly or indirectly, including any obligation of the guaranteeing person,
whether or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds (1) for the purchase or payment of any such primary obligation or
(2) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (iv) otherwise to assure or hold
harmless the owner of any such primary obligation against loss in respect
thereof; provided, however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing person
shall be deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such guaranteeing person
may be liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined by the
Borrower in good faith.
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"Hedge Agreements": all swaps, caps, collars or similar arrangements
providing for protection against fluctuations in interest rates, currency
exchange rates or commodities prices or the exchange of nominal interest
obligations, either generally or under specific contingencies.
"Indebtedness": of any Person at any date, without duplication, (a) all
indebtedness of such Person for borrowed money, (b) all obligations of such
Person for the deferred purchase price of property or services (other than
current trade payables incurred in the ordinary course of such Person's
business), (c) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (e) all Capital Lease Obligations of
such Person, (f) all obligations of such Person, contingent or otherwise, as an
account party under acceptance, letter of credit or similar facilities, (g) the
liquidation value of all redeemable preferred Capital Stock of such Person
(other than any such preferred Capital Stock that is not redeemable until a date
that is no earlier than one year and one day after the final maturity of the
Loans and the Preferred Stock), (h) all Guarantee Obligations of such Person in
respect of obligations of the kind referred to in clauses (a) through (g) above;
(i) all obligations of the kind referred to in clauses (a) through (h) above
secured by (or for which the holder of such obligation has an existing right,
contingent or otherwise, to be secured by) any Lien on property (including
accounts and contract rights) owned by such Person, whether or not such Person
has assumed or become liable for the payment of such obligation; and (j) for the
purposes of Section 8(e) only, all obligations of such Person in respect of
Hedge Agreements.
"Insolvency": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intellectual Property": the collective reference to all rights,
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including
copyrights, copyright licenses, patents, patent licenses, trademarks, trademark
licenses, technology, know-how and processes, and all rights to sue at law or in
equity for any infringement or other impairment thereof, including the right to
receive all proceeds and damages therefrom.
"Interest Payment Date": (a) as to any ABR Loan, the last day of each
March, June, September and December to occur while such Loan is outstanding and
the final maturity date of such Loan, (b) as to any Eurodollar Loan having an
Interest Period of three months or less, the last day of such Interest Period,
(c) as to any Eurodollar Loan having an Interest Period longer than three
months, each day that is three months, or a whole multiple thereof, after the
first day of such Interest Period and the last day of such Interest Period and
(d) as to any Loan (other than any Revolving Loan
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that is an ABR Loan and any Swingline Loan), the date of any repayment or
prepayment made in respect thereof.
"Interest Period": as to any Eurodollar Loan, (a) initially, the period
commencing on the borrowing or conversion date, as the case may be, with respect
to such Eurodollar Loan and ending one, two, three or six months thereafter, as
selected by the Borrower in its notice of borrowing or notice of conversion, as
the case may be, given with respect thereto; and (b) thereafter, each period
commencing on the last day of the next preceding Interest Period applicable to
such Eurodollar Loan and ending one, two, three or six months thereafter, as
selected by the Borrower by irrevocable notice to the Administrative Agent not
less than three Business Days prior to the last day of the then current Interest
Period with respect thereto; provided that, all of the foregoing provisions
relating to Interest Periods are subject to the following:
(i) if any Interest Period would otherwise end on a day that is
not a Business Day, such Interest Period shall be extended to
the next succeeding Business Day unless the result of such
extension would be to carry such Interest Period into another
calendar month in which event such Interest Period shall end
on the immediately preceding Business Day;
(ii) the Borrower may not select an Interest Period for a
particular Facility that would extend beyond the final
maturity date applicable thereto;
(iii) 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 a calendar month; and
(iv) the Borrower shall select Interest Periods so as not to
require a payment or prepayment of any Eurodollar Loan during
an Interest Period for such Loan.
"Investments": as defined in Section 7.8.
"Issuing Lender": The Chase Manhattan Bank (or any of its Affiliates,
including, without limitation, Chase Manhattan Bank of Delaware), in its
capacity as issuer of any Letter of Credit.
"LC Fee Payment Date": the last day of each March, June, September and
December and the last day of the Revolving Commitment Period.
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"LC/MD Commitment": as to any Lender, the collective reference to such
Lender's LC/MD LC Commitment and LC/MD Term Commitment.
"LC/MD Extensions of Credit": as to any LC/MD Lender at any time, an
amount equal to the sum of (a) the aggregate principal amount of all LC/MD Loans
held by such Lender then outstanding and (b) such Lender's LC/MD Percentage of
the LC/MD LC Obligations then outstanding.
"LC/MD LC Commitment": as to any Lender, the obligation of such Lender,
if any, to participate in the NJ Letter of Credit in an aggregate face amount
not to exceed the amount set forth under the heading "LC/MD LC Commitment"
opposite such Lender's name on Schedule 1.1A or in the Assignment and Acceptance
pursuant to which such Lender became a party hereto, as the same may be changed
from time to time pursuant to the terms hereof. The original aggregate amount of
the LC/MD LC Commitments is $122,250,000.
"LC/MD LC Obligations": at any time, an amount equal to the sum of (a)
the aggregate then undrawn and unexpired amount of the NJ Letter of Credit and
(b) the aggregate amount of drawings under the NJ Letter of Credit that have not
then been reimbursed by the Borrower or pursuant to Section 3.5 (but only, in
the case of this clause (b), until the refunding procedure contemplated by
Section 3.5 has been completed).
"LC/MD Lender": each Lender that has a LC/MD Commitment or that holds
LC/MD Loans.
"LC/MD Loans": the collective reference to LC/MD Reimbursement Loans
and LC/MD Term Loans.
"LC/MD Percentage": as to any LC/MD Lender at any time, the percentage
which such Lender's LC/MD Commitment then constitutes of the Total LC/MD
Commitments (or, at any time after the LC/MD Commitments shall have expired or
terminated, the percentage which the aggregate principal amount of such Lender's
LC/MD Loans then outstanding constitutes of the aggregate principal amount of
the LC/MD Loans then outstanding).
"LC/MD Reimbursement Loans": any participating interest in any
unreimbursed payment under the NJ Letter of Credit funded by an LC/MD Lender, it
being understood that LC/MD Reimbursement Loans are referred to as "Loans"
hereunder for convenience of reference only, and such references shall not be
construed to imply that any proceeds of LC/MD Reimbursement Loans are to be
received by the Borrower.
"LC/MD Scheduled Termination Date": as defined in Section 2.1(b).
"LC/MD Term Commitment": as to any Lender, the obligation of such
Lender, if any, to make LC/MD Term Loans in an aggregate principal amount not to
exceed the amount set forth
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under the heading "LC/MD Term Commitment" opposite such Lender's name on
Schedule 1.1A or in the Assignment and Acceptance pursuant to which such Lender
became a party hereto, as the same may be changed from time to time pursuant to
the terms hereof. The original aggregate amount of the LC/MD Term Commitments
is $85,000,000.
"LC/MD Term Commitment Period": the period from and including the NJ LC
Termination Date to the LC/MD Scheduled Termination Date.
"LC/MD Term Loans": as defined in Section 2.1(b).
"LC Participants": (a) in the case of the Revolving Letters of Credit,
the collective reference to all Revolving Lenders (including the Issuing Lender)
and (b) in the case of the NJ Letter of Credit, the collective reference to all
LC/MD Lenders (including the Issuing Lender).
"Lenders": as defined in the preamble hereto.
"Letters of Credit": the collective reference to the NJ Letter of
Credit and the Revolving Letters of Credit.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any conditional sale or
other title retention agreement and any capital lease having substantially the
same economic effect as any of the foregoing).
"Loan": any loan made by any Lender pursuant to this Agreement.
"Loan Documents": this Agreement, the Security Documents and the Notes.
"Loan Parties": the Borrower and each Subsidiary of the Borrower that
is a party to a Loan Document.
"Majority Facility Lenders": with respect to any Facility, the holders
of more than 50% of the aggregate unpaid principal amount of the Term Loans, the
Total Revolving Extensions of Credit or the Total LC/MD Extensions of Credit, as
the case may be, outstanding under such Facility (or (a) in the case of the
Revolving Facility, prior to any termination of the Revolving Commitments, the
holders of more than 50% of the Total Revolving Commitments and (b) in the case
of the LC/MD Facility, prior to any termination of the LC/MD Commitments, the
holders of more than 50% of the Total LC/MD Commitments).
"Material Adverse Effect": a material adverse effect on (a) the
business, property, operations, condition (financial or otherwise) or prospects
of the Borrower and its Subsidiaries taken
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<PAGE> 23
as a whole or (b) the validity or enforceability of this Agreement or any of
the other Loan Documents or the rights or remedies of the Administrative Agent
or the Lenders hereunder or thereunder.
"Materials of Environmental Concern": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as such
in or under any Environmental Law, including asbestos, polychlorinated biphenyls
and urea-formaldehyde insulation.
"Mortgaged Properties": the real properties listed on Schedule 1.1B, as
to which the Administrative Agent for the benefit of the Lenders shall be
granted a Lien pursuant to the Mortgages in accordance with Section 6.12.
"Mortgages": each of the mortgages and deeds of trust made by any Loan
Party in favor of, or for the benefit of, the Administrative Agent for the
benefit of the Lenders, substantially in the form of Exhibit D (with such
changes thereto as shall be advisable under the law of the jurisdiction in which
such mortgage or deed of trust is to be recorded), as the same may be amended,
supplemented or otherwise modified from time to time.
"Multiemployer Plan": a Plan that is a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"Net Cash Proceeds": (a) in connection with any Asset Sale or any
Recovery Event, the proceeds thereof in the form of cash and Cash Equivalents
(including any such proceeds received by way of deferred payment of principal
pursuant to a note or installment receivable or purchase price adjustment
receivable or otherwise, but only as and when received) of such Asset Sale or
Recovery Event, net of attorneys' fees, accountants' fees, investment banking
fees, amounts required to be applied to the repayment of Indebtedness secured by
a Lien expressly permitted hereunder on any asset that is the subject of such
Asset Sale or Recovery Event (other than any Lien pursuant to a Security
Document) and other customary fees and expenses actually incurred in connection
therewith and net of taxes paid or reasonably estimated to be payable currently
as a result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements) and (b) in connection with any
issuance or sale of equity securities or debt securities or instruments or the
incurrence of loans, the cash proceeds received from such issuance or
incurrence, net of attorneys' fees, investment banking fees, accountants' fees,
underwriting discounts and commissions and other customary fees and expenses
actually incurred in connection therewith.
"NJ LC Termination Date": as defined in Section 2.1(b).
"NJ Letter of Credit": as defined in Section 3.1(a).
"Non-Excluded Taxes": as defined in Section 2.19(a).
"Non-U.S. Lender": as defined in Section 2.19(d).
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<PAGE> 24
"Notes": the collective reference to any promissory note evidencing
Loans.
"Obligations": the unpaid principal of and interest on (including
interest accruing after the maturity of the Loans and Reimbursement Obligations
and interest accruing after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to
the Borrower, whether or not a claim for post-filing or post-petition interest
is allowed in such proceeding) the Loans and all other obligations and
liabilities of the Borrower to the Administrative Agent or to any Lender (or, in
the case of Hedge Agreements, any affiliate of any Lender), whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with, this
Agreement, any other Loan Document, the Letters of Credit, any Hedge Agreement
entered into with any Lender or any affiliate of any Lender in connection with
this Agreement or any other document made, delivered or given in connection
herewith or therewith, whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses (including all fees, charges and
disbursements of counsel to the Administrative Agent or to any Lender that are
required to be paid by the Borrower pursuant hereto) or otherwise.
"Other Taxes": any and all present or future stamp or documentary taxes
or any other excise or property taxes, charges or similar levies arising from
any payment made hereunder or from the execution, delivery or enforcement of, or
otherwise with respect to, this Agreement or any other Loan Document.
"Participant": as defined in Section 10.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA (or any successor).
"Permitted Acquisition": any acquisition, consisting of a single
transaction or a series of related transactions, by the Borrower or any one or
more of its Wholly Owned Subsidiary Guarantors of all of the Capital Stock of,
or all or a substantial part of the assets of, or of a business, unit or
division of, any Person organized under the laws of the United States or any
state thereof (such business, unit or division, the "Acquired Business"),
provided that (a) the consideration paid by the Borrower or such Subsidiary or
Subsidiaries pursuant to such acquisition shall be solely in a form referred to
in clause (a), (b), (c) or (d) of the definition of "Purchase Price" set forth
in Section 1.1 (or some combination thereof), (b) the requirements of Section
6.11 have been satisfied with respect to such acquisition, (c) the Borrower
shall be in compliance, on a pro forma basis after giving effect to such
acquisition, with the covenants contained in Section 7.1, in each case
recomputed as at the last day of the most recently ended fiscal quarter of the
Borrower as if such acquisition had occurred on the first day of each relevant
period for testing such compliance, (d) no Default or Event of Default shall
have occurred and be continuing, or would occur after giving effect to such
acquisition, (e) all actions required to be taken with respect to any acquired
or newly formed Subsidiary or otherwise with respect to the Acquired Business in
such acquisition under Section 6.10 shall have been taken, (f) the aggregate
Purchase Prices in respect of such acquisition and all other
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Permitted Acquisitions consummated in accordance with this Agreement shall not
exceed (i) during the Borrower's fiscal years 1998 and 1999, $50,000,000 in
each such fiscal year (or, in the case of fiscal 1998, the portion thereof
occurring after the Closing Date), and (ii) thereafter, in any fiscal year of
the Borrower, the sum of (A) $100,000,000 (or, if the Consolidated Leverage
Ratio as of the last day of any fiscal quarter during such fiscal year is less
than 3.50 to 1.0, $150,000,000) and (B) an additional up to $25,000,000 to the
extent not expended as Capital Expenditures (Expansion) during such fiscal year
pursuant to 7.7(b), (g) the Cash/Debt Consideration in respect of such
acquisition and all other Permitted Acquisitions consummated in accordance with
this Agreement shall not exceed (i) during the Borrower's fiscal years 1998 and
1999, $50,000,000 in each such fiscal year (or, in the case of fiscal 1998, the
portion thereof occurring after the Closing Date), and (ii) thereafter, in any
fiscal year of the Borrower, $70,000,000 (plus any amounts available pursuant
to the foregoing clause (f)(ii)(B)), and (h) any such acquisition shall have
been approved by the Board of Directors or such comparable governing body of
the Person (or whose business, unit or division is, as the case may be) being
acquired.
"Permitted Investors": the collective reference to (i) the Sponsor,
(ii) the Talley Persons and (iii) the Speese Persons.
"Person": an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan that is covered
by ERISA and in respect of which the Borrower or a Commonly Controlled Entity is
(or, if such plan were terminated at such time, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Preferred Stock": as defined in Section 5.1(b)(ii).
"Pricing Grid": the pricing grid attached hereto as Annex A.
"Pro Forma Financial Statements": as defined in Section 4.1(a).
"Projections": as defined in Section 6.2(c).
"Properties": as defined in Section 4.17(a).
"Purchase Price": with respect to any Permitted Acquisition, the sum
(without duplication) of (a) the amount of cash paid by the Borrower and its
Subsidiaries in connection with such acquisition, (b) the value (as determined
for purposes of such acquisition in accordance with the applicable acquisition
agreement) of all Capital Stock of the Borrower issued or given as consideration
in connection with such acquisition, (c) the Qualified Net Cash Equity Proceeds
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applied to finance such acquisition and (d) the principal amount (or, if less,
the accreted value) at the time of such acquisition of all Assumed Indebtedness
with respect thereto.
"Qualified Net Cash Equity Proceeds": the Net Cash Proceeds of any
offering of Capital Stock of the Borrower, provided that (a) such offering was
made in express contemplation of a Permitted Acquisition, (b) such Capital Stock
is not mandatorily redeemable and (c) such Permitted Acquisition is consummated
within 90 days after receipt by the Borrower of such Net Cash Proceeds.
"Recovery Event": any settlement of or payment in respect of any
property or casualty insurance claim or any condemnation proceeding relating to
any asset of the Borrower or any of its Subsidiaries. "Reference Lender": The
Chase Manhattan Bank.
"Reference Period": with respect to any date, the period of four
consecutive fiscal quarters of the Borrower immediately preceding such date or,
if such date is the last day of a fiscal quarter, ending on such date.
"Refunded Swingline Loans": as defined in Section 2.6(b).
"Refunding Date": as defined in Section 2.6(c).
"Register": as defined in Section 10.6(d).
"Regulation U": Regulation U of the Board as in effect from time to
time.
"Reimbursement Obligation": the obligation of the Borrower to reimburse
the Issuing Lender pursuant to Section 3.5 for amounts paid under Letters of
Credit.
"Reinvestment Deferred Amount": with respect to any Reinvestment Event,
the aggregate Net Cash Proceeds received by the Borrower or any of its
Subsidiaries in connection therewith that are not applied to prepay the Term
Loans or reduce the Revolving Commitments pursuant to Section 2.11(c) as a
result of the delivery of a Reinvestment Notice.
"Reinvestment Event": any Asset Sale or Recovery Event in respect of
which the Borrower has delivered a Reinvestment Notice.
"Reinvestment Notice": a written notice executed by a Responsible
Officer stating that no Event of Default has occurred and is continuing and that
the Borrower (directly or indirectly through a Subsidiary) intends and expects
to use all or a specified portion of the Net Cash Proceeds of an Asset Sale or
Recovery Event to acquire assets useful in its business.
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"Reinvestment Prepayment Amount": with respect to any Reinvestment
Event, the Reinvestment Deferred Amount relating thereto less any amount
expended prior to the relevant Reinvestment Prepayment Date to acquire assets
useful in the Borrower's business.
"Reinvestment Prepayment Date": with respect to any Reinvestment Event,
the earlier of (a) the date occurring twelve months after such Reinvestment
Event and (b) the date on which the Borrower shall have determined not to, or
shall have otherwise ceased to, acquire assets useful in the Borrower's business
with all or any portion of the relevant Reinvestment Deferred Amount.
"Reorganization": with respect to any Multiemployer Plan, the condition
that such plan is in reorganization within the meaning of Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043(c) of
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg.
ss. 4043.
"Required Lenders": at any time, the holders of more than 50% of (a)
until the Closing Date, the Commitments then in effect and (b) thereafter, the
sum of (i) the aggregate unpaid principal amount of the A/B/C Term Loans then
outstanding, (ii) the Total Revolving Commitments then in effect or, if the
Revolving Commitments have been terminated, the Total Revolving Extensions of
Credit then outstanding and (iii) the Total LC/MD Commitments then in effect or,
if the LC/MD Commitments have been terminated, the Total LC/MD Extensions of
Credit then outstanding.
"Required Prepayment Lenders": the Majority Facility Lenders in respect
of each Facility.
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"Responsible Officer": the chief executive officer, president, chief
financial officer or treasurer of the Borrower, but in any event, with respect
to financial matters, the chief financial officer or president of the Borrower.
"Restricted Payments": as defined in Section 7.6.
"Revolving Commitment": as to any Lender, the obligation of such
Lender, if any, to make Revolving Loans and participate in Swingline Loans and
Revolving Letters of Credit in an aggregate principal and/or face amount not to
exceed the amount set forth under the heading
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"Revolving Commitment" opposite such Lender's name on Schedule 1.1A or in the
Assignment and Acceptance pursuant to which such Lender became a party hereto,
as the same may be changed from time to time pursuant to the terms hereof. The
original amount of the Total Revolving Commitments is $120,000,000.
"Revolving Commitment Period": the period from and including the
Closing Date to the Revolving Scheduled Commitment Termination Date.
"Revolving Extensions of Credit": as to any Revolving Lender at any
time, an amount equal to the sum of (a) the aggregate principal amount of all
Revolving Loans held by such Lender then outstanding, (b) such Lender's
Revolving Percentage of the Revolving LC Obligations then outstanding and (c)
such Lender's Revolving Percentage of the aggregate principal amount of
Swingline Loans then outstanding.
"Revolving LC Commitment": $75,000,000.
"Revolving LC Obligations": at any time, an amount equal to the sum of
(a) the aggregate then undrawn and unexpired amount of the then outstanding
Revolving Letters of Credit and (b) the aggregate amount of drawings under
Revolving Letters of Credit that have not then been reimbursed pursuant to
Section 3.5.
"Revolving Lender": each Lender that has a Revolving Commitment or that
holds Revolving Loans.
"Revolving Letters of Credit": as defined in Section 3.1.
"Revolving Loans": as defined in Section 2.2.
"Revolving Percentage": as to any Revolving Lender at any time, the
percentage which such Lender's Revolving Commitment then constitutes of the
Total Revolving Commitments (or, at any time after the Revolving Commitments
shall have expired or terminated, the percentage which the aggregate principal
amount of such Lender's Revolving Loans then outstanding constitutes of the
aggregate principal amount of the Revolving Loans then outstanding).
"Revolving Scheduled Commitment Termination Date": July 31, 2004.
"Sale/Leaseback Transaction": any arrangement providing for the leasing
to the Borrower or any Subsidiary of real or personal property that has been or
is to be (a) sold or transferred by the Borrower or any Subsidiary or (b)
constructed or acquired by a third party in anticipation of a program of leasing
to the Borrower or any Subsidiary.
"SEC": the Securities and Exchange Commission, any successor thereto
and any analogous Governmental Authority.
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"Security Documents": the collective reference to the Guarantee and
Collateral Agreement, the Mortgages and all other security documents hereafter
delivered to the Administrative Agent granting a Lien on any property of any
Person to secure the obligations and liabilities of any Loan Party under any
Loan Document.
"Seller": Thorn International BV.
"Senior Subordinated Note Indenture": the Indenture to be entered into
by the Borrower and certain of its Subsidiaries in connection with the issuance
of the Senior Subordinated Notes, together with all instruments and other
agreements entered into by the Borrower or such Subsidiaries in connection
therewith, as the same may be amended, supplemented or otherwise modified from
time to time in accordance with Section 7.9.
"Senior Subordinated Notes": the subordinated notes of the Borrower to
be issued pursuant to the Senior Subordinated Note Indenture.
"Single Employer Plan": any Plan that is covered by Title IV of ERISA,
but that is not a Multiemployer Plan.
"Solvent": when used with respect to any Person, means that, as of any
date of determination, (a) the amount of the "present fair saleable value" of
the assets of such Person will, as of such date, exceed the amount of all
"liabilities of such Person, contingent or otherwise", as of such date, as such
quoted terms are determined in accordance with applicable federal and state laws
governing determinations of the insolvency of debtors, (b) the present fair
saleable value of the assets of such Person will, as of such date, be greater
than the amount that will be required to pay the liability of such Person on its
debts as such debts become absolute and matured, (c) such Person will not have,
as of such date, an unreasonably small amount of capital with which to conduct
its business, and (d) such Person will be able to pay its debts as they mature.
For purposes of this definition, (i) "debt" means liability on a "claim", and
(ii) "claim" means any (x) right to payment, whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y)
right to an equitable remedy for breach of performance if such breach gives rise
to a right to payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured or unmatured, disputed,
undisputed, secured or unsecured.
"Specified Change of Control": a "Change of Control" as defined in the
Subordinated Bridge Facility or the Senior Subordinated Note Indenture.
"Speese Persons": the collective reference to Mark E. Speese, any
person having a relationship with Mark E. Speese by blood, marriage or adoption
not more remote than first cousin and any trust established for the benefit of
any such person.
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"Sponsor": Apollo Management IV, L.P., Apollo Investment Fund IV, L.P.,
Apollo Overseas Partners IV, L.P. and their Control Investment Affiliates.
"Subordinated Bridge Facility": the collective reference to (i) the
Senior Subordinated Credit Agreement, dated as of the date hereof, among the
Borrower, the lenders from time to time parties thereto and Chase, as
administrative agent for such lenders, together with the Indenture referred to
therein, and (ii) any other document governing Indebtedness (other than the
Senior Subordinated Notes) incurred pursuant to Section 7.2(f)(i)(A)(y).
"Subsidiary": as to any Person, a corporation, partnership, limited
liability company or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person. Unless otherwise qualified, all
references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer
to a Subsidiary or Subsidiaries of the Borrower. All references to Subsidiaries
of the Borrower applicable on the Closing Date and thereafter shall include the
Acquired Company and its Subsidiaries.
"Subsidiary Guarantor": each Subsidiary of the Borrower other than any
Excluded Foreign Subsidiary.
"Swingline Commitment": the obligation of the Swingline Lender to make
Swingline Loans pursuant to Section 2.6 in an aggregate principal amount at any
one time outstanding not to exceed $20,000,000.
"Swingline Lender": The Chase Manhattan Bank, in its capacity as the
lender of Swingline Loans.
"Swingline Loans": as defined in Section 2.3.
"Swingline Participation Amount": as defined in Section 2.6(c).
"Syndication Agent": as defined in the preamble hereto.
"Talley Persons": the collective reference to J. Ernest Talley, any
person having a relationship with J. Ernest Talley by blood, marriage or
adoption not more remote than first cousin (other than his children) and any
trust established for the benefit of any person having a relationship with J.
Ernest Talley by blood, marriage or adoption not more remote than first cousin.
"Term Lenders": the collective reference to the Tranche A Term Lenders,
the Tranche B Term Lenders, the Tranche C Term Lenders and the LC/MD Lenders.
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"Term Loans": the collective reference to the A/B/C Term Loans and the
LC/MD Loans.
"Total LC/MD Commitments": at any time, (a) until the NJ LC Termination
Date, the aggregate amount of the LC/MD LC Commitments then in effect and (b)
thereafter, the aggregate amount of the LC/MD Term Commitments then in effect.
"Total LC/MD Extensions of Credit": at any time, the aggregate amount
of the LC/MD Extensions of Credit of the LC/MD Lenders outstanding at such time.
"Total Revolving Commitments": at any time, the aggregate amount of the
Revolving Commitments then in effect.
"Total Revolving Extensions of Credit": at any time, the aggregate
amount of the Revolving Extensions of Credit of the Revolving Lenders
outstanding at such time.
"Tranche A Term Commitment": as to any Lender, the obligation of such
Lender, if any, to make a Tranche A Term Loan to the Borrower hereunder in a
principal amount not to exceed the amount set forth under the heading "Tranche A
Term Commitment" opposite such Lender's name on Schedule 1.1A. The original
aggregate amount of the Tranche A Term Commitments is $120,000,000.
"Tranche A Term Lender": each Lender that has a Tranche A Term
Commitment or is the holder of a Tranche A Term Loan.
"Tranche A Term Loan": as defined in Section 2.1(a).
"Tranche A Term Percentage": as to any Tranche A Term Lender at any
time, the percentage which such Lender's Tranche A Term Commitment then
constitutes of the aggregate Tranche A Term Commitments (or, at any time after
the Closing Date, the percentage which the aggregate principal amount of such
Lender's Tranche A Term Loans then outstanding constitutes of the aggregate
principal amount of the Tranche A Term Loans then outstanding).
"Tranche B Term Commitment": as to any Lender, the obligation of such
Lender, if any, to make a Tranche B Term Loan to the Borrower hereunder in a
principal amount not to exceed the amount set forth under the heading "Tranche B
Term Commitment" opposite such Lender's name on Schedule 1.1A. The original
aggregate amount of the Tranche B Term Commitments is $270,000,000.
"Tranche B Term Lender": each Lender that has a Tranche B Term
Commitment or that holds a Tranche B Term Loan.
"Tranche B Term Loan": as defined in Section 2.1(b).
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<PAGE> 32
"Tranche B Term Percentage": as to any Tranche B Term Lender at any
time, the percentage which such Lender's Tranche B Term Commitment then
constitutes of the aggregate Tranche B Term Commitments (or, at any time after
the Closing Date, the percentage which the aggregate principal amount of such
Lender's Tranche B Term Loans then outstanding constitutes of the aggregate
principal amount of the Tranche B Term Loans then outstanding).
"Tranche C Term Commitment": as to any Lender, the obligation of such
Lender, if any, to make a Tranche C Term Loan to the Borrower hereunder in a
principal amount not to exceed the amount set forth under the heading "Tranche C
Term Commitment" opposite such Lender's name on Schedule 1.1A. The original
aggregate amount of the Tranche C Term Commitments is $330,000,000.
"Tranche C Term Lender": each Lender that has a Tranche C Term
Commitment or that holds a Tranche C Term Loan.
"Tranche C Term Loan": as defined in Section 2.1(c).
"Tranche C Term Percentage": as to any Tranche C Term Lender at any
time, the percentage which such Lender's Tranche C Term Commitment then
constitutes of the aggregate Tranche C Term Commitments (or, at any time after
the Closing Date, the percentage which the aggregate principal amount of such
Lender's Tranche C Term Loans then outstanding constitutes of the aggregate
principal amount of the Tranche C Term Loans then outstanding).
"Transferee": any Assignee or Participant.
"Type": as to any Loan, its nature as an ABR Loan or a Eurodollar Loan.
"Uniform Customs": the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No. 500,
as the same may be amended from time to time.
"United States": the United States of America.
"Voting Stock": with respect to any Person, any class or series of
Capital Stock of such Person that is ordinarily entitled to vote in the election
of directors thereof at a meeting of stockholders called for such purpose,
without the occurrence of any additional event or contingency.
"Wholly Owned Subsidiary": as to any Person, any other Person all of
the Capital Stock of which (other than directors' qualifying shares required by
law) is owned by such Person directly and/or through other Wholly Owned
Subsidiaries.
"Wholly Owned Subsidiary Guarantor": any Subsidiary Guarantor that is a
Wholly Owned Subsidiary of the Borrower.
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<PAGE> 33
1.2 Other Definitional Provisions. Unless otherwise specified
therein, all terms defined in this Agreement shall have the
defined meanings when used in the other Loan Documents or any
certificate or other document made or delivered pursuant
hereto or thereto.
(b) As used herein and in the other Loan Documents, and any
certificate or other document made or delivered
pursuant hereto or thereto, (i) accounting terms
relating to the Borrower and its Subsidiaries not
defined in Section 1.1 and accounting terms partly
defined in Section 1.1, to the extent not defined,
shall have the respective meanings given to them under
GAAP, (ii) the words "include", "includes" and
"including" shall be deemed to be followed by the
phrase "without limitation" and (iii) the words "asset"
and "property" shall be construed to have the same
meaning and effect and to refer to any and all tangible
and intangible assets and properties, including cash,
Capital Stock, securities, revenues, accounts,
leasehold interests and contract rights.
(c) The words "hereof", "herein" and "hereunder" and words
of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Section,
Schedule and Exhibit references are to this Agreement
unless otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural
forms of such terms.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Term Commitments and LC/MD Commitments. (a) Subject to the
terms and conditions hereof, (i) each Tranche A Term Lender
severally agrees to make a term loan (a "Tranche A Term
Loan") to the Borrower on the Closing Date in an amount not
to exceed the amount of the Tranche A Term Commitment of such
Lender, (ii) each Tranche B Term Lender severally agrees to
make a term loan (a "Tranche B Term Loan") to the Borrower on
the Closing Date in an amount not to exceed the amount of the
Tranche B Term Commitment of such Lender and (iii) each
Tranche C Term Lender severally agrees to make a term loan (a
"Tranche C Term Loan") to the Borrower on the Closing Date in
an amount not to exceed the amount of the Tranche C Term
Commitment of such Lender
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(b) Subject to the terms and conditions hereof, each LC/MD Lender
severally agrees to make LC/MD Reimbursement Loans upon the occurrence of any
drawing under the NJ Letter of Credit to the extent contemplated by Section 3.5
in an aggregate amount not to exceed the amount of the LC/MD LC Commitment of
such Lender. In addition, after the date (the "NJ LC Termination Date") on which
the NJ Letter of Credit has expired or otherwise been terminated or on which the
full amount available thereunder has been drawn, subject to the terms and
conditions hereof, each LC/MD Lender severally agrees to make term loans ("LC/MD
Term Loans") to the Borrower from time to time to the extent, but only to the
extent, of any remaining LC/MD Term Commitment of such Lender as in effect
immediately prior to the making of the relevant LC/MD Term Loan. The obligation
of the LC/MD Lenders to make LC/MD Term Loans shall terminate on the date (the
"LC/MD Scheduled Termination Date") that is the earlier of (i) the later of (x)
September 30, 2000 and (y) the date that is 90 days after the NJ LC Termination
Date and (ii) March 30, 2004. The LC/MD LC Commitments shall automatically be
permanently reduced by the principal amount of any LC/MD Reimbursement Loans
created hereunder. The LC/MD LC Commitments shall terminate on the NJ LC
Termination Date. The LC/MD Term Commitments shall automatically be permanently
reduced by the principal amount of any LC/MD Reimbursement Loans or LC/MD Term
Loans borrowed hereunder. The LC/MD Term Commitments shall terminate on the
LC/MD Scheduled Termination Date.
(c) The Term Loans may from time to time be Eurodollar Loans or ABR
Loans, as determined by the Borrower and notified to the Administrative Agent in
accordance with Sections 2.4, 2.5 and 2.12.
2.2 Revolving Commitments. Subject to the terms and conditions
hereof, each Revolving Lender severally agrees to make
revolving credit loans ("Revolving Loans") to the Borrower
from time to time during the Revolving Commitment Period in
an aggregate principal amount at any one time outstanding
which, when added to such Lender's Revolving Percentage of
the sum of (a) the Revolving LC Obligations then outstanding
and (b) the aggregate principal amount of the Swingline Loans
then outstanding, does not exceed the amount of such Lender's
Revolving Commitment. During the Revolving Commitment Period
the Borrower may use the Revolving Commitments by borrowing,
prepaying the Revolving Loans in whole or in part, and
reborrowing, all in accordance with the terms and conditions
hereof. The Revolving Loans may from time to time be
Eurodollar Loans or ABR Loans, as determined by the Borrower
and notified to the Administrative Agent in accordance with
Sections 2.5 and 2.12.
2.3 Swingline Commitment. Subject to the terms and conditions
hereof, the Swingline Lender agrees to make a portion of the
credit otherwise
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<PAGE> 35
available to the Borrower under the Revolving Commitments
from time to time during the Revolving Commitment Period by
making swing line loans ("Swingline Loans") to the Borrower;
provided that (a) the aggregate principal amount of Swingline
Loans outstanding at any time shall not exceed the Swingline
Commitment then in effect (notwithstanding that the Swingline
Loans outstanding at any time, when aggregated with the
Swingline Lender's other outstanding Revolving Loans
hereunder, may exceed the Swingline Commitment then in
effect) and (b) the Borrower shall not request, and the
Swingline Lender shall not make, any Swingline Loan if, after
giving effect to the making of such Swingline Loan, the
aggregate amount of the Available Revolving Commitments would
be less than zero. During the Revolving Commitment Period,
the Borrower may use the Swingline Commitment by borrowing,
repaying and reborrowing, all in accordance with the terms
and conditions hereof. Swingline Loans shall be ABR Loans
only.
2.4 Procedure for A/B/C Term Loan Borrowing. The Borrower shall
give the Administrative Agent irrevocable notice (which
notice must be received by the Administrative Agent prior to
10:00 A.M., New York City time, one Business Day prior to the
anticipated Closing Date) requesting that the relevant Term
Lenders make the A/B/C Term Loans on the Closing Date and
specifying the amount to be borrowed. The A/B/C Term Loans
made on the Closing Date shall initially be ABR Loans and,
unless otherwise agreed by the Administrative Agent in its
sole discretion, (A) no such Term Loan may be converted into
or continued as a Eurodollar Loan prior to the date that is
30 days after the Closing Date and (B) no such Term Loan may
be converted into or continued as a Eurodollar Loan having an
Interest Period in excess of one month prior to the date that
is 90 days after the Closing Date. Upon receipt of such
notice the Administrative Agent shall promptly notify each
relevant Term Lender thereof. Not later than 12:00 Noon, New
York City time, on the Closing Date each relevant Term Lender
shall make available to the Administrative Agent at the
Funding Office an amount in immediately available funds equal
to the A/B/C Term Loan(s) to be made by such Lender. The
Administrative Agent shall credit the account of the Borrower
on the books of such office of the Administrative Agent with
the aggregate of the amounts so made available to the
Administrative Agent by the Term Lenders in immediately
available funds.
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<PAGE> 36
2.5 Procedure for LC/MD Term Loan and Revolving Loan Borrowing.
The Borrower may borrow under the LC/MD Term Commitments
during the LC/MD Term Commitment Period or under the
Revolving Commitments during the Revolving Commitment Period
on any Business Day, provided that the Borrower shall give
the Administrative Agent irrevocable notice (which notice
must be received by the Administrative Agent prior to 12:00
Noon, New York City time, (a) three Business Days prior to
the requested Borrowing Date, in the case of Eurodollar
Loans, or (b) one Business Day prior to the requested
Borrowing Date, in the case of ABR Loans), specifying (i) the
amount and Type of Loans to be borrowed, (ii) the requested
Borrowing Date and (iii) in the case of Eurodollar Loans, the
respective amounts of each such Type of Loan and the
respective lengths of the initial Interest Period therefor.
Any Revolving Loans made on the Closing Date shall initially
be ABR Loans and, unless otherwise agreed by the
Administrative Agent in its sole discretion, (A) no Revolving
Loan may be made as, converted into or continued as a
Eurodollar Loan prior to the date that is 30 days after the
Closing Date and (B) no Revolving Loan may be made as,
converted into or continued as a Eurodollar Loan having an
Interest Period in excess of one month prior to the date that
is 90 days after the Closing Date. Each borrowing under the
LC/MD Term Commitments shall be in an amount equal to (x) in
the case of ABR Loans, $4,000,000 or a whole multiple of
$500,000 in excess thereof (or, if the then aggregate LC/MD
Term Commitments are less than $4,000,000, such lesser
amount) and (y) in the case of Eurodollar Loans, $5,000,000
or a whole multiple of $1,000,000 in excess thereof. Each
borrowing under the Revolving Commitments shall be in an
amount equal to (x) in the case of ABR Loans, $4,000,000 or a
whole multiple of $500,000 in excess thereof (or, if the then
aggregate Available Revolving Commitments are less than
$4,000,000, such lesser amount) and (y) in the case of
Eurodollar Loans, $5,000,000 or a whole multiple of
$1,000,000 in excess thereof; provided, that the Swingline
Lender may request, on behalf of the Borrower, borrowings
under the Revolving Commitments that are ABR Loans in other
amounts pursuant to Section 2.6. Upon receipt of any such
notice from the Borrower, the Administrative Agent shall
promptly notify each relevant Lender thereof. Each relevant
Lender will make the amount of its pro rata share of each
borrowing available to the Administrative Agent for the
account of the Borrower at the Funding Office prior to 12:00
Noon, New York City time, on the Borrowing Date requested by
the Borrower in funds immediately available to the
Administrative Agent. Such borrowing will then be made
available
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<PAGE> 37
to the Borrower by the Administrative Agent crediting the
account of the Borrower on the books of such office with the
aggregate of the amounts made available to the Administrative
Agent by the relevant Lenders and in like funds as received
by the Administrative Agent.
2.6 Procedure for Swingline Borrowing; Refunding of Swingline
Loans. Whenever the Borrower desires that the Swingline
Lender make Swingline Loans it shall give the Swingline
Lender irrevocable telephonic notice confirmed promptly in
writing (which telephonic notice must be received by the
Swingline Lender not later than 1:00 P.M., New York City
time, on the proposed Borrowing Date), specifying (i) the
amount to be borrowed and (ii) the requested Borrowing Date
(which shall be a Business Day during the Revolving
Commitment Period). Each borrowing under the Swingline
Commitment shall be in an amount equal to $500,000 or a whole
multiple of $100,000 in excess thereof. Not later than 3:00
P.M., New York City time, on the Borrowing Date specified in
a notice in respect of Swingline Loans, the Swingline Lender
shall make available to the Administrative Agent at the
Funding Office an amount in immediately available funds equal
to the amount of the Swingline Loan to be made by the
Swingline Lender. The Administrative Agent shall make the
proceeds of such Swingline Loan available to the Borrower on
such Borrowing Date by depositing such proceeds in the
account of the Borrower with the Administrative Agent on such
Borrowing Date in immediately available funds.
(b) The Swingline Lender, at any time and from time to time
in its sole and absolute discretion may, on behalf of
the Borrower (which hereby irrevocably directs the
Swingline Lender to act on its behalf), on one Business
Day's notice given by the Swingline Lender no later
than 12:00 Noon, New York City time (with a copy of
such notice being provided to the Borrower), request
each Revolving Lender to make, and each Revolving
Lender hereby agrees to make, a Revolving Loan, in an
amount equal to such Revolving Lender's Revolving
Percentage of the aggregate amount of the Swingline
Loans (the "Refunded Swingline Loans") outstanding on
the date of such notice, to repay the Swingline Lender.
Each Revolving Lender shall make the amount of such
Revolving Loan available to the Administrative Agent at
the Funding Office in immediately available funds, not
later than 10:00 A.M., New York City time, one Business
Day
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<PAGE> 38
after the date of such notice. The proceeds of such
Revolving Loans shall be immediately made available by
the Administrative Agent to the Swingline Lender for
application by the Swingline Lender to the repayment of
the Refunded Swingline Loans. The Borrower irrevocably
authorizes the Swingline Lender to charge the
Borrower's accounts with the Administrative Agent (up
to the amount available in each such account) in order
to immediately pay the amount of such Refunded
Swingline Loans to the extent amounts received from the
Revolving Lenders are not sufficient to repay in full
such Refunded Swingline Loans (with notice of such
charge being provided to the Borrower, provided that
the failure to give such notice shall not affect the
validity of such charge).
(c) If prior to the time a Revolving Loan would have
otherwise been made pursuant to Section 2.6(b), one of
the events described in Section 8(f) shall have
occurred and be continuing with respect to the Borrower
or if for any other reason, as determined by the
Swingline Lender in its sole discretion, Revolving
Loans may not be made as contemplated by Section
2.6(b), each Revolving Lender shall, on the date such
Revolving Loan was to have been made pursuant to the
notice referred to in Section 2.6(b) (the "Refunding
Date"), purchase for cash an undivided participating
interest in the then outstanding Swingline Loans by
paying to the Swingline Lender an amount (the
"Swingline Participation Amount") equal to (i) such
Revolving Lender's Revolving Percentage times (ii) the
sum of the aggregate principal amount of Swingline
Loans then outstanding that were to have been repaid
with such Revolving Loans.
(d) Whenever, at any time after the Swingline Lender has
received from any Revolving Lender such Lender's
Swingline Participation Amount, the Swingline Lender
receives any payment on account of the Swingline Loans,
the Swingline Lender will distribute to such Lender its
Swingline Participation Amount (appropriately adjusted,
in the case of interest payments, to reflect the period
of time during which such Lender's participating
interest was outstanding and funded and, in the case of
principal and interest payments, to reflect such
Lender's pro rata portion of such payment if such
payment is not sufficient to pay the principal of and
interest on all Swingline Loans then due); provided,
however, that in the event that such payment received
by the Swingline Lender is
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required to be returned, such Revolving Lender will
return to the Swingline Lender any portion thereof
previously distributed to it by the Swingline Lender.
(e) Each Revolving Lender's obligation to make the Loans
referred to in Section 2.6(b) and to purchase
participating interests pursuant to Section 2.6(c)
shall be absolute and unconditional and shall not be
affected by any circumstance, including (i) any setoff,
counterclaim, recoupment, defense or other right that
such Revolving Lender or the Borrower may have against
the Swingline Lender, the Borrower or any other Person
for any reason whatsoever; (ii) the occurrence or
continuance of a Default or an Event of Default or the
failure to satisfy any of the other conditions
specified in Section 5; (iii) any adverse change in the
condition (financial or otherwise) of the Borrower;
(iv) any breach of this Agreement or any other Loan
Document by the Borrower, any other Loan Party or any
other Revolving Lender; or (v) any other circumstance,
happening or event whatsoever, whether or not similar
to any of the foregoing.
2.7 Repayment of Loans; Scheduled Commitment Reductions. (a) The
Tranche A Term Loan of each Tranche A Lender shall mature in
9 installments, each of which shall be in an amount equal to
such Lender's Tranche A Term Percentage multiplied by the
amount set forth below opposite such installment:
<TABLE>
<CAPTION>
Installment Principal Amount
----------- ----------------
<S> <C>
September 30, 2000 $12,000,000
March 31, 2001 10,000,000
September 30, 2001 10,000,000
March 31, 2002 12,000,000
September 30, 2002 12,000,000
March 31, 2003 14,000,000
September 30, 2003 14,000,000
March 31, 2004 18,000,000
July 31, 2004 18,000,000
</TABLE>
(b) The Tranche B Term Loan of each Tranche B Lender shall mature in 12
installments, each of which shall be in an amount equal to such Lender's Tranche
B Term Percentage multiplied by the amount set forth below opposite such
installment:
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<PAGE> 40
<TABLE>
<CAPTION>
Installment Principal Amount
----------- ----------------
<S> <C>
September 30, 1999 $1,000,000
September 30, 2000 1,000,000
September 30, 2001 1,000,000
September 30, 2002 1,000,000
September 30, 2003 1,000,000
September 30, 2004 1,000,000
December 31, 2004 44,000,000
March 31, 2005 44,000,000
June 30, 2005 44,000,000
September 30, 2005 44,000,000
December 31, 2005 44,000,000
January 31, 2006 44,000,000
</TABLE>
(c) The Tranche C Term Loan of each Tranche C Lender shall mature in 13
installments, each of which shall be in an amount equal to such Lender's Tranche
C Term Percentage multiplied by the amount set forth below opposite such
installment:
<TABLE>
<CAPTION>
Installment Principal Amount
----------- ----------------
<S> <C>
September 30, 1999 $1,000,000
September 30, 2000 1,000,000
September 30, 2001 1,000,000
September 30, 2002 1,000,000
September 30, 2003 1,000,000
September 30, 2004 1,000,000
September 30, 2005 1,000,000
December 31, 2005 1,000,000
March 31, 2006 64,400,000
June 30, 2006 64,400,000
September 30, 2006 64,400,000
December 31, 2006 64,400,000
January 31, 2007 64,400,000
</TABLE>
(d) The LC/MD Loans of each LC/MD Lender shall mature in equal
quarterly installments (determined on the basis of the aggregate outstanding
principal amount of such LC/MD Loans on the LC/MD Scheduled Termination Date),
which installments shall be payable on the last day of each calendar quarter
ending after the LC/MD Scheduled Termination Date (provided that the last such
installment shall be payable on July 31, 2004). Notwithstanding anything to the
contrary in this Agreement, in the event that, on any date (an "Excess Date"),
the aggregate principal amount of the LC/MD Reimbursement Loans exceeds (such
excess, "Excess LC/MD Reimbursement Loans") the Total LC/MD Term Commitments in
effect immediately prior to the
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<PAGE> 41
creation of such LC/MD Reimbursement Loans, such Excess LC/MD Reimbursement
Loans shall be due and payable on the date that is 30 days after such Excess
Date.
(e) The Borrower shall repay all outstanding Revolving Loans and
Swingline Loans on the Revolving Scheduled Commitment Termination Date.
2.8 Commitment Fees, etc. The Borrower agrees to pay to the
Administrative Agent for the account of each Revolving Lender
a commitment fee for the period from and including the
Closing Date to the last day of the Revolving Commitment
Period, computed at a per annum rate equal to the Commitment
Fee Rate on the average daily amount of the Available
Revolving Commitment of such Lender during the period for
which payment is made, payable quarterly in arrears on the
last day of each March, June, September and December and on
the Revolving Scheduled Commitment Termination Date,
commencing on the first of such dates to occur after the date
hereof.
(b) The Borrower agrees to pay to the Administrative Agent
for the account of each LC/MD Lender a commitment fee
for the period from and including the NJ LC Termination
Date to the last day of the LC/MD Term Commitment
Period, computed at the Commitment Fee Rate on the
average daily amount of the LC/MD Term Commitment of
such Lender during the period for which payment is
made, payable quarterly in arrears on the last day of
each March, June, September and December and on the
LC/MD Scheduled Termination Date, commencing on the
first of such dates to occur after the NJ LC
Termination Date.
(c) The Borrower agrees to pay to the Administrative Agent
the fees in the amounts and on the dates previously
agreed to in writing by the Borrower and the
Administrative Agent.
2.9 Termination or Reduction of Commitments. The Borrower shall
have the right, upon not less than three Business Days'
notice to the Administrative Agent, to terminate the
Revolving Commitments or the LC/MD Commitments or, from time
to time, to reduce the amount of the Revolving Commitments or
the LC/MD Commitments; provided that (i) no such termination
or reduction of Revolving Commitments shall be permitted if,
after giving effect thereto and to any prepayments of the
Revolving Loans and Swingline Loans made on the effective
date thereof, the Total Revolving Extensions of
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<PAGE> 42
Credit would exceed the Total Revolving Commitments and (ii)
no such termination or reduction of LC/MD Commitments shall
be permitted if, after giving effect thereto, the LC/MD LC
Obligations would exceed the Total LC/MD Commitments. Any
such partial reduction shall be in an amount equal to
$1,000,000, or a whole multiple thereof, and shall reduce
permanently the relevant Commitments then in effect.
2.10 Optional Prepayments. Subject to Section 2.17, the Borrower
may at any time and from time to time prepay the Loans, in
whole or in part, without premium or penalty, upon
irrevocable notice delivered to the Administrative Agent at
least three Business Days prior thereto in the case of
Eurodollar Loans and at least one Business Day prior thereto
in the case of ABR Loans, which notice shall specify the date
and amount of prepayment and whether the prepayment is of
Eurodollar Loans or ABR Loans; provided, that if a Eurodollar
Loan is prepaid on any day other than the last day of the
Interest Period applicable thereto, the Borrower shall also
pay any amounts owing pursuant to Section 2.20. Upon receipt
of any such notice the Administrative Agent shall promptly
notify each relevant Lender thereof. If any such notice is
given, the amount specified in such notice shall be due and
payable on the date specified therein, together with (except
in the case of Revolving Loans that are ABR Loans and
Swingline Loans) accrued interest to such date on the amount
prepaid. Partial prepayments of Term Loans and Revolving
Loans shall be in an aggregate principal amount of $1,000,000
or a whole multiple thereof. Partial prepayments of Swingline
Loans shall be in an aggregate principal amount of $100,000
or a whole multiple thereof.
2.11 Mandatory Prepayments. Unless the Required Prepayment Lenders
shall otherwise agree, if any Capital Stock (other than any
Capital Stock issued by the Borrower to finance any Permitted
Acquisition or to refinance the Subordinated Bridge Facility)
shall be issued by the Borrower or any of its Subsidiaries,
an amount equal to 75% (the "Equity Percentage") of the Net
Cash Proceeds thereof shall be applied within two Business
Days following the date of such issuance toward the
prepayment of the Term Loans; provided that the Equity
Percentage shall instead equal 50% if the Consolidated
Leverage Ratio, determined as at the end of the most recent
period of four consecutive fiscal quarters ended prior to the
required date of prepayment for which the relevant financial
information is available
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<PAGE> 43
on a pro forma basis as if such issuance had occurred on the
first day of such period, is less than 3.50 to 1.0.
(b) (i) Unless the Required Prepayment Lenders shall
otherwise agree, if any Indebtedness shall be incurred
by the Borrower or any of its Subsidiaries (excluding
any Indebtedness incurred in accordance with Section
7.2 as in effect on the date of this Agreement), an
amount equal to 100% of the Net Cash Proceeds thereof
shall be applied on the date of such incurrence toward
the prepayment of the Term Loans.
(ii) Notwithstanding Section 2.11(b)(i) and anything to the contrary in
Section 2.17, if the Borrower shall issue an aggregate principal amount of
Senior Subordinated Notes in excess of $175,000,000 (any such excess amount, the
"Excess Senior Subordinated Note Amount"), (A) an amount equal to 50% of the Net
Cash Proceeds of such excess issuance shall be applied on the date of such
issuance toward the prepayment of the Tranche A Term Loans in reduction of the
then remaining installments thereof pro rata based upon the then remaining
principal amount thereof and (B) an amount equal to 50% of the Net Cash Proceeds
of such excess issuance shall be applied on the date of such issuance toward the
permanent reduction of the Revolving Commitments. Any such reduction of the
Revolving Commitments shall be accompanied by prepayment of the Revolving Loans
and/or Swingline Loans to the extent, if any, that the Total Revolving
Extensions of Credit exceed the amount of the Total Revolving Commitments as so
reduced, provided that if the aggregate principal amount of Revolving Loans and
Swingline Loans then outstanding is less than the amount of such excess (because
Revolving LC Obligations constitute a portion thereof), the Borrower shall, to
the extent of the balance of such excess, replace outstanding Revolving Letters
of Credit and/or deposit an amount in cash in a cash collateral account
established with the Administrative Agent for the benefit of the Lenders on
terms and conditions satisfactory to the Administrative Agent.
(c) Unless the Required Prepayment Lenders shall otherwise
agree, if on any date the Borrower or any of its
Subsidiaries shall receive Net Cash Proceeds from any
Asset Sale or Recovery Event then, unless a
Reinvestment Notice shall be delivered in respect
thereof, an amount equal to 75% of such Net Cash
Proceeds shall be applied within two Business Days
following such date toward the prepayment of the Term
Loans; provided, that, notwithstanding the foregoing,
(i) the aggregate Net Cash Proceeds of Asset Sales that
may be excluded from the foregoing requirement pursuant
to a Reinvestment Notice shall not exceed (x) during
the period from the Closing Date to the second
anniversary of the Closing Date, $45,000,000, and (y)
thereafter, $15,000,000 in any fiscal year of the
Borrower (or, in the case of the period
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commencing on the second anniversary of the Closing
Date, the remaining portion of the fiscal year in which
such second anniversary falls), and (ii) on each
Reinvestment Prepayment Date, an amount equal to the
Reinvestment Prepayment Amount with respect to the
relevant Reinvestment Event shall be applied toward the
prepayment of the Term Loans; provided, further, that,
notwithstanding the foregoing, the Borrower and its
Subsidiaries shall not be required to prepay the Term
Loans in accordance with this paragraph (c) except to
the extent that the Net Cash Proceeds from all Asset
Sales which have not been so applied equals or exceeds
$5,000,000 in the aggregate.
(d) Unless the Required Prepayment Lenders shall otherwise
agree, if, for any fiscal year of the Borrower
commencing with the fiscal year ending December 31,
1999, there shall be Excess Cash Flow, the Borrower
shall, on the relevant Excess Cash Flow Application
Date, apply 75% (or, if the Consolidated Leverage Ratio
as of the last day of such fiscal year is not greater
than 3.50 to 1.0, 50%) of such Excess Cash Flow toward
the prepayment of the Term Loans. Each such prepayment
and commitment reduction shall be made on a date (an
"Excess Cash Flow Application Date") no later than five
Business Days after the earlier of (i) the date on
which the financial statements of the Borrower referred
to in Section 6.1(a), for the fiscal year with respect
to which such prepayment is made, are required to be
delivered to the Lenders and (ii) the date such
financial statements are actually delivered.
(e) The application of any prepayment under a Facility
pursuant to Section 2.11 shall be made, first, to ABR
Loans and, second, to Eurodollar Loans. Each prepayment
of the Loans under Section 2.11 (except in the case of
Revolving Loans that are ABR Loans and Swingline Loans)
shall be accompanied by accrued interest to the date of
such prepayment on the amount prepaid.
2.12 Conversion and Continuation Options. The Borrower may elect
from time to time to convert Eurodollar Loans to ABR Loans by
giving the Administrative Agent at least two Business Days'
prior irrevocable notice of such election, provided that any
such conversion of Eurodollar Loans may only be made on the
last day of an Interest
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Period with respect thereto. The Borrower may elect from time
to time to convert ABR Loans to Eurodollar Loans by giving
the Administrative Agent at least three Business Days' prior
irrevocable notice of such election (which notice shall
specify the length of the initial Interest Period therefor),
provided that no ABR Loan under a particular Facility may be
converted into a Eurodollar Loan when any Event of Default
has occurred and is continuing and the Administrative Agent
or the Majority Facility Lenders in respect of such Facility
have determined in its or their sole discretion not to permit
such conversions. Upon receipt of any such notice the
Administrative Agent shall promptly notify each relevant
Lender thereof.
(b) Any Eurodollar Loan may be continued as such upon the
expiration of the then current Interest Period with
respect thereto by the Borrower giving irrevocable
notice to the Administrative Agent, in accordance with
the applicable provisions of the term "Interest Period"
set forth in Section 1.1, of the length of the next
Interest Period to be applicable to such Loans,
provided that no Eurodollar Loan under a particular
Facility may be continued as such when any Event of
Default has occurred and is continuing and the
Administrative Agent has or the Majority Facility
Lenders in respect of such Facility have determined in
its or their sole discretion not to permit such
continuations, and provided, further, that if the
Borrower shall fail to give any required notice as
described above in this paragraph or if such
continuation is not permitted pursuant to the preceding
proviso such Loans shall be automatically converted to
ABR Loans on the last day of such then expiring
Interest Period. Upon receipt of any such notice the
Administrative Agent shall promptly notify each
relevant Lender thereof.
2.13 Limitations on Eurodollar Tranches. Notwithstanding anything
to the contrary in this Agreement, all borrowings,
conversions and continuations of Eurodollar Loans hereunder
and all selections of Interest Periods hereunder shall be in
such amounts and be made pursuant to such elections so that,
(a) after giving effect thereto, the aggregate principal
amount of the Eurodollar Loans comprising each Eurodollar
Tranche shall be equal to $5,000,000 or a whole multiple of
$1,000,000 in excess thereof and (b) no more than 15
Eurodollar Tranches shall be outstanding at any one time.
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2.14 Interest Rates and Payment Dates. Each Eurodollar Loan shall
bear interest for each day during each Interest Period with
respect thereto at a rate per annum equal to the Eurodollar
Rate determined for such day plus the Applicable Margin.
(b) Each ABR Loan shall bear interest at a rate per annum
equal to the ABR plus the Applicable Margin.
(c) (i) If all or a portion of the principal amount of any
Loan or Reimbursement Obligation shall not be paid when
due (whether at the stated maturity, by acceleration or
otherwise), all outstanding Loans and Reimbursement
Obligations (whether or not overdue) shall bear
interest at a rate per annum equal to (x) in the case
of the Loans, the rate that would otherwise be
applicable thereto pursuant to the foregoing provisions
of this Section plus 2% or (y) in the case of
Reimbursement Obligations, the rate applicable to ABR
Loans under the Revolving Facility or the LC/MD
Facility, as the case may be, plus 2%, and (ii) if all
or a portion of any interest payable on any Loan or
Reimbursement Obligation or any commitment fee or other
amount payable hereunder shall not be paid when due
(whether at the stated maturity, by acceleration or
otherwise), such overdue amount shall bear interest at
a rate per annum equal to the rate then applicable to
ABR Loans under the relevant Facility plus 2% (or, in
the case of any such other amounts that do not relate
to a particular Facility, the rate then applicable to
ABR Loans under the Revolving Facility plus 2%), in
each case, with respect to clauses (i) and (ii) above,
from the date of such non-payment until such amount is
paid in full (as well after as before judgment).
(d) Interest shall be payable in arrears on each Interest
Payment Date, provided that interest accruing pursuant
to paragraph (c) of this Section shall be payable from
time to time on demand.
2.15 Computation of Interest and Fees. Interest and fees payable
pursuant hereto shall be calculated on the basis of a 360-day
year for the actual days elapsed, except that, with respect
to ABR Loans the rate of interest on which is calculated on
the basis of the Prime Rate, the interest thereon shall be
calculated on the basis of a 365- (or 366-, as the case may
be) day year for the actual days elapsed. The Administrative
Agent shall as soon as practicable notify the Borrower
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and the relevant Lenders of each determination of a
Eurodollar Rate. Any change in the interest rate on a
Loan resulting from a change in the ABR or the
Eurocurrency Reserve Requirements shall become
effective as of the opening of business on the day on
which such change becomes effective. The Administrative
Agent shall as soon as practicable notify the Borrower
and the relevant Lenders of the effective date and the
amount of each such change in interest rate.
(b) Each determination of an interest rate by the
Administrative Agent pursuant to any provision of this
Agreement shall be conclusive and binding on the
Borrower and the Lenders in the absence of manifest
error. The Administrative Agent shall, at the request
of the Borrower, deliver to the Borrower a statement
showing the quotations used by the Administrative Agent
in determining any interest rate pursuant to Section
2.15(a).
2.16 Inability to Determine Interest Rate. If prior to the first
day of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the
Borrower) that, by reason of circumstances affecting
the relevant market, adequate and reasonable means do
not exist for ascertaining the Eurodollar Rate for such
Interest Period, or
(b) the Administrative Agent shall have received notice
from the Majority Facility Lenders in respect of the
relevant Facility that the Eurodollar Rate determined
or to be determined for such Interest Period will not
adequately and fairly reflect the cost to such Lenders
(as conclusively certified by such Lenders) of making
or maintaining their affected Loans during such
Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to
the Borrower and the relevant Lenders as soon as practicable thereafter. If
such notice is given (x) any Eurodollar Loans under the relevant Facility
requested to be made on the first day of such Interest Period shall be made as
ABR Loans, (y) any Loans under the relevant Facility that were to have been
converted on the first day of such Interest Period to Eurodollar Loans shall be
continued as ABR Loans and (z) any outstanding Eurodollar Loans under the
relevant Facility shall be converted, on the last day of the then-current
Interest Period, to ABR Loans. Until such notice has been withdrawn by the
Administrative Agent, no further Eurodollar Loans under the relevant Facility
shall be made or
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continued as such, nor shall the Borrower have the right to convert Loans under
the relevant Facility to Eurodollar Loans.
2.17 Pro Rata Treatment and Payments. Each borrowing by the
Borrower from the Lenders hereunder, each payment by the
Borrower on account of any commitment fee and any reduction
of the Commitments of the Lenders shall be made pro rata
according to the respective Tranche A Term Percentages,
Tranche B Term Percentages, Tranche C Term Percentages,
Revolving Percentages or LC/MD Percentages, as the case may
be, of the relevant Lenders.
(b) Except for payments made pursuant to Section 2.7, each
payment (including each prepayment) by the Borrower on
account of principal of and interest on the Term Loans
shall be made pro rata according to the respective
outstanding principal amounts of the Term Loans then
held by the Term Lenders (except as otherwise provided
in Section 2.17(c)). The amount of each principal
prepayment of the Term Loans shall be applied to reduce
the then remaining installments of the Tranche A Term
Loans, Tranche B Term Loans, Tranche C Term Loans or
LC/MD Loans, as the case may be, pro rata based upon
the then remaining principal amount thereof. Amounts
prepaid on account of the Term Loans may not be
reborrowed.
(c) Notwithstanding anything to the contrary in this
Agreement, with respect to the amount of any optional
or mandatory prepayment that would otherwise be
allocated to Tranche B Term Loans or Tranche C Term
Loans (such amounts, the "Tranche B Prepayment Amount"
and the "Tranche C Prepayment Amount", respectively),
at any time when Tranche A Term Loans and/or LC/MD
Loans remain outstanding, the Borrower will, in lieu of
applying such amount to the prepayment of Tranche B
Term Loans and Tranche C Term Loans, on the date
specified for such prepayment, give the Administrative
Agent telephonic notice (promptly confirmed in writing)
requesting that the Administrative Agent prepare and
provide to each Tranche B Lender and Tranche C Lender a
notice (each, a "Prepayment Option Notice") as
described below. As promptly as practicable after
receiving such notice from the Borrower, the
Administrative Agent will send to each Tranche B Lender
and Tranche C Lender a Prepayment Option Notice, which
shall
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be in the form of Exhibit H, and shall include an offer
by the Borrower to prepay, on the date (each a
"Prepayment Date") that is 10 Business Days after the
date of the Prepayment Option Notice, the relevant Term
Loans of such Lender by an amount equal to the portion
of the Prepayment Amount indicated in such Lender's
Prepayment Option Notice as being applicable to such
Lender's Tranche B Term Loans or Tranche C Term Loans,
as the case may be. On the Prepayment Date, (i) the
Borrower shall pay to the relevant Tranche B Lenders
and Tranche C Lenders the aggregate amount necessary to
prepay that portion of the outstanding relevant Term
Loans in respect of which such Lenders have accepted
prepayment as described above (such Lenders, the
"Accepting Lenders") and (ii) the Borrower shall pay to
the Tranche A Lenders and the LC/MD Lenders an amount
equal to the portion of the Tranche B Prepayment Amount
and the Tranche C Prepayment Amount not accepted by the
Accepting Lenders, and such amount shall be applied pro
rata to the prepayment of the then outstanding Tranche
A Term Loans and the LC/MD Loans.
(d) Each payment (including each prepayment) by the
Borrower on account of principal of and interest on the
Revolving Loans shall be made pro rata according to the
respective outstanding principal amounts of the
Revolving Loans then held by the Revolving Lenders.
(e) All payments (including prepayments) to be made by the
Borrower hereunder, whether on account of principal,
interest, fees or otherwise, shall be made without
setoff or counterclaim and shall be made prior to 12:00
Noon, New York City time, on the due date thereof to
the Administrative Agent, for the account of the
Lenders, at the Funding Office, in Dollars and in
immediately available funds. The Administrative Agent
shall distribute such payments to the Lenders promptly
upon receipt in like funds as received. If any payment
hereunder (other than payments on the Eurodollar Loans)
becomes due and payable on a day other than a Business
Day, such payment shall be extended to the next
succeeding Business Day. If any payment on a Eurodollar
Loan becomes due and payable on a day other than a
Business Day, the maturity thereof shall be extended to
the next succeeding Business Day unless the result of
such
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extension would be to extend such payment into another
calendar month, in which event such payment shall be
made on the immediately preceding Business Day. In the
case of any extension of any payment of principal
pursuant to the preceding two sentences, interest
thereon shall be payable at the then applicable rate
during such extension.
(f) Unless the Administrative Agent shall have been
notified in writing by any Lender prior to a borrowing
that such Lender will not make the amount that would
constitute its share of such borrowing available to the
Administrative Agent, the Administrative Agent may
assume that such Lender is making such amount available
to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make
available to the Borrower a corresponding amount. If
such amount is not made available to the Administrative
Agent by the required time on the Borrowing Date
therefor, such Lender shall pay to the Administrative
Agent, on demand, such amount with interest thereon at
a rate equal to the daily average Federal Funds
Effective Rate for the period until such Lender makes
such amount immediately available to the Administrative
Agent. A certificate of the Administrative Agent
submitted to any Lender with respect to any amounts
owing under this paragraph shall be conclusive in the
absence of manifest error. If such Lender's share of
such borrowing is not made available to the
Administrative Agent by such Lender within three
Business Days of such Borrowing Date, the
Administrative Agent shall also be entitled to recover
such amount with interest thereon at the rate per annum
applicable to ABR Loans under the relevant Facility, on
demand, from the Borrower.
(g) Unless the Administrative Agent shall have been
notified in writing by the Borrower prior to the date
of any payment being made hereunder that the Borrower
will not make such payment to the Administrative Agent,
the Administrative Agent may assume that the Borrower
is making such payment, and the Administrative Agent
may, but shall not be required to, in reliance upon
such assumption, make available to the Lenders their
respective pro rata shares of a corresponding amount.
If such payment is not made to the Administrative Agent
by the Borrower within three Business Days of such
required date, the Administrative Agent shall be
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entitled to recover, on demand, from each Lender to
which any amount which was made available pursuant to
the preceding sentence, such amount with interest
thereon at the rate per annum equal to the daily
average Federal Funds Effective Rate. Nothing herein
shall be deemed to limit the rights of the
Administrative Agent or any Lender against the
Borrower.
2.18 Requirements of Law. If the adoption of or any change in any
Requirement of Law or in the interpretation or application
thereof or compliance by any Lender with any request or
directive (whether or not having the force of law) from any
central bank or other Governmental Authority made subsequent
to the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever with
respect to this Agreement, any Letter of Credit, any Application or any
Eurodollar Loan made by it, or change the basis of taxation of payments to such
Lender in respect thereof (except for Non-Excluded Taxes covered by Section 2.19
and changes in the rate of tax on the overall net income of such Lender);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by, deposits
or other liabilities in or for the account of, advances, loans or other
extensions of credit by, or any other acquisition of funds by, any office of
such Lender that is not otherwise included in the determination of the
Eurodollar Rate hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount that such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit, or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, the Borrower shall promptly pay such Lender,
upon its demand, any additional amounts necessary to compensate such Lender for
such increased cost or reduced amount receivable. If any Lender becomes
entitled to claim any additional amounts pursuant to this paragraph, it shall
promptly notify (no more frequently than quarterly) the Borrower (with a copy
to the Administrative Agent) of the event by reason of which it has become so
entitled.
(b) If any Lender shall have determined that the adoption
of or any change in any Requirement of Law regarding
capital adequacy or in the interpretation or
application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or
directive regarding capital adequacy (whether or not
having the force of law) from any
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Governmental Authority made subsequent to the date
hereof shall have the effect of reducing the rate of
return on such Lender's or such corporation's capital
as a consequence of its obligations hereunder or under
or in respect of any Letter of Credit to a level below
that which such Lender or such corporation could have
achieved but for such adoption, change or compliance
(taking into consideration such Lender's or such
corporation's policies with respect to capital
adequacy) by an amount deemed by such Lender to be
material, then from time to time, after submission by
such Lender to the Borrower (with a copy to the
Administrative Agent) of a written request therefor
(which may be submitted no more frequently than
quarterly), the Borrower shall pay to such Lender such
additional amount or amounts as will compensate such
Lender for such reduction; provided that the Borrower
shall not be required to compensate a Lender pursuant
to this paragraph for any amounts incurred more than
six months prior to the date that such Lender notifies
the Borrower of such Lender's intention to claim
compensation therefor; and provided further that, if
the circumstances giving rise to such claim have a
retroactive effect, then such six-month period shall be
extended to include the period of such retroactive
effect.
(c) In determining any additional amounts payable pursuant
to this Section 2.18, each Lender will act reasonably
and in good faith and will use averaging and
attribution methods which are reasonable, provided that
such Lender's determination of compensation owing under
this Section 2.18 shall, absent manifest error, be
final and conclusive and binding on all the parties
hereto. Each Lender, upon determining that any
additional amounts will be payable pursuant to this
Section 2.18, shall give prompt written notice of such
determination to the Borrower, which notice shall show
the basis for calculation of such additional amounts.
The obligations of the Borrower pursuant to this
Section 2.18 shall survive the termination of this
Agreement and the payment of the Loans and all other
amounts payable hereunder.
2.19 Taxes. Subject to the last proviso of this paragraph (a), all
payments made by the Borrower under this Agreement shall be
made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or
other taxes, levies,
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imposts, duties, charges, fees, deductions or withholdings,
now or hereafter imposed, levied, collected, withheld or
assessed by any Governmental Authority, excluding net income
taxes and franchise taxes imposed on the Administrative Agent
or any Lender as a result of a present or former connection
between the Administrative Agent or such Lender and the
jurisdiction of the Governmental Authority imposing such tax
or any political subdivision or taxing authority thereof or
therein (other than any such connection arising solely from
the Administrative Agent or such Lender having executed,
delivered or performed its obligations or received a payment
under, or enforced, this Agreement or any other Loan
Document). If any such non-excluded taxes, levies, imposts,
duties, charges, fees, deductions or withholdings
("Non-Excluded Taxes") or Other Taxes are required to be
withheld from any amounts payable to the Administrative Agent
or any Lender hereunder, the amounts so payable to the
Administrative Agent or such Lender shall be increased to the
extent necessary to yield to the Administrative Agent or such
Lender (after payment of all Non-Excluded Taxes and Other
Taxes) interest or any such other amounts payable hereunder
at the rates or in the amounts specified in this Agreement,
provided, however, that the Borrower shall not be required to
increase any such amounts payable to any Lender with respect
to any Non-Excluded Taxes (i) that are attributable to such
Lender's failure to comply with the requirements of paragraph
(d) or (e) of this Section or (ii) that are United States
withholding taxes imposed on amounts payable to such Lender
at the time the Lender becomes a party to this Agreement,
except to the extent that such Lender's assignor (if any) was
entitled, at the time of assignment, to receive additional
amounts from the Borrower with respect to such Non-Excluded
Taxes pursuant to this paragraph.
(b) In addition, the Borrower shall pay any Other Taxes to
the relevant Governmental Authority in accordance with
applicable law.
(c) Whenever any Non-Excluded Taxes or Other Taxes are
payable by the Borrower, as promptly as possible
thereafter the Borrower shall send to the
Administrative Agent for its own account or for the
account of the relevant Lender, as the case may be, a
certified copy of an original official receipt received
by the Borrower showing payment thereof. If the
Borrower fails to pay any Non-Excluded Taxes or Other
Taxes when due to the appropriate taxing authority or
fails to remit to the Administrative Agent the required
receipts or
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other required documentary evidence, the Borrower shall
indemnify the Administrative Agent and the Lenders for
any incremental taxes, interest or penalties that may
become payable by the Administrative Agent or any
Lender as a result of any such failure.
(d) Each Lender (or Transferee) that is not a citizen or
resident of the United States of America, a
corporation, partnership or other entity created or
organized in or under the laws of the United States of
America (or any state thereof), or any estate or trust
that is subject to federal income taxation regardless
of the source of its income (a "Non-U.S. Lender") shall
deliver to the Borrower and the Administrative Agent
(or, in the case of a Participant, to the Lender from
which the related participation shall have been
purchased) two copies of either U.S. Internal Revenue
Service Form 1001 or Form 4224, or, in the case of a
Non-U.S. Lender claiming exemption from U.S. federal
withholding tax under Section 871(h) or 881(c) of the
Code with respect to payments of "portfolio interest",
a statement substantially in the form of Exhibit I and
a Form W-8, or any subsequent versions thereof or
successors thereto, properly completed and duly
executed by such Non- U.S. Lender claiming complete
exemption from, or a reduced rate of, U.S. federal
withholding tax on all payments by the Borrower under
this Agreement and the other Loan Documents. Such forms
shall be delivered by each Non-U.S. Lender on or before
the date it becomes a party to this Agreement (or, in
the case of any Participant, on or before the date such
Participant purchases the related participation). In
addition, each Non-U.S. Lender shall deliver such forms
promptly upon the request of the Borrower as a result
of the obsolescence, inaccuracy or invalidity of any
form previously delivered by such Non-U.S. Lender. Each
Non-U.S. Lender shall promptly notify the Borrower at
any time it determines that it is no longer qualified
to provide or capable of providing any previously
delivered certificate to the Borrower (or any other
form of certification adopted by the U.S. taxing
authorities for such purpose). Notwithstanding any
other provision of this paragraph, a Non-U.S. Lender
shall not be required to deliver any form pursuant to
this paragraph that such Non-U.S. Lender is not legally
able to deliver.
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(e) A Lender that is entitled to an exemption from or
reduction of non-U.S. withholding tax under the law of
the jurisdiction in which the Borrower is located, or
any treaty to which such jurisdiction is a party, with
respect to payments under this Agreement shall deliver
to the Borrower (with a copy to the Administrative
Agent), at the time or times prescribed by applicable
law or reasonably requested by the Borrower, such
properly completed and executed documentation
prescribed by applicable law as will permit such
payments to be made without withholding or at a reduced
rate, provided that such Lender is legally entitled to
complete, execute and deliver such documentation and in
such Lender's judgment such completion, execution or
submission would not materially prejudice the legal
position of such Lender.
(f) If any Lender receives a refund of any Non-Excluded
Taxes or Other Taxes paid or indemnified by the
Borrower under this Section 2.19, such Lender shall pay
the amount of such refund to the Borrower within 15
days of the date it received such refund.
(g) The agreements in this Section shall survive the
termination of this Agreement and the payment of the
Loans and all other amounts payable hereunder.
2.20 Indemnity. The Borrower agrees to indemnify each Lender and
to hold each Lender harmless from any loss or expense that
such Lender may sustain or incur as a consequence of (a)
default by the Borrower in making a borrowing of, conversion
into or continuation of Eurodollar Loans after the Borrower
has given a notice requesting the same in accordance with the
provisions of this Agreement, (b) default by the Borrower in
making any prepayment of or conversion from Eurodollar Loans
after the Borrower has given a notice thereof in accordance
with the provisions of this Agreement or (c) the making of a
prepayment of Eurodollar Loans on a day that is not the last
day of an Interest Period with respect thereto. Such
indemnification may include an amount equal to the excess, if
any, of (i) the amount of interest that would have accrued on
the amount so prepaid, or not so borrowed, converted or
continued, for the period from the date of such prepayment or
of such failure to borrow, convert or continue to the last
day of such Interest Period (or, in the case of a failure to
borrow, convert or continue, the Interest Period that would
have commenced on the date of such failure) in each case at
the applicable
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rate of interest for such Loans provided for herein
(excluding, however, the Applicable Margin included therein,
if any) over (ii) the amount of interest (as reasonably
determined by such Lender) that would have accrued to such
Lender on such amount by placing such amount on deposit for a
comparable period with leading banks in the interbank
eurodollar market. A certificate as to any amounts payable
pursuant to this Section submitted to the Borrower by any
Lender shall be conclusive in the absence of manifest error.
This covenant shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable
hereunder.
2.21 Change of Lending Office. Each Lender agrees that, upon the
occurrence of any event giving rise to the operation of
Section 2.18 or 2.19(a) with respect to such Lender, it will
use reasonable efforts (subject to overall policy
considerations of such Lender) to designate another lending
office for any Loans affected by such event with the object
of avoiding the consequences of such event; provided, that
such designation is made on terms that, in the sole judgment
of such Lender, cause such Lender and its lending office(s)
to suffer no economic, legal or regulatory disadvantage, and
provided, further, that nothing in this Section shall affect
or postpone any of the obligations of any Borrower or the
rights of any Lender pursuant to Section 2.18 or 2.19(a).
2.22 Replacement of Lenders. The Borrower shall be permitted to
replace any Lender that (a) requests reimbursement for
amounts owing pursuant to Section 2.18 or 2.19(a) or (b)
defaults in its obligation to make Loans hereunder, with a
replacement financial institution; provided that (i) such
replacement does not conflict with any Requirement of Law,
(ii) no Event of Default shall have occurred and be
continuing at the time of such replacement, (iii) prior to
any such replacement, such Lender shall have taken no action
under Section 2.21 so as to eliminate the continued need for
payment of amounts owing pursuant to Section 2.18 or 2.19(a),
(iv) the replacement financial institution shall purchase, at
par, all Loans and other amounts owing to such replaced
Lender on or prior to the date of replacement, (v) the
Borrower shall be liable to such replaced Lender under
Section 2.20 if any Eurodollar Loan owing to such replaced
Lender shall be purchased other than on the last day of the
Interest Period relating thereto, (vi) the replacement
financial institution, if not already a Lender, shall be
reasonably satisfactory to the Administrative Agent, (vii)
the replaced Lender shall be obligated to make such
replacement in accordance with the provisions of
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Section 10.6 (provided that the Borrower shall be obligated
to pay the registration and processing fee referred to
therein), (viii) until such time as such replacement shall be
consummated, the Borrower shall pay all additional amounts
(if any) required pursuant to Section 2.18 or 2.19(a), as the
case may be, and (ix) any such replacement shall not be
deemed to be a waiver of any rights that the Borrower, the
Administrative Agent or any other Lender shall have against
the replaced Lender.
SECTION 3. LETTERS OF CREDIT
3.1 LC Commitment. Subject to the terms and conditions hereof,
the Issuing Lender, in reliance on the agreements of the LC
Participants, as set forth in Section 3.4(a), agrees to issue
(i) on the Closing Date, a letter of credit (the "NJ Letter
of Credit") for the benefit of the Superior Court of New
Jersey supporting a potential liability with respect to a
judgment rendered in the case of Robinson v. Thorn Americas,
Inc. in the State of New Jersey and (ii) on any Business Day
during the Revolving Commitment Period, other letters of
credit ("Revolving Letters of Credit"), in each case for the
account of the Borrower (including the account of the
Borrower acting on behalf of any of its Subsidiaries) and in
such form as may be approved from time to time by the Issuing
Lender; provided that the Issuing Lender shall have no
obligation to issue any Revolving Letter of Credit if, after
giving effect to such issuance, (i) the Revolving LC
Obligations would exceed the Revolving LC Commitment or (ii)
the aggregate amount of the Available Revolving Commitments
would be less than zero. Each Letter of Credit shall (i) be
denominated in Dollars and (ii) expire no later than the
earlier of (x) the first anniversary of its date of issuance
and (y) the date that is five Business Days prior to the
Revolving Scheduled Commitment Termination Date or, in the
case of the NJ Letter of Credit, March 30, 2004, provided
that any Letter of Credit with a one-year term may provide
for the renewal thereof for additional one-year periods
(which shall in no event extend beyond the date referred to
in clause (y) above).
(b) Each Letter of Credit shall be subject to the Uniform
Customs and, to the extent not inconsistent therewith,
the laws of the State of New York.
(c) The Issuing Lender shall not at any time be obligated
to issue any Letter of Credit hereunder if such
issuance would conflict with, or cause the Issuing
Lender or any LC
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Participant to exceed any limits imposed by, any
applicable Requirement of Law.
3.2 Procedure for Issuance of Letter of Credit. The Borrower may
from time to time request that the Issuing Lender issue a
Letter of Credit by delivering to the Issuing Lender at its
address for notices specified herein an Application therefor,
completed to the satisfaction of the Issuing Lender, and such
other certificates, documents and other papers and
information as the Issuing Lender may request. Upon receipt
of any Application, the Issuing Lender will process such
Application and the certificates, documents and other papers
and information delivered to it in connection therewith in
accordance with its customary procedures and shall promptly
issue the Letter of Credit requested thereby (but in no event
shall the Issuing Lender be required to issue any Letter of
Credit earlier than three Business Days after its receipt of
the Application therefor and all such other certificates,
documents and other papers and information relating thereto)
by issuing the original of such Letter of Credit to the
beneficiary thereof or as otherwise may be agreed to by the
Issuing Lender and the Borrower. The Issuing Lender shall
furnish a copy of such Letter of Credit to the Borrower
promptly following the issuance thereof. The Issuing Lender
shall promptly furnish to the Administrative Agent, which
shall in turn promptly furnish to the Lenders, notice of the
issuance of each Letter of Credit (including the amount
thereof).
3.3 Fees and Other Charges. The Borrower will pay a fee on all
outstanding Letters of Credit at a per annum rate equal to
the Applicable Margin then in effect with respect to
Eurodollar Loans under the Revolving Facility or, in the case
of the NJ Letter of Credit, the LC/MD Facility, shared
ratably among the Lenders under the relevant Facility and
payable quarterly in arrears on each LC Fee Payment Date
after the issuance date. In addition, the Borrower shall pay
to the Issuing Lender for its own account a fronting fee of
0.25% per annum on the undrawn and unexpired amount of each
Letter of Credit, payable quarterly in arrears on each LC Fee
Payment Date after the Issuance Date.
(b) In addition to the foregoing fees, the Borrower shall
pay or reimburse the Issuing Lender for such normal and
customary costs and expenses as are incurred or charged
by the Issuing Lender in issuing, negotiating,
effecting payment under, amending or otherwise
administering any Letter of Credit.
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3.4 LC Participations. The Issuing Lender irrevocably agrees to
grant and hereby grants to each LC Participant, and, to
induce the Issuing Lender to issue Letters of Credit
hereunder, each LC Participant irrevocably agrees to accept
and purchase and hereby accepts and purchases from the
Issuing Lender, on the terms and conditions hereinafter
stated, for such LC Participant's own account and risk an
undivided interest equal to such LC Participant's Revolving
Percentage or LC/MD Percentage, as the case may be, in the
Issuing Lender's obligations and rights under each Letter of
Credit issued hereunder and the amount of each draft paid by
the Issuing Lender thereunder. Each LC Participant
unconditionally and irrevocably agrees with the Issuing
Lender that, if a draft is paid under any Letter of Credit
for which the Issuing Lender is not reimbursed in full by the
Borrower in accordance with the terms of this Agreement, such
LC Participant shall pay to the Issuing Lender upon demand at
the Issuing Lender's address for notices specified herein an
amount equal to such LC Participant's Revolving Percentage or
LC/MD Percentage, as the case may be, of the amount of such
draft, or any part thereof, that is not so reimbursed (which
payments shall constitute LC/MD Reimbursement Loans to the
extent contemplated by Section 3.5).
(b) If any amount required to be paid by any LC Participant
to the Issuing Lender pursuant to Section 3.4(a) in
respect of any unreimbursed portion of any payment made
by the Issuing Lender under any Letter of Credit is
paid to the Issuing Lender within three Business Days
after the date such payment is due, such LC Participant
shall pay to the Issuing Lender on demand an amount
equal to the product of such amount, times the daily
average Federal Funds Effective Rate during the period
from and including the date such payment is required to
the date on which such payment is immediately available
to the Issuing Lender, times a fraction the numerator
of which is the number of days that elapse during such
period and the denominator of which is 360. If any such
amount required to be paid by any LC Participant
pursuant to Section 3.4(a) is not made available to the
Issuing Lender by such LC Participant within three
Business Days after the date such payment is due, the
Issuing Lender shall be entitled to recover from such
LC Participant, on demand, such amount with interest
thereon calculated from such due date at the rate per
annum applicable to ABR Loans under the Revolving
Facility or the LC/MD Facility, as the case may be. A
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certificate of the Issuing Lender submitted to any LC
Participant with respect to any amounts owing under
this Section shall be conclusive in the absence of
manifest error.
(c) Whenever, at any time after the Issuing Lender has made
payment under any Letter of Credit and has received
from any LC Participant its pro rata share of such
payment in accordance with Section 3.4(a), the Issuing
Lender receives any payment related to such Letter of
Credit (whether directly from the Borrower or
otherwise, including proceeds of collateral applied
thereto by the Issuing Lender), or any payment of
interest on account thereof, the Issuing Lender will
distribute to such LC Participant its pro rata share
thereof; provided, however, that in the event that any
such payment received by the Issuing Lender shall be
required to be returned by the Issuing Lender, such LC
Participant shall return to the Issuing Lender the
portion thereof previously distributed by the Issuing
Lender to it.
(d) Each LC Participant's obligation to purchase
participating interests pursuant to Section 3.4(a)
(including participating interests that constitute
LC/MD Reimbursement Loans) shall be absolute and
unconditional and shall not be affected by any
circumstance, including (i) any setoff, counterclaim,
recoupment, defense or other right that such LC
Participant or the Borrower may have against the
Issuing Lender, the Borrower or any other Person for
any reason whatsoever; (ii) the occurrence or
continuance of a Default or an Event of Default or the
failure to satisfy any of the other conditions
specified in Section 5; (iii) any adverse change in the
condition (financial or otherwise) of the Borrower;
(iv) any breach of this Agreement or any other Loan
Document by the Borrower, any other Loan Party or any
other Lender; or (v) any other circumstance, happening
or event whatsoever, whether or not similar to any of
the foregoing.
3.5 Reimbursement Obligation of the Borrower. The Borrower agrees
to reimburse the Issuing Lender in accordance with the
immediately following sentence upon notification of the
Borrower of the date and amount of a draft presented under
any Revolving Letter of Credit and paid by the Issuing Lender
for the amount of (a) such draft so paid and (b) any taxes,
fees, charges or other costs or expenses incurred by the
Issuing Lender in connection with such payment. If the
Borrower
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is notified as provided in the immediately preceding sentence
by 2:00 P.M., New York City time, on any day, then the
Borrower shall so reimburse the Issuing Lender by 12:00 Noon,
New York City time, on the next succeeding Business Day, and,
if so notified after 2:00 P.M., New York City time, on any
day, the Borrower shall so reimburse the Issuing Lender by
12:00 Noon, New York City time, on the second succeeding
Business Day. Each such payment shall be made to the Issuing
Lender at its address for notices specified herein in lawful
money of the United States and in immediately available
funds. Interest shall be payable on any and all amounts
remaining unpaid by the Borrower under this Section from the
date such amounts become payable (whether at stated maturity,
by acceleration or otherwise) until payment in full at the
rate set forth in (i) until the second Business Day following
the date of payment of the applicable drawing, Section
2.14(b) and (ii) thereafter, Section 2.14(c) (but only, in
the case of the NJ Letter of Credit, to the extent such
payment of such drawing has not been refunded by the LC
Participants as contemplated in the next succeeding
sentence). Notwithstanding anything to the contrary herein,
in the case of any payment of any drawing under the NJ Letter
of Credit, the Issuing Lender shall notify the relevant LC
Participants that such payment of such drawing is to be
refunded by such LC Participants through the purchase of
participating interests pursuant to Section 3.4 that will
constitute LC/MD Reimbursement Loans, with the funding date
thereof to be the second Business Day after the date of
payment of such drawing. Any such LC/MD Reimbursement Loans
shall initially be ABR Loans and may from time to time
thereafter be Eurodollar Loans or ABR Loans, as contemplated
by Section 2.1. In the event that, for any reason, any
portion of the LC/MD Reimbursement Loans required to be
funded by the relevant LC Participants as provided above are
not so funded, the Borrower shall be obligated to reimburse
the Issuing Lender for such unfunded amounts no later than
the date that is three Business Days after the date such
funding by the LC Participants was otherwise required to be
made.
3.6 Obligations Absolute. The Borrower's obligations under this
Section 3 shall be absolute and unconditional under any and
all circumstances and irrespective of any setoff,
counterclaim or defense to payment that the Borrower may have
or have had against the Issuing Lender, any beneficiary of a
Letter of Credit or any other Person. The Borrower also
agrees with the Issuing Lender that the Issuing Lender shall
not be responsible for, and the Borrower's Reimbursement
Obligations under Section 3.5 shall not be affected
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by, among other things, the validity or genuineness of
documents or of any endorsements thereon, even though such
documents shall in fact prove to be invalid, fraudulent or
forged, or any dispute between or among the Borrower and any
beneficiary of any Letter of Credit or any other party to
which such Letter of Credit may be transferred or any claims
whatsoever of the Borrower against any beneficiary of such
Letter of Credit or any such transferee. The Issuing Lender
shall not be liable for any error, omission, interruption or
delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of
Credit, except for errors or omissions constituting gross
negligence or willful misconduct of the Issuing Lender. The
Borrower agrees that any action taken or omitted by the
Issuing Lender under or in connection with any Letter of
Credit or the related drafts or documents, if done in the
absence of gross negligence or willful misconduct and in
accordance with the standards of care specified in the
Uniform Customs and, to the extent not inconsistent
therewith, the Uniform Commercial Code of the State of New
York, shall be binding on the Borrower and shall not result
in any liability of the Issuing Lender to the Borrower.
3.7 Letter of Credit Payments. If any draft shall be presented
for payment under any Letter of Credit, the Issuing Lender
shall promptly notify the Borrower of the date and amount
thereof. The responsibility of the Issuing Lender to the
Borrower in connection with any draft presented for payment
under any Letter of Credit shall, in addition to any payment
obligation expressly provided for in such Letter of Credit,
be limited to determining that the documents (including each
draft) delivered under such Letter of Credit in connection
with such presentment are substantially in conformity with
such Letter of Credit.
3.8 Applications. To the extent that any provision of any
Application related to any Letter of Credit is inconsistent
with the provisions of this Section 3, the provisions of this
Section 3 shall apply.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this
Agreement and to make the Loans and issue or participate in the Letters of
Credit, the Borrower hereby represents and warrants to the Administrative Agent
and each Lender that:
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4.1 Financial Condition. The unaudited pro forma consolidated
balance sheet and statement of operations of the Borrower and
its consolidated Subsidiaries as at, or for the period of
four consecutive fiscal quarters ended, March 31, 1998 (the
"Pro Forma Financial Statements"), copies of which have
heretofore been furnished to each Lender, have been prepared
giving effect (as if such events had occurred on such date or
at the beginning of such period, as the case may be) to (i)
the consummation of the Acquisition, (ii) the Loans to be
made and the Senior Subordinated Notes (or the Subordinated
Bridge Facility to be funded, as the case may be) and
Preferred Stock to be issued on the Closing Date and the use
of proceeds thereof and (iii) the payment of fees and
expenses in connection with the foregoing. The Pro Forma
Financial Statements have been prepared based on the best
information available to the Borrower as of the date of
delivery thereof, and present fairly on a pro forma basis the
estimated financial position of Borrower and its consolidated
Subsidiaries as at, or for the period of four consecutive
fiscal quarters ended, March 31, 1998, assuming that the
events specified in the preceding sentence had actually
occurred at such date or at the beginning of such period, as
the case may be.
(b) The audited consolidated balance sheets of the Borrower
as at December 31, 1995, December 31, 1996 and December
31, 1997, and the related consolidated statements of
operations, stockholder's equity and cash flows for the
fiscal years ended on such dates, reported on by and
accompanied by an unqualified report from Grant
Thornton LLP, present fairly the consolidated financial
condition of the Borrower as at such date, and the
consolidated results of its operations and its
consolidated cash flows for the respective fiscal years
then ended. The unaudited consolidated balance sheet of
the Borrower as at March 31, 1998, and the related
unaudited consolidated statements of operations,
stockholder's equity and cash flows for the three-month
period ended on such date, present fairly the
consolidated financial condition of the Borrower as at
such date, and the consolidated results of its
operations and its consolidated cash flows for the
three-month period then ended (subject to normal
year-end audit adjustments). All such financial
statements have been prepared in accordance with GAAP
applied consistently throughout the periods involved
(except as approved by the aforementioned firm of
accountants and disclosed therein). The Borrower and
its Subsidiaries do not have any material
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Guarantee Obligations, contingent liabilities and
liabilities for taxes, or any long-term leases or
unusual forward or long-term commitments, including any
interest rate or foreign currency swap or exchange
transaction or other obligation in respect of
derivatives, that are not reflected in the most recent
financial statements referred to in this paragraph.
During the period from December 31, 1997 to and
including the date hereof there has been no Disposition
by the Borrower or any of its Subsidiaries of any
material part of its business or property.
(c) The Borrower has provided to the Lenders the audited
consolidated balance sheets of the Acquired Company as
at March 31, 1996, March 31, 1997 and March 31, 1998,
and the related consolidated statements of operations,
stockholder's equity and cash flows for the fiscal
years ended on such dates, reported on by and
accompanied by an unqualified report from Ernst & Young
LLP (the "Audited Acquired Company Financials"), as
adjusted in certain respects by the Borrower in order
to achieve consistency with the Borrower's customary
presentation of financial information. Such adjustments
do not unfairly present the consolidated financial
condition of the Acquired Company as at such date, and
the consolidated results of its operations and its
consolidated cash flows for the respective fiscal years
then ended, in each case as reflected in the Audited
Acquired Company Financials.
4.2 No Change. Since March 31, 1998 there has been no development
or event that has had or could reasonably be expected to have
a Material Adverse Effect.
4.3 Corporate Existence; Compliance with Law. Each of the
Borrower and its Subsidiaries (a) is duly organized, validly
existing and in good standing under the laws of the
jurisdiction of its organization, (b) has the corporate power
and authority, and the legal right, to own and operate its
property, to lease the property it operates as lessee and to
conduct the business in which it is currently engaged, (c) is
duly qualified as a foreign corporation and in good standing
under the laws of each jurisdiction where its ownership,
lease or operation of property or the conduct of its business
requires such qualification, except to the extent that the
failure to be so qualified and in good standing could not, in
the aggregate, reasonably be expected to have a Material
Adverse Effect, and (d) is in compliance with all
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Requirements of Law except to the extent that the failure to
comply therewith could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect.
4.4 Corporate Power; Authorization; Enforceable Obligations. Each
Loan Party has the corporate power and authority, and the
legal right, to make, deliver and perform the Loan Documents
to which it is a party and, in the case of the Borrower, to
borrow hereunder. Each Loan Party has taken all necessary
corporate action to authorize the execution, delivery and
performance of the Loan Documents to which it is a party and,
in the case of the Borrower, to authorize the borrowings on
the terms and conditions of this Agreement. No consent or
authorization of, filing with, notice to or other act by or
in respect of, any Governmental Authority or any other Person
is required in connection with the Acquisition and the
borrowings hereunder or with the execution, delivery,
performance, validity or enforceability of this Agreement or
any of the Loan Documents, except (i) consents,
authorizations, filings and notices described in Schedule
4.4, which consents, authorizations, filings and notices have
been obtained or made and are in full force and effect and
(ii) the filings referred to in Section 4.19. Each Loan
Document has been duly executed and delivered on behalf of
each Loan Party party thereto. This Agreement constitutes,
and each other Loan Document upon execution will constitute,
a legal, valid and binding obligation of each Loan Party
party thereto, enforceable against each such Loan Party in
accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable
principles (whether enforcement is sought by proceedings in
equity or at law).
4.5 No Legal Bar. The execution, delivery and performance of this
Agreement and the other Loan Documents, the issuance of
Letters of Credit, the borrowings hereunder and the use of
the proceeds thereof will not violate any Requirement of Law
or any material Contractual Obligation of the Borrower or any
of its Subsidiaries and will not result in, or require, the
creation or imposition of any Lien on any of their respective
properties or revenues pursuant to any Requirement of Law or
any such Contractual Obligation (other than the Liens created
by the Security Documents). No Requirement of Law or
Contractual Obligation applicable to the Borrower or any of
its Subsidiaries could reasonably be expected to have a
Material Adverse Effect.
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4.6 Litigation. Except as set forth on Schedule 4.6, no
litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the
knowledge of the Borrower, threatened by or against the
Borrower or any of its Subsidiaries or against any of their
respective properties or revenues (a) with respect to any of
the Loan Documents or any of the transactions contemplated
hereby or thereby, or (b) that could reasonably be expected
to have a Material Adverse Effect.
4.7 No Default. Neither the Borrower nor any of its Subsidiaries
is in default under or with respect to any of its Contractual
Obligations in any respect that could reasonably be expected
to have a Material Adverse Effect. No Default or Event of
Default has occurred and is continuing.
4.8 Ownership of Property; Liens. Each of the Borrower and its
Subsidiaries has title in fee simple to, or a valid leasehold
interest in, all its material real property, and good title
to, or a valid leasehold interest in, all its other material
property, and none of such property is subject to any Lien
except as permitted by Section 7.3.
4.9 Intellectual Property. The Borrower and each of its
Subsidiaries owns, or is licensed to use, all Intellectual
Property necessary for the conduct of its business as
currently conducted. No material claim has been asserted and
is pending by any Person challenging or questioning the use
of any Intellectual Property or the validity or effectiveness
of any Intellectual Property, nor does the Borrower know of
any valid basis for any such claim. The use of Intellectual
Property by the Borrower and its Subsidiaries does not
infringe on the rights of any Person in any material respect.
4.10 Taxes. Each of the Borrower and each of its Subsidiaries has
filed or caused to be filed all Federal, state and other
material tax returns that are required to be filed and has
paid all taxes shown to be due and payable on said returns or
on any assessments made against it or any of its property and
all other taxes, fees or other charges imposed on it or any
of its property by any Governmental Authority to the extent
due and payable (other than any the amount or validity of
that are currently being contested in good faith by
appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided on the books of the
Borrower or its Subsidiaries, as the case may be); no
material tax Lien has been filed, and, to the
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knowledge of the Borrower, no claim is being asserted, with
respect to any such tax, fee or other charge.
4.11 Federal Regulations. No part of the proceeds of any Loans
will be used for "buying" or "carrying" any "margin stock"
within the respective meanings of each of the quoted terms
under Regulation U as now and from time to time hereafter in
effect or for any purpose that violates the provisions of the
Regulations of the Board. If requested by any Lender or the
Administrative Agent, the Borrower will furnish to the
Administrative Agent and each Lender a statement to the
foregoing effect in conformity with the requirements of FR
Form G-3 or FR Form U-1, as applicable, referred to in
Regulation U.
4.12 Labor Matters. Except as set forth on Schedule 4.6 and as, in
the aggregate, could not reasonably be expected to have a
Material Adverse Effect: (a) there are no strikes or other
labor disputes against the Borrower or any of its
Subsidiaries pending or, to the knowledge of the Borrower,
threatened; (b) hours worked by and payment made to employees
of the Borrower and its Subsidiaries have not been in
violation of the Fair Labor Standards Act or any other
applicable Requirement of Law dealing with such matters; and
(c) all payments due from the Borrower or any of its
Subsidiaries on account of employee health and welfare
insurance have been paid or accrued as a liability on the
books of the Borrower or the relevant Subsidiary.
4.13 ERISA. Neither a Reportable Event nor an "accumulated funding
deficiency" (within the meaning of Section 412 of the Code or
Section 302 of ERISA) has occurred during the five-year
period prior to the date on which this representation is made
or deemed made with respect to any Plan, and each Plan has
complied in all material respects with the applicable
provisions of ERISA and the Code. No termination of a Single
Employer Plan has occurred, and no Lien against the Borrower
or any Commonly Controlled Entity and in favor of the PBGC or
a Plan has arisen, during such five-year period. The present
value of all accrued benefits under each Single Employer Plan
(based on those assumptions used to fund such Plans) did not,
as of the last annual valuation date prior to the date on
which this representation is made or deemed made, exceed the
value of the assets of such Plan allocable to such accrued
benefits by a material amount. Neither the Borrower nor any
Commonly Controlled Entity has had a complete or partial
withdrawal from any Multiemployer Plan that has resulted or
could reasonably be expected to result in a material
liability under ERISA, and neither the Borrower nor any
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Commonly Controlled Entity would become subject to any
material liability under ERISA if the Borrower or any such
Commonly Controlled Entity were to withdraw completely from
all Multiemployer Plans as of the valuation date most closely
preceding the date on which this representation is made or
deemed made. No such Multiemployer Plan is in Reorganization
or Insolvent.
4.14 Investment Company Act; Other Regulations. No Loan Party is
an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment
Company Act of 1940, as amended. No Loan Party is subject to
regulation under any Requirement of Law (other than
Regulation X of the Board) that limits its ability to incur
Indebtedness.
4.15 Subsidiaries. Except as disclosed to the Administrative Agent
by the Borrower in writing from time to time after the
Closing Date, Schedule 4.15 sets forth the name and
jurisdiction of incorporation of each Subsidiary and, as to
each such Subsidiary, the percentage of each class of Capital
Stock owned by any Loan Party and there are no outstanding
subscriptions, options, warrants (other than any warrants
issued in connection with the funding under the Subordinated
Bridge Facility), calls, rights or other agreements or
commitments (other than stock options granted to employees or
directors and directors' qualifying shares) of any nature
relating to any Capital Stock of the Borrower or any
Subsidiary, except as created by the Loan Documents.
4.16 Use of Proceeds. The proceeds of the A/B/C Term Loans shall
be used to finance a portion of the Acquisition, to repay
certain existing Indebtedness of the Borrower and its
Subsidiaries and to pay related fees and expenses. The
proceeds of the LC/MD Term Loans shall be used for general
corporate purposes (other than financing acquisitions,
capital expenditures or the working capital needs of the
Borrower and its Subsidiaries). The proceeds of the Revolving
Loans and the Swingline Loans, and the Revolving Letters of
Credit, shall be used for general corporate purposes. The NJ
Letter of Credit shall be used for the purpose specified in
Section 3.1.
4.17 Environmental Matters. Except as, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect:
(a) the facilities and properties owned, leased or operated by the
Borrower or any of its Subsidiaries (the "Properties") do not contain, and have
not previously contained, any
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Materials of Environmental Concern in amounts or concentrations or under
circumstances that constitute or constituted a violation of, or could give rise
to liability under, any Environmental Law;
(b) neither the Borrower nor any of its Subsidiaries has received or is
aware of any notice of violation, alleged violation, non-compliance, liability
or potential liability regarding environmental matters or compliance with
Environmental Laws with regard to any of the Properties or the business operated
by the Borrower or any of its Subsidiaries (the "Business"), nor does the
Borrower have knowledge or reason to believe that any such notice will be
received or is being threatened;
(c) Materials of Environmental Concern have not been transported or
disposed of from the Properties in violation of, or in a manner or to a location
that could give rise to liability under, any Environmental Law, nor have any
Materials of Environmental Concern been generated, treated, stored or disposed
of at, on or under any of the Properties in violation of, or in a manner that
could give rise to liability under, any applicable Environmental Law;
(d) no judicial proceeding or governmental or administrative action is
pending or, to the knowledge of the Borrower, threatened, under any
Environmental Law to which the Borrower or any Subsidiary is or will be named as
a party with respect to the Properties or the Business, nor are there any
consent decrees or other decrees, consent orders, administrative orders or other
orders, or other administrative or judicial requirements outstanding under any
Environmental Law with respect to the Properties or the Business;
(e) there has been no release or threat of release of Materials of
Environmental Concern at or from the Properties, or arising from or related to
the operations of the Borrower or any Subsidiary in connection with the
Properties or otherwise in connection with the Business, in violation of or in
amounts or in a manner that could give rise to liability under Environmental
Laws;
(f) the Properties and all operations at the Properties are in
compliance, and have in the last five years been in compliance, with all
applicable Environmental Laws, and there is no contamination at, under or about
the Properties or violation of any Environmental Law with respect to the
Properties or the Business; and
(g) neither the Borrower nor any of its Subsidiaries has assumed any
liability of any other Person under Environmental Laws.
4.18 Accuracy of Information, etc. No statement or information
contained in this Agreement, any other Loan Document, the
Confidential Information Memorandum or any other document,
certificate or statement furnished by or on behalf of any
Loan Party to the Administrative Agent or the Lenders, or any
of them, for use in
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connection with the transactions contemplated by this
Agreement or the other Loan Documents, contained as of the
date such statement, information, document or certificate was
so furnished (or, in the case of the Confidential Information
Memorandum, as of the date of this Agreement), any untrue
statement of a material fact or omitted to state a material
fact necessary to make the statements contained herein or
therein not misleading. The projections and pro forma
financial information contained in the materials referenced
above are based upon good faith estimates and assumptions
believed by management of the Borrower to be reasonable at
the time made, it being recognized by the Lenders that such
financial information as it relates to future events is not
to be viewed as fact and that actual results during the
period or periods covered by such financial information may
differ from the projected results set forth therein by a
material amount. As of the date hereof, the representations
and warranties made by the Borrower and, to the Borrower's
knowledge, made by the Seller and Thorn plc, in the
Acquisition Documentation are true and correct in all
material respects. There is no fact known to any Loan Party
that could reasonably be expected to have a Material Adverse
Effect that has not been expressly disclosed herein, in the
other Loan Documents, in the Confidential Information
Memorandum or in any other documents, certificates and
statements furnished to the Administrative Agent and the
Lenders for use in connection with the transactions
contemplated hereby and by the other Loan Documents.
4.19 Security Documents. The Guarantee and Collateral Agreement is
effective to create in favor of the Administrative Agent, for
the benefit of the Lenders, a legal, valid and enforceable
security interest in the Collateral described in paragraphs
(a) through (k), inclusive, (m) and (n) of Section 3 thereof
and proceeds of such Collateral. In the case of the Pledged
Stock described in the Guarantee and Collateral Agreement,
when stock certificates representing such Pledged Stock are
delivered to the Administrative Agent, and in the case of the
other Collateral described in the Guarantee and Collateral
Agreement, when financing statements and other filings
specified on Schedule 4.19(a) (or otherwise notified to the
Administrative Agent) in appropriate form are filed in the
offices specified on Schedule 4.19(a) (or otherwise notified
to the Administrative Agent), the Guarantee and Collateral
Agreement shall constitute a fully perfected Lien on, and
security interest in, all right, title and interest of the
Loan Parties in such Collateral and the proceeds thereof, as
security for the Obligations (as defined in the Guarantee and
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Collateral Agreement), in each case prior and superior in
right to any other Person (except, in the case of Collateral
other than Pledged Stock, Liens permitted by Section 7.3).
(b) Each of the Mortgages (if any) is effective to create
in favor of the Administrative Agent, for the benefit
of the Lenders, a legal, valid and enforceable Lien on
the Mortgaged Properties described therein and proceeds
thereof, and when filed in the offices specified on
Schedule 4.19(b), each such Mortgage shall constitute a
fully perfected Lien on, and security interest in, all
right, title and interest of the Loan Parties in such
Mortgaged Properties and the proceeds thereof, as
security for the Obligations (as defined in the
relevant Mortgage), in each case prior and superior in
right to any other Person except Liens permitted by
Section 7.3.
4.20 Solvency. Each Loan Party is, and after giving effect to the
Acquisition and the incurrence of all Indebtedness and
obligations being incurred in connection herewith and
therewith will be and will continue to be, Solvent.
4.21 Senior Indebtedness. The Obligations constitute "Senior
Indebtedness" of the Borrower under and as defined in the
Subordinated Bridge Facility and the Senior Subordinated Note
Indenture. The obligations of each Subsidiary Guarantor under
the Guarantee and Collateral Agreement constitute "Guarantor
Senior Indebtedness" of such Subsidiary Guarantor under and
as defined in the Subordinated Bridge Facility and the Senior
Subordinated Note Indenture.
4.22 Year 2000 Matters. Any reprogramming required to permit the
proper functioning (but only to the extent that such proper
functioning would otherwise be impaired by the occurrence of
the year 2000) in and following the year 2000 of computer
systems and other equipment containing embedded microchips,
in either case owned or operated by the Borrower or any of
its Subsidiaries or used or relied upon in the conduct of
their business (including any such systems and other
equipment supplied by others), and the testing of all such
systems and other equipment as so reprogrammed, will be
completed by June 30, 1999. The costs to the Borrower and its
Subsidiaries that have not been incurred as of the date
hereof for such reprogramming and testing and for the other
reasonably foreseeable consequences to them of any improper
functioning of other computer systems and
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equipment containing embedded microchips due to the
occurrence of the year 2000 could not reasonably be expected
to result in a Default or Event of Default or to have a
Material Adverse Effect. Except for any reprogramming
referred to above, the computer systems of the Borrower and
its Subsidiaries are and, with ordinary course upgrading and
maintenance, will continue for the term of this Agreement to
be, sufficient for the conduct of their business as currently
conducted.
4.23 Regulation H. No Mortgage encumbers improved real property
that is located in an area that has been identified by the
Secretary of Housing and Urban Development as an area having
special flood hazards and in which flood insurance has been
made available under the National Flood Insurance Act of
1968.
SECTION 5. CONDITIONS PRECEDENT
5.1 Conditions to Initial Extension of Credit. The agreement of
each Lender to make the initial extension of credit requested
to be made by it is subject to the satisfaction, prior to or
concurrently with the making of such extension of credit on
the Closing Date, of the following conditions precedent:
(a) Credit Agreement; Addenda; Guarantee and Collateral
Agreement. The Administrative Agent shall have received
(i) this Agreement, executed and delivered by the
Agents and the Borrower, (ii) an Addendum, executed and
delivered by each Person listed on Schedule 1.1A, (iii)
the Guarantee and Collateral Agreement, executed and
delivered by the Borrower and each Subsidiary Guarantor
and (iv) an Acknowledgement and Consent in the form
attached to the Guarantee and Collateral Agreement,
executed and delivered by each Issuer (as defined
therein), if any, that is not a Loan Party.
In the event that an Addendum has not been duly executed and delivered
by each Person listed on Schedule 1.1A on the date scheduled to be the Closing
Date, the condition referred to in clause (ii) above shall nevertheless be
deemed satisfied if on such date the Borrower and the Administrative Agent shall
have designated one or more Persons (the "Designated Lenders") to assume, in the
aggregate, all of the Commitments that would have been held by the Persons
listed on Schedule 1.1A (the "Non-Executing Persons") which have not so executed
and delivered an Addendum (subject to each such Designated Lender's consent and
its execution and delivery of an Addendum). Schedule 1.1A shall automatically
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be deemed to be amended to reflect the respective Commitments of the Designated
Lenders and the omission of the Non-Executing Persons as Lenders hereunder.
(b) Acquisition, etc. The following transactions shall have
been consummated prior to or concurrently with the
funding of the initial Loans hereunder:
(i) the Borrower shall have acquired 100% of the
outstanding Capital Stock of the Acquired
Company in accordance with the terms and
conditions of the Acquisition Agreement (the
"Acquisition") for a purchase price (including
approximately $27,000,000 of change of control
bonuses paid on the Closing Date on behalf of
Thorn plc) not exceeding $900,000,000;
(ii) the Borrower shall have received at least
$235,000,000 in gross cash proceeds from the
issuance of preferred stock (the "Preferred
Stock") to the Sponsor;
(iii) the Borrower shall have received at least
$175,000,000 in gross cash proceeds from the
issuance of the Senior Subordinated Notes or the
funding under the Subordinated Bridge Facility;
(iv) the transaction fees and expenses to be incurred
in connection with the Acquisition and the
financing thereof shall not exceed $40,000,000;
and
(v) (i) the Administrative Agent shall have received
satisfactory evidence that the Existing Credit
Agreement shall have been terminated and all
amounts thereunder shall have been paid in full
and (ii) satisfactory arrangements shall have
been made for the termination of all Liens
granted in connection therewith.
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(c) Pro Forma Financial Statements; Financial Statements.
The Lenders shall have received (i) the Pro Forma
Financial Statements and (ii) the consolidated
financial statements of the Borrower and the Acquired
Company referred to in Sections 4.1(b) and 4.1(c).
(d) Approvals. All governmental and material third party
approvals (including landlords' and other consents)
necessary in connection with the Acquisition, the
continuing operations of the Borrower and its
Subsidiaries and the transactions contemplated hereby
shall have been obtained and be in full force and
effect, and all applicable waiting periods shall have
expired without any action being taken by any competent
authority that would restrain, prevent or otherwise
impose materially adverse conditions on the Acquisition
or the financing contemplated hereby.
(e) Lien Searches. The Administrative Agent shall have
received the results of a recent lien search in each of
the jurisdictions where material assets of the Loan
Parties are located, and such search shall reveal no
liens on any of the assets of the Borrower or its
Subsidiaries except for liens permitted by Section 7.3
or discharged on or prior to the Closing Date pursuant
to documentation satisfactory to the Administrative
Agent.
(f) Fees. The Lenders and the Administrative Agent shall
have received all fees required to be paid by the
Borrower, and all expenses for which invoices have been
presented (including the reasonable fees and expenses
of legal counsel to the Administrative Agent only), on
or before the Closing Date. All such amounts may be
paid with proceeds of Loans made on the Closing Date
and, to the extent paid in such manner, will be
reflected in the funding instructions given by the
Borrower to the Administrative Agent on or before the
Closing Date.
(g) Closing Certificate. The Administrative Agent shall
have received, with a counterpart for each Lender, a
certificate of each Loan Party, dated the Closing Date,
substantially in the form of Exhibit C, with
appropriate insertions and attachments.
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(h) Legal Opinions. The Administrative Agent shall have
received the following executed legal opinions:
(i) the legal opinion of Winstead Sechrest & Minick P.C.,
counsel to the Borrower and its Subsidiaries, substantially in the form of
Exhibit F-1;
(ii) the legal opinion of Arnold & Porter, New York counsel to the
Borrower and its Subsidiaries, substantially in the form of Exhibit F-2;
(iii) the legal opinion of Stinson, Mag & Fizzell, P.C., Kansas
counsel to the Borrower and its Subsidiaries, substantially in the form of
Exhibit F-3; and
(iv) to the extent consented to by the relevant counsel, each
legal opinion, if any, delivered in connection with the Acquisition Agreement,
accompanied by a reliance letter in favor of the Lenders.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative Agent
may reasonably require.
(i) Pledged Stock; Stock Powers; Pledged Notes. The
Administrative Agent shall have received (i) the
certificates representing the shares of Capital Stock
pledged pursuant to the Guarantee and Collateral
Agreement, together with an undated stock power for
each such certificate executed in blank by a duly
authorized officer of the pledgor thereof and (ii) each
promissory note (if any) pledged to the Administrative
Agent pursuant to the Guarantee and Collateral
Agreement endorsed (without recourse) in blank (or
accompanied by an executed transfer form in blank) by
the pledgor thereof.
(j) Filings, Registrations and Recordings. Each document
(including any Uniform Commercial Code financing
statement) required by the Security Documents or under
law or reasonably requested by the Administrative Agent
to be filed, registered or recorded in order to create
in favor of the Administrative Agent, for the benefit
of the Lenders, a perfected Lien on the Collateral
described therein, prior and superior in right to any
other Person (other than with respect to Liens
expressly permitted by Section 7.3), shall be in proper
form for filing, registration or recordation.
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(k) Solvency Opinion. The Administrative Agent shall have
received a solvency opinion from Valuation Research
Corporation.
(l) Insurance. The Administrative Agent shall have received
insurance certificates satisfying the requirements of
Section 5.2(b) of the Guarantee and Collateral
Agreement.
5.2 Conditions to Each Extension of Credit. The agreement of each
Lender to make any extension of credit requested to be made
by it on any date (including its initial extension of credit)
is subject to the satisfaction of the following conditions
precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by any Loan Party
in or pursuant to the Loan Documents shall be true and
correct in all material respects on and as of such date
as if made on and as of such date (unless such
representations expressly relate to an earlier date, in
which case they shall be true and correct in all
material respects on and as of such earlier date).
(b) No Default. No Default or Event of Default shall have
occurred and be continuing on such date or after giving
effect to the extensions of credit requested to be made
on such date.
Each borrowing by and issuance of a Letter of Credit on behalf of the Borrower
hereunder shall constitute a representation and warranty by the Borrower as of
the date of such extension of credit that the conditions contained in this
Section 5.2 have been satisfied.
SECTION 6. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Letter of Credit remains outstanding or any Loan or other amount is
owing to any Lender or the Administrative Agent hereunder, the Borrower shall
and shall cause each of its Subsidiaries to:
6.1 Financial Statements. Furnish to the Administrative Agent
with sufficient copies for each Lender:
(a) as soon as available, but in any event within 90 days
after the end of each fiscal year of the Borrower, a
copy of the audited consolidated balance sheet of the
Borrower and its consolidated Subsidiaries as at the
end of such year and the related audited consolidated
statements of income and of cash flows for such year,
setting forth in each case
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in comparative form the figures for the previous year,
reported on without a "going concern" or like
qualification or exception, or qualification arising
out of the scope of the audit, by Grant Thornton LLP or
other independent certified public accountants of
nationally recognized standing; and
(b) as soon as available, but in any event not later than
45 days after the end of each of the first three
quarterly periods of each fiscal year of the Borrower,
the unaudited consolidated balance sheet of the
Borrower and its consolidated Subsidiaries as at the
end of such quarter and the related unaudited
consolidated statements of income and of cash flows for
such quarter and the portion of the fiscal year through
the end of such quarter, setting forth in each case in
comparative form the figures for the previous year,
certified by a Responsible Officer as being fairly
stated in all material respects (subject to normal
year-end audit adjustments and the absence of notes
thereto).
All such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
6.2 Certificates; Other Information. Furnish to the
Administrative Agent with sufficient copies for each Lender
(or, in the case of clause (g), to the relevant Lender):
(a) concurrently with the delivery of the financial
statements referred to in Section 6.1(a), a certificate
of the independent certified public accountants
reporting on such financial statements stating that in
making the examination necessary therefor no knowledge
was obtained of any Default or Event of Default, except
as specified in such certificate;
(b) concurrently with the delivery of any financial
statements pursuant to Section 6.1, (i) a certificate
of a Responsible Officer stating that, to the best of
each such Responsible Officer's knowledge, each Loan
Party during such period has observed or performed all
of its covenants and other agreements, and satisfied
every condition, contained in this Agreement and the
other Loan Documents to which it is a party to be
observed, performed or satisfied by it, and that such
Responsible Officer has obtained no knowledge of any
Default or Event of Default except as specified in such
certificate and (ii) in the
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case of quarterly or annual financial statements, (x) a
Compliance Certificate containing all information and
calculations necessary for determining compliance by
the Borrower and its Subsidiaries with the provisions
of this Agreement referred to therein as of the last
day of the fiscal quarter or fiscal year of the
Borrower, as the case may be, and (y) to the extent not
previously disclosed to the Administrative Agent, a
listing of each new Subsidiary of any Loan Party, of
any new county or state within the United States where
any Loan Party keeps material inventory or equipment
and of any new fee-owned real property or material
Intellectual Property acquired by any Loan Party since
the date of the most recent list delivered pursuant to
this clause (y) (or, in the case of the first such list
so delivered, since the Closing Date);
(c) as soon as available, and in any event no later than 45
days after the end of each fiscal year of the Borrower,
a detailed consolidated budget for the following fiscal
year (including a projected consolidated balance sheet
of the Borrower and its Subsidiaries as of the end of
the following fiscal year, the related consolidated
statements of projected cash flow, projected changes in
financial position and projected income and a
description of the underlying assumptions applicable
thereto), and, as soon as available, significant
revisions, if any, of such budget and projections with
respect to such fiscal year (collectively, the
"Projections"), which Projections shall in each case be
accompanied by a certificate of a Responsible Officer
stating that such Projections are based on reasonable
estimates, information and assumptions and that such
Responsible Officer has no reason to believe that such
Projections are incorrect or misleading in any material
respect;
(d) within 45 days after the end of each of the first three
fiscal quarters of each fiscal year of the Borrower, a
narrative discussion and analysis of the financial
condition and results of operations of the Borrower and
its Subsidiaries for such fiscal quarter and for the
period from the beginning of the then current fiscal
year to the end of such fiscal quarter, as compared to
the portion of the Projections covering such periods
and to the comparable periods of the previous year;
provided that delivery of the Report on Form 10-Q filed
with the SEC with respect to such fiscal quarter shall
be deemed to satisfy the foregoing requirement;
(e) no later than five Business Days prior to the
effectiveness thereof, copies of substantially final
drafts of any proposed amendment,
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supplement, waiver or other modification with respect
to (i) the Acquisition Documentation or (ii) the Senior
Subordinated Note Indenture or the Subordinated Bridge
Facility as to which the Senior Subordinated Note
Indenture or the Subordinated Bridge Facility requires
the approval of any percentage of the holders of
Indebtedness thereunder;
(f) within five Business Days after the same are sent,
copies of all financial statements and reports that the
Borrower sends to the holders of any class of its debt
securities or public equity securities and, within five
Business Days after the same are filed, copies of all
financial statements and reports that the Borrower may
make to, or file with, the SEC; and
(g) promptly, such additional financial and other
information as any Lender may from time to time
reasonably request.
6.3 Payment of Obligations. Pay, discharge or otherwise satisfy
at or before maturity or before they become delinquent, as
the case may be, all its material obligations of whatever
nature, except where the amount or validity thereof is
currently being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP with respect
thereto have been provided on the books of the Borrower or
its Subsidiaries, as the case may be.
6.4 Maintenance of Existence; Compliance. (i) Preserve, renew and
keep in full force and effect its corporate existence and
(ii) take all reasonable action to maintain all rights,
privileges and franchises necessary or desirable in the
normal conduct of its business, except, in each case, as
otherwise permitted by Section 7.4 and except, in the case of
clause (ii) above, to the extent that failure to do so could
not reasonably be expected to have a Material Adverse Effect;
and (b) comply with all Contractual Obligations and
Requirements of Law except to the extent that failure to
comply therewith could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect.
6.5 Maintenance of Property; Insurance. Keep all property useful
and necessary in its business in good working order and
condition, ordinary wear and tear excepted and (b) maintain
with financially sound and reputable insurance companies
insurance on all its property in at least such amounts and
against at least such risks (but including in any event
public liability, product liability and business interruption
expense coverage) as are usually insured against in the
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same general area by companies engaged in the same or a
similar business.
6.6 Inspection of Property; Books and Records; Discussions. (a)
Keep proper books of records and account in which full, true
and correct entries in conformity with GAAP and all
Requirements of Law shall be made of all dealings and
transactions in relation to its business and activities and
(b) subject to the provisions of Section 10.14, permit
representatives of any Lender, upon reasonable prior notice,
to visit and inspect any of its properties and examine and
make abstracts from any of its books and records at any
reasonable time and as often as may reasonably be desired and
to discuss the business, operations, properties and financial
and other condition of the Borrower and its Subsidiaries with
officers and employees of the Borrower and its Subsidiaries
and with its independent certified public accountants.
6.7 Notices. Promptly give notice to the Administrative Agent
with sufficient copies for each Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any
Contractual Obligation of the Borrower or any of its
Subsidiaries or (ii) litigation, investigation or
proceeding that may exist at any time between the
Borrower or any of its Subsidiaries and any
Governmental Authority, that in either case, if not
cured or if reasonably expected to be adversely
determined, as the case may be, could reasonably be
expected to have a Material Adverse Effect;
(c) any litigation or proceeding affecting the Borrower or
any of its Subsidiaries in which the amount claimed is
$5,000,000 or more and not covered by insurance or in
which injunctive or similar relief is sought which
could reasonably be expected to be granted and which,
if granted, could reasonably be expected to have a
Material Adverse Effect;
(d) the following events, as soon as possible and in any
event within 30 days after the Borrower knows or has
reason to know thereof: (i) the occurrence of any
Reportable Event with respect to any Plan, a failure to
make any required contribution to a Plan, the creation
of any Lien in favor of the PBGC or a Plan or any
withdrawal from, or the termination, Reorganization or
Insolvency of, any Multiemployer Plan or (ii) the
institution of proceedings or the taking of any other
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action by the PBGC or the Borrower or any Commonly
Controlled Entity or any Multiemployer Plan with
respect to the withdrawal from, or the termination,
Reorganization or Insolvency of, any Single Employer
Plan or Multiemployer Plan; and
(e) any development or event that has had or could
reasonably be expected to have a Material Adverse
Effect.
Each notice pursuant to this Section 6.7 shall be accompanied by a statement of
a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action the Borrower or the relevant Subsidiary
proposes to take with respect thereto.
6.8 Environmental Laws. Except as could not reasonably be
expected to have a Material Adverse Effect:
(a) Comply with, and contractually require compliance by
all tenants and subtenants, if any, with, all
applicable Environmental Laws, and obtain and comply
with and maintain, and contractually require that all
tenants and subtenants obtain and comply with and
maintain, any and all licenses, approvals,
notifications, registrations or permits required by
applicable Environmental Laws.
(b) Conduct and complete all investigations, studies,
sampling and testing, and all remedial, removal and
other actions required under Environmental Laws and
promptly comply with all lawful orders and directives
of all Governmental Authorities regarding Environmental
Laws.
6.9 Interest Rate Protection. In the case of the Borrower, within
90 days after the Closing Date, enter into Hedge Agreements
to the extent necessary to provide that at least 50% of the
aggregate principal amount of the A/B/C Term Loans is subject
to either a fixed interest rate or interest rate protection
for a period of not less than three years, which Hedge
Agreements shall have terms and conditions reasonably
satisfactory to the Administrative Agent.
6.10 Additional Collateral, etc. With respect to any property
acquired after the Closing Date by the Borrower or any of its
Subsidiaries (other than (w) any vehicles and any immaterial
inventory and equipment, (x) any property described in
paragraph (b), (c) or (d) below, (y) any property subject to
a Lien expressly permitted by Section 7.3(g) or (j) and (z)
property acquired by any Excluded Foreign Subsidiary) as to
which the Administrative Agent, for the
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benefit of the Lenders, does not have a perfected Lien,
promptly (i) execute and deliver to the Administrative Agent
such amendments to the Guarantee and Collateral Agreement or
such other documents as the Administrative Agent deems
necessary or advisable to grant to the Administrative Agent,
for the benefit of the Lenders, a security interest in such
property and (ii) take all actions necessary or advisable to
grant to the Administrative Agent, for the benefit of the
Lenders, a perfected first priority security interest in such
property, including the filing of Uniform Commercial Code
financing statements in such jurisdictions as may be required
by the Guarantee and Collateral Agreement or by law or as may
be requested by the Administrative Agent.
(b) With respect to any fee interest in any real property
having a value (together with improvements thereof) of
at least $750,000 acquired after the Closing Date by
the Borrower or any of its Subsidiaries (other than (x)
any such real property subject to a Lien expressly
permitted by Section 7.3(g) or (j) and (z) real
property acquired by any Excluded Foreign Subsidiary),
promptly (i) execute and deliver a first priority
Mortgage, in favor of the Administrative Agent, for the
benefit of the Lenders, covering such real property,
(ii) if requested by the Administrative Agent, provide
the Lenders with (x) title and extended coverage
insurance covering such real property in an amount at
least equal to the purchase price of such real property
(or such other amount as shall be reasonably specified
by the Administrative Agent) as well as a current ALTA
survey thereof, together with a surveyor's certificate
and (y) any consents or estoppels reasonably deemed
necessary or advisable by the Administrative Agent in
connection with such mortgage or deed of trust, each of
the foregoing in form and substance reasonably
satisfactory to the Administrative Agent and (iii) if
requested by the Administrative Agent, deliver to the
Administrative Agent legal opinions relating to the
matters described above, which opinions shall be in
form and substance, and from counsel, reasonably
satisfactory to the Administrative Agent.
(c) With respect to any new Subsidiary (other than an
Excluded Foreign Subsidiary) created or acquired after
the Closing Date by the Borrower (which, for the
purposes of this paragraph (c), shall include any
existing Subsidiary that ceases to be an Excluded
Foreign Subsidiary), the Borrower or any of its
Subsidiaries, promptly (i)
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execute and deliver to the Administrative Agent such
amendments to the Guarantee and Collateral Agreement as
the Administrative Agent deems necessary or advisable
to grant to the Administrative Agent, for the benefit
of the Lenders, a perfected first priority security
interest in the Capital Stock of such new Subsidiary
that is owned by the Borrower or any of its
Subsidiaries, (ii) deliver to the Administrative Agent
the certificates representing such Capital Stock,
together with undated stock powers, in blank, executed
and delivered by a duly authorized officer of the
Borrower or such Subsidiary, as the case may be, and
(iii) cause such new Subsidiary (A) to become a party
to the Guarantee and Collateral Agreement, (B) to take
such actions necessary or advisable to grant to the
Administrative Agent for the benefit of the Lenders a
perfected first priority security interest in the
Collateral described in the Guarantee and Collateral
Agreement with respect to such new Subsidiary,
including the filing of Uniform Commercial Code
financing statements in such jurisdictions as may be
required by the Guarantee and Collateral Agreement or
by law or as may be requested by the Administrative
Agent and (C) to deliver to the Administrative Agent a
certificate of such Subsidiary, substantially in the
form of Exhibit C, with appropriate insertions and
attachments.
(d) With respect to any new Excluded Foreign Subsidiary
created or acquired after the Closing Date by the
Borrower or any of its Subsidiaries, promptly (i)
execute and deliver to the Administrative Agent such
amendments to the Guarantee and Collateral Agreement as
the Administrative Agent deems necessary or advisable
to grant to the Administrative Agent, for the benefit
of the Lenders, a perfected first priority security
interest in the Capital Stock of such new Subsidiary
that is owned by the Borrower or any of its
Subsidiaries (provided that in no event shall more than
65% of the total outstanding Capital Stock of any such
new Subsidiary be required to be so pledged), and (ii)
deliver to the Administrative Agent the certificates
representing such Capital Stock, together with undated
stock powers, in blank, executed and delivered by a
duly authorized officer of the Borrower or such
Subsidiary, as the case may be, and take such other
action as may be necessary or, in the opinion of the
Administrative Agent, desirable to perfect the
Administrative Agent's security interest therein.
6.11 Permitted Acquisitions. Deliver to the Lenders, within ten
Business Days following the closing date of any Permitted
Acquisition involving a Purchase Price less than $20,000,000,
each of the
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following: (i) a description of the property, assets and/or
equity interest being purchased, in reasonable detail; and
(ii) a copy of the purchase agreement pursuant to which such
acquisition is to be consummated or a term sheet or other
description setting forth the essential terms and the basic
structure of such acquisition.
(b) Deliver to the Lenders, (i) within ten Business Days
following the closing date of any Permitted Acquisition
involving a Purchase Price greater than or equal to
$20,000,000 but less than $30,000,000 and (ii) not less
than five Business Days prior to the closing date of
any Permitted Acquisition involving a Purchase Price
greater than or equal to $30,000,000, each of the
following: (A) a description of the property, assets
and/or equity interest being purchased, in reasonable
detail; (B) a copy of the purchase agreement pursuant
to which such acquisition is to be consummated or a
term sheet or other description setting forth the
essential terms and the basic structure of such
acquisition; (C) projected statements of income for the
entity that is being acquired (or the assets, if an
acquisition of assets) for at least a two-year period
following such acquisition (including a summary of
assumptions or pro forma adjustments for such
projections); (D) to the extent made available to the
Borrower, historical financial statements for the
entity that is being acquired (or the assets, if an
acquisition of assets) (including balance sheets and
statements of income, retained earnings and cash flows
for at least a two-year period prior to such
acquisition); and (E) confirmation, supported by
detailed calculations, that the Borrower and its
Subsidiaries would have been in compliance with all the
covenants in Section 7.1 for the fiscal quarter ending
immediately prior to the consummation of such
acquisition, with such compliance determined on a pro
forma basis as if such acquisition had been consummated
on the first day of the Reference Period ending on the
last day of such fiscal quarter.
6.12 Real Estate Matters. Except in the case of any Mortgaged
Property as to which the Borrower (or its relevant
Subsidiary, as the case may be) shall have obtained a written
commitment for the sale thereof in a transaction otherwise in
accordance with the terms of this Agreement, within 90 days
after the Closing Date:
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(a) Furnish to the Administrative Agent a Mortgage with
respect to each Mortgaged Property, executed and
delivered by a duly authorized officer of each party
thereto.
(b) If requested by the Administrative Agent, furnish to
the Administrative Agent and the title insurance
company issuing the policy referred to in paragraph (c)
below (the "Title Insurance Company"), maps or plats of
an as-built survey of the sites of the Mortgaged
Properties certified to the Administrative Agent and
the Title Insurance Company in a manner satisfactory to
them, dated a date satisfactory to the Administrative
Agent and the Title Insurance Company by an independent
professional licensed land surveyor satisfactory to the
Administrative Agent and the Title Insurance Company,
which maps or plats and the surveys on which they are
based shall be made in accordance with the Minimum
Standard Detail Requirements for Land Title Surveys
jointly established and adopted by the American Land
Title Association and the American Congress on
Surveying and Mapping in 1992, and, without limiting
the generality of the foregoing, there shall be
surveyed and shown on such maps, plats or surveys the
following: (i) the locations on such sites of all the
buildings, structures and other improvements and the
established building setback lines; (ii) the lines of
streets abutting the sites and width thereof; (iii) all
access and other easements appurtenant to the sites;
(iv) all roadways, paths, driveways, easements,
encroachments and overhanging projections and similar
encumbrances affecting the site, whether recorded,
apparent from a physical inspection of the sites or
otherwise known to the surveyor; (v) any encroachments
on any adjoining property by the building structures
and improvements on the sites; (vi) if the site is
described as being on a filed map, a legend relating
the survey to said map; and (vii) the flood zone
designations, if any, in which the Mortgaged Properties
are located.
(c) Furnish to the Administrative Agent in respect of each
Mortgaged Property a mortgagee's title insurance policy
(or policies) or marked up unconditional binder for
such insurance. Each such policy shall (i) be in an
amount satisfactory to the Administrative Agent; (ii)
be issued at ordinary rates; (iii) insure that the
Mortgage insured thereby creates a valid first Lien on
such Mortgaged Property free and clear of all defects
and encumbrances, except as disclosed therein; (iv)
name the Administrative Agent for the benefit of the
Lenders as the insured thereunder; (v) be in the form
of ALTA Loan Policy - 1970 (Amended 10/17/70 and
10/17/84) (or equivalent policies); (vi)
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contain such endorsements and affirmative coverage as
the Administrative Agent may reasonably request and
(vii) be issued by title companies satisfactory to the
Administrative Agent (including any such title
companies acting as co-insurers or reinsurers, at the
option of the Administrative Agent). The Administrative
Agent shall have received evidence satisfactory to it
that all premiums in respect of each such policy, all
charges for mortgage recording tax, and all related
expenses, if any, have been paid.
(d) If requested by the Administrative Agent, furnish to
the Administrative Agent (i) a policy of flood
insurance that (A) covers any parcel of improved real
property that is encumbered by any Mortgage, (B) is
written in an amount not less than the outstanding
principal amount of the indebtedness secured by such
Mortgage that is reasonably allocable to such real
property or the maximum limit of coverage made
available with respect to the particular type of
property under the National Flood Insurance Act of
1968, whichever is less, and (C) has a term ending not
later than the maturity of the Indebtedness secured by
such Mortgage and (ii) confirmation that the Borrower
has received the notice required pursuant to Section
208(e)(3) of Regulation H of the Board.
(e) Furnish to the Administrative Agent a copy of all
recorded documents referred to, or listed as exceptions
to title in, the title policy or policies referred to
in paragraph (c) above and a copy of all other material
documents affecting the Mortgaged Properties.
SECTION 7. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Letter of Credit remains outstanding or any Loan or other amount is
owing to any Lender or the Administrative Agent hereunder, the Borrower shall
not, and shall not permit any of its Subsidiaries to, directly or indirectly:
7.1 Financial Condition Covenants.
(a) Consolidated Leverage Ratio. Permit the Consolidated
Leverage Ratio as at the last day of any period of four
consecutive fiscal quarters of the Borrower ending with
any fiscal quarter during any period set forth below to
exceed the ratio set forth below opposite such period:
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<TABLE>
<CAPTION>
Consolidated
Period Leverage Ratio
------ --------------
<S> <C>
Fiscal quarter ending 12/31/98
to fiscal quarter ending 9/30/99 5.60 to 1.00
Fiscal quarter ending 12/31/99
to fiscal quarter ending 3/31/00 5.50 to 1.00
Fiscal quarter ending 6/30/00 5.25 to 1.00
Fiscal quarter ending 9/30/00 5.00 to 1.00
Fiscal quarter ending 12/31/00 4.75 to 1.00
Fiscal quarter ending 3/31/01
to fiscal quarter ending 6/30/01 4.50 to 1.00
Fiscal quarter ending 9/30/01
to fiscal quarter ending 12/31/01 4.25 to 1.00
Fiscal year 2002 3.75 to 1.00
Fiscal year 2003 and thereafter 3.00 to 1.00.
</TABLE>
(b) Consolidated Interest Coverage Ratio. Permit the
Consolidated Interest Coverage Ratio for any period of
four consecutive fiscal quarters of the Borrower ending
with any fiscal quarter during any period set forth
below to be less than the ratio set forth below
opposite such period:
<TABLE>
<CAPTION>
Consolidated Interest
Period Coverage Ratio
------ --------------
<S> <C>
Fiscal quarter ending 12/31/98
to fiscal quarter ending 12/31/99 2.00 to 1.00
Fiscal year 2000 2.15 to 1.00
Fiscal year 2001 2.50 to 1.00
Fiscal year 2002 3.00 to 1.00
Fiscal year 2003 3.50 to 1.00
Fiscal year 2004 and thereafter 4.00 to 1.00.
</TABLE>
(c) Consolidated Fixed Charge Coverage Ratio. Permit the
Consolidated Fixed Charge Coverage Ratio for any period
of four consecutive fiscal quarters of the Borrower
ending with any fiscal quarter during the period set
forth below to be less than the ratio set forth below
opposite such period:
<TABLE>
<CAPTION>
Consolidated Fixed
Period Charge Coverage Ratio
------ ---------------------
<S> <C>
Fiscal quarter ending 12/31/98
and thereafter 1.30 to 1.00.
</TABLE>
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7.2 Indebtedness. Create, issue, incur, assume, become liable in
respect of or suffer to exist any Indebtedness, except:
(a) Indebtedness of any Loan Party pursuant to any Loan
Document;
(b) Indebtedness of the Borrower to any Subsidiary and of
any Wholly Owned Subsidiary Guarantor to the Borrower
or any other Subsidiary;
(c) Guarantee Obligations incurred in the ordinary course
of business by the Borrower or any of its Subsidiaries
of obligations of any Wholly Owned Subsidiary
Guarantor;
(d) Indebtedness outstanding on the date hereof and listed
on Schedule 7.2(d) and any refinancings, refundings,
renewals or extensions thereof (without increasing, or
shortening the maturity of, the principal amount
thereof);
(e) Indebtedness (including, without limitation, Capital
Lease Obligations) secured by Liens permitted by
Section 7.3(g) in an aggregate principal amount not to
exceed $15,000,000 at any one time outstanding;
(f) either (i) (A) Indebtedness of the Borrower (x) in
respect of the Subordinated Bridge Facility or (y) the
proceeds of which are used solely to refinance the
Subordinated Bridge Facility, provided that any
Indebtedness incurred pursuant to this clause (y) shall
be subordinated to the Obligations and shall have a
final stated maturity no earlier than one year and one
day after the final maturity of the Loans and (B)
Guarantee Obligations of any Subsidiary Guarantor in
respect of Indebtedness incurred pursuant to clause
(i), provided that such Guarantee Obligations are
subordinated to the same extent as the obligations of
the Borrower in respect of such Indebtedness, or (ii)
(A) Indebtedness of the Borrower in respect of the
Senior Subordinated Notes in an aggregate principal
amount not to exceed $300,000,000 and (B) Guarantee
Obligations of any Subsidiary Guarantor in respect of
such Indebtedness, provided that such Guarantee
Obligations are subordinated to the same extent as the
obligations of the Borrower in respect of the Senior
Subordinated Notes;
(g) Assumed Indebtedness incurred pursuant to Permitted
Acquisitions;
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(h) Guarantee Obligations of the Borrower in respect of
Indebtedness of franchisees not to exceed $50,000,000
at any one time outstanding; and
(i) additional Indebtedness of the Borrower or any of its
Subsidiaries in an aggregate principal amount (for the
Borrower and all Subsidiaries) not to exceed
$25,000,000 at any one time outstanding.
7.3 Liens. Create, incur, assume or suffer to exist any Lien upon
any of its property, whether now owned or hereafter acquired,
except for:
(a) Liens for taxes not yet due or that are being contested
in good faith by appropriate proceedings, provided that
adequate reserves with respect thereto are maintained
on the books of the Borrower or its Subsidiaries, as
the case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary
course of business that are not overdue for a period of
more than 30 days or that are being contested in good
faith by appropriate proceedings;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social
security legislation;
(d) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases,
statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like
nature incurred in the ordinary course of business;
(e) easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of
business that, in the aggregate, are not substantial in
amount and that do not in any case materially detract
from the value of the property subject thereto or
materially interfere with the ordinary conduct of the
business of the Borrower or any of its Subsidiaries;
(f) Liens in existence on the date hereof listed on
Schedule 7.3(f), securing Indebtedness permitted by
Section 7.2(d), provided that no such Lien is spread to
cover any additional property after the Closing Date
(other than "products" and "proceeds" thereof, as each
such term is defined in the Uniform Commercial Code of
the State of New York) and that the amount of
Indebtedness secured thereby is not increased;
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(g) Liens securing Indebtedness of the Borrower or any
other Subsidiary incurred pursuant to Section 7.2(e) to
finance the acquisition of fixed or capital assets,
provided that (i) such Liens shall be created
substantially simultaneously with the acquisition of
such fixed or capital assets, (ii) such Liens do not at
any time encumber any property other than the property
financed by such Indebtedness (including the "products"
and "proceeds" thereof, as each such term is defined in
the Uniform Commercial Code of the State of New York)
and (iii) the amount of Indebtedness secured thereby is
not increased;
(h) Liens created pursuant to the Security Documents;
(i) any interest or title of a lessor under any lease
entered into by the Borrower or any other Subsidiary in
the ordinary course of its business and covering only
the assets so leased;
(j) Liens securing Assumed Indebtedness, provided that such
Liens (i) were not incurred in contemplation of the
Permitted Acquisition consummated in conjunction with
the assumption of such Assumed Indebtedness and (ii) do
not encumber any property other than the property
acquired pursuant to such acquisition; and
(k) Liens not otherwise permitted by this Section so long
as neither (i) the aggregate outstanding principal
amount of the obligations secured thereby nor (ii) the
aggregate fair market value (determined as of the date
such Lien is incurred) of the assets subject thereto
exceeds (as to the Borrower and all Subsidiaries)
$10,000,000 at any one time.
7.4 Fundamental Changes. Enter into any merger, consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or Dispose of, all or
substantially all of its property or business, except that:
(a) any Subsidiary of the Borrower may be merged or
consolidated with or into the Borrower (provided that
the Borrower shall be the continuing or surviving
corporation) or with or into any Wholly Owned
Subsidiary Guarantor (provided that the Wholly Owned
Subsidiary Guarantor shall be the continuing or
surviving corporation);
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(b) any Subsidiary of the Borrower may Dispose of any or
all of its assets (upon voluntary liquidation or
otherwise) to the Borrower or any Wholly Owned
Subsidiary Guarantor; and
(c) any Permitted Acquisition may be structured as a merger
with or into the Borrower (provided that the Borrower
shall be the continuing or surviving corporation) or
with or into any Wholly Owned Subsidiary Guarantor
(provided that such Wholly Owned Subsidiary Guarantor
shall be the continuing or surviving corporation).
7.5 Disposition of Property. Dispose of any of its property,
whether now owned or hereafter acquired, or, in the case of
any Subsidiary, issue or sell any shares of such Subsidiary's
Capital Stock to any Person, except:
(a) the Disposition of obsolete or worn out property in the
ordinary course of business;
(b) the sale of inventory in the ordinary course of
business;
(c) Dispositions permitted by Section 7.4(b);
(d) the sale or issuance of any Subsidiary's Capital Stock
to the Borrower or any Wholly Owned Subsidiary
Guarantor;
(e) (i) Dispositions of the Acquired Vehicles otherwise
permitted by this Agreement and (ii) the Disposition of
other property having a fair market value not to exceed
(A) during the period from the Closing Date to and
including the date that is two years after the Closing
Date, $60,000,000 in the aggregate, and (B) thereafter,
$20,000,000 for any fiscal year of the Borrower;
provided, in the case of each of the foregoing clauses
(i) and (ii), that the requirements of Section 2.11(c)
are complied with in connection therewith; and
(f) Dispositions referred to in Section 7.8(g).
7.6 Restricted Payments. Declare or pay any dividend (other than
dividends payable solely in (i) common stock of the Person
making such dividend or (ii) the same class of Capital Stock
of the Person making such dividend on which such dividend is
being declared or paid) on, or make any payment on account
of, or set apart assets for a sinking or other analogous fund
for, the purchase, redemption, defeasance, retirement or
other acquisition of, any Capital Stock of
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the Borrower or any Subsidiary, whether now or hereafter
outstanding, or make any other distribution in respect
thereof, either directly or indirectly, whether in cash or
property or in obligations of the Borrower or any Subsidiary
(collectively, "Restricted Payments"), except that:
(a) any Subsidiary may make Restricted Payments to the
Borrower or any Wholly Owned Subsidiary Guarantor; and
(b) so long as no Default or Event of Default shall have
occurred and be continuing, the Borrower may purchase
the Borrower's common stock or common stock options
from present or former officers or employees of the
Borrower or any Subsidiary upon the death, disability
or termination of employment of such officer or
employee, provided, that the aggregate amount of
payments under this paragraph (b) after the date hereof
(net of any proceeds received by the Borrower after the
date hereof in connection with resales of any common
stock or common stock options so purchased) shall not
exceed $10,000,000; provided, further, that the
Borrower shall be permitted to make additional payments
under this paragraph (b) not in excess of $25,000,000
in the aggregate in order to purchase shares owned by
the Talley Persons in connection with the Acquisition.
7.7 Capital Expenditures. (a) Make or commit to make any Capital
Expenditure (Maintenance) (in addition to restructuring
charges in an amount up to $10,000,000 in connection with the
Acquisition), except (i) Capital Expenditures (Maintenance)
of the Borrower and its Subsidiaries not exceeding in the
aggregate (x) during the period from the Closing Date to the
end of fiscal 1998, $16,700,000, and (y) during each fiscal
year thereafter, $40,000,000; provided, that (A) up to
$10,000,000 of any such amount, if not so expended in the
fiscal year for which it is permitted, may be carried over
for expenditure in the next succeeding fiscal year and (B)
Capital Expenditures (Maintenance) made pursuant to this
clause (i) during any fiscal year shall be deemed made,
first, in respect of amounts permitted for such fiscal year
as provided in clauses (x) and (y) above and, second, in
respect of amounts carried over from the prior fiscal year
pursuant to subclause (A) above and (ii) Capital Expenditures
(Maintenance) made with the proceeds of any Reinvestment
Deferred Amount.
(b) Make or commit to make any Capital Expenditure (Expansion), except
(i) Capital Expenditures (Expansion) of the Borrower and its Subsidiaries not
exceeding in the aggregate for any fiscal year $25,000,000; provided, that (A)
up to $10,000,000 of such amount, if not so expended
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in the fiscal year for which it is permitted, may be carried over for
expenditure in the next succeeding fiscal year and (B) Capital Expenditures
(Expansion) made pursuant to this clause (i) during any fiscal year shall be
deemed made, first, in respect of the $25,000,000 initially permitted for such
fiscal year as provided above and, second, in respect of amounts carried over
from the prior fiscal year pursuant to subclause (A) above and (ii) Capital
Expenditures (Expansion) made with the proceeds of any Reinvestment Deferred
Amount.
7.8 Investments. Make any advance, loan, extension of credit (by
way of guaranty or otherwise) or capital contribution to, or
purchase any Capital Stock, bonds, notes, debentures or other
debt securities of, or any assets constituting a business
unit of, or make any other investment in, any other Person
(all of the foregoing, "Investments"), except:
(a) extensions of trade credit in the ordinary course of
business;
(b) investments in Cash Equivalents;
(c) Guarantee Obligations permitted by Section 7.2;
(d) loans and advances to employees of the Borrower or any
Subsidiary of the Borrower in the ordinary course of
business (including for travel, entertainment and
relocation expenses) in an aggregate amount for the
Borrower and its Subsidiaries not to exceed $5,000,000
at any one time outstanding;
(e) the Acquisition;
(f) intercompany Investments in the ordinary course of
business by the Borrower or any of its Subsidiaries in
the Borrower or any Person that, prior to such
investment, is a Wholly Owned Subsidiary Guarantor;
(g) in addition to Investments otherwise expressly
permitted by this Section, Investments by the Borrower
or any of its Subsidiaries in an aggregate amount
(valued at cost) not to exceed $10,000,000 (net of the
amount of any Net Cash Proceeds received by the
Borrower and its Subsidiaries in respect of a
Disposition of any such Investment; provided, that such
amount shall not exceed the original amount of such
Investment) during the term of this Agreement;
(h) Investments not in excess of $40,000,000 in the
aggregate during the period from the Closing Date to
the end of the 1999 fiscal year
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constituting purchases of franchisees of the Borrower
and its Subsidiaries; and
(i) additional Investments constituting Permitted
Acquisitions.
7.9 Payments and Modifications of Certain Debt Instruments and
Preferred Stock. (a) Make or offer to make any payment,
prepayment, repurchase or redemption of or otherwise defease
or segregate funds with respect to the Senior Subordinated
Notes or Indebtedness under the Subordinated Bridge Facility,
other than interest payments expressly required by the terms
thereof and pursuant to mandatory prepayment provisions
contained in the Subordinated Bridge Facility, (b) amend,
modify, waive or otherwise change, or consent or agree to any
amendment, modification, waiver or other change to, any of
the terms of the Senior Subordinated Notes or the
Subordinated Bridge Facility (other than any such amendment,
modification, waiver or other change that (i) would extend
the maturity or reduce the amount of any payment of principal
thereof or reduce the rate or extend any date for payment of
interest thereon and (ii) does not involve the payment of a
consent fee), (c) amend, modify, waive or otherwise change,
or consent or agree to any amendment, modification, waiver or
other change to, any of the terms of the Preferred Stock
(other than any such amendment, modification, waiver or other
change that (i) would extend the scheduled redemption date or
reduce the amount of any scheduled redemption payment or
reduce the rate or extend any date for payment of dividends
thereon and (ii) does not involve the payment of a consent
fee) or (d) designate any Indebtedness (other than
obligations of the Loan Parties pursuant to the Loan
Documents) as "Designated Senior Indebtedness" for the
purposes of the Senior Subordinated Note Indenture or the
Subordinated Bridge Facility.
7.10 Transactions with Affiliates. Enter into any transaction,
including any purchase, sale, lease or exchange of property,
the rendering of any service or the payment of any
management, advisory or similar fees, with any Affiliate
(other than the Borrower or any Wholly Owned Subsidiary
Guarantor) unless such transaction is (a) otherwise permitted
under this Agreement, (b) in the ordinary course of business
of the Borrower or such Subsidiary, as the case may be, and
(c) upon fair and reasonable terms no less favorable to the
Borrower or such Subsidiary, as the case may be, than it
would obtain in a comparable arm's length transaction with a
Person that is not an Affiliate.
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7.11 Sales/Leaseback Transactions. Enter into any Sale/Leaseback
Transaction, except for any Sale/Leaseback Transaction with
respect to the Acquired Vehicles pursuant to which such
Acquired Vehicles are leased under an operating lease.
7.12 Changes in Fiscal Periods. Permit the fiscal year of the
Borrower to end on a day other than December 31 or change the
Borrower's method of determining fiscal quarters.
7.13 Negative Pledge Clauses. Enter into or suffer to exist or
become effective any agreement that prohibits or limits the
ability of the Borrower or any of its Subsidiaries to create,
incur, assume or suffer to exist any Lien upon any of its
property or revenues, whether now owned or hereafter
acquired, other than (a) this Agreement and the other Loan
Documents and (b) any agreements governing any purchase money
Liens or Capital Lease Obligations otherwise permitted hereby
(in which case, any prohibition or limitation shall only be
effective against the assets financed thereby).
7.14 Clauses Restricting Subsidiary Distributions. Enter into or
suffer to exist or become effective any consensual
encumbrance or restriction on the ability of any Subsidiary
of the Borrower to (a) make Restricted Payments in respect of
any Capital Stock of such Subsidiary held by, or pay any
Indebtedness owed to, the Borrower or any other Subsidiary of
the Borrower, (b) make loans or advances to, or other
Investments in, the Borrower or any other Subsidiary of the
Borrower or (c) transfer any of its assets to the Borrower or
any other Subsidiary of the Borrower, except for such
encumbrances or restrictions existing under or by reason of
(i) any restrictions existing under the Loan Documents, (ii)
restrictions in effect on the date hereof and listed on
Schedule 7.14, (iii) in the case of clause (c) above,
customary non-assignment clauses in leases and other
contracts entered into in the ordinary course of business and
(iv) any restrictions with respect to a Subsidiary imposed
pursuant to an agreement that has been entered into in
connection with the Disposition of all or substantially all
of the Capital Stock or assets of such Subsidiary.
7.15 Lines of Business. Enter into any business, either directly
or through any Subsidiary, except for those businesses in
which the Borrower and its Subsidiaries are engaged on the
date of this Agreement (after giving effect to the
Acquisition) or that are reasonably related or incidental
thereto.
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7.16 Amendments to Acquisition Documents. (a) Amend, supplement or
otherwise modify (pursuant to a waiver or otherwise) the
terms and conditions of the indemnities and licenses
furnished to the Borrower or any of its Subsidiaries pursuant
to the Acquisition Documentation or any other document
delivered by the Seller or any of its affiliates in
connection therewith such that after giving effect thereto
such indemnities or licenses shall be materially less
favorable to the interests of the Loan Parties or the Lenders
with respect thereto or (b) otherwise amend, supplement or
otherwise modify the terms and conditions of the Acquisition
Documentation or any such other documents except for any such
amendment, supplement or modification that could not
reasonably be expected to have a Material Adverse Effect.
SECTION 8. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) the Borrower shall fail to pay any principal of any Loan or
Reimbursement Obligation when due in accordance with the
terms hereof; or the Borrower shall fail to pay any interest
on any Loan or Reimbursement Obligation, or any other amount
payable hereunder or under any other Loan Document, within
five days after any such interest or other amount becomes due
in accordance with the terms hereof; or
(b) any representation or warranty made or deemed made by any
Loan Party herein or in any other Loan Document or that is
contained in any certificate, document or financial or other
statement furnished by it at any time under or in connection
with this Agreement or any such other Loan Document shall
prove to have been inaccurate in any material respect on or
as of the date made or deemed made; or
(c) any Loan Party shall default in the observance or performance
of any agreement contained in clause (i) or (ii) of Section
6.4(a) (with respect to the Borrower only), Section 6.7(a) or
Section 7 of this Agreement or Section 5.7(b) of the
Guarantee and Collateral Agreement; or
(d) any Loan Party shall default in the observance or performance
of any other agreement contained in this Agreement or any
other Loan Document (other than as provided in paragraphs (a)
through (c) of
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this Section), and such default shall continue unremedied for
a period of 30 days after notice to the Borrower from the
Administrative Agent or the Required Lenders; or
(e) the Borrower or any of its Subsidiaries shall (i) default in
making any payment of any principal of any Indebtedness
(including any Guarantee Obligation, but excluding the Loans)
on the scheduled or original due date with respect thereto;
or (ii) default in making any payment of any interest on any
such Indebtedness beyond the period of grace, if any,
provided in the instrument or agreement under which such
Indebtedness was created; or (iii) default in the observance
or performance of any other agreement or condition relating
to any such Indebtedness or contained in any instrument or
agreement evidencing, securing or relating thereto, or any
other event shall occur or condition exist, the effect of
which default or other event or condition is to cause, or to
permit the holder or beneficiary of such Indebtedness (or a
trustee or agent on behalf of such holder or beneficiary) to
cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity or
(in the case of any such Indebtedness constituting a
Guarantee Obligation) to become payable; provided, that a
default, event or condition described in clause (i), (ii) or
(iii) of this paragraph (e) shall not at any time constitute
an Event of Default unless, at such time, one or more
defaults, events or conditions of the type described in
clauses (i), (ii) and (iii) of this paragraph (e) shall have
occurred and be continuing with respect to Indebtedness the
outstanding principal amount of which exceeds in the
aggregate $10,000,000; or
(f) (i) the Borrower or any of its Subsidiaries shall commence
any case, proceeding or other action (A) under any existing
or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief
of debtors, seeking to have an order for relief entered with
respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition
or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian,
conservator or other similar official for it or for all or
any substantial part of its assets, or the Borrower or any of
its Subsidiaries shall make a general assignment for the
benefit of its creditors; or (ii) there shall be commenced
against the Borrower or any of its Subsidiaries any case,
proceeding or other action of a nature referred to in clause
(i) above that (A) results in the entry of an order for
relief or any such adjudication or appointment or (B) remains
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undismissed, undischarged or unbonded for a period of 60
days; or (iii) there shall be commenced against the Borrower
or any of its Subsidiaries any case, proceeding or other
action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any
substantial part of its assets that results in the entry of
an order for any such relief that shall not have been
vacated, discharged, or stayed or bonded pending appeal
within 60 days from the entry thereof; or (iv) the Borrower
or any of its Subsidiaries shall take any action in
furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i),
(ii), or (iii) above; or (v) the Borrower or any of its
Subsidiaries shall generally not, or shall be unable to, or
shall admit in writing its inability to, pay its debts as
they become due; or
(g) (i) any Person shall engage in any non-exempt "prohibited
transaction" (as defined in Section 406 and 408 of ERISA or
Section 4975 of the Code) involving any Plan, (ii) any
"accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to
any Plan or any Lien in favor of the PBGC or a Plan shall
arise on the assets of the Borrower or any Commonly
Controlled Entity, (iii) a Reportable Event shall occur with
respect to, or proceedings shall commence under Title IV of
ERISA to have a trustee appointed, or a trustee shall be
appointed under Title IV of ERISA, to administer or to
terminate, any Single Employer Plan, which Reportable Event
or commencement of proceedings or appointment of a trustee
is, in the reasonable opinion of the Required Lenders, likely
to result in the termination of such Plan for purposes of
Title IV of ERISA, (iv) any Single Employer Plan shall
terminate in a "distress termination" or an "involuntary
termination", as such terms are defined in Title IV of ERISA,
(v) the Borrower or any Commonly Controlled Entity shall, or
in the reasonable opinion of the Required Lenders is likely
to, incur any liability in connection with a withdrawal from,
or the Insolvency or Reorganization of, a Multiemployer Plan
or (vi) any other event or condition shall occur or exist
with respect to a Plan; and in each case in clauses (i)
through (vi) above, such event or condition, together with
all other such events or conditions, if any, could, in the
sole judgment of the Required Lenders, reasonably be expected
to have a Material Adverse Effect; or
(h) one or more judgments or decrees shall be entered against the
Borrower or any of its Subsidiaries involving in the
aggregate a liability (not paid or fully covered by insurance
as to which the
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relevant insurance company has acknowledged coverage) of
$10,000,000 or more, and all such judgments or decrees shall
not have been vacated, discharged, stayed or bonded pending
appeal within 30 days from the entry thereof; or
(i) any of the Security Documents shall cease, for any reason, to
be in full force and effect, or any Loan Party or any
Affiliate of any Loan Party shall so assert, or any Lien
created by any of the Security Documents shall cease to be
enforceable and of the same effect and priority purported to
be created thereby; or
(j) the guarantee contained in Section 2 of the Guarantee and
Collateral Agreement shall cease, for any reason (other than,
with respect to the guarantee of a Subsidiary, (i) as a
result of a merger of such Subsidiary into the Borrower in
accordance with the terms of this Agreement or (ii) as a
result of a release pursuant to Section 8.15(b) of the
Guarantee and Collateral Agreement), to be in full force and
effect or any Loan Party or any Affiliate of any Loan Party
shall so assert; or
(k) (i) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")), excluding the
Permitted Investors, shall at any time become, or obtain
rights (whether by means of warrants, options or otherwise)
to become, the "beneficial owner" (as defined in Rules 13(d)
3 and 13(d) 5 under the Exchange Act), directly or
indirectly, of a percentage (the "Third Party Stock
Percentage") equal to 33-1/3% or more of the Voting Stock of
the Borrower unless at such time (x) the percentage of
outstanding Voting Stock of the Borrower beneficially owned
by the Permitted Investors (determined on a fully diluted
basis) is equal to or greater than the Third Party Stock
Percentage and (y) the Sponsor owns of record and
beneficially at least 35% of the Voting Stock of the Borrower
then owned by the Permitted Investors; (ii) the Sponsor at
any time shall cease to own of record and beneficially an
amount of Voting Stock of the Borrower equal to at least 50%
of the amount of Voting Stock of the Borrower owned by the
Sponsor of record and beneficially as of the Closing Date
immediately after giving effect to the Acquisition; (iii) the
Talley Persons at any time shall cease to own of record and
beneficially an amount of Voting Stock of the Borrower equal
to at least 50% of the amount of Voting Stock of the Borrower
owned by the Talley Persons of record and beneficially as of
the Closing Date immediately after giving effect to the
Acquisition (excluding the
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shares of Voting Stock to be repurchased by the Borrower from
the Talley Persons for $25,000,000 on or about the date of
issuance of the Senior Subordinated Notes); (iv) the Speese
Persons at any time shall cease to own of record and
beneficially an amount of Voting Stock of the Borrower equal
to at least 50% of the amount of Voting Stock of the Borrower
owned by the Speese Persons of record and beneficially as of
the Closing Date immediately after giving effect to the
Acquisition; or (v) a Specified Change of Control shall
occur; or
(l) the Senior Subordinated Notes or the guarantees thereof shall
cease, for any reason, to be validly subordinated to the
Obligations or the obligations of the Subsidiary Guarantors
under the Guarantee and Collateral Agreement, as the case may
be, as provided in the Senior Subordinated Note Indenture, or
any Loan Party, any Affiliate of any Loan Party, the trustee
in respect of the Senior Subordinated Notes or the holders of
at least 25% in aggregate principal amount of the Senior
Subordinated Notes shall so assert;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Borrower,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the other Loan Documents (including all amounts of LC Obligations,
whether or not the beneficiaries of the then outstanding Letters of Credit shall
have presented the documents required thereunder) shall immediately become due
and payable, and (B) if such event is any other Event of Default, either or both
of the following actions may be taken: (i) with the consent of the Required
Lenders, the Administrative Agent may, or upon the request of the Required
Lenders, the Administrative Agent shall, by notice to the Borrower declare the
Revolving Commitments to be terminated forthwith, whereupon the Revolving
Commitments shall immediately terminate; and (ii) with the consent of the
Required Lenders, the Administrative Agent may, or upon the request of the
Required Lenders, the Administrative Agent shall, by notice to the Borrower,
declare the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement and the other Loan Documents (including all
amounts of LC Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents required
thereunder) to be due and payable forthwith, whereupon the same shall
immediately become due and payable. With respect to all Letters of Credit with
respect to which presentment for honor shall not have occurred at the time of an
acceleration pursuant to this paragraph, the Borrower shall at such time deposit
in a cash collateral account opened by the Administrative Agent an amount equal
to the aggregate then undrawn and unexpired amount of such Letters of Credit.
Amounts held in such cash collateral account shall be applied by the
Administrative Agent to the payment of drafts drawn under such Letters of
Credit, and the unused portion thereof after all such Letters of Credit shall
have expired or been fully drawn upon, if any, shall be applied to repay other
obligations of the Borrower hereunder and under the other Loan Documents. After
all such Letters of Credit shall have expired or been fully drawn upon, all
Reimbursement Obligations shall have been satisfied and all other
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obligations of the Borrower hereunder and under the other Loan Documents shall
have been paid in full, the balance, if any, in such cash collateral account
shall be returned to the Borrower (or such other Person as may be lawfully
entitled thereto). Except as expressly provided above in this Section,
presentment, demand, protest and all other notices of any kind (other than
notices expressly required pursuant to this Agreement and any other Loan
Document) are hereby expressly waived by the Borrower.
SECTION 9. THE AGENTS
9.1 Appointment. Each Lender hereby irrevocably designates and
appoints the Administrative Agent as the agent of such Lender
under this Agreement and the other Loan Documents, and each
such Lender irrevocably authorizes the Administrative Agent,
in such capacity, to take such action on its behalf under the
provisions of this Agreement and the other Loan Documents and
to exercise such powers and perform such duties as are
expressly delegated to the Administrative Agent by the terms
of this Agreement and the other Loan Documents, together with
such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in
this Agreement, the Administrative Agent shall not have any
duties or responsibilities, except those expressly set forth
herein, or any fiduciary relationship with any Lender, and no
implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement
or any other Loan Document or otherwise exist against the
Administrative Agent.
9.2 Delegation of Duties. The Administrative Agent may execute
any of its duties under this Agreement and the other Loan
Documents by or through agents or attorneys-in-fact and shall
be entitled to advice of counsel concerning all matters
pertaining to such duties. The Administrative Agent shall not
be responsible for the negligence or misconduct of any agents
or attorneys in-fact selected by it with reasonable care.
9.3 Exculpatory Provisions. Neither any Agent nor any of their
respective officers, directors, employees, agents,
attorneys-in-fact or affiliates shall be (i) liable for any
action lawfully taken or omitted to be taken by it or such
Person under or in connection with this Agreement or any
other Loan Document (except to the extent that any of the
foregoing are found by a final and nonappealable decision of
a court of competent jurisdiction to have resulted from its
or such Person's own gross negligence or willful misconduct)
or (ii) responsible in any manner to any of the Lenders for
any recitals,
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statements, representations or warranties made by any Loan
Party or any officer thereof contained in this Agreement or
any other Loan Document or in any certificate, report,
statement or other document referred to or provided for in,
or received by the Agents under or in connection with, this
Agreement or any other Loan Document or for the value,
validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document or
for any failure of any Loan Party a party thereto to perform
its obligations hereunder or thereunder. The Agents shall not
be under any obligation to any Lender to ascertain or to
inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or
any other Loan Document, or to inspect the properties, books
or records of any Loan Party.
9.4 Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely, and shall be fully protected in
relying, upon any instrument, writing, resolution, notice,
consent, certificate, affidavit, letter, telecopy, telex or
teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel
(including counsel to the Borrower), independent accountants
and other experts selected by the Administrative Agent. The
Administrative Agent may deem and treat the payee of any Note
as the owner thereof for all purposes unless a written notice
of assignment, negotiation or transfer thereof shall have
been filed with the Administrative Agent. The Administrative
Agent shall be fully justified in failing or refusing to take
any action under this Agreement or any other Loan Document
unless it shall first receive such advice or concurrence of
the Required Lenders (or, if so specified by this Agreement,
all Lenders) as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any
and all liability and expense that may be incurred by it by
reason of taking or continuing to take any such action. The
Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement
and the other Loan Documents in accordance with a request of
the Required Lenders (or, if so specified by this Agreement,
all Lenders), and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the
Lenders and all future holders of the Loans.
9.5 Notice of Default. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any
Default or Event of Default hereunder unless the
Administrative Agent has
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received notice from a Lender, the Borrower referring to this
Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". In the
event that the Administrative Agent receives such a notice,
the Administrative Agent shall give notice thereof to the
Lenders. The Administrative Agent shall take such action with
respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders (or, if so
specified by this Agreement, all Lenders); provided that
unless and until the Administrative Agent shall have received
such directions, the Administrative Agent may (but shall not
be obligated to) take such action, or refrain from taking
such action, with respect to such Default or Event of Default
as it shall deem advisable in the best interests of the
Lenders.
9.6 Non-Reliance on Agents and Other Lenders. Each Lender
expressly acknowledges that neither the Agents nor any of
their respective officers, directors, employees, agents,
attorneys-in-fact or affiliates have made any representations
or warranties to it and that no act by any Agent hereinafter
taken, including any review of the affairs of a Loan Party or
any affiliate of a Loan Party, shall be deemed to constitute
any representation or warranty by any Agent to any Lender.
Each Lender represents to the Agents that it has,
independently and without reliance upon any Agent or any
other Lender, and based on such documents and information as
it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property,
financial and other condition and creditworthiness of the
Loan Parties and their affiliates and made its own decision
to make its Loans hereunder and enter into this Agreement.
Each Lender also represents that it will, independently and
without reliance upon any Agent or any other Lender, and
based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit
analysis, appraisals and decisions in taking or not taking
action under this Agreement and the other Loan Documents, and
to make such investigation as it deems necessary to inform
itself as to the business, operations, property, financial
and other condition and creditworthiness of the Loan Parties
and their affiliates. Except for notices, reports and other
documents expressly required to be furnished to the Lenders
by the Administrative Agent hereunder, the Administrative
Agent shall not have any duty or responsibility to provide
any Lender with any credit or other information concerning
the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of any Loan Party
or any affiliate of a Loan Party that may come into the
possession of the Administrative
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Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.
9.7 Indemnification. The Lenders agree to indemnify each Agent in
its capacity as such (to the extent not reimbursed by the
Borrower and without limiting the obligation of the Borrower
to do so), ratably according to their respective Aggregate
Exposure Percentages in effect on the date on which
indemnification is sought under this Section (or, if
indemnification is sought after the date upon which the
Commitments shall have terminated and the Loans shall have
been paid in full, ratably in accordance with such Aggregate
Exposure Percentages immediately prior to such date), from
and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever that may at
any time (whether before or after the payment of the Loans)
be imposed on, incurred by or asserted against such Agent in
any way relating to or arising out of, the Commitments, this
Agreement, any of the other Loan Documents or any documents
contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby or any action
taken or omitted by such Agent under or in connection with
any of the foregoing; provided that no Lender shall be liable
for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements that are found by a
final and nonappealable decision of a court of competent
jurisdiction to have resulted from such Agent's gross
negligence or willful misconduct. The agreements in this
Section shall survive the payment of the Loans and all other
amounts payable hereunder.
9.8 Agent in Its Individual Capacity. Each Agent and its
affiliates may make loans to, accept deposits from and
generally engage in any kind of business with any Loan Party
as though such Agent was not an Agent. With respect to its
Loans made or renewed by it and with respect to any Letter of
Credit issued or participated in by it, each Agent shall have
the same rights and powers under this Agreement and the other
Loan Documents as any Lender and may exercise the same as
though it were not an Agent, and the terms "Lender" and
"Lenders" shall include each Agent in its individual
capacity.
9.9 Successor Administrative Agent. The Administrative Agent may
resign as Administrative Agent upon 10 days' notice to the
Lenders and the Borrower. If the Administrative Agent shall
resign as Administrative Agent under this Agreement and the
other Loan
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Documents, then the Required Lenders shall appoint from among
the Lenders a successor agent for the Lenders, which
successor agent shall (unless an Event of Default under
Section 8(a) or Section 8(f) with respect to the Borrower
shall have occurred and be continuing) be subject to approval
by the Borrower (which approval shall not be unreasonably
withheld or delayed), whereupon such successor agent shall
succeed to the rights, powers and duties of the
Administrative Agent, and the term "Administrative Agent"
shall mean such successor agent effective upon such
appointment and approval, and the former Administrative
Agent's rights, powers and duties as Administrative Agent
shall be terminated, without any other or further act or deed
on the part of such former Administrative Agent or any of the
parties to this Agreement or any holders of the Loans. If no
successor agent has accepted appointment as Administrative
Agent by the date that is 10 days following a retiring
Administrative Agent's notice of resignation, the retiring
Administrative Agent's resignation shall nevertheless
thereupon become effective and the Lenders shall assume and
perform all of the duties of the Administrative Agent
hereunder until such time, if any, as the Required Lenders
appoint a successor agent as provided for above. After any
retiring Administrative Agent's resignation as Administrative
Agent, the provisions of this Section 9 shall inure to its
benefit as to any actions taken or omitted to be taken by it
while it was Administrative Agent under this Agreement and
the other Loan Documents.
9.10 Authorization to Release Guarantees and Liens.
Notwithstanding anything to the contrary contained herein or
in any other Loan Document, the Administrative Agent is
hereby irrevocably authorized by each of the Lenders (without
requirement of notice to or consent of any Lender except as
expressly required by Section 10.1) to take any action
requested by the Borrower having the effect of releasing any
Collateral or guarantee obligations to the extent necessary
to permit consummation of any transaction not prohibited by
any Loan Document or that has been consented to in accordance
with Section 10.1.
9.11 Documentation Agent and Syndication Agent. Neither the
Documentation Agent nor the Syndication Agent shall have any
duties or responsibilities hereunder in its capacity as such.
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SECTION 10. MISCELLANEOUS
10.1 Amendments and Waivers. Neither this Agreement, any other
Loan Document, nor any terms hereof or thereof may be
amended, supplemented or modified except in accordance with
the provisions of this Section 10.1. The Required Lenders and
each Loan Party party to the relevant Loan Document may, or,
with the written consent of the Required Lenders, the
Administrative Agent and each Loan Party party to the
relevant Loan Document may, from time to time, (a) enter into
written amendments, supplements or modifications hereto and
to the other Loan Documents for the purpose of adding any
provisions to this Agreement or the other Loan Documents or
changing in any manner the rights of the Lenders or of the
Loan Parties hereunder or thereunder or (b) waive, on such
terms and conditions as the Required Lenders or the
Administrative Agent, as the case may be, may specify in such
instrument, any of the requirements of this Agreement or the
other Loan Documents or any Default or Event of Default and
its consequences; provided, however, that no such waiver and
no such amendment, supplement or modification shall (i)
forgive the principal amount or extend the final scheduled
date of maturity of any Loan, extend the scheduled date of
any amortization payment in respect of any Term Loan, reduce
the stated rate of any interest or fee payable hereunder or
extend the scheduled date of any payment thereof, or increase
the amount or extend the expiration date of any Lender's
Revolving Commitment or LC/MD Commitment, in each case
without the consent of each Lender directly affected thereby;
(ii) amend, modify or waive any provision of this Section
10.1 or reduce any percentage specified in the definition of
Required Lenders or Required Prepayment Lenders, consent to
the assignment or transfer by the Borrower of any of its
rights and obligations under this Agreement and the other
Loan Documents, release all or substantially all of the
Collateral or release all or substantially all of the
Subsidiary Guarantors from their obligations under the
Guarantee and Collateral Agreement, in each case without the
written consent of all Lenders; (iii) reduce the percentage
specified in the definition of Majority Facility Lenders with
respect to any Facility without the written consent of all
Lenders under such Facility; (iv) amend, modify or waive any
provision of Section 9 without the written consent of the
Administrative Agent; (v) amend, modify or waive any
provision of Section 2.3 or 2.6 without the written consent
of the Swingline Lender; or (vi) amend, modify or waive any
provision of Section 3 without the written consent of the
Issuing Lender. Any such waiver and any such amendment,
supplement or modification shall apply equally to each of the
Lenders and shall be binding upon the Loan Parties, the
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Lenders, the Administrative Agent and all future holders of
the Loans. In the case of any waiver, the Loan Parties, the
Lenders and the Administrative Agent shall be restored to
their former position and rights hereunder and under the
other Loan Documents, and any Default or Event of Default
waived shall be deemed to be cured and not continuing; but no
such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right consequent thereon.
10.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing
(including by telecopy), and, unless otherwise expressly
provided herein, shall be deemed to have been duly given or
made when delivered, or three Business Days after being
deposited in the mail, postage prepaid, or, in the case of
telecopy notice, when received, addressed as follows in the
case of the Borrower and the Administrative Agent, and as set
forth in an administrative questionnaire delivered to the
Administrative Agent in the case of the Lenders, or to such
other address as may be hereafter notified by the respective
parties hereto:
The Borrower: Renters Choice, Inc.
13800 Montfort Drive
Suite 300
Dallas, Texas 75240
Attention: J. Ernest Talley
Telecopy: (972) 701-0360
Telephone: (972) 419-2611
with a copy to: Winstead Sechrest & Minick P.C.
1201 Elm Street
5400 Renaissance Tower
Dallas, Texas 75270
Attention: Thomas W. Hughes
Telecopy: (214) 745-5390
Telephone: (214) 745-5201
The Administrative Agent: The Chase Manhattan Bank
One Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Attention: Agency Services,
Janet Belden
Telecopy: (212) 552-5658
Telephone: (212) 552-7277
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with copies to: Chase Securities Inc.
270 Park Avenue, 4th Floor
New York, New York 10017
Attention: Kathy Duncan
Telecopy: (212) 972-0009
Telephone: (212) 270-5808
and
Chase Manhattan Bank Delaware
1201 Market Street, 8th Floor
Wilmington, Delaware 19801
Attention: Letter of Credit Department,
Michael Handago
Telecopy: (302) 428-3390 / 984-4904
Telephone: (302) 428-3311
provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders shall not be effective until received.
10.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent
or any Lender, any right, remedy, power or privilege
hereunder or under the other Loan Documents shall operate as
a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers
and privileges provided by law.
10.4 Survival of Representations and Warranties. All
representations and warranties made hereunder, in the other
Loan Documents and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall
survive the execution and delivery of this Agreement and the
making of the Loans and other extensions of credit hereunder.
10.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay
or reimburse the Administrative Agent for all its
out-of-pocket costs and expenses incurred in connection with
the development, preparation and execution of, and any
amendment, supplement or modification to,
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this Agreement and the other Loan Documents and any other
documents prepared in connection herewith or therewith, and
the consummation and administration of the transactions
contemplated hereby and thereby, including the reasonable
fees and disbursements of counsel to the Administrative Agent
and filing and recording fees and expenses, with statements
with respect to the foregoing to be submitted to the Borrower
prior to the Closing Date (in the case of amounts to be paid
on the Closing Date) and from time to time thereafter on a
quarterly basis or such other periodic basis as the
Administrative Agent shall deem appropriate, (b) to pay or
reimburse each Lender and the Administrative Agent (in the
case of each Lender, after the occurrence and during the
continuance of an Event of Default) for all its costs and
expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement, the other
Loan Documents and any such other documents, including the
fees and disbursements of counsel (including the allocated
fees and expenses of in-house counsel (but not both outside
and in-house counsel)) to each Lender and of counsel to the
Administrative Agent, (c) to pay, indemnify, and hold each
Lender and the Administrative Agent harmless from, any and
all recording and filing fees and any and all liabilities
with respect to, or resulting from any delay in paying,
stamp, excise and other taxes, if any, that may be payable or
determined to be payable in connection with the execution and
delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or
modification of, or any waiver or consent under or in respect
of, this Agreement, the other Loan Documents and any such
other documents, and (d) to pay, indemnify, and hold each
Lender and the Administrative Agent and their respective
officers, directors, trustees, employees, affiliates, agents
and controlling persons (each, an "Indemnitee") harmless from
and against any and all other liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever
with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the other
Loan Documents and any such other documents, including any of
the foregoing relating to the use of proceeds of the Loans or
the violation of, noncompliance with or liability under, any
Environmental Law applicable to the operations of the
Borrower any of its Subsidiaries or any of the Properties and
the reasonable fees and expenses of legal counsel in
connection with claims, actions or proceedings by any
Indemnitee against any Loan Party under any Loan Document
(all the foregoing in this clause (d), collectively, the
"Indemnified Liabilities"), provided, that the
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Borrower shall have no obligation hereunder to any Indemnitee
with respect to Indemnified Liabilities to the extent such
Indemnified Liabilities arise from the gross negligence or
willful misconduct of such Indemnitee. Without limiting the
foregoing, and to the extent permitted by applicable law, the
Borrower agrees not to assert and to cause its Subsidiaries
not to assert, and hereby waives and agrees to cause its
Subsidiaries to so waive, all rights for contribution or any
other rights of recovery with respect to all claims, demands,
penalties, fines, liabilities, settlements, damages, costs
and expenses of whatever kind or nature, under or related to
Environmental Laws, that any of them might have by statute or
otherwise against any Indemnitee. All amounts due under this
Section 10.5 shall be payable not later than 10 Business Days
after written demand therefor. Statements payable by the
Borrower pursuant to this Section 10.5 shall be submitted to
Danny Z. Wilbanks (Telephone No. 972-419-2652) (Telecopy No.
972-701-0360), at the address of the Borrower set forth in
Section 10.2, or to such other Person or address as may be
hereafter designated by the Borrower in a written notice to
the Administrative Agent. The agreements in this Section 10.5
shall survive repayment of the Loans and all other amounts
payable hereunder.
10.6 Successors and Assigns; Participations and Assignments. This
Agreement shall be binding upon and inure to the benefit of
the Borrower, the Lenders, the Administrative Agent, all
future holders of the Loans and their respective successors
and assigns, except that the Borrower may not assign or
transfer any of its rights or obligations under this
Agreement without the prior written consent of each Lender.
(b) Any Lender may, without the consent of the Borrower, in
accordance with applicable law, at any time sell to one
or more banks, financial institutions or other entities
(each, a "Participant") participating interests in any
Loan owing to such Lender, any Commitment of such
Lender or any other interest of such Lender hereunder
and under the other Loan Documents. In the event of any
such sale by a Lender of a participating interest to a
Participant, such Lender's obligations under this
Agreement to the other parties to this Agreement shall
remain unchanged, such Lender shall remain solely
responsible for the performance thereof, such Lender
shall remain the holder of any such Loan for all
purposes under this Agreement and the other Loan
Documents, and the
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Borrower and the Administrative Agent shall continue to
deal solely and directly with such Lender in connection
with such Lender's rights and obligations under this
Agreement and the other Loan Documents. In no event
shall any Participant under any such participation have
any right to approve any amendment or waiver of any
provision of any Loan Document, or any consent to any
departure by any Loan Party therefrom, except to the
extent that such amendment, waiver or consent would
reduce the principal of, or interest on, the Loans or
any fees payable hereunder, or postpone the date of the
final maturity of the Loans, in each case to the extent
subject to such participation. The Borrower agrees that
if amounts outstanding under this Agreement and the
Loans are due or unpaid, or shall have been declared or
shall have become due and payable upon the occurrence
of an Event of Default, each Participant shall, to the
maximum extent permitted by applicable law, be deemed
to have the right of setoff in respect of its
participating interest in amounts owing under this
Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a
Lender under this Agreement, provided that, in
purchasing such participating interest, such
Participant shall be deemed to have agreed to share
with the Lenders the proceeds thereof as provided in
Section 10.7(a) as fully as if it were a Lender
hereunder. The Borrower also agrees that each
Participant shall be entitled to the benefits of
Sections 2.18, 2.19 and 2.20 with respect to its
participation in the Commitments and the Loans
outstanding from time to time as if it was a Lender;
provided that, in the case of Section 2.19, such
Participant shall have complied with the requirements
of said Section and provided, further, that no
Participant shall be entitled to receive any greater
amount pursuant to any such Section than the transferor
Lender would have been entitled to receive in respect
of the amount of the participation transferred by such
transferor Lender to such Participant had no such
transfer occurred.
(c) Any Lender (an "Assignor") may, in accordance with
applicable law, at any time and from time to time
assign to any Lender, any affiliate thereof or an
Approved Fund with respect thereto or, with the consent
of the Borrower and the Administrative Agent (which, in
each case, shall not be unreasonably withheld or
delayed), to an additional bank, financial institution
or other entity (an "Assignee") all or any part of
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its rights and obligations under this Agreement
pursuant to an Assignment and Acceptance, executed by
such Assignee, such Assignor and any other Person whose
consent is required pursuant to this paragraph, and
delivered to the Administrative Agent for its
acceptance and recording in the Register; provided that
no such assignment to an Assignee (other than any
Lender, any affiliate thereof or an Approved Fund with
respect thereto) shall be in an aggregate principal
amount of less than $5,000,000 (other than in the case
of an assignment of all of a Lender's interests under
this Agreement), unless otherwise agreed by the
Borrower and the Administrative Agent. Any such
assignment need not be ratable as among the Facilities.
Upon such execution, delivery, acceptance and
recording, from and after the effective date determined
pursuant to such Assignment and Acceptance, (x) the
Assignee thereunder shall be a party hereto and, to the
extent provided in such Assignment and Acceptance, have
the rights and obligations of a Lender hereunder with a
Commitment and/or Loans as set forth therein, and (y)
the Assignor thereunder shall, to the extent provided
in such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of
an Assignment and Acceptance covering all of an
Assignor's rights and obligations under this Agreement,
such Assignor shall cease to be a party hereto).
Notwithstanding any provision of this Section 10.6, the
consent of the Borrower shall not be required for any
assignment that occurs when an Event of Default
pursuant to Section 8(f) shall have occurred and be
continuing with respect to the Borrower.
(d) The Administrative Agent shall, on behalf of the
Borrower, maintain at its address referred to in
Section 10.2 a copy of each Assignment and Acceptance
delivered to it and a register (the "Register") for the
recordation of the names and addresses of the Lenders
and the Commitment of, and the principal amount of the
Loans owing to, each Lender from time to time. The
entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrower, each other
Loan Party, the Administrative Agent and the Lenders
shall treat each Person whose name is recorded in the
Register as the owner of the Loans and any Notes
evidencing the Loans recorded therein for all purposes
of this Agreement. Any assignment of any Loan, whether
or not evidenced by a Note, shall be effective only
upon appropriate entries with respect thereto being
made in the Register (and each Note shall expressly so
provide).
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(e) Upon its receipt of an Assignment and Acceptance
executed by an Assignor, an Assignee and any other
Person whose consent is required by Section 10.6(c),
together with payment to the Administrative Agent of a
registration and processing fee of $3,500, the
Administrative Agent shall (i) promptly accept such
Assignment and Acceptance and (ii) record the
information contained therein in the Register on the
effective date determined pursuant thereto; provided,
however, that no such fee shall be payable in the case
of an assignment by a Lender to an affiliate of such
Lender or an Approved Fund with respect to such Lender;
and provided, further, that, in the case of
contemporaneous assignments by a Lender to more than
one fund managed by the same investment advisor (which
funds are not then Lenders hereunder), only a single
such fee shall be payable for all such contemporaneous
assignments.
(f) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this Section 10.6
concerning assignments of Loans and Notes relate only
to absolute assignments and that such provisions do not
prohibit assignments creating security interests,
including any pledge or assignment by a Lender of any
Loan or Note to any Federal Reserve Bank in accordance
with applicable law.
(g) The Borrower, upon receipt of written notice from the
relevant Lender, agrees to issue Notes to any Lender
requiring Notes to facilitate transactions of the type
described in paragraph (f) above.
10.7 Adjustments; Setoff. Except to the extent that this Agreement
expressly provides for payments to be allocated to a
particular Lender or to the Lenders under a particular
Facility, if any Lender (a "Benefitted Lender") shall, at any
time after the Loans and other amounts payable hereunder
shall immediately become due and payable pursuant to Section
8, receive any payment of all or part of the Obligations
owing to it, or receive any collateral in respect thereof
(whether voluntarily or involuntarily, by setoff, pursuant to
events or proceedings of the nature referred to in Section
8(f), or otherwise), in a greater proportion than any such
payment to or collateral received by any other Lender, if
any, in respect of the Obligations owing to such other
Lender, such Benefitted Lender shall purchase for cash from
the other Lenders a participating interest in such portion of
the Obligations owing to each such other Lender, or shall
provide such other Lenders with the benefits of any such
collateral, as shall be necessary to cause such Benefitted
Lender to share the excess payment or benefits of such
collateral ratably with each of the
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Lenders; provided, however, that if all or any portion of
such excess payment or benefits is thereafter recovered from
such Benefitted Lender, such purchase shall be rescinded, and
the purchase price and benefits returned, to the extent of
such recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right,
without prior notice to the Borrower, any such notice
being expressly waived by the Borrower to the extent
permitted by applicable law, upon any amount becoming
due and payable by the Borrower hereunder (whether at
the stated maturity, by acceleration or otherwise), to
set off and appropriate and apply against such amount
any and all deposits (general or special, time or
demand, provisional or final), in any currency, and any
other credits, indebtedness or claims, in any currency,
in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or
owing by such Lender or any branch or agency thereof to
or for the credit or the account of the Borrower. Each
Lender agrees promptly to notify the Borrower and the
Administrative Agent after any such setoff and
application made by such Lender, provided that the
failure to give such notice shall not affect the
validity of such setoff and application.
10.8 Counterparts. This Agreement may be executed by one or more
of the parties to this Agreement on any number of separate
counterparts, and all of said counterparts taken together
shall be deemed to constitute one and the same instrument.
Delivery of an executed signature page of this Agreement by
facsimile transmission shall be effective as delivery of a
manually executed counterpart hereof. A set of the copies of
this Agreement signed by all the parties shall be lodged
with the Borrower and the Administrative Agent.
10.9 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other
jurisdiction.
10.10 Integration. This Agreement and the other Loan Documents
represent the agreement of the Borrower, the Administrative
Agent and the Lenders with respect to the subject matter
hereof, and there
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are no promises, undertakings, representations or warranties
by the Administrative Agent or any Lender relative to
subject matter hereof not expressly set forth or referred to
herein or in the other Loan Documents.
10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF
THE STATE OF NEW YORK.
10.12 Submission To Jurisdiction; Waivers. The Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action
or proceeding relating to this Agreement and the other
Loan Documents to which it is a party, or for
recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of
the courts of the State of New York, the courts of the
United States for the Southern District of New York,
and appellate courts from any thereof;
(b) consents that any such action or proceeding may be
brought in such courts and waives any objection that it
may now or hereafter have to the venue of any such
action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient
court and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially
similar form of mail), postage prepaid, to the Borrower
at its address set forth in Section 10.2 or at such
other address of which the Administrative Agent shall
have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted
by law or shall limit the right to sue in any other
jurisdiction; and
(e) waives, to the maximum extent not prohibited by law,
any right it may have to claim or recover in any legal
action or proceeding referred to in this Section any
special, exemplary, punitive or consequential damages.
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10.13 Acknowledgements. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other
Loan Documents;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to the Borrower
arising out of or in connection with this Agreement or
any of the other Loan Documents, and the relationship
between Administrative Agent and Lenders, on one hand,
and the Borrower, on the other hand, in connection
herewith or therewith is solely that of debtor and
creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the
transactions contemplated hereby among the Lenders or
among the Borrower and the Lenders.
10.14 Confidentiality. Each of the Administrative Agent and each
Lender agrees to keep confidential all non-public
information provided to it by any Loan Party pursuant to
this Agreement that is designated by such Loan Party as
confidential; provided that nothing herein shall prevent the
Administrative Agent or any Lender from disclosing any such
information (a) to the Administrative Agent, any other
Lender or any affiliate or Approved Fund of any Lender, (b)
to any Transferee or prospective Transferee that agrees to
comply with the provisions of this Section, (c) to its
employees, directors, trustees, agents, attorneys,
accountants, investment advisors and other professional
advisors or those of any of its affiliates, (d) upon the
request or demand of any Governmental Authority, (e) in
response to any order of any court or other Governmental
Authority or as may otherwise be required pursuant to any
Requirement of Law, (f) if requested or required to do so in
connection with any litigation or similar proceeding,
provided that in the case of any such request or
requirement, the Administrative Agent or Lender (as
applicable) so requested or required to make such disclosure
shall as soon as practicable notify the Borrower thereof,
(g) that has been publicly disclosed, (h) to the National
Association of Insurance Commissioners or any similar
organization or any nationally recognized rating agency that
requires access to information about a Lender's investment
portfolio in connection with ratings issued with respect to
such Lender, or (i) in connection with the exercise of any
remedy hereunder or under any other Loan Document.
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<PAGE> 117
10.15 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE
AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND
FOR ANY COUNTERCLAIM THEREIN.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
RENTERS CHOICE, INC.
By:
------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, as
Administrative Agent and as a Lender
By:
------------------------------------
Name:
Title:
NATIONSBANK, N.A., as Syndication Agent
and as a Lender
By:
------------------------------------
Name:
Title:
COMERICA BANK, as Documentation Agent
and as a Lender
By:
------------------------------------
Name:
Title:
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<PAGE> 119
Annex A
PRICING GRID
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Consolidated Applicable Margin for Applicable Margin for Commitment
Leverage Ratio Eurodollar Loans ABR Loans Fee Rate
---------------------------------------------------------------------
A/RC/LCMD B C A/RC/LCMD B C
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Greater than or 2.25% 2.50% 2.75% 1.25% 1.50% 1.75% 0.500%
equal to
4.00 to 1.0
Greater than or 2.00% 2.25% 2.50% 1.00% 1.25% 1.50% 0.375%
equal to
3.50 to 1.0
and less than
4.00 to 1.0
Greater than or 1.75% 2.25% 2.50% 0.75% 1.25% 1.50% 0.375%
equal to
3.00 to 1.0
and less than
3.50 to 1.0
Greater than or 1.50% 2.00% 2.25% 0.50% 1.00% 1.25% 0.300%
equal to
2.50 to 1.0
and less than
3.00 to 1.0
Less than 1.25% 1.75% 2.00% 0.25% 0.75% 1.00% 0.250%
2.50 to 1.0
- ---------------------------------------------------------------------------------------------------
</TABLE>
As used above, "A/RC/LCMD" refers to Tranche A Term Loans, Revolving
Credit Loans, Swing Line Loans and LC/MD Loans, "B" refers to Tranche B Term
Loans and "C" refers to Tranche C Term Loans.
Changes in the Applicable Margin resulting from changes in the
Consolidated Leverage Ratio shall become effective on the date (the "Adjustment
Date") on which financial statements are delivered to the Lenders pursuant to
Section 6.1 (but in any event not later than the 45th day after the end of each
of the first three quarterly periods of each fiscal year or the 90th day after
the end of each fiscal year, as the case may be) and shall remain in effect
until the next change to be effected pursuant to this paragraph. If any
financial statements referred to above are not delivered within the time periods
specified above, then, until such financial statements are delivered, the
Consolidated Leverage Ratio as at the end of the fiscal period that would have
been covered thereby shall for the purposes of this definition be deemed to be
greater than 4.00 to 1.0. In addition, at any time prior to the first Adjustment
Date occurring after two full fiscal quarters have been completed after the
Closing Date and at all times while an Event of Default shall have occurred and
be continuing, the Consolidated Leverage Ratio shall for the purposes of this
definition be deemed to be greater than 4.00 to 1.0. Each determination of the
Consolidated Leverage Ratio pursuant to this pricing grid shall be made with
respect to (or, in the case of Consolidated Funded Debt, as at the end of) the
period of four consecutive fiscal quarters of the Borrower ending at the end of
the period covered by the relevant financial statements.
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<PAGE> 1
EXHIBIT 10.21
DRAFT: AUGUST 5, 1998
STOCKHOLDERS AGREEMENT
OF RENTERS CHOICE, INC.
STOCKHOLDERS AGREEMENT (the "Agreement"), dated as of August
5 1998, by and among (i) each of Apollo Investment Fund IV, L.P., a Delaware
limited partnership, and Apollo Overseas Partners IV, L.P., an exempted limited
partnership registered in the Cayman Islands acting through its general partner
(individually and collectively with their Permitted Transferees (defined
below), the "Purchaser"), (ii) J. Ernest Talley, an individual ("Talley"),
(iii) Mark E. Speese, an individual ("Speese"), (iv) Renters Choice, Inc., a
Delaware corporation (the "Company"), and (v) each other Person (defined below)
who becomes a party to this Agreement in accordance with the terms hereof.
W I T N E S S E T H:
WHEREAS, this Agreement shall become effective (the "Effective
Date") on the date of, and simultaneously with, the closing under the Stock
Purchase Agreement, dated as of August 5, 1998, between the Company and the
Purchaser (the "Stock Purchase Agreement");
WHEREAS, on the Effective Date, (i) the authorized capital
stock of the Company will consist of 50,000,000 shares of common stock, $.01
par value (the "Common Stock"), and 5,000,000 shares of preferred stock, $.01
par value (the "Preferred Stock") of which ______ shares will be designated
Series A Preferred Stock, $.01 par value (the "Series A Preferred Stock"), and
_________ shares will be designated Series B Preferred Stock, $.01 par value
(the "Series B Preferred Stock" and together with the Series A Preferred Stock,
the "Series A and B Preferred Stock") and (ii) the issued and outstanding
capital stock of the Company will consist of _____________ shares of Common
Stock, 134,414 shares of Series A Preferred Stock and 115,586 shares of Series
B Preferred Stock, with ___________ shares of Common Stock reserved for
issuance upon the exercise of certain stock options and upon conversion of the
Series A and B Preferred Stock;
WHEREAS, on the Effective Date (i) the Purchaser shall
beneficially own 250,000 shares of Preferred Stock, and (ii) the Management
Stockholders shall beneficially own 8,421,697 shares of Common Stock.
WHEREAS, the parties hereto desire to restrict the sale,
assignment, transfer, encumbrance or other disposition of the Shares (as
defined below), including both issued and outstanding Shares as well as Shares
that may be issued or otherwise acquired hereafter, to provide for certain
rights and obligations in respect to the Shares and the Company as hereinafter
provided.
NOW THEREFORE, the parties hereto agree as follows:
<PAGE> 2
ARTICLE I
DEFINITIONS
Section 1. Definitions. As used in
this Agreement, the following terms
have the following meanings:
"Affiliate" as applied to any specified Person, shall mean any
other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person and, in the case
of a Person who is an individual, shall include (i) members of such specified
Person's immediate family (as defined in Instruction 2 of Item 404(a) of
Regulation S-K under the Securities Act) and (ii) trusts, the trustee and all
beneficiaries of which are such specified Person or members of such Person's
immediate family as determined in accordance with the foregoing clause (i). For
the purposes of this definition, control when used with respect to any Person
means the power to direct the management and policies of such person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing. Notwithstanding the foregoing, the
Purchaser and its Affiliates shall not be deemed Affiliates of the Company for
purposes of this Agreement.
"Apollo Nominees" shall have the meaning set forth in Section
4. l(a).
"beneficial owner" of a security shall mean any person who,
directly or indirectly, through any contract, arrangement, understanding,
relationship, or otherwise has (i) the power to vote, or to direct the voting
of, such security or (ii) the power to dispose, or to direct the disposition
of, such security.
"Board of Directors" shall mean the Board of Directors of the
Company.
"Business Day" shall mean each day other than Saturdays,
Sundays and days when commercial banks are authorized to be closed for business
in New York, New York.
"Certificates of Designations" shall mean the Certificates of
Designations of the Series A and B Preferred Stock in the forms attached as
exhibits to the Stock Purchase Agreement.
"Charter Documents" shall mean the Amended and Restated
Certificate of Incorporation and Amended and Restated By-Laws of the Company,
each as amended to date, attached hereto as Exhibits A and B, respectively.
"Commission" shall mean the United States Securities and
Exchange Commission.
2
<PAGE> 3
"Common Stock" shall have the meaning set forth in the
recitals.
"Company" shall have the meaning set forth in the preamble.
"Company Nominees" shall have the meaning set forth in Section
4.1(a).
"Credit Agreements" shall mean (i) that certain Credit
Agreement dated August 5, 1998 by and among the Company, Comerica Bank,
NationsBank and The Chase Manhattan Bank and (ii) that certain Senior
Subordinated Credit Agreement dated August 5, 1998 by and among the Company,
The Chase Manhattan Bank and Chase Securities Inc., as such may be amended from
time to time.
"Effective Date" shall have the meaning set forth in the
recitals.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
"Indebtedness" shall mean with respect to any person, without
duplication, all liabilities of such person (a) for borrowed money (whether or
not the recourse of the lender is to the whole of the assets of such person or
only to a portion thereof), (b) evidenced by bonds, notes, debentures or
similar instruments or representing the balance deferred and unpaid of the
purchase price of any property (other than any such balance that represents an
account payable or any other monetary obligation to a trade creditor (whether
or not an Affiliate)), or (c) for the payment of money relating to a
capitalized lease obligation.
"IRR" shall have the meaning set forth in Section 4.2(b).
"Management Stockholders" shall mean Talley and Speese and any
of their respective Permitted Transferees.
"MD&A" shall mean a management's discussion and analysis of
the Company's financial condition and results of operation comparable to the
discussion that is required to be included in periodic reports filed under the
Exchange Act.
"Notices" shall have the meaning set forth in Section 6.5.
"pecuniary interest" in any security shall mean the
opportunity, directly or indirectly, to profit or share in any profit derived
from a transaction in such security, and shall include securities owned by an
individual's spouse or issue or any trust solely for the benefit of such
individual, spouse or issue.
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"Permitted Transferee" shall mean:
(a) in the case of the Purchaser (i) any officer,
director or partner of, or Person controlling, the Purchaser, (ii) any other
Person that is (x) an Affiliate of the general partners, investment managers or
investment advisors of the Purchaser, (y) an Affiliate of the Purchaser or a
Permitted Transferee of an Affiliate or (z) an investment fund, investment
account or investment entity whose investment manager, investment advisor or
general partner thereof is the Purchaser or a Permitted Transferee of the
Purchaser or (iii) if a Permitted Transferee of a Person set forth in the
foregoing clauses (i) and (ii) is an individual, (x) any spouse or issue of
such individual, or any trust solely for the benefit of such individual, spouse
or issue, and (y) upon such individual's death, any Person to whom Shares are
transferred in accordance with the laws of descent and/or testamentary
distribution, in each case in a bona fide distribution or other transaction not
intended to avoid the provisions of this Agreement;
(b) in the case of any Management Stockholder,
(i) any Person that is solely controlled by such Management Stockholder, (ii)
upon a bona fide liquidation of, or a bona fide withdrawal from, such
Management Stockholder, in each case, not intended to avoid the provisions of
this Agreement, the shareholders, partners or principals, as the case may be,
of such Management Stockholder, or (iii) if such Management Stockholder is an
individual, (x) any spouse or issue of such individual, or any trust solely for
the benefit of such individual, spouse or issue, and (y) upon such individual's
death, any Person to whom Shares are transferred in accordance with the laws of
descent and/or testamentary distribution; and
(c) any Person who is a party to this Agreement.
"Person" shall mean an individual or a corporation, limited
liability company, partnership, trust, or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Preferred Stock" shall have the meaning set forth in the
recitals.
"Purchaser" shall have the meaning set forth in the preamble.
"Registration Rights Agreements" shall mean the Series A
Registration Rights Agreement and the Series B Registration Rights Agreement,
each dated as of the date hereof, by and between the Company and the Purchaser,
attached hereto as Exhibits C and D, respectively.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
"Series A and B Preferred Stock" shall have the meaning set
forth in the recitals.
"Series A Preferred Stock" shall have the meaning set forth in
the recitals.
"Series B Preferred Stock" shall have the meaning set forth in
the recitals.
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"Shares" shall mean, collectively, the Common Stock and the
Preferred Stock, whether now owned or acquired after the date hereof. Whenever
this Agreement refers to a number or percentage of Shares, such number or
percentage shall be calculated as if each of the Shares had been exchanged or
converted into shares of Common Stock immediately prior to such calculation
regardless of the existence of any restrictions on such exchange or conversion.
"Speese Included Shares" shall mean those 2,528,432 shares of
Common Stock beneficially owned by Speese as of the Effective Date.
"Stock Purchase Agreement" shall have the meaning set forth in
the recitals.
"Subsidiary" shall mean, with respect to any Person, (a) a
corporation a majority of whose capital stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by a Subsidiary of such Person, or by such Person and one or
more Subsidiaries of such Person, (b) a partnership in which such Person or a
Subsidiary of such Person is, at the date of determination, a general partner
of such partnership, or (c) any other Person (other than a corporation) in
which such Person, a Subsidiary of such Person or such Person and one or more
Subsidiaries of such Person, directly or indirectly, at the date of
determination thereof, has (i) at least a majority ownership interest or (ii)
the power to elect or direct the election of the directors or other governing
body of such Person.
"Talley Included Shares" shall mean those 5,893,265 shares of
Common Stock beneficially owned by Talley as of the Effective Date.
"Transfer" shall mean (i) when used as a noun: any direct or
indirect transfer, sale, assignment, pledge, hypothecation, encumbrance or
other disposition and (ii) when used as a verb: to directly or indirectly
transfer, sell, assign, pledge, hypothecate, encumber, or otherwise dispose of;
provided, however, Transfer shall not include a pledge in connection with a
recourse, bona fide loan transaction that is not intended to avoid the
provisions of this Agreement.
"Transferee" shall mean any Person to whom Shares have been
Transferred in compliance with the terms of this Agreement.
ARTICLE II
RESTRICTIONS ON TRANSFERS
Section 1. Transfers in Accordance with
this Agreement. Any attempt to
Transfer, or purported Transfer of,
any of the Talley Included Shares or
the Speese Included Shares in
violation of the terms of this
Agreement shall be null and void and
the Company shall not register upon
its books, and shall direct its
transfer agent not to register on
its books any such Transfer. A copy
of this Agreement shall be filed
with the
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Secretary of the Company and the
Company's transfer agent and kept
with the records of the Company.
Section 2. Agreement to be Bound.
(a) No party hereto (other than the Company, the
Purchaser and their Permitted Transferees) shall
Transfer any Shares except (i) to a Permitted
Transferee or (ii) as specifically provided herein.
(b) None of Talley or his Permitted Transferees
shall Transfer their respective pecuniary interests
in any of the Talley Included Shares to any party
other than a Permitted Transferee of Talley, except
that (i) commencing upon the date that is one year
from the date of this Agreement, Talley and his
Permitted Transferees shall be entitled to Transfer
up to 500,000 Shares in aggregate during any
subsequent twelve-month period and (ii) the Company
shall be entitled to repurchase up to $25,000,000 of
the Talley Included Shares. Notwithstanding the
forgoing, in no case shall Talley or his Permitted
Transferees Transfer any Shares if such Transfer
would trigger default or change-in-control provisions
under the Certificates of Designations, the Credit
Agreements or any other material debt instrument of
the Company.
(c) None of Speese or his Permitted Transferees
shall Transfer their respective pecuniary interests
in any of the Speese Included Shares to any party
other than a Permitted Transferee of Speese, except
that during any twelve-month period Speese and his
Permitted Transferees shall be entitled to Transfer
up to 300,000 Shares in aggregate through sales
pursuant to Rule 144 under the Securities Act.
Notwithstanding the forgoing, in no case shall Speese
or his Permitted Transferees (i) Transfer more than
50% of the Speese Included Shares during the five-
year period commencing on the Effective Date or (ii)
Transfer any Shares if such Transfer would trigger
default or change-in-control provisions under the
Certificates of Designations, the Credit Agreements
or any other material debt instrument of the Company.
(d) No Transfer to a Permitted Transferee of
Purchaser or of any party as provided in the
foregoing clauses (a), (b) and (c) of this Section
2.2 shall be permitted unless (i) the certificates
representing such Shares issued to the Transferee
bear the legend provided in Section 2.3 and (ii) the
Transferee (if not already a party hereto) has
executed and delivered to each other party hereto, as
a condition precedent to such Transfer, an instrument
or instruments, reasonably satisfactory to the
Company, confirming that the Transferee agrees to be
bound by the terms of this Agreement in the same
manner as such Transferee's transferor, except as
otherwise specifically provided in this Agreement.
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Section 3. Legend. The Purchaser and
each Management Stockholder hereby
agrees that each outstanding
certificate representing Shares
issued to any of them, or any
certificate issued in exchange for
or upon conversion of any similarly
legended certificate, shall bear a
legend reading substantially as
follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE
SECURITIES LAWS, AND MAY BE OFFERED AND SOLD ONLY IF SO REGISTERED OR AN
EXEMPTION FROM REGISTRATION IS AVAILABLE. THE HOLDER OF THESE SHARES MAY BE
REQUIRED TO DELIVER TO THE COMPANY, IF THE COMPANY SO REQUESTS, AN OPINION OF
COUNSEL (REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY) TO THE
EFFECT THAT AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT (OR FROM
REGISTRATION OR QUALIFICATION UNDER STATE SECURITIES LAWS) IS AVAILABLE WITH
RESPECT TO ANY TRANSFER OF THESE SHARES THAT HAS NOT BEEN SO REGISTERED (OR
QUALIFIED).
THE SHARES REPRESENTED BY THIS CERTIFICATE ALSO ARE SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AND OBLIGATIONS, TO WHICH ANY TRANSFEREE
AGREES BY HIS ACCEPTANCE HEREOF, AS SET FORTH IN THE STOCKHOLDERS AGREEMENT,
DATED AS OF AUGUST 5, 1998, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.
NO TRANSFER OF SUCH SHARES WILL BE MADE ON THE BOOKS OF THE COMPANY UNLESS
ACCOMPANIED BY EVIDENCE OF COMPLIANCE WITH THE TERMS OF SUCH AGREEMENT AND BY
AN AGREEMENT OF THE TRANSFEREE TO BE BOUND BY THE RESTRICTIONS SET FORTH IN THE
STOCKHOLDERS AGREEMENT.
ARTICLE III
ADDITIONAL RIGHTS AND OBLIGATIONS OF
THE PURCHASER AND THE COMPANY
Section 1. Access to Information;
Confidentiality. Upon the request
of the Purchaser, the Company shall
afford the Purchaser and its
accountants, counsel and other
representatives reasonable access to
all of the properties, books,
contracts, commitments and records
(including, but not limited to, tax
returns) of the Company and its
Subsidiaries that are reasonably
requested. The Purchaser will, and
will cause its agents to, conduct
any such
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investigations on reasonable advance
notice, during normal business
hours, with reasonable numbers of
persons and in such a manner as not
to interfere unreasonably with the
normal operations of the Company and
its Subsidiaries.
Except as otherwise required by applicable law, neither the
Company nor any of its Subsidiaries shall be required to provide access to or
to disclose information where such access or disclosure would violate or
prejudice the rights of any customer or other Person, would jeopardize the
attorney-client privilege of the Person in possession or control of such
information, or would contravene any law, rule, regulation, order, judgment,
decree, fiduciary duty or binding agreement entered into prior to the date
hereof. The parties hereto will make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding
sentence apply.
The Purchaser shall, and shall use its best efforts to cause
their representatives to, keep confidential all such information to the same
extent such information is treated as confidential by the Company, and shall
not directly or indirectly use such information for any competitive or other
commercial purpose. The obligation to keep such information confidential shall
not apply to (i) any information that (x) was already in the Purchaser's
possession prior to the disclosure thereof by the Company (other than through
disclosure by any other Person known by the Purchaser to be subject to a duty
of confidentiality), (y) was then generally known to the public, or (z) was
disclosed to the Purchaser by a third party not known by the Purchaser to be
bound by an obligation of confidentiality or (ii) disclosures made as required
by law or legal process or to any person exercising regulatory authority over
such the Purchaser or its Affiliates. If in the absence of a protective order
or the receipt of a waiver hereunder, the Purchaser is nonetheless, in the
opinion of their counsel, compelled to disclose information concerning the
Company to any tribunal or governmental body or agency or else stand liable for
contempt or suffer other censure or penalty, the Purchaser may disclose such
information to such tribunal or governmental body or agency without liability
hereunder. In addition, in the event that any information disclosed by the
Company to Purchaser is material nonpublic information, the Purchaser agrees to
comply with its obligations under the applicable Federal and state securities
laws with respect thereto, including but not limited to, the laws pertaining to
the possession, dissemination and utilization of such material nonpublic
information.
Section 2. Furnishing of Information.
(a) The Company shall deliver to
the Purchaser, as long as the
Purchaser shall own any Shares:
(i) As promptly as practical, but in no event
later than 30 days after the end of each calendar month, a copy of the
monthly financial reporting package for such month customarily
prepared for the Company's Chief Executive Officer.
(ii) As promptly as practical, but in no event
later than 60 days after the close of each of its first three
quarterly accounting periods during any fiscal year of the Company,
the consolidated balance sheet of the Company as at the end of such
quarterly period, and the related consolidated statements of
operations, stockholders' equity and cash flows for such quarterly
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period, and for the elapsed portion of the fiscal year ended with the
last day of such quarterly period, and in each case setting forth
comparative figures for the related periods in the prior fiscal year
(if such comparative figures are available without unreasonable
expense), all of which shall be certified by the chief financial
officer of the Company, to have been prepared in accordance with
generally accepted accounting principles, subject to year-end audit
adjustments, together with an MD&A;
(iii) As promptly as practical, but in no event
later than 105 days after the close of each fiscal year of the
Company, the consolidated balance sheet of the Company as of the end
of such fiscal year and the related consolidated statements of
operations, stockholders' equity and cash flows for such fiscal year,
in each case setting forth comparative figures for the preceding
fiscal year, and certified by independent certified public accountants
of recognized national standing, together with an MD&A; and
(iv) All reports, if any, filed by the Company or
any Subsidiary of the Company with the Commission under the Exchange
Act, as promptly as practical, but in no event later than 15 days
after filing any such reports with the Commission.
(b) The provisions of Sections 3.2(a)(ii) and
(iii) above shall be deemed to have been satisfied if the Company delivers the
reports timely filed by the Company with the Commission on Form 10-Q or 10-K,
as applicable, for such periods promptly, but in no event later than 15 days
after filing any such Form with the Commission.
ARTICLE IV
CORPORATE GOVERNANCE AND VOTING
Section 1. Board of Directors of the
Company.
(a) On or immediately following the Effective
Date, the Company and the Management Stockholders shall take appropriate
actions to cause the amendment of the Amended and Restated Bylaws of the
Company to provide that the Board of Directors of the Company shall be composed
of seven (7) members (or such lesser number of members as actually shall have
been designated and agreed to by the parties hereto in accordance with the
provisions of this Section 4.1). Thereupon the Company shall be entitled, but
not required, to nominate five members to the Board of Directors (collectively,
the "Company Nominees"), and the Purchaser (or any representative thereof
designated by the Purchaser) shall be entitled, but not required, to nominate
two members to the Board of Directors (collectively, the "Apollo Nominees").
One Apollo Nominee shall be classified as a Class I Director of the Company,
and the other Apollo Nominee shall be classified as a Class II Director of the
Company.
(b) The Management Stockholders and the Company
shall take appropriate actions to cause the appointment of the Apollo Nominees
to become effective upon the
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amendment of the Amended and Restated Bylaws of the Company as provided in
Section 4.1(a) above. The Management Stockholders and the Purchaser shall vote
all of the Shares owned or held of record by them at all regular and special
meetings of the stockholders of the Company called or held for the purpose of
filling positions on the Board of Directors, and in each written consent
executed in lieu of such a meeting of stockholders, and, to the extent entitled
to vote thereon, each party hereto shall take all actions otherwise necessary
to ensure (to the extent within the parties' collective control) that the
Company Nominees and the Apollo Nominees are elected to the Board of Directors.
(c) The Company, the Management Stockholders and
the Purchaser shall use their respective best efforts to call, or cause the
appropriate officers and directors of the Company, to call, a special meeting
of stockholders of the Company, as applicable, and to vote all of the Shares
owned or held of record by them for, or to take all actions by written consent
in lieu of any such meeting necessary to cause, the removal (with or without
cause) of (A) any Company Nominee if the Management Stockholders request such
director's removal in writing for any reason, and (B) any Apollo Nominee if the
Purchaser requests such director's removal in writing for any reason. The
Company and the Purchaser, respectively, shall have the right to designate a
new nominee in the event any Company Nominee or Apollo Nominee, respectively,
shall be so removed under this Section 4.1(c) or shall vacate his directorship
for any reason.
Except as provided in this Section 4. l(c), each party hereto
agrees that, at any time that it is then entitled to vote for the election or
removal of directors, it will not vote in favor of the removal of any Company
Nominee or Apollo Nominee unless (i) such removal shall be at the request of
the party who nominated such director pursuant to the provisions of Section 4.
l(a) or (ii) the right of the party who nominated such director to do so has
terminated in accordance with clause (f) below.
(d) The Company shall not, and shall not permit
any of its Subsidiaries to, without the consent of holders of a majority of the
Shares held by the Management Stockholders or the Purchaser, as the case may
be, take any action under Section 4.2(b) of this Agreement that requires the
approval of the Apollo Nominees, if any of the Company Nominees or Apollo
Nominees are Persons whose removal from the Board of Directors has been
requested at or prior to the time of such action by the party who nominated
such director pursuant to Section 4. l(a). Each party hereto shall use
reasonable efforts to prevent any action from being taken by the Board of
Directors, during the pendency of any vacancy due to death, resignation or
removal of a director, unless the Person entitled to have a person nominated by
it elected to fill such vacancy shall have failed, for a period of ten (10)
days after notice of such vacancy, to nominate a replacement.
(e) The initial Company Nominees shall be J.
Ernest Talley, Mark E. Speese, J. V. Lentell, Joseph V. Mariner, Jr. and Rex W.
Thompson. Any other person designated by the Company as a Company Nominee
shall be reasonably acceptable to the Purchaser. The initial Apollo Nominees
shall be Peter P. Copses and Laurence M. Berg. Any other person designated by
the Purchaser as an Apollo Nominee shall either be (x) a partner, employee or
Affiliate of the Purchaser or its Affiliates or (y) a person who is reasonably
acceptable to the Management Stockholders.
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(f) The obligations of the Purchaser pursuant to
this Section 4.1 shall terminate if the Management Stockholders cease to
beneficially own 50% of the number of Shares owned by the Management
Stockholders on the Effective Date; provided, however, that so long as Talley
remains Chairman and Chief Executive Officer of the Company, the Purchaser
shall continue to vote for Talley as a Company Nominee in accordance with this
Section 4, and so long as Speese remains President of the Company, the
Purchaser shall continue to vote for Speese as a Company Nominee in accordance
with this Section 4.
(g) At such time as the Purchaser, together with
any and all of its Permitted Transferees, cease to hold in aggregate 50% or
more of the Shares owned by the Purchaser on the Effective Date, Purchaser
shall be entitled, but not required, to nominate only one Apollo Nominee in
accordance with this Section 4. At such time as the Purchaser, together with
any and all of its Permitted Transferees, cease to hold in aggregate 10% or
more of the Shares owned by the Purchaser on the Effective Date, the Purchaser
shall no longer be entitled to nominate any Apollo Nominees in accordance with
this Section 4.
(h) In the event the Company establishes an
Executive Committee of the Board of Directors, it shall be comprised of such
persons as a majority of the Board of Directors shall approve, provided,
however, such committee shall also include at least one Apollo Nominee. The
Executive Committee shall have authority, subject to applicable law, to take
all actions that (A) are ancillary to or arise in the normal course of the
businesses of the Company, or (B) implement and are consistent with
resolutions of the Board of Directors provided, however, that such Executive
Committee shall not be authorized to take any action which, if proposed to be
taken by the full Board of Directors would require the affirmative vote of the
Apollo Nominees in accordance with Section 4.2.
(i) The Finance Committee of the Board of
Directors shall be comprised of one of the Apollo Nominees, one of the Company
Nominees and one other director designated by the Board of Directors who is not
also a member of management of the Company.
(j) Each of the Audit Committee and the
Compensation Committee of the Board of Directors shall be comprised of at least
one of the Apollo Nominees and at least one other director designated by the
Board of Directors who is not also a member of management of the Company.
(k) Each committee of the Board of Directors, to
which authority has been delegated, shall keep complete and accurate minutes
and records of all actions taken by such committee, prepare such minutes and
records in a timely fashion and promptly distribute such minutes and records to
each member of the Board of Directors.
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(l) The parties agree that upon the request of
Purchaser, the Company shall cause the Board of Directors of any wholly-owned
subsidiary of the Company to include such number of individuals designated by
the Purchaser (or any representative thereof designated by the Purchaser) in
the same proportion of the total number of members of the Board of Directors of
such subsidiary as the proportion of the Company's Board of Directors to which
the Purchaser is entitled pursuant to Section 4.1(a).
Section 2. Action by the Board of
Directors.
(a) Except as provided below, all decisions of
the Board of Directors shall require the affirmative
vote of a majority of the directors of the Company
then in office, or a majority of the members of an
Executive Committee of the Board of Directors, to the
extent such decisions may be lawfully delegated to an
Executive Committee pursuant to Section 4.1(g).
(b) The Company shall not, and it shall cause
each of its Subsidiaries not to, take (or agree to
take) any action regarding the following matters,
directly or indirectly, including through a merger or
consolidation with any other corporation or
otherwise, without the affirmative vote of the Apollo
Nominees: (i) increase the number of authorized
shares of Preferred Stock or authorize the issuance
or issue of any shares of Preferred Stock other than
to existing holders of Preferred Stock, (ii) issue
any new class or series of equity security, (iii)
amend, alter or repeal, in any manner whatsoever, the
designations, preferences and relative rights and
limitations and restrictions of the Series A and B
Preferred Stock; (iv) amend, alter or repeal any of
the provisions of the Charter Documents or the
Certificates of Designations in a manner that would
negatively impact the holders of the Series A and B
Preferred Stock, including (but not limited to) any
amendment that is in conflict with the approval
rights set forth in this Section 4.2; (v) directly or
indirectly, redeem, purchase or otherwise acquire for
value (including through an exchange), or set apart
money or other property for any mandatory purchase or
other analogous fund for the redemption, purchase or
acquisition of any shares of Common Stock or Junior
Stock (as defined in the Certificates of
Designations), except for the repurchase by the
Company of up to $25,000,000 in Common Stock from
Talley, or declare or pay any dividend or make any
distribution (whether in cash, shares of capital
stock of the Company, or other property) on shares of
Common Stock or Junior Stock; (vi) cause the number
of directors of the
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Company to be greater than seven (7); (vii) enter
into any agreement or arrangement with or for the
benefit of any Person who is an Affiliate of the
Company with a value in excess of $5 million in a
single transaction or series of related transactions;
(viii) effect a voluntary liquidation, dissolution or
winding up of the Company; (ix) sell or agree to sell
all or substantially all of the assets of the
Company, unless such transaction (1) occurs after the
fourth anniversary of the Effective Date, (2) is a
sale for cash and (3) results in an internal rate of
return ("IRR") to the Purchaser of 30% compounded
quarterly or greater with respect to each Share
issued to the Purchaser on the Effective Date; or (x)
enter into any merger or consolidation or other
business combination involving the Company (except a
merger of a wholly- owned subsidiary of the Company
into the Company in which the Company's
capitalization is unchanged as a result of such
merger) unless such transaction (1) occurs after the
fourth anniversary of the Effective Date, (2) is for
cash and (3) results in an IRR to the Purchaser of
30% compounded quarterly or greater with respect to
each Share issued to the Purchaser on the Effective
Date.
(c) Notwithstanding the foregoing Section 4(b),
if the Purchaser owns less than 33 1/3% of the Shares
owned by them on the Effective Date, the provisions
of Section 4(b) shall cease to exist and shall be of
no further force or effect.
(d) While any shares of Series and B Preferred
Stock are outstanding, the Company shall not and it
shall cause each of its Subsidiaries not to, issue
any debt securities of the Company with a value in
excess of $10 million (including any refinancing of
existing indebtedness) without the majority
affirmative vote of the Finance Committee
(e) While any shares of Series A and B Preferred Stock
are outstanding, the Company shall not, and it shall cause each of its
Subsidiaries not to, issue any equity securities of the Company with a value in
excess of $10 million (including any refinancing of existing indebtedness)
without the unanimous affirmative vote of the Finance Committee; provided,
however, that the following equity issuances shall require only a majority
affirmative vote of the Finance Committee: (A) an offering of Common Stock
within 24 months of the Effective Date that is equal to or less than $75
million of gross proceeds to the Company and the selling price is equal to or
greater than the Conversion Price (as defined in the Series A Preferred Stock
Certificate of Designations), (B) an offering of Common Stock in which the
selling price (1) at any time prior to the third anniversary of the Effective
Date is equal to or greater
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than two times the Conversion Price (as defined in the Series A Preferred Stock
Certificate of Designations) and (2) thereafter, equal to or greater than the
price that would imply 25% or greater IRR compounded quarterly on the
Conversion Price (as defined below) and (C) an issuance of equity in connection
with an acquisition if the issuance is equal to or less than 10% of the
outstanding Common Stock (calculated post-issuance of such shares of Common
Stock).
Section 3. Charter Documents. (a)
Exhibits A and B set forth copies of
the Charter Documents, each in the
form in which it is to be in effect
on the Effective Date, except that
the Company's Amended and Restated
Certificate of Incorporation shall
also include, in addition to the
terms of Exhibit A hereto, the
Certificates of Designations, which
shall have been filed with the
Secretary of State of Delaware as
part of the Company's Amended and
Restated Certificate of
Incorporation on or prior to the
Effective Date.
(b) The Company covenants that it will act, and
each Management Stockholder and the Purchaser agrees to use its best efforts to
cause the Company to act, in accordance with its Charter Documents and
Certificates of Designations in all material respects and to cause compliance
with all provisions contained herein. Each Management Stockholder and the
Purchaser shall vote all the Shares owned or held of record by it at any
regular or special meeting of stockholders of the Company or in any written
consent executed in lieu of such a meeting of stockholders, and shall take all
action necessary, to ensure (to the extent within the parties' collective
control) that (i) the Charter Documents and Certificates of Designations of the
Company do not, at any time, conflict with the provisions of this Agreement,
and (ii) unless an amendment is approved by the Board of Directors in
accordance with Section 4.2, the Charter Documents of the Company continue to
be in effect in the forms attached hereto as Exhibits A and B and the
Certificates of Designations continue to be in effect in the form attached as
exhibits to the Stock Purchase Agreement.
ARTICLE V
TERMINATION
Section 1. Termination. Except as
otherwise provided herein with
respect to certain specific
provisions, this Agreement shall
terminate upon the earlier to occur
of:
(i) the mutual agreement of the parties
hereto,
(ii) with respect to any party hereto
other than the Company, such party ceasing to
own any Shares,
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(iii) such time as less than 10% of the
Shares continue to be subject to the
provisions of this Agreement, or
(iv) on the eleventh anniversary of the
Effective Date.
ARTICLE VI
MISCELLANEOUS
Section 1. No Inconsistent Agreements.
Each party hereto hereby consents to
the termination of any prior written
or oral agreement or understanding
restricting, conditioning or
limiting the ability of any party to
transfer or vote Shares.
Each of the Company and the Management Stockholders represents
and agrees that, as of the Effective Date, there is no (and from and after the
Effective Date they will not, and will cause their respective Subsidiaries and
Affiliates not to, enter into any) agreement with respect to any securities of
the Company or any of its Subsidiaries (and from and after the Effective Date
neither the Company nor any Management Stockholder shall take, or permit any of
their Subsidiaries or Affiliates to take, any action) that is inconsistent in
any material respect with the rights granted to the Purchaser in this
Agreement.
Without limiting the foregoing, the Company represents that
there are no existing agreements relating to the voting or registration of any
equity securities of the Company or any of its Subsidiaries other than the
agreements of (i)[Talley and Speese dated as of July 8, 1998, as amended by
their respective agreements dated as of August 5, 1998] (ii) Mark Talley dated
as of August 5, 1998, (iii) Michael C. Talley dated as of August 5, 1998 and
(iv) Mitchell Fadel dated as of August 5, 1998 to vote in favor of the
transactions contemplated in the Stock Purchase Agreement at a stockholders
meeting held for such purpose, and there are no other existing agreements
between the Company and any other holder of Shares relating to the transfer of
any equity securities of the Company or any of its Subsidiaries.
Section 2. Recapitalization. Exchanges,
etc. If any capital stock or other
securities are issued in respect of,
in exchange for, or in substitution
of, any Shares by reason of any
reorganization, recapitalization,
reclassification, merger,
consolidation, spin-off, partial or
complete liquidation, stock
dividend, split-up, sale of assets,
distribution to stockholders or
combination of the Shares or any
other change in capital structure of
the Company, appropriate adjustments
shall be made with respect to the
relevant provisions of this
Agreement so as to fairly and
equitably preserve, as far as
practicable, the original rights and
obligations of the parties hereto
under this Agreement and
15
<PAGE> 16
the terms "Common Stock," "Preferred
Stock" and "Shares," each as used
herein, shall be deemed to include
shares of such capital stock or
other securities, as appropriate.
Without limiting the foregoing,
whenever a particular number of
Shares is specified herein, such
number shall be adjusted to reflect
stock dividends, stock-splits,
combinations or other
reclassifications of stock or any
similar transactions.
Section 3. Successors and Assigns.
This Agreement shall be binding upon
and shall inure to the benefit of
the parties hereto, and their
respective successors and permitted
assigns; provided that (i) neither
this Agreement nor any rights or
obligations hereunder may be
transferred or assigned by the
Company (except by operation of law
in any merger); (ii) neither this
Agreement nor any rights or
obligations hereunder may be
transferred or assigned by the
Management Stockholders or the
Purchaser except to any Person to
whom it has Transferred Shares in
compliance with this Agreement and
who has become bound by this
Agreement pursuant to Section 2.2
hereof; and (iii) the rights of the
parties under Article IV hereof may
not be assigned to any Person except
as explicitly provided therein.
Section 4. No Waivers; Amendments. (a)
No failure or delay by any party in
exercising any right, power or
privilege hereunder shall operate as
a waiver thereof, nor shall any
single or partial exercise thereof
preclude any other or further
exercise thereof or the exercise of
any other right, power or privilege.
The rights and remedies herein
provided shall be cumulative and not
exclusive of any rights or remedies
provided by law.
(b) This Agreement may not be amended or
modified, nor may any provision hereof be waived, other than by a written
instrument signed by the parties hereto.
Section 5. Notices. All notices,
demands, requests, consents or
approvals (collectively, "Notices")
required or permitted to be given
hereunder or which are given with
respect to this Agreement shall be
in writing and shall be personally
delivered or mailed, registered or
certified, return receipt requested,
postage prepaid (or by a
substantially similar method), or
delivered by a reputable overnight
courier service with charges
prepaid, or transmitted by hand
delivery or facsimile, addressed as
set forth below, or such other
address
16
<PAGE> 17
(and with such other copy) as such
party shall have specified most
recently by written notice. Notice
shall be deemed given or delivered
on the date of service or
transmission if personally served or
transmitted by facsimile. Notice
otherwise sent as provided herein
shall be deemed given or delivered
on the third business day following
the date mailed or on the next
business day following delivery of
such notice to a reputable overnight
courier service.
To the Company or the Management Stockholders:
Renters Choice, Inc.
13800 Montfort Drive, Suite 300
Dallas, Texas 75240
Attn: J. Ernest Talley, Chief Executive Officer
Fax: (214)385-1625
with a copy (which shall not constitute notice) to:
Winstead Sechrest & Minick P.C.
5400 Renaissance Tower
1201 Elm Street
Attn: Thomas W. Hughes, Esq.
Fax: (214)745-5390
To the Purchaser:
Apollo Investment Fund IV, L.P. and/or
Apollo Overseas Partners IV, L.P.
c/o Apollo Management IV, L.P.
1999 Avenue of the Stars, Suite 1900
Los Angeles, California 90067
Attn: Michael D. Weiner
Facsimile: (310)201-4166
with a copy (which shall not constitute notice) to:
Morgan, Lewis & Bockius LLP
300 South Grand Avenue, Suite 2200
Los Angeles, California 90071
Attn: John F. Hartigan, Esq.
Fax: (213)612-2554
17
<PAGE> 18
Section 6. Inspection. So long as this
Agreement shall be in effect, this
Agreement and any amendments hereto
and waivers hereof shall be
distributed to all parties hereto
after becoming effective and shall
be made available for inspection at
the principal office of the Company
by the Purchaser.
SECTION 7. GOVERNING LAW. THIS
AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, AS
APPLIED TO CONTRACTS MADE AND
PERFORMED WITHIN THE STATE OF NEW
YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICT OF LAWS,
EXCEPT AS TO MATTERS OF CORPORATE GOVERNANCE, WHICH SHALL BE INTERPRETED IN
ACCORDANCE WITH THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE. EACH
PARTY HERETO CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF THE FEDERAL AND
STATE COURTS WITHIN THE STATE OF NEW YORK.
Section 8. Section Headings. The
section headings contained in this
Agreement are for reference purposes
only and shall not affect the
meaning or interpretation of this
Agreement.
Section 9. Entire Agreement. This
Agreement, together with the Stock
Purchase Agreement, the Certificate
of Designations and the Registration
Rights Agreements, constitutes the
entire agreement and understanding
among the parties hereto with
respect to the subject matter hereof
and thereof and supersedes any and
all prior agreements and
understandings, written or oral,
relating to the subject matter
hereof.
Section 10. Severability. Any term or
provision of this Agreement which is
invalid or unenforceable in any
jurisdiction shall, as to such
jurisdiction, be ineffective to the
extent of such invalidity or
unenforceability without rendering
invalid or unenforceable the
remaining terms and provisions of
this Agreement or affecting the
validity or enforceability of any of
the terms or provisions of this
Agreement in any other
jurisdictions, it being intended
that all rights and obligations of
the parties hereunder shall be
enforceable to the fullest extent
permitted by law.
Section 11. Counterparts. This
Agreement may be signed in
counterparts, each of which shall
constitute an original and which
together shall constitute one and
the same agreement.
Section 12. Required Approvals. If
approval of this Agreement or any of
the transactions contemplated hereby
shall be required
18
<PAGE> 19
by any governmental or
supra-governmental agency or
instrumentality or is considered to
be necessary or advisable to all the
parties hereto, all parties hereto
shall use their best efforts to
obtain such approval.
Section 13. Public Disclosure. The
Company shall not, and shall not
permit any of its Subsidiaries to,
make any public announcements or
disclosures relating or referring to
the Purchaser, any of its
affiliates, or any of their
respective directors, officers,
partners, employees or agents
(including, without limitation, any
Person designated as a director of
the Company pursuant to the terms
hereof) unless the Purchaser has
consented to the form and substance
thereof, which consent shall not be
unreasonably withheld except to the
extent such disclosure is, in the
opinion of counsel, required by law
or by stock exchange regulation,
provided that (i) any such required
disclosure shall only be made, to
the extent consistent with the law,
after consultation with the
Purchaser and (ii) no such
announcement or disclosure (except
as required by law or by stock
exchange regulation) shall identify
any such Person without the
Purchaser's prior consent.
* * *
19
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
RENTERS CHOICE, INC.
By:
----------------------------------------------
Name:
--------------------------------------------
Title:
-------------------------------------------
APOLLO INVESTMENT FUND IV., L.P.
a Delaware limited partnership
By: Apollo Advisors IV, L.P.
its General Partner
By: Apollo Capital Management IV, Inc.
its General Partner
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
APOLLO OVERSEAS PARTNERS IV, L.P.
an exempted limited partnership registered
in the Cayman Islands
By: Apollo Advisors IV, L.P.
its General Partner
By: Apollo Capital Management IV, Inc.
its Managing General Partner
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
-------------------------------------------------
J. Ernest Talley
-------------------------------------------------
Mark E. Speese
<PAGE> 21
SPOUSAL RIGHTS
The undersigned spouse of a party hereto acknowledges that
such spouse has read this Stockholders Agreement. Such spouse specifically
agrees that the provisions of this Agreement shall apply to any ownership
interest in Common Stock of Renters Choice that she now has or hereafter
acquires and to any such Common Stock that she may acquire in her own right as
a result of any marital separation, marital dissolution, separate maintenance
proceedings or any similar action. Such spouse hereby agrees that her spouse
may join in any future amendment or modification of this Stockholders Agreement
without any further signature, acknowledgment, agreement or consent on her
part, and hereby further agrees that any interest which she may have in such
Common Stock shall be subject to the provisions of this Stockholders Agreement.
-------------------------------------
Marianne Talley
21
<PAGE> 22
SPOUSAL RIGHTS
The undersigned spouse of a party hereto acknowledges that
such spouse has read this Stockholders Agreement. Such spouse specifically
agrees that the provisions of this Agreement shall apply to any ownership
interest in Common Stock of Renters Choice that she now has or hereafter
acquires and to any such Common Stock that she may acquire in her own right as
a result of any marital separation, marital dissolution, separate maintenance
proceedings or any similar action. Such spouse hereby agrees that her spouse
may join in any future amendment or modification of this Stockholders Agreement
without any further signature, acknowledgment, agreement or consent on her
part, and hereby further agrees that any interest which she may have in such
Common Stock shall be subject to the provisions of this Stockholders Agreement.
-------------------------------------
Carolyn Speese
22
<PAGE> 1
EXHIBIT 10.22
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT is entered into as of August 5,
1998, by and between Renters Choice, Inc., a Delaware corporation (the
"Company"), and each of Apollo Investment Fund IV, L.P., a Delaware limited
partnership, and Apollo Overseas Partners IV, L.P., an exempted limited
partnership registered in the Cayman Islands acting through its general partner
(collectively, the "Investor").
1. Definitions. As used in this Agreement, the following terms shall
have the following meanings:
Advice: See Section 6 hereof.
Common Stock: The common stock, $.01 par value, of the Company.
Series A Preferred Stock: The Series A Preferred Stock of the
Company, $.01 par value per share.
Demand Notice: See Section 3 hereof.
Demand Registrations: See Section 3 hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Losses: See Section 8 hereof.
Notice: See Section 3 hereof.
Person: An individual, partnership, joint venture, limited liability
company, corporation, trust, unincorporated organization or government or any
department or agency thereof.
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Securities covered by such Registration Statement and all
other amendments and supplements to the prospectus, including post-effective
amendments, and all material incorporated or deemed to be incorporated by
reference in such prospectus.
Registrable Securities: (i) the Shares; (ii) the Common Stock issuable
or issued upon conversion of the Shares; (iii) any Series A Preferred Stock or
Common Stock issued as (or issuable
<PAGE> 2
upon the conversion or exercise of any warrant, right or other security which
is issued as) a dividend or other distribution with respect to, or in exchange
for or in replacement of the securities listed in clauses (i), or (ii) hereof;
and (iv) any security listed in clause (iii) hereof.
Registration Statement: Any registration statement of the Company
which covers any of the Registrable Securities pursuant to the provisions of
this Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated or deemed to be incorporated by reference in such
registration statement.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and the rules
and regulations promulgated by the SEC thereunder.
Shares: The shares of Series A Preferred Stock purchased by Investor
pursuant to the Stock Purchase Agreement dated as of the date hereof between
the Company and Investor.
Underwritten registration or underwritten offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to
the public.
2. Securities Subject to this Agreement.
(a) Subject Securities. The securities entitled
to the benefits of this Agreement are the Registrable
Securities pursuant to the provisions of this Agreement.
(b) Holders of Registrable Securities. A person
is deemed to be a holder of Registrable Securities
whenever such person owns Registrable Securities or
has the right to acquire such Registrable Securities,
whether or not such acquisition has actually been
effected and disregarding any legal restrictions upon
the exercise of such right.
3. Demand Registrations
(a) Demand Registrations. From and after the
second anniversary of the closing date of Investor's
acquisition of the Shares, Investor shall have the
right, by written notice delivered to the Company,
to require the Company to register (the "Demand
Registrations") under the Securities Act not less
than 20% and up to 100% of its Registrable Securities
then outstanding in accordance with this Section 3.
For purposes of this Agreement, "Registrable
Securities then outstanding" shall be the total of
(i) the number of shares of Common Stock outstanding
which are Registrable Securities and (ii) the number
of shares of Common Stock issuable pursuant to then
exercisable or convertible securities, including but
not limited to the Shares, which are Registrable
Securities.
2
<PAGE> 3
The number of Demand Registrations pursuant to this Section
3(a) shall not exceed two (2).
(b) Filing and Effectiveness. The Company shall
file each of the Demand Registrations within 60 days and shall
use its best efforts to cause the same to be declared effective
by the SEC within 120 days of the date on which Investor first
gave the written notice (a "Demand Notice") required by Section
3(a) hereof with respect to such Demand Registration. If any
Demand Registration is requested to be a "shelf" registration,
the Company shall keep the Registration Statement filed in
respect thereof effective for a period of nine months from the
date on which the SEC declares such Registration Statement
effective or such shorter period which will terminate when the
distribution of all registered Registrable Securities pursuant
to such Registration Statement ends.
(c) Request for Demand Registrations. Subject to
the conditions set forth in Section 3(a) hereof, Investor may,
at any time, make a written request for a Demand Registration.
All requests made pursuant to this Section 3 will specify the
number of the Registrable Securities to be registered and will
also specify the intended methods of disposition thereof. If
Investor specifies one particular type of underwritten offering,
such method of disposition shall be such type of underwritten
offering or a series of such underwritten offerings (as Investor
may elect) during the time period the Registration Statement is
effective.
(d) Piggy-Back by Other Shareholders. Subject to
the provisions of Section 3(e), the Company may include in a
Demand Registration shares of Common Stock ("Piggy-Back Shares")
for the account of other holders thereof exercising contractual
piggy-back rights ("Piggy-Back Holders"), on the same terms and
conditions as the Registrable Securities to be included therein
for the account of the Investor. The Company shall not have the
right to include any securities of the Company in any Demand
Registration for its own account.
(e) Reduction of Offering. If any of the
Registrable Securities registered pursuant to any Demand
Registration are to be sold in one or more firm commitment
underwritten offerings, and the managing underwriter advises the
Company and Investor in writing that in its opinion the total
amount of securities proposed to be sold in the offering is such
as to materially and adversely affect the success of such
offering, then the number of Piggy-Back Shares to be offered for
the account of any Piggy-Back Holders shall be reduced (to zero,
if necessary), pro rata in proportion to the respective number
of Piggy-Back Shares requested to be registered to the extent
necessary to reduce the total securities requested to be
included in such offering to the amount, if any, recommended by
such managing underwriters. If the Piggy-Back Shares have been
reduced to zero and the number of Registrable Securities
requested to be registered by Investor exceeds the number of
Registrable Securities
3
<PAGE> 4
recommended by the managing underwriter, then the number of
Registrable Securities to be offered for the account of
Investor may be reduced; provided, that if the number of
Registrable Securities the Investor has requested be registered
pursuant to a Demand Registration are reduced, upon the
recommendation of the managing underwriter in an underwritten
offering, or by the Company in a non-underwritten offering, to
less than 51% of the total number of Registrable Securities
Investor requested to be registered pursuant to such Demand
Registration, then such registration shall no longer constitute
a Demand Registration under this Agreement and shall not reduce
the number of Demand Registrations to which Investor is
otherwise entitled.
(f) Other Registrations. Except for (i)
registrations effected in accordance with (A) the Exchange
Notes registration rights and/or the Warrant Securities
registration rights granted to the "Lenders" under that certain
Senior Subordinate Credit Agreement of even date herewith (the
"Senior Subordinate Credit Agreement") entered into by and
among the Company and the "Lenders" named therein (such
Exchange Notes registration rights and such Warrant Securities
registration rights being hereinafter collectively referred to
as the "Senior Subordinate Credit Agreement Registration
Rights") and (ii) any registrations effected by Investor or its
assignee(s) in accordance with such registration rights as
Investor and/or its assignee(s) shall have either under this
Agreement or otherwise (such registration rights being
hereinafter referred to as "Investors' Additional Registration
Rights") (the Senior Subordinate Credit Agreement Registration
Rights and the Investor's Additional Registration Rights being
hereinafter collectively referred to as the "Authorized
Registration Rights"), the Company shall not effect any
registration of its securities (except on Form S-8 or any
successor form to such Form), or a sale pursuant to Regulation
D under the Securities Act (other than offerings made pursuant
to and in accordance with Rule 504 of Regulation D), whether on
its own behalf or at the request of any holder or holders of
such securities (other than pursuant to and in accordance with
this Section 3), from the date of a request to register
Registrable Securities pursuant to and in accordance with this
Section 3 until the earlier of (i) 90 days after the date on
which all securities covered by such Demand Registration have
been sold or (ii) 180 days after the effective date of such
Demand Registration, unless the Company shall have first
notified Investor in writing of its intention to do so, and
Investor or the managing underwriters, if any, shall have
consented thereto in writing.
4. Piggy-Back Registration
(a) Right to Piggy-Back. If at any time
the Company proposes to file a registration statement under the
Securities Act with respect to any class of its equity
securities (other than a registration statement (i) on Form S-8
or any successor form to such Form or (ii) filed in connection
with an exchange offer or an offering of its common stock or of
securities convertible or exchangeable into its common stock
4
<PAGE> 5
made solely to its existing shareholders in connection with a
rights offering or solely to employees of the Company), whether
or not for its own account, then the Company shall give written
notice of such proposed filing to Investor at least 30 days
before the anticipated filing date. Such notice shall offer
Investor the opportunity to register such amount of Registrable
Securities as Investor may request (a "Piggy-Back
Registration"). Subject to Section 4(b) hereof, the Company
shall include in each such Piggy-Back Registration all
Registrable Securities with respect to which the Company has
received from Investor a written request for inclusion therein
within 20 days after notice has been duly given to Investor.
Investor shall be permitted to withdraw all or any part of the
Registrable Securities from a Piggy-Back Registration at any
time prior to the effective date of such Piggy-Back
Registration.
(b) Priority on Piggy-Back Registrations. The Company
shall cause the managing underwriter or underwriters of a
proposed underwritten offering to permit Investor to include
all the Registrable Securities that Investor has requested to
be included in such offering on the same terms and conditions
as any similar securities, if any, of the Company included
therein. Notwithstanding the foregoing, if the managing
underwriter or underwriters of such offering deliver(s) a
written opinion to the Company and the Investor that the total
amount of securities which Investor, the Company, and any other
persons or entities having registration rights, intend to
include in such offering is such as to materially and adversely
affect the success of such offering, then the amount of
securities to be offered for the account of all Persons shall
be reduced or limited pro rata in proportion to the amount of
securities proposed to be registered in such offering by each
Person to the extent necessary to reduce the total amount of
securities to be included in such offering to the amount
recommended by such managing underwriter or underwriters.
(c) Registration of Securities Other than Registrable
Securities. Except for the Authorized Registration Rights,
without the written consent of the holders of a majority in
aggregate amount of the Registrable Securities then
outstanding, the Company shall not grant to any Person the
right to request the Company to register any securities of the
Company under the Securities Act unless the rights so granted
are subject to the prior rights of the holders of Registrable
Securities set forth in, and are not otherwise in conflict or
inconsistent with the provisions of, this Agreement.
5. Holdback Agreements
(a) Restrictions on Public Sale by Holders of
Registrable Securities. Investor agrees, if reasonably
requested by the managing underwriter or underwriters in an
underwritten offering (to the extent timely notified in writing
by the Company or the managing underwriter or underwriters),
not to effect any public sale or distribution of securities of
the Company of any class included in a Registration Statement
registering the sale of Common Stock by the Company pursuant to
Section 3 hereof, including a sale pursuant to Rule 144 under
the Securities Act (except as part of such
5
<PAGE> 6
underwritten registration), during the 10-day period prior to,
and the 90-day period beginning on, the closing date of any
underwritten offering made pursuant to such Registration
Statement.
The foregoing provisions shall not apply if Investor is
prevented by applicable statute or regulation from entering into any such
agreement; provided, however, that Investor shall undertake in its request to
participate in such underwritten offering, not to effect any public sale or
distribution of the class of Registrable Securities covered by such
Registration Statement (except as part of such underwritten registration)
during such period unless it has provided 45 days prior written notice of such
sale or distribution to the managing underwriters.
(b) Restrictions on Public Sale by the Company and
Others. The Company agrees (i) if requested by the managing
underwriter or underwriters in an underwritten offering of
Registrable Securities covered by a Registration Statement
filed pursuant to Section 3 hereof, not to effect any public or
private sale or distribution of its securities, including a
sale pursuant to Regulation D under the Securities Act, during
the 10-day period prior to, and the 90-day period beginning on,
the effective date of any underwritten offering made pursuant
to such Registration Statement (except as part of such
underwritten registration or pursuant to registrations on Form
S-8 or any successor form to such Form), and (ii) to cause each
holder of its securities purchased from the Company at any time
after the date of this Agreement (other than in a registered
public offering) to agree not to effect any public sale or
distribution of any such securities during such period,
including a sale pursuant to Rule 144 under the Securities Act
(except as part of such underwritten registration, if otherwise
permitted).
6. Registration Procedures. In connection with the registration
obligations of the Company pursuant to and in accordance with Section 3 of
this Agreement, the Company shall effect such registrations to permit the
sale of such Registrable Securities in accordance with the intended method
or methods of disposition thereof, and pursuant thereto the Company shall
as expeditiously as possible:
(a) notify Investor and the managing underwriters, if
any, promptly, and (if requested by any such Person) confirm
such notice in writing, (i) when a Prospectus or any Prospectus
supplement or post-effective amendment related to such
Registrable Securities has been filed, and, with respect to a
Registration Statement or any post-effective amendment related
to such Registrable Securities, when the same has become
effective, (ii) of any request by the SEC for amendments or
supplements to such Registration Statement or related
Prospectus or for additional information, (iii) of the issuance
by the SEC of any stop order suspending the effectiveness of
such Registration Statement or the initiation of any
proceedings for that purpose, (iv) if at any time the
representations and warranties of the Company contained in any
agreement (including any underwriting agreement) contemplated
by Section 6(k) below cease to be true and correct, (v) of the
receipt by the Company of
6
<PAGE> 7
any notification with respect to the suspension of the
qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose,
(vi) of the happening of any event which makes any statement
made in such Registration Statement or related Prospectus or
any document incorporated or deemed to be incorporated therein
by reference untrue or which requires the making of any changes
in such Registration Statement or Prospectus so that such
documents 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 (vii) of the reasonable determination of the
Company that a post-effective amendment to such Registration
Statement would be appropriate;
(b) use every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of a
Registration Statement, or the lifting of any suspension of the
qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, at the
earliest possible moment;
(c) if requested by the managing underwriters or the
Investor, (i) immediately incorporate in a Prospectus
supplement or post-effective amendment such information as the
managing underwriters and such holder agree should be included
therein and as may be required by applicable law, (ii) make all
required filings of such Prospectus supplement or such
post-effective amendment as soon as the Company has received
notification of the matters to be incorporated in such
Prospectus supplement or such post-effective amendment and
(iii) supplement or make amendments to such Registration
Statement; provided, however, that the Company shall not be
required to take any of the actions in this Section 6(c) which
are not, in the opinion of counsel for the Company, in
compliance with applicable law;
(d) furnish to Investor and each managing
underwriter, if any, without charge, at least one signed copy
of each Registration Statement related to such Registrable
Securities and any post-effective amendments thereto, including
financial statements and schedules, all documents incorporated
therein by reference and all exhibits (including, if requested,
those previously furnished or incorporated by reference) at the
earliest practicable time under the circumstances before the
filing of such documents with the SEC;
(e) deliver to Investor and the underwriters, if any,
without charge, as many copies of the Prospectus or
Prospectuses related to such Registrable Securities (including
each preliminary prospectus) and as many copies of any
amendment or supplement thereto as such Persons may reasonably
request; the Company consents to the use of such Prospectus or
any amendment or supplement thereto by each of the selling
holders of Registrable Securities and the underwriters, if any,
in connection
7
<PAGE> 8
with the offering and sale of the Registrable Securities
covered by such Prospectus or any amendment or supplement
thereto;
(f) prior to any public offering of Registrable
Securities, to register or qualify or cooperate with Investor,
the underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption
from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky
laws of such jurisdictions as any seller or underwriter
reasonably requests in writing; 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 necessary or
advisable to enable the disposition in such jurisdictions of
the Registrable Securities covered by the applicable
Registration Statement; provided, however, that the Company
will not be required to (A) qualify generally to do business in
any jurisdiction where it is not then so qualified or (B) take
any action which would subject it to general service of process
in any such jurisdiction where it is not then so subject;
(g) in connection with an underwritten offering,
participate, to the extent reasonably requested by the managing
underwriter for the offering or Investor, in customary efforts
to sell the securities under the offering, including, without
limitation, participating in "road shows;"
(h) cooperate with Investor and the managing
underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to
be sold, which certificates shall not bear any restrictive
legends;
(i) cause the Registrable Securities covered by each
Registration Statement to be registered with or approved by
such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the
underwriters, if any, to consummate the disposition of such
Registrable Securities;
(j) upon the occurrence of any event contemplated
by paragraphs 6(a)(vi) or 6(a)(vii) above, prepare a supplement
or post-effective amendment to each Registration Statement or a
supplement to the related Prospectus or any document
incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of
the Registrable Securities being sold thereunder, such
Prospectus will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light
of the circumstances in which they were made, not misleading;
(k) to the extent possible, cause all Registrable
Securities covered by such a Registration Statement to be (i)
listed on each securities exchange, if any, on which similar
securities issued by the Company are then listed, or (ii)
authorized to be
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<PAGE> 9
quoted on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") or the National Market
System of NASDAQ if the securities so qualify, if requested by
Investor;
(l) enter into such agreements (including an
underwriting agreement in form, scope and substance as is
customary in underwritten offerings) and take all such other
actions in connection therewith (including those reasonably
requested by the managing underwriters, if any, or Investor) in
order to expedite or facilitate the disposition of such
Registrable Securities and in such connection, whether or not
an underwriting agreement is entered into and whether or not
the registration is an underwritten registration (i) make such
representations and warranties to Investor and the
underwriters, if any, with respect to the business of the
Company and its Subsidiaries, the Registration Statement, the
Prospectus, and documents, if any incorporated or deemed to be
incorporated by reference in the Registration Statement, in
each case, in form, substance and scope as are customarily made
by issuers to underwriters in underwritten offerings and
confirm the same if and when requested; (ii) obtain opinions of
counsel to the Company and updates thereof (which counsel and
opinions (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriters, if any, and
Investor) addressed to Investor and each of the underwriters,
if any, covering the matters customarily covered in opinions
requested in underwritten offerings and such other matters as
may be reasonably requested by Investor and such underwriters,
(iii) obtain "cold comfort" letters and updates thereof from
the independent certified public accountants of the Company
(and, if necessary, any other certified public accountants of
any subsidiary of the Company or of any business acquired by
the Company for which financial statements and financial data
is or is required to be included in the Registration Statement)
addressed to Investor and each of the underwriters, if any,
such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in
connection with underwritten offerings; (iv) if an underwriting
agreement is entered into, cause the same to contain
indemnification provisions and procedures no less favorable
than those set forth in Section 8 hereof (or such other
provisions and procedures acceptable to Investor) with respect
to all parties to be indemnified pursuant to said Section; and
(v) deliver such documents and certificates as may be requested
by Investor and the managing underwriters, if any, to evidence
the continued validity of the representations and warranties of
the Company made pursuant to paragraph 6(k)(i) above and to
evidence compliance with any customary conditions contained in
the underwriting agreement or other agreement entered into by
the Company. The above shall be done at each closing under such
underwriting or similar agreement or, as and to the extent
required thereunder;
(m) make available for inspection by a representative
of Investor, any underwriter participating in any disposition
of Registrable Securities, and any attorney or accountant
retained by such selling holders or underwriter, all financial
and other records, pertinent corporate documents and properties
of the Company; and cause the
9
<PAGE> 10
officers, directors and employees of the Company and its
subsidiaries to supply all information reasonably requested by
any such representative, underwriter, attorney or accountant in
connection with such Registration Statement; provided, however,
that any records, information or documents that are designated
by the Company in writing as confidential at the time of
delivery of such records, information or documents shall be
kept confidential by such Persons and their designees unless
(i) such records, information or documents are in the public
domain or otherwise publicly available, (ii) disclosure of such
records, information or documents is required by court or
administrative order or (iii) disclosure of such records,
information or documents, in the opinion of counsel to such
Person, is otherwise required by law (including, without
limitation, pursuant to the requirements of the Securities
Act); and
(n) comply with all applicable rules and regulations
of the SEC and make generally available to its securityholders
earning statements satisfying the provisions of Section 11(a)
of the Securities Act and Rule 158 thereunder 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 Securities 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.
The Company may require Investor to furnish to the Company
such information regarding the distribution of Registrable Securities as the
Company may from time to time reasonably request in writing and the Company may
exclude from such registration the Registrable Securities if Investor
unreasonably fails to furnish such information within a reasonable time after
receiving such request; provided, that Investor's Registrable Securities shall
be counted for the demand made upon the Company hereunder.
Investor agrees by acquisition of Registrable Securities that,
upon receipt of any notice from the Company of the happening of any event of
the kind described in Section 6(a)(ii), 6(a)(iii), 6(a)(v), 6(a)(vi) or
6(a)(vii) hereof, Investor shall forthwith discontinue disposition of such
Registrable Securities covered by such Registration Statement or Prospectus
until Investor's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 6(i) hereof, or until it is advised in
writing (the "Advice") by the Company that the use of the applicable Prospectus
may be resumed, and has received copies of any additional or supplemental
filings which are incorporated or deemed to be incorporated by reference in
such Prospectus.
7. Registration Expenses
(a) All reasonable fees and expenses incidental to
the Company's performance of or compliance with this Agreement
(including, without limitation, (i) all
10
<PAGE> 11
registration and filing fees including, without limitation,
fees and expenses (A) with respect to filings required to be
made with the National Association of Securities Dealers, Inc.,
and (B) of compliance with securities or Blue Sky laws
(including, without limitation, fees and disbursements of
counsel for the underwriters or selling holders (subject to the
provisions of Section 6(b)) in connection with Blue Sky
qualifications of the Registrable Securities and determination
of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as the managing
underwriters or holders of a majority in number of the
Registrable Securities being sold may designate), (ii) printing
expenses, (iii) messenger, telephone and delivery expenses,
(iv) fees and disbursements of counsel for the Company, and
Special Counsel or other counsel for the sellers of the
Registrable Securities (subject to the provisions of Section
7(b) hereof), (v) fees and disbursements of all independent
certified public accountants referenced to in Section 6(k)(iii)
hereof (including the expenses of any special audit and "cold
comfort" letters required by or incident to such performance),
(vi) underwriter's fees and expenses (excluding discounts,
commissions or fees of underwriters, selling brokers, dealer
managers or similar securities industry professionals relating
to the distribution of the Registrable Securities or legal
expenses of any Person other than the Company, the underwriters
and the selling holders; but including the fees and expenses of
any "qualified independent underwriter" or other independent
appraiser participating in an offering pursuant to Section 3 of
Schedule E to the Bylaws of the National Association of
Securities Dealers, Inc.), (vii) Securities Act liability
insurance if the Company so desires such insurance and (viii)
fees and expenses of all other Persons retained by the Company)
shall be borne by the Company whether or not any Registration
Statement becomes effective. Notwithstanding the foregoing,
the Company will not be required to reimburse Investor for its
out-of-pocket expenses arising out of a Demand Registration if
the Registration Statement for such Demand Registration fails
to become effective at the request of Investor.
(b) In connection with each Piggy-Back Registration
hereunder, the Company shall reimburse Investor for the
reasonable fees and disbursements of not more than one counsel
(or more than one counsel if a conflict exists among such
selling holders in the exercise of the reasonable judgment of
counsel for the selling holders and counsel for the Company)
chosen by Investor.
8. Indemnification
(a) Indemnification by the Company. The Company
shall, notwithstanding termination of this Agreement and
without limitation as to time, indemnify and hold harmless, to
the full extent permitted by law, Investor, its officers,
directors, agents and employees, each person who controls such
holder (within the meaning of Section 15 of the Securities Act
or Section 20 the Exchange Act), and the officers, directors,
agents or employees of any such controlling person, from and
against all losses, claims, damages, liabilities, costs
(including, without limitation, reasonable costs of
11
<PAGE> 12
preparation and attorneys' fees) and reasonable expenses
(collectively, "Losses") arising out of or based upon any
untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or
preliminary prospectus, or arising out of or based upon any
omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not
misleading except insofar as the same are based solely upon
information furnished in writing to the Company by Investor
expressly for use therein. The Company shall also indemnify
underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the
distribution, their officers, directors, agents and employees
and each Person who controls such Persons (within the meaning
of Section 15 of the Securities Act or Section 20 of the
Exchange Act) to the same extent as provided above with respect
to the indemnification of Investor.
(b) Indemnification by Investor. In connection with
any Registration Statement in which Investor is participating,
Investor shall furnish to the Company in writing such
information as the Company reasonably requests for use in
connection with any Registration Statement or Prospectus and
agrees to indemnify and hold harmless, to the full extent
permitted by law, the Company, its directors, officers, agents
and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act) and the directors, officers, agents or
employees of such controlling persons, from and against all
Losses arising out of or based upon any untrue statement of a
material fact contained in any Registration Statement,
Prospectus or preliminary prospectus, or arising out of or
based upon any omission of a material fact required to be
stated therein or necessary to make the statement therein not
misleading, to the extent, but only to the extent, that such
untrue statement or omission is contained in any information so
furnished in writing by Investor to the Company expressly for
use in such Registration Statement or Prospectus and that such
information was solely relied upon by the Company in
preparation of any Registration Statement, Prospectus or
preliminary prospectus. In no event shall the liability of
Investor be greater in amount than the dollar amount of the
proceeds (net of the payment of all expenses) received by
Investor upon the sale of the Registrable Securities giving
rise to such indemnification obligation. The Company shall be
entitled to receive indemnities from underwriters, selling
brokers, dealer managers and similar securities industry
professionals participating in the distribution to the same
extent as provided above with respect to information so
furnished in writing by such Persons expressly for use in any
Prospectus or Registration Statement.
(c) Conduct of Indemnification Proceedings. If any
action or proceeding (including any governmental investigation
or inquiry) shall be brought or any claim shall be asserted
against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly
notify the party from which such indemnity is sought (the
"Indemnifying Party") in writing, and the Indemnifying
12
<PAGE> 13
Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all fees and expenses
incurred in connection with the defense thereof. All such fees
and expenses (including any fees and expenses incurred in
connection with investigating or preparing to defend such
action or proceeding) shall be paid to the Indemnified Party,
as incurred, within 5 days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately
determined that an Indemnified Party is not entitled to
indemnification hereunder). Any such Indemnified Party shall
have the right to employ separate counsel in any such action,
claim or proceeding and to participate in the defense thereof,
but the fees and expenses of such counsel shall be the expenses
of such Indemnified Party unless (a) the Indemnifying Party has
agreed to pay such fees and expenses or (b) the Indemnifying
Party shall have failed to promptly assume the defense of such
action, claim or proceeding and to employ counsel reasonably
satisfactory to the Indemnified Party in any such action, claim
or proceeding or (c) the named parties to any such action,
claim or proceeding (including any impleaded parties) include
both such Indemnified Party and the Indemnifying Party, and
such Indemnified Party shall have been advised by counsel that
there may be one or more legal defenses available to it which
are different from or additional to those available to the
Indemnifying Party (in which case, if such Indemnified Party
notifies the Indemnifying Party in writing that it elects to
employ separate counsel at the expense of the Indemnifying
Party, the Indemnifying Party shall not have the right to
assume the defense of such action, claim or proceeding on
behalf of such Indemnified Party, it being understood, however,
that the Indemnifying Party shall not, in connection with any
one such action, claim or proceeding or separate but
substantially similar or related actions, claims or proceedings
in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (together
with appropriate local counsel) at any time for all such
Indemnified Parties, unless in the reasonable judgment of any
such Indemnified Party a conflict of interest may exist between
such Indemnified Party and any other of such Indemnified
Parties with respect to such action, claim or proceeding, in
which event the Indemnifying Party shall be obligated to pay
the fees and expenses of such additional counsel or counsels).
(d) Contribution. If the indemnification provided
for in this Section 8 is unavailable to an Indemnified Party
under Section 8(a) or 8(b) hereof (other than by reason of
exceptions provided in those Sections) in respect of any
Losses, then each applicable Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall, jointly and
severally, contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of
the Indemnifying Party and Indemnified Party in connection with
the actions, statements or omissions which resulted in such
Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and such
Indemnified Party shall be determined by reference to, among
other things,
13
<PAGE> 14
whether any action in question, including any untrue statement
or alleged untrue statement of a material fact or omission or
alleged omission of a material fact, has been taken or made by,
or relates to information supplied by, such Indemnifying Party
or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to
include, subject to the limitations set forth in Section 8(c),
any legal or other fees or expenses reasonably incurred by such
party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 8(d) were determined by pro
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provision of this Section 8(d), an Indemnifying
Party which is a selling holder of Registrable Securities shall not be required
to contribute any amount in excess of the amount by which the total price at
which the Registrable Securities sold by such Indemnifying Party and
distributed to the public were offered to the public exceeds the amount of any
damages which such Indemnifying Party has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
9. Rule 144 and Rule 144A. The Company shall file the reports
required to be filed by it under the Securities Act and the Exchange
Act in a timely manner and, if at any time the Company is not required
to file such reports, it will, upon the request of Investor, make
available public or other information so long as necessary to permit
sales of its securities pursuant to Rules 144 and 144A. The Company
further covenants that it will take such further action as Investor may
reasonably request, all to the extent required from time to time to
enable Investor to sell Registrable Securities without registration
under the Securities Act within the limitation of the exemptions
provided by Rules 144 and 144A. Upon the request of Investor, the
Company shall deliver to Investor a written statement as to whether it
has complied with such requirements. The Company will cooperate to
enable Investor to sell Registrable Securities in block trades or other
similar transactions, including furnishing to Investor (i) an opinion
or opinions of counsel to the Company, and (ii) a comfort letter from
the Company's independent public accountants, as Investor reasonably
requests, (iii) such reasonable representations, warranties, covenants
and indemnities as are customary for such transactions, and (iv) as to
prospective purchasers of Investor's securities, the information
described in Rule 144A(d)(4). Notwithstanding the foregoing, nothing
in this Section 9 shall be deemed to require the Company to register
any of its securities pursuant to the Exchange Act.
10. Underwritten Registrations. If any Demand Registration is an
underwritten offering, the Investor will have the right to select the
investment banker or investment bankers and
14
<PAGE> 15
managers and attorneys to administer the offering; provided, that such
investment bank or manager shall be reasonably satisfactory to the
Company. If any Piggy-Back Registration is an underwritten offering,
the Company will have the right to select the investment banker or
investment bankers and managers to administer the offering; provided,
that such investment bank or manager shall be reasonably satisfactory
to Investor if Investor is participating in such underwritten offering.
No Person may participate in any underwritten registration
hereunder unless such Person (a) agrees to sell such Person's securities to be
included in the underwritten registration 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.
11. Miscellaneous
(a) Remedies. In the event of a breach by the Company of
its obligations under this Agreement, Investor, in addition to
being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company
agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it
of any of the provisions of this Agreement and hereby further
agrees that, in the event of any action for specific
performance in respect of any such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Except for the agreement
pursuant to which the Authorized Registration are granted, (i)
the Company shall not, on or after the date of this Agreement,
enter into any agreement with respect to its securities which
is inconsistent with the rights granted to Investor in this
Agreement or otherwise conflicts with the provisions hereof,
and (ii) the Company has not entered into any agreement with
respect to its securities granting any registration rights to
any person other than this Agreement.
(c) Adjustments Affecting Registrable Securities. The
Company shall not take any action, or permit any change to
occur, with respect to the Registrable Securities (i) which
would adversely affect the ability of Investor to include such
Registrable Securities in a registration undertaken pursuant
to this Agreement or (ii) which would adversely affect the
marketability of such Registrable Securities in any such
registration.
(d) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not
be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given,
except by written instrument signed by the Company and
Investor.
15
<PAGE> 16
(e) Notices. All notices and other communications provided
for or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, nationally
recognized air courier, telex or telecopier:
If to Investor:
Apollo Investment Fund IV, L.P. and/or
Apollo Overseas Partners IV, L.P.
c/o Apollo Management IV, L.P.
1999 Avenue of the Stars
Suite 1900
Los Angeles, CA 90067
Attention: Michael D. Weiner Fax: (310)201-4166
With a copy (which shall not constitute notice) to:
Morgan, Lewis & Bockius LLP
300 South Grand Avenue
Suite 2200
Los Angeles, California 90071
Attn: John F. Hartigan, Esq.
Fax: (213)612-2554
If to Company:
Renters Choice, Inc.
13800 Montfort Drive, Suite 300
Dallas, Texas 75240
Attn: J. Ernest Talley, Chief Executive Officer
Fax: (214)385-1625
With a copy (which shall not constitute notice) to:
Winstead Sechrest & Minick P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas
Attn: Thomas W. Hughes, Esq.
Fax: (214)745-5390
All such notices and communication shall be deemed to have
been duly given: when
16
<PAGE> 17
delivered by hand, if personally delivered; two business days after being
deposited in the mail, postage prepaid, if mailed; one business day after being
timely dispatched, if by air courier; when answered back, if telexed; and when
receipt is acknowledged, if telecopy. Any of the above addresses may be
changed by notice made in accordance with this Section 12(e).
(f) Owner of Registrable Securities. The Company will
maintain, or will cause its registrar and transfer agent to
maintain, a stock book with respect to the Common Stock, in
which all transfers of Registrable Securities of which the
Company has received notice will be recorded. The Company may
deem and treat the person in whose name Registrable Securities
are registered in the stock book of the Company as the owner
thereof for all purposes, including without limitation, the
giving of notices under this Agreement.
(g) Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the successors and
assigns of each of the parties, including without limitation
and without the need for an express assignment, subsequent
holders of Registrable Securities. Notwithstanding the
foregoing, the Demand Registration rights set forth herein,
prior to the exercise thereof by Investor, may be assigned
only in connection with a transfer to any single Person or
group of affiliated Persons (in a single transaction or series
of related transactions) of at least 25% of the Registrable
Securities held by it on the date hereof.
(h) Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
(i) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
(j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS,
AND EACH PARTY HERETO SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF THE FEDERAL AND STATE COURTS WITHIN THE STATE
OF NEW YORK.
(k) Severability. If any term, provision, covenant
or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, 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 which
may be hereafter declared invalid, void or unenforceable.
(l) Entire Agreement. This Agreement is intended by
the parties as a final expression of their agreement, and is
intended to be a complete and exclusive
17
<PAGE> 18
statement of the agreement and understanding of the parties
hereto, in respect of the subject matter contained herein.
There are no restrictions, promises, warranties nor
undertakings, other than those set forth or referred to
herein, with respect to the registration rights granted by the
Company with respect to the securities sold pursuant to the
Purchase Agreement. This Agreement supersedes all prior
agreements and understandings between the parties with respect
to such subject matter.
(m) Attorneys' Fees. 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
prevailing party shall be entitled to recover reasonably
attorneys' fees in addition to its costs and expenses and any
other available remedy.
18
<PAGE> 19
IN WITNESS WHEREOF, the undersigned have executed, or caused to be
executed on their behalf by an agent thereunto duly authorized, this
Registration Rights Agreement as of the date first above written.
THE COMPANY:
RENTERS CHOICE, INC.,
a Delaware corporation
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
INVESTOR:
APOLLO INVESTMENT FUND IV, L.P.
a Delaware limited partnership
By: Apollo Advisors IV, L.P.
its General Partner
By: Apollo Capital Management IV, Inc.
its General Partner
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
APOLLO OVERSEAS PARTNERS IV, L.P.
an exempted limited partnership registered
in the Cayman Islands
By: Apollo Advisors IV, L.P.
its General Partner
By: Apollo Capital Management IV, Inc.
its Managing General Partner
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
19
<PAGE> 1
EXHIBIT 10.23
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT is entered into as of August 5,
1998, by and between Renters Choice, Inc., a Delaware corporation (the
"Company"), and each of Apollo Investment Fund IV, L.P., a Delaware limited
partnership, and Apollo Overseas Partners IV, L.P., an exempted limited
partnership registered in the Cayman Islands acting through its general partner
(collectively, the "Investor").
1. Definitions. As used in this Agreement, the following terms
shall have the following meanings:
Advice: See Section 6 hereof.
Series B Preferred Stock: The Series B Convertible Stock of the
Company, $.01 par value per share.
Demand Notice: See Section 3 hereof.
Demand Registrations: See Section 3 hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.
Losses: See Section 8 hereof.
Notice: See Section 3 hereof.
Non-Voting Common Stock: The non-voting common stock, $.01 par value,
of the Company.
Person: An individual, partnership, joint venture, limited liability
company, corporation, trust, unincorporated organization or government or any
department or agency thereof.
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Securities covered by such Registration Statement and all
other amendments and supplements to the prospectus, including post-effective
amendments, and all material incorporated or deemed to be incorporated by
reference in such prospectus.
<PAGE> 2
Registrable Securities: (i) the Shares; (ii) the Non-Voting Common
Stock issuable or issued upon conversion of the Shares; (iii) any Series B
Preferred Stock or Non-Voting Common Stock issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in exchange for or in
replacement of the securities listed in clauses (i), (ii) hereof; and (iv) any
security listed in clause (iii) hereof.
Registration Statement: Any registration statement of the Company which
covers any of the Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated or deemed to be incorporated by reference in such
registration statement.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and the rules
and regulations promulgated by the SEC thereunder.
Shares: The shares of Series B Preferred Stock purchased by Investor
pursuant to the Stock Purchase Agreement dated as of the date hereof between the
Company and Investor.
Underwritten registration or underwritten offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
2. Securities Subject to this Agreement.
(a) Subject Securities. The securities entitled to the
benefits of this Agreement are the Registrable Securities
pursuant to the provisions of this Agreement.
(b) Holders of Registrable Securities. A person is deemed to
be a holder of Registrable Securities whenever such person
owns Registrable Securities or has the right to acquire such
Registrable Securities, whether or not such acquisition has
actually been effected and disregarding any legal restrictions
upon the exercise of such right.
3. Demand Registrations
(a) Demand Registrations. From and after the second
anniversary of the closing date of Investor's acquisition of
the Shares, Investor shall have the right, by written notice
delivered to the Company, to require the Company to register
(the "Demand Registrations") under the Securities Act not less
than 20% and up to 100% of its Registrable Securities then
outstanding in accordance with this Section 3. For purposes of
this Agreement, "Registrable Securities then outstanding"
shall be the total of (i) the number of shares of Non-Voting
Common Stock outstanding which are Registrable Securities and
(ii) the number of shares of Non-Voting Common
Stock issuable pursuant to then exercisable or convertible
securities, including but not limited to the Shares, which are
Registrable Securities.
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The number of Demand Registrations pursuant to this Section
3(a) shall not exceed two (2).
(b) Filing and Effectiveness. The Company shall file each of
the Demand Registrations within 60 days and shall use its best
efforts to cause the same to be declared effective by the SEC
within 120 days of the date on which Investor first gave the
written notice (a "Demand Notice") required by Section 3(a)
hereof with respect to such Demand Registration. If any Demand
Registration is requested to be a "shelf" registration, the
Company shall keep the Registration Statement filed in respect
thereof effective for a period of nine months from the date on
which the SEC declares such Registration Statement effective
or such shorter period which will terminate when the
distribution of all registered Registrable Securities pursuant
to such Registration Statement ends.
(c) Request for Demand Registrations. Subject to the
conditions set forth in Section 3(a) hereof, Investor may, at
any time, make a written request for a Demand Registration.
All requests made pursuant to this Section 3 will specify the
number of the Registrable Securities to be registered and will
also specify the intended methods of disposition thereof. If
Investor specifies one particular type of underwritten
offering, such method of disposition shall be such type of
underwritten offering or a series of such underwritten
offerings (as Investor may elect) during the time period the
Registration Statement is effective.
(d) Piggy-Back by Other Shareholders. Subject to the
provisions of Section 3(e), the Company may include in a
Demand Registration shares of Common Stock ("Piggy-Back
Shares") for the account of other holders thereof exercising
contractual piggy-back rights ("Piggy-Back Holders"), on the
same terms and conditions as the Registrable Securities to be
included therein for the account of the Investor. The Company
shall not have the right to include any securities of the
Company in any Demand Registration for its own account.
(e) Reduction of Offering. If any of the Registrable
Securities registered pursuant to any Demand Registration are
to be sold in one or more firm commitment underwritten
offerings, and the managing underwriter advises the Company
and Investor in writing that in its opinion the total amount
of securities proposed to be sold in the offering is such as
to materially and adversely affect the success of such
offering, then the number of Piggy-Back Shares to be offered
for the account of any Piggy-Back Holders shall be reduced (to
zero, if necessary), pro rata in proportion to the respective
number of Piggy-Back Shares requested to be registered to the
extent necessary to reduce the total securities requested to
be included in such offering to the amount, if any,
recommended by such managing underwriters. If the Piggy-Back
Shares have been reduced to zero and the number of Registrable
Securities requested
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<PAGE> 4
to be registered by Investor exceeds the number of Registrable
Securities recommended by the managing underwriter, then the
number of Registrable Securities to be offered for the account
of Investor may be reduced; provided, that if the number of
Registrable Securities the Investor has requested be
registered pursuant to a Demand Registration are reduced, upon
the recommendation of the managing underwriter in an
underwritten offering, or by the Company in a non-underwritten
offering, to less than 51% of the total number of Registrable
Securities Investor requested to be registered pursuant to
such Demand Registration, then such registration shall no
longer constitute a Demand Registration under this Agreement
and shall not reduce the number of Demand Registrations to
which Investor is otherwise entitled.
(f) Other Registrations. Except for (i) registrations
effected in accordance with (A) the Exchange Notes
registration rights and/or the Warrant Securities registration
rights granted to the "Lenders" under that certain Senior
Subordinate Credit Agreement of even date herewith (the
"Senior Subordinate Credit Agreement") entered into by and
among the Company and the "Lenders" named therein (such
Exchange Notes registration rights and such Warrant Securities
registration rights being hereinafter collectively referred to
as the "Senior Subordinate Credit Agreement Registration
Rights") and (ii) any registrations effected by Investor or
its assignee(s) in accordance with such registration rights as
Investor and/or its assignee(s) shall have either under this
Agreement or otherwise (such registration rights being
hereinafter referred to as "Investors' Additional Registration
Rights") (the Senior Subordinate Credit Agreement Registration
Rights and the Investor's Additional Registration Rights being
hereinafter collectively referred to as the "Authorized
Registration Rights"), the Company shall not effect any
registration of its securities (except on Form S-8 or any
successor form to such Form), or a sale pursuant to Regulation
D under the Securities Act (other than offerings made pursuant
to and in accordance with Rule 504 of Regulation D), whether
on its own behalf or at the request of any holder or holders
of such securities (other than pursuant to and in accordance
with this Section 3), from the date of a request to register
Registrable Securities pursuant to and in accordance with this
Section 3 until the earlier of (i) 90 days after the date on
which all securities covered by such Demand Registration have
been sold or (ii) 180 days after the effective date of such
Demand Registration, unless the Company shall have first
notified Investor in writing of its intention to do so, and
Investor or the managing underwriters, if any, shall have
consented thereto in writing.
4. Piggy-Back Registration
(a) Right to Piggy-Back. If at any time the Company proposes
to file a registration statement under the Securities Act with
respect to any class of its equity securities (other than a
registration statement (i) on Form S-8 or any successor form
to such Form or (ii) filed in connection with an exchange
offer or an offering of its
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<PAGE> 5
common stock or of securities convertible or exchangeable into
its common stock made solely to its existing shareholders in
connection with a rights offering or solely to employees of
the Company), whether or not for its own account, then the
Company shall give written notice of such proposed filing to
Investor at least 30 days before the anticipated filing date.
Such notice shall offer Investor the opportunity to register
such amount of Registrable Securities as Investor may request
(a "Piggy-Back Registration"). Subject to Section 4(b) hereof,
the Company shall include in each such Piggy-Back Registration
all Registrable Securities with respect to which the Company
has received from Investor a written request for inclusion
therein within 20 days after notice has been duly given to
Investor. Investor shall be permitted to withdraw all or any
part of the Registrable Securities from a Piggy-Back
Registration at any time prior to the effective date of such
Piggy-Back Registration.
(b) Priority on Piggy-Back Registrations. The Company shall
cause the managing underwriter or underwriters of a proposed
underwritten offering to permit Investor to include all the
Registrable Securities that Investor has requested to be
included in such offering on the same terms and conditions as
any similar securities, if any, of the Company included
therein. Notwithstanding the foregoing, if the managing
underwriter or underwriters of such offering deliver(s) a
written opinion to the Company and the Investor that the total
amount of securities which Investor, the Company, and any
other persons or entities having registration rights, intend
to include in such offering is such as to materially and
adversely affect the success of such offering, then the amount
of securities to be offered for the account of all Persons
shall be reduced or limited pro rata in proportion to the
amount of securities proposed to be registered in such
offering by each Person to the extent necessary to reduce the
total amount of securities to be included in such offering to
the amount recommended by such managing underwriter or
underwriters.
(c) Registration of Securities Other than Registrable
Securities. Except for the Authorized Registration Rights,
without the written consent of the holders of a majority in
aggregate amount of the Registrable Securities then
outstanding, the Company shall not grant to any Person the
right to request the Company to register any securities of the
Company under the Securities Act unless the rights so granted
are subject to the prior rights of the holders of Registrable
Securities set forth in, and are not otherwise in conflict or
inconsistent with the provisions of, this Agreement.
5. Holdback Agreements
(a) Restrictions on Public Sale by Holders of Registrable
Securities. Investor agrees, if reasonably requested by the
managing underwriter or underwriters in an underwritten
offering (to the extent timely notified in writing by the
Company or the managing underwriter or underwriters), not to
effect any public sale or distribution of securities of the
Company of any class included in a Registration Statement
registering the sale of Common Stock by the Company pursuant
to Section 3 hereof,
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<PAGE> 6
including a sale pursuant to Rule 144 under the Securities Act
(except as part of such underwritten registration), during the
10-day period prior to, and the 90-day period beginning on,
the closing date of any underwritten offering made pursuant to
such Registration Statement.
The foregoing provisions shall not apply if Investor is
prevented by applicable statute or regulation from entering into any such
agreement; provided, however, that Investor shall undertake in its request to
participate in such underwritten offering, not to effect any public sale or
distribution of the class of Registrable Securities covered by such Registration
Statement (except as part of such underwritten registration) during such period
unless it has provided 45 days prior written notice of such sale or distribution
to the managing underwriters.
(b) Restrictions on Public Sale by the Company and Others.
The Company agrees (i) if requested by the managing
underwriter or underwriters in an underwritten offering of
Registrable Securities covered by a Registration Statement
filed pursuant to Section 3 hereof, not to effect any public
or private sale or distribution of its securities, including a
sale pursuant to Regulation D under the Securities Act, during
the 10-day period prior to, and the 90-day period beginning
on, the effective date of any underwritten offering made
pursuant to such Registration Statement (except as part of
such underwritten registration or pursuant to registrations on
Form S-8 or any successor form to such Form), and (ii) to
cause each holder of its securities purchased from the Company
at any time after the date of this Agreement (other than in a
registered public offering) to agree not to effect any public
sale or distribution of any such securities during such
period, including a sale pursuant to Rule 144 under the
Securities Act (except as part of such underwritten
registration, if otherwise permitted).
6. Registration Procedures. In connection with the registration
obligations of the Company pursuant to and in accordance with Section 3
of this Agreement, the Company shall effect such registrations to
permit the sale of such Registrable Securities in accordance with the
intended method or methods of disposition thereof, and pursuant thereto
the Company shall as expeditiously as possible:
(a) notify Investor and the managing underwriters, if any,
promptly, and (if requested by any such Person) confirm such
notice in writing, (i) when a Prospectus or any Prospectus
supplement or post-effective amendment related to such
Registrable Securities has been filed, and, with respect to a
Registration Statement or any post-effective amendment
related to such Registrable Securities, when the same has
become effective, (ii) of any request by the SEC for
amendments or supplements to such Registration Statement or
related Prospectus or for additional information, (iii) of the
issuance by the SEC of any stop order suspending the
effectiveness of such Registration Statement or the initiation
of any proceedings for that purpose, (iv) if at any time the
representations and warranties of the Company contained in any
agreement (including any underwriting agreement) contemplated
by
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<PAGE> 7
Section 6(k) below cease to be true and correct, (v) of the
receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in
any jurisdiction or the initiation or threatening of any
proceeding for such purpose, (vi) of the happening of any
event which makes any statement made in such Registration
Statement or related Prospectus or any document incorporated
or deemed to be incorporated therein by reference untrue or
which requires the making of any changes in such Registration
Statement or Prospectus so that such documents 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
(vii) of the reasonable determination of the Company that a
post-effective amendment to such Registration Statement would
be appropriate;
(b) use every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration
Statement, or the lifting of any suspension of the
qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, at the
earliest possible moment;
(c) if requested by the managing underwriters or the
Investor, (i) immediately incorporate in a Prospectus
supplement or post-effective amendment such information as the
managing underwriters and such holder agree should be included
therein and as may be required by applicable law, (ii) make
all required filings of such Prospectus supplement or such
post-effective amendment as soon as the Company has received
notification of the matters to be incorporated in such
Prospectus supplement or such post-effective amendment and
(iii) supplement or make amendments to such Registration
Statement; provided, however, that the Company shall not be
required to take any of the actions in this Section 6(c) which
are not, in the opinion of counsel for the Company, in
compliance with applicable law;
(d) furnish to Investor and each managing underwriter, if
any, without charge, at least one signed copy of each
Registration Statement related to such Registrable Securities
and any post-effective amendments thereto, including financial
statements and schedules, all documents incorporated therein
by reference and all exhibits (including, if requested, those
previously furnished or incorporated by reference) at the
earliest practicable time under the circumstances before the
filing of such documents with the SEC;
(e) deliver to Investor and the underwriters, if any, without
charge, as many copies of the Prospectus or Prospectuses
related to such Registrable Securities (including each
preliminary prospectus) and as many copies of any amendment or
supplement thereto as such Persons may reasonably request; the
Company consents to the use of such Prospectus or any
amendment or supplement thereto by each of the
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<PAGE> 8
selling holders of Registrable Securities and the
underwriters, if any, in connection with the offering and sale
of the Registrable Securities covered by such Prospectus or
any amendment or supplement thereto;
(f) prior to any public offering of Registrable Securities,
to register or qualify or cooperate with Investor, the
underwriters, if any, and their respective counsel in
connection with the registration or qualification (or
exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities
or Blue Sky laws of such jurisdictions as any seller or
underwriter reasonably requests in writing; 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 necessary or advisable to enable the disposition in
such jurisdictions of the Registrable Securities covered by
the applicable Registration Statement; provided, however, that
the Company will not be required to (A) qualify generally to
do business in any jurisdiction where it is not then so
qualified or (B) take any action which would subject it to
general service of process in any such jurisdiction where it
is not then so subject;
(g) in connection with an underwritten offering, participate,
to the extent reasonably requested by the managing underwriter
for the offering or Investor, in customary efforts to sell the
securities under the offering, including, without limitation,
participating in "road shows;"
(h) cooperate with Investor and the managing underwriters, if
any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold,
which certificates shall not bear any restrictive legends;
(i) cause the Registrable Securities covered by each
Registration Statement to be registered with or approved by
such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the
underwriters, if any, to consummate the disposition of such
Registrable Securities;
(j) upon the occurrence of any event contemplated by
paragraphs 6(a)(vi) or 6(a)(vii) above, prepare a supplement
or post-effective amendment to each Registration Statement or
a supplement to the related Prospectus or any document
incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of
the Registrable Securities being sold thereunder, such
Prospectus will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light
of the circumstances in which they were made, not misleading;
(k) to the extent possible, cause all Registrable Securities
covered by such a Registration Statement to be (i) listed on
each securities exchange, if any, on which
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<PAGE> 9
similar securities issued by the Company are then listed, or
(ii) authorized to be quoted on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") or
the National Market System of NASDAQ if the securities so
qualify, if requested by Investor;
(l) enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in
underwritten offerings) and take all such other actions in
connection therewith (including those reasonably requested by
the managing underwriters, if any, or Investor) in order to
expedite or facilitate the disposition of such Registrable
Securities and in such connection, whether or not an
underwriting agreement is entered into and whether or not the
registration is an underwritten registration (i) make such
representations and warranties to Investor and the
underwriters, if any, with respect to the business of the
Company and its Subsidiaries, the Registration Statement, the
Prospectus, and documents, if any incorporated or deemed to be
incorporated by reference in the Registration Statement, in
each case, in form, substance and scope as are customarily
made by issuers to underwriters in underwritten offerings and
confirm the same if and when requested; (ii) obtain opinions
of counsel to the Company and updates thereof (which counsel
and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters, if any,
and Investor) addressed to Investor and each of the
underwriters, if any, covering the matters customarily covered
in opinions requested in underwritten offerings and such other
matters as may be reasonably requested by Investor and such
underwriters, (iii) obtain "cold comfort" letters and updates
thereof from the independent certified public accountants of
the Company (and, if necessary, any other certified public
accountants of any subsidiary of the Company or of any
business acquired by the Company for which financial
statements and financial data is or is required to be included
in the Registration Statement) addressed to Investor and each
of the underwriters, if any, such letters to be in customary
form and covering matters of the type customarily covered in
"cold comfort" letters in connection with underwritten
offerings; (iv) if an underwriting agreement is entered into,
cause the same to contain indemnification provisions and
procedures no less favorable than those set forth in Section 8
hereof (or such other provisions and procedures acceptable to
Investor) with respect to all parties to be indemnified
pursuant to said Section; and (v) deliver such documents and
certificates as may be requested by Investor and the managing
underwriters, if any, to evidence the continued validity of
the representations and warranties of the Company made
pursuant to paragraph 6(k)(i) above and to evidence compliance
with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company. The
above shall be done at each closing under such underwriting or
similar agreement or, as and to the extent required
thereunder;
(m) make available for inspection by a representative of
Investor, any underwriter participating in any disposition of
Registrable Securities, and any attorney or accountant
retained by such selling holders or underwriter, all financial
and other
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<PAGE> 10
records, pertinent corporate documents and properties of the
Company; and cause the officers, directors and employees of
the Company and its subsidiaries to supply all information
reasonably requested by any such representative, underwriter,
attorney or accountant in connection with such Registration
Statement; provided, however, that any records, information or
documents that are designated by the Company in writing as
confidential at the time of delivery of such records,
information or documents shall be kept confidential by such
Persons and their designees unless (i) such records,
information or documents are in the public domain or otherwise
publicly available, (ii) disclosure of such records,
information or documents is required by court or
administrative order or (iii) disclosure of such records,
information or documents, in the opinion of counsel to such
Person, is otherwise required by law (including, without
limitation, pursuant to the requirements of the Securities
Act); and
(n) comply with all applicable rules and regulations of the
SEC and make generally available to its securityholders
earning statements satisfying the provisions of Section 11(a)
of the Securities Act and Rule 158 thereunder 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 Securities 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.
The Company may require Investor to furnish to the Company
such information regarding the distribution of Registrable Securities as the
Company may from time to time reasonably request in writing and the Company may
exclude from such registration the Registrable Securities if Investor
unreasonably fails to furnish such information within a reasonable time after
receiving such request; provided, that Investor's Registrable Securities shall
be counted for the demand made upon the Company hereunder.
Investor agrees by acquisition of Registrable Securities that,
upon receipt of any notice from the Company of the happening of any event of the
kind described in Section 6(a)(ii), 6(a)(iii), 6(a)(v), 6(a)(vi) or 6(a)(vii)
hereof, Investor shall forthwith discontinue disposition of such Registrable
Securities covered by such Registration Statement or Prospectus until Investor's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 6(i) hereof, or until it is advised in writing (the "Advice") by the
Company that the use of the applicable Prospectus may be resumed, and has
received copies of any additional or supplemental filings which are incorporated
or deemed to be incorporated by reference in such Prospectus.
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<PAGE> 11
7. Registration Expenses
(a) All reasonable fees and expenses incidental to the
Company's performance of or compliance with this Agreement
(including, without limitation, (i) all registration and
filing fees including, without limitation, fees and expenses
(A) with respect to filings required to be made with the
National Association of Securities Dealers, Inc., and (B) of
compliance with securities or Blue Sky laws (including,
without limitation, fees and disbursements of counsel for the
underwriters or selling holders (subject to the provisions of
Section 6(b)) in connection with Blue Sky qualifications of
the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under
the laws of such jurisdictions as the managing underwriters or
holders of a majority in number of the Registrable Securities
being sold may designate), (ii) printing expenses, (iii)
messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company, and Special Counsel
or other counsel for the sellers of the Registrable Securities
(subject to the provisions of Section 7(b) hereof), (v) fees
and disbursements of all independent certified public
accountants referenced to in Section 6(k)(iii) hereof
(including the expenses of any special audit and "cold
comfort" letters required by or incident to such performance),
(vi) underwriter's fees and expenses (excluding discounts,
commissions or fees of underwriters, selling brokers, dealer
managers or similar securities industry professionals relating
to the distribution of the Registrable Securities or legal
expenses of any Person other than the Company, the
underwriters and the selling holders; but including the fees
and expenses of any "qualified independent underwriter" or
other independent appraiser participating in an offering
pursuant to Section 3 of Schedule E to the Bylaws of the
National Association of Securities Dealers, Inc.), (vii)
Securities Act liability insurance if the Company so desires
such insurance and (viii) fees and expenses of all other
Persons retained by the Company) shall be borne by the Company
whether or not any Registration Statement becomes effective.
Notwithstanding the foregoing, the Company will not be
required to reimburse Investor for its out-of-pocket expenses
arising out of a Demand Registration if the Registration
Statement for such Demand Registration fails to become
effective at the request of Investor.
(b) In connection with each Piggy-Back Registration
hereunder, the Company shall reimburse Investor for the
reasonable fees and disbursements of not more than one counsel
(or more than one counsel if a conflict exists among such
selling holders in the exercise of the reasonable judgment of
counsel for the selling holders and counsel for the Company)
chosen by Investor.
8. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding termination of this Agreement and without
limitation as to time, indemnify and hold harmless, to the
full extent permitted by law, Investor, its officers,
directors, agents
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<PAGE> 12
and employees, each person who controls such holder (within
the meaning of Section 15 of the Securities Act or Section 20
the Exchange Act), and the officers, directors, agents or
employees of any such controlling person, from and against all
losses, claims, damages, liabilities, costs (including,
without limitation, reasonable costs of preparation and
attorneys' fees) and reasonable expenses (collectively,
"Losses") arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any
Registration Statement, Prospectus or preliminary prospectus,
or arising out of or based upon any omission or alleged
omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading except
insofar as the same are based solely upon information
furnished in writing to the Company by Investor expressly for
use therein. The Company shall also indemnify underwriters,
selling brokers, dealer managers and similar securities
industry professionals participating in the distribution,
their officers, directors, a gents and employees and each
Person who controls such Persons (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange
Act) to the same extent as provided above with respect to the
indemnification of Investor.
(b) Indemnification by Investor. In connection with any
Registration Statement in which Investor is participating,
Investor shall furnish to the Company in writing such
information as the Company reasonably requests for use in
connection with any Registration Statement or Prospectus and
agrees to indemnify and hold harmless, to the full extent
permitted by law, the Company, its directors, officers, agents
and employees, each Person who controls the Company (within
the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) and the directors, officers, agents or
employees of such controlling persons, from and against all
Losses arising out of or based upon any untrue statement of a
material fact contained in any Registration Statement,
Prospectus or preliminary prospectus, or arising out of or
based upon any omission of a material fact required to be
stated therein or necessary to make the statement therein not
misleading, to the extent, but only to the extent, that such
untrue statement or omission is contained in any information
so furnished in writing by Investor to the Company expressly
for use in such Registration Statement or Prospectus and that
such information was solely relied upon by the Company in
preparation of any Registration Statement, Prospectus or
preliminary prospectus. In no event shall the liability of
Investor be greater in amount than the dollar amount of the
proceeds (net of the payment of all expenses) received by
Investor upon the sale of the Registrable Securities giving
rise to such indemnification obligation. The Company shall be
entitled to receive indemnities from underwriters, selling
brokers, dealer managers and similar securities industry
professionals participating in the distribution to the same
extent as provided above with respect to information so
furnished in writing by such Persons expressly for use in any
Prospectus or Registration Statement.
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(c) Conduct of Indemnification Proceedings. If any action or
proceeding (including any governmental investigation or
inquiry) shall be brought or any claim shall be asserted
against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly
notify the party from which such indemnity is sought (the
"Indemnifying Party") in writing, and the Indemnifying Party
shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and
the payment of all fees and expenses incurred in connection
with the defense thereof. All such fees and expenses
(including any fees and expenses incurred in connection with
investigating or preparing to defend such action or
proceeding) shall be paid to the Indemnified Party, as
incurred, within 5 days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately
determined that an Indemnified Party is not entitled to
indemnification hereunder). Any such Indemnified Party shall
have the right to employ separate counsel in any such action,
claim or proceeding and to participate in the defense thereof,
but the fees and expenses of such counsel shall be the
expenses of such Indemnified Party unless (a) the Indemnifying
Party has agreed to pay such fees and expenses or (b) the
Indemnifying Party shall have failed to promptly assume the
defense of such action, claim or proceeding and to employ
counsel reasonably satisfactory to the Indemnified Party in
any such action, claim or proceeding or (c) the named parties
to any such action, claim or proceeding (including any
impleaded parties) include both such Indemnified Party and the
Indemnifying Party, and such Indemnified Party shall have been
advised by counsel that there may be one or more legal
defenses available to it which are different from or
additional to those available to the Indemnifying Party (in
which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ
separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the
defense of such action, claim or proceeding on behalf of such
Indemnified Party, it being understood, however, that the
Indemnifying Party shall not, in connection with any one such
action, claim or proceeding or separate but substantially
similar or related actions, claims or proceedings in the same
jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more
than one separate firm of attorneys (together with appropriate
local counsel) at any time for all such Indemnified Parties,
unless in the reasonable judgment of any such Indemnified
Party a conflict of interest may exist between such
Indemnified Party and any other of such Indemnified Parties
with respect to such action, claim or proceeding, in which
event the Indemnifying Party shall be obligated to pay the
fees and expenses of such additional counsel or counsels).
(d) Contribution. If the indemnification provided for in this
Section 8 is unavailable to an Indemnified Party under Section
8(a) or 8(b) hereof (other than by reason of exceptions
provided in those Sections) in respect of any Losses, then
each applicable Indemnifying Party, in lieu of indemnifying
such Indemnified Party, shall, jointly and severally,
contribute to the amount paid or payable by such Indemnified
Party as a result of such Losses, in such proportion as is
appropriate to reflect the
13
<PAGE> 14
relative fault of the Indemnifying Party and Indemnified Party
in connection with the actions, statements or omissions which
resulted in such Losses as well as any other relevant
equitable considerations. The relative fault of such
Indemnifying Party and such Indemnified Party shall be
determined by reference to, among other things, whether any
action in question, including any untrue statement or alleged
untrue statement of a material fact or omission or alleged
omission of a material fact, has been taken or made by, or
relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed
to include, subject to the limitations set forth in Section
8(c), any legal or other fees or expenses reasonably incurred
by such party in connection with any investigation or
proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 8(d) were determined by pro
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provision of this Section 8(d), an Indemnifying
Party which is a selling holder of Registrable Securities shall not be required
to contribute any amount in excess of the amount by which the total price at
which the Registrable Securities sold by such Indemnifying Party and distributed
to the public were offered to the public exceeds the amount of any damages which
such Indemnifying Party has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
9. Rule 144 and Rule 144A. The Company shall file the reports
required to be filed by it under the Securities Act and the Exchange
Act in a timely manner and, if at any time the Company is not required
to file such reports, it will, upon the request of Investor, make
available public or other information so long as necessary to permit
sales of its securities pursuant to Rules 144 and 144A. The Company
further covenants that it will take such further action as Investor may
reasonably request, all to the extent required from time to time to
enable Investor to sell Registrable Securities without registration
under the Securities Act within the limitation of the exemptions
provided by Rules 144 and 144A. Upon the request of Investor, the
Company shall deliver to Investor a written statement as to whether it
has complied with such requirements. The Company will cooperate to
enable Investor to sell Registrable Securities in block trades or other
similar transactions, including furnishing to Investor (i) an opinion
or opinions of counsel to the Company, and (ii) a comfort letter from
the Company's independent public accountants, as Investor reasonably
requests, (iii) such reasonable representations, warranties, covenants
and indemnities as are customary for such transactions, and (iv) as to
prospective purchasers of Investor's securities, the information
described in Rule 144A(d)(4). Notwithstanding the foregoing, nothing in
this Section 9 shall be deemed to require the Company to register any
of its securities pursuant to the Exchange Act.
14
<PAGE> 15
10. Underwritten Registrations. If any Demand Registration is an
underwritten offering, the Investor will have the right to select the
investment banker or investment bankers and managers and attorneys to
administer the offering; provided, that such investment bank or manager
shall be reasonably satisfactory to the Company. If any Piggy-Back
Registration is an underwritten offering, the Company will have the
right to select the investment banker or investment bankers and
managers to administer the offering; provided, that such investment
bank or manager shall be reasonably satisfactory to Investor if
Investor is participating in such underwritten offering.
No Person may participate in any underwritten registration
hereunder unless such Person (a) agrees to sell such Person's securities to be
included in the underwritten registration 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.
11. Miscellaneous
(a) Remedies. In the event of a breach by the Company of its
obligations under this Agreement, Investor, in addition to
being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company
agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it
of any of the provisions of this Agreement and hereby further
agrees that, in the event of any action for specific
performance in respect of any such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Except for the agreements
pursuant to which the Authorized Registration Rights are
granted, (i) the Company shall not, on or after the date of
this Agreement, enter into any agreement with respect to its
securities which is inconsistent with the rights granted to
Investor in this Agreement or otherwise conflicts with the
provisions hereof, and (ii) the Company has not entered into
any agreement with respect to its securities granting any
registration rights to any person other than this Agreement.
(c) Adjustments Affecting Registrable Securities. The Company
shall not take any action, or permit any change to occur, with
respect to the Registrable Securities (i) which would
adversely affect the ability of Investor to include such
Registrable Securities in a registration undertaken pursuant
to this Agreement or (ii) which would adversely affect the
marketability of such Registrable Securities in any such
registration.
15
<PAGE> 16
(d) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, except
by written instrument signed by the Company and Investor.
(e) Notices. All notices and other communications provided
for or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, nationally
recognized air courier, telex or telecopier:
If to Investor:
Apollo Investment Fund IV, L.P. and/or
Apollo Overseas Partners IV, L.P.
c/o Apollo Management IV, L.P.
1999 Avenue of the Stars
Suite 1900
Los Angeles, CA 90067
Attention: Michael D. Weiner
Fax: (310)201-4166
With a copy (which shall not constitute notice) to:
Morgan, Lewis & Bockius LLP
300 South Grand Avenue
Suite 2200
Los Angeles, California 90071
Attn: John F. Hartigan, Esq.
Fax: (213)612-2554
If to Company:
Renters Choice, Inc.
13800 Montfort Drive, Suite 300
Dallas, Texas 75240
Attn: J. Ernest Talley, Chief Executive Officer
Fax: (214)385-1625
With a copy (which shall not constitute notice) to:
Winstead Sechrest & Minick P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas
Attn: Thomas W. Hughes, Esq.
Fax: (214)745-5390
16
<PAGE> 17
All such notices and communication shall be deemed to have
been duly given: when delivered by hand, if personally delivered; two business
days after being deposited in the mail, postage prepaid, if mailed; one business
day after being timely dispatched, if by air courier; when answered back, if
telexed; and when receipt is acknowledged, if telecopy. Any of the above
addresses may be changed by notice made in accordance with this Section 12(e).
(f) Owner of Registrable Securities. The Company will
maintain, or will cause its registrar and transfer agent to
maintain, a stock book with respect to the Common Stock, in
which all transfers of Registrable Securities of which the
Company has received notice will be recorded. The Company may
deem and treat the person in whose name Registrable Securities
are registered in the stock book of the Company as the owner
thereof for all purposes, including without limitation, the
giving of notices under this Agreement.
(g) Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and assigns
of each of the parties, including without limitation and
without the need for an express assignment, subsequent holders
of Registrable Securities. Notwithstanding the foregoing, the
Demand Registration rights set forth herein, prior to the
exercise thereof by Investor, may be assigned only in
connection with a transfer to any single Person or group of
affiliated Persons (in a single transaction or series of
related transactions) of at least 25% of the Registrable
Securities held by it on the date hereof.
(h) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
(i) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
(j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS, AND
EACH PARTY HERETO SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF
THE FEDERAL AND STATE COURTS WITHIN THE STATE OF NEW YORK.
(k) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, 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
17
<PAGE> 18
remaining terms, provisions, covenants and restrictions
without including any of such which may be hereafter declared
invalid, void or unenforceable.
(l) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement, and is
intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto, in respect
of the subject matter contained herein. There are no
restrictions, promises, warranties nor undertakings, other
than those set forth or referred to herein, with respect to
the registration rights granted by the Company with respect to
the securities sold pursuant to the Purchase Agreement. This
Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
(m) Attorneys' Fees. 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
prevailing party shall be entitled to recover reasonably
attorneys' fees in addition to its costs and expenses and any
other available remedy.
18
<PAGE> 19
IN WITNESS WHEREOF, the undersigned have executed, or caused to be
executed on their behalf by an agent thereunto duly authorized, this
Registration Rights Agreement as of the date first above written.
THE COMPANY:
RENTERS CHOICE, INC.,
a Delaware corporation
By:
------------------------------------------------
Name:
----------------------------------------------
Title:
---------------------------------------------
INVESTOR:
APOLLO INVESTMENT FUND IV, L.P.
a Delaware limited partnership
By: Apollo Advisors IV, L.P.
its General Partner
By: Apollo Capital Management IV, Inc.
its General Partner
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
APOLLO OVERSEAS PARTNERS IV, L.P.
an exempted limited partnership registered
in the Cayman Islands
By: Apollo Advisors IV, L.P.
its General Partner
By: Apollo Capital Management IV, Inc.
its Managing General Partner
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF EARNINGS
FOUND ON PAGES 1 AND 2 OF THE COMPANY'S FORM 10-Q FOR THE SIX MONTHS ENDED JUNE
30, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 23,347
<SECURITIES> 0
<RECEIVABLES> 2,147
<ALLOWANCES> 348
<INVENTORY> 31,773<F1>
<CURRENT-ASSETS> 0<F2>
<PP&E> 37,304
<DEPRECIATION> 15,826
<TOTAL-ASSETS> 335,838
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 0
0
0
<COMMON> 250
<OTHER-SE> 170,093<F3>
<TOTAL-LIABILITY-AND-EQUITY> 335,838
<SALES> 27,574<F4>
<TOTAL-REVENUES> 193,546
<CGS> 24,687<F5>
<TOTAL-COSTS> 153,813
<OTHER-EXPENSES> 10,465<F6>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,317
<INCOME-PRETAX> 27,951
<INCOME-TAX> 11,566
<INCOME-CONTINUING> 16,385
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,385
<EPS-PRIMARY> .66
<EPS-DILUTED> .65
<FN>
<F1>RENTAL MERCHANDISE, HELD FOR RENT.
<F2>BALANCE SHEET IS UNCLASSIFIED.
<F3>ADDITIONAL PAID IN CAPITAL AND RETAINED EARNINGS.
<F4>STORE AND FRANCHISE MERCHANDISE SALES.
<F5>STORE AND FRANCHISE COST OF MERCHANDISE SOLD.
<F6>GENERAL AND ADMINISTRATIVE EXPENSE AND AMORTIZATION OF INTANGIBLES.
</FN>
</TABLE>
