EXECUTION COPY
GUARANTEE AGREEMENT
by and among
A.C. MOORE INCORPORATED,
as Borrower
A.C. MOORE ARTS & CRAFTS, INC.,
MOORESTOWN FINANCE, INC.,
BLACKWOOD ASSETS, INC.,
THE SUBSIDIARY GUARANTORS PARTY HERETO
and
KEYBANK NATIONAL ASSOCIATION,
As Administrative Agent
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Dated as of August 3, 2001
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS ...................................................... 1
Section 1.1 Definitions...................................................... 1
Section 1.2 Rules of Interpretation ......................................... 2
ARTICLE 2. GUARANTEE; FRAUDULENT TRANSFER, ETC.; CONTRIBUTION ............... 2
Section 2.1 Guarantee ....................................................... 2
Section 2.2 Guarantee of Payment ............................................ 2
Section 2.3 Fraudulent Transfer ............................................. 2
Section 2.4 Contributions ................................................... 3
ARTICLE 3. OBLIGATIONS NOT WAIVED .......................................... 4
ARTICLE 4. SECURITY ......................................................... 4
ARTICLE 5. NO DISCHARGE OR DIMINISHMENT OF GUARANTEE ........................ 4
ARTICLE 6. DEFENSES OF BORROWER WAIVED ..................................... 4
ARTICLE 7. AGREEMENT TO PAY; SUBORDINATION ................................. 5
ARTICLE 8. INFORMATION ...................................................... 5
ARTICLE 9. REPRESENTATIONS AND WARRANTIES ................................ 6
Section 9.1 Organization; Powers ........................................ 6
Section 9.2 Authorization; Enforceability ................................... 6
Section 9.3 Governmental Approvals; No Conflicts ........................... 6
Section 9.4 Properties ...................................................... 6
Section 9.5 Litigation and Environmental Matters ........................... 7
Section 9.6 Compliance with Laws and Agreements ............................. 7
Section 9.7 Investment and Holding Company Status ..................... 7
Section 9.8 Taxes ..................................................... 7
Section 9.9 ERISA ..................................................... 8
Section 9.10 Disclosure ..................................................... 8
Section 9.11 Subsidiaries ............................................... 8
Section 9.12 Insurance ..................................................... 8
Section 9.13 Labor Matters ................................................ 8
Section 9.14 Solvency ...................................................... 9
Section 9.15 Federal Reserve Regulations .................................... 9
Section 9.16 Financial Statements ......................................... 9
ARTICLE 10. AFFIRMATIVE COVENANTS ........................................ 10
Section 10.1 Financial Statements and Other Information ..................... 10
Section 10.2 Notices of Material Events ..................................... 11
Section 10.3 Existence; Conduct of Business ............................. 11
Section 10.4 Payment and Performance of Obligations ......................... 11
Section 10.5 Maintenance of Properties ...................................... 12
Section 10.6 Books and Records; Inspection Rights ........................... 12
Section 10.7 Compliance with Laws ........................................... 12
Section 10.8 Information Regarding Collateral ................................12
Section 10.9 Insurance ...................................................... 13
Section 10.10 Casualty and Condemnation ..................................... 13
Section 10.11 Additional Subsidiaries ....................................... 13
Section 10.12 Further Assurances ............................................ 14
Section 10.13 Environmental Compliance ...................................... 15
Section 10.14 Net Proceeds .................................................. 15
Section 10.15 Landlord Consent Agreements ................................... 15
ARTICLE 11. NEGATIVE COVENANTS .............................................. 16
Section 11.1 Indebtedness ................................................... 16
Section 11.2 Liens 17
Section 11.3 Fundamental Changes ............................................ 18
Section 11.4 Investments, Loans, Advances, Guarantees and Acquisitions ...... 18
Section 11.5 Asset Sales .................................................... 19
Section 11.6 Sale and Lease-Back Transactions ............................... 20
Section 11.7 Hedging Agreements ............................................. 20
Section 11.8 Restricted Payments ............................................ 20
Section 11.9 Restrictive Agreements ......................................... 20
Section 11.10 Organizational Documents ...................................... 21
ARTICLE 12. TERMINATION ..................................................... 21
ARTICLE 13. BINDING EFFECT; SEVERAL AGREEMENT; ASSIGNMENTS .................. 21
ARTICLE 14. WAIVERS; AMENDMENT .............................................. 22
Section 14.1 No Waiver ...................................................... 22
Section 14.2 Amendments, etc ................................................ 22
ARTICLE 15. NOTICES ......................................................... 22
ARTICLE 16. SURVIVAL OF AGREEMENT; SEVERABILITY ............................. 22
Section 16.1 Survival of Agreement .......................................... 22
Section 16.2 Severability ................................................... 23
ARTICLE 17. ADDITIONAL GUARANTORS ........................................... 23
ARTICLE 18. RIGHT OF SETOFF ................................................. 23
ARTICLE 19. GOVERNING LAW; JURISDICTION; VENUE; WAIVER OF JURY TRIAL ........ 23
Section 19.1 GOVERNING LAW .................................................. 23
Section 19.2 Consent to Jurisdiction ........................................ 24
Section 19.3 Waiver of Objection to Venue ................................... 24
Section 19.4 Consent to Service of Process .................................. 24
Section 19.5 WAIVER OF JURY TRIAL ........................................... 24
ARTICLE 20. MISCELLANEOUS ................................................... 25
Section 20.1 Headings ....................................................... 25
Section 20.2 Counterparts ................................................... 25
SCHEDULES:
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Schedule I | List of Subsidiary Guarantors
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Schedule 9.4 | List of Real Property
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Schedule 9.11 | List of Parent Group Members
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Schedule 9.12 | List of Insurance
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Schedule 11.1 | List of Existing Indebtedness
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Schedule 11.2 | List of Existing Liens
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Schedule 11.4 | List of Existing Investments
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Schedule 11.10 | List of Existing Restrictions
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Annex 1 Form of Supplement
GUARANTEE AGREEMENT, dated as of August 3, 2001 among A.C. MOORE ARTS &
CRAFTS INC., a Pennsylvania corporation (the "Parent"), A.C. MOORE INCORPORATED,
a Delaware corporation (the "Borrower"), MOORESTOWN FINANCE, INC., a Delaware
corporation, BLACKWOOD ASSETS, INC., a Delaware corporation, each of the
subsidiaries of the Borrower listed on Schedule I hereto (each such subsidiary,
individually, a "Subsidiary Guarantor" and, collectively, the "Subsidiary
Guarantors"; the Parent, Moorestown Finance, Inc., Blackwood Assets, Inc., and
the Subsidiary Guarantors are sometimes referred to collectively herein as the
"Guarantors"), and KEYBANK NATIONAL ASSOCIATION, as administrative agent under
the Credit Agreement referred to in the next paragraph acting on behalf of the
Secured Parties (as defined in such Credit Agreement).
Reference is made to the Credit Agreement, dated as of August 3, 2001,
among the Borrower, the Lenders from time to time party thereto and KeyBank
National Association, as Administrative Agent (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement").
The Lenders have agreed to make Loans to, and the Issuing Bank has
agreed to issue Letters of Credit for the account of, the Borrower pursuant to,
and upon the terms and subject to the conditions specified in, the Credit
Agreement. The Borrower is a wholly-owned subsidiary of the Parent, and each of
the Guarantors is a direct or indirect subsidiary wholly-owned of the Parent.
Each Guarantor acknowledges that (i) it will derive substantial benefit from the
making of the Loans and the issuance of the Letters of Credit and (ii) the
execution and delivery by the Guarantors and the Borrower of this Guarantee
Agreement is a condition precedent to the effectiveness of the Credit Agreement,
and the Credit Parties would not have entered into the Credit Agreement if the
Guarantors and the Borrower had not executed and delivered this Guarantee
Agreement.
Accordingly, the parties hereto agree as follows:
ARTICLE 1. DEFINITIONS
Section 1.1 Definitions
(a) Terms Used in the Credit Agreement. Capitalized terms used herein
and not defined herein, and the term "subsidiary", shall have the meanings
assigned to such terms in the Credit Agreement.
(b) Other Defined Terms. When used in this Guarantee Agreement, the
following capitalized terms shall have the respective meanings ascribed thereto
as follows:
"Parent Group" means the Parent and any subsidiary of the Parent.
"Parent Group Member" means each member of the Parent Group.
Section 1.2 Rules of Interpretation
The rules of interpretation specified in Sections 1.2, 1.3 and 1.4 of
the Credit Agreement shall be applicable to this Guarantee Agreement.
ARTICLE 2. GUARANTEE; FRAUDULENT TRANSFER, ETC.; CONTRIBUTION
Section 2.1 Guarantee
Each Guarantor unconditionally guarantees, jointly with the other
Guarantors and severally, as a primary loan party and not merely as a surety,
the Obligations. Each Guarantor further agrees that the Obligations may be
extended or renewed, in whole or in part, without notice to or further assent
from it and that it will remain bound upon its guarantee notwithstanding any
extension or renewal of any Obligation.
Section 2.2 Guarantee of Payment
Each Guarantor further agrees that its guarantee hereunder constitutes
a guarantee of payment when due and not of collection, and waives any right to
require that any resort be had by the Administrative Agent or any other Secured
Party to any of the security held for payment of the Obligations or to any
balance of any deposit account or credit on the books of the Administrative
Agent or any other Secured Party in favor of the Borrower or any other person.
Section 2.3 Fraudulent Transfer
Anything in this Guarantee Agreement to the contrary notwithstanding,
(i) the obligations of each Subsidiary Guarantor hereunder shall be limited to a
maximum aggregate amount equal to the greatest amount that would not render such
Subsidiary Guarantor's obligations hereunder subject to avoidance as a
fraudulent transfer, obligation or conveyance under Section 548 of Title 11 of
the United States Code or any provisions of applicable state law (collectively,
the "Fraudulent Transfer Laws"), in each case after giving effect to all other
liabilities of such Subsidiary Guarantor, contingent or otherwise, that are
relevant under the Fraudulent Transfer Laws (specifically excluding, however,
any liabilities of such Subsidiary Guarantor (A) in respect of intercompany debt
owed or owing to the Parent or Affiliates of the Parent to the extent that such
debt would be discharged in an amount equal to the amount paid by such
Subsidiary Guarantor hereunder and (B) under any Guarantee of senior unsecured
debt or Indebtedness subordinated in right of payment to the Obligations, which
Guarantee contains a limitation as to maximum amount similar to that set forth
in this clause (i), pursuant to which the liability of such Subsidiary Guarantor
hereunder is included in the liabilities taken into account in determining such
maximum amount) and after giving effect as assets to the value (as determined
under the applicable provisions of the Fraudulent Transfer Laws) of any rights
to subrogation, contribution, reimbursement, indemnity or similar rights of such
Subsidiary Guarantor pursuant to (I) applicable law or (II) any agreement
providing for an equitable allocation among such Subsidiary Guarantor and other
Affiliates of the Borrower of obligations arising under guarantees by such
parties (including the agreements described in Section 2.4) and (ii) each Parent
Group Member expressly waives any and all rights of subrogation, reimbursement,
indemnity, exoneration, contribution or any other claim that it may now or
hereafter have against the Borrower, any other Loan Party, any other guarantor
or any other Person directly or contingently liable for the Obligations, or
against or with respect to the property of the Borrower, such other Loan Party,
such other guarantor or such other Person, arising from the existence or
performance hereof, and, in furtherance, and not in limitation, of the preceding
waiver, each Parent Group Member agrees that, in the event that any money or
property shall be transferred to any Credit Party by such Parent Group Member
pursuant to this Guarantee Agreement in reduction of the Obligations, such
transfer shall be deemed to be a contribution to the capital of the applicable
Loan Party, other guarantor or other Person (in the case of the transfer of
property, in an amount equal to the fair market value of the property so
transferred) as of the date of such transfer, and any such transfer shall not
cause such Parent Group Member to be a creditor of such Loan Party.
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Section 2.4 Contributions
In addition to all rights of indemnity and subrogation the Subsidiary
Guarantors may have under applicable law (but subject to this paragraph), the
Borrower agrees that (i) in the event a payment shall be made by any Subsidiary
Guarantor hereunder, the Borrower shall indemnify such Subsidiary Guarantor for
the full amount of such payment, and such Subsidiary Guarantor shall be
subrogated to the rights of the Person to whom such payments shall have been
made to the extent of such payment, and (ii) in the event that any assets of any
Subsidiary Guarantor shall be sold pursuant to any Loan Document to satisfy any
claim of any Secured Party, the Borrower shall indemnify such Subsidiary
Guarantor in an amount equal to the greater of the book value or the fair market
value of the assets so sold. Each Subsidiary Guarantor (a "Contributing
Subsidiary Guarantor") agrees (subject to this paragraph) that, in the event a
payment shall be made by any other Subsidiary Guarantor hereunder or assets of
any other Subsidiary Guarantor shall be sold pursuant to any Loan Document to
satisfy a claim of any Secured Party and such other Subsidiary Guarantor (the
"Claiming Subsidiary Guarantor") shall not have been fully indemnified by the
Borrower as provided in this paragraph, the Contributing Subsidiary Guarantor
shall indemnify the Claiming Subsidiary Guarantor in an amount equal to the
amount of such payment or the greater of the book value or the fair market value
of such assets, as applicable, in each case multiplied by a fraction of which
the numerator shall be the net worth of the Contributing Subsidiary Guarantor on
the date hereof and the denominator shall be the aggregate net worth of all the
Subsidiary Guarantors on the date hereof (or, in the case of any Subsidiary
Guarantor becoming a party hereto pursuant to Article 17, the date of the
Supplement hereto executed and delivered by such Subsidiary Guarantor). Any
Contributing Subsidiary Guarantor making any payment to a Claiming Subsidiary
Guarantor pursuant to this paragraph shall be subrogated to the rights of such
Claiming Subsidiary Guarantor under this paragraph to the extent of such
payment. Notwithstanding any provision of this paragraph to the contrary, all
rights of the Subsidiary Guarantors under this paragraph and all other rights of
indemnity, contribution or subrogation under applicable law or otherwise shall
be fully subordinated to the final and indefeasible payment in full in cash of
the Obligations. No failure on the part of the Borrower or any Subsidiary
Guarantor to make the payments required by this paragraph (or any other payments
required under applicable law or otherwise) shall in any respect limit the
obligations and liabilities of any Subsidiary Guarantor with respect to its
obligations under this paragraph, and each Subsidiary Guarantor shall remain
liable for the full amount of the obligations of such Subsidiary Guarantor under
this paragraph.
ARTICLE 3. OBLIGATIONS NOT WAIVED
To the fullest extent permitted by applicable law, each Guarantor
waives presentment to, demand of payment from, and protest to any Loan Party of
any of the Obligations, and also waives notice of acceptance of its guarantee
and notice of protest for nonpayment. To the fullest extent permitted by
applicable law, the obligations of each Guarantor hereunder shall not be
affected by (i) the failure of the Administrative Agent or any other Secured
Party to assert any claim or demand or to enforce or exercise any right or
remedy against the Borrower or any other Guarantor under the provisions of the
Credit Agreement or any other Loan Document, or otherwise, (ii) any rescission,
waiver, amendment or modification of, or any release from, any of the terms or
provisions of this Guarantee Agreement, any other Loan Document, any Guarantee
or any other agreement, including with respect to any other Guarantor under this
Guarantee Agreement or (iii) the failure to perfect any security interest in, or
the release of, any of the security held by or on behalf of the Administrative
Agent or any other Secured Party.
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ARTICLE 4. SECURITY
Each Guarantor authorizes the Administrative Agent and each other
Secured Party to (i) take and hold security for the payment of the obligations
under this Guarantee Agreement pursuant to the Security Documents and the
Obligations and exchange, enforce, waive and release any such security, (ii)
apply such security and direct the order or manner of sale thereof in accordance
with the Loan Documents and (iii) release or substitute any one or more
endorsees, other Guarantors or other loan parties.
ARTICLE 5. NO DISCHARGE OR DIMINISHMENT OF GUARANTEE
The obligations of each Guarantor hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason (other than the
final and indefeasible payment in full in cash of the Obligations), including
any claim of waiver, release, surrender, alteration or compromise of any of the
Obligations, and shall not be subject to any defense or setoff, counterclaim,
recoupment or termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of each Guarantor hereunder shall
not be discharged or impaired or otherwise affected by the failure of the
Administrative Agent or any other Secured Party to assert any claim or demand or
to enforce any remedy under the Credit Agreement, any other Loan Document or any
other agreement, by any waiver or modification of any provision of any thereof,
by any default, failure or delay, willful or otherwise, in the performance of
the Obligations, or by any other act or omission that may or might in any manner
or to any extent vary the risk of any Guarantor or that would otherwise operate
as a discharge of any Guarantor as a matter of law or equity (other than the
final and indefeasible payment in full in cash of all the Obligations).
ARTICLE 6. DEFENSES OF BORROWER WAIVED
To the fullest extent permitted by applicable law, each of the
Guarantors waives any defense based on or arising out of any defense of the
Borrower or any other Loan Party or the unenforceability of the Obligations or
any part thereof from any cause, or the cessation from any cause of the
liability of the Borrower or any other Loan Party, other than the final and
indefeasible payment in full in cash of the Obligations. The Administrative
Agent and the other Secured Parties may, at their election, foreclose on any
security held by one or more of them by one or more judicial or nonjudicial
sales, accept an assignment of any such security in lieu of foreclosure,
compromise or adjust any part of the Obligations, make any other accommodation
with any Loan Party or exercise any other right or remedy available to them
against any Loan Party, without affecting or impairing in any way the liability
of any Guarantor hereunder except to the extent the Obligations have been fully,
finally and indefeasibly paid in cash. Pursuant to applicable law, each
Guarantor waives any defense arising out of any such election even though such
election operates, pursuant to applicable law, to impair or to extinguish any
right of reimbursement or subrogation or other right or remedy of such Guarantor
against the Borrower or any other Guarantor, as applicable, or any security.
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ARTICLE 7. AGREEMENT TO PAY; SUBORDINATION
In furtherance of the foregoing and not in limitation of any other
right that the Administrative Agent or any other Secured Party has at law or in
equity against any Guarantor by virtue hereof, upon the failure of any Loan
Party to pay any Obligation when and as the same shall become due, whether at
maturity, by acceleration, after notice of prepayment or otherwise, each
Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the
Administrative Agent or such other Secured Party as designated thereby in cash
the amount of such unpaid Obligations. Upon payment by any Guarantor of any sums
to the Administrative Agent or any Secured Party as provided above, all rights
of such Guarantor against the applicable Loan Party arising as a result thereof
by way of right of subrogation, contribution, reimbursement, indemnity or
otherwise shall in all respects be subordinate and junior in right of payment to
the prior final and indefeasible payment in full in cash of the Obligations. In
addition, any debt of any Loan Party now or hereafter held by any Guarantor is
hereby subordinated in right of payment to the prior final and indefeasible
payment in full in cash of the Obligations. If any amount shall erroneously be
paid to any Guarantor on account of (i) such subrogation, contribution,
reimbursement, indemnity or similar right or (ii) any such debt of such Loan
Party, such amount shall be held in trust for the benefit of the Secured Parties
and shall forthwith be paid to the Administrative Agent to be credited against
the payment of the Obligations, whether matured or unmatured, in accordance with
the terms of the Loan Documents.
ARTICLE 8. INFORMATION
Each Guarantor assumes all responsibility for being and keeping itself
informed of each Loan Party's financial condition and assets, and of all other
circumstances bearing upon the risk of nonpayment of the Obligations and the
nature, scope and extent of the risks that such Guarantor assumes and incurs
hereunder, and agrees that none of the Administrative Agent or the other Secured
Parties will have any duty to advise any of the Guarantors of information known
to it or any of them regarding such circumstances or risks.
ARTICLE 9. REPRESENTATIONS AND WARRANTIES
Each of the Subsidiary Guarantors represents and warrants as to itself
that all representations and warranties relating to it contained in the Credit
Agreement are true and correct. Each Parent Group Member represents and warrants
as follows:
Section 9.1 Organization; Powers
Each Parent Group Member is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, has all
requisite power and authority to carry on its business as now conducted and,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, is qualified to
do business in, and is in good standing in, every jurisdiction where such
qualification is required.
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Section 9.2 Authorization; Enforceability
The Transactions are within the corporate, partnership or other
analogous powers of each Parent Group Member to the extent it is a party thereto
and have been duly authorized by all necessary corporate, partnership or other
similar analogous and, if required, equity holder action. Each Loan Document has
been duly executed and delivered by each Parent Group Member to the extent it is
a party thereto and constitutes a legal, valid and binding obligation thereof,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally.
Section 9.3 Governmental Approvals; No Conflicts
The Transactions (i) do not require any consent or approval of,
registration or filing with, or any other action by, any Governmental Authority,
except such as have been obtained or made and are in full force and effect, (ii)
will not violate any applicable law or regulation or the charter, by-laws or
other organizational documents of any Parent Group Member or any order of any
Governmental Authority, (iii) will not violate or result in a default under any
material indenture, agreement or other instrument binding upon any Parent Group
Member or its assets, or give rise to a right thereunder to require any payment
to be made by any Parent Group Member, and (iv) will not result in the creation
or imposition of any Lien on any asset of any Parent Group Member (other than
Liens permitted by Section 11.2).
Section 9.4 Properties
(a) Each Parent Group Member has good title to, or valid leasehold interests in,
all its real and personal property material to its business, except for minor
defects in title that do not interfere with its ability to conduct its business
as currently conducted or to utilize such properties for their intended
purposes.
(b) Each Parent Group Member owns, or is entitled to use, all
trademarks, trade names, copyrights, patents and other intellectual property
material to its business, and the use thereof by any Parent Group Member does
not infringe upon the rights of any other Person, except for any such
infringements that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
(b) Schedule 9.4 sets forth the address of each item of real property
that is owned or leased by any Parent Group Member on the date hereof.
Section 9.5 Litigation and Environmental Matters
(a) There are no actions, suits or proceedings by or before any
arbitrator or Governmental Authority pending against or, to the knowledge of any
Parent Group Member, threatened against or affecting the Parent or any of its
subsidiaries (i) that, if adversely determined (and there exists a reasonable
possibility of such adverse determination), could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect (other
than the Disclosed Matters) or (ii) that involve any Loan Document or the
Transactions.
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(b) Except for the Disclosed Matters and except with respect to any
other matters that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, no Parent Group Member (i) has
failed to comply with any Environmental Law or to obtain, maintain or comply
with any permit, license or other approval required under any Environmental Law,
(ii) has become subject to any Environmental Liability, (iii) has received
notice of any claim with respect to any Environmental Liability or (iv) knows of
any basis for any Environmental Liability.
(c) Since the Agreement Date, there has been no change in the status of
the Disclosed Matters that, individually or in the aggregate, has resulted in,
or materially increased the likelihood of, a Material Adverse Effect.
Section 9.6 Compliance with Laws and Agreements
Each Parent Group Member is in compliance with all laws, regulations
and orders of any Governmental Authority applicable to it or its property and
all indentures, agreements and other instruments binding upon it or its
property, except where the failure to do so, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect. No
Default has occurred and is continuing.
Section 9.7 Investment and Holding Company Status
No Parent Group Member is (i) an "investment company" as defined in, or
subject to regulation under, the Investment Company Act of 1940 or (ii) a
"holding company" as defined in, or subject to regulation under, the Public
Utility Holding Company Act of 1935.
Section 9.8 Taxes
Each Parent Group Member has timely filed or caused to be filed all Tax returns
and reports required to have been filed and has paid or caused to be paid all
Taxes required to have been paid by it, except (i) Taxes that are being
contested in good faith by appropriate proceedings and for which the applicable
Parent Group Member, has set aside on its books adequate reserves or (ii) to the
extent that the failure to do so could not reasonably be expected to result in a
Material Adverse Effect.
Section 9.9 ERISA
No ERISA Event has occurred or is reasonably expected to occur that,
when taken together with all other such ERISA Events for which liability is
reasonably expected to occur, could reasonably be expected to result in a
Material Adverse Effect. The present value of all accumulated benefit
obligations under each Plan did not, as of the date of the most recent financial
statements reflecting such amounts, exceed by more than $2,000,000 the fair
market value of the assets of such Plan, and the present value of all
accumulated benefit obligations of all underfunded Plans did not, as of the date
of the most recent financial statements reflecting such amounts, exceed by more
than $2,000,000 the fair market value of the assets of all such underfunded
Plans.
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Section 9.10 Disclosure
Each Parent Group Member has disclosed to the Credit Parties all
agreements, instruments and corporate or other restrictions to which it or any
of its subsidiaries is subject, and all other matters known to it, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. None of the reports, financial statements, certificates
or other information furnished by or on behalf of each Parent Group Member to
any Credit Party in connection with the negotiation of the Loan Documents or
delivered thereunder (as modified or supplemented by other information so
furnished) contains any material misstatement of fact or omits to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, provided that, with
respect to projected financial information, the Parent represents only that such
information was prepared in good faith based upon assumptions believed to be
reasonable at the time.
Section 9.11 Subsidiaries
Schedule 9.11 sets forth the name of, and the ownership interest of
each Parent Group Member in, each of its subsidiaries and identifies each such
subsidiary that is a Guarantor, in each case on the Agreement Date.
Section 9.12 Insurance
Schedule 9.12 sets forth a description of all insurance maintained by
or on behalf of each Parent Group Member on the Agreement Date. As of the
Agreement Date, all premiums in respect of such insurance that are due and
payable have been paid.
Section 9.13 Labor Matters
Except for the Disclosed Matters, (i) there are no strikes, lockouts or
slowdowns against any Parent Group Member pending or, to the knowledge of the
any Parent Group Member, threatened, (ii) the hours worked by and payments made
to employees of any Parent Group Member have not been in violation of the Fair
Labor Standards Act or any other applicable Federal, state, local or foreign law
dealing with such matters, except where any such violations, individually and in
the aggregate, would not be reasonably likely to result in a Material Adverse
Effect, (iii) all material payments due from any Parent Group Member, or for
which any claim may be made against any Parent Group Member, on account of wages
and employee health and welfare insurance and other benefits, have been paid or
accrued as a liability on the books of any Parent Group Member and (iv) the
consummation of the Transactions will not give rise to any right of termination
or right of renegotiation on the part of any union under any collective
bargaining agreement to which any Parent Group Member is bound.
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Section 9.14 Solvency
Immediately after the consummation of each Transaction, (i) the fair
value of the assets of each Parent Group Member, at a fair valuation, will
exceed its debts and liabilities, subordinated, contingent or otherwise, (ii)
the present fair saleable value of the property of each Parent Group Member,
will be greater than the amount that will be required to pay the probable
liability of its debts and other liabilities, subordinated, contingent or
otherwise, as such debts and other liabilities become absolute and matured,
(iii) each Parent Group Member will be able to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured and (iv) each Parent Group Member will not have
unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be conducted
following such date.
Section 9.15 Federal Reserve Regulations
(a) No Parent Group Member is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
buying or carrying Margin Stock.
(b) No part of the proceeds of any Loan or any Letter of Credit will be
used, whether directly or indirectly, and whether immediately, incidentally or
ultimately, to purchase, acquire or carry any Margin Stock or for any purpose
that entails a violation of, or that is inconsistent with, the provisions of the
regulations of the Board, including Regulation T, U or X.
Section 9.16 Financial Statements
(a) The Parent has furnished or caused to be furnished to each Credit
Party a copy of its (A) Annual Report on Form 10-K in respect of its fiscal year
ended December 31, 2000, together with the financial statements required to be
attached thereto and (B) Form 10-Q for the fiscal quarter ended March 31, 2001
together with the financial statements required to be attached thereto. Such
financial statements present fairly, in all material respects, the financial
position and results of operations and cash flows of the Parent and its
consolidated subsidiaries as of such dates and for such periods in accordance
with GAAP, subject to year-end audit adjustments and the absence of footnotes in
the case of the quarterly statements referred to above. Except as fully
reflected in such financial statements, there are no material liabilities or
obligations with respect to the Parent or any of its consolidated subsidiaries
of any nature whatsoever (whether absolute, contingent or otherwise and whether
or not due).
(b) Since December 31, 2000, there has been no material adverse change
in the business, assets, operations, prospects or condition, financial or
otherwise, of the Parent Group Members, taken as a whole.
9
ARTICLE 10. AFFIRMATIVE COVENANTS
Until the Revolving Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees and other amounts payable
under the Loan Documents shall have been paid in full and all Letters of Credit
have expired and all LC Disbursements have been reimbursed, each Parent Group
Member covenants and agrees with the Credit Parties that:
Section 10.1 Financial Statements and Other Information
The Parent will furnish or cause to be furnished to the Administrative
Agent:
(a) within 90 days after the end of each fiscal year of the Parent, a
copy of the Parent's Annual Report on Form 10-K in respect of such fiscal year,
together with the financial statements required to be attached thereto, provided
that if the Parent shall not be required to file an Annual Report on Form 10-K
for any fiscal year, in lieu thereof, the Parent shall deliver a copy of its
consolidated balance sheet as at the end of such fiscal year, together with the
related consolidated statements of operations, stockholders' equity and cash
flows as of and through the end of such fiscal year. The consolidated financial
statements referred to herein shall be reported on by PricewaterhouseCoopers LLP
or other independent public accountants of recognized national standing (without
a "going concern" or like qualification or exception and without any
qualification or exception as to the scope of such audit) to the effect that
such consolidated financial statements present fairly in all material respects
the financial condition and results of operations of the Parent and its
consolidated subsidiaries, on a consolidated basis in accordance with GAAP
consistently applied.
(b) As soon as available, but in any event not later than 45 days after
the end of each of the first three quarterly accounting periods in each fiscal
year of the Parent a copy of the Parent's Quarterly Report on Form 10-Q in
respect of such fiscal quarter, together with the financial statements required
to be attached, provided that if the Parent shall not be required to file a
Quarterly Report on Form 10-K for any fiscal quarter, in lieu thereof, the
Parent shall deliver a copy of its consolidated balance sheet as at the end of
such fiscal quarter, together with the related consolidated statements of
operations and cash flows as of and through the end of such fiscal quarter and
for the elapsed portion of the fiscal year through such date. The statements
referred to in this subsection (b) shall be certified by the chief financial
officer of the Parent as being complete and correct in all material respects and
as presenting fairly the consolidated financial condition and the consolidated
results of operations of the Parent and its consolidated subsidiaries.
(c) Concurrently with any delivery of financial statements under clause
(a) above, a certificate of the accounting firm that reported on such financial
statements stating whether they obtained knowledge during the course of their
examination of such financial statements of any
10
Default (which certificate may be limited to the extent required by accounting
rules or guidelines).
(d) Promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by any
Parent Group Member with the Securities and Exchange Commission, or any
Governmental Authority succeeding to any or all of the functions of said
Commission, or with any national securities exchange, or distributed by any
Parent Group Member to its shareholders generally, as the case may be.
(e) Promptly following any request therefor, such other information
regarding the operations, business, affairs and financial condition of the
Parent or any Parent Group Member, including information regarding the issuance
of any equity securities, or compliance with the terms of the Loan Documents, as
any Credit Party may reasonably request.
Section 10.2 Notices of Material Events
The Parent will furnish or cause to be furnished to the Administrative
Agent and each Lender prompt written notice of the following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or proceeding by or
before any arbitrator or Governmental Authority against or affecting the Parent
or any Affiliate thereof that, if adversely determined, could in the good faith
opinion of the Parent reasonably be expected to result in a Material Adverse
Effect;
(c) any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
the chief financial officer or other executive officer of the Parent setting
forth the details of the event or development requiring such notice and any
action taken or proposed to be taken with respect thereto.
Section 10.3 Existence; Conduct of Business
The Parent will, and will cause each other Parent Group Member to, do
or cause to be done all things necessary to preserve, renew and keep in full
force and effect its legal existence and the rights, licenses, permits,
privileges and franchises material to the conduct of its business, provided that
the foregoing shall not prohibit any merger, consolidation, liquidation or
dissolution permitted under Section 11.3.
Section 10.4 Payment and Performance of Obligations
The Parent will, and will cause each other Parent Group Member to, pay
or perform its obligations, including Tax liabilities, that, if not paid or
performed, could reasonably be expected to result in a Material Adverse Effect
before the same shall become delinquent or in default, except where (i) the
validity or amount thereof is being contested in good faith by appropriate
proceedings, (ii) such Parent Group Member has set aside on its books adequate
reserves with respect thereto in accordance with GAAP and (iii) the failure to
make payment pending such contest could not reasonably be expected to result in
a Material Adverse Effect.
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Section 10.5 Maintenance of Properties
The Parent will, and will cause each other Parent Group Member to, keep
and maintain all property material to the conduct of its business in good
working order and condition, ordinary wear and tear excepted.
Section 10.6 Books and Records; Inspection Rights
The Parent will, and will cause each other Parent Group Member to, keep
proper books of record and account in which full, true and correct entries are
made of all dealings and transactions in relation to its business and
activities. The Parent will, and will cause each other Parent Group Member to,
permit any representatives designated by the Administrative Agent or any Lender,
upon reasonable prior notice, to visit and inspect its properties, to examine
and make extracts from its books and records, and to discuss its affairs,
finances and condition with its officers and independent accountants, all at
such reasonable times and as often as reasonably requested and all at the
expense of the Parent.
Section 10.7 Compliance with Laws
The Parent will, and will cause each other Parent Group Member to,
comply with all laws, rules, regulations and orders of any Governmental
Authority applicable to it or its property, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.
Section 10.8 Information Regarding Collateral
The Parent will furnish to the Administrative Agent prompt written
notice of any change in (i) the legal name or jurisdiction of incorporation or
formation of any Parent Group Member or in any trade name used to identify it in
the conduct of its business or in the ownership of its properties, (ii) the
location of the chief executive office of any Parent Group Member, its principal
place of business, any office in which it maintains books or records relating to
Collateral owned or held by it or on its behalf or, except as provided in the
applicable Security Documents, any office or facility at which Collateral owned
or held by it or on its behalf with an aggregate book value in excess of $10,000
is located (including the establishment of any such new office or facility),
(iii) the identity or organizational structure of any Parent Group Member such
that a filed financing statement becomes misleading or (iv) the Federal Taxpayer
Identification Number of any Parent Group Member. Each Parent Group Member
agrees not to effect or permit any change referred to in the preceding sentence
unless all filings have been made under the Uniform Commercial Code or otherwise
that are required in order for the Administrative Agent to continue at all times
following such change to have a valid, legal and perfected security interest in
all the Collateral. Each Parent Group Member also agrees promptly to notify the
Administrative Agent if any material portion of the Collateral is damaged or
destroyed.
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Section 10.9 Insurance
The Parent will, and will cause each other Parent Group Member to,
maintain, with financially sound and reputable insurance companies, (i) adequate
insurance for its insurable properties, all to such extent and against such
risks, including fire, casualty and other risks insured against by extended
coverage, as is customary with companies in the same or similar businesses
operating in the same or similar locations and (ii) such other insurance as is
required pursuant to the terms of any Security Document.
Section 10.10 Casualty and Condemnation
(a) The Parent will furnish to the Credit Parties prompt written notice
of any casualty or other insured damage to any portion of any property owned or
held by or on behalf of any Parent Group Member or the commencement of any
action or proceeding for the taking of any such property or any part thereof or
interest therein under power of eminent domain or by condemnation or similar
proceeding.
(b) If any Reduction Event results in Net Proceeds (whether in the form
of insurance proceeds, condemnation award or otherwise), the Administrative
Agent is authorized to collect such Net Proceeds and, if received by the Parent
or any or any of its subsidiaries, such Net Proceeds shall be paid over to the
Administrative Agent, provided that (i) to the extent that the Parent or any of
its subsidiaries intends to use any such Net Proceeds to repair, restore,
reinvest or replace assets of the Borrower or any of the Guarantors as provided
in the proviso of the definition of the term "Net Proceeds", the Administrative
Agent shall, subject to the provision of such proviso, deliver such Net Proceeds
to the Parent or the Borrower, as applicable, (ii) otherwise, the Administrative
Agent shall, and the Parent hereby authorizes the Administrative Agent to, apply
such Net Proceeds, to the extent that they are Net Proceeds, to prepay the Loans
in accordance with Section 2.7 of the Credit Agreement and (iii) all proceeds of
business interruption insurance shall be paid over to the Parent or the
Borrower, as applicable, unless a Default has occurred and is continuing.
(c) All proceeds received by or paid to the Administrative Agent that
do not constitute Net Proceeds shall be paid over to the Parent or the Borrower,
as applicable, on behalf of the relevant Loan Parties, unless an Event of
Default has occurred and is continuing.
Section 10.11 Additional Subsidiaries
If any Parent Group Member (other than a Parent Group Member that is a
party to the Guarantee Agreement and the Security Agreement) is formed or
acquired after the Agreement Date, the Parent will notify the Credit Parties in
writing thereof not later than the tenth Business Day after the date on which
such Parent Group Member is formed or acquired and (i) the Parent will cause
such Parent Group Member to (a) execute and deliver each applicable Guarantee
Document (or otherwise become a party thereto in the manner provided therein)
and become a party to each applicable Security Document in the manner provided
therein, in each case not later than the tenth Business Day after the date on
which such Parent Group Member is formed or acquired and (b) promptly take such
actions to create and perfect Liens on such Parent Group Member's assets to
secure the Obligations as the Administrative Agent or the Required Lenders shall
reasonably request and (ii) if any Equity Interests issued by any such Parent
Group Member are owned or held by or on behalf of the Parent or any other
Guarantor or any loans, advances or other debt is owed or owing by any such
Parent Group Member to the Parent or any other Guarantor, the Parent will cause
such Equity Interests and promissory notes and other instruments evidencing such
loans, advances and other debt to be pledged pursuant to the Security Documents
not later than the tenth Business Day after the date on which such subsidiary is
formed or acquired.
13
Section 10.12 Further Assurances
(a) The Parent will, and will cause each other Parent Group Member to,
execute any and all further documents, financing statements, agreements
(including guarantee agreements and security agreements) and instruments, and
take all such further actions (including the filing and recording of financing
statements, fixture filings and other documents), that may be required under any
applicable law, or which the Administrative Agent or Required Lenders may
reasonably request, to effectuate the transactions contemplated by the Secured
Documents or to grant, preserve, protect or perfect (including as a result of
any change in applicable law) the Liens created or intended to be created by the
Security Documents or the validity or priority of any such Lien, all at the
expense of the Parent. The Parent also agrees to provide to the Administrative
Agent, from time to time upon request, evidence reasonably satisfactory to the
Administrative Agent as to the perfection and priority of the Liens created or
intended to be created by the Security Documents.
(b) The Parent hereby covenants and agrees that, if at any time on or
after the date hereof any asset or property acquired, owned or held by or on
behalf of any Parent Group Member that constitutes or would constitute
Collateral is not subject to a perfected Lien of the Administrative Agent
hereunder with the priority required hereby (except as a result of the
Administrative Agent's failure to maintain possession of any instrument, stock
certificate or other similar document delivered to it hereunder or as a result
of such asset or property being used or disposed of in a manner expressly
permitted by any Loan Document), then the Parent shall, at its own cost and
expense, promptly (i) notify the Administrative Agent thereof and (ii) execute
and deliver or cause the applicable Guarantor to execute and deliver, any and
all agreements, instruments and other documents, and take all further action
(including the filing and recording of financing statements and other
documents), that may be necessary or reasonably requested by the Administrative
Agent to cause such asset or property to become subject to a perfected Lien of
the Administrative Agent hereunder (including, where applicable, perfection by
establishing "sole dominion and control" within the meaning of the common law
and "control" within the meaning of the UCC), with the priority required hereby.
(c) If any material assets are acquired by any Parent Group Member
after the Agreement Date (other than assets constituting Collateral under the
Security Documents that become subject to the Lien of the Security Documents
upon acquisition thereof, and other than assets upon which the Administrative
Agent has a first perfected Lien), the Parent will notify the Credit Parties
thereof, and, if requested by the Administrative Agent or the Required Lenders,
the Parent will cause such assets to be subjected to a Lien securing the
Obligations and will take, and cause each other Parent Group Member to take,
such actions as shall be necessary or reasonably requested by the Administrative
Agent to grant and perfect such Liens, including actions described in paragraph
(a) of this Section, all at the expense of the Parent.
(d) If the Administrative Agent or the Required Lenders shall notify
the Parent that they require any Parent Group Member to deposit and maintain
with the Administrative Agent as Collateral all cash and cash equivalents of any
Parent Group Member, the Parent will cause such cash and cash equivalents to be
deposited and maintained with the Administrative Agent and subjected to a Lien
securing the Obligations and will take, and cause each such other Parent Group
Member to take, such actions as shall be necessary or reasonably requested by
the Administrative Agent to grant and perfect such Liens, including actions
described in paragraph (a) of this Section, all at the expense of the Parent,
provided that, so long as no Default or Event of Default shall have occurred and
be continuing, each Parent Group Member shall have access to such cash and cash
equivalents on deposit and maintained with the Administrative Agent.
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Section 10.13 Environmental Compliance
The Parent will, and will cause each other Parent Group Member to, use
and operate all of its facilities and property in compliance with all
Environmental Laws, keep all necessary permits, approvals, certificates,
licenses and other authorizations relating to environmental matters in effect
and remain in compliance therewith, and handle all Hazardous Materials in
compliance with all applicable Environmental Laws, except where noncompliance
with any of the foregoing could not reasonably be expected to have a Material
Adverse Effect.
Section 10.14 Net Proceeds
In the event that any Parent Group Member receives Net Proceeds in
respect of a Reduction Event, such Parent Group Member shall, directly or
indirectly, make a capital contribution thereof to the Borrower to enable the
Borrower to prepay the Loans pursuant to the provisions of the Credit Agreement.
Section 10.15 Landlord Consent Agreements
(a) The Parent shall, and shall cause each Parent Group Member to, use
its best efforts to obtain, within 90 days of the date hereof, counterparts of a
Landlord Consent Agreement in the form of Exhibit H to the Credit Agreement or
such other form reasonably acceptable to the Administrative Agent, signed on
behalf of each applicable Parent Group Member and the applicable landlord of the
leased properties disclosed on Schedule 9.4.
(b) If any Parent Group Member leases any real property after the
Agreement Date (other than leases with respect to which the applicable Parent
Group Member and lessor thereunder has executed and delivered a Landlord Consent
Agreement), such Parent Group Member will notify the Credit Parties thereof, and
the applicable Parent Group Member will use its reasonable efforts to deliver or
cause to be delivered to the Administrative Agent a Landlord Consent Agreement
in the form of Exhibit H to the Credit Agreement or such other form reasonably
acceptable to the Administrative Agent, signed on behalf of such Parent Group
Member and such lessor.
ARTICLE 11. NEGATIVE COVENANTS
Until the Revolving Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees and other amounts payable
under the Loan Documents shall have been paid in full and all Letters of Credit
have expired and all LC Disbursements have been reimbursed, each Parent Group
Member covenants and agrees with the Credit Parties that:
Section 11.1 Indebtedness
(a) The Parent will not, and will not permit any other Parent Group
Member to, create, incur, assume or permit to exist any Indebtedness, except:
(i) Indebtedness under the Loan Documents;
15
(ii) Indebtedness existing on the date hereof and set forth in Schedule
11.1, but not any extensions, renewals or replacements of any such Indebtedness;
(iii) Indebtedness of any Parent Group Member incurred to finance the
acquisition, construction or improvement of any fixed or capital assets,
including Capital Lease Obligations and any Indebtedness assumed in connection
with the acquisition of any such assets or secured by a Lien on any such assets
prior to the acquisition thereof, and extensions, renewals and replacements of
any such Indebtedness that do not increase the outstanding principal amount
thereof, provided that (A) such Indebtedness is incurred prior to or within 90
days after such acquisition or the completion of such construction or
improvement and (B) the aggregate principal amount of Indebtedness permitted by
this clause (iii) shall not, without duplication, together with the Indebtedness
permitted under clauses (iv) and (vii) of this Section and clauses (iii), (iv)
and (vii) of Section 7.1 of the Credit Agreement exceed $5,000,000 in the
aggregate at any time outstanding;
(iv) Indebtedness of any Person that becomes a Parent Group Member
after the Agreement Date, provided that (A) such Indebtedness exists at the time
such Person becomes a Parent Group Member and is not created in contemplation of
or in connection with such Person becoming a Subsidiary and (B) the aggregate
principal amount of Indebtedness permitted by this clause (iv) shall not,
without duplication, together with the Indebtedness permitted under clauses
(iii) and (vii) of this Section and clauses (iii), (iv) and (vii) of Section 7.1
of the Credit Agreement exceed $5,000,000 in the aggregate at any time
outstanding;
(v) Indebtedness of any Parent Group Member to any other Parent Group
Member;
(vi) Guarantees by any Parent Group Member of Indebtedness of any other
Parent Group Member; and
(vii) other unsecured Indebtedness of the Parent Group Members,
provided that the aggregate principal amount of Indebtedness permitted by this
clause (vii) shall not, without duplication, together with the Indebtedness
permitted under clauses (iii) and (iv) of this Section and clauses (iii), (iv)
and (vii) of Section 7.1 of the Credit Agreement exceed $5,000,000 in the
aggregate at any time outstanding.
(b) The Parent will not, and it will not permit any Parent Group Member
to, issue any preferred Equity Interest, other than preferred Equity Interests
issued by any Parent Group Member to the Parent.
Section 11.2 Liens
The Parent will not, and will not permit any other Parent Group Member
to, create, incur, assume or permit to exist any Lien on any property or asset
now owned or hereafter acquired by it, or assign or sell any income or revenues
(including accounts receivable) or rights in respect of any thereof, except:
(a) Liens created under the Loan Documents;
16
(b) Permitted Encumbrances;
(c) any Lien on any property or asset of any Parent Group Member
existing on the Agreement Date and set forth in Schedule 11.2, provided that (i)
such Lien shall not apply to any other property or asset of any Parent Group
Member and (ii) such Lien shall secure only those obligations which it secures
on the Agreement Date and any extensions, renewals and replacements thereof that
do not increase the outstanding principal amount thereof;
(d) security interests on fixed or capital assets acquired, constructed
or improved by any Parent Group Member, provided that (i) such security
interests secure Indebtedness permitted by clause (iii) of Section 11.1, (ii)
such security interests and the Indebtedness secured thereby are incurred prior
to or within 90 days after such acquisition or the completion of such
construction or improvement, (iii) the Indebtedness secured thereby does not
exceed the cost of acquiring, constructing or improving such fixed or capital
assets and (iv) such security interests shall not apply to any other property or
assets of any Parent Group Member; and
(e) security interests existing on any property or asset prior to the
acquisition thereof by any Parent Group Member or existing on any property or
asset of any Person that becomes a Parent Group Member after the Agreement Date
prior to the time such Person becomes a Parent Group Member, provided that (i)
such security interests secure Indebtedness permitted by clause (iv) of Section
11.1, (ii) such security interests are not created in contemplation of or in
connection with such acquisition or such Person becoming a Parent Group Member,
as applicable, (iii) such security interests shall not apply to any other
property or assets of any Parent Group Member and (iv) such security interests
shall secure only the Indebtedness that they secure on the date of such
acquisition or the date such Person becomes any Parent Group Member, as
applicable, and any extensions, renewals and replacements thereof that do not
increase the outstanding principal amount thereof.
Section 11.3 Fundamental Changes
(a) The Parent will not, and will not permit any Parent Group Member
to, merge into or consolidate with any other Person, or permit any other Person
to merge into or consolidate with it, or sell, transfer, lease or otherwise
dispose of (in one transaction or in a series of transactions) all or
substantially all of its assets, or all or substantially all of the Equity
Interests (or all or substantially all of the Equity Interests within the
meaning of clause (a) of such defined term) issued by any Parent Group Member(in
each case, whether now owned or hereafter acquired), or liquidate or dissolve,
except that, if at the time thereof and immediately after giving effect thereto,
no Default shall or would have occurred and be continuing:
(i) any Parent Group Member may merge into any other Parent Group
Member, provided that in case of a merger involving the Parent, the Parent is
the surviving entity;
17
(ii) any Parent Group Member (other than the Parent) may merge with any
Person in a transaction that is not permitted by clause (i) of this Section
11.3(a), provided that such merger is permitted by Sections 11.4 or 11.5, as
applicable;
(iii) any Parent Group Member may sell, transfer, lease or otherwise
dispose of all or substantially all of its assets to any other Parent Group
Member;
(iv) any Parent Group Member may sell, transfer, lease or otherwise
dispose of its assets in a transaction that is not permitted by clause (iii) of
this Section 11.3(a), provided that such sale, transfer, lease or other
disposition is also permitted by Section 11.5; and
(v) any Parent Group Member (other than the Parent) may liquidate or
dissolve if the Parent determines in good faith that such liquidation or
dissolution is in the best interests of the Parent and is not materially
disadvantageous to the Lenders.
(b) The Parent will not, and will not permit any other Parent Group
Member to, engage to any material extent in any business other than businesses
of the type conducted by it on the Agreement Date and businesses which are now
directly related thereto.
Section 11.4 Investments, Loans, Advances, Guarantees and Acquisitions
The Parent will not, and will not permit any other Parent Group Member
to, purchase, hold or acquire (including pursuant to any merger) any capital
stock, evidences of indebtedness or other securities (including any option,
warrant or other right to acquire any of the foregoing) of, make or permit to
exist any loans or advances to, make or permit to exist any Guarantees of any
obligations of, or make or permit to exist any investment or any other interest
in, any other Person, or purchase or otherwise acquire (in one transaction or a
series of transactions (including pursuant to any merger)) any assets of any
other Person constituting a business unit, except:
(a) Permitted Investments;
(b) investments existing on the Agreement Date and set forth in
Schedule 11.4;
(c) investments made by the Parent in the Equity Interests of the
Borrower and any other Parent Group Member and made by any other Parent Group
Member in the Equity Interests of any other Parent Group Member;
(d) loans or advances made by any Parent Group Member to any other
Parent Group Member, provided that any such loans and advances made by a Parent
Group Member shall be evidenced by a promissory note which shall be pledged
pursuant to the Security Agreement;
18
(e) acquisitions made by any Parent Group Member from any other Parent
Group Member;
(f) Guarantees permitted by Section 11.1; and
(g) if at the time thereof and immediately after giving effect thereto
no Default shall have occurred and be continuing other investments, loans,
advances, Guarantees and acquisitions, provided that the sum of (i) the
aggregate consideration paid by any Parent Group Member in connection with all
such acquisitions, (ii) the aggregate amount of all such investments, loans and
advances outstanding and (iii) the amount of obligations and liabilities
outstanding in the aggregate that is Guaranteed pursuant to all such Guarantees,
shall not, together with all amounts expended under Section 7.4(g) of the Credit
Agreement, exceed $2,500,000 at any time.
Section 11.5 Asset Sales
The Parent will not, and will not permit any other Parent Group Member
to, sell, transfer, lease or otherwise dispose (including pursuant to a merger)
of any asset, including any Equity Interest, nor will the Parent permit any
other Parent Group Member to issue any additional Equity Interests, except:
(a) sales, transfers, leases and other dispositions of inventory, used
or surplus equipment and Permitted Investments, in each case in the ordinary
course of business;
(b) sales, transfers, leases and other dispositions made by any Parent
Group Member to any other Parent Group Member;
(c) other sales, transfers, leases and dispositions of assets provided
that the aggregate amount of sales, transfers, leases and dispositions permitted
by this clause (c) and Section 7.5(c) of the Credit Agreement shall not exceed
$2,500,000 in the aggregate at any time outstanding; and
(d) issuances of Equity Interests by any Parent Group Member to the
Parent.
Section 11.6 Sale and Lease-Back Transactions
The Parent will not, and will not permit any other Parent Group Member
to, enter into any arrangement, directly or indirectly, with any Person whereby
it shall sell or transfer any property, real or personal, used or useful in its
business, whether now owned or hereafter acquired, and thereafter rent or lease
such property or other property that it intends to use for substantially the
same purpose or purposes as the property being sold or transferred.
Section 11.7 Hedging Agreements
The Parent will not, and will not permit any other Parent Group Member
to, enter into any Hedging Agreement, other than Hedging Agreements entered into
in the ordinary course of business to hedge or mitigate risks to which any
Parent Group Member is exposed in the conduct of its business or the management
of its liabilities.
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Section 11.8 Restricted Payments
The Parent will not, and will not permit any other Parent Group Member
to, declare or make, or agree to pay for or make, directly or indirectly, any
Restricted Payment, except that (i) the Parent may declare and pay dividends
with respect to its Equity Interests payable solely in perpetual common Equity
Interests, (ii) any Parent Group Member may declare and pay dividends with
respect to its Equity Interests to the Parent or any other Parent Group Member,
and (iii) provided that both immediately before and after giving effect thereto
no Default shall or would exist, the Parent may declare and make one or more
Restricted Payments.
Section 11.9 Restrictive Agreements
The Parent will not, and will not permit any other Parent Group Member
to, directly or indirectly, enter into, incur or permit to exist any agreement
or other arrangement binding on any Parent Group Member that prohibits,
restricts or imposes any condition upon (i) the ability of any Parent Group
Member to create, incur or permit to exist any Lien upon any of its property or
assets (unless such agreement or arrangement does not prohibit, restrict or
impose any condition upon the ability of any Loan Party to create, incur or
permit to exist any Lien in favor of the Secured Parties created under the Loan
Documents) or (ii) the ability of any Parent Group Member (other than the
Parent) to pay dividends or other distributions with respect to any of its
Equity Interests or to make or repay loans or advances to any Loan Party or to
Guarantee Indebtedness of the Parent or any of its subsidiaries, provided that
(a) the foregoing shall not apply to restrictions and conditions imposed by law
or by the Loan Documents, (b) the foregoing shall not apply to restrictions and
conditions existing on the Agreement Date identified on Schedule 11.10 (but
shall apply to any extension or renewal of, or any amendment or modification
expanding the scope of, any such restriction or condition), (c) the foregoing
shall not apply to customary restrictions and conditions contained in agreements
relating to the sale of a Parent Group Member (other than the Parent) pending
such sale, provided that such restrictions and conditions apply only to the
Parent Group Member that is to be sold and such sale is permitted hereunder, (d)
clause (i) of this Section shall not apply to restrictions or conditions imposed
by any agreement relating to secured Indebtedness permitted hereby if such
restrictions or conditions apply only to the property or assets securing such
Indebtedness and (e) clause (i) of this Section shall not apply to customary
provisions in leases restricting the assignment thereof.
Section 11.10 Organizational Documents
The Parent will not, and will not permit any other Parent Group Member
to, amend, modify or waive any of its rights under its certificate of
incorporation, by-laws or other organizational documents, other than immaterial
amendments, modifications or waivers that would not reasonably be expected to
adversely affect the Credit Parties, provided that the Parent shall deliver or
cause to be delivered to the Administrative Agent and each Lender a copy of each
such amendment, modification or waiver promptly after the execution and delivery
thereof).
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ARTICLE 12. TERMINATION
The guarantees made hereunder (i) shall terminate when all the
Obligations have been finally and indefeasibly paid in full in cash, the Issuing
Bank and the Lenders have no further commitment to lend or otherwise extend
credit under the Credit Agreement and all outstanding Letters of Credit shall
have been canceled and returned to the Issuing Bank and (ii) shall continue to
be effective or be reinstated, as applicable, if at any time payment, or any
part thereof, of any Obligation is rescinded or must otherwise be restored by
any Secured Party or any Guarantor upon the bankruptcy or reorganization of any
Loan Party or otherwise.
ARTICLE 13. BINDING EFFECT; SEVERAL AGREEMENT; ASSIGNMENTS
Whenever in this Guarantee Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the successors and
assigns of such party; and all covenants, promises and agreements by or on
behalf of any Guarantor that are contained in this Guarantee Agreement shall
bind and inure to the benefit of each party hereto and its successors and
assigns. This Guarantee Agreement shall become effective as to any Guarantor
when a counterpart hereof executed on behalf of such Guarantor shall have been
delivered to the Administrative Agent and a counterpart hereof shall have been
executed on behalf of the Administrative Agent, and thereafter shall be binding
upon such Guarantor and the Administrative Agent and their respective successors
and assigns, and shall inure to the benefit of such Guarantor, the
Administrative Agent and the other Secured Parties, and their respective
successors and assigns, except that no Guarantor shall have the right to assign
its rights or obligations hereunder or any interest herein (and any such
attempted assignment shall be void), except as expressly contemplated by this
Guarantee Agreement or the other Loan Documents. If any of the equity interests
in any Guarantor (other than the Parent) is sold, transferred or otherwise
disposed of pursuant to a transaction permitted by the Loan Documents and,
immediately after giving effect thereto, such Guarantor shall no longer be a
subsidiary of the Parent, then the obligations of such Guarantor under this
Guarantee Agreement shall be automatically released. This Guarantee Agreement
shall be construed as a separate agreement with respect to each Guarantor and
may be amended, modified, supplemented, waived or released with respect to any
Guarantor without the approval of any other Guarantor and without affecting the
obligations of any other Guarantor hereunder.
ARTICLE 14. WAIVERS; AMENDMENT
Section 14.1 No Waiver
No failure or delay of the Administrative Agent in exercising any power
or right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Administrative Agent hereunder and of the other Secured
Parties under the other Loan Documents are cumulative and are not exclusive of
any rights or remedies that they would otherwise have. No waiver of any
provision of this Guarantee Agreement or any other Loan Document or consent to
any departure by any Guarantor therefrom shall in any event be effective unless
the same shall be permitted by Section 14.2, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice or demand on any Guarantor in any case shall entitle such
Guarantor to any other or further notice or demand in similar or other
circumstances.
Section 14.2 Amendments, etc.
Neither this Guarantee Agreement nor any provision hereof may be
waived, amended or modified except pursuant to a written agreement entered into
by, between or among the Administrative Agent and the Guarantor or Guarantors
with respect to which such waiver, amendment or modification is to apply,
subject to any consent required in accordance with Section 10.2 of the Credit
Agreement.
21
ARTICLE 15. NOTICES
All communications and notices hereunder shall be in writing and given
as provided in Section 10.1 of the Credit Agreement. All communications and
notices hereunder to each Subsidiary Guarantor shall be given to it at its
address set forth on Schedule I hereto, with a copy to the Borrower. All
communications and notices hereunder to each Parent Group Member shall be given
to it c/o the Parent at 500 University Court, Blackwood, New Jersey 08012,
Attention: Leslie Gordon, Chief Financial Officer (Telephone No. (856) 228-6700
ext. 109); Facsimile No. (856) 228-0080), with a copy to the Borrower.
ARTICLE 16. SURVIVAL OF AGREEMENT; SEVERABILITY
Section 16.1 Survival of Agreement
All covenants, agreements, representations and warranties made by the
Guarantors herein and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Guarantee Agreement or any
other Loan Document shall be considered to have been relied upon by the
Administrative Agent and the other Secured Parties and shall survive the
execution and delivery of any Loan Document, the making of any Loan and the
issuance of any Letter of Credit, regardless of any investigation made by the
Secured Parties or on their behalf, and shall continue in full force and effect
until this Guarantee Agreement shall terminate.
Section 16.2 Severability
In the event any one or more of the provisions contained in this
Guarantee Agreement or in any other Loan Document should be held invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby (it being understood that the
invalidity of a particular provision in a particular jurisdiction shall not in
and of itself affect the validity of such provision in any other jurisdiction).
The parties shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
ARTICLE 17. ADDITIONAL GUARANTORS
Upon execution and delivery after the date hereof by the Administrative
Agent and a subsidiary of the Parent of an instrument in the form of Annex 1,
such subsidiary shall become a Guarantor hereunder with the same force and
effect as if originally named as a Guarantor herein. The execution and delivery
of any such instrument shall not require the consent of any other Guarantor
hereunder. The rights and obligations of each Guarantor hereunder shall remain
in full force and effect notwithstanding the addition of any new Subsidiary
Guarantor as a party to this Guarantee Agreement.
22
ARTICLE 18. RIGHT OF SETOFF
If an Event of Default shall have occurred and be continuing, each
Secured Party is hereby authorized at any time and from time to time, to the
fullest extent permitted by applicable law, to setoff and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other Indebtedness at any time owing by such Secured Party to or for
the credit or the account of any Guarantor against any or all the obligations of
such Guarantor now or hereafter existing under this Guarantee Agreement and the
other Loan Documents held by such Secured Party, irrespective of whether or not
such Secured Party shall have made any demand under this Guarantee Agreement or
any other Loan Document and although such obligations may be unmatured. The
rights of each Secured Party under this Article are in addition to other rights
and remedies (including other rights of setoff) which such Secured Party may
have.
ARTICLE 19. GOVERNING LAW; JURISDICTION; VENUE; WAIVER OF JURY TRIAL
Section 19.1 GOVERNING LAW
THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Section 19.2 Consent to Jurisdiction
Each Guarantor hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New York State
court or Federal court of the United States of America sitting in New York City,
and any appellate court from any thereof, in any action or proceeding arising
out of or relating to this Guarantee Agreement or the other Loan Documents, or
for recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that, to the extent permitted by
applicable law, all claims in respect of any such action or proceeding may be
heard and determined in such New York State court or, to the extent permitted by
applicable law, in such Federal court. Each of the parties hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Guarantee Agreement shall affect any right that
the Administrative Agent or any other Secured Party may otherwise have to bring
any action or proceeding relating to this Guarantee Agreement or the other Loan
Documents against any Guarantor, or any of its property, or in the courts of any
jurisdiction.
Section 19.3 Waiver of Objection to Venue
Each Guarantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Guarantee Agreement or the other Loan
Documents in any court referred to in Section 19.2. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by applicable law,
the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
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Section 19.4 Consent to Service of Process
Each party to this Guarantee Agreement irrevocably consents to service
of process in the manner provided for notices in Article 15. Nothing in this
Guarantee Agreement will affect the right of any party to this Guarantee
Agreement to serve process in any other manner permitted by law.
Section 19.5 WAIVER OF JURY TRIAL
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS GUARANTEE AGREEMENT. EACH PARTY HERETO (I) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS GUARANTEE AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
ARTICLE 20. MISCELLANEOUS
Section 20.1 Headings
Article and Section headings and the Table of Contents used herein are
for convenience of reference only, are not part of this Agreement and shall not
affect the construction of, or be taken into consideration in interpreting, this
Agreement.
Section 20.2 Counterparts
This Guarantee Agreement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which, when taken together, shall constitute
but one contract (subject to Article 13), and shall become effective as provided
in Article 13. Delivery of an executed counterpart of this Guarantee Agreement
by facsimile transmission shall be as effective as delivery of a manually
executed counterpart of this Guarantee Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
A.C. MOORE INCORPORATED
GUARANTEE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have duly executed this
Guarantee Agreement as of the day and year first above written.
A.C. MOORE INCORPORATED
By: /s/ Leslie H. Gordon
---------------------------------
Name: Leslie H. Gordon
---------------------------------
Title: Chief Financial Officer
---------------------------------
A.C. MOORE ARTS & CRAFTS, INC.
By: /s/ Leslie H. Gordon
---------------------------------
Name: Leslie H. Gordon
---------------------------------
Title: Chief Financial Officer
---------------------------------
MOORESTOWN FINANCE, INC.
BLACKWOOD ASSETS, INC.
By: /s/ Leslie H. Gordon
---------------------------------
Name: Leslie H. Gordon
---------------------------------
Title: Chief Financial Officer
---------------------------------
EACH OF THE SUBSIDIARIES OF THE
BORROWER LISTED ON THE SCHEDULE I
HERETO
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
A.C. MOORE INCORPORATED
GUARANTEE AGREEMENT
KEYBANK NATIONAL ASSOCIATION,
as Administrative Agent
By: /s/ Brendan Sachtjen
---------------------------------
Name: Brendan Sachtjen
---------------------------------
Title: Senior Vice President
---------------------------------