Exhibit 10.5
CREDIT AGREEMENT
CREDIT AGREEMENT (as hereafter amended, from time to time, the "Credit
Agreement") dated as of February 25, 1994, amending and restating the Credit
Agreement dated as of February 25, 1994, as amended to date (such credit
agreement, as so amended to date, the "Original Credit Agreement"), by and among
DAIRY MART CONVENIENCE STORES, INC., a Delaware corporation (the "Company"),
SOCIETY NATIONAL BANK, a national banking association organized under the laws
of the United States of America, and the banks and other financial institutions
listed on Schedule I attached hereto and made a part hereof (Society National
Bank and such banks hereinafter sometimes collectively called the "Banks" and
individually "Bank") and SOCIETY NATIONAL BANK, successor agent for the Banks
under the Original Credit Agreement, as agent (Society National Bank in such
capacity, the "Agent").
W I T N E S S E T H:
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WHEREAS, the Company, the Designated Subsidiaries, the Banks, and the Agent
entered into the Original Credit Agreement pursuant to which the Banks agreed
severally to extend credit to the Company in an aggregate principal amount not
to exceed $30,000,000 at any time outstanding, the proceeds of which were, and
are, to be used for the purposes therein and hereinafter set forth;
WHEREAS, of the $30,000,000 of aggregate extensions of credit to be made
available to the Company under the Original Credit Agreement and hereunder, up
to $15,000,000 of such extensions of credit shall be available under the L/C
Commitments (as hereinafter defined); and
WHEREAS, the Company has requested the Banks to amend the Original Credit
Agreement to amend certain provisions thereof and to amend and restate the
entire agreement to, among other things, facilitate the Company's issuance of
$13,500,000 in senior subordinated notes;
WHEREAS, the Banks are willing to amend and restate the Original Credit
Agreement and to continue to extend the credit provided thereunder upon the
terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
Section 1. GENERAL PROVISIONS.
1.1 Defined Terms. Certain terms used in this Agreement are defined in
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the Recitals hereto. In addition, as used in this Agreement, the following
terms shall have the following meanings:
"Affiliate": of a Person (the "Primary Person"), (a) any other Person
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(other than, with respect to the Company only, a Subsidiary and other than, with
respect to a Subsidiary of the Company only, the Company) which, directly or
indirectly, is in control of, is controlled by, or is under common control with,
the Primary Person or (b) any Person who is a director or officer (i) of the
Primary Person, (ii) of any Subsidiary of the Primary Person or (iii) of any
Person described in clause (a) above. For purposes of this definition, control
of a Person shall mean the power, directly or indirectly, (i) to vote 10% or
more of the securities having ordinary voting power for the election of
directors of such Person or (ii) to direct or cause the direction of the
management and policies of such Person whether by contract or otherwise.
"Agreement": this Credit Agreement, as amended, supplemented or otherwise
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modified from time to time.
"Application": an application in such form as the Issuing Bank may specify
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from time to time, requesting the Issuing Bank to issue a Letter of Credit.
"Asset Disposition": any sale, lease, sublease, transfer, issuance or
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other disposition (or series of related sales, leases, subleases, transfers,
issuances or dispositions) of shares of Capital Stock of the Company, any
Subsidiary or FinOp (other than directors' qualifying shares), property or other
assets (each referred to for the purposes of this definition as a "disposition")
by the Company, any Subsidiary or FinOp, including any disposition by means of a
merger, consolidation, or similar transaction; provided, however, that, for
purposes of this definition, disposition shall not include (i) a disposition of
inventory at not less than fair market value in the ordinary course of business,
(ii) a disposition of obsolete assets in the ordinary course of business, (iii)
a sale or issuance of Capital Stock of the Company which is not exchangeable or
convertible into any security other than Capital Stock of the Company that, by
its terms or otherwise, is neither exchangeable or convertible into another
security or required to be redeemed, or subject to redemption at the option of
the holder, before March 15, 2005; (iv) the sales of individual assets in the
ordinary course of business having a fair market value of less than, and for
consideration less than, $5,000, (v) any disposition of assets of FinOp not
constituting, together with any related dispositions by FinOp, a sale of all or
substantially all of the assets of FinOp, and (vi) any disposition to a
Designated Subsidiary.
"Assignment and Acceptance": an Assignment and Acceptance, substantially
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in the form of Exhibit A.
"Available Commitment": as to any Bank at any time, an amount equal to the
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excess, if any, of the amount of such Bank's Commitment over the sum
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of (i) the aggregate principal amount of all Working Capital Loans made by such
Bank then outstanding and (ii) the product of such Bank's L/C Commitment
Percentage times the L/C Obligations then outstanding.
"Available L/C Commitment": as to any Bank at any time, an amount equal to
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the excess, if any, of the amount of such Bank's L/C Commitment over the product
of such Bank's L/C Commitment Percentage times the L/C Obligations then
outstanding.
"Available Working Capital Loan Commitment": as to any Bank at any time,
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an amount equal to the excess, if any, of the amount of such Bank's Working
Capital Loan Commitment over the aggregate principal amount of all Working
Capital Loans made by such Bank then outstanding.
"Borrowing Date": any Business Day specified in a notice pursuant to
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subsection 2.4 as a date on which the Company requests the Banks to make Loans
hereunder.
"Business Day" a day other than a Saturday, Sunday or other day on which
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commercial banks in Cleveland, Ohio are authorized or required by law to close.
"Capital Expenditures": the amount as determined in accordance with GAAP.
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"Capital Stock": any and all shares, interests, participations or other
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equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation) and any
and all warrants or options to purchase any of the foregoing.
"Cash Collateral Account": as defined in Section 8.3.
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"Change of Control": the occurrence of any of the following events: (i)
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any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended), other than one or more
Permitted Holders or any Person or Persons controlled by one or more Permitted
Holders, is or becomes the beneficial owner, directly or indirectly, of more
than 50% of the total voting power of the Voting Stock of the Company; (ii)
during any period of two consecutive years, individuals who at the beginning of
such period constituted the Board of Directors of the Company (together with any
new directors whose election by such Board of Directors or whose nomination for
election by the shareholders of the Company was approved by the directors then
still in office who either were directors at the beginning of such period or
whose election or nomination for director was previously so approved) cease for
any reason to constitute a majority of the Board of Directors of the Company
then in office; (iii) the direct or indirect, sale, lease, exchange or other
transfer of all or substantially
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all of the assets of the Company to any "person" or "group" (as such terms are
used in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended); provided that the foregoing shall not include the granting of Liens
permitted by this Agreement; (iv) the Permitted Holders cease to control at
least 10% of the total voting power of the Company; or (v) the Company
consolidates with or merges into another corporation or any Person consolidates
with or merges into the Company, in either event pursuant to a transaction in
which either (A) the outstanding Voting Stock of the Company is changed into or
exchanged for cash, securities or other property (other than any such
transaction where the outstanding Voting Stock of the Company is changed into or
exchanged for Voting Stock of the surviving corporation) or (B) the holders of a
majority of the voting power of the Voting Stock of the Company immediately
prior to such transaction own, directly or indirectly, less than a majority of
voting power of the Voting Stock of the surviving corporation immediately after
such transaction; or (v) neither ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ nor ▇▇▇▇▇▇ ▇▇▇▇▇ shall any
longer be a member of the Company's senior management.
"Closing Date": November 29, 1995.
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"Code": the Internal Revenue Code of 1986, as amended from time to time.
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"Collateral": the collective reference to the Collateral, as such term is
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defined in each of the Company Security Agreement, the Company Pledge Agreement,
the Subsidiary Pledge Agreement, the Company Security Agreement Regarding
Inventory and Other Collateral (executed and delivered by the Company to the
Agent as of May 12, 1995) and each Security Agreement of Subsidiary Guarantor
Regarding Inventory and Other Collateral (executed and delivered by the
Subsidiaries to the Agent as of May 12, 1995), as such documents may from time
to time be amended, modified or supplemented.
"Commitment": as to any Bank, the obligation of such Bank to extend credit
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to the Company hereunder in an aggregate principal amount (including an amount
equal to such Bank's L/C Percentage times the aggregate stated amount of issued
and outstanding Letters of Credit) at any one time outstanding not to exceed the
amount set forth opposite such Bank's name in the Commitment Amount column on
Schedule I of this Agreement. "Commitments" refers to the Working Capital Loan
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Commitments and the L/C Commitments, collectively.
"Commitment Percentage": as to any Bank at any time, such Bank's
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percentage of the relevant commitment as set forth on Schedule I of this
Agreement.
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"Commitment Period": the period from and including February 25, 1994 to
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but not including the Termination Date or such earlier date on which the
Commitments shall terminate as provided herein.
"Commonly Controlled Entity": an entity, whether incorporated or not,
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which is under common control with the Company within the meaning of Section
4001 of ERISA or is part of a group which includes the Company and which is
treated as a single employer under Section 414 of the Code.
"Company Pledge Agreement": the Pledge Agreement, substantially in the
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form of Exhibit B, made by the Company in favor of the Agent for the ratable
benefit of the Banks, as the same may be amended, supplemented or otherwise
modified from time to time.
"Company Security Agreement": the Security Agreement, substantially in the
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form of Exhibit C, executed and delivered by the Company, as the same may be
amended, supplemented or otherwise modifIed from time to time.
"Compliance Certificate": a certificate of a Responsible Officer which
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shall certify that, to the best of such Officer's knowledge, each of the Company
and its Subsidiaries during such period has observed or performed all of its
covenants and other agreements, and satisfied every condition, contained in this
Agreement, the Notes and the other Loan Documents to which it is a party to be
observed, performed or satisfied by it, and that such Officer has obtained no
knowledge of any Default or Event of Default except as specified in such
certificate.
"Consolidated EBIRT": for any period, Consolidated Net Income for such
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period plus the aggregate amounts deducted in determining such Consolidated Net
Income in respect of (a) income taxes for such period, (b) Consolidated Interest
Expense for such period and (c) Consolidated Rent Expense for such period.
"Consolidated EBIDA": for any period, Consolidated Net Income for such
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period plus the aggregate amounts deducted (in the cases of (d) and (e) below,
whether or not so deducted) in determining such Consolidated Net Income in
respect of (a) Consolidated Interest Expense, (b) depreciation expense, (c) the
expense associated with amortization of intangible and other assets, (d) the
proceeds from either the sale of assets or a Sale/Leaseback Transaction, as
defined in subsection 7.12, (e) the net cash proceeds from the issuance of any
equity security, and (f) that portion of the provision for income taxes,
determined in accordance with GAAP, that has not been paid or received.
"Consolidated EBITDA": for any period, Consolidated Net Income for such
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period plus the aggregate amounts deducted in determining such Consolidated Net
Income in respect of (a) income taxes, (b) Consolidated
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Interest Expense, (c) depreciation expense and (d) the expense associated with
amortization of intangible and other assets.
"Consolidated Indebtedness": at a particular date, all Indebtedness of the
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Company and its consolidated Subsidiaries which by its terms matures more than
one year after the date of calculation, and any other Indebtedness of the
Company and its consolidated Subsidiaries maturing within one year from such
date which is renewable or extendable at the option of the obligor to a date
more than one year from such date, including, in any event, the Loans, but
excluding any Financing Leases entered into by the Company or its consolidated
Subsidiaries after February 25, 1994.
"Consolidated Interest Expense": for any period, interest expense of the
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Company and its Subsidiaries for such period, determined on a consolidated basis
in accordance with GAAP, excluding any nonrecurring interest, and including the
interest component of payments under Financing Leases.
"Consolidated Net Income": for any period, the consolidated net income
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(or loss) of the Company and its Subsidiaries for such period determined in
accordance with GAAP; provided, that there shall be excluded from the
calculation thereof any extraordinary or unusual gains or losses, gains or
losses from discontinuance of operations, gains or losses arising from the sale
or disposition by the Company or any Subsidiary of any asset (including, without
limitation, the issuance of any debt or equity securities but excluding the sale
or disposition of any Franchise Asset or any inventory of the Company or of any
Subsidiary) and other non-recurring gains or losses during such period.
"Consolidated Net Worth": at a particular date, all amounts which would be
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included under shareholders' equity on a consolidated balance sheet of the
Company and its Subsidiaries determined on a consolidated basis in accordance
with GAAP as at such date.
"Consolidated Rent Expense": for any period, the aggregate rental
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obligations of the Company and its Subsidiaries determined on a consolidated
basis payable in respect of such period under leases of real and/or personal
property (net of principal receipts from subleases thereof, and excluding taxes,
insurance, maintenance and similar expenses which the lessee is obligated to pay
under the terms of said leases), regardless of whether such obligations are
reflected as liabilities or commitments on a consolidated balance sheet of the
Company and its consolidated Subsidiaries or in the notes thereto; provided,
that with respect to Financing Leases, the rental obligations referred to herein
shall be limited to the principal portion of the payments in respect of such
obligations.
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"Contractual Obligation": as to any Person, any provision of any security
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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.
"Default": any of the events specified in Section 8, regardless of whether
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any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.
"Default Rate": at any time, the per annum rate of interest equal to the
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sum of the Prime Rate, from time to time in effect, and 3.00%.
"Designated Subsidiary": a Subsidiary listed on Part A of Schedule VI.
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"DM Associates": DM Associates Limited Partnership, a Connecticut limited
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partnership.
"DM Associates Note": that certain promissory note from DM Associates in
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the original principal amount of $7,100,000, originally payable to the
Connecticut Development Authority, and due on July 31, 1997, a copy of which is
attached hereto as Exhibit D hereto.
"Dollars" and "$": dollars in lawful currency of the United States of
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America.
"Environmental Laws": any and all Federal, state, local or municipal laws,
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rules, orders, regulations, statutes, ordinances, codes, decrees or requirements
of any Governmental Authority regulating, relating to or imposing liability or
standards of conduct concerning environmental protection matters, including
without limitation, Hazardous Materials, as now or may at any time hereafter be
in effect.
"ERISA": The Employee Retirement Income Security Act of 1974, as amended
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from time to time.
"Event of Default": any of the events specified in Section 8; provided
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that any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"Extension": as defined in subsection 2.12.
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"Federal Funds Effective Rate": at any time and with respect to any Bank,
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shall mean the rate of interest charged to such Bank in the interbank market at
such time for excess reserve balances.
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"Financing Lease": any lease of property, real or personal, the
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obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.
"FinOp": Financial Opportunities, Inc., a Kentucky corporation that is a
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Subsidiary and a small business investment company licensed by the SBA.
"FQED": the end date of any fiscal quarter in any fiscal year of the
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Company.
"Franchise Assets": all real and personal property of the Company or of
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any Subsidiary sold or otherwise transferred to any franchisee of the Company or
such Subsidiary pursuant to the Company's ongoing franchise program, in the
ordinary course of such program and pursuant to customary documentation of the
Company or such Subsidiary for such purpose.
"Franchisee Guarantees": Guarantee Obligations of the Company or of any
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Subsidiary guaranteeing Indebtedness of a franchisee of the Company with respect
to the Company's ongoing franchise program, which Guarantee Obligations are
reflected on the consolidated financial statements of the Company and its
consolidated Subsidiaries or in the notes thereto.
"FYED": the end date of the Company's fiscal year designated with such
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term, being the Saturday closest to January 31 in the calendar year designated
with such term; thus FYED 1995 shall mean the Saturday closest to January 31,
1995, which shall be the date on which the Company's 1995 fiscal year shall end.
"GAAP": generally accepted accounting principles in the United States of
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America in effect from time to time.
"Governmental Authority": any nation or government, any state or other
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political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Guarantee Obligation": as to any Person (the "guaranteeing person"), any
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obligation of (a) the guaranteeing person or (b) another Person (including,
without limitation, any bank under any letter of credit), to induce the creation
of which obligation the guaranteeing person has issued a reimbursement,
counterindemnity or similar obligation, in either case guaranteeing or in effect
guaranteeing any Indebtedness, leases, dividends or other obligations (the
"primary obligations") of any other third Person (the "primary obligor") in any
manner, whether directly or indirectly, including, without limitation, any
obligation of the guaranteeing person, whether contingent or not, (i) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds
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(A) for the purchase or payment of any such primary obligation or (B) 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 (x) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made and (y) 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
Company in good faith.
"Hazardous Materials": any hazardous materials, hazardous wastes,
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hazardous constituents, hazardous or toxic substances, petroleum products
(including crude oil or any fraction thereof), defined or regulated as such in
or under any Environmental Law.
"Indebtedness": of any Person at any date, (a) all indebtedness of such
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Person for borrowed money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices) or which is
evidenced by a note, bond, debenture or similar instrument, (b) all obligations
of such Person under Financing Leases, (c) all obligations of such Person in
respect of acceptances issued or created for the account of such Person, and (d)
all liabilities secured by any Lien on any property owned by such Person even
though such Person has not assumed or otherwise become liable for the payment
thereof.
"Indenture": the Amended and Restated Indenture, dated as of November 29,
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1995, among the Company, certain of its Subsidiaries, as guarantors, and First
Bank National Association (as successor to Society National Bank) as trustee,
amending and restating the indenture pursuant to which the Company has issued
its 10.25% Senior Subordinated Notes due 2004 in the aggregate original
principal amount of $75,000,000, and providing for issuance by the Company of
its 10.25% Senior Subordinated Notes, Series B, due 2004 in the aggregate
original principal amount of $13,500,000--as such Indenture may, with the prior
written consent of the Banks, be amended, supplemented or otherwise modified
from time to time.
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"Insolvency": with respect to any Multiemployer Plan, the condition that
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such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
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"Interest Payment Date": the last day of each March, June, September and
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December to occur while such Loan is outstanding.
"Interest Rate Agreement": any interest rate swap agreement, interest rate
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collar agreement, currency exchange agreement, or other similar agreement or
arrangement entered into by the Company, in order to hedge or minimize risk with
respect to the fluctuation of interest rates, with (i) either of the initial
Banks parties hereto or (ii) a financial institution with a minimum long-term
indebtedness rating of at least A- by Standard & Poor's Corporation and at least
A3 by ▇▇▇▇▇'▇ Investors Service, Inc.
"Issuing Bank": Society National Bank, in its capacity as issuer of any
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Letter of Credit.
"L/C Commitment": as to any Bank, the obligation of such Bank to
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participate in the issuance of Letters of Credit hereunder in an aggregate
principal amount at any one time outstanding not to exceed the amount set forth
opposite such Bank's name in the L/C Commitment Amount column on Schedule I of
this Agreement.
"L/C Commitment Percentage": as to any Bank at any time, the percentage
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set forth opposite such Bank's name in the L/C Commitment Percentage column on
Schedule I of this Agreement.
"L/C Fee": as defined in subsection 3.3(a).
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"L/C Obligations": at any time, an amount equal to the sum of (a) the
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aggregate then undrawn and unexpired amount of the then outstanding Letters of
Credit and (b) the aggregate amount of drawings under Letters of Credit which
have not then been reimbursed pursuant to subsection 3.5.
"L/C Participants": the collective reference to all the Banks other than
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the Issuing Bank.
"Letters of Credit": as defined in subsection 3.1(a).
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"Letter of Credit Rate": for each Letter of Credit, at any time, a rate
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per annum equal to 2.50%.
"Lien": any mortgage, pledge, hypothecation, assignment, security
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interest, deposit arrangement, encumbrance, lien (statutory or other), or
preference, priority or other security agreement or preferential arrangement
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of any kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement, any Financing Lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the Uniform Commercial Code or comparable law
of any jurisdiction in respect of any of the foregoing).
"Loan": any loan, advance or other disbursement by Agent or by any or all
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of the Banks to or for the account of the Company under the Commitments
(including without limitation, amounts paid in respect of any draft under any
Letter of Credit) or in respect of any amounts due and not paid by the Company
in accordance with subsection 10.5.
"Loan Documents": this Agreement, the Notes, the Applications, the
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Subsidiary Guarantee, the Pledge Agreements and the Company Security Agreement,
together with any and all other instruments, documents and agreements executed
and delivered by the Company or the Designated Subsidiaries from time to time in
connection with the Indebtedness evidenced by this Agreement and the Notes, as
the same may hereafter be amended, restated or modified, from time to time.
"Material Adverse Effect": a material adverse effect on (a) the business,
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operations, property, condition (financial or otherwise) or prospects of the
Company and its Subsidiaries taken as a whole, (b) the ability of the Company or
any Designated Subsidiary to perform its obligations under the Loan Documents to
which it is a party or (c) the validity or enforceability of this Agreement, the
Notes or any of the other Loan Documents or the rights or remedies of the Agent
or the Banks hereunder or thereunder.
"Multiemployer Plan": a Plan which is a multiemployer plan as defined in
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Section 4001(a)(3) of ERISA.
"Net Cash Proceeds": (a) when used in respect of any sale or other
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disposition of assets that is not an issuance of debt securities by the Company
or by any Subsidiary, the gross proceeds received by the Company or such
Subsidiary from such sale or disposition less (i) all reasonable legal, title,
recording and transfer tax expenses, commissions and other customary fees and
expenses incurred, and all other federal, state and local taxes assessed, in
connection therewith, (ii) the principal amount of, premium, if any, and
interest on any Indebtedness (other than the Loans and the Reimbursement
Obligations) which is secured by the asset sold or otherwise disposed of and
which is required to be repaid in connection with such sale or other disposition
of assets and (iii) amounts to be provided by the Company or such Subsidiary as
a reserve, in accordance with GAAP, against any liabilities associated with any
such sale or other disposition of assets and retained by such Person after such
sale or other disposition of assets, including, without limitation, pension and
other post-employment benefit liabilities and liabilities related to
environmental matters or against any indemnification obligations
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associated with such sale or other disposition of assets; and (b) when used in
respect of the issuance of any debt securities by the Company or any Subsidiary,
the gross proceeds received by the Company or such Subsidiary from such issuance
less all legal expenses, commissions and other fees and expenses incurred and
all federal, state and local taxes assessed in connection therewith.
"Notes": the collective reference to the Working Capital Loan Notes.
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"Participants": as defined in subsection 10.6(b).
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"PBGC": the Pension Benefit Guaranty Corporation established pursuant to
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Subtitle A of Title IV of ERISA.
"Permitted Holder": DM Associates, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇ and
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their respective Related Parties. "Permitted Holders" refers to such Persons,
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collectively.
"Person": an individual, partnership, corporation, business trust, joint
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stock company, trust, unincorporated association, joint venture, Governmental
Authority or other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan which is covered
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by ERISA and in respect of which the Company 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.
"Pledge Agreements": the Company Pledge Agreement and the Subsidiary
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Pledge Agreement.
"POS Program Expenses": those expenses incurred in connection with the
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acquisition or installation by the Company or any Subsidiary of cash registers,
personal computers and other inventory management equipment, and any licenses of
intellectual property in connection therewith.
"Prime Rate": the interest rate established from time to time by the Agent
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as Agent's "prime", "base" or "reference" rate, whether or not such rate is
publicly announced; the Prime Rate may not be the lowest rate charged by the
Agent for commercial or other extensions of credit. Any change in the Prime
Rate shall be effective as of the opening of business on the effective day of
such change in the Prime Rate.
"Purchasing Banks": as defined in subsection 10.6(c).
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"Register": as defined in subsection 10.6(d).
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"Regulation U": Regulation U of the Board of Governors of the Federal
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Reserve System.
"Reimbursement Obligation": the obligation of the Company to reimburse the
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Issuing Bank pursuant to subsection 3.4 for amounts drawn under Letters of
Credit.
"Reimbursing Bank": as defined in subsection 2.11(a).
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"Related Party": with respect to each Permitted Holder, (a) any spouse or
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immediate family member of such Permitted Holder or (b) any trust, corporation,
partnership or other entity, all of the beneficiaries, stockholders, partners,
owners or Persons beneficially holding an 80% or more controlling interest of
which consist of Permitted Holders and/or such other Persons referred to in the
immediately preceding clause (a).
"Reorganization": with respect to any Multiemployer Plan, the condition
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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, other than those events as to which the thirty day notice period is
waived under subsections .13, .14,.16, .18, .19 or .20 of PBGC Reg. (S) 2615.
"Required Banks": at any time, any Bank or group of Banks having more than
--------------
50%, collectively, of the Commitment Percentages.
"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 or the president or
-------------------
other executive officer of the Company or, with respect to financial matters,
the chief financial officer or other executive officer of the Company.
"Sale/Leaseback Transaction": as defined in subsection 7.12.
--------------------------
"SBA": the United States Small Business Administration or any regulatory
---
body succeeding to all or any of the functions thereof.
"Security Documents": the Pledge Agreements, the Company Security
------------------
Agreement, the Company Security Agreement Regarding Inventory and Other
Collateral (executed and delivered by the Company to the Agent as of May 12,
1995) and each Security Agreement of Subsidiary Guarantor
13
Regarding Inventory and Other Collateral (executed and delivered by the
Subsidiaries to the Agent as of May 12, 1995), as such documents may from time
to time be amended, modified or supplemented.
"Senior Subordinated Notes": the 10.25% Senior Subordinated Notes due 2004
-------------------------
in the original principal amount of $75,000,000 and the Senior Subordinated
Notes due 2004, Series B, in the original principal amount of $13,500,000 issued
pursuant to the Indenture--as such Notes may, with the prior written consent of
the Banks, be amended, modified, supplemented, renewed or extended from time to
time.
"Single Employer Plan": any Plan which is covered by Article IV of ERISA,
--------------------
but which is not a Multiemployer Plan.
"Subsequently Acquired Subsidiary": any Subsidiary acquired by the Company
--------------------------------
or any Designated Subsidiary pursuant to subsection 7.9(i) if the assets or
revenues of such Subsequently Acquired Subsidiary are considered, in the
reasonable judgment of the Agent and the Banks, material in relation to the
consolidated assets or consolidated revenues of the Company and its consolidated
Subsidiaries (as shown from the most recent financial statements delivered
pursuant to subsection 6.1).
"Subsidiary": as to any Person, a corporation, partnership 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 so long as such contingency has not
occurred) 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 Company.
"Subsidiary Guarantee" the Amended and Restated Guarantee, substantially in
--------------------
the form of Exhibit E, made by each Designated Subsidiary in favor of the Agent
for the ratable benefit of the Banks, as the same may be amended, supplemented
or otherwise modified from time to time.
"Subsidiary Pledge Agreement": the Pledge Agreement, substantially in the
---------------------------
form of Exhibit F, made by each Designated Subsidiary in favor of the Agent for
the ratable benefit of the Banks, as the same may be amended, supplemented or
otherwise modified from time to time.
"Subsidiary Security Agreement": the Security Agreement, substantially in
-----------------------------
the form of Exhibit G, executed and delivered by certain of Subsidiaries, as the
same may be amended, supplemented or otherwise modifIed from time to time.
14
"Successor Agent": any Bank or any bank, depository or financial
---------------
institution, trust company, bank and trust company having capital and surplus in
excess of $100,000,000 and acceptable to the remaining Bank or Banks and to the
Company, the Company's consent not to be unreasonably withheld or delayed.
"Termination Date": May 31, 1996, or such later date to which the
----------------
Termination Date may be extended in accordance with subsection 2.12.
"Transferee": as defined in subsection 10.6(f).
----------
"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.
"Voting Stock": with respect to a corporation, all classes of Capital
------------
Stock then outstanding of such corporation normally entitled to vote in
elections of directors.
"Working Capital Loan Commitment": as to any Bank, the obligation of such
-------------------------------
Bank to make Working Capital Loans to the Company hereunder in an aggregate
principal amount at any one time outstanding not to exceed the amount set forth
opposite such Bank's name in the Working Capital Loan Commitment Amount column
on Schedule I of this Agreement.
"Working Capital Loan Commitment Percentage": as to any Bank at any time,
------------------------------------------
the percentage set forth opposite such Bank's name in the Working Capital Loan
Commitment Percentage column on Schedule I of this Agreement.
"Working Capital Loan Note": as defined in subsection 2.5.
-------------------------
"Working Capital Loans": Any loans, advances or other disbursements by
---------------------
the Agent or any or all of the Banks to or for the account of the Company under
the Working Capital Loan Commitments or, in the discretion of the Agent, in
respect of any amounts due and not paid by the Company in accordance with
subsection 10.5.
1.2 Rules of Construction. (a) Unless otherwise specified therein, all
---------------------
terms defined in this Agreement shall have the defined meanings when used in the
Notes or any certificate or other document made or delivered pursuant hereto.
(b) As used herein and in the Notes, and any certificate or other document
made or delivered pursuant hereto, accounting terms relating to the Company and
its Subsidiaries not defined in subsection 1.1 and accounting
15
terms partly defined in subsection 1.1, to the extent not defined, shall have
the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.
(e) All references in the Loan Documents to the Original Credit Agreement,
in whatever form or manner, shall be deemed and construed to be references to
this Credit Agreement.
1.3 Change in Accounting Principles. Except as otherwise provided herein,
-------------------------------
any changes in GAAP which are hereafter made and adopted by the Company with the
agreement of its independent certified public accountants shall not affect the
method of calculation of any of the financial covenants, standards or terms
found in subsection 1.1 or Section 7.
1.4 Acknowledgment of Continuing Obligations under Original Credit
--------------------------------------------------------------
Agreement. The Company hereby acknowledges and agrees that: (i) this Agreement
----------
is an amendment and restatement of the Original Credit Agreement and does not
constitute or represent an extension of new credit; (ii) all the obligations
incurred by the Company under the Original Credit Agreement and the other Loan
Documents continue as obligations of the Company, in accordance with the terms
thereof, with the same force and effect as though the Original Credit Agreement
were not being amended and restated by this Agreement; and (iii) such
obligations include, without limitation, (A) the obligations of the Company
under the Company Security Agreement and the Company Pledge Agreement, neither
of which documents is being amended or restated at this time, (B) the
obligations under the Working Capital Loan Notes, (C) the obligations of the
Company with respect to Letters of Credit heretofore issued by the Issuing Bank,
(D) the obligations of the Company and the signatory Subsidiaries under the
Security Documents other than the Company Security Agreement and the Company
Pledge Agreement, and (E) the obligations of the Company under certain letters
delivered to Society National Bank and Fleet Bank National Association in
connection with the execution and delivery by the Company of the Second
Amendment Agreement dated as of May 12, 1995, which amended the Original Credit
Agreement.
1.5 Conditions to Effectiveness of this Agreement. The effectiveness of
---------------------------------------------
this Credit Agreement is subject to each of the following conditions precedent:
16
(i) Agreement. The Agent shall have received with a counterpart for
---------
each Bank, this Agreement, executed and delivered by a duly authorized
officer of the Company.
(ii) Reaffirmation. The Agent shall have received, with a counterpart
-------------
for each Bank, the Consent, Acknowledgement and Reaffirmation Agreement,
substantially in the form of Exhibit H hereto, of each Subsidiary that has
heretofore executed and delivered to Agent a Subsidiary Pledge Agreement,
Subsidiary Security Agreement or a Subsidiary Guarantee, executed and
delivered by a duly authorized officer of each such Subsidiary;
(iii) Indenture. The Agent shall have received for each Bank, a copy
---------
of the Indenture together with a certificate, dated the Closing Date and
executed by a duly authorized officer of the Company certifying that such
copies are true, correct and complete copies of such indentures as of the
date of such certificate;
(iv) Corporate Proceedings. The Agent shall have received, with a
---------------------
counterpart for each Bank, a copy of the resolutions, in form and substance
satisfactory to the Agent, of the Board of Directors of the Company and
each Designated Subsidiary authorizing (i) the execution, delivery and
performance of the Loan Documents to which it is a party, (ii) with respect
to the Company, the borrowings contemplated hereunder, (iii) with respect
to the Company, the grant of the Liens pursuant to the Security Documents
to which it is a party. and (iv) with respect to each Designated
Subsidiary, the grant of the Liens pursuant to the Subsidiary Pledge
Agreement, in each case certified by the Secretary or an Assistant
Secretary of the Company or such Designated Subsidiary at the Closing Date,
which certificate shall state that the resolutions thereby certified have
not been amended, modified, revoked or rescinded and shall be in form and
substance satisfactory to the Agent;
(v) Incumbency Certificates. The Agent shall have received a
-----------------------
certificate dated the Closing Date, of the Secretary or an Assistant
Secretary of the Company and each Designated Subsidiary as to the
incumbency and signature of the officer or officers signing the Loan
Documents to which such Person is a party, together with evidence of the
incumbency of such Secretary or Assistant Secretary;
(vi) Closing Certificate. The Agent shall have received, with a
-------------------
counterpart for each Bank, a Closing Certificate, substantially in the form
of Exhibit I and dated the Closing Date, executed by a duly authorized
officer of the Company and each Designated Subsidiary;
17
(vii) Litigation. No suit, action, investigation, inquiry or other
----------
proceeding (including, without limitation, the enactment or promulgation of
a statute or rule) by or before any arbitrator or any Governmental
Authority shall be formally instituted or threatened and no preliminary or
permanent injunction or restraining order by a state or federal court shall
have been entered or threatened (A) in connection with any Loan Document or
any of the transactions contemplated hereby or thereby or (B) which, in the
reasonable opinion of the Banks, could have a Material Adverse Effect;
(viii) No Violation. The consummation of the transactions
------------
contemplated by this Agreement, the Notes, each Application and the other
Loan Documents shall not contravene, violate or conflict with, nor involve
the Agent or any Bank in any violation of, any Requirement of Law;
(ix) Fees. The Agent and each Bank shall have received the fees to
----
be received by it on the Closing Date referred to in subsection 2.6 and
those fees to be paid on the Closing Date by the Company pursuant to its
written agreement or agreements executed prior to the date hereof;
(x) Legal Opinions. The Agent shall have received, with a
--------------
counterpart for each Bank, the executed legal opinions of ▇▇▇▇▇▇ & ▇▇▇▇▇▇,
Ribicoff & ▇▇▇▇▇▇, counsel to the Company and its Subsidiaries, and ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, General Counsel to the Company and its Subsidiaries, each dated
the Closing Date and substantially in the form of Exhibit J with such
changes thereto as the Agent shall approve. Such legal opinions shall
cover such other matters incident to the transactions contemplated by this
Agreement as the Agent may reasonably require; and
(xi) Insolvency Letter. The Agent shall have received, with a copy
-----------------
for each Bank, copies of the "Solvency" and "Fairness" letters delivered by
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ of New York City in connection with the
closing under the Settlement Agreements referred to in subsection 1.6(v)
below.
1.6 Provisions Relating to Settlement Agreements. (a) The consummation
--------------------------------------------
by the Company of any or all of the following transactions shall not constitute
either a Default or an Event of Default under this Agreement or any of the other
Loan Documents except as and to the extent that the consummation of any of such
transactions would cause a breach of subsection 7.1 hereof, and, to the extent
that steps taken in connection with the consummation of any of such transactions
has or, but for the execution of this Agreement, would have constituted a
Default or an Event of Default under
18
the Original Credit Agreement, the Banks hereby waive such Default or Event of
Default under the Original Credit Agreement:
(i) the execution and delivery of the Indenture and the issuance
pursuant thereto, on or before the Closing Date, of the Senior Subordinated
Notes, Series B, in the original principal amount of $13,500,000 and
bearing interest at 10.25% per annum or, in the event that registration of
the note issue is not effected as required under the Registration Rights
Agreement applicable to the notes, such higher rate, not to exceed 11.75%
per annum, as is specified in such agreement;
(ii) the issuance on or before the Closing Date of Warrants,
substantially in the form of Exhibit K hereto, for the purchase from the
Company of up to 1,715,000 shares of Capital Stock of the Company, subject
to adjustment asset forth in the provisions of the Stock Purchase
Agreement, a copy of which has heretofore been provided to the Agent, and
the exercise from time to time of some or all of such Warrants in
accordance with their terms;
(iii) the transfer of the interests of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and his
Affiliates and Related Parties in DM Associates and the acquisition of such
interests by the Company;
(iv) the acquisition of the DM Associates Note; or
(v) the incurring of Indebtedness to the extent necessary to honor
the Company's obligations under the Settlement Agreements, copies of which
are attached hereto as Exhibit L; provided that the total amount of such
Indebtedness shall not exceed $13,500,000;
(b) Nothing in this Agreement and the execution and delivery hereof by the
Banks shall be construed to imply, represent or constitute, in any manner or to
any degree whatsoever, that the Agent or any of the Banks has reviewed,
approved, consented or refused to consent to, recommended, offered advice with
respect to, or in any other manner whatsoever participated in the negotiation of
or the execution and delivery by the Company of, the Settlement Agreements, or
any of them. No person may or should rely on the Banks' execution and delivery
of this Agreement and, in particular, the content of this subsection 1.6, as
evidencing in any sense or to any degree, whatsoever, any conclusion or view or
opinion by the Banks as to the wisdom, fairness, appropriateness, propriety or
potential consequences of the Company's execution and delivery of the Settlement
Agreements or the consummation thereof.
19
1.7 Provisions Relating to DM Associates Note. Notwith-standing anything
-----------------------------------------
to the contrary in any of the other Loan Documents, the DM Associates Note shall
not constitute part of the Collateral.
1.8 Release and Covenant not to ▇▇▇. The Company hereby fully,
-------------------------------
unconditionally and forever, jointly and severally releases and discharges the
Agent and each of the Banks of and from the following, to the extent arising out
of or in any manner connected or related, directly or indirectly, in whole or in
part, to the Original Credit Agreement or any of the Loan Documents and existing
or arising from or predicated upon circumstances existing or having occurred on
or prior to the Closing Date: any and all claims, demands, agreements,
contracts, covenants, actions, suits, causes of action, obligations,
controversies, debts, costs, expenses, accounts, damages, judgments, losses and
liabilities of whatever kind or nature in law, equity or otherwise, whether
known or unknown, and of every nature and extent whatsoever, which the Company
had, may have had, now has, or can, shall or may have, for or by reason of any
and all matters, causes, or things whatsoever from the beginning of time to and
including the Closing Date; and the Company agrees that it will not institute
any action at law or suit in equity against the Agent or any of the Banks, nor
institute, prosecute or in any way aid in the institution or prosecution of any
claim, demand, action, or cause of action for damages, costs, loss of services,
expenses, or compensation for or on account of any damage, loss or injury either
to person or property, or both, whether contingent or not, liquidated or
unliquidated, developed or undeveloped, resulting or to result, known or
unknown, past, present or future which are, were, might or could have been
asserted against the Agent or any of the Banks in connection with any of the
matters released herein.
Section 2. AMOUNT AND TERMS OF COMMITMENTS.
2.1 Commitments. Subject to the terms and conditions hereof, and provided
-----------
that no Default or Event of Default shall have occurred and be continuing, each
Bank severally agrees to make Working Capital Loans to the Company and to
participate in the issuance of Letters of Credit, from time to time on or after
the date each of the conditions precedent set forth in Section 5 has been
satisfied or waived by the Required Banks and continuing throughout the
Commitment Period, in an aggregate principal amount at any one time outstanding
not to exceed the amount of such Bank's Available Commitment.
2.2 Working Capital Loan Commitments. Subject to the terms and conditions
--------------------------------
hereof, and provided that no Default or Event of Default shall have occurred and
be continuing, each Bank severally agrees to make Working Capital Loans to the
Company, from time to time during the Commitment Period, in an aggregate
principal amount at any one time outstanding not to exceed the amount of such
Bank's Available Working Capital Loan Commitment. During the Commitment Period,
the Company
20
may use the Working Capital Loan Commitments by borrowing, prepaying the Working
Capital Loans in whole or in part, and reborrowing in accordance with the terms
and conditions hereof.
2.3 Interest Rate and Payment Dates. (a) Each Working Capital Loan shall
-------------------------------
bear interest for so long as it is outstanding and unpaid at a rate per annum
equal to the Prime Rate from time to time in effect.
(b) If all or a portion of the principal amount of any Loan, any interest
payable thereon, any Reimbursement Obligation or any fee required to be paid
under this Agreement shall not be paid when due (whether at the stated maturity,
by acceleration or otherwise), such overdue amount shall bear interest at the
Default Rate from the date of such non-payment until such amount is paid in full
(after as well as before judgment).
(c) Interest shall be payable in arrears on each Interest Payment Date;
provided that interest accruing at the Default Rate pursuant to subsection
2.3(b) shall be payable on demand.
(d) In the event that the total amount of any payment of principal or
interest or amounts due in respect of any Reimbursement Obligation or of any fee
required to be paid under this Agreement is not received by the Agent or the
Issuing Bank, as the case may be, within ten days following the due date of such
payment, the Company shall, in addition to and together with such payment, pay
to the Agent or the Issuing Bank, as the case may be, a late charge equal to
five percent of the total amount of such payment or amount due.
2.4 Procedure for Borrowing. The Company may borrow under the Working
-----------------------
Capital Loan Commitments during the Commitment Period on any Business Day by
giving the Agent irrevocable notice (which notice must be received by the Agent
prior to 1:00 P.M., Cleveland, Ohio local time, on the requested Borrowing
Date), specifying (i) the amount to be borrowed, and (ii) the requested
Borrowing Date. Each borrowing under the Working Capital Loan Commitments shall
be in an amount equal to $100,000 or a whole multiple thereof (or, if the then
Available Working Capital Loan Commitments are less than $100,000, such lesser
amount). With each request for a borrowing hereunder, the Company shall deliver
a Compliance Certificate to the Agent. Upon receipt of any such notice from the
Company, the Agent shall promptly notify each Bank thereof. Each Bank will make
the amount of its pro rata share (based on its Commitment Percentage) of each
borrowing available to the Agent for the account of the Company at the office of
the Agent specified in subsection 10.2 prior to 2:00 P.M., Cleveland, Ohio local
time, on the Borrowing Date requested by the Company in funds immediately
available to the Agent. Such borrowing will then be made available to the
Company by the Agent by crediting the account of the Company on the books of
such office with the aggregate of the amounts made
21
available to the Agent by the Banks and in like funds as received by the Agent.
2.5 Working Capital Loan Notes. The Working Capital Loans made by each
--------------------------
Bank shall be evidenced by a promissory note of the Company, substantially in
the form of Exhibit M with appropriate insertions as to payee, date and
principal amount(a "Working Capital Loan Note"), payable to the order of such
Bank and in a principal amount equal to the amount of the Working Capital Loan
Commitment of such Bank. Each Bank is hereby authorized to record the date and
amount of each Working Capital Loan made by such Bank, and the date and amount
of each payment or prepayment of principal thereof on the Working Capital Loan
Note, and any such recordation shall constitute prima facie evidence of the
accuracy of the information so recorded. Each Working Capital Loan Note shall
(i) be dated May 12, 1995, (ii) be stated to mature on the Termination Date and
(iii) provide for the payment of interest in accordance with subsection 2.3.
2.6 Fees. The Company agrees to pay to the Agent for the account of each
----
Bank a commitment fee for the period from and including February 25, 1994, to
the Termination Date, computed at the rate of 1/2 of 1% per annum on the average
daily amount of the Available Commitment of such Bank 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 Termination Date or such earlier
date as the Commitments shall terminate as provided herein, commencing on the
first of such dates to occur after February 25, 1994. On the Closing Date, the
Company shall pay to Society National Bank for its own account a fee equal to
0.50% of such Bank's Commitment and to Fleet Bank, National Association for its
own account a fee equal to $10,000, and, unless Fleet Bank, National Association
shall no longer be a Participant on such date, the Company shall pay to Fleet
Bank, National Association for its own account on December 31, 1995, an
additional fee equal to $100,500. The Company shall pay such other fees as may
from time to time be agreed to by the Company and the Agent or by the Company
and any Bank, as the case may be.
2.7 Termination or Reduction of Commitments. (a) The Company shall have
---------------------------------------
the right, upon not less than three Business Days notice to the Agent, to
terminate the Commitments or, from time to time, to reduce the amount of the
Commitments; provided that no such termination or reduction shall be permitted
if, after giving effect thereto and to any prepayments of the Working Capital
Loans made on the effective date thereof, the aggregate principal amount of the
Working Capital Loans then outstanding, when added to such Bank's Commitment
Percentage of the L/C Obligations, would exceed the Commitments then in effect.
Any such reduction shall be in an amount not less than $250,000 (or such lesser
amount as shall equal the aggregate of the Commitments then outstanding) and
shall reduce permanently the Commitments then in effect.
22
(b) Simultaneously with any required prepayment of the Working Capital
Loans pursuant to subsection 2.9(a) or (b), the Commitments shall automatically
be reduced by an amount equal to the amount of such required prepayment.
Simultaneously with the occurrence of any event requiring prepayment pursuant to
subsection 2.9(d), the Commitments shall automatically terminate.
2.8 Optional Prepayments. The Company may at any time and from time to
--------------------
time, prepay the Working Capital Loans, in whole or in part, without premium or
penalty, upon irrevocable notice (which notice must be received by 1:00 P.M.,
Cleveland, Ohio local time, on or before the proposed date of prepayment) to the
Agent, specifying the date and amount of prepayment. Upon receipt of any such
notice the Agent shall promptly give notice thereof to each Bank. If any such
notice is given by the Company, the amount specified in such notice shall be due
and payable on the date specified therein. Partial prepayments of the Working
Capital Loans shall be in an aggregate principal amount of $100,000 or a whole
multiple thereof.
2.9 Mandatory Payments; Cash Collateralization. (a) Immediately upon
------------------------------------------
the occurrence of any public issuance or private placement of any debt
securities of the Company or any Subsidiary (other than Indebtedness incurred
pursuant to subsection 7.2(d) and other than renewals or refinancings of the
indebtedness evidenced by the Senior Subordinated Notes or of Indebtedness
evidenced by debt securities issued and outstanding as of the Closing Date, so
long as the outstanding principal amount of such Indebtedness is not increased
by such renewal or refinancing) the Company shall make or cause to be made a
prepayment on the Working Capital Loans equal to 100% of the Net Cash Proceeds
received therefor.
(b) If, at any time or from time to time, the Company makes an Asset
Disposition, then the Company shall, within 210 days from the date of such Asset
Disposition, apply all of the Net Cash Proceeds from such Asset Disposition to
either or both (in the sole discretion of the Company) of (i) the prepayment of
the Loans or (ii) an investment in "fixed assets" (as defined under GAAP) in the
same or substantially similar line of business as defined in the Indenture as
the assets that were the subject of such Asset Disposition; provided that,
notwithstanding the foregoing, (A) up to $1,000,000 of the Net Cash Proceeds
received in any fiscal year from any such Asset Dispositions shall not be
subject to this subsection 2.9(b) and (B) no application of the Net Cash
Proceeds resulting from any such Asset Dispositions shall be subject to this
paragraph until the aggregate amount of such Net Cash Proceeds (other than the
proceeds of the $13,500,000 Senior Subordinated Notes, Series B) received after
February 24, 1994 (above the aforesaid $1,000,000) equals or exceeds $5,000,000.
Without limiting the generality of the foregoing, no repayments by the Company
of outstanding Working Capital Loans shall be considered mandatory prepayments
under this subsection unless and until the Company shall have designated such
repayments as such.
23
(c) Upon the Company's receipt of any payments on account of the DM
Associates Note or the Company's receipt of the proceeds of the sale or transfer
of any collateral securing the obligations of DM Associates under such note,
then the Company shall immediately pay over such proceeds to the Agent and such
proceeds shall be applied in accordance with the terms of subsections 2.9(a) or
2.9(b) above and subsection 2.9(d) below with like effect as if such proceeds
were the Net Cash Proceeds of the issuance of equities or debt or of an Asset
Disposition.
(d) Amounts prepaid on account of Working Capital Loans pursuant to this
subsection 2.9 shall be allocated to the outstanding principal amount of the
Working Capital Loans, together with a corresponding permanent reduction of the
Working Capital Loan Commitments; provided that, if the amount of such
prepayment (the "Prepayment Amount") exceeds the then outstanding Working
Capital Loans or is made at a time when no Working Capital Loans are
outstanding, then the Company shall deposit such Prepayment Amount as collateral
for the then outstanding L/C Obligations in the Cash Collateral Account, which
deposit shall be made on the payment date specified in the notice of prepayment.
2.10 Computation of Interest and Fees. Interest on the Loans, Letter of
--------------------------------
Credit commissions and commitment fees shall each be calculated on the basis of
a 360-day year for the actual number of days elapsed. Any change in the
interest rate on a Loan resulting from a change in the Prime Rate shall become
effective as of the opening of business on the day on which such change becomes
effective. The Agent shall notify the Company and the Banks as soon as
practicable of the effective date and the amount of each such change in interest
rate. Each determination of an interest rate by the Agent pursuant to any
provision of this Agreement shall be conclusive and binding on the Company and
the Banks in the absence of manifest error.
2.11 Pro Rata Treatment and Payments. (a) Unless the Agent shall have
-------------------------------
been notified in writing by any Bank prior to a Borrowing Date that such Bank
will not make the amount that would constitute its Commitment Percentage of the
borrowing on such date available to the Agent, the Agent may assume that such
Bank (a "Reimbursing Bank") has made such amount available to the Agent on such
Borrowing Date, and the Agent or any Bank may (but shall not be obligated), in
reliance upon such assumption, make available to the Company a corresponding
amount. If such amount is made available to the Agent on a date after such
Borrowing Date, the Reimbursing Bank shall pay to the Agent on demand an amount
equal to the product of (i) the daily average Federal Funds Effective Rate
during such period as quoted by the Agent, times (ii) the amount of such
Reimbursing Bank's Commitment Percentage of such borrowing, times (iii) a
fraction (A) the numerator of which is the number of days that elapse from and
including such Borrowing Date to the date on which such Reimbursing Bank's
Commitment Percentage of such borrowing shall have become immediately
24
available to the Agent and (B) the denominator of which is 360. A certificate of
the Agent submitted to any Reimbursing Bank with respect to any amounts owing
under this subsection shall be conclusive in the absence of manifest error. If a
Reimbursing Bank's Commitment Percentage of such borrowing is not in fact made
available to the Agent by such Reimbursing Bank within three Business Days of
such Borrowing Date, the Agent shall be entitled to recover such amount, with
interest thereon at the rate per annum applicable to Working Capital Loans
hereunder, on demand, from such Reimbursing Bank or the Company in such order
and manner as Agent may determine in its discretion.
(b) Each Working Capital Loan shall be made by the Banks pro rata in
accordance with the respective Working Capital Loan Commitment Percentage of
such Banks. Each payment by the Company on account of the principal of and
interest on the Working Capital Loans, any commitment fee hereunder and any
reduction of the Commitments of the Banks shall be payable or allocable to the
Banks pro rata in accordance with the respective Commitment Percentages of the
Banks; provided that in the event the Agent or any Bank pursuant to subsection
2.11(a) makes available to the Company a Reimbursing Bank's Commitment
Percentage of a requested borrowing, the Agent or such Bank providing such
funding shall be entitled to receive all payments that would otherwise be
payable to such Reimbursing Bank until such time as the Agent or such Bank, as
the case may be, shall have received an amount equal to the amount so funded on
behalf of such Reimbursing Bank, together with interest thereon as provided in
subsection 2.11(a). All payments (including prepayments) to be made by the
Company hereunder and under the Notes, whether on account of principal,
interest, fees or otherwise, shall be made without set off or counterclaim and
shall be made prior to 1:00 P.M., Cleveland, Ohio local time, on the due date
thereof to the Agent, for the account of the Banks, at the Agent's office
specified in subsection 10.2, in Dollars and in immediately available funds.
The Agent shall distribute such payments to the Banks promptly upon receipt in
like funds as received. If any payment hereunder becomes due and payable on a
day other than a Business Day, such payment shall be extended to the next
succeeding Business Day, and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.
2.12 Extension of Termination Date. By the date which is 60 days prior to
-----------------------------
the Termination Date, the Company may notify the Agent of its desire to extend
the Termination Date for an additional year (each such extension, an
"Extension"), and request that the Banks approve such Extension, whereupon the
Agent shall promptly notify the Banks of such request. The Agent shall notify
the Company of the decision of the Banks (to be made in the Banks' sole
discretion) with respect thereto not later than 30 days after the Agent's
receipt of the request for such Extension. If all of the Banks agree to the
requested Extension, the Termination Date shall be so extended.
25
2.13 Clean-Down of Working Capital Loans. For a period of at least five
-----------------------------------
consecutive Business Days in each calendar month, the aggregate principal amount
of Working Capital Loans outstanding shall be reduced to zero. In addition,
after each Borrowing Period, the aggregate principal amount of Working Capital
Loans outstanding shall be reduced to zero for at least two consecutive Business
Days. As used herein, "Borrowing Period" shall mean a period of one or more
days, not to exceed five consecutive Business Days, on which the Company
requests a Working Capital Loan.
2.14 Requirements of Law. If any Bank 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 Bank or
any corporation controlling such Bank with any request or directive regarding
capital adequacy (whether having the force of law or not) from any Governmental
Authority made subsequent to February 25, 1994, does or shall have the effect of
reducing the rate of return on such Bank's or such corporation's capital as a
consequence of its obligations hereunder to a level below that which such Bank
or such corporation could have achieved but for such change or compliance
(taking into consideration such Bank's or such corporation's policies with
respect to capital adequacy) by an amount deemed by such Bank to be material,
then from time to time, after submission by such Bank to the Company (with a
copy to the Agent) of a written request therefore, the Company shall pay to such
Bank such additional amount or amounts as will compensate such Bank for such
reduction.
2.15 Taxes. (a) All payments made by the Company under this Agreement
-----
and the Notes 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 Agent or any Bank as a result of a
present or former connection between the Agent or such Bank 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 Agent or such Bank having executed, delivered or performed its
obligations or received a payment under, or enforced, this Agreement or the
Notes). If any such non-excluded taxes, levies, imposts, duties, charges, fees
deductions or withholdings ("Non-Excluded Taxes") are required to be withheld
from any amounts payable to the Agent or any Bank hereunder or under the Notes,
the amounts so payable to the Agent or such Bank shall be increased to the
extent necessary to yield to the Agent or such Bank (after payment of all Non-
Excluded Taxes) interest or any such other amounts payable hereunder at the
rates or in the amounts specified in this Agreement and the Notes; provided,
however, that the Company shall not be required to increase any such amounts
payable to any Bank that is not organized under the laws of the
26
United States of America or a state thereof if such Bank fails to comply with
the requirements of paragraph (b) of this subsection. Whenever any Non-Excluded
Taxes are payable by the Company, as promptly as possible thereafter the Company
shall send to the Agent for its own account or for the account of such Bank, as
the case may be, a certified copy of an original official receipt received by
the Company showing payment thereof. If the Company fails to pay any Non-
Excluded Taxes when due to the appropriate taxing authority or fails to remit to
the Agent the required receipts or other required documentary evidence, the
Company shall indemnify the Agent and the Banks for any incremental taxes,
interest or penalties that may become payable by the Agent or any Bank as a
result of any such failure. The agreements in this subsection shall survive the
termination of this Agreement and the payment of the Notes and all other amounts
payable hereunder.
(b) Each Bank that is not incorporated under the laws of the United States
of America or a state thereof shall:
(i) deliver to the Company and the Agent (A) two duly completed
copies of United States Internal Revenue Service Form 1001 or 4224, or
successor applicable form, as the case may be, and (B) an Internal Revenue
Service Form W-8 or W-9, or successor applicable form, as the case may be;
(ii) deliver to the Company and the Agent two further copies of any
such form or certification on or before the date that any such form or
certification expires or becomes obsolete and after the occurrence of any
event requiring a change in the most recent form previously delivered by it
to the Company; and
(iii) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by the Company or
the Agent;unless in any such case an event (including, without limitation,
any change in treaty, law or regulation) has occurred prior to the date on
which any such delivery would otherwise be required which renders all such
forms inapplicable or which would prevent such Bank from duly completing
and delivering any such form with respect to it and such Bank so advises
the Company and the Agent. Such Bank shall certify (i) in the case of a
Form 1001 or 4224, that it is entitled to receive payments under this
Agreement without deduction or withholding of any United States federal
income taxes and (ii) in the case of a Form W-8 or W-9, that it is entitled
to an exemption from United States backup withholding tax. Each Person
that shall become a Bank or a Participant pursuant to subsection 10.6
shall, upon the effectiveness of the related transfer, be required to
provide all of the forms and statements required pursuant to this
subsection; provided that, in the case of a Participant, such Participant
27
shall furnish all such required forms and statements to the Bank from which
the related participation shall have been purchased.
Section 3. LETTERS OF CREDIT.
3.1 L/C Commitment. (a) Prior to the date hereof, the Issuing Bank
--------------
issued various letters of credit on behalf of the Company. Subject to the terms
and conditions hereof, the Issuing Bank, in reliance on the agreements of the
other Banks set forth in subsection 3.5(a), agrees to issue standby letters of
credit for the account of the Company and its Designated Subsidiaries on any
Business Day until the date which is five Business Days prior to the end of the
Commitment Period in such form as may be approved from time to time by the
Issuing Bank (all such letters of credit outstanding on February 25, 1994 and
all letters of credit issued thereafter under the Original Credit Agreement or
to be issued hereunder, together with all extensions, renewals and replacements
thereof, are herein collectively referred to as the "Letters of Credit");
provided that the Issuing Bank shall have no obligation to issue any Letter of
--------
Credit if at the time of the request for such issuance a Default exists or an
Event of Default has occurred and is continuing or if, after giving effect to
such issuance, (i) the L/C Obligations would exceed the L/C Commitment or (ii)
the Available Commitment would be less than zero. Each Letter of Credit shall
(i) be denominated in Dollars, (ii) expire no later than the Termination Date
and (iii) expire no later than a date one year after its issuance. Each Letter
of Credit (except for previously issued Letters of Credit) shall be issued as
credit support for (x) insurance and vendor financial obligations, (y)
performance bonds issued on behalf of the Company or any Designated Subsidiary
in its ordinary course of business or (z) other similar financial support for
obligations of the Company.
(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 the Issuing
Bank's principal place of business.
(c) The Issuing Bank shall not at any time be obligated to issue any
Letter of Credit hereunder if such issuance would conflict with, or cause the
Issuing Bank or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
3.2 Procedure for Issuance of Letters of Credit. The Company may from
-------------------------------------------
time to time request that the Issuing Bank issue a Letter of Credit by
delivering to the Issuing Bank at its address for notices specified herein an
Application therefor, completed to the satisfaction of the Issuing Bank, and
such other certificates, documents and other papers and
28
information as the Issuing Bank may request. With each request for the issuance
of a Letter of Credit hereunder, the Company shall deliver a Compliance
Certificate to the Issuing Bank. Upon receipt of any Application, the Issuing
Bank 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 Bank 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 by the Issuing
Bank and the Company. The Issuing Bank shall furnish a copy of such Letter of
Credit to the Company and the other Banks promptly following the issuance
thereof.
3.3 Fees, Commissions and Other Charges. (a) The Company shall pay to
-----------------------------------
the Agent a letter of credit facility fee (the "L/C Fee"), upon issuance of a
Letter of Credit, in an amount equal to the product of (i) the face amount of
such Letter of Credit, times (ii) the applicable Letter of Credit Rate, times
(iii) the term of such Letter of Credit, expressed as a fraction equal to the
number of days of such term divided by 360. In the event any Letter of Credit
is terminated or the available credit thereunder is permanently reduced prior to
the stated expiry date thereof, the Company shall be entitled to a rebate of
that portion of the L/C Fee paid with respect to such Letter of Credit which is
allocable pro rata to the portion of the Letter of Credit that has been
terminated or reduced, as the case may be, as determined by the Issuing Bank.
Each L/C Fee payable under this subsection 3.3 shall be shared ratably among the
Banks in accordance with their respective L/C Commitment Percentages.
(b) In addition to the L/C Fees, the Company shall pay or reimburse the
Issuing Bank for such normal and customary costs and expenses as are incurred or
charged by the Issuing Bank in issuing, processing, effecting payment under,
amending or otherwise administering any Letter of Credit.
(c) The Agent shall, promptly following its receipt thereof, distribute to
the Issuing Bank and the L/C Participants all fees and commissions received by
the Agent for their respective accounts pursuant to this subsection.
3.4 Reimbursement Obligation of the Company. The Company agrees to
---------------------------------------
reimburse the Issuing Bank on each date on which the Issuing Bank notifies the
Company of the date and amount of a draft presented under any Letter of Credit
and paid by the Issuing Bank for the amount of (a) such draft so paid and (b)
any taxes (other than income taxes), fees, charges or other costs or expenses
incurred by the Issuing Bank in connection with such payment. Each such payment
shall be made to the Issuing Bank at its address for notices specified herein in
Dollars and in immediately available funds. Interest shall be payable on any
and all amounts remaining unpaid by the Company under this subsection from the
date such amounts become payable
29
(whether at stated maturity, by acceleration or otherwise) until payment in full
at the Default Rate.
3.5 L/C Draws and Reimbursements. (a) Each L/C Participant
----------------------------
unconditionally and irrevocably agrees with the Issuing Bank that, if a draft is
paid under any Letter of Credit for which the Issuing Bank is not reimbursed in
full by the Company in accordance with the terms of this Agreement, such L/C
Participant shall pay to the Issuing Bank upon demand at the Issuing Bank's
address for notices specified herein an amount equal to such L/C Participant's
Commitment Percentage of the amount of such draft, or any part thereof, which is
not so reimbursed through participation or otherwise. In furtherance of the
foregoing, the Issuing Bank irrevocably agrees to grant and hereby grants to
each L/C Participant, and, to induce the Issuing Bank to issue Letters of Credit
hereunder, each L/C Participant irrevocably agrees to accept and purchase and
hereby accepts and purchases from the Issuing Bank, on the terms and conditions
hereinafter stated, for such L/C Participant's own account and risk an undivided
interest equal to such L/C Participant's Commitment Percentage in the Issuing
Bank's obligations and rights under each Letter of Credit issued hereunder and
the amount of each draft paid by the Issuing Bank thereunder.
(b) If any amount required to be paid by any L/C Participant to the
Issuing Bank pursuant to subsection 3.5(a) in respect of any unreimbursed
portion of any payment made by the Issuing Bank under any Letter of Credit is
paid to the Issuing Bank within three Business Days after the date such payment
is due, such L/C Participant shall pay to the Issuing Bank on demand an amount
equal to the product of (I) such amount, times (2) the daily average Federal
-----
Funds Effective Rate, as quoted by the Issuing Bank, 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 Bank, times (3) 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 L/C Participant
pursuant to subsection 3.5(a) is not in fact made available to the Issuing Bank
by such L/C Participant within three Business Days after the date such payment
is due, the Issuing Bank shall be entitled to recover from such L/C Participant,
on demand, such amount with interest thereon calculated from such due date at
the rate per annum equal to the Prime Rate. A certificate of the Issuing Bank
submitted to any L/C Participant with respect to any amounts owing under this
subsection shall be conclusive in the absence of manifest error.
(c) Whenever, at any time after the Issuing Bank has made payment under
any Letter of Credit and has received from any L/C Participant its share of such
payment in accordance with subsection 3.5(a), the Issuing Bank receives any
payment related to such Letter of Credit (whether directly from the Company or
otherwise, including proceeds of collateral applied thereto by the Issuing
Bank), or any payment of interest on account thereof, the Issuing
30
Bank will distribute to such L/C Participant its share thereof; provided,
--------
however, that in the event that any such payment received by the Issuing Bank
-------
shall be required to be returned by the Issuing Bank, such L/C Participant shall
return to the Issuing Bank the portion thereof previously distributed by the
Issuing Bank to it.
3.6 Obligations Absolute. The Company's obligations under this Section 3
--------------------
shall he absolute and unconditional under any and all circumstances and
irrespective of any set-off, counterclaim or defense to payment which the
Company may have or have had against the Issuing Bank or any beneficiary of a
Letter of Credit. The Company also agrees with the Issuing Bank that the
Issuing Bank shall not be responsible for, and the Company's Reimbursement
Obligations under subsection 3.4 shall not be affected 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 Company 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 Company against any beneficiary of such Letter of
Credit or any such transferee. The Issuing Bank 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 caused by the Issuing Bank's gross
negligence or willful misconduct. The Company agrees that any action taken or
omitted by the Issuing Bank under or in connection with any Letter of Credit or
the related drafts or documents, if done in the absence of gross negligence or
willful misconduct and in accordance with the standards of care specified in the
Uniform Commercial Code of the State of Ohio, shall be binding on the Company
and shall not result in any liability of the Issuing Bank to the Company.
3.7 Letter of Credit Payments. If any draft shall be presented for
-------------------------
payment under any Letter of Credit, the Issuing Bank shall promptly notify the
Company and the Banks of the date and amount thereof. The responsibility of the
Issuing Bank to the Company 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 in conformity with the requirements set out
in such Letter of Credit.
3.8 Application. 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 Banks to enter
into this Agreement and to make the Loans and
31
issue or participate in the Letters of Credit the Company hereby represents and
warrants to the Agent and each Bank that:
4.1 Financial Condition. (a) The consolidated balance sheet of the
-------------------
Company and its consolidated Subsidiaries as at January 28, 1995 and the related
consolidated statements of operations and retained earnings and of cash flows
for the fiscal year ended on such date, reported on by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP,
copies of which have heretofore been furnished to each Bank, are complete and
correct and present fairly the consolidated financial condition of the Company
and its consolidated Subsidiaries as at such date, and the consolidated results
of their operations and their consolidated cash flows for the fiscal year then
ended. The unaudited consolidated balance sheet of the Company and its
consolidated Subsidiaries as at September 23, 1995 and the related unaudited
consolidated statements of operations and retained earnings for the eight-month
period ended on such date, certified by a Responsible Officer, copies of which
have heretofore been furnished to each Bank, are complete and correct and
present fairly the consolidated financial condition of the Company and its
consolidated Subsidiaries as at such date, and the consolidated results of their
operations for the eight-month period then ended (subject to normal year-end
audit adjustments). All such financial statements, including the related
schedules and notes thereto, have been prepared in accordance with GAAP applied
consistently throughout the periods involved (except as approved by such
accountants or Responsible Officer, as the case may be, and as disclosed
therein).
(b) Except a set forth on Schedule II, neither the Company nor any
of its consolidated Subsidiaries had, at the date of the most recent balance
sheet referred to in subsection 4.1(a), any material Guarantee Obligation,
contingent liability or liability for taxes, or any long-term lease or unusual
forward or long-term commitment, including, without limitation, any interest
rate or foreign currency swap or exchange transaction, which is not reflected in
the financial statements referred to in subsection 4.1(a) or in the notes
thereto.
(c) Except as set forth on Schedule III, during the period from
January 28, 1995 to and including the date hereof there has been no sale,
transfer or other disposition by the Company or any of its consolidated
Subsidiaries of any material part of its business or property and no purchase or
other acquisition of any business or property (including any capital stock of
any other Person) material in relation to the consolidated financial condition
of the Company and its consolidated Subsidiaries at January 28, 1995.
4.2 No Change. Since January 28, 1995 (a) there has been no development
---------
or event nor any prospective development or event which has had or could have a
Material Adverse Effect and (b) except as set forth on
32
Schedule IV or as permitted by this Agreement, no dividends or other
distributions have been declared, paid or made upon the Capital Stock of the
Company or any of its Subsidiaries nor has any of the Capital Stock of the
Company been redeemed, retired, purchased or otherwise acquired for value by the
Company or any of its Subsidiaries.
4.3 Corporate Existence; Compliance with Law. Each of the Company and
----------------------------------------
each Designated Subsidiary (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 in each jurisdiction where the failure
to have such power, authority or right would have a Material Adverse Effect, (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 where the failure so
to qualify could not 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, have a Material Adverse Effect.
4.4 Corporate Power; Authorization; Enforceable Obligations. Each of the
-------------------------------------------------------
Company and each Designated Subsidiary has the corporate power and authority,
and the legal right, to make, deliver and perform this Agreement, the Notes,
each Application and the other Loan Documents to which it is a party, to borrow
hereunder and to grant the Liens pursuant to the Security Documents to which it
is a party and has taken all necessary corporate action to authorize the
borrowings on the terms and conditions of this Agreement and the Notes, the
grant of the Liens pursuant to the Security Documents to which it is a party and
the execution, delivery and performance of this Agreement, the Notes, each
Application and each other Loan Document to which it is a party. No consent or
authorization of, filing with or other act by or in respect of, any Governmental
Authority or any other Person is required in connection with the borrowings
hereunder, the grant of the Liens pursuant to the Security Documents or the
execution, delivery, performance, validity or enforceability of this Agreement,
the Note, each Application or any other Loan Document except that prior
authorization of the SBA is required for any exercise of remedies under the
Subsidiary Pledge Agreement with respect to the FinOp common stock pledged
thereunder and under the Company Pledge Agreement with respect to the common
stock of CONNA Corporation pledged thereunder. This Agreement and each other
Loan Document to which the Company is a party (except the Notes) has been, and
each Note will be, duly executed and delivered on behalf of the Company. This
Agreement and each other Loan Document to which the Company is a party (except
the Notes) constitutes, and each Note when executed and delivered will
constitute, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as enforceability may
be limited
33
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, the Notes, each Application and each other Loan Document, the grant
of the Liens pursuant to the Security Documents, the borrowings hereunder and
the use of the proceeds thereof will not violate any Requirement of Law or
Contractual Obligation of the Company or of any Designated Subsidiary and will
not result in, or require, the creation or imposition of any Lien on any of its
or their respective properties or revenues pursuant to any such Requirement of
Law or Contractual Obligation.
4.6 No Material Litigation. No litigation, investigation or proceeding
----------------------
of or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Company, threatened by or against the Company or any Designated
Subsidiary or against any of its or their respective properties or revenues (a)
with respect to this Agreement, the Notes, any Application or any other Loan
Document or any of the transactions contemplated hereby or thereby or (b) which
could have a Material Adverse Effect, except with respect to matters described
on Schedule VII.
4.7 No Default. Neither the Company nor any Designated Subsidiary is in
----------
default under or with respect to any of its Contractual Obligations or Capital
Stock in any respect which could have a Material Adverse Effect. No Default or
Event of Default has occurred and is continuing.
4.8 Ownership of Property; Liens. (a) Each of the Company and each
----------------------------
Designated Subsidiary has good record and marketable title in fee simple to, or
a valid leasehold interest in, all its real property, and good title to all its
other property except for any defect (other than with respect to the Collateral)
in title thereto or leasehold interest therein which would not in the aggregate
have a Material Adverse Effect; (b) none of the property (other than Collateral)
owned or leased by the Company or any Designated Subsidiary is subject to any
Lien except as permitted by subsection 7.3 or which, in the aggregate, would not
have a Material Adverse Effect; and (c) none of the Collateral is subject to any
Lien except as permitted by subsection 7.3 or any Lien granted in favor of the
Agent .
4.9 Intellectual Property. The Company and each Designated Subsidiary
---------------------
owns, or is licensed to use, all trademarks, tradenames, copyrights, technology,
know-how and processes necessary for the conduct of its business as currently
conducted except for those the failure to own or license which could not have a
Material Adverse Effect (the "Intellectual Property"). No claim has been
asserted and is pending by any Person challenging or
34
questioning the use of any such Intellectual Property or the validity or
effectiveness of any such Intellectual Property, nor does the Company know of
any valid basis for any such claim which could or might have a Material Adverse
Effect. The use of such Intellectual Property by the Company and each Designated
Subsidiary does not infringe on the rights of any Person, except for such claims
and infringements that, in the aggregate, do not have a Material Adverse Effect.
4.10 No Burdensome Restrictions. No Requirement of Law or Contractual
--------------------------
Obligation of the Company or any Designated Subsidiary has a Material Adverse
Effect.
4.11 Taxes. Each of the Company and its Subsidiaries has filed or caused
-----
to be filed all tax returns which, to the knowledge of the Company, are required
to be filed (the "Tax Returns") and has paid all taxes shown to be due and
payable on said returns or on any assessments made against it or any of its
property and all other taxes, fees or other charges imposed on it or any of its
property by any Governmental Authority (other than any the amount or validity of
which are currently being contested in good faith by appropriate proceedings and
with respect to which reserves in conformity with GAAP have been provided on the
books of the Company or its Subsidiaries, as the case may be) where the
failure to so file such Tax Returns or to pay such taxes could or might have a
Material Adverse Effect; no tax Lien has been filed, and, to the knowledge of
the Company, no claim is being asserted, with respect to any such tax, fee or
other charge. Schedule XII sets forth a complete and correct list of all audits
concerning any Tax Return that are being conducted by any Governmental Authority
or are otherwise in progress on the Closing Date.
4.12 Federal Regulations. No part of the proceeds of any Loans will be
-------------------
used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U of the Board of
Governors of the Federal Reserve System as now and from time to time hereafter
in effect or for any purpose which violates the provisions of the regulations of
such Board of Governors. If requested by any Bank or the Agent, the Company
will furnish to the Agent and each Bank a statement to the foregoing effect in
conformity with the requirements of FR Form U-1 referred to in said Regulation
U.
4.13 ERISA. No Reportable Event 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. The present value of all
accrued benefits under each Single Employer Plan maintained by the Company or
any Commonly Controlled Entity (based on those assumptions used to fund the
Plans) did not, as of the last annual valuation date prior to the date on which
this representation is made or
35
deemed made, exceed the value of the assets of such Plan allocable to such
accrued benefits. Neither the Company nor any Commonly Controlled Entity has had
a complete or partial withdrawal from any Multiemployer Plan except as set forth
on Part A of Schedule V, and neither the Company nor any Commonly Controlled
Entity would become subject to any liability under ERISA if the Company 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, except as set forth on Part B
of Schedule V. No such Multiemployer Plan in such Reorganization or insolvent.
The present value (determined using actuarial and other assumptions which are
reasonable in respect of the benefits provided and the employees participating)
of the liability of the Company and each Commonly Controlled Entity for post-
retirement benefits to be provided to their current and former employees under
Plans which are welfare benefit plans (as defined in Section 3(1) of ERISA) does
not, in the aggregate, exceed the assets under all such Plans allocable to such
benefits.
4.14 Investment Company Act; Other Regulations. Neither the Company nor
-----------------------------------------
any Subsidiary is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended. Neither the Company nor any Designated Subsidiary is subject to
regulation under any Federal or State statute or regulation which limits its
ability to incur Indebtedness.
4.15 Subsidiaries. All the Subsidiaries of the Company (other than the
------------
Designated Subsidiaries) are listed on Part B of Schedule VI except for those
corporations or other entities not listed which are not known to the Company on
the Closing Date due to the Company's or a Subsidiary's acquisition of certain
businesses prior to the Closing Date, which corporations or other entities not
so listed are immaterial to the business, operations, property, condition
(financial or otherwise) of the Company or any Designated Subsidiary. The
assets owned by the Designated Subsidiaries on the Closing Date represent in the
aggregate at least 90% of the total assets of the Company and its Subsidiaries
as shown on the audited consolidated balance sheet as at January 28, 1995
referred to in subsection 4.1(a). The revenues of the Designated Subsidiaries
represent in the aggregate at least 90% of the revenues of the Company and its
Subsidiaries as shown on the audited consolidated statement of operations and
retained earnings for the period ended January 28, 1995 referred to in
subsection 4.1(a).
4.16 Purpose of Loans. The proceeds of the Loans shall be used by the
----------------
Company for the working capital needs of the Company, including, without
limitation, financing any Reimbursement Obligations and financing any other
general corporate purposes of the Company or any Designated Subsidiary in the
ordinary course of the Company's or such Subsidiary's business.
36
4.17 Environmental Matters. To the best knowledge of the Company, each of
---------------------
the representations and warranties set forth in paragraphs (a) through (e) of
this subsection is true and correct with respect to each parcel of real property
heretofore or now owned or operated by the Company or any Subsidiary (the
"Properties"), except as set forth on Schedule VII and except to the extent that
the facts and circumstances giving rise to any such failure to be so true and
correct could not have a Material Adverse Effect:
(a) The Properties do not contain, and have not previously contained,
in, on, or under, including, without limitation, the soil and groundwater
thereunder, any Hazardous Materials.
(b) The Properties and all operations and facilities at the
Properties are in compliance with all Environmental Laws, and there is no
Hazardous Materials contamination or violation of any Environmental Law
which could interfere with the continued operation of any of the Properties
or impair the fair saleable value of any thereof.
(c) Neither the Company nor any of its Subsidiaries has received any
complaint, notice of violation, alleged violation, investigation or
advisory action or of potential liability or of potential responsibility
regarding environmental protection matters or permit compliance with regard
to the Properties, nor is the Company aware that any Governmental Authority
is contemplating delivering to the Company or any of its Subsidiaries any
such notice.
(d) Hazardous Materials have not been generated, treated, stored,
disposed of, at, on or under any of the Properties, nor have any Hazardous
Materials been transferred from the Properties to any other location.
(e) There are no governmental, administrative or judicial proceedings
pending or contemplated under any Environmental Laws to which the Company
or any of its Subsidiaries is or will be named as a party with respect to
the Properties, 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 any of the Properties.
4.18 Security Documents. (a) The provisions of each Pledge Agreement are
------------------
effective to create in favor of the Agent for the ratable benefit of the Banks a
legal, valid and enforceable security interest in all right, title and interest
of the pledgor in the Collateral as described therein. Each Pledge Agreement
constitutes a fully perfected first Lien on, and security
37
interest in, all right, title and interest of the Company in the Collateral
described therein,
(c) The provisions of the Subsidiary Security Agreements are effective to
create in favor of the Agent for the ratable benefit of the Banks a legal, valid
and enforceable security interest in all right, title and interest of the
Subsidiaries parties thereto in the Collateral as described therein. The
Subsidiary Security Agreements constitutes a fully perfected first Lien on, and
security interest in, all right, title and interest of the respective Subsidiary
parties thereto in the Collateral described therein, and no Uniform Commercial
Code financing statements have been filed by any other Person with respect to
such Collateral other than as may be filed in connection with this Agreement.
4.19 Senior Indebtedness. The extensions of credit under this Agreement,
-------------------
the Notes and each Application will be, and are hereby designated as, Senior
Indebtedness under and as defined in the Indenture.
Section 5. CONDITIONS PRECEDENT TO EXTENSION OF CREDIT. The obligation of
each Bank to make an extension of credit requested to be made by it under this
Agreement is subject to the satisfaction of each of the following conditions
precedent:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties made by the Company and each Subsidiary 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; provided that, with respect
--------
to extensions of credit made after the Closing Date, Guarantee Obligations
incurred after the Closing Date and in accordance with the terms of this
Agreement shall not be deemed a breach of the representation and warranty
set forth in subsection 4.1(b) to the extent that such Guarantee
Obligations are not described in the financial statements described in
subsection 4.1(a).
38
(b) No Default. No Default or Event of Default shall have occurred
----------
and be continuing on such date or after giving effect to the extension of
credit requested to be made on such date.
(c) Additional Documents. The Agent shall have received each
--------------------
additional document, instrument, legal opinion or item of information
reasonably requested by it, including, without limitation, a copy of any
debt instrument, security agreement or other material contract to which the
Company or any Subsidiary may be a party.
(d) Additional Matters. All corporate and other proceedings, and all
------------------
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Loan Documents
shall be satisfactory in form and substance to the Agent, and the Agent
shall have received such other documents and legal opinions in respect of
any aspect or consequence of the transactions contemplated hereby or
thereby as it shall reasonably request.
(e) No Circumstances with Material Adverse Effect. No event shall
---------------------------------------------
have occurred or set of circumstances then be in existence that, in the
reasonable judgment of Agent or the Banks, has had or is likely to have a
Material Adverse Effect.
Each borrowing by and Letter of Credit issued on behalf of the Company or any of
its Designated Subsidiaries hereunder shall constitute a representation and
warranty by the Company as of the date of such Loan or Letter of Credit that the
conditions contained in this subsection 5 have been satisfied.
Section 6. AFFIRMATIVE COVENANTS. The Company hereby agrees that, so long
as the Commitments remain in effect, any Note or any Letter of Credit remains
outstanding and unpaid or any other amount is owing to any Bank or the Agent
hereunder, the Company shall and (except in the case of delivery of financial
information, reports and notices) shall cause each of its Subsidiaries to:
6.1 Financial Statements. Furnish to each Bank the financial statements
--------------------
described in this subsection 6.1, complete and correct in all material respects
and prepared in reasonable detail in accordance with GAAP applied consistently
throughout the periods reflected therein and with prior periods (except as
approved by the independent certified public accountants auditing or the officer
certifying the same, as the case may be, and disclosed therein):
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Company, a copy of the consolidated balance
sheet of the Company and its consolidated Subsidiaries as at
39
the end of such year and the related consolidated statements of operations
and retained earnings 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 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
or other independent certified public accountants of nationally recognized
standing not unacceptable to the Required Banks;
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three fiscal quarters of each fiscal
year of the Company, the unaudited consolidated balance sheet of the
Company and its consolidated Subsidiaries as at the end of such quarter,
the related unaudited consolidated statement of operations and retained
earnings of the Company and its consolidated Subsidiaries, for such quarter
and the portion of the fiscal year through the end of such quarter, and the
related unaudited consolidated statement of cash flows of the Company and
its consolidated Subsidiaries for 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 when considered in relation to the
consolidated financial statements of the Company and its consolidated
Subsidiaries (subject to normal year-end audit adjustments); and
(c) as soon as available, but in any event not later than 45 days
after the last day of each of the 12 fiscal periods of each fiscal year of
the Company (other than the last such fiscal period in each such fiscal
year), (i) the unaudited consolidated balance sheet of the Company and its
consolidated Subsidiaries as at the end of such fiscal period and the
related unaudited consolidated statement of operations and retained
earnings of the Company and its consolidated Subsidiaries for such fiscal
period and the portion of the fiscal year of the Company through the end of
such fiscal period, setting forth in each case in comparative form the
figures for the previous year and (ii) a statement setting forth the
aggregate amount of Capital Expenditures made by the Company and its
consolidated Subsidiaries during such fiscal period (which aggregate amount
shall separately specify the total amount of Capital Expenditures
consisting of cash and the total amount of Capital Expenditures consisting
of Financing Leases and other non-cash financings), in each case, certified
by a Responsible Officer as being fairly stated in all material respects
when, in the case of the financial statements delivered pursuant to clause
(i) above, considered in relation to the consolidated financial statements
of the Company and its consolidated Subsidiaries (subject to normal year-
end audit adjustments).
40
6.2 Certificates; Other Information. Furnish to each Bank:
-------------------------------
(a) concurrently with the delivery of the financial statements
referred to in subsection 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) (i) concurrently with the delivery of each of the financial
statements referred to in subsections 6.1 (a) and 6.1 (b), a certificate of
a Responsible Officer (which certificate shall set forth, in detail, all
interim and preparatory figures and calculations used in determining the
Company's satisfaction of its covenants and agreements contained in
subsection 7.1) stating that, to the best of such Officer's knowledge, each
of the Company and its Subsidiaries during such period has observed or
performed all of its covenants and other agreements, and satisfied every
condition, contained in this Agreement, the Notes and the other Loan
Documents to which it is a party to be observed, performed or satisfied by
it, and that such Officer has obtained no knowledge of any Default or Event
of Default except as specified in such certificate and (ii) concurrently
with the delivery of the financial statements referred to in subsection
6.1(a), a certificate of a Responsible Officer setting forth the aggregate
Net Cash Proceeds received by the Company and any of its Subsidiaries
during the preceding fiscal year, the portion thereof which has been
reinvested by the Company or its Subsidiaries in fixed or capital assets or
POS Program Expenses, the portion thereof which has been applied by or on
behalf of the Company to make any mandatory prepayment in accordance with
subsection 2.9 and any remaining balances in respect of such Net Cash
Proceeds which have not been so reinvested or applied;
(c) as soon as delivered, but in any event within 120 days after the
end of each fiscal year of the Company, a copy of any correspondence
between the Company and the certified public accountants who prepared the
financial statements referred to in subsection 6.1(a) for such fiscal
year, including, without limitation, any so called "management letter" or
similar document if one is prepared by such accountants;
(d) as soon as available, but in any event within 30 days after the
end of each fiscal year of the Company, a copy of (i) the projections by
the Company of the operating budget and cash flow budget of the Company and
its Subsidiaries for the succeeding fiscal year and (ii) the projected
consolidated balance sheet of the Company and its consolidated subsidiaries
as at the last day of the succeeding
41
fiscal year, such projections and projected balance sheet to be accompanied
by a certificate of a Responsible Officer to the effect that such
projections and projected balance sheet have been prepared on the basis of
sound financial planning practice and that such Officer has no reason to
believe they are incorrect or misleading in any material respect;
(e) within five days after the same are sent, copies of all financial
statements and reports which the Company sends to its stockholders, and
within five days after the same are filed, copies of all financial
statements and reports which the Company may make to, or file with, the
Securities and Exchange Commission or any successor or analogous
Governmental Authority; and
(f) promptly, such additional financial and other information as any
Bank 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
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 Company or its Subsidiaries, as the case may be or except where the failure
to pay, discharge or otherwise satisfy could not have a Material Adverse Effect.
6.4 Conduct of Business and Maintenance of Existence. Continue to engage
------------------------------------------------
in business of the same general type as now conducted by it and preserve, renew
and keep in full force and effect its corporate existence and take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business, except as otherwise permitted
pursuant to subsection 7.5, and comply with all Contractual Obligations and
Requirements of Law except to the extent that failure to comply therewith could
not, in the aggregate, have a Material Adverse Effect.
6.5 Maintenance of Property; Insurance. (a) Keep all property useful and
----------------------------------
necessary in its business in good working order and condition except where the
failure to do so could not have a Material Adverse Effect; (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) as
are usually insured against in the same general area by companies engaged in the
same or a similar business, and furnish to each Bank, upon written request, full
information as to the insurance carried; provided that a program of self-
--------
insurance maintained by the Company and its Subsidiaries with respect to certain
product liability, workmen's compensation,
42
environmental liability, public liability, accident and health and property
insurance risks shall comply with the requirements of subsection 6.5(b) so long
as adequate reserves in connection with such self-insurance program are taken
and maintained in accordance with GAAP and such program is otherwise reasonably
satisfactory to the Agent.
6.6 Inspection of Property; Books and Records; Discussions. Keep proper
------------------------------------------------------
books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities; and permit
representatives of any Bank, upon reasonable notice to the Company, 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 Company and its Subsidiaries with officers and employees
of the Company and its Subsidiaries and with its independent certified public
accountants.
6.7 Notices. Promptly give notice to the Agent and each Bank 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 Company or any of its Subsidiaries or (ii) litigation,
investigation or proceeding which may exist at any time between the Company
or any of its Subsidiaries and any Governmental Authority, which in either
case, if not cured or if adversely determined, as the case may be, would
have a Material Adverse Effect;
(c) any litigation or proceeding affecting the Company or any of its
Subsidiaries in which the amount involved is $1,000,000 or more and not
covered by insurance or in which injunctive or similar relief is sought
which individually or in the aggregate could or might have a Material
Adverse Effect; provided that the Company shall not be required to give
notice of any such litigation or proceeding if the Company has reasonably
determined, after consultation with counsel, that the possibility is remote
that such litigation or proceeding will result in a judgment of $1,000,000
or more or in injunctive or similar relief against the Company or its
Subsidiaries;
(d) the following events, as soon as possible and in any event within
30 days after the Company knows or has reason to know thereof: (i) the
occurrence or expected occurrence of any Reportable Event with respect to
any 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
43
by the PBGC or the Company or any Commonly Controlled Entity or any
Multiemployer Plan with respect to the withdrawal from, or the terminating,
Reorganization or Insolvency of, any Plan;
(e) as soon as the Company knows or has reason to know that it or any
Subsidiary has become liable for remediation and/or environmental
compliance expenses and/or fines, penalties or other charges which, in the
aggregate, are in excess of $2,000,000 at any one time outstanding (net of
all reimbursements in respect of such amounts from any state trust funds
which have been or are reasonably expected to be made to the Company or its
Subsidiaries and have been recognized as a receivable or may properly be
set off as a credit against such liabilities in accordance with GAAP); and
(f) a material adverse change in the business, operations, property,
condition (financial or otherwise) or prospects of the Company and its
Subsidiaries taken as a whole.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Company proposes to take with respect thereto.
6.8 Environmental Laws. (a) Comply with, and insure compliance by all
------------------
tenants and subtenants, if any, with, all Environmental Laws and obtain and
comply with and maintain, and ensure that all tenants and subtenants obtain and
comply with and maintain, any and all licenses, approvals, registrations or
permits required by Environmental Laws, except to the extent that failure to do
so could not have a Material Adverse Effect;
(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 respecting Environmental Laws, except to the extent
that the same are being contested in good faith by appropriate proceedings and
the pendency of such proceedings could not have a Material Adverse Effect;
(c) Defend, indemnify and hold harmless the Agent and the Banks, and their
respective employees, agents, officers and directors, from and against any
claims, demands, penalties, fines, liabilities, settlements, damages, costs and
expenses of whatever kind or nature known or unknown, contingent or otherwise,
arising out of, or in any way relating to the violatIon of or noncompliance with
any Environmental Laws by the Company or any of its Subsidiaries, or any orders,
requirements or demands of Governmental Authorities related thereto, including,
without limitation, attorney's and consultant's fees, investigation and
laboratory fees, court costs and litigation
44
expenses, except to the extent that any of the foregoing arise out of the gross
negligence or willful misconduct of the party seeking indemnification therefor.
(d) Prepare and deliver, at least as frequently as once each fiscal
quarter, to the Agent and to each other Bank, a report setting forth a summary,
as of the end of such fiscal quarter, of (i) the gross amount of ail sums
accrued in respect of any remediation required by applicable Environmental Laws,
(ii) all reimbursements in respect of such amounts from any state trust funds
which have been or are reasonably expected to be made to the Company or its
Subsidiaries and have been recognized as a receivable or may properly be set off
as a credit against the cost of such remediation under GAAP and (iii) the net
amount of all sums accrued in respect of such remediation costs.
6.9 Additional Designated Subsidiaries. If, at any time following the
----------------------------------
delivery of the financial statements referred to in subsections 6.1(a) and (b),
the Company cannot (x) represent and warrant to the Agent and the Banks as to
the matters set forth in either the second or third sentences of subsection 4.15
because a Subsidiary or certain Subsidiaries not named a Designated Subsidiary
on the Closing Date causes the Designated Subsidiaries to fail to reach the
percentage threshold set forth in either of such sentences or (y) pursuant to
the provisions of the Indenture is required to cause one or more of its
Subsidiaries to become an additional "Guarantor" (as defined in the Indenture)
(in either case, an "Undesignated Subsidiary"), then as soon as possible and in
any event concurrently with any actions taken in respect thereof under the
Indenture or within 15 days after the delivery of such financial statements, (a)
the Company shall deliver to the Agent, with a counterpart for each Bank, (i) a
supplement to the Subsidiary Guarantee, satisfactory in form and substance to
the Agent, whereby such Undesignated Subsidiary guarantees the Obligations (as
defined in the Subsidiary Guarantee and subject to the Maximum Guaranteed
Amount, as defined therein, with respect to such Undesignated Subsidiary) and
agrees to be bound by the terms and conditions of the Subsidiary Guarantee, (ii)
the Capital Stock of any such Undesignated Subsidiary, pledged and delivered by
the holder thereof pursuant to a supplement to the pledge agreement to which
such holder is a party, duly authorized, executed and delivered by such holder
and otherwise in form and substance satisfactory to the Agent and (iii) an
opinion of counsel to such Undesignated Subsidiary and such pledgor addressed to
the Agent and the Banks and covering such matters as the Agent may reasonably
request and (b) Schedule VI shall be deemed amended to include the name of such
Undesignated Subsidiary. Furthermore, upon the request of the Required Banks,
the Company shall deliver to the Agent for the benefit of the Banks, the
guarantee of any Subsidiary whose guarantee is so requested, other than FinOp.
Such guarantee shall be in the form and substance of the Subsidiary Guarantee,
as it may be from time to time amended.
45
Section 7. NEGATIVE COVENANTS. The Company hereby agrees that, so long as
the Commitments remain in effect, any Note or any Letter of Credit remains
outstanding and unpaid or any other amount is owing to any Bank or the Agent
hereunder, the Company shall not, and (except with respect to subsection 7.1)
shall not permit any of its Subsidiaries to, directly or indirectly:
7.1 Financial Condition Covenants. Effective at FYED 1995 and thereafter,
-----------------------------
(a) EBIRT to Interest and Rent. For any period of four consecutive
--------------------------
fiscal quarters ending on any FQED, permit the ratio of (i) Consolidated
EBIRT for the applicable period to (ii) the sum of Consolidated Interest
Expense and Consolidated Rent Expense for such period to be less than (A)
0.86 to 1.00 at ▇▇▇▇ ▇▇▇▇, (▇) 0.87 to 1.00 at first FQED 1996, (C) 1.00 to
1.00 at second FQED 1996, (D) 1.10 to 1.00 at third FQED 1996, and (E) 1.10
to 1.00 at each FQED thereafter.
(b) EBIDA to Interest, Capital Expenditures and Current Maturities.
--------------------------------------------------------------
Commencing at the first FQED 1996, permit the ratio of (i) Consolidated
EBIDA for the applicable period to (ii) the sum, for the Company and its
Subsidiaries, for such period, of (A) Consolidated Interest Expense, (B)
Capital Expenditures and (C) current maturities of long-term debt, to be
less than 1.00 to 1.00 during any fiscal quarter, based upon the Company's
financial statements for the fiscal year to date period at the end of such
quarter; provided that, for fiscal quarters subsequent to FYED 1996, such
ratio shall be tested based upon a period of four consecutive fiscal
quarters ending on any FQED.
(c) Consolidated Indebtedness to Consolidated EBITDA. For any
------------------------------------------------
period of four consecutive fiscal quarters ending on any FQED to occur
during any "Test Period" set forth below, permit the ratio of (i)
Consolidated Indebtedness at the end of such period to (ii) Consolidated
EBITDA for such period to be more than the ratio set forth opposite such
period below:
Test Period Ratio
----------- -----
At Third FQED 1996 4.75 to 1.00
Thereafter 4.25 to 1.00
(d) Maintenance of Net Worth. Permit Consolidated Net Worth of the
------------------------
Company to be less than: (i)$24,000,000 at third FQED 1996 or (ii) at each
FQED thereafter, the greater of (A) $9,000,000 and (B) $17,000,000 less the
net amount by which the
46
Consolidated Net Worth of the Company is reduced, as a result of being
required to treat the stock in the Company held by DM Associates as
treasury stock, after taking into account the increase in Consolidated Net
Worth resulting from the issuance of warrants in connection with the
issuance of the Senior Subordinated Notes, Series B.
7.2 Limitation on Indebtedness. Create, incur, assume or suffer to exist
--------------------------
any Indebtedness, except:
(a) Indebtedness in respect of the Loans, the Notes and the Letters
of Credit and other obligations of the Company and its Designated
Subsidiaries under the Loan Documents;
(b) Indebtedness of the Company to any Designated Subsidiary and of
any Designated Subsidiary to the Company or any other Designated
Subsidiary;
(c) Indebtedness outstanding on the Closing Date and listed on
Schedule IX;
(d) any Indebtedness of the Company or any Designated Subsidiary
incurred after the Closing Date to finance the acquisition, improvement or
construction of fixed or capital assets or POS Program Expenses (whether
pursuant to a loan, a Financing Lease or otherwise), including any
Indebtedness incurred in connection with any transaction permitted under
subsection 7.3(g);
(e) Indebtedness of FinOp to the SBA incurred in connection with the
Company's on-going franchise program, in an aggregate amount not exceeding
$20,000,000 at any one time outstanding;
(f) Indebtedness under any Interest Rate Agreement; and
(g) Indebtedness incurred in connection with the transactions
described in subsection 1.6 hereof, subject to the limitations contained in
such section 1.6.
7.3 Limitation on Liens. Create, incur, assume or suffer to exist any
-------------------
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings; provided that adequate reserves with
--------
respect thereto are maintained on the books of the
47
Company 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 which are
not overdue for a period of more than 60 days or which are being contested
in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements;
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of the
Company or such Subsidiary;
(f) Liens in existence on the Closing Date listed on Schedule X,
securing Indebtedness permitted by subsection 7.2(c); provided that no such
Lien is expanded to cover any additional property after the Closing Date
and that the amount of Indebtedness secured thereby is not increased;
(g) Liens securing Indebtedness of the Company or a Designated
Subsidiary permitted by subsection 7.2 (d); provided that (i) such Liens
--------
shall be created promptly upon the acquisition, improvement or completion
of the construction of such fixed or capital asset or the incurring of such
POS Program Expense, as the case may be (and in any event no later than the
earlier of (A) twelve months from the date on which the construction of
such fixed or capital asset is completed or such POS Program Expense is
incurred and (B) 24 months from the date on which the real estate, on which
such fixed or capital asset is located, was purchased by the Company, (ii)
such Liens do not at any time encumber any property other than the property
financed by such Indebtedness, (iii) the amount of Indebtedness secured
thereby is not increased and (iv) the principal amount of Indebtedness
secured by any such Lien shall at no time exceed 100% of the original
purchase price of such property, and (v) there shall be no Liens on any of
the following types of collateral, as those terms are
48
defined in Chapter 1309 of the Ohio Revised Code: inventory, accounts or
general intangibles (except Liens on general intangibles that result from
the granting of a mortgage, equipment lease financing or other equipment
financing arrangement); and
(h) Liens created under the Security Documents.
7.4 Limitation on Guarantee Obligations. Create, incur, assume or suffer
-----------------------------------
to exist any Guarantee Obligation except:
(a) the Subsidiary Guarantee;
(b) Guarantee Obligations arising from the issuance of the Letters of
Credit issued pursuant to this Agreement and any Application issued for the
account of the Company or any Designated Subsidiary in the ordinary course
of its business, not to exceed an aggregate face amount and unreimbursed
obligations of the L/C Commitment at any one time outstanding;
(c) Guarantee Obligations arising with respect to the Franchisee
Guarantees or under the Indenture; and
(d) Guarantee Obligations arising as a result of guarantees by the
Company of any Indebtedness of a consolidated Subsidiary that would appear
as a liability on a consolidated balance sheet of the Company and its
consolidated Subsidiaries.
7.5 Limitations on Fundamental Changes. Enter into any merger,
----------------------------------
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets, or make any material change in its present method of conducting
business, except:
(a) any Subsidiary of the Company may be merged or consolidated with
or into the Company (provided that the Company shall be the continuing or
--------
surviving corporation) or with or into any one or more wholly-owned
Designated Subsidiaries of the Company (provided that the wholly-owned
--------
Designated Subsidiary or Designated Subsidiaries shall be the continuing or
surviving corporation and shall be a member of the Company's consolidated
group for financial reporting and tax purposes);
(b) any wholly-owned Designated Subsidiary may sell, lease, transfer
or otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to the Company or any other wholly-owned
Designated Subsidiary of the Company; and
49
(c) any Subsidiary which is not a Designated Subsidiary (i) may be
merged or consolidated with or into any other Subsidiary (provided that if
it is merged or consolidated with a Designated Subsidiary, the continuing
or surviving entity must be the Designated Subsidiary) and (ii) may
liquidate, wind up or dissolve itself (provided, in the case of clause (ii)
only, that the Required Banks consent to such action (which consent will
not be unreasonably withheld)).
7.6 Limitation on Sale of Assets. Convey, sell, lease, assign, transfer
----------------------------
or otherwise dispose of any of its property, business or assets (including,
without limitation, receivables and leasehold interests), whether now owned or
hereafter acquired, except:
(a) the sale of inventory in the ordinary course of business;
(b) as permitted by subsection 7.5(b); and
(c) Asset Dispositions, such dispositions being subject to the
provisions of subsection 2.9(b) hereof.
7.7 Limitation on Dividends. Declare or pay any dividend on, or make any
-----------------------
payment on account of, or set apart assets for a sinking or other analogous fund
for, the purchase, redemption, defeasance, retirement or other acquisition of,
any shares of any class of Capital Stock of the Company or any Subsidiary or any
warrants or options to purchase any such Stock, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either directly
or indirectly, whether in cash or property or in obligations of the Company or
any Subsidiary (other than (i) dividends payable solely in common stock of a
Subsidiary so long as any such common stock dividend is pledged by the
stockholder pursuant to the Pledge Agreement to which such stockholder is a
party, (ii) dividends payable solely to the Company or a Subsidiary which has
executed and delivered to the Agent a Subsidiary Guarantee, or (iii) dividends
payable solely in the common stock of the Company to stockholders of the
Company).
7.8 Limitation on Capital Expenditures. Make or commit to make (by way of
----------------------------------
the acquisition of securities of a Person or otherwise) any Capital Expenditures
more than $22,850,000, in the aggregate, for the Company and its Subsidiaries,
during any fiscal year of the Company.
7.9 Limitation on Investments, Loans and Advances. Make any advance,
---------------------------------------------
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of or any assets constituting a
business unit of, or make any other investment in (each, an "Investment"), any
Person, except:
50
(a) extensions of trade credit in the ordinary course of business;
(b) investments in (i) securities issued or directly and fully
guaranteed or insured by the United States Government or any agency or
instrumentality thereof having maturities of not more than one year from
the date of acquisition, (ii) certificates of deposit and eurodollar time
deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case, with any Bank or with any
domestic commercial bank having capital and, surplus in excess of
$100,000,000, (iii) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clauses (i)
and (ii) entered into with any financial institution meeting the
qualifications specified in clause (ii) above, and (iv) commercial paper
issued by any Bank or the parent corporation of any Bank and commercial
paper of any other issuer rated at least A-1 or the equivalent thereof by
Standard & Poor's Corporation or at least P-1 or the equivalent thereof by
▇▇▇▇▇'▇ Investors Service, Inc. and in each case maturing within six months
after the date of acquisition.
(c) loans and advances to employees of the Company or its
Subsidiaries in the ordinary course of business in an aggregate amount for
the Company and its Subsidiaries not to exceed $750,000 in the aggregate at
any one time outstanding (including the principal amount of the loans
listed on Schedule XI hereto);
(d) Investments by the Company in its Subsidiaries and investments by
a Designated Subsidiary in the Company and in other Designated Subsidiaries
(other than, in either case, any investments in FinOp); provided that any
--------
Designated Subsidiary making an investment or receiving the proceeds
thereof is a member of the company consolidated group for financial
reporting and tax purposes;
(e) Investments after the date hereof by the Company or any
Designated Subsidiary in FinOp in an aggregate amount of up to $2,500,000;
(f) Investments by ▇.▇. Insurance, Ltd., a Bermuda corporation, of
its statutory or regulatory reserves in accordance with the laws of the
jurisdiction of its incorporation;
(g) Investments of amounts held in depositary accounts in financial
institutions geographically proximate to the location of the Company's or a
Subsidiary's retail operations; provided that such amounts are withdrawn
--------
from such accounts and deposited into the
51
Company's cash concentration account at least once during each seven-day
period;
(h) Investments by the Company or any Designated Subsidiary in any
Person not a Subsidiary on the Closing Date; provided that (i) any such
Investment (whether made in one transaction or a series of transactions)
does not exceed $2,000,000 (inclusive of commissions, fees and other
transaction costs, but not including any portion of the Investments with
respect to which the consideration is the capital stock of the Company),
(ii) all such Investments made after the Closing Date do not exceed
$5,000,000 in the aggregate (inclusive of commissions, fees and other
transaction costs, but not including any portion of the Investments with
respect to which the consideration is the capital stock of the Company),
(iii) any such acquired Person that is a Subsequently Acquired Subsidiary
executes and delivers to the Agent, with a counterpart for each Bank, a
supplement to the Subsidiary Guarantee, satisfactory in form and substance
to the Agent, whereby such Subsequently Acquired Subsidiary guarantees the
Obligations (as defined in the Subsidiary Guarantee subject to the Maximum
Guaranteed Amount, as defined therein, with respect to such Subsequently
Acquired Subsidiary) and agrees to be bound by the terms and conditions of
the Subsidiary Guarantee), (iv) the Capital Stock of any such acquired
Person is pledged and delivered by the holder thereof pursuant to a
supplement to the Pledge Agreement to which such holder is a party, duly
authorized, executed and delivered by such holder and otherwise in form and
substance satisfactory to the Agent and (v) in connection with the matters
contemplated by the foregoing clauses (iii) and (iv) the Person executing
such supplement contemporaneously therewith causes to be delivered an
opinion of counsel to such Person so executing such supplement and such
pledgor, addressed to the Agent and the Banks and covering such matters as
the Agent may request. Notwithstanding the foregoing, the Company or any
Subsidiary shall not make any Investment in any Person which exceeds one
percent of the voting power represented by the Capital Stock then
outstanding of such Person if the Board of Directors or other governing
body of such Person has disapproved or recommended against any such
Investment or refused to negotiate or terminated negotiations with the
Company or such Subsidiary; and
(i) the acquisition of the interests in DM Associates described in
subsection 1.6.
7.10 Limitation on Optional Payments and Modifications of Debt
---------------------------------------------------------
Instruments. (a) Make any optional payment or prepayment on or redemption of
-----------
any Indebtedness other than Indebtedness under this Agreement, including,
without limitation (except to the extent permitted by
52
subsection 7.7), the Senior Subordinated Notes; (b) amend, modify or change, or
consent or agree to any amendment, modification or change to any of the terms of
the Senior Subordinated Notes or the Indenture, including, without limitation,
any amendment to the subordination provisions thereof; or (c) amend, modify or
change, or consent or agree to any amendment, modification or change to, any of
the terms relating to the payment or prepayment of principal of or interest on
any Indebtedness (other than Indebtedness pursuant to this Agreement or the
Senior Subordinated Notes), other than, with respect to the Indebtedness
described in the foregoing clauses (b) and (c), any such amendment, modification
or change the primary effect of which would extend the maturity or reduce the
amount of any payment of principal thereof or the primary effect of which would
reduce the rate or extend the date for payment of interest thereon.
7.11 Transactions with Affiliates. Enter into any transaction, including,
----------------------------
without limitation, any purchase, sale, Lease or exchange of property or the
rendering of any service, with any Affiliate unless such transaction is not
otherwise prohibited under this Agreement, is in the ordinary course of the
Company's or such Subsidiary's business (including in connection with the
Company's on-going franchise program) and is upon fair and reasonable terms no
less favorable to the Company or such Subsidiary, a the case may be, than it
would obtain in a comparable arm's length transaction with a Person not an
Affiliate.
7.12 Sale and Leaseback. Enter into any arrangement with any Person
------------------
providing for the leasing by the Company or any Subsidiary of real or personal
property which has been or is to be sold or transferred by the Company or such
Subsidiary to such Person or to any other Person to whom funds have been or are
to be advanced by such Person on the security of such property or rental
obligations of the Company or such Subsidiary (a "Sale/Leaseback Transaction")
unless (a) the proceeds received therefrom are not required by subsections 2.9
and 7.6 to be applied to prepay the Loans, or (b) the proceeds received
therefrom are so applied.
7.13 Corporate Documents/Corporate Names/Location of Assets. (a) Amend
------------------------------------------------------
its Certificate of Incorporation (except to increase the number of authorized
shares of common stock); or (b) do any of the following, unless, in each case,
it shall provide the Agent with at least 30 days prior written notice of such
action: (i) change its corporate name; (ii) change the location of its
inventory or equipment; (iii) change the location of the office where its
maintains its records pertaining to its accounts; (iv) change the location of
its existing places of business or open any new places of business; or (v)
change the location of its chief executive office; provided, however, that
anything herein to the contrary notwithstanding, (A) in the alternative, with
respect to store openings and closings, the Company may satisfy the requirement
of this subsection with respect to such stores by submitting to the Agent, on a
monthly basis, a list of all stores opened and closed, and (B) with respect to
53
moving inventory from store to store, no notice need be provided pursuant to
this subsection so long as the Company, or a Subsidiary, as the case may be, has
executed and delivered to the Agent a Uniform Commercial Code financing
statement appropriate for filing to perfect the Agent's security interest in the
inventory in its new location. As used herein, "inventory", "equipment" and
"accounts" have the respective meanings ascribed to them in Chapter 1309 of the
Ohio Revised Code.
7.14 Fiscal Year. Permit the fiscal year of the Company to end on a day
-----------
other than on the Saturday closest to January 31 of each calendar year.
7.15 Limitation on Negative Pledge Clauses. Enter into any agreement with
-------------------------------------
any Person other than the Banks pursuant hereto which prohibits or limits the
ability of the Company or any of its Subsidiaries to create, incur, assume or
suffer to exist any Lien upon any of its property, assets or revenues,
whether now owned or hereafter acquired; provided, however, that this subsection
7.15 shall not prohibit the Company from entering into such an agreement to the
extent otherwise permitted by this Agreement or in connection with any
industrial revenue bonds, purchase money or other mortgages, the Indenture or a
Financing Lease to the extent that any prohibition or limitation contained in
any such agreement shall apply only to assets financed thereunder.
7.16 Amendments to Indenture. Consent to any amendment, supplement,
-----------------------
modification or alteration of the Indenture or the Senior Subordinated Notes (or
the Company's obligations thereunder) or any agreement or instrument related to
the Indenture or the Senior Subordinated Notes without the prior written consent
of the Required Banks.
Section 8. EVENTS OF DEFAULT.
8.1. Events of Default. Each of the following events shall constitute an
-----------------
"Event of Default" under this Agreement:
(a) The Company shall fail to pay any principal of any Note or any
Reimbursement Obligation when due in accordance with the terms thereof or
hereof; or the Company shall fail to pay any interest on any Note or any
Reimbursement Obligation, or any other amount payable hereunder, within
five days after any such interest or other amount becomes due in accordance
with the terms thereof or hereof; or
(b) Any representation or warranty made or deemed made by the Company
or any Subsidiary in any Loan Document to which the Company or such
Subsidiary is a party or which is contained in any certificate, document or
financial or other statement furnished at any time under or in connection
with this Agreement or any other Loan
54
Document shall prove to have been incorrect in any material respect on or
as of the date made or deemed made; or
(c) The Company shall default in the observance or performance of any
agreement contained in Section 6 (other than subsection 6.7) and Section 7;
or
(d) The Company shall default in the observance or performance of any
other agreement contained in this Agreement (other than as provided in
paragraphs (a) through (c) of this subsection), and such default shall
continue unremedied for a period of 30 days after the earlier of (i) an
officer of the Company becomes aware of such default or (ii) notice of such
default to the Company by Agent or any Bank; or
(e) Any Subsidiary shall default in the observance or performance of
any agreement contained in any Loan Document to which it is a party, and
such default shall continue unremedied for a period of 30 days after the
earlier of (i) an officer of any such Subsidiary becomes aware of such
default or (ii) notice of such default to such Subsidiary by Agent or any
Bank; or
(f) The Company or any of its Subsidiaries shall (i) default in any
payment of principal of or interest of any Indebtedness (other than the
Notes) which has an aggregate principal amount in excess of $500,000,
individually or in the aggregate, or in the payment of any Guarantee
Obligation under which the maximum liability of the Company or such
Subsidiary exceeds $500,000, individually or in the aggregate, beyond the
period of grace (not to exceed 30 days), if any, provided in the instrument
or agreement under which such Indebtedness or Guarantee Obligation was
created; or (ii) default in the observance or performance of any other
agreement or condition relating to any such Indebtedness or Guarantee
Obligation or contained in any instrument or agreement evidencing, securing
or relating thereto, or any other event shall occur or condition exist, the
effect of which default or other event or condition is to cause, or to
permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf
of such holder or holders or beneficiary or beneficiaries) to cause, with
the giving of notice if required, such Indebtedness to become due prior to
its stated maturity or such Guarantee Obligation to become payable; or
(g) (i) The Company 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
55
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 or other similar official for it or for
all or any substantial part of its assets, or the Company or any of its
Subsidiaries shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against the Company or any of
its Subsidiaries any case, proceeding or other action of a nature referred
to in clause (i) above which (A) results in the entry of an order for
relief or any such adjudication or appointment or (B) remains undismissed,
undischarged or unbonded for a period of 60 days; or (iii) there shall be
commenced against the Company 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 which results in the entry of an order for any such relief
which shall not have been vacated, discharged, or stayed or bonded pending
appeal within 60 days from the entry thereof; or (iv) the Company 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 Company 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
(h) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether waived or not, shall exist with respect to any Plan,
(iii) a Reportable Event shall occur with respect to, or proceedings shall
commence to have a trustee appointed, or a trustee shall be appointed, to
administer or to terminate, any Single Employer Plan, which Reportable
Event or commencement of proceedings or appointment of a trustee is, in the
reasonable opinion of the Required Banks, likely to result in the
termination of such Plan for purposes of Title IV of ERISA, (iv) any Single
Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the
Company or any Commonly Controlled Entity shall, or in the reasonable
opinion of the Required Banks 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 subject the Company or any of its Subsidiaries to
any tax, penalty or other liabilities in the aggregate material in relation
to the business, operations, property or financial
56
or other condition of the Company and its Subsidiaries taken as a whole; or
(i) One or more judgments or decrees shall be entered against the
Company or any of its Subsidiaries involving in the aggregate a liability
(to the extent not paid or covered by insurance) of $1,000,000 or more and
all such judgments or decrees shall not have been vacated, discharged,
stayed or bonded pending appeal within 60 days from the entry thereof; or
(j) If at any time the Company or all or any of its Subsidiaries
shall become liable for remediation and/or environmental compliance
expenses and/or fines, penalties or other charges which, in the aggregate,
are in excess of $3,000,000 at any one time outstanding (net of all
reimbursements in respect of such amounts from any state trust funds which
have been or are reasonably expected to be made to the Company or its
Subsidiaries and have been recognized as a receivable or may properly be
set off as a credit against such liabilities under GAAP); or
(k) A Change of Control shall have occurred; or
(l) The Subsidiary Guarantee or any other Guarantee Obligation in
respect of the Company's Indebtedness hereunder shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect, or any Person having a Guarantee
Obligation in respect of the Company's Indebtedness hereunder, including
without limitation each Designated Subsidiary (or any Person acting on
behalf of any such Person) shall deny or disaffirm such Guarantee
Obligation; or
(m) An "Event of Default" (as defined therein) shall occur under the
Indenture; or
(n) Circumstances develop or events occur which constitute a Material
Adverse Effect.
8.2 Remedies. Upon the occurrence of any Event of Default, (A) if such
--------
event is an Event of Default specified in clause (i) or (ii) of subsection
8.1(g) above with respect to the Company, then the Commitments shall immediately
and automatically terminate and the Loans hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement (including, without
limitation, all amounts of L/C Obligations, regardless of whether the
beneficiaries of the then outstanding Letters of Credit shall have presented the
documents required thereunder) and the Notes shall immediately become due and
payable, and (B) if such event is any other Event of Default, then either or
both of the following actions may be taken:
57
(i) with the consent of the Required Banks, the Agent may, or upon the request
of the Required Banks, the Agent shall, by notice to the Company declare the
Commitments to be terminated forthwith, whereupon the Commitments shall
immediately terminate; and (ii) with the consent of the Required Banks, the
Agent may, or upon the request of the Required Banks, the Agent shall, by notice
of default to the Company, declare the Loans hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement (including, without
limitation, all amounts of L/C Obligations, regardless of whether the
beneficiaries of the then outstanding Letters of Credit shall have presented the
documents required thereunder) and the Notes to be due and payable forthwith,
whereupon the same shall immediately become due and payable.
8.3 Cash Collateral Account. With respect to all Letters of Credit with
-----------------------
respect to which presentment for honor shall not have occurred at the time of an
acceleration pursuant to the preceding paragraph, the Company shall at such time
deposit in a cash collateral account to be opened by the Agent (the "Cash
Collateral Account") an amount equal to the aggregate then undrawn and unexpired
amount of such Letters of Credit. The Company hereby grants to the Agent, for
the benefit of the Issuing Bank and the L/C Participants, a security interest in
the Cash Collateral Account and all amounts from time to time on deposit therein
to secure all obligations of the Company in respect of such Letters of Credit
under this Agreement and the other Loan Documents. The Company shall execute
and deliver to the Agent, for the account of the Issuing Bank and the L/C
Participants. Such further documents and instruments as the Agent may request
to evidence the creation and perfection of such security interest in the
Cash Collateral Account. Amounts held in the Cash Collateral Account shall be
applied by the 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 Company hereunder and under the Notes. After all such
Letters of Credit shall have expired or been fully drawn upon, all Reimbursement
Obligations shall have been satisfied and all other obligations of the Company
hereunder and under the Notes shall have been paid in full, the balance, if any,
in the Cash Collateral Account shall be returned to the Company.
8.4 Presentment, Demand and Protest Waived. Except as expressly provided
--------------------------------------
in this Section 8, presentment, demand, protest and all other notices of any
kind are hereby expressly waived.
Section 9. THE AGENT.
9.1 Appointment. Each Bank hereby irrevocably designates and appoints
-----------
Society National Bank as the Agent of such Bank under this Agreement and the
other Loan Documents, and each such Bank irrevocably authorizes Society National
Bank, as the Agent for such Bank, to take such
58
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 Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
9.2 Delegation of Duties. The 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 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 the Agent nor any of its officers,
----------------------
directors, employees, agents, attorneys-in-fact or Affiliates shall be (i)
liable for any action lawfully taken or omitted to be taken by it or such Person
under or in connection with this Agreement or any other Loan Document (except
for its or such Person's own gross negligence or willful misconduct) or (ii)
responsible in any manner to any of the Banks for any recitals, statements,
representations or warranties made by the Company 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 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 the Notes or any other Loan Document or for
any failure of the Company to perform its obligations hereunder or thereunder.
The Agent shall not be under any obligation to any Bank to ascertain or to
inquire as to the observance or performance of any of the agreements contained
in, or conditions of, this Agreement or any other Loan Document, or to inspect
the properties, books or records of the Company.
9.4 Reliance by Agent. The Agent shall be entitled to rely, and shall be
-----------------
fully protected in relying, upon any Note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, 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 Company), independent accountants and other experts
selected by the Agent. The 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 Agent. The 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 Banks as it deems appropriate or it shall first
be indemnified to its satisfaction by the Banks against any and all liability
and expense which may
59
be incurred by it by reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement and the Notes and the other Loan Documents in
accordance with a request of the Required Banks, and such request and any action
taken or failure to act pursuant thereto shall be binding upon all the Banks and
all future holders of the Notes.
9.5 Notice of Default. The Agent shall not be deemed to have knowledge or
-----------------
notice of the occurrence of any Default or Event of Default hereunder unless the
Agent has received notice from a Bank or the Company referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". In the event that the Agent receives such a
notice, the Agent shall give notice thereof to the Banks. The Agent shall take
such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Banks; provided that unless and until the
Agent shall have received such directions, the 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 Banks.
9.6 Non-Reliance on Agent and Other Banks. Each Bank expressly
-------------------------------------
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by the Agent hereinafter taken, including
any review of the affairs of the Company, shall be deemed to constitute any
representation or warranty by the Agent to any Bank. Each Bank represents to
the Agent that it has, independently and without reliance upon the Agent or any
other Bank, 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
Company and made its own decision to make its Loans hereunder and enter into
this Agreement. Each Bank also represents that it will, independently and
without reliance upon the Agent or any other Bank, 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, and keep itself informed,
as to the business, operations, property, financial and other condition and
creditworthiness of the Company. Except for notices, reports and other documents
expressly required to be furnished to the Banks by the Agent hereunder, the
Agent shall not have any duty or responsibility to provide any Bank with any
credit or other information concerning the business, operations, property,
condition (financial or otherwise), prospects or creditworthiness of the Company
which may come into the possession of the Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates.
60
9.7 Indemnification. The Banks agree to indemnify the Agent in its
---------------
capacity as such (to the extent not reimbursed by the Company and without
limiting the obligation of the Company to do so), ratably according to the
respective amounts of their original Commitments, 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 Notes)
be imposed on, incurred by or asserted against the Agent in any way relating to
or arising out of 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 Agent under
or in connection with any of the foregoing; provided that no Bank shall be
--------
liable for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from the Agent's gross negligence or willful misconduct. The
agreements in this subsection shall survive the payment of the Notes and all
other amounts payable hereunder.
9.8 Agent in Its Individual Capacity. The Agent and its Affiliates may
--------------------------------
make loans to, accept deposits from and generally engage in any kind of business
with the Company as though the Agent were not the Agent hereunder and under the
other Loan Documents. With respect to its Loans made or renewed by it and any
Note issued to it and with respect to any Letter of Credit issued or
participated in by it, the Agent shall have the same rights and powers under
this Agreement and the other Loan Documents as any Bank and may exercise the
same as though it were not the Agent, and the terms "Bank" and "Banks" shall
include the Agent in its individual capacity.
9.9 Successor Agent. The Agent may resign as Agent upon 10 days' notice
---------------
to the Banks. If the Agent shall resign as Agent under this Agreement and the
other Loan Documents, then the Required Banks shall appoint a Successor Agent,
whereupon such Successor Agent shall succeed to the rights, powers and duties of
the Agent, and the term "Agent" shall mean such Successor Agent effective upon
its appointment, and the former Agent's rights, powers and duties as Agent shall
be terminated, without any other or further act or deed on the part of such
former Agent or any of the parties to this Agreement or any holders of the
Notes. After any retiring Agent's resignation as Agent, the provisions of this
subsection shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under this Agreement and the other Loan
Documents.
9.10 No Duties except as Expressly Set Out Herein. Notwithstanding any
--------------------------------------------
provision to the contrary elsewhere in this Agreement, the Agent shall not have
any duties or responsibilities, except those expressly set forth herein, or any
fiduciary relationship with any Bank, and no implied covenants, functions,
61
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
Section 10. MISCELLANEOUS.
10.1 Amendments and Waivers. Neither this Agreement, any Note, any other
----------------------
Loan Document nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this subsection. With the
written consent of the Agent and the Required Banks, the Agent and the Company
may, from time to time, enter into written amendments, supplements or
modifications hereto and to the Notes and the other Loan Documents for the
purpose of adding any provisions to this Agreement, the Notes or the other Loan
Documents or changing in any manner the rights of the Banks or of the Company
hereunder or thereunder or waiving, on such terms and conditions as the Agent
may specify in such instrument, any of the requirements of this Agreement, the
Notes 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 (a) reduce the amount or extend the maturity of
any Note or any installment thereof, or reduce the rate or extend the time of
payment of interest thereon, or reduce any fee payable to any Bank hereunder, or
change the amount of any Bank's Commitment, in each case without the consent of
the Bank affected thereby, or (b) amend, modify or waive any provision of this
subsection or reduce the percentage specified in the definition of Required
Banks, or consent to the assignment or transfer by the Company of any of its
rights and obligations under this Agreement and the other Loan Documents or
release any of the Collateral, in each case without the written consent of the
Agent and all the Banks, or (c) amend, modify or waive any provision of Section
9 without the written consent of the then Agent. Any such waiver and any such
amendment, supplement or modification shall apply equally to each of the Banks
and shall be binding upon the Company, the Banks, the Agent and all future
holders of the Notes. In the case of any waiver, the Company, the Banks and the
Agent shall be restored to their former position and rights hereunder and under
the outstanding Notes and any 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,
telegraph or telex), and, unless otherwise expressly provided herein, shall be
deemed to have been duly given or made when delivered by hand, or three days
after being deposited in the mail, postage prepaid, or, in the case of telecopy
notice, when received, or, in the case of telegraphic notice, when delivered to
the telegraph company, or, in the case of telex notice, when sent, answerback
received, addressed as follows in the case of the Company and the
62
Agent, and as set forth in Schedule I in the case of the other parties hereto,
or to such other address as may be hereafter notified by the respective parties
hereto and any future holders of the Notes:
The Company: Dairy Mart Convenience Stores, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
The Agent: Society National Bank
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
provided that any notice, request or demand to or upon the Agent or the Banks
pursuant to subsections 2.4, 2.7, 2.11 and 2.12 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 Agent or any Bank, any right, remedy, power or
privilege hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. 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 repre-sentations and
------------------------------------------
warranties made hereunder 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 Notes.
10.5 Payment of Expenses and Taxes. The Company agrees, within 15 days
-----------------------------
after demand, (a) to pay or reimburse the Agent for all its out-of-pocket costs
and expenses incurred in connection with the development, preparation and
execution of, and any amendment, supplement or modification to, this Agreement,
the Notes and the other Loan Documents and any other documents prepared in
connection herewith or therewith, and the consummation of the transactions
contemplated hereby and thereby, including, without limitation, the fees and
disbursements of counsel to the Agent, (b) to pay or reimburse each Bank and the
Agent for all its costs and expenses incurred in connection with the enforcement
or preservation of any rights under this Agreement, the Notes, the other Loan
Documents and any
63
such other documents, including, without limitation, fees and disbursements of
counsel to the Agent and to the several Banks, and (c) to pay, indemnify, and
hold each Bank and the Agent harmless from, any and all recording and filing
fees and any and all liabilities with respect to, or resulting from any delay in
paying, stamp, excise and other taxes, if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation 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 Notes, the other Loan Documents and any such other
documents, and (d) to pay, indemnify and hold each Bank harmless from any and
all fees, costs and expenses incurred by any such Bank after the occurrence and
throughout the continuance of an Event of Default in connection with any
inspection or examination pursuant to subsection 6.6, and (e) to pay, indemnify,
and hold each Bank and the Agent (and their respective 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 this
Agreement, the Notes, the other Loan Documents and any such other documents (all
the foregoing, collectively, the "indemnified liabilities"); provided, that the
--------
Company shall have no obligation hereunder to the Agent or any Bank with respect
to indemnified liabilities arising from (i) the gross negligence or willful
misconduct of the Agent or any such Bank (or any of their respective directors,
officers, employees or agents), (ii) legal proceedings commenced against the
Agent or any such Bank by any security holder or creditor thereof arising out of
and based upon rights afforded any such security holder or creditor solely in
its capacity as such, or (iii) legal proceedings commence, against the Agent or
any such Bank by any other Bank or by any Transferee. The agreement: in this
subsection shall survive repayment of the Notes and all other amounts payable
hereunder.
10.6 Successors and Assigns; Participations; Purchasing Banks. (a) This
--------------------------------------------------------
Agreement shall be binding upon and inure to the benefit of the Company, the
Banks, the Agent, all future holders of the Notes and their respective
successors and assigns, except that the Company may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of each Bank.
(b) Without the consent of the Company, any Bank may, in the ordinary
course of its commercial banking business and in accordance with applicable law,
at any time sell to one or more banks or other entities (other than any entity
which, to the knowledge of such Bank, is a competitor of the Company or an
Affiliate of such a competitor ("Participants")) participating interests in any
Loan owing to such Bank, any Note held by such Bank, any Commitment of such Bank
or any other interest of such Bank hereunder and under the other Loan Documents.
In the event of any such sale by a Bank of participating interests to a
Participant, such Bank's obligations under this
64
Agreement to the other parties to this Agreement shall remain unchanged, such
Bank shall remain solely responsible for the performance thereof, such Bank
shall remain the holder of any such Note for all purposes under this Agreement
and the other Loan Documents, and the Company and the Agent shall continue to
deal solely and directly with such Bank in connection with such Bank's rights
and obligations under this Agreement and the other Loan Documents. The Company
agrees that if amounts outstanding under this Agreement and the Notes 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 be deemed to have
the right of setoff in respect of its participating interest in amounts owing
under this Agreement and any Note to the same extent as if the amount of its
participating interest were owing directly to it as a Bank under this Agreement
or any Note; provided that such Participant shall only be entitled to such right
--------
of setoff if it shall have agreed in the agreement pursuant to which it shall
have acquired its participating interest to share with the Banks the proceeds
thereof as provided in subsection 10.7. The Company also agrees that each
Participant shall be entitled to the benefits of subsections 2.13, 2.14, 2.15
and 10.5 with respect to its participation in the Commitments and the Loans
outstanding from time to time; provided, that no Participant shall be entitled
to receive any greater amount pursuant to such subsections than the transferor
Bank would have been entitled to receive in respect of the amount of the
participation transferred by such transferor Bank to such Participant had no
such transfer occurred.
(c) Any Bank may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to any Bank or
any affiliate thereof and, with the consent of the Company and each other Bank
if a Purchasing Bank (as hereinafter defined) is not then a Bank party to this
Agreement (which shall not be unreasonably withheld), to one or more additional
banks or financial institutions ("Purchasing Banks") all or any part of its
rights and obligations under this Agreement and the Notes pursuant to an
Assignment and Acceptance executed by such Purchasing Bank, such transferor Bank
(and, in the case of a Purchasing Bank that is not then a Bank or an affiliate
thereof, by the Company and the Agent) and delivered to the Agent for its
acceptance and recording in the Register. Upon such execution, delivery,
acceptance and recording, from and after the Transfer Effective Date determined
pursuant to such Assignment and Acceptance, (x) the Purchasing Bank thereunder
shall be a party hereto and, to the extent provided in such Assignment and
Acceptance, have the rights and obligations of a Bank hereunder with a
Commitment as set forth therein, and (y) the transferor Bank 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 a transferor Bank's rights
and obligations under this Agreement, such transferor Bank shall cease to be a
party hereto). Such Assignment and Acceptance shall be deemed to amend this
Agreement to the extent, and only
65
to the extent, necessary to reflect the addition of such Purchasing Bank and the
resulting adjustment of the appropriate Commitment Percentages arising from the
purchase by such Purchasing Bank of all or a portion of the rights and
obligations of such transferor Bank under this Agreement and the Notes. On or
prior to the Transfer Effective Date determined pursuant to such Assignment and
Acceptance, the Company shall execute and deliver to the Agent in exchange for
the Working Capital Loan Note a new Working Capital Loan Note to the order of
such Purchasing Bank in an amount equal to the Commitment assumed by it pursuant
to such Assignment and Acceptance and, if the transferor Bank has retained a
Commitment hereunder, new Notes to the order of the transferor Bank in an amount
equal to the Commitment retained by it hereunder. Such new Notes shall be dated
May 12, 1995, and shall otherwise be in the form of the Notes replaced thereby.
The Notes surrendered by the transferor Bank shall be returned by the Agent to
the Company marked "cancelled".
(d) The Agent shall maintain at its address referred to in subsection 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 Banks and the
Commitment of, and principal amount of the Loans owing to, each Bank from time
to time. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Company, the Agent and the Banks may treat each Person
whose name is recorded in the Register as the owner of the Loan recorded therein
for all purposes of this Agreement. The Register shall be available for
inspection by the Company or any Bank at any reasonable time and from time to
time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by a
transferor Bank and Purchasing Bank (and, in the case of a Purchasing Bank that
is not then a Bank or an affiliate thereof, by the Company and the Agent)
together with, if such Purchasing Bank is not then a Bank hereunder, payment by
the transferor Bank and/or the Purchasing Bank of a registration and processing
fee of $3,000, the Agent shall (i) promptly accept such Assignment and
Acceptance (ii) on the Transfer Effective Date determined pursuant thereto
record the information contained therein in the Register and give notice of such
acceptance and recordation to the Banks and the Company.
(f) The Company authorizes each Bank to disclose to any Participant or
Purchasing Bank (each, a "Transferee") and any prospective Transferee any and
all financial information in such Bank's possession concerning the Company and
its affiliates which has been delivered to such Bank by or on behalf of the
Company pursuant to this Agreement or which has been delivered to such Bank by
or on behalf of the Company in connection with such Bank's credit evaluation of
the Company and its affiliates prior to becoming a party to this Agreement.
66
(g) If, pursuant to this subsection 10.6, any interest in this Agreement
or any Note is transferred to any Transferee which is organized under the laws
of any jurisdiction other than the United States or any state thereof, the
transferor Bank shall cause such Transferee, concurrently with the effectiveness
of such transfer, (i) to represent to the transferor Bank (for the benefit of
the transferor Bank, the Agent and the Company) that under applicable law and
treaties no taxes will be required to be withheld by the Agent, the Company or
the transferor Bank with respect to any payments to be made to such Transferee
in respect of the Loans, (ii) to furnish to the transferor Bank (and, in the
case of any Purchasing Bank registered in the Register, the Agent and the
Company) either (A) United States Internal Revenue Service Form 4224 or United
States Internal Revenue Service Form 1001 or (B) United States Internal Revenue
Service Form W-8 or W-9, as applicable (wherein such Transferee claims
entitlement to complete exemption from United States federal withholding tax on
all interest payments hereunder), and (iii) to agree (for the benefit of the
transferor Bank, the Agent and the Company) to provide the transferor Bank (and,
in the case of any Purchasing Bank registered in the Register, the Agent and the
Company) a new Form 4224 or Form 1001 or Form W-8 or W-9, as applicable, upon
the expiration or obsolescence of any previously delivered form and comparable
statements in accordance with applicable United States laws and regulations and
amendments duly executed and completed by such Transferee, and to comply from
time to time with all applicable United States laws and regulations with regard
to such withholding tax exemption.
(h) Nothing herein shall prohibit any Bank from pledging or assigning any
Note to any Federal Reserve Bank in accordance with applicable law.
10.7 Adjustments; Set-off. (a) Subject to the provisions of subsection
--------------------
2.11, if any Bank (a "benefitted Bank") shall at any time receive any payment of
all or part of its Loans or the Reimbursement Obligations owing to it, or
interest thereon, or receive any collateral in respect thereof (whether
voluntarily or involuntarily, by set-off, pursuant to events or proceedings of
the nature referred to in subsection 8.1(g), or otherwise), in a greater
proportion than any such payment to or collateral received by any other Bank, if
any, in respect of Loans or Reimbursement Obligations owing to it, or interest
thereon, then such benefitted Bank shall purchase for cash from the other Bank
such portion of such other Bank's Loans or the Reimbursement Obligations owing
to it, or shall provide such other Bank with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to cause such
benefitted Bank to share the excess payment or benefits of such collateral or
proceeds ratably with each of the other Banks; provided, however, that if all or
-------- -------
any portion of such excess payment or benefits is thereafter recovered from such
benefitted Bank, such purchase shall be rescinded, and the purchase price and
benefits returned, to the extent of such recovery, but without interest. The
Company agrees that each Bank
67
so purchasing a portion of another Bank's Loan or the Reimbursement Obligations
owing to it may exercise all rights of payment (including, without limitation,
rights of set-off) with respect to such portion as fully as if such Bank were
the direct holder of such portion.
(b) In addition to any rights and remedies of the Banks provided by law,
each Bank shall have the right, without prior notice to the Company, any such
notice being expressly waived by the Company to the extent permitted by
applicable law, upon any amount becoming due and payable by the Company
hereunder or under the Notes (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 Bank to or for the credit or the
account of the Company. Each Bank agrees promptly to notify the Company and the
Agent after any such set-off and application made by such Bank; 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, 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 Company and the 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 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 represents the agreement of the
-----------
Company, the Agent and the Banks with respect to the subject matter hereof, and
there are no promises, undertakings, representations or warranties by the Agent
or any Bank 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 Notes and the rights and
-------------
obligations of the parties under this Agreement and the Notes shall be governed
by, and construed and interpreted in accordance with, the laws of the state of
Ohio.
68
10.12 Submission To Jurisdiction; Waivers. The Company 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 Ohio, the courts of the United States of America for the
Northern District of Ohio, 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
Company at its address set forth in subsection 10.2 or at such other
address of which the 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 ▇▇▇ 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 Company hereby acknowledges that:
----------------
(a) it has been advised by counsel in the negotiation, execution
and delivery of this Agreement, the Notes and the other Loan Documents;
(b) neither the Agent nor any Bank has any fiduciary relationship
to the Company, and the relationship between Agent and Banks, on one hand,
and Company, on the other hand, is solely that of debtor and creditor; and
(c) no joint venture exists among the Banks or among the Company
and the Banks.
69
10.14 Warrant of Attorney. The Company authorizes any attorney at law at
-------------------
any time or times after the maturity hereof (whether maturity occurs by lapse of
time or by acceleration) to appear in any state or federal court of record in
the United States of America, to waive the issuance and service of process, to
admit the maturity of this note and the nonpayment thereof when due, to confess
judgment against the Company in favor of the holder of this note for the amount
then appearing due, together with interest and costs of suit, and thereupon to
release all errors and to waive all rights of appeal and stay of execution. The
foregoing warrant of attorney shall survive any judgment, and if any judgment be
vacated for any reason, the holder hereof nevertheless may thereafter use the
foregoing warrant of attorney to obtain an additional judgment or judgments
against the Company. The Company agrees that the Agent or the Banks' attorney
may confess judgment pursuant to the foregoing warrant of attorney. The Company
further agrees that the attorney confessing judgment pursuant to the foregoing
warrant of attorney may receive a legal fee or other compensation from the Agent
or the Banks.
10.15. Construction of Ambiguities. The Company has requested, on behalf
---------------------------
of itself and the Designated Subsidiaries, that Agent and the other Banks
complete, approve and execute this Agreement as quickly as possible and in the
shortest feasible time. Agent and Banks have agreed to this request and,
accordingly, have exerted every effort to close on this Agreement in the
shortest possible time, foregoing the careful and extensive (and therefore time-
consuming) review of the documentation that is their normal practice in order to
accommodate the needs of the Company and the Designated Subsidiaries. Further,
this Agreement and the related Loan Documents have been the subject of extensive
negotiations and numerous revisions at the request of all parties. Accordingly,
the parties agree that any ambiguity in any of the Loan Documents shall be
construed in favor of the Agent and the Banks. Further, the Company agrees that
the Agent, notwithstanding that such document has already been executed by all
the parties, may correct any obvious error and complete any blank in any Loan
Document, and the Agent shall not be liable to the Company or any Designated
Subsidiary for any such action unless in taking such action the Agent acts in
bad faith or gross negligence or with a wilful disregard for the interests of
the Company or such Designated Subsidiary.
10.16 JURY TRIAL WAIVER. TO THE EXTENT PERMITTED BY LAW, THE COMPANY, THE
-----------------
AGENT AND EACH OF THE BANKS EACH HEREBY WAIVES ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE, AMONG THE COMPANY, THE AGENT AND THE BANKS, OR ANY THEREOF, ARISING
OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THIS AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS OR THE RELATIONSHIP ESTABLISHED AMONG THEM IN
CONNECTION WITH THIS AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT
70
OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS
RELATED THERETO. THIS WAIVER SHALL NOT IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR
MODIFY (I) THE ABILITY OF THE AGENT OR ANY BANK TO PURSUE REMEDIES PURSUANT TO
ANY WARRANT OF ATTORNEY, CONFESSION OF JUDGMENT OR COGNOVIT PROVISION CONTAINED
IN THIS OR ANY OTHER AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT AMONG THE COMPANY, THE AGENT AND THE BANKS, OR ANY THEREOF, OR (II)
ANY OTHER WAIVERS OF JURY TRIAL.
[SIGNATURE PAGES FOLLOW]
71
--------------------------------------------------------------------------------
"WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT
OR ANY OTHER CAUSE."
--------------------------------------------------------------------------------
DAIRY MART CONVENIENCE STORES, INC.
By:/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President
and Corporate Counsel
SOCIETY NATIONAL BANK,
Individually and as Agent
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
FLEET BANK, NATIONAL ASSOCIATION
By:/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Vice President
72
EXHIBIT M
WORKING CAPITAL LOAN NOTE
$__________________ Cleveland, Ohio
May 12, 1995
FOR VALUE RECEIVED, the undersigned DAIRY MART CONVENIENCE STORES, INC.
(the "Company") promises to pay on May 31, 1996, to the order of
______________________ (the "Bank") at the Main Office of Society National Bank,
the Agent, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ the principal sum of
________________________________________________________________________DOLLARS
or the aggregate unpaid principal amount of all Loans made by Bank to the
undersigned pursuant to the Credit Agreement, as hereinafter defined, whichever
is less, in lawful money of the United States of America. As used herein,
"Credit Agreement" means the credit agreement dated as of February 25, 1994, as
the same may from time to time be amended, among the Company, the Banks named
therein and Society National Bank, as Successor Agent to Fleet Bank, National
Association. Capitalized terms used herein shall have the meanings ascribed to
them in the Credit Agreement.
The undersigned also promises to pay interest on the unpaid principal
amount of each Loan from time to time outstanding, from the date of such Loan
until the payment in full thereof, at the rates per annum which shall be
determined in accordance with the provisions of the Credit Agreement. Such
interest shall be payable on the last day of each March, June, September and
December of each year; provided, however, that interest on any principal portion
which is not paid when due shall be payable on demand.
The Bank is authorized to record the date and amount of each Loan made by
the Bank pursuant to the Credit Agreement and the date and amount of each
payment or prepayment of principal hereof on the reverse side hereof, or reflect
such information on the records of the Bank by such other methods as Bank may
generally employ; provided, however, that failure to make any such entry shall
in no way detract from the undersigned's obligations under this Note.
If this Note shall not be paid at maturity, whether such maturity occurs by
reason of lapse of time or by operation of any provision for acceleration of
maturity contained in the Credit Agreement, the principal hereof and the unpaid
interest thereon shall bear interest, until paid, at a rate per annum which
shall be three per cent (3%) in excess of the Prime Rate from time to time in
effect. All payments of principal of and interest on this Note shall be made in
immediately available funds. In an Event of Default in the payment of interest
or balance of principal, when the same becomes due, the Bank may
M-1
collect and the undersigned agrees to pay a late charge of an amount equal to
the greater of (a) ten per cent (10%) of the amount of such late payment, or (b)
Twenty Five Dollars ($25).
This Note is one of the Working Capital Loan Notes referred to in the
Credit Agreement. Reference is made to the Credit Agreement for a description
of the right of the undersigned to anticipate payments hereof, the right of the
holder hereof to declare this Note due prior to its stated maturity, and other
terms and conditions upon which this Note is issued.
The undersigned authorizes any attorney at law at any time or times after
the maturity hereof (whether maturity occurs by lapse of time or by
acceleration) to appear in any state or federal court of record in the United
States of America, to waive the issuance and service of process, to admit the
maturity of this Note and the nonpayment thereof when due, to confess judgment
against the undersigned in favor of the holder of this Note for the amount then
appearing due, together with interest and costs of suit, and thereupon to
release all errors and to waive all rights of appeal and stay of execution. The
foregoing warrant of attorney shall survive any judgment, and if any judgment be
vacated for any reason, the holder hereof nevertheless may thereafter use the
foregoing warrant of attorney to obtain an additional judgment or judgments
against the undersigned. The undersigned agrees that the Agent or the Banks'
attorney may confess judgment pursuant to the foregoing warrant of attorney.
The undersigned further agrees that the attorney confessing judgment pursuant to
the foregoing warrant of attorney may receive a legal fee or other compensation
from the Agent or the Banks.
DAIRY MART CONVENIENCE STORES, INC.
By:_________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Vice President and Corporate Counsel
================================================================================
"WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT
OR ANY OTHER CAUSE."
================================================================================
M-2
SCHEDULE 1
Working
Bank Capital
L/C Commitment Commitment Commitment
% $ Amount % $ Amount $ Amount
---------------------------------------------------------------------------
Society National Bank 55 8,300,000 100% 5,000,000 13,300,000
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------
Telecopy No.: 216/689-8468
-------------
Fleet Bank, National 45 6,700,000 0 0 6,700,000
Association
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
P.O. Box 366,
Mail Stop RI-OP-TO-5A
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------
Telecopy No. 401/459-4964
------------
TOTALS: 100 15,000,000 100 5,000,000 20,000,000
=== ========== === ========= ==========
* The amount of the Working Capital Loan Commitment portion of the Commitment
has been temporarily reduced to $5,000,000 and shall be increased to $30,000,000
upon the occurrence of all of the following conditions described in (i) or the
condition described in (ii) and provided that the L/C Commitment shall then
become, by further amendment of the Credit Agreement, a sublimit of the overall
credit facility of $30,000,000: (i) (a) The Company shall have recorded a
Consolidated Net Income (excluding any income from sale of capital assets and
nonrecurring gains) of not less than $19,500,000 on a rolling four quarter basis
at the end of any fiscal quarter, as confirmed (in the discretion of the Agent)
by an audit report of the Company's independent public accountant; (b) the
payment of fees satisfactory to the Agent; and (c) no Default shall exist; or
(ii) the Agent and the Bank otherwise agree to increase the Working Capital Loan
Commitment.
EXHIBITS
--------
Exhibit A Assignment and Acceptance
Exhibit B Company Pledge Agreement
Exhibit C Company Security Agreement
Exhibit D DM Associates Note
Exhibit E Amended and Restated Subsidiary Guarantee
Exhibit F Subsidiary Pledge Agreement
Exhibit G Subsidiary Security Agreement
Exhibit H Consent, Acknowledgement and Reaffirmation Agreement
Exhibit I Closing Certificate
Exhibit J Legal Opinions - The legal opinions of ▇▇▇▇▇▇ & ▇▇▇▇▇▇,
Ribicoff & ▇▇▇▇▇▇, counsel to the Company and its
Subsidiaries, and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, General Counsel to the
Company and its Subsidiaries
Exhibit K Warrant
Exhibit L Settlement Agreements
Exhibit M Working Capital Loan Note
