Exhibit 4.19
NOTE, GUARANTY AND SECURITY AGREEMENT
Guaranteed Secured Term A Notes due 2004
Guaranteed Secured Term B Notes due 2004
As of March 27, 2003
TO THE NOTEHOLDERS WHOSE NAMES
APPEAR ON THE SIGNATURE PAGES HERETO
Ladies and Gentlemen:
(i) MIDAS INTERNATIONAL CORPORATION, a Delaware corporation ("MIC"),
PARTS WAREHOUSE, INC., a Delaware corporation, DEALERS WHOLESALE, INC., a
Delaware corporation, INTERNATIONAL PARTS CORPORATION, a Delaware corporation,
MUFFLER CORPORATION OF AMERICA, a Illinois corporation, HUTH, INC., a Delaware
corporation, MIDAS PROPERTIES, INC., a New York corporation, MIDAS REALTY
CORPORATION, a Delaware corporation, COSMIC HOLDINGS LLC, a Delaware limited
liability company, COSMIC HOLDINGS CORPORATION, a Delaware corporation (all of
the foregoing, together with MIC, being referred to collectively as the
"Companies" and each, including MIC, being referred to individually as a
"Company"), and (ii) MIDAS, INC., a Delaware corporation (the "Parent") and the
other Subsidiaries of the Parent identified on the signature pages hereto as
"Guarantors" (the Parent and such other Subsidiaries, collectively, the
"Guarantors" and each, individually, a "Guarantor"), agree with each of the
Persons identified as Noteholders on the signature pages hereto (together with
their successors and permitted assigns collectively, the "Noteholders" or
"Holders" and each individually a "Noteholder" or "Holder") and U.S. Bank
National Association, solely in its capacity as collateral agent under this
Agreement (together with any successor collateral agent, the "Collateral Agent")
as follows:
1. EXISTING NOTE AGREEMENT; EXISTING NOTES; AUTHORIZATION OF NOTES; SALE AND
PURCHASE OF NOTES.
1.1 Existing Note Agreement and Existing Notes.
The Noteholders, MIC and the Parent are parties to the Note and
Guarantee Agreement dated as of April 15, 1998, as amended prior to the date
hereof (the "Existing Note Agreement") pursuant to which MIC issued $75,000,000
aggregate principal amount of its 6.89% Guaranteed Senior Notes due 2005, as
amended prior to the date hereof (the "Existing Notes"). The Existing Notes have
an outstanding principal balance as of the date hereof (immediately prior to
the Closing) of $45,000,000 and are owned by the Existing Noteholders.
1.2 Authorization of Notes.
The Companies have authorized the issue and sale of $31,415,094
aggregate principal amount of Guaranteed Secured Term A Notes of the Issuers due
2004 (the "Term A Notes", such term to include
any notes issued in substitution or replacement therefor) and $13,584,906
aggregate initial principal amount of Guaranteed Secured Term B Notes of the
Issuers due 2004 (the "Term B Notes", such term to include any notes issued in
substitution or replacement therefor). The Term A Notes shall be substantially
in the form set out in Exhibit 1-A, with such changes therefrom, if any, as may
be approved by each Noteholder and the Administrative Obligor. The Term B Notes
shall be substantially in the form set out in Exhibit 1-B, with such changes
therefrom, if any, as may be approved by each Noteholder and Administrative
Obligor. The Term A Notes and the Term B Notes are referred to collectively as
the "Notes" and each individually as a "Note".
Payment of the principal of and interest on the Notes and other
amounts owing under the Note Documents shall be unconditionally guaranteed by
each Guarantor as provided in this Agreement.
1.3 Sale and Purchase of Notes.
Subject to the terms and conditions of this Agreement, the Companies
will issue and sell to each Noteholder and each Noteholder will purchase from
the Companies, at the Closing provided for in Section 2, Term A Notes and Term B
Notes in the respective principal amounts specified opposite such Noteholder's
name in Schedule A at the purchase price of 100% of the principal amount
thereof, which purchase price will be payable by such Noteholder by the exchange
and cancellation of the outstanding principal balance of the Existing Notes of
such Noteholder. The Noteholders' obligations hereunder are several and not
joint obligations and no Noteholder shall have any liability to any Person for
the performance or non-performance of any obligation by any other Noteholder
hereunder.
The Obligors and the Noteholders agree that (i) each Warrant not
subject to clawback under the Warrant Agreement has a value of $5.00 per share,
(ii) each Warrant subject to clawback under the Warrant Agreement has a value of
$0 and (iii) they will not take a position inconsistent with the foregoing on
any federal, state, local and/or foreign tax return or any information
statement.
1.4 Defined Terms.
(a) Definitions. Certain capitalized terms used in this Agreement
are defined in Schedule B. References to a "Schedule" or an "Exhibit"
are, unless otherwise specified, to a Schedule or an Exhibit attached
to this Agreement.
(b) Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP. When used
herein, the term "financial statements" shall include the notes and
schedules thereto. Whenever the term "Companies" or the term
"Obligors" or the term "Parent" is used in respect of a financial
covenant or a related definition, it shall be understood to mean
Parent and its Subsidiaries on a consolidated basis unless the context
clearly requires otherwise.
(c) Code. Any terms used in this Agreement that are defined in
the Code shall be construed and defined as set forth in the Code
unless otherwise defined herein.
(d) Construction. Unless the context of this Agreement or any
other Note Document clearly requires otherwise, references to the
plural include the singular, references to the singular include the
plural, the term "including" is not limiting, and the term "or" has,
except where otherwise indicated, the inclusive meaning represented by
the phrase "and/or." The words "hereof," "herein," "hereby,"
"hereunder," and similar terms in this Agreement or any other Note
Document refer to this Agreement or such other Note Document, as the
case may be, as a whole and not to any particular provision of this
Agreement or such other Note Document, as the case
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may be. Section, subsection, clause, schedule, and exhibit references
herein are to this Agreement unless otherwise specified. Any reference
in this Agreement or in the other Note Documents to any agreement,
instrument, or document shall include all alterations, amendments,
changes, extensions, modifications, renewals, replacements,
substitutions, joinders, and supplements, thereto and thereof, as
applicable (subject to any restrictions on such alterations,
amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements set forth
herein). Any reference herein to any Person shall be construed to
include such Person's successors and assigns. Any requirement of a
writing contained herein or in the other Note Documents shall be
satisfied by the transmission of a Record and any Record transmitted
by any Obligor shall constitute a representation and warranty as to
the accuracy and completeness of the information contained therein.
(e) Schedules and Exhibits. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by
reference.
2. CLOSING AND TERMS OF PAYMENT.
2.1 Closing.
The sale and purchase of the Notes to be purchased by each Noteholder
shall occur at the offices of Winston & Strawn, 35 West Wacker Drive, Chicago,
IL 60601 at 10:00 a.m., Chicago time, at a closing (the "Closing") on March 27,
2003 (the "Closing Date"). At the Closing the Companies will deliver to each
Noteholder the Notes to be purchased by such Noteholder in the form of a single
Term A Note and a single Term B Note (or such greater number of Term A Notes or
Term B Notes in denominations of at least $500,000 as such Noteholder may
request) dated the date of the Closing and registered in such Noteholder's name
(or in the name of such Noteholder's nominee), against delivery by such
Noteholder to the Administrative Obligor of the original Existing Notes of such
Noteholder for exchange and cancellation of the outstanding principal balance
thereof. If at the Closing the Companies shall fail to tender such Notes to any
Noteholder as provided above in this Section, or any of the conditions specified
in this Agreement shall not have been fulfilled to such Noteholder's
satisfaction, such Noteholder shall, at such Noteholder's election, be relieved
of all further obligations under this Agreement, without thereby waiving any
rights such Noteholder may have by reason of such failure or such
nonfulfillment.
2.2 Interest Rates; Additional Fees and Premiums.
(a) The Term A Notes shall bear interest at a rate per annum
equal to 7.67%, subject to increase as provided below (the "Term A
Rate"). The Term A Rate shall be automatically increased on the date
that any Revolver Rate Increase takes effect by the amount of such
Revolver Rate Increase and such increase in the Term A Rate shall
remain in effect for so long as such Revolver Rate Increase remains in
effect. There shall be an increase in the Term A Rate each time a
Revolver Rate Increase takes effect.
(b) The Term B Notes shall bear interest at a rate per annum
equal to 18%, subject to increase as provided below (the "Term B
Rate"). The Term B Rate shall be automatically increased on the date
that any Revolver Rate Increase takes effect by the amount of such
Revolver Rate Increase and such increase in the Term B Rate shall
remain in effect for so long as such Revolver Rate Increase remains in
effect. There shall be an increase in the Term B Rate each time a
Revolver Rate Increase takes effect. That portion of the interest
accrued and unpaid on any Term B Note as of the first day of each
calendar month that accrued at a rate in excess of 12% per annum
(initially 6%) shall be paid-in-kind by being added to the outstanding
principal
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amount of such Term B Note (inclusive of any Term B Note PIK Amount
theretofore so added) on the first day of such calendar month.
(c) For purposes of this Agreement, a "Revolver Rate Increase"
shall mean any increase in the rate of interest payable on the
outstanding Advances under the Bank Loan Agreement, but the term
Revolver Rate Increase shall (i) expressly exclude any increases
resulting solely from the provisions (other than the provisions
referred to in clause (ii) below) of the Bank Loan Agreement as in
effect on the date hereof, including, without limitation, increases in
such rate of interest resulting solely from (x) changes in the Base
Rate or the LIBOR Rate (each as defined in the Bank Loan Agreement as
in effect on the date hereof), and (y) increases pursuant to any of
Section 2.6(c), 2.6(e), 2.13, 2.14, 2.15 and 2.16 of the Bank Loan
Agreement as in effect on the date hereof, but (ii) expressly include
any increase pursuant to or incurred in connection with the
syndication or similar transfer of any Commitment or Loan under the
Bank Loan Agreement or any similar changes, whether or not consented
to by any of the Obligors.
(d) The Companies shall be obligated to pay to the Noteholders,
pro rata in proportion to the respective outstanding principal
balances of the Notes held by each, an amount equal to the Noteholder
Equivalent of each Additional Revolver Fee paid in respect of the Bank
Loan Agreement, such payment to be made to the Noteholders concurrent
with, and on the same terms as, the payment of such Additional
Revolver Fee under the Bank Loan Agreement. For purposes of this
Agreement, an "Additional Revolver Fee " shall mean any additional or
increased fee or premium payable in respect of the Advances or
revolving credit under the Bank Loan Agreement that is not required to
be paid under the Bank Loan Agreement as in effect on the date hereof,
but the term Additional Revolver Fee shall expressly include any
additional fee or premium or increase pursuant to the syndication or
similar transfer of any Commitment or Loan under the Bank Loan
Agreement or any similar changes, whether or not consented to by any
of the Obligors. For purposes of this Agreement, the "Noteholder
Equivalent" of an Additional Revolver Fee shall mean (i), in the case
of an Additional Revolver Fee which is calculated on the basis of a
number of basis points or percentage points, an amount with respect to
the outstanding principal amount of the Notes that is calculated on
the basis of the same number of basis points or percentage points, and
(ii) in the case of any other Additional Revolver Fee which is paid,
an amount equal to the amount of such Additional Revolver Fee
multiplied by a fraction, the numerator of which is the aggregate
outstanding principal balance of the Notes, and the denominator of
which is the outstanding aggregate principal balance of the Notes and
the Term Loans.
(e) The Administrative Obligor shall give the Noteholder Group
prompt notice of any Revolver Rate Increase or Additional Revolver
Fee.
2.3 Voluntary Prepayments.
The Obligors may, at any time, subject to Section 2.11, prepay all or
a portion of the Notes without penalty or premium; provided, that except in
connection with the repayment in full of all of the Obligations, (i) the
Required Liquidity shall be satisfied immediately after giving effect to such
prepayment and (ii) immediately before and immediately after giving effect to
such prepayment, no Event of Default shall have occurred and be continuing. The
application of all such prepayments, and the apportionment of such prepayments
among the Term Loans and the Notes, shall be subject to the terms of the
Intercreditor Agreement. Each prepayment shall be applied pro rata among the
Term A Notes and the Term B Notes in proportion to the original outstanding
principal balances thereof, and prepayment of any Note shall be applied against
the remaining installments of principal due on such Note in the inverse order of
maturity to the Notes against the remaining installments of principal due on the
Notes in the inverse
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order of maturity. The outstanding unpaid principal balance (including the Term
B Loan PIK Amount) and all accrued and unpaid interest under the Notes
(including the Term B Loan PIK Amount) shall be due and payable on the date of
termination of this Agreement, whether by its terms, by prepayment, or by
acceleration. All amounts outstanding under the Notes (including the Term B Loan
PIK Amount) shall constitute Obligations.
2.4 Mandatory Prepayments.
(a) If on any day the Revolver Commitment is terminated pursuant
to Section 9.1 of the Bank Loan Agreement, the Obligors shall
immediately repay in full the Notes.
(b) Immediately upon the receipt by any Obligor of any proceeds
of any sale or disposition by any Obligor or its Subsidiaries of
property or assets, including any collections from any Accounts
generated from the sale of such property or assets, (other than a
Permitted Disposition described in clause (b) or (d) of the definition
of such term) or the receipt by any Obligor of the proceeds of any
insurance policy with respect to Inventory or condemnation awards with
respect to Inventory, Obligors shall prepay the outstanding principal
amount of the Notes in accordance with Section 2.5 in an amount equal
to 100% of the Net Cash Proceeds or the insurance or condemnation
proceeds received by such Person in connection with such sales or
dispositions or such casualty or condemnation event to the extent that
the aggregate amount of Net Cash Proceeds received by all Obligors and
their Subsidiaries (and not paid to the Noteholders as a prepayment of
the Notes) for all such sales or dispositions shall exceed $1,000,000
since the Closing Date (other than sales or dispositions of property
or assets, insurance proceeds or condemnation awards with respect to
Inventory or any proceeds thereof (including the collections of any
Accounts) in respect of the Inventory Divestiture Plan, all of which
shall be applied in accordance with Section 2.5). Nothing contained in
this subclause (b) shall permit any Obligor or any of its Subsidiaries
to sell or otherwise dispose of any property or assets other than in
accordance with Section 7.4.
(c) Upon the receipt by any Obligor or any of its Subsidiaries of
any Extraordinary Receipts in excess of $1,000,000 in the aggregate in
any Fiscal Year, except for such amounts applied for repairs,
replacements or restoration in accordance with Section 6.7(b),
Obligors shall prepay the outstanding principal of the Notes in
accordance with Section 2.5 below in an amount equal to 100% of such
Extraordinary Receipts, net of any reasonable expenses incurred in
collecting such Extraordinary Receipts.
(d) Within ten (10) Business Days of delivery to the Noteholders
of each of the monthly financial statements in respect of the last
month of a fiscal quarter pursuant to Section 6.3(b), beginning with
the fiscal quarter ended June 28, 2003, or, if such financial
statements are not delivered to the Noteholders on the date such
statements are required to be delivered pursuant to Section 6.3(b),
ten (10) Business Days after the date such statements are required to
be delivered to the Noteholders pursuant to Section 6.3(b), the
Obligors shall pay to the Noteholders an amount equal to 75% of the
Excess Cash Flow for the three-month period covered by such financial
statements, to be applied in accordance with Section 2.5.
(e) Upon the issuance or incurrence by any Obligor or any of its
Subsidiaries of any Indebtedness (other than Indebtedness referred to
in Section 7.1), or the sale or issuance by any Obligor or any of its
Subsidiaries of any shares of its Stock, the Obligors shall prepay the
outstanding amount of the Notes in accordance with Section 2.5 in an
amount equal to 100% of the Net Cash Proceeds received by such Person
in connection therewith. The provisions of this
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subsection (e) shall not be deemed to be implied consent to any such
issuance, incurrence or sale otherwise prohibited by the terms and
conditions of this Agreement.
2.5 Application of Payments.
All prepayments of the Notes shall be apportioned among the Term Loans
and the Notes in accordance with the terms of the Intercreditor Agreement. Each
prepayment pursuant to clauses 2.4(b), 2.4(c), 2.4(d) and 2.4(e) above shall,
(A) so long as no Priority Event shall have occurred and be continuing, be
applied, subject to (x) the prior payment of amounts due pursuant to Section
2.4(c)(i) of the Bank Loan Agreement and (y) except for prepayments pursuant to
clause 2.4(d) above, the prior satisfaction of the Required Liquidity, pro rata,
to the outstanding principal amount of the Term A Notes and the Term B Notes,
until paid in full, and (B) if a Priority Event shall have occurred and be
continuing, be applied in accordance with Section 4.2 of the Intercreditor
Agreement.
2.6 Default Rate.
Upon the occurrence and during the continuation of an Event of Default
at the election of the Required Holders, all Obligations shall bear interest on
the balance thereof at a per annum rate equal to two (2) percentage points above
the per annum rate otherwise applicable hereunder.
2.7 Payment.
Interest and all other fees payable hereunder shall be due and
payable, in arrears, on the first day of each month (or, in the case of fees,
such other date on which such fees are due and payable) at any time that
Obligations are outstanding. Any interest not paid when due shall be compounded
monthly and shall thereafter constitute Obligations hereunder and shall accrue
interest at the rate then applicable to the Term A Notes and the Term B Notes,
as applicable, hereunder.
2.8 Computation.
All interest and fees chargeable under the Note Documents shall be
computed on the basis of a 360 day year for the actual number of days elapsed.
2.9 Intent to Limit Charges to Maximum Lawful Rate.
In no event shall the interest rate or rates payable under this
Agreement, plus any other amounts paid in connection herewith, exceed the
highest rate permissible under any law that a court of competent jurisdiction
shall, in a final determination, deem applicable. The Obligors and the
Noteholder Group, in executing and delivering this Agreement, intend legally to
agree upon the rate or rates of interest and manner of payment stated within it;
provided, however, that, anything contained herein to the contrary
notwithstanding, if said rate or rates of interest or manner of payment exceeds
the maximum allowable under applicable law, then, ipso facto, as of the date of
this Agreement, the Obligors are and shall be liable only for the payment of
such maximum as allowed by law, and payment received from the Obligors in excess
of such legal maximum, whenever received, shall be applied to reduce the
principal balance of the Obligations to the extent of such excess.
2.10 Audit, Appraisal, and Valuation Charges.
For the separate account of the Noteholders, audit, appraisal, and
valuation fees and other fees and charges as follows, (i) a fee of $850 per day,
per auditor, plus out-of-pocket expenses for each audit of an Obligor performed
by personnel employed by the Noteholders, (ii) if implemented, a one time
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charge of $3,000 plus out-of-pocket expenses for expenses for the establishment
of electronic collateral reporting systems, (iii) the actual charges paid or
incurred by the Noteholders if they elect to employ the services of one or more
third Persons to perform audits of the Obligors, to appraise the Collateral, or
any portion thereof, or to assess an Obligor's business valuation and (iv) such
additional fees and expenses as shall be requested by the Noteholders in their
reasonable discretion with respect to property subject to the Inventory
Divestiture Plan; provided that, in the absence of a continuing Event of
Default, the Obligors shall not be required to pay for more than (i) four audits
of the Obligors in any Fiscal Year, (ii) two appraisals of the Inventory in any
Fiscal Year and (iii) one appraisal of the Real Property in any year.
2.11 Fixed Rate Breakage Fee.
Upon any prepayment of all or any portion of the Term B Notes
(regardless of the source of such prepayment and whether voluntary, by
acceleration or otherwise), Obligors shall pay the Noteholders on a pro rata
basis an amount (the "Fixed Rate Breakage Fee") equal to the present value, for
each successive month in the remaining term of such prepaid Term B Notes, of (1)
the yield as reported in the Federal Reserve statistical release H.15 (519)
under the caption "U.S. Government Securities/Treasury Constant Maturities"
(hereinafter "H.15 (519)") for a Treasury Note with a term equal to that
remaining on such Note (which will be obtained by interpolating between the
yield reported on the H.15 (519) for specific whole years) on the Closing Date
less (2) the yield as reported on the date of such prepayment in the H.15 (519)
for a Treasury Note with a term equal to that remaining on such Term B Notes
(which will be obtained by interpolating between the yield reported on the H.15
(519) for specific whole years) on the date of such prepayment, multiplied by
(a) the outstanding principal balance of such Note at the time of prepayment for
purposes of calculating such amount for the month during which such prepayment
occurs and by (b) the principal balance that would have been outstanding at the
beginning of each successive month in the remaining term of such Note had the
amortization schedule set forth for such Note been adhered to; provided, that
the rate determined in (2) above will be used as the discount rate in computing
such present value. The Fixed Rate Breakage Fee represents the reinvestment loss
of the Holders of the Term B Notes resulting from making a fixed rate loan.
2.12 Joint and Several Liability of Companies.
(a) Each Company is accepting joint and several liability
hereunder and under the other Note Documents in consideration of the
financial accommodations to be provided by the Collateral Agent and
the Noteholders under this Agreement, for the mutual benefit, directly
and indirectly, of each Company and in consideration of the
undertakings of the other Companies to accept joint and several
liability for the Obligations.
(b) Each Company, jointly and severally, hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a
co-debtor, joint and several liability with the other Companies, with
respect to the payment and performance of all of the Obligations
(including, without limitation, any Obligations arising under this
Section 2.12), it being the intention of the parties hereto that all
the Obligations shall be the joint and several obligations of each
Person composing the Companies without preferences or distinction
among them.
(c) If and to the extent that any of the Companies shall fail to
make any payment with respect to any of the Obligations as and when
due or to perform any of the Obligations in accordance with the terms
thereof, then in each such event the other Persons composing Companies
will make such payment with respect to, or perform, such Obligation.
(d) The Obligations of each Person composing Companies under the
provisions of this Section 2.12 constitute the absolute and
unconditional, full recourse Obligations of each
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Person composing Companies enforceable against each such Company to
the full extent of its properties and assets, irrespective of the
validity, regularity or enforceability of this Agreement or any other
circumstances whatsoever.
(e) Except as otherwise expressly provided in this Agreement,
each Person composing Companies hereby waives notice of acceptance of
its joint and several liability, notice of any Notes issued under or
pursuant to this Agreement, notice of the occurrence of any Default,
Event of Default, or of any demand for any payment under this
Agreement, notice of any action at any time taken or omitted by the
Collateral Agent or the Noteholders under or in respect of any of the
Obligations, any requirement of diligence or to mitigate damages and,
generally, to the extent permitted by applicable law, all demands,
notices and other formalities of every kind in connection with this
Agreement (except as otherwise provided in this Agreement). Each
Person composing Companies hereby assents to, and waives notice of,
any extension or postponement of the time for the payment of any of
the Obligations, the acceptance of any payment of any of the
Obligations, the acceptance of any partial payment thereon, any
waiver, consent or other action or acquiescence by the Collateral
Agent or Noteholders at any time or times in respect of any default by
any other Person composing Companies in the performance or
satisfaction of any term, covenant, condition or provision of this
Agreement, any and all other indulgences whatsoever by the Collateral
Agent or Noteholders in respect of any of the Obligations, and the
taking, addition, substitution or release, in whole or in part, at any
time or times, of any security for any of the Obligations or the
addition, substitution or release, in whole or in part, of any Person
composing Companies. Without limiting the generality of the foregoing,
each Company assents to any other action or delay in acting or failure
to act on the part of the Collateral Agent or any Noteholder with
respect to the failure by any Person composing Companies to comply
with any of its respective Obligations, including, without limitation,
any failure strictly or diligently to assert any right or to pursue
any remedy or to comply fully with applicable laws or regulations
thereunder, which might, but for the provisions of this Section 2.12
afford grounds for terminating, discharging ------------ or relieving
any Person composing Companies, in whole or in part, from any of its
Obligations under this Section 2.12, it ------------ being the
intention of each Person composing Companies that, so long as any of
the Obligations hereunder remain unsatisfied, the Obligations of such
Person composing Companies under this Section 2.12 shall not be
discharged except by performance and ------------ then only to the
extent of such performance. The Obligations of each Person composing
Companies under this Section 2.12 ------------ shall not be diminished
or rendered unenforceable by any winding up, reorganization,
arrangement, liquidation, reconstruction or similar proceeding with
respect to any Person composing Companies or the Collateral Agent or
any Noteholder. The joint and several liability of the Persons
composing Companies hereunder shall continue in full force and effect
notwithstanding any absorption, merger, amalgamation or any other
change whatsoever in the name, constitution or place of formation of
any of the Persons composing Companies or the Collateral Agent or any
Noteholder.
(f) Each Person composing Companies represents and warrants to
the Collateral Agent and Noteholders that such Company is currently
informed of the financial condition of Companies and of all other
circumstances which a diligent inquiry would reveal and which bear
upon the risk of nonpayment of the Obligations. Each Person composing
Companies further represents and warrants to the Collateral Agent and
Noteholders that such Company has read and understands the terms and
conditions of the Note Documents. Each Person composing Companies
hereby covenants that such Company will continue to keep informed of
Companies' financial condition, the financial condition of other
guarantors, if any, and of all other circumstances which bear upon the
risk of nonpayment or nonperformance of the Obligations.
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(g) Each of the Persons composing Companies waives all rights and
defenses arising out of an election of remedies by the Collateral
Agent or any Noteholder, even though that election of remedies, such
as a nonjudicial foreclosure with respect to security for a guaranteed
obligation, has destroyed the Collateral Agent's or such Noteholder's
rights of subrogation and reimbursement against such Company by the
operation of Section 580(d) of the California Code of Civil Procedure
or otherwise.
(h) Each of the Persons composing Companies waives all rights and
defenses that such Company may have because the Obligations are
secured by Real Property. This means, among other things:
(i) The Collateral Agent and Noteholders may collect from
such Company without first foreclosing on any Real or Personal
Property Collateral pledged by Companies.
(ii) If the Collateral Agent or any Noteholder
forecloses on any Real Property Collateral pledged by
Companies:
(A) The amount of the Obligations may be reduced
only by the price for which that collateral is sold at the
foreclosure sale, even if the collateral is worth more than
the sale price.
(B) The Collateral Agent and Noteholders may
collect from such Company even if Collateral Agent or
Noteholders, by foreclosing on the Real Property Collateral,
has destroyed any right such Company may have to collect
from the other Companies.
This is an unconditional and irrevocable waiver of any rights and
defenses such Company may have because the Obligations are secured by
Real Property. These rights and defenses include, but are not limited
to, any rights or defenses based upon Section 580a, 580b, 580d or 726
of the California Code of Civil Procedure.
(i) The provisions of this Section 2.12 are made for the benefit
of the Collateral Agent, the Noteholders and their respective
successors and assigns, and may be enforced by it or them from time to
time against any or all of the Persons composing Companies as often as
occasion therefor may arise and without requirement on the part of any
such Collateral Agent, Noteholder, successor or assign first to
marshal any of its or their claims or to exercise any of its or their
rights against any of the other Persons composing Companies or to
exhaust any remedies available to it or them against any of the other
Persons composing Companies or to resort to any other source or means
of obtaining payment of any of the Obligations hereunder or to elect
any other remedy. The provisions of this Section 2.12 shall remain in
effect until all of the Obligations shall have been paid in full or
otherwise fully satisfied. If at any time, any payment, or any part
thereof, made in respect of any of the Obligations, is rescinded or
must otherwise be restored or returned by any Collateral Agent or
Noteholder upon the insolvency, bankruptcy or reorganization of any of
the Persons composing Companies, or otherwise, the provisions of this
Section 2.12 will forthwith be reinstated in effect, as though such
payment had not been made.
(j) Each of the Persons composing Companies hereby agrees that it
will not enforce any of its rights of contribution or subrogation
against the other Persons composing Companies with respect to any
liability incurred by it hereunder or under any of the other Note
Documents, any payments made by it to the Collateral Agent or the
Noteholders with respect to any of the
9
Obligations or any collateral security therefor until such time as all
of the Obligations have been paid in full in cash. Any claim which any
Company may have against any other Company with respect to any
payments to any Collateral Agent or Noteholder hereunder or under any
other Note Documents are hereby expressly made subordinate and junior
in right of payment, without limitation as to any increases in the
Obligations arising hereunder or thereunder, to the prior payment in
full in cash of the Obligations and, in the event of any insolvency,
bankruptcy, receivership, liquidation, reorganization or other similar
proceeding under the laws of any jurisdiction relating to any Company,
its debts or its assets, whether voluntary or involuntary, all such
Obligations shall be paid in full in cash before any payment or
distribution of any character, whether in cash, securities or other
property, shall be made to any other Company therefor.
(k) Each of the Persons composing Companies hereby agrees that,
after the occurrence and during the continuance of any Default or
Event of Default, the payment of any amounts due with respect to the
indebtedness owing by any Company to any other Company is hereby
subordinated to the prior payment in full in cash of the Obligations.
Each Company hereby agrees that after the occurrence and during the
continuance of any Default or Event of Default, such Company will not
demand, sue for or otherwise attempt to collect any indebtedness of
any other Company owing to such Company until the Obligations shall
have been paid in full in cash. If, notwithstanding the foregoing
sentence, such Company shall collect, enforce or receive any amounts
in respect of such indebtedness, such amounts shall be collected,
enforced and received by such Company as trustee for the Noteholder
Group, and such Company shall deliver any such amounts to the
Collateral Agent for application to the Obligations.
(l) It is understood that while the amount of the Obligations for
which Companies have joint and several liability hereunder is not
limited, if in any action or proceeding involving any state, federal
or foreign bankruptcy, insolvency or other law affecting the rights or
creditors generally, this joint and several liability would be held or
determined to be void, invalid or unenforceable on account of the
amount of the aggregate liability under this Section 2.12, then,
notwithstanding any other provision of this Section 2.12 to the
contrary, the aggregate amount of such liability shall, without any
further action of the Collateral Agent, the Noteholders or any other
Person, be automatically limited and reduced to the highest amount
which is valid and enforceable as determined in such action or
proceeding.
3. CONDITIONS TO CLOSING; TERMINATION.
3.1 Conditions to Closing.
Each Noteholder's obligation to purchase and pay for the Notes to be
sold to such Noteholder at the Closing is subject to the fulfillment to such
Noteholder's satisfaction, prior to or at the Closing, of the following
conditions:
(a) Conditions set forth on Exhibit 3.
Each of the conditions set forth on Exhibit 3 to this Agreement.
(b) Purchase Permitted By Applicable Law, etc.
On the date of the Closing, such Noteholder's purchase of Notes shall
(i) be permitted by the laws and regulations of each jurisdiction to which such
Noteholder is subject, without recourse to provisions (such as Section
l405(a)(8) of the New York Insurance Law) permitting limited investments by
insurance companies without restriction as to the character of the particular
investment, (ii) not violate any
10
applicable law or regulation (including, without limitation, Regulation U, T or
X of the Board of Governors of the Federal Reserve System) and (iii) not subject
such Noteholder to any tax, penalty or liability under or pursuant to any
applicable law or regulation, which law or regulation was not in effect on the
date hereof.
(c) Sale of Other Notes.
Contemporaneously with the Closing the Companies shall sell to each
other Noteholder and each other Noteholder shall purchase the Notes to be
purchased by it at the Closing as specified in Schedule A.
3.2 Termination of Existing Note Agreement.
Upon the Closing, each Existing Noteholder agrees that all obligations
and liabilities under or in respect of the Existing Note Agreement and the
Existing Notes and all documents, agreements and liens granted thereunder shall
be terminated and the Obligors are released from their obligations thereunder
(except, in all cases, for indemnification obligations or other obligations
which survive the termination thereof). The Obligors hereby release each
Existing Noteholder and its officers, directors, employees, agents and advisors
(collectively, the "Released Parties") from any and all claims and/or actions of
any kind or nature whatsoever against any Released Party under or in respect of
the Existing Credit Agreement, the Existing Notes or any documents and
instruments delivered in connection therewith and agrees that the Existing
Noteholders shall have no further obligations, liabilities, duties,
responsibilities or commitments under the Existing Notes or the Existing Note
Agreements or any documents and instruments delivered in connection therewith.
3.3 Term.
This Agreement shall become effective upon the execution and delivery
hereof by the Obligors, the Collateral Agent, and the Noteholders and shall
continue in full force and effect for a term ending on October 3, 2004 (the
"Maturity Date"). The outstanding principal balance of the Notes together with
all accrued but unpaid interest thereon, and all other outstanding Obligations,
shall be due and payable to the Holders on the Maturity Date.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest.
(a) Each Obligor other than the Parent and the Canadian
Guarantors (it being agreed that solely for the purpose of this
Section 4, the Obligors shall not include the Parent or the Canadian
Guarantors) hereby grants to Collateral Agent, for the benefit of the
Noteholders, a continuing security interest in all of its right,
title, and interest in all currently existing and hereafter acquired
or arising Personal Property Collateral in order to secure prompt
repayment of any and all of the Obligations in accordance with the
terms and conditions of the Note Documents and in order to secure
prompt performance by the Obligors of each of their covenants and
duties under the Note Documents.
(b) The Collateral Agent's Liens in and to the Personal Property
Collateral shall attach to all Personal Property Collateral without
further act on the part of Collateral Agent or the Obligors. Anything
contained in this Agreement or any other Note Document to the contrary
notwithstanding, except for Permitted Dispositions, the Obligors have
no authority, express or implied, to dispose of any item or portion of
the Collateral.
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4.2 Negotiable Collateral.
In the event that any Collateral, including proceeds, is evidenced by
or consists of Negotiable Collateral, and if and to the extent that perfection
or priority of the Collateral Agent's security interest is dependent on or
enhanced by possession, the applicable Obligor, immediately upon the request of
Collateral Agent, shall endorse and deliver physical possession of such
Negotiable Collateral to the Bank Agent, to be held by Bank Agent pursuant to
the Intercreditor Agreement.
4.3 Collection of Accounts and General Intangibles.
The Collateral Agent or Collateral Agent's designee may (a) at any
time after the occurrence and during the continuation of an Event of Default (or
at any time if required by the laws of the jurisdiction in which the Account
Debtor is located in order for Collateral Agent to perfect its Lien in such
collateral) notify Account Debtors of the Obligors that the Accounts, chattel
paper, or General Intangibles have been assigned to Collateral Agent or that
Collateral Agent has a security interest therein, (b) contact Account Debtors
for the purpose of verifying the balances of Accounts owing by such Account
Debtors, or (c) at any time after the occurrence and during the continuation of
an Event of Default, collect the Accounts, chattel paper, or General Intangibles
directly and charge the collection costs and expenses to the Loan Account. Each
Obligor agrees that it will hold in trust for the Noteholder Group, as the
Noteholder Group's trustee, any Collections that it receives and immediately
deliver such Collections to the Bank Agent in their original form as received by
the applicable Obligor, in accordance with the terms and conditions of the Bank
Loan Agreement.
4.4 Filing of Financing Statements; Commercial Tort Claims, Etc.
(a) Each Obligor authorizes Collateral Agent to file any
financing statement required hereunder, and any continuation statement
or amendment with respect thereto, in any appropriate filing office
without the signature of such Obligor where permitted by applicable
law. Each Obligor hereby ratifies the filing of any financing
statement, and any continuation statement or amendment with respect
thereto, filed without the signature of such Obligor prior to the date
hereof.
(b) If any Obligor acquires any commercial tort claims after the
date hereof, such Obligor shall immediately deliver to Collateral
Agent a written description of such commercial tort claim and shall
deliver one or more written agreements, in form and substance
satisfactory to Collateral Agent, pursuant to which such Obligor shall
pledge and collaterally assign all of its right, title and interest in
and to such commercial tort claim to Collateral Agent for the benefit
of Collateral Agent and the Noteholders as security for the
Obligations and the Guaranteed Obligations (a "Commercial Tort Claim
Assignment").
(c) At any time upon the request of Collateral Agent, any Obligor
shall execute and deliver to Collateral Agent, any and all financing
statements, original financing statements in lieu of continuation
statements, amendments to financing statements, fixture filings,
security agreements, pledges, assignments, Commercial Tort Claim
Assignments, endorsements of certificates of title, and all other
documents (the "Additional Documents") that Collateral Agent may
request in its reasonable discretion, in form and substance
satisfactory to Collateral Agent, to perfect and continue perfected or
better perfect the Collateral Agent's Liens in the Collateral (whether
now owned or hereafter arising or acquired), and in order to fully
consummate all of the transactions contemplated hereby and under the
other Note Documents.
12
(d) At any time upon the request of Collateral Agent, the
Obligors shall execute and deliver to the Collateral Agent, any and
all Additional Documents that Collateral Agent may request in its
reasonable discretion, in form and substance satisfactory to
Collateral Agent, to create and perfect and continue perfected or
better perfect the Collateral Agent's Liens in the Collateral (whether
now owned or hereafter arising or acquired, tangible or intangible,
real or personal), to create and perfect Liens in favor of Collateral
Agent in any Real Property acquired after the Closing Date, and in
order to fully consummate all of the transactions contemplated hereby
and under the other Note Documents, including any Mortgages. To the
maximum extent permitted by applicable law, each Obligor authorizes
Collateral Agent to execute any such Additional Documents in the
applicable Company's name and authorizes Collateral Agent to file such
executed Additional Documents in any appropriate filing office. To the
maximum extent permitted by applicable law, each Obligor authorizes
the filing of any such Additional Documents without the signature of
such Obligor in any appropriate filing office. In addition, on such
periodic basis as Collateral Agent shall require, each Obligor shall
(i) provide Collateral Agent with a report of all new patentable,
copyrightable, or trademarkable materials acquired or generated by
such Obligor during the prior period, (ii) cause all patents,
copyrights, and trademarks acquired or generated by such Obligor that
are not already the subject of a registration with the appropriate
filing office (or an application therefor diligently prosecuted) to be
registered with such appropriate filing office in a manner sufficient
to impart constructive notice of such Obligor ownership thereof, and
(iii) cause to be prepared, executed, and delivered to Collateral
Agent supplemental schedules to the applicable Note Documents to
identify such patents, copyrights, and trademarks as being subject to
the security interests created thereunder.
4.5 Power of Attorney.
Each Obligor hereby irrevocably makes, constitutes, and appoints
Collateral Agent (and any of Collateral Agent's officers, employees, or agents
designated by Collateral Agent) as such Obligor's true and lawful attorney, with
power to (a) if such Obligor refuses to, or fails timely to execute and deliver
any of the documents described in Section 4.4, sign the name of such Obligor on
any of the documents described in Section 4.4, (b) at any time that an Event of
Default has occurred and is continuing, sign such Obligor's name on any invoice
or bill of lading relating to the Collateral, drafts against Account Debtors, or
notices to Account Debtors, (c) send requests for verification of Accounts, (d)
endorse such Obligor's name on any Collection item that may come into the
Noteholder Group's possession, (e) at any time that an Event of Default has
occurred and is continuing, make, settle, and adjust all claims under such
Obligor's policies of insurance (including, without limitation, any insurance
policies obtained for the benefit of an Obligor by a franchisee thereof) and
make all determinations and decisions with respect to such policies of
insurance, and (f) at any time that an Event of Default has occurred and is
continuing, settle and adjust disputes and claims respecting the Accounts,
chattel paper, or General Intangibles directly with Account Debtors, for amounts
and upon terms that Collateral Agent determines to be reasonable, and Collateral
Agent may cause to be executed and delivered any documents and releases that
Collateral Agent determines to be necessary. The appointment of Collateral Agent
as each Company's attorney, and each and every one of its rights and powers,
being coupled with an interest, is irrevocable until all of the Obligations have
been fully and finally repaid and performed and any obligation of the Noteholder
Group to extend credit hereunder are terminated.
4.6 Right to Inspect.
Collateral Agent and each Noteholder (through any of their respective
officers, employees, or agents) shall have the right, from time to time
hereafter (subject to the limitations in this Agreement) to inspect the Books
and to check, test, and appraise the Collateral in order to verify the financial
condition or the amount, quality, value, condition of, or any other matter
relating to, the Collateral.
13
4.7 Control Agreements.
Each Obligor agrees that it will not transfer assets out of any
Securities Accounts other than as permitted under Section 7.19.
4.8 License.
The Collateral Agent is hereby granted a license or other right to
use, following the occurrence and during the continuance of an Event of Default,
without charge, each Obligor's labels, patents, copyrights, rights of use of any
name, trade secrets, trade names, trademarks, service marks, customer lists and
advertising matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale, and selling any
Collateral, and, following the occurrence and during the continuance of an Event
of Default, each Obligor's rights under all licenses and all franchise
agreements shall inure to Collateral Agent's benefit. In addition, each Obligor
hereby irrevocably agrees that Collateral Agent may, following the occurrence
and during the continuance of an Event of Default, sell any of such Obligor's
Inventory directly to any Person, including without limitation Persons who have
previously purchased such Obligor's Inventory from such Obligor and in
connection with any such sale or other enforcement of Collateral Agent's rights
under this Agreement, may sell Inventory which bears any trademark owned by or
licensed to such Obligor and any Inventory that is covered by any copyright
owned by or licensed to such Obligor and Collateral Agent may finish any work in
process and affix any trademark owned by or licensed to such Obligor and sell
such Inventory as provided herein. This right and license is subject to the
terms of the Intercreditor Agreement and shall inure to the benefit of all
successors, assigns and transferees of Collateral Agent, whether by voluntary
conveyance, operation of law, assignment, transfer, foreclosure, deed in lieu of
foreclosure or otherwise. Such right and license is granted free of charge and
does not require the consent of any other Person. Each Obligor represents and
warrants that there are no restrictions on Collateral Agent's ability and no
other license, consent or approval of any Person or Governmental Authority is
required for Collateral Agent, to sell or dispose of any Inventory or other
Collateral other than as set forth in the Intercreditor Agreement.
4.9 Intellectual Property.
(a) Each Obligor (either itself or through licensees) will (i)
continue to maintain each trademark (or trademark registration)
material to its business in full force and effect free from any claim
of abandonment for non-use, (ii) maintain as in the past the quality
of products and services offered under such trademark (or trademark
registration), (iii) use such trademark (or trademark registration)
with the appropriate notice of registration and all other notices and
legends required by applicable law, and (iv) not (and not permit any
licensee or sublicensee thereof to) do any act or knowingly omit to do
any act whereby such trademark (or trademark registration) may become
invalidated or impaired in any way.
(b) No Obligor (either itself or through licensees) will do any
act, or omit to do any act, whereby any material patent (or patent
registration) may become forfeited, abandoned or dedicated to the
public.
(c) Each Obligor (either itself or through licensees) (i) will
employ each material copyright (or copyright registration) and (ii)
will not (and will not permit any licensee or sublicensee thereof to)
do any act or knowingly omit to do any act whereby any material
copyrights (or copyright registrations) may become invalidated or
otherwise impaired. No Obligor will (either itself or through
licensees) do any act whereby any material copyrights (or copyright
registrations) may fall into the public domain.
14
(d) No Obligor (either itself or through licensees) will do any
act that knowingly uses any material intellectual property to infringe
the intellectual property rights of any other Person.
(e) Each Obligor will notify Collateral Agent immediately if it
knows, or has reason to know, that any application or registration
relating to any material intellectual property may become forfeited,
abandoned or dedicated to the public, or of any adverse determination
or development (including the institution of, or any such
determination or development in, any proceeding in the United States
Patent and Trademark Office, the United States Copyright Office or any
court or tribunal in any country) regarding, such Obligor's ownership
of, or the validity of, any material intellectual property or such
Obligor's right to register the same or to own and maintain the same.
(f) Whenever any Obligor, either by itself or through any agent,
employee, licensee or designee, shall file an application for the
registration of any intellectual property with the United States
Patent and Trademark Office, the United States Copyright Office or any
similar office or agency in any other country or any political
subdivision thereof, such Obligor shall report such filing to
Collateral Agent and update Schedule 5.16. Upon the request of
Collateral Agent, such Obligor shall execute and deliver, and have
recorded, any and all agreements, instruments, documents, and papers
as Collateral Agent may request to evidence Collateral Agent's Lien in
any copyright, patent or trademark and the goodwill and general
intangibles of such Obligor relating thereto or represented thereby.
(g) Such Obligor will take all reasonable and necessary steps to
maintain and pursue each application (and to obtain the relevant
registration) and to maintain each registration of all material
intellectual property owned by it.
(h) In the event that any material intellectual property is
infringed upon or misappropriated or diluted by a third party, such
Obligor shall (i) take such actions Collateral Agent shall reasonably
deem appropriate under the circumstances to protect such intellectual
property and (ii) if such intellectual property is of economic value,
sue for infringement, misappropriation or dilution, to seek injunctive
relief where appropriate and to recover any and all damages for such
infringement, misappropriation or dilution.
4.10 Further Assurances.
Each Obligor shall cause all of its properties to be subject to the
Collateral Agent's Liens and take all actions and execute all documents
requested by Collateral Agent to grant, perfect and/or maintain such Liens,
including, without limitation, the execution and delivery of Mortgages in
respect of Real Property acquired after the Closing. Each Obligor covenants and
agree that it will notify the Noteholder Group no less than thirty (30) days
prior to acquiring in fee after the Closing Date any Real Property.
5. REPRESENTATIONS AND WARRANTIES.
The Obligors jointly and severally represent and warrant to each
Noteholder and the Collateral Agent:
15
5.1 Representations and Warranties Set forth on Exhibit 5.
Each of the representations and warranties set forth on Exhibit 5 is
true and correct as of the Closing and shall continue to be true until the
Obligations have been paid in full, except to the extent any representation or
warranty expressly relates to an earlier date.
5.2 Private Offering by the Obligors.
None of the Obligors nor anyone acting on their behalf has offered any
of the Notes or the Guarantees or any similar securities for sale to, or
solicited any offer to buy any of the same from, or otherwise approached or
negotiated in respect thereof with, any Person other than the Noteholders, the
Lenders and not more than 15 other Institutional Investors, each of which has
been offered the Notes or such similar securities at a private sale for
investment. None of the Obligors nor anyone acting on their behalf has taken, or
will take, any action that would subject the issuance and sale of the Notes or
the Guarantees to the registration requirements of Section 5 of the Securities
Act of 1933, as amended (the "Securities Act"). For purposes of this Agreement,
the term "Institutional Investor" shall mean (a) any original purchaser of a
Note, (b) any Holder holding more than 5% of the aggregate principal amount of
the Notes then outstanding, and (c) any bank, trust company, savings and loan
association or other financial institution, any pension plan, any investment
company, any insurance company, any broker or dealer, or any other similar
financial institution or entity, regardless of legal form.
5.3 Foreign Assets Control Regulations, etc.
Neither the sale of the Notes by the Companies hereunder with the
benefit of the Guarantees nor the Obligors' use of the proceeds thereof will
violate the Trading with the Enemy Act, as amended, or any of the foreign assets
control regulations of the United States Treasury (31 CFR, Subtitle B, Chapter
V, as amended) or any enabling legislation or executive order relating thereto.
5.4 Status Under Certain Statutes.
None of the Obligors nor any Subsidiary is subject to regulation under
the Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, the Interstate Commerce Act, as amended, or the
Federal Power Act, as amended.
6. AFFIRMATIVE COVENANTS.
Each Obligor covenants and agrees that until full and final payment of
the Obligations and the termination of this Agreement, each Obligor shall and
shall cause each of its respective Subsidiaries to do all of the following:
6.1 Accounting System.
Maintain a system of accounting that enables Parent and its
Subsidiaries to produce financial statements in accordance with GAAP and
maintain records pertaining to the Collateral that contain information as from
time to time reasonably may be requested by the Noteholder Group. Parent and its
Subsidiaries also shall keep an inventory reporting system that shows all
additions, sales, claims, returns, and allowances with respect to the Inventory.
16
6.2 Collateral Reporting.
Provide to each Noteholder: (i) when provided to the Bank Agent, a
copy of each Borrowing Base Certificate delivered in accordance with the terms
of the Bank Loan Agreement if requested by the Noteholders; and (ii) reports
related to the Collateral, or the financial condition of the Obligors, as the
Noteholders may reasonably request.
6.3 Financial Statements, Reports, Certificates.
Deliver to each Noteholder:
(a) as soon as available, but in any event within 30 days (45
days (or such lesser number of days as may be required pursuant to the
Exchange Act) in the case of a month that is the end of one of the
first 3 fiscal quarters in a fiscal year) after the end of each month
during each of Parent's fiscal years,
(1) a company prepared consolidated and consolidating (based
on internal management reports) balance sheet, income statement,
and statement of cash flow covering Parent's and its
Subsidiaries' operations during such period,
(2) a certificate signed by the chief financial officer of
Parent to the effect that:
(A) the consolidated financial statements delivered
hereunder have been prepared in accordance with GAAP (except
for the lack of footnotes and being subject to year-end
audit adjustments) and fairly present in all material
respects the financial condition of Parent and its
Subsidiaries,
(B) the representations and warranties of the Obligors
contained in this Agreement and the other Note Documents are
true and correct in all material respects on and as of the
date of such certificate, as though made on and as of such
date (except to the extent that such representations and
warranties relate solely to an earlier date), and
(C) there does not exist any condition or event that
constitutes a Default or Event of Default (or, to the extent
of any non-compliance, describing such non-compliance as to
which he or she may have knowledge and what action the
Obligors have taken, are taking, or propose to take with
respect thereto), and
(3) for each month that is the date on which a financial
covenant in Section 7.20 is to be tested, a Compliance
Certificate demonstrating, in reasonable detail, compliance at
the end of such period with the applicable financial covenants
contained in Section 7.20, and
(b) as soon as available, but in any event within 90 days (or
such lesser number of days as may be required pursuant to the Exchange
Act) after the end of each of Parent's fiscal years,
(1) consolidated financial statements of Parent and its
Subsidiaries for each such fiscal year, audited by independent
certified public accountants reasonably acceptable to the
Noteholder Group and certified, without any qualifications
(including, without limitation, (A) any going concern or like
qualification or exception or (B) any
17
qualification as to the scope of such audit), by such accountants
to have been prepared in accordance with GAAP (such audited
financial statements to include a balance sheet, income
statement, and statement of cash flow and, if prepared, such
accountants' letter to management),
(2) a certificate of such accountants addressed to the
Noteholder Group stating that such accountants do not have
knowledge of the existence of any Default or Event of Default
under Section 7.20,
(c) as soon as available, but in any event on or prior to the
last day of each Fiscal Year, copies of the Obligors' Projections, in
form and substance (including as to scope and underlying assumptions)
satisfactory to the Noteholders, for the forthcoming 3 years, year by
year, and for the next Fiscal Year, month by month, certified by an
Authorized Person as being such officer's good faith best estimate of
the financial performance of the Obligors during the period covered
thereby, and
(d) if and when filed by any Obligor,
(1) 10-Q quarterly reports, Form 10-K annual reports, and
Form 8-K current reports,
(2) any other filings made by any Obligor with the SEC,
(3) copies of Obligors' federal income tax returns, and any
amendments thereto, filed with the Internal Revenue Service, and
(4) any other information that is provided by Parent to its
shareholders generally,
(e) if and when filed by any Obligor and as requested by the
Noteholder Group, satisfactory evidence of payment of applicable
excise taxes in each jurisdictions in which (i) any Obligor conducts
business or is required to pay any such excise tax, (ii) where any
Obligor's failure to pay any such applicable excise tax would result
in a Lien on the properties or assets of any Obligor, or (iii) where
any Obligor's failure to pay any such applicable excise tax reasonably
could be expected to result in a Material Adverse Change,
(f) as soon as an Obligor has knowledge of any event or condition
that constitutes a Default or an Event of Default, notice thereof and
a statement of the curative action that such Obligor proposes to take
with respect thereto,
(g) (i) promptly and in any event (A) within 10 days after any
Obligor or any ERISA Affiliate thereof knows or has reason to know
that any Termination Event described in clause (i) of the definition
of Termination Event with respect to any Benefit Plan has occurred,
(B) within 10 days after any Obligor or any ERISA Affiliate thereof
knows or has reason to know that any other Termination Event with
respect to any Benefit Plan has occurred, or (C) within 10 days after
any Obligor or any ERISA Affiliate thereof knows or has reason to know
that an accumulated funding deficiency has been incurred or an
application has been made to the Secretary of the Treasury for a
waiver or modification of the minimum funding standard (including
installment payments) or an extension of any amortization period under
Section 412 of the IRC or the equivalent provision under any federal,
state, local or foreign counterparts or equivalents thereof with
respect to a Benefit Plan, a statement of an Authorized Person setting
18
forth the details of such occurrence and the action, if any, which
such Obligor or such ERISA Affiliate propose to take with respect
thereto, (ii) promptly and in any event within 3 days after receipt
thereof by any Obligor or any ERISA Affiliate thereof from the PBGC,
copies of each notice received by any Obligor or any ERISA Affiliate
thereof of the PBGC's intention to terminate any Plan or to have a
trustee appointed to administer any Plan, (iii) promptly and in any
event within 10 days after the filing thereof with the Internal
Revenue Service if requested by Collateral Agent, copies of each
Schedule B (Actuarial Information) or the federal, state, local or
foreign equivalent thereof to the annual report (Form 5500 Series) or
the federal, state, local or foreign equivalent thereof with respect
to each Benefit Plan and Multiemployer Plan, (iv) promptly and in any
event within 10 days after any Obligor or any ERISA Affiliate thereof
knows or has reason to know that a required installment within the
meaning of Section 412 of the IRC or the equivalent provision under
any federal, state, local or foreign counterparts or equivalents
thereof has not been made when due with respect to a Benefit Plan, (v)
promptly and in any event within 3 days after receipt thereof by any
Obligor or any ERISA Affiliate thereof from a sponsor of a
Multiemployer Plan or from the PBGC, a copy of each notice received by
any Obligor or any ERISA Affiliate thereof concerning the imposition
or amount of withdrawal liability under Section 4202 of ERISA or the
equivalent provision under any federal, state, local or foreign
counterparts or equivalents thereof or indicating that such
Multiemployer Plan may enter reorganization status under Section 4241
of ERISA or the equivalent provision under any federal, state, local
or foreign counterparts or equivalents thereof, and (vi) promptly and
in any event within 10 days after any Obligor or any ERISA Affiliate
thereof send notice of a plant closing or mass layoff (as defined in
the Worker Adjustment and Retraining Notification Act) to employees,
copies of each such notice sent by any Obligor or any ERISA Affiliate
thereof,
(h) upon the request of the Noteholder Group, any other report
reasonably requested relating to the financial condition of the
Obligors, and
(i) (x) promptly after receipt or delivery thereof, copies of any
material notices that any Obligor receives from or sends to any Person
in connection with the Note Documents, the Fiat Magneti Agreements and
any Franchise Agreements, and (y) promptly after the effective date
thereof, any amendments, modifications, waivers or other changes to
any of the foregoing agreements; provided that only material
amendments, modifications, waivers or other changes to any Franchise
Agreements need to be delivered to the Collateral Agent.
In addition to the financial statements referred to above, the
Obligors agree that no Obligor, or any Subsidiary of an Obligor, will have a
fiscal year different from that of Parent. The Obligors agree that their
independent certified public accountants are authorized to communicate with the
Noteholder Group and to release to the Noteholder Group whatever financial
information concerning the Obligors that the Noteholder Group reasonably may
request; provided that Administrative Obligor shall have the right to be present
in respect of any such communications. Each Obligor waives the right to assert a
confidential relationship, if any, it may have with any accounting firm or
service bureau in connection with any information requested by the Noteholder
Group pursuant to or in accordance with this Agreement, and agrees that the
Noteholder Group may contact directly any such accounting firm or service bureau
in order to obtain such information; provided that the Noteholder Group will
give Administrative Obligor reasonable prior notice thereof and permit such
Obligor to participate in any such discussions.
6.4 Return.
Cause returns and allowances as between Obligors and their Account
Debtors, to be on the same basis and in accordance with the usual customary
practices of the applicable Obligor (including special
19
promotions and programs), as they exist at the time of the execution and
delivery of this Agreement. If, at a time when no Event of Default has occurred
and is continuing, any Account Debtor returns any Inventory to any Obligor, the
applicable Obligor promptly shall determine the reason for such return and, if
the applicable Obligor accepts such return, issue a credit memorandum (with a
copy to be sent to Collateral Agent upon request) in the appropriate amount to
such Account Debtor. If, at a time when an Event of Default has occurred and is
continuing, any Account Debtor returns any Inventory to any Obligor, the
applicable Obligor promptly shall determine the reason for such return and, if
Collateral Agent consents (which consent shall not be unreasonably withheld or
required in connection with special promotions or programs), issue a credit
memorandum (with a copy to be sent to Collateral Agent upon request) in the
appropriate amount to such Account Debtor.
6.5 Maintenance of Properties.
Maintain and preserve in all material respects all of its properties
(including Real Property) which are necessary or useful in the proper conduct to
its business in good working order and condition, ordinary wear and tear
excepted, and comply at all times with the provisions of all leases to which it
is a party as lessee, so as to prevent any loss or forfeiture thereof or
thereunder.
6.6 Taxes.
Cause all assessments and taxes, whether real, personal, or otherwise,
due or payable by, or imposed, levied, or assessed against the Obligors or any
of their assets to be paid in full, before delinquency or before the expiration
of any extension period, except to the extent that the validity of such
assessment or tax shall be the subject of a Permitted Protest. The Obligors will
make timely payment or deposit of all tax payments and withholding taxes
required of it by applicable laws, including the Canadian Income Tax Act and
including those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal or provincial income taxes, and will, upon request, furnish
Collateral Agent with proof satisfactory to Collateral Agent indicating that the
applicable Obligor has made such payments or deposits. Upon the request of the
Noteholder Group, the Obligors shall deliver satisfactory evidence of payment of
applicable excise taxes in each jurisdictions in which any Obligor is required
to pay any such excise tax.
6.7 Insurance.
(a) At Companies' expense, maintain, and cause each of the
Obligors' franchisees to maintain, insurance respecting the property
and assets of the Obligors wherever located, covering loss or damage
by fire, theft, explosion, and all other hazards and risks as
ordinarily are insured against by other Persons engaged in the same or
similar businesses. The Obligors also shall maintain, and cause each
of the Obligors' franchisees, to the extent such franchisees are
required pursuant to the terms of the applicable Franchise Agreement,
to maintain, business interruption, public liability, and product
liability insurance, as well as insurance against larceny,
embezzlement, and criminal misappropriation. All such policies of
insurance shall be in such amounts and with such insurance companies
as are reasonably satisfactory to the Noteholder Group. The Companies
shall deliver copies of all such policies (other than franchisees'
policies) to Collateral Agent with a satisfactory lender's loss
payable endorsement naming Collateral Agent as payee or additional
insured, as appropriate. Each policy of insurance or endorsement shall
contain a clause requiring the insurer to give not less than 30 days
prior written notice to Collateral Agent in the event of cancellation
of the policy for any reason whatsoever.
(b) Administrative Obligor shall give the Noteholder Group prompt
notice of any loss covered by insurance as set forth in Section
6.7(a). Except as provided in the proviso at the
20
end of this sentence and except with respect to any proceeds of
insurance in respect of Inventory, any monies in excess of $250,000
received as payment for any loss under any insurance policy mentioned
above (other than liability insurance policies) or as payment of any
award or compensation for condemnation or taking by eminent domain,
shall be paid over in accordance with the terms of the Intercreditor
Agreement.
(c) The Obligors shall not take out separate insurance concurrent
in form or contributing in the event of loss with that required to be
maintained under this Section 6.8, unless Collateral Agent is included
thereon as named insured with the loss payable to Collateral Agent
under a lender's loss payable endorsement or its equivalent.
Administrative Obligor immediately shall notify Collateral Agent
whenever such separate insurance is taken out, specifying the insurer
thereunder and full particulars as to the policies evidencing the
same, and copies of such policies promptly shall be provided to
Collateral Agent.
6.8 Location of Inventory and Equipment.
Keep the Inventory and Equipment only at the locations identified on
Schedule 5.5; provided, however, that Administrative Obligor may amend Schedule
5.5 so long as such amendment occurs by written notice to Collateral Agent not
less than 30 days prior to the date on which the Inventory or Equipment is moved
to such new location, so long as such new location is within the continental
United States, and Canada and so long as, at the time of such written
notification, the applicable Obligor provides any financing statements or
fixture filings necessary to perfect and continue perfected the Collateral
Agent's Liens on such assets and also provides to Bank Agent (subject to the
terms of the Intercreditor Agreement) a Collateral Access Agreement for each
Leased Real Property used in the manufacturing, warehousing and distribution
operations of the Obligors.
6.9 Compliance with Laws.
Comply with the requirements of all applicable laws, rules,
regulations, and orders of any Governmental Authority, including the Fair Labor
Standards Act, the Americans With Disabilities Act, and all laws, rules and
regulations related to franchising and licensing as applicable to the Obligors
and their business, assets and properties, which compliance shall be
satisfactory to the Noteholder Group, other than laws, rules, regulations, and
orders the non-compliance with which, individually or in the aggregate, would
not result in and reasonably could not be expected to result in a Material
Adverse Change.
6.10 Leases.
Pay when due all rents and other amounts payable under any leases to
which any Obligor is a party or by which any Obligor's properties and assets are
bound, unless such payments are the subject of a Permitted Protest.
6.11 Brokerage Commissions.
Pay any and all brokerage commission or finders fees incurred in
connection with or as a result of Companies' obtaining financing from the
Noteholder Group under this Agreement. Companies agree and acknowledge that
payment of all such brokerage commissions or finders fees shall be the sole
responsibility of Companies, and each Company agrees to indemnify, defend, and
hold Collateral Agent and the Noteholder Group harmless from and against any
claim of any broker or finder arising out of Companies' obtaining financing from
the Noteholder Group under this Agreement.
21
6.12 Existence.
At all times preserve and keep in full force and effect each Obligor's
valid existence and good standing and any rights and privileges material to
Obligors' businesses.
6.13 Environmental.
(a) Keep any property either owned, leased or operated by any
Obligor free of any Environmental Liens or post bonds or other financial
assurances sufficient to satisfy the obligations or liability evidenced by such
Environmental Liens, (b) comply, in all material respects, with Environmental
Laws and provide to the Noteholder Group documentation of such compliance which
Collateral Agent reasonably requests, (c) promptly notify the Noteholder Group
of any release of a Hazardous Material of any reportable quantity from or onto
property owned, leased or operated by any Obligor and take any Remedial Actions
required to abate said release that are required pursuant to applicable
Environmental Law, (d) promptly provide the Noteholder Group with written notice
within 10 days of the receipt of any of the following: (i) notice that an
Environmental Lien has been filed against any of the real or personal property
of any Obligor or (ii) commencement of any Environmental Action or notice that
an Environmental Action will be filed against any Obligor, and (iii) notice of a
violation, citation, or other administrative order which reasonably could be
expected to result in a Material Adverse Change, and (e) upon the request of the
Noteholder Group in its sole discretion based on the results of Phase I
environmental surveys, cause Phase II environmental surveys to be conducted with
respect to any Real Property owned by any Obligor with the report thereon
delivered to the Noteholder Group.
6.14 Other Disclosure Updates.
Promptly and in no event later than 5 Business Days after obtaining
knowledge thereof, (a) notify the Noteholder Group if any written information,
exhibit, or report furnished to the Noteholder Group contained any untrue
statement of a material fact or omitted to state any material fact necessary to
make the statements contained therein not misleading in light of the
circumstances in which made, and (b) correct any defect or error that may be
discovered therein or in any Note Document or in the execution, acknowledgement,
filing, or recordation thereof. Without limiting the generality of the
foregoing, the Obligors shall supplement each Schedule hereto, or any
representation herein or in any other Note Document, with respect to any matter
hereafter arising that, if existing or occurring at the date of this Agreement,
would have been required to be set forth or described in such Schedule or as an
exception to such representation or that is necessary to correct any information
in such Schedule or representation which has been rendered inaccurate thereby
(and, in the case of any supplements to any Schedule, such Schedule shall be
appropriately marked to show the changes made therein); provided that no such
supplement to any such Schedule or representation shall amend, supplement or
otherwise modify any Schedule or representation, or be or be deemed a waiver of
any Default or Event of Default resulting from the matters disclosed therein,
except as consented to in accordance with Section 15.1.
6.15 Commercial Tort Claims; Organizational ID Number.
Immediately upon obtaining any commercial tort claim, deliver to the
Collateral Agent an updated Schedule 5.7 and the other documents required under
Section 4.4. Immediately upon obtaining an organizational identification number
(to the extent such Obligor has not been issued such number on or prior to the
Closing Date), notify Collateral Agent in writing and deliver to Collateral
Agent an updated Schedule 5.7.
22
6.16 Inventory Divestiture Plan.
Use its best efforts to consummate the Inventory Divestiture Plan in
all material respects on or before the applicable completion date set forth
therein.
7. NEGATIVE COVENANTS.
Each Obligor covenants and agrees that until full and final payment of
the Obligations and the termination of this Agreement, each Obligor will not and
will not permit any of its Subsidiaries to do any of the following:
7.1 Indebtedness.
Create, incur, assume, permit, guarantee, or otherwise become or
remain, directly or indirectly, liable with respect to any Indebtedness, except
the following ("Permitted Indebtedness"):
(a) Indebtedness evidenced by this Agreement and the other Note
Documents and Indebtedness evidenced by the Bank Loan Agreement;
(b) Indebtedness existing as of the Closing Date set forth on
Schedule 5.20;
(c) Permitted Purchase Money Indebtedness;
(d) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b) and (c) of this Section 7.1 (and
continuance or renewal of any Permitted Liens associated therewith) so
long as: (i) the terms and conditions of such refinancings, renewals,
or extensions do not, in the Noteholder Group's reasonable discretion,
materially impair the prospects of repayment of the Obligations by the
Obligors or materially impair Obligors' creditworthiness, (ii) such
refinancings, renewals, or extensions do not result in an increase in
the principal amount of, or interest rate with respect to, the
Indebtedness so refinanced, renewed, or extended, (iii) such
refinancings, renewals, or extensions do not result in a shortening of
the average weighted maturity of the Indebtedness so refinanced,
renewed, or extended, nor are they on terms or conditions, that, taken
as a whole, are materially more burdensome or restrictive to the
applicable Obligor, and (iv) if the Indebtedness that is refinanced,
renewed, or extended was subordinated in right of payment to the
Obligations, then the terms and conditions of the refinancing,
renewal, or extension Indebtedness must include subordination terms
and conditions that are at least as favorable to the Noteholder Group
as those that were applicable to the refinanced, renewed, or extended
Indebtedness; and
(e) Indebtedness comprising Permitted Investments.
7.2 Liens.
Create, incur, assume, or permit to exist, directly or indirectly, any
Lien on or with respect to any of its assets, of any kind, whether now owned or
hereafter acquired, or any income or profits therefrom, except for Permitted
Liens (including Liens that are replacements of Permitted Liens to the extent
that the original Indebtedness is refinanced, renewed, or extended under Section
7.1(d) and so long as the replacement Liens only encumber those assets that
secured the refinanced, renewed, or extended Indebtedness).
23
7.3 Restrictions on Fundamental Changes.
(a) Enter into any merger, consolidation, reorganization, or
recapitalization, or reclassify its Stock. (b) Liquidate, wind up, or
dissolve itself (or suffer any liquidation or dissolution).
(c) Other than Permitted Dispositions, convey, sell, lease,
license, assign, transfer, or otherwise dispose of, in one transaction
or a series of transactions, all or any substantial part of its
assets.
7.4 Disposal of Assets.
Other than Permitted Dispositions, convey, sell, lease, license,
assign, transfer, or otherwise dispose of any of the assets of any Obligor.
7.5 Change Name.
Change any Obligor's name, organizational identification number, state
of incorporation, FEIN, corporate structure, or identity, or add any new
fictitious name; provided, however, that an Obligor may change its name upon at
least 30 days prior written notice to Collateral Agent of such change and
Collateral Agent's acknowledgement thereof and so long as, at the time of such
written notification, such Person provides any financing statements or fixture
filings necessary to perfect and continue perfected the Collateral Agent's
Liens.
7.6 Guarantee.
Except pursuant to or as otherwise permitted by this Agreement or a
Guaranty, guarantee or otherwise become in any way liable with respect to the
obligations of any third Person except by endorsement of instruments or items of
payment for deposit to the account of Companies or which are transmitted or
turned over to the Bank Agent or the Collateral Agent.
7.7 Nature of Business.
Make any change in the principal nature of any Obligor's business.
7.8 Prepayments and Amendments.
(a) Except in connection with a refinancing permitted by Section
7.1(d), prepay, redeem, defease, purchase, or otherwise acquire any
Indebtedness of any Obligor, other than the Obligations in accordance
with this Agreement.
(b) (i) Except in connection with a refinancing permitted by
Section 7.1(d), directly or indirectly, amend, modify, alter,
increase, or change any of the terms or conditions of any agreement,
instrument, document, indenture, or other writing evidencing or
concerning Indebtedness permitted under Sections 7.1(b), (c) or (e),
(ii) directly or indirectly, amend, modify, alter or change any of the
terms or conditions of any of the Fiat Magneti Agreements or (iii)
enter into any amendment or modification of the Bank Loan Agreement or
the Loan Documents to the extent prohibited by the Intercreditor
Agreement.
24
(c) Directly or indirectly, by deposit of monies or otherwise,
make any payment on account of any principal, premium or interest
payable in connection with any Indebtedness under the Bank Loan
Agreement other than in accordance with the terms of the Intercreditor
Agreement and the Bank Loan Agreement.
7.9 Consignments.
Consign any Inventory in an aggregate amount in excess of $2,000,000
at any time, or sell any Inventory on bill and hold, sale or return, sale on
approval, or other conditional terms of sale.
7.10 Distributions.
Other than distributions or declaration and payment of dividends by
any Subsidiary of a Parent to an Obligor, make any distribution or declare or
pay any dividends (in cash or other property, other than common Stock) on, or
purchase, acquire, redeem, or retire any of an Obligor's Stock, of any class,
whether now or hereafter outstanding; provided that Parent may redeem or acquire
shares of restricted common Stock of Parent from management employees of the
Obligors in settlement of such employees' tax obligations in respect thereof in
a maximum aggregate amount not in excess of $500,000 per fiscal year.
7.11 Accounting Methods.
Modify or change its method of accounting (other than as may be
required to conform to GAAP) or enter into, modify, or terminate any agreement
currently existing, or at any time hereafter entered into with any third party
accounting firm or service bureau for the preparation or storage of the Obligors
accounting records without said accounting firm or service bureau agreeing to
provide Collateral Agent information regarding the Collateral or Obligors'
financial condition.
7.12 Investments.
Except for Permitted Investments, directly or indirectly, make or
acquire any Investment, or incur any liabilities (including contingent
obligations) for or in connection with any Investment; provided, however, that
the Obligors shall not have Permitted Investments (other than in the Cash
Management Accounts established under the Bank Loan Agreement) in deposit
accounts or Securities Accounts in excess of $250,000 outstanding at any one
time unless the applicable Obligor and the applicable securities intermediary or
bank have entered into Control Agreements or similar arrangements governing such
Permitted Investments, as Collateral Agent shall determine in its Permitted
Discretion, to perfect (and further establish) the Collateral Agent's Liens in
such Permitted Investments.
7.13 Transactions with Affiliates and Franchisees.
Directly or indirectly enter into or permit to exist any transaction
with any Affiliate of any Obligor or any franchisee of an Obligor except for
transactions that are in the ordinary course of such Obligor's business, upon
fair and reasonable terms, that are fully disclosed to Collateral Agent, and
that are no less favorable to such Obligor than would be obtained in an arm's
length transaction with a non-Affiliate or non-franchisee; provided that any
such transaction or series of transactions having a value in excess of $500,000
shall be disclosed to the Noteholders; provided further that nothing in this
Section 7.13 shall restrict an Obligor's ability to lease and sublease its
properties, enter into amendments of Franchise Agreements or otherwise enter
into transactions otherwise permitted hereunder in the ordinary course of
business consistent with past practices.
25
7.14 Suspension.
Suspend or go out of a substantial portion of its business other than
Permitted Dispositions.
7.15 Compensation.
Increase the annual fee or per-meeting fees paid to the members of its
Board of Directors during any Fiscal Year by more than 15% over the prior Fiscal
Year; except as provided in employment and incentive compensation plans or
agreements in effect as of the Closing Date, pay or accrue total cash
compensation, during any Fiscal Year, to its officers and senior management
employees in an aggregate amount in excess of 115% of that paid or accrued in
the prior Fiscal Year.
7.16 Reserved.
7.17 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees.
Relocate its chief executive office to a new location without
Administrative Obligor providing 30 days prior written notification thereof to
Collateral Agent and so long as, at the time of such written notification, the
applicable Obligor provides any financing statements or fixture filings
necessary to perfect and continue perfected the Collateral Agent's Liens and, if
such new location is leased by such Obligor, also provides to the Bank Agent a
Collateral Access Agreement with respect to such new location. The Inventory and
Equipment shall not at any time now or hereafter be stored with a bailee,
warehouseman, or similar party without Collateral Agent's prior written consent
and, unless Collateral Agent otherwise consents, unless such bailee,
warehouseman, or similar party has executed a Collateral Access Agreement. If
Collateral Agent shall not have received a Collateral Access Agreement, as
provided in this Section 7.17, from the owner and lessor with respect to such
leased location, duly authorized, executed and delivered by such owner and
lessor (or Collateral Agent shall determine to accept a Collateral Access
Agreement that does not include all required provisions or provisions in the
form otherwise required by the Collateral Agents), Collateral Agent may, at its
option, establish such reserves in respect of amounts at any time due or to
become due to the owner and lessor thereof as Collateral Agent shall determine.
7.18 Securities Accounts.
Establish or maintain any Securities Account unless such Securities
Account is permitted under the terms of the Bank Loan Agreement or transfer any
assets out of any such Securities Account except as permitted by the Bank Loan
Agreement.
7.19 Parent.
Parent shall have no assets other than assets subject to the
Collateral Agent's Liens.
7.20 Financial Covenants.
(a) Permit:
(1) Total Leverage Ratio. The ratio of (x) Indebtedness
outstanding at the end of each period set forth below, less the amount
of cash and Cash Equivalents of the Companies subject to a Control
Agreement in favor of the Bank Agent at the end of such period, to (y)
EBITDA for such period, to exceed the ratio set forth opposite such
period:
26
----------------------------------------------------------------
Period Ratio
----------------------------------------------------------------
For the 12 month period ending March 29, 2003 5.25:1.00
----------------------------------------------------------------
For the 12 month period ending June 28, 2003 6.00:1.00
----------------------------------------------------------------
For the 12 month period ending September 27, 2003 6.10:1.00
----------------------------------------------------------------
For the 12 month period ending January 3, 2004 4.10:1.00
----------------------------------------------------------------
For the 12 month period ending April 3, 2004 3.70:1.00
----------------------------------------------------------------
For the 12 month period ending July 3, 2004 3.60:1.00
----------------------------------------------------------------
For the 12 month period ending October 2, 2004 2.75:1.00
----------------------------------------------------------------
(2) Fixed Charge Coverage Ratio. The ratio of (x) EBITDAR as of
the end of each period set forth below to (y) Fixed Charges for such
period to be less than the ratio set forth below opposite such period:
----------------------------------------------------------------
Period Ratio
----------------------------------------------------------------
For the 3 month period ending March 29, 2003 0.75:1.00
----------------------------------------------------------------
For the 6 month period ending June 28, 2003 0.90:1.00
----------------------------------------------------------------
For the 9 month period ending September 27, 2003 1.10:1.00
----------------------------------------------------------------
For the 12 month period ending January 3, 2004 1.10:1.00
----------------------------------------------------------------
For the 12 month period ending April 3, 2004 1.25:1.00
----------------------------------------------------------------
For the 12 month period ending July 3, 2004 1.25:1.00
----------------------------------------------------------------
For the 12 month period ending October 2, 2004 1.25:1.00
----------------------------------------------------------------
(3) Interest Coverage Ratio. The ratio of (x) EBITDA for each
period set forth below to (y) cash interest expense on a consolidated
basis for such period to be less than the ratio set forth below
opposite such period:
27
-----------------------------------------------------------------
Period Ratio
-----------------------------------------------------------------
For the 12 month period ending March 29, 2003 1.75:1.00
-----------------------------------------------------------------
For the 12 month period ending June 28, 2003 1.35:1.00
-----------------------------------------------------------------
For the 12 month period ending September 27, 2003 1.10:1.00
-----------------------------------------------------------------
For the 12 month period ending January 3, 2004 1.60:1.00
-----------------------------------------------------------------
For the 12 month period ending April 3, 2004 1.75:1.00
-----------------------------------------------------------------
For the 12 month period ending July 3, 2004 2.00:1.00
-----------------------------------------------------------------
For the 12 month period ending October 2, 2004 2.15:1.00
-----------------------------------------------------------------
(b) Fail to maintain:
(1) Minimum EBITDA. EBITDA for each period set forth below of not
less than the amount set forth below opposite such period:
-----------------------------------------------------------------
Period Amount
-----------------------------------------------------------------
For the 12 month period ending March 29, 2003 $29,000,000
-----------------------------------------------------------------
For the 12 month period ending June 28, 2003 $23,500,000
-----------------------------------------------------------------
For the 12 month period ending September 27, 2003 $22,000,000
-----------------------------------------------------------------
For the 12 month period ending January 3, 2004 $30,000,000
-----------------------------------------------------------------
For the 12 month period ending April 3, 2004 $33,000,000
-----------------------------------------------------------------
For the 12 month period ending July 3, 2004 $35,000,000
-----------------------------------------------------------------
For the 12 month period ending October 2, 2004 $37,500,000
-----------------------------------------------------------------
(2) Minimum Net Worth. Net Worth, at the end of any fiscal
quarter, to be less than the sum of (a) 75% of Net Worth as of
December 28, 2002, plus (b) 50% of positive Consolidated Net Income,
if any, for each fiscal quarter ending after the Closing Date and on
or prior to the date of determination, minus (c) Net Restructuring
Charges, plus (d) 100% of the amount of Net Cash Proceeds realized by
Parent or any of its Subsidiaries from the issuance of equity
securities after the Closing Date.
28
(c) Make:
(1) Capital Expenditures. Capital Expenditures (A) in excess of
$5,000,000 for the Fiscal Year ended January 3, 2004 or (B) in excess
of $2,500,000 for the nine-month period ended October 2, 2004.
7.21 Inventory Divestiture Plan.
Enter into any agreement or arrangement in connection with the
Inventory Divestiture Plan which would result in a material increase in the
average cost of Inventory to the Obligors or their franchisees or enter into any
agreement or arrangement that would limit or impair the Obligors' ability to
effectuate the Inventory Divestiture Plan.
7.22 Insurance Service Management.
Permit any proceeds of the Loans made under the Bank Loan Agreement to
be transferred to or otherwise used by or for the benefit of Insurance Service
Management, make any loans, advances or contributions to, or other Investments
in, or for the benefit of, Insurance Service Management in excess of $150,000 in
the aggregate, guaranty or otherwise become liable for any obligations of
Insurance Service Management or sell, lease, assign or otherwise transfer any
assets or property to Insurance Service Management.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:
8.1 If the Obligors fail to pay (i) when due and payable or when
declared due and payable (whether by acceleration or otherwise), all or any
portion of the principal of any Note or the Guaranteed Obligations or (ii)
within three (3) days after the date when due and payable or when declared due
and payable (whether by acceleration or otherwise), any other amounts
constituting Obligations or Guaranteed Obligations (including any interest
which, but for the provisions of the Bankruptcy Code, would have accrued on such
amounts) or reimbursement of Noteholder Group Expenses;
8.2 If the Obligors fail to perform, keep, or observe any term,
provision, condition, covenant, or agreement contained in Section 6.2, 6.3, 6.6,
6.7 or 6.12 or in Section 7 of this Agreement or in any of the other Note
Documents or in the Warrant or the Warrant Agreement;
8.3 If the Obligors fail to perform, keep, or observe any other term,
provision, condition, covenant, or agreement contained in this Agreement or in
any of the other Note Documents and such failure shall remain uncured for thirty
(30) days;
8.4 If any material portion of any Obligor's or any of its
Subsidiaries' assets is attached, seized, subjected to a writ or distress
warrant, levied upon, or comes into the possession of any third Person which has
not been discharged, vacated or stayed within thirty (30) days;
8.5 If an Insolvency Proceeding is commenced by any Obligor or any of
its Subsidiaries;
8.6 If an Insolvency Proceeding is commenced against any Obligor, or
any of its Subsidiaries, and any of the following events occur: (a) the
applicable Obligor or the Subsidiary consents to the institution of the
Insolvency Proceeding against it, (b) the petition commencing the Insolvency
29
Proceeding is not timely controverted, (c) the petition commencing the
Insolvency Proceeding is not dismissed within 60 calendar days of the date of
the filing thereof, (d) an interim trustee is appointed to take possession of
all or any substantial portion of the properties or assets of, or to operate all
or any substantial portion of the business of, any Obligor or any of its
Subsidiaries, or (e) an order for relief shall have been entered therein;
8.7 If any Obligor or any of its Subsidiaries is enjoined, restrained,
or in any way prevented by court order from continuing to conduct all or any
material part of its business affairs;
8.8 Other than in respect of Permitted Protests, if a notice of Lien,
levy, or assessment is filed of record with respect to any Obligor's or any of
its Subsidiaries' assets by the United States or Canada, or any department,
agency, or instrumentality thereof, or by any state, provincial, county,
municipal, or governmental agency, or if any taxes or debts owing at any time
hereafter to any one or more of such entities becomes a Lien, whether choate or
otherwise, upon any Obligor's or any of its Subsidiaries' assets and the same is
not paid on the payment date thereof;
8.9 If a judgment or other claim becomes a Lien or encumbrance upon
any material portion of any Obligor's or any of its Subsidiaries' properties or
assets;
8.10 If there is a default in any Material Contract to which any
Obligor or any of its Subsidiaries is a party, including, without limitation,
under the Bank Loan Agreement or any other Loan Document, and such default (a)
occurs at the final maturity of the obligations thereunder, or (b) results in a
right by the other party thereto, irrespective of whether exercised, to
accelerate the maturity of the applicable Obligor's or its Subsidiaries'
obligations thereunder, to terminate such agreement, or to refuse to renew such
agreement pursuant to an automatic renewal right therein;
8.11 If any Obligor or any of its Subsidiaries makes any payment on
account of Indebtedness that has been contractually subordinated in right of
payment to the payment of the Obligations, except to the extent such payment is
permitted by the terms of the subordination provisions applicable to such
Indebtedness;
8.12 If any misstatement or misrepresentation exists now or hereafter
in any warranty, representation, statement, or Records made to the Noteholder
Group by any Obligor, its Subsidiaries, or any officer, employee, agent, or
director of any Obligor or any of its Subsidiaries;
8.13 If there if a loss, suspension or revocation of, or failure to
renew, any license or permit now held or hereafter acquired by any Obligor or
any of its Subsidiaries and such loss, suspension, revocation or failure to
renew could reasonably be expected to have a Material Adverse Change.
8.14 If the obligation of any Guarantor under its Guaranty is limited
or terminated by operation of law or by such Guarantor thereunder;
8.15 If this Agreement or any other Note Document that purports to
create a Lien, shall, for any reason, fail or cease to create a valid and
perfected Lien on or security interest in the Collateral covered hereby or
thereby; or
8.16 If any Obligor or any of its Subsidiaries or any of their ERISA
Affiliates shall have made a complete or partial withdrawal from a Multiemployer
Plan, and, as a result of such complete or partial withdrawal, such Obligor or
any of its Subsidiaries or such ERISA Affiliate incurs a withdrawal liability in
an annual amount exceeding $250,000; or a Multiemployer Plan enters
reorganization status under Section 4241 of ERISA, and, as a result thereof, an
Obligor's or such Subsidiary's, or such ERISA
30
Affiliate's annual contribution requirement with respect to such Multiemployer
Plan increases in an annual amount exceeding $250,000;
8.17 If any Termination Event with respect to any Benefit Plan shall
have occurred, and, 30 days thereafter, (i) such Termination Event (if
correctable) shall not have been corrected, and (ii) the then current value of
such Benefit Plan's vested benefits exceeds the then current value of assets
allocable to such benefits in such Benefit Plan by more than $250,000 (or, in
the case of a Termination Event involving liability under Section 409, 502(i),
502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 4971
or 4975 of the Code, the liability is in excess of such amount); or
8.18 Any provision of any Note Document shall at any time for any
reason be declared to be null and void, or the validity or enforceability
thereof shall be contested by any Obligor, or a proceeding shall be commenced by
any Company, or by any Governmental Authority having jurisdiction over any
Obligor, seeking to establish the invalidity or unenforceability thereof, or any
Obligor shall deny that any Obligor has any liability or obligation purported to
be created under any Note Document; or
8.19 A Material Adverse Change shall occur; or
8.20 A Change of Control shall occur; or
8.21 If there is a default by any Obligor under any Warrant or in the
Warrant Agreement.
9. NOTEHOLDERS AND COLLATERAL AGENT'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies.
Upon the occurrence, and during the continuation, of an Event of
Default, subject to the Intercreditor Agreement, the Collateral Agent, if
directed by the Required Holders, shall, on behalf of the Noteholder Group:
(a) declare all or any portion of the Obligations, whether
evidenced by this Agreement, the Notes by any of the other Note
Documents, or otherwise, immediately due and payable;
(b) cause the Obligors to hold all returned Inventory in trust
for the Noteholder Group, segregate all returned Inventory from all
other assets of the Obligors or in the Obligors' possession and
conspicuously label said returned Inventory as the property of the
Noteholder Group;
(c) send notices of the existence of Events of Default to any
Person;
(d) terminate the Noteholder Group's obligations under this
Agreement and any of the other Note Documents immediately and without
notice as to any future liability or obligation of the Noteholder
Group, but without affecting any of the Collateral Agent's Liens in
the Collateral and without affecting the Obligations;
(e) settle or adjust disputes and claims directly with Account
Debtors for amounts and upon terms which Collateral Agent considers
advisable, and in such cases, Collateral Agent will credit the Loan
Account with only the net amounts received by Collateral Agent in
payment of such disputed Accounts after deducting all Noteholder Group
Expenses incurred or expended in connection therewith;
31
(f) without notice to or demand upon any Obligor, make such
payments and do such acts as Collateral Agent considers necessary or
reasonable to protect its security interests in the Collateral. Each
Obligor agrees to assemble the Personal Property Collateral if
Collateral Agent so requires, and to make the Personal Property
Collateral available to Collateral Agent at a place that Collateral
Agent may designate which is reasonably convenient to both parties.
Each Obligor authorizes Collateral Agent to enter the premises where
the Personal Property Collateral is located, to take and maintain
possession of the Personal Property Collateral, or any part of it, and
to pay, purchase, contest, or compromise any Lien that in Collateral
Agent's determination appears to conflict with the Collateral Agent's
Liens and to pay all expenses incurred in connection therewith, for
the Obligors' account. With respect to any of Obligors' owned or
leased premises, each Obligor hereby grants Collateral Agent a license
to enter into possession of such premises and to occupy the same,
without charge, in order to exercise any of the Noteholder Group's
rights or remedies provided herein, at law, in equity, or otherwise;
(g) without notice to any Obligor (such notice being expressly
waived), and without constituting an acceptance of any collateral in
full or partial satisfaction of an obligation (within the meaning of
the Code), set off and apply to the Obligations any and all (i)
balances and deposits of any Obligor held by the Noteholder Group, or
(ii) Indebtedness at any time owing to or for the credit or the
account of any Obligor held by the Noteholder Group;
(h) hold, as cash collateral, any and all balances and deposits
of any Obligor held by the Noteholder Group, to secure the full and
final repayment of all of the Obligations;
(i) ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Personal Property Collateral;
(j) sell the Personal Property Collateral at either a public or
private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places
(including the Obligors' premises) as Collateral Agent determines is
commercially reasonable. It is not necessary that the Personal
Property Collateral be present at any such sale;
(k) give notice of the disposition of the Personal Property
Collateral as follows:
(1) give Administrative Obligor (for the benefit of the
Obligors) a notice in writing of the time and place of public
sale, or, if the sale is a private sale or some other disposition
other than a public sale is to be made of the Personal Property
Collateral, the time on or after which the private sale or other
disposition is to be made; and
(2) personally deliver or mail such notice, postage prepaid,
to Administrative Obligor as provided in Section 12, at least 10
days before the earliest time of disposition set forth in the
notice; provided, that no notice need be given prior to the
disposition of any portion of the Personal Property Collateral
that is perishable or threatens to decline speedily in value or
that is of a type customarily sold on a recognized market;
(l) on behalf of the Noteholder Group, credit bid and purchase at
any public sale;
(m) seek the appointment of a receiver or keeper to take
possession of all or any portion of the Collateral or to operate same
and, to the maximum extent permitted by law, seek the appointment of
such a receiver without the requirement of prior notice or a hearing;
and
32
(n) foreclose any or all of the Mortgages and sell the Real
Property or cause the Real Property to be sold in accordance with the
provisions of the Mortgages and applicable law and exercise any and
all other rights or remedies available to Collateral Agent, on behalf
of the Noteholder Group, under the Mortgages or any of the other Note
Documents, at law or in equity, with respect to the Collateral
encumbered by the Mortgages.
The election of remedies set forth herein are subject to the terms and
provisions of the Intercreditor Agreement.
The Noteholder Group shall have all other rights and remedies
available to it at law or in equity or pursuant to any other Note Documents. Any
deficiency that exists after disposition of the Collateral as provided above
will be paid immediately by the Obligors. Subject to the Intercreditor
Agreement, any excess will be returned, without interest and subject to the
rights of third Persons, by Collateral Agent to Administrative Obligor (for the
benefit of the applicable Obligors).
9.2 Remedies Cumulative.
The rights and remedies of the Noteholder Group under this Agreement,
the other Note Documents, and all other agreements shall be cumulative. The
Noteholder Group shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity. No exercise by the
Noteholder Group of one right or remedy shall be deemed an election, and no
waiver by the Noteholder Group of any Event of Default shall be deemed a
continuing waiver. No delay by the Noteholder Group shall constitute a waiver,
election, or acquiescence by it.
10. TAXES AND EXPENSES.
If any Obligor fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) due to third Persons, or fails to make
any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, the Noteholders, in their
reasonable discretion and without prior notice to any Obligor, may do any or all
of the following: (a) make payment of the same or any part thereof, or (b) in
the case of the failure to comply with Section 6.8 hereof, obtain and maintain
insurance policies of the type described in Section 6.8 and take any action with
respect to such policies as the Noteholders deem prudent. Any such amounts paid
by Agent shall constitute Noteholder Group Expenses and any such payments shall
not constitute an agreement by the Noteholder Group to make similar payments in
the future or a waiver by the Noteholder Group of any Event of Default under
this Agreement. The Collateral Agent need not inquire as to, or contest the
validity of, any such expense, tax, or Lien and the receipt of the usual
official notice for the payment thereof shall be conclusive evidence that the
same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 Demand; Protest; etc.
Each Obligor waives demand, protest, notice of protest, notice of
default or dishonor, notice of payment and nonpayment, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of documents,
instruments, chattel paper, and guarantees at any time held by the Noteholder
Group on which any such Obligor may in any way be liable.
33
11.2 The Noteholder Group's Liability for Collateral.
Each Obligor hereby agrees that: (a) so long as the Noteholder Group
complies with its obligations, if any, under the Code, the Noteholder Group
shall not in any way or manner be liable or responsible for: (i) the safekeeping
of the Collateral, (ii) any loss or damage thereto occurring or arising in any
manner or fashion from any cause, (iii) any diminution in the value thereof, or
(iv) any act or default of any carrier, warehouseman, bailee, forwarding agency,
or other Person, and (b) all risk of loss, damage, or destruction of the
Collateral shall be borne by the Obligors.
11.3 Indemnification.
(a) General. Each Obligor shall pay, indemnify, defend, and hold
the Collateral Agent-Related Persons, the Noteholder-Related Persons
with respect to each Noteholder, each Participant, and each of their
respective officers, directors, employees, agents, and
attorneys-in-fact (each, an "Indemnified Person") harmless (to the
fullest extent permitted by law) from and against any and all claims,
demands, suits, actions, investigations, proceedings, and damages, and
all reasonable attorneys fees and disbursements and other costs and
expenses actually incurred in connection therewith (as and when they
are incurred and irrespective of whether suit is brought), at any time
asserted against, imposed upon, or incurred by any of them (a) in
connection with or as a result of or related to the execution,
delivery, enforcement, performance, or administration of this
Agreement, any of the other Note Documents, or the transactions
contemplated hereby or thereby, and (b) with respect to any
investigation, litigation, or proceeding related to this Agreement,
any other Note Document, or the use of the proceeds of the credit
provided hereunder (irrespective of whether any Indemnified Person is
a party thereto), or any act, omission, event, or circumstance in any
manner related thereto (all the foregoing, collectively, the
"Indemnified Liabilities"). The foregoing to the contrary
notwithstanding, Obligors shall have no obligation to any Indemnified
Person under this Section 11.3 with respect to any Indemnified
Liability that a court of competent jurisdiction finally determines to
have resulted from the gross negligence or willful misconduct of such
Indemnified Person. This provision shall survive the termination of
this Agreement and the repayment of the Obligations. If any
Indemnified Person makes any payment to any other Indemnified Person
with respect to an Indemnified Liability as to which Obligors were
required to indemnify the Indemnified Person receiving such payment,
the Indemnified Person making such payment is entitled to be
indemnified and reimbursed by Obligors with respect thereto. WITHOUT
LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED
PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN
PART CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH
INDEMNIFIED PERSON OR OF ANY OTHER PERSON.
(b) Environmental Indemnity. Without limiting Section 11.3(a)
hereof, each Obligor shall pay, indemnify, defend, and hold harmless
each Indemnified Person against any and all Environmental Liabilities
and Costs and all other claims, demands, penalties, fines, liability
(including strict liability), losses, damages, costs and expenses
(including reasonable legal fees and expenses, consultant fees and
laboratory fees), arising out of (i) any releases or threatened
releases of any Hazardous Materials (x) at any property presently or
formerly owned or operated by such Obligor or any Subsidiary of such
Obligor, or any predecessor in interest, or (y) generated and disposed
of by such Obligor or any Subsidiary of such Obligor, or any
predecessor in interest; (ii) any violations of Environmental Laws;
(iii) any Environmental Action relating to such Obligor or any
Subsidiary of such Obligor, or any predecessor in interest; (iv) any
personal injury (including wrongful death) or property damage (real or
personal) arising out of exposure to Hazardous Materials used,
handled, generated, transported or disposed by such Obligor or any
34
Subsidiary of such Obligor, or any predecessor in interest; and (v)
any breach of any warranty or representation regarding environmental
matters made by the Obligors in Section 5.14 or the breach of any
covenant made by the Obligors in Section 6.15.
11.4 Effectiveness.
This Agreement shall be binding and deemed effective when executed and
delivered by the Obligors, the Collateral Agent, and each Noteholder whose
signature is provided for on the signature pages hereof.
11.5 Section Headings.
Headings and numbers have been set forth herein for convenience only.
Unless the contrary is compelled by the context, everything contained in each
Section applies equally to this entire Agreement.
11.6 Interpretation.
Neither this Agreement nor any uncertainty or ambiguity herein shall
be construed or resolved against the Noteholder Group or Obligors, whether under
any rule of construction or otherwise. On the contrary, this Agreement has been
reviewed by all parties and shall be construed and interpreted according to the
ordinary meaning of the words used so as to accomplish fairly the purposes and
intentions of all parties hereto.
11.7 Counterparts; Telefacsimile Execution.
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same Agreement. Delivery of an
executed counterpart of this Agreement by telefacsimile shall be equally as
effective as delivery of an original executed counterpart of this Agreement. Any
party delivering an executed counterpart of this Agreement by telefacsimile also
shall deliver an original executed counterpart of this Agreement but the failure
to deliver an original executed counterpart shall not affect the validity,
enforceability, and binding effect of this Agreement. The foregoing shall apply
to each other Note Document mutatis mutandis.
11.8 Revival and Reinstatement of Obligations.
If the incurrence or payment of the Obligations by any Obligor or the
transfer to the Noteholder Group of any property should for any reason
subsequently be declared to be void or voidable under any state or federal law
relating to creditors' rights, including provisions of the Bankruptcy Code
relating to fraudulent conveyances, preferences, or other voidable or
recoverable payments of money or transfers of property (collectively, a
"Voidable Transfer"), and if the Noteholder Group is required to repay or
restore, in whole or in part, any such Voidable Transfer, or elects to do so
upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that the Noteholder Group is required or elects
to repay or restore, and as to all reasonable costs, expenses, and attorneys
fees of the Noteholder Group related thereto, the liability of each Obligor
automatically shall be revived, reinstated, and restored and shall exist as
though such Voidable Transfer had never been made.
12. NOTICES.
All notices and communications provided for hereunder shall be in
writing and (except for financial statements and other informational documents
which may be sent by first-class mail, postage
35
prepaid) either (a) personally delivered or (b) sent by telecopy (receipt
confirmed), by a recognized overnight delivery service (with charges prepaid),
by electronic mail (receipt confirmed) or by registered or certified mail
(postage prepaid, return receipt requested). Any such notice must be sent:
(a) if to any Noteholder or its nominee, to such Noteholder or nominee
at the address specified for such communications in Schedule A, or at such
other address as such Noteholder or nominee shall have specified to the
Collateral Agent and the Administrative Obligor in writing, with copies to:
Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, Massachusetts 02109
Attn: Laura C. Glynn, Esq.
Direct Dial: 617 248 5048
Telecopier: 617 248 4000
Electronic Mail: lglynn@choate.com
(b) if to any other Holder of any Note, to such Holder at such address
as such other Holder shall have specified to the Collateral Agent and the
Administrative Obligor in writing, with copies to:
Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, Massachusetts 02109
Attn: Laura C. Glynn, Esq.
Direct Dial: 617 248 5048
Telecopier: 617 248 4000
Electronic Mail: lglynn@choate.com
(c) if to the Collateral Agent, at its address set forth below, or at
such other address as the Collateral Agent shall have specified to each
Holder and the Administrative Obligor in writing.
U.S. Bank National Association Goodwin Square 225
Asylum Street 23rd Floor Hartford, Connecticut 06103
Attn:Corporate Trust Telecopier: 860-241-6881
Telephone: 860-241-6859.
(d) if to any Obligor, to the Administrative Obligor at its address
set forth below, or at such other address as the Administrative Obligor
shall have specified to each Holder and the Collateral Agent in writing.
36
MIDAS INTERNATIONAL CORPORATION
1300 Arlington Heights Road
Itasca, Illinois 60143
Attn: Chief Financial Officer
Fax No. (630) 438-3880
with copies to: GREENBERG TRAURIG, P.C.
77 West Wacker Drive, Suite 2500
Chicago, Illinois 60601
Attn: Nancy A. Mitchell, Esq.
Fax No. (312) 456-8435
All notices or communications sent in accordance with this Section, other than
notices by the Collateral Agent or any Noteholder in connection with the
enforcement of rights against the Collateral under the provisions of the Code,
shall be deemed received on the earlier of the date of actual receipt or 3
Business Days after the deposit thereof in the mail. Each Obligor acknowledges
and agrees that notices sent by the Collateral Agent or any Noteholder in
connection with the exercise of enforcement rights against Collateral under the
provisions of the Code shall be deemed sent when deposited in the mail or
personally delivered, or, where permitted by law, transmitted by telefacsimile
or any other method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER NOTE DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER NOTE DOCUMENT IN RESPECT OF SUCH
OTHER NOTE DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF
AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO
ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL
BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF ILLINOIS (WITHOUT GIVING EFFECT TO CONFLICT OF LAW OR
CHOICE OF LAW PRINCIPLES).
THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER NOTE DOCUMENTS SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF COOK,
STATE OF ILLINOIS, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST
ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE COLLATERAL AGENT'S
OPTION, IN THE COURTS OF ANY JURISDICTION WHERE THE COLLATERAL AGENT ELECTS TO
BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH
OF THE OBLIGORS, EACH OF THE NOTEHOLDERS AND THE COLLATERAL AGENT WAIVE, TO THE
EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE
DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION.
EACH OF THE OBLIGORS, EACH OF THE NOTEHOLDERS AND THE COLLATERAL AGENT
HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF ANY OF THE NOTE DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL
37
OTHER COMMON LAW OR STATUTORY CLAIMS. EACH OF THE OBLIGORS, EACH OF THE
NOTEHOLDERS AND THE COLLATERAL AGENT REPRESENT THAT IT HAS REVIEWED THIS WAIVER
AND IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
14.1 Registration of Notes.
The Administrative Obligor shall keep at its principal executive
office a register for the registration and registration of transfers of Notes.
The name and address of each Holder of one or more Notes, each transfer thereof
and the name and address of each transferee of one or more Notes shall be
registered in such register. Prior to due presentment for registration of
transfer, the Person in whose name any Note shall be registered shall be deemed
and treated as the owner and Holder thereof for all purposes hereof, and no
Obligor shall be affected by any notice or knowledge to the contrary. The
Administrative Obligor shall give to any Holder of a Note that is an
Institutional Investor and to the Collateral Agent promptly upon request
therefor, a complete and correct copy of the names and addresses of all
registered holders of Notes.
14.2 Transfer and Exchange of Notes.
Upon surrender of any Note at the notice address of the Administrative
Obligor for purposes of this Agreement for registration of transfer or exchange
(and in the case of a surrender for registration of transfer, duly endorsed or
accompanied by a written instrument of transfer duly executed by the registered
holder of such Note or his attorney duly authorized in writing and accompanied
by the address for notices of each transferee of such Note or part thereof), the
Companies shall execute and deliver, at the Companies' expense (except as
provided below), one or more new Notes (as requested by the Holder thereof) in
exchange therefor, in an aggregate principal amount equal to the unpaid
principal amount of the surrendered Note. Each such new Note shall be payable to
such Person as such Holder may request and shall be substantially in the form of
Exhibit 1-A or Exhibit 1-B hereto, as applicable. Each such new Note shall be
dated and bear interest from the date to which interest shall have been paid on
the surrendered Note or dated the date of the surrendered Note if no interest
shall have been paid thereon. The Administrative Obligor may require payment of
a sum sufficient to cover any stamp tax or governmental charge imposed in
respect of any such transfer of Notes. Notes shall not be transferred in
denominations of less than $500,000, provided that if necessary to enable the
registration of transfer by a Holder of its entire holding of Term A Notes or
Term B Notes, one Term A Note and one Term B Note may be in a denomination of
less than $500,000. Any transferee, by its acceptance of a Note registered in
its name (or the name of its nominee), shall be deemed to have made the
representation set forth in Section. Notwithstanding the foregoing, no Holder of
a Note shall knowingly transfer all or any portion of any Note to a Person, a
substantial portion of whose business consists of the operation or franchising
of automotive repair facilities.
14.3 Replacement of Notes.
Upon receipt by the Administrative Obligor of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of any Note (which evidence shall be, in the case of an Institutional
Investor, notice from such Institutional Investor of such ownership and such
loss, theft, destruction or mutilation), and
38
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the Holder of such
Note is, or is a nominee for, an original Noteholder or another Holder
of a Note with a minimum net worth of at least $10,000,000, such
Person's own unsecured agreement of indemnity shall be deemed to be
satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof, the Administrative Obligor at its own expense shall execute
and deliver, in lieu thereof, a new Note, dated and bearing interest
from the date to which interest shall have been paid on such lost,
stolen, destroyed or mutilated Note or dated the date of such lost,
stolen, destroyed or mutilated Note if no interest shall have been
paid thereon.
15. AMENDMENT AND WAIVER.
15.1 Requirements.
This Agreement, the Notes and each other Note Document (other than the
Intercreditor Agreement, the Warrants and the Warrant Agreement, the amendment
and waiver of which are governed by the respective provisions of such documents)
may be amended, and the observance of any term hereof or of the Notes or any
other Note Document (other than the Intercreditor Agreement, the Warrants and
the Warrant Agreement) may be waived (either retroactively or prospectively),
with (and only with) the written consent of the Administrative Obligor and the
Required Holders (or in the case of a Note Document to which the Collateral
Agent is a party, but the Noteholders are not parties, without the written
consent of the Administrative Obligor and the Collateral Agent (acting at the
direction of the Required Holders), except that (a) no amendment or waiver of
any of the provisions of Section 1, 3 or 19 hereof, or any defined term (as it
is used therein), will be effective as to any Noteholder unless consented to by
such Noteholder in writing, (b) no such amendment or waiver may, without the
written consent of the Holder of each Note at the time outstanding affected
thereby, (i) subject to the provisions of this Agreement relating to
acceleration or rescission, change the amount or time of any prepayment or
payment of principal of, or reduce the rate or change the time of payment or
method of computation of interest on the Notes, (ii) change the percentage of
the principal amount of the Notes the Holders of which are required to consent
to any such amendment or waiver, or (iii) amend any of Sections 2, 15, 20, or
24, and (c) no amendment, modification or waiver shall adversely affect any of
the Collateral Agent's rights, immunities or rights to indemnification hereunder
or under any of the other Note Documents or expand its duties or reduce any
amount payable to the Collateral Agent hereunder or under any of the other Note
Documents without the written consent of the Collateral Agent. The Noteholders
and the Collateral Agent shall not amend this Agreement if such amendment would
be prohibited by the Intercreditor Agreement.
For purposes of this Agreement, the term "Required Holders" or
"Required Noteholders" shall mean, at any time, (i) the Holders of more than 50%
in principal amount of the Term A Notes at the time outstanding, together with
(ii) the Holders of more than 50% in principal amount of the Term B Notes at the
time outstanding, in each case, exclusive of any Notes then owned by any Obligor
or any of their respective Affiliates.
15.2 Solicitation of Holders of Notes.
(a) Solicitation. The Obligors will provide each Holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such Holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes or any other Note Document. The Obligors will deliver
executed or true and correct copies of each
39
amendment, waiver or consent effected pursuant to the provisions of this Section
to each Holder of outstanding Notes promptly following the date on which it is
executed and delivered by, or receives the consent or approval of, the requisite
Holders of Notes.
(b) Payment. No Obligor will directly or indirectly pay or cause to be
paid any remuneration, whether by way of supplemental or additional interest,
fee or otherwise, or grant any security, to any Holder of Notes as consideration
for or as an inducement to the entering into by any Holder of Notes of any
waiver or amendment of any of the terms and provisions hereof or any other Note
Document unless such remuneration is concurrently paid, or security is
concurrently granted, on the same terms, ratably to each Holder of Notes then
outstanding even if such Holder did not consent to such waiver or amendment.
15.3 Binding Effect, etc.
Any amendment or waiver consented to as provided in this Section
applies equally to all Holders of Notes and is binding upon them and upon each
future Holder of any Note and upon the Obligors without regard to whether such
Note has been marked to indicate such amendment or waiver. No such amendment or
waiver will extend to or affect any obligation, covenant, agreement, Default or
Event of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between any Obligor and the Holder of any Note nor
any delay in exercising any rights hereunder or under any Note or other Note
Document shall operate as a waiver of any rights of any Holder of such Note. As
used herein, the term "this Agreement" and references thereto shall mean this
Agreement as it may from time to time be amended or supplemented.
15.4 Notes held by Obligor, etc.
Solely for the purpose of determining whether the Holders of the
requisite percentage of the aggregate principal amount of Notes then outstanding
approved or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes or any other Note Document, or have directed the taking
of any action provided herein or in the Notes or any other Note Document to be
taken upon the direction of the Holders of a specified percentage of the
aggregate principal amount of Notes then outstanding, Notes directly or
indirectly owned by any Obligor or any Affiliate of any Obligor shall be deemed
not to be outstanding.
16. CONCERNING THE COLLATERAL AGENT
16.1 Certain Notices.
(a) Each Noteholder hereby agrees to give written notice to the
Collateral Agent of any demand for payment in full of the Obligations owing to
the demanding party, whether by acceleration of such obligations or otherwise.
Any Required Holders giving a Remedies Notice shall contemporaneously give a
copy thereof to each of the other Noteholders and the Collateral Agent.
(b) No Noteholder shall incur liability of any kind should it, upon
the occurrence of any Event of Default, refrain from accelerating maturity or
otherwise demanding payment in full of any Obligations owing to it, or should it
refrain from exercising any of its rights and remedies against any Obligor in
respect of the Obligations.
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16.2 Enforcement.
The Collateral Agent shall (subject to the provisions of this section
16) take any such actions (and only such actions) in the exercise of rights and
remedies under the Note Documents as are directed by the Required Holders;
provided that the Collateral Agent, without direction, may but shall not be
obligated to take such actions as it shall in its good faith judgment determine
are necessary to prevent impairment of the Collateral or the Collateral Agent's
Liens. It is acknowledged that the Collateral Agent shall have no obligation to
take any action (including, without limitation, submitting such matter to court)
unless it has received security or indemnity as contemplated by Section 16.8.
16.3 Agents.
No Noteholder is acting as agent for any other Noteholder; and nothing
stated or implied in this Agreement shall be deemed to create such an agency
relationship.
16.4 Appointment of Collateral Agent.
Each of the Noteholders hereby appoints the Collateral Agent to act as
collateral agent (or as administrative agent solely for purposes of the
Mortgages) pursuant to the terms of this Agreement and the other Note Documents
and hereby irrevocably authorize the Collateral Agent to execute and enter into
the Intercreditor Agreement and to take such action and perform such duties as
are expressly provided therein, and the Collateral Agent hereby accepts such
appointment. The relationship between the Collateral Agent and the Holders of
the Obligations is and shall be that of agent and principal only, and nothing
contained in this Agreement or any of the other Note Documents shall be
construed to appoint the Collateral Agent as a trustee or other fiduciary for
any such holder.
16.5 Limitations on Responsibility of Collateral Agent.
(a) The Collateral Agent shall not be responsible in any manner
whatsoever for the correctness of any recitals, statements, representations or
warranties contained herein or in any other Note Document, except for those made
by it herein. The Collateral Agent makes no representation as to the value or
condition of the Collateral or any part thereof, as to the title of any Obligor
to the Collateral, as to the security afforded by this Agreement or any other
Note Document or as to the validity, execution, enforceability, legality or
sufficiency of this Agreement or any other Note Document, and the Collateral
Agent shall incur no liability or responsibility in respect of any such matters.
The Collateral Agent shall not be responsible for insuring the Collateral, for
the payment of taxes, charges, assessments or liens upon the Collateral or
otherwise as to the maintenance of the Collateral, except as provided in the
immediately following sentence when the Collateral Agent has possession of the
Collateral. The Collateral Agent shall have no duty to any Obligor or to the
Holders of as to the care of any Collateral in its possession or control or in
the possession or control of any agent or nominee of the Collateral Agent or any
income thereon or as to the preservation of rights against prior parties or any
other rights pertaining thereto, except the duty to accord such of the
Collateral as may be in its possession substantially the same care as it accords
its own assets and the duty to account for monies received by it. The Collateral
Agent's duties and responsibilities shall be determined solely by the provisions
of this Agreement and the other Note Documents to which it is a party, and the
Collateral Agent shall not be liable or responsible for any duties or
obligations set forth in any other document to which it is not a party. The
designation of U.S. Bank National Association as "administrative agent" for
purposes of the Mortgages is for convenience only, and shall not confer on U.S.
Bank National Association any additional duties or responsibilities.
(b) The Collateral Agent shall not be responsible for any loss
suffered with respect to any investment permitted to be made under this
Agreement and shall not be responsible for the consequences
41
of any oversight or error of judgment whatsoever, except that the Collateral
Agent may be liable for losses due to its willful misconduct, gross negligence
or breach of its agreement set forth herein. The Collateral Agent shall not be
required to ascertain or inquire as to the performance by any Obligor of any of
the covenants or agreements contained herein or in any of the other Note
Documents. Neither the Collateral Agent nor any officer, agent or representative
thereof shall be personally liable for any action taken or omitted to be taken
by any such Person in connection with this Agreement or any other Note Document
except for such Person's gross negligence or willful misconduct. Neither the
Collateral Agent nor any officer shall be personally liable for any action taken
by any such Person in accordance with any notice given by the Required Holders
in accordance with and pursuant to the terms of this Agreement even if, at the
time such action is taken by any such Person, the Required Holders or Persons
purporting to be the Required Holders are not so authorized by the Required
Holders to give such notice, except where a Responsible Officer of the
Collateral Agent has actual knowledge that such Required Holders or Persons
purporting to be the Required Holders are not so authorized by the Required
Holders to give such notice. The Collateral Agent may execute any of the powers
granted under this Agreement or any of the other Note Documents and perform any
duty hereunder or thereunder either directly or by or through agents, receivers,
or attorneys-in-fact and shall not be responsible for anything done by such
agents, receivers or attorneys-in-fact selected by it with due care.
(c) Whenever pursuant to the provisions hereof or of any other Note
Document it is required that any party hereto obtain the consent or approval of
the Collateral Agent, or that any matter prove satisfactory to the Collateral
Agent, or if the Collateral Agent, in its best judgment, needs clarification or
instruction concerning its duties or obligations hereunder, the Collateral
Agent, prior to giving any such consent or approval or indicating its
satisfaction with any such matter, or performing such duty or obligation, shall
(except where the failure to do so, in its good faith judgment, could imperil
the Collateral or the Collateral Agent's Liens thereon) be required to consult
with the Holders in a manner deemed reasonable by the Collateral Agent, and the
Collateral Agent shall be protected in following any direction of the Required
Holders.
(d) The foregoing provisions of this section 16.5 shall not relieve
the Collateral Agent of any liability for any failure to perform any contractual
duty expressly undertaken by it to be performed under this Agreement if such
liability is caused by the gross negligence or willful misconduct of the
Collateral Agent.
16.6 Reliance by Collateral Agent; Etc.
(a) Whenever in the performance of its duties under this Agreement the
Collateral Agent shall deem it necessary or desirable that a matter be proved or
established with respect to any Person in connection with the taking, suffering
or omitting of any action hereunder by the Collateral Agent, such matter may be
conclusively deemed to be proved or established by a certificate executed by an
officer of such Person, and the Collateral Agent shall have no liability with
respect to any action taken, suffered or omitted in reliance in good faith
thereon.
(b) The Collateral Agent may consult with counsel and shall be fully
protected in taking any action hereunder in good faith in accordance with any
advice of such counsel. The Collateral Agent shall have the right but not the
obligation at any time to seek instructions concerning the administration of
this Agreement, the duties created hereunder, or any of the Collateral from any
court of competent jurisdiction.
(c) The Collateral Agent shall be fully protected in relying in good
faith upon any resolution, statement, certificate, instrument, opinion, Report,
notice, request, consent, order or other paper or document which it believes to
be genuine and to have been signed or presented by the proper party or
42
parties. In the absence of its gross negligence or willful misconduct, the
Collateral Agent may conclusively rely in good faith, as to the truth of the
statements and the correctness of the opinions expressed therein, upon any
certificate or opinions furnished to the Collateral Agent in connection with
this Agreement.
(d) The Collateral Agent shall not be deemed to have actual,
constructive, direct or indirect notice or knowledge of the occurrence of any
Event of Default unless and until a Responsible Officer of the Collateral Agent
shall have received a notice of such Event of Default. The Collateral Agent
shall have no obligation whatsoever either prior to or after receiving such a
notice to inquire whether an Event of Default has, in fact, occurred and shall
be entitled to rely in good faith conclusively, and shall be fully protected in
so relying, on any certificate so furnished to it and shall have no obligation,
absent written instructions from the Required Holders to take or omit to take
any action with respect to such notice of Event of Default.
(e) To the extent the Collateral Agent is required to determine any
amount, or take any action to distribute any amount, of any Obligation or other
payments hereunder, it shall have no obligation to do so unless such amount
shall have been certified in writing by the Required Holders as being the amount
in question. Each of the other parties hereto agrees to certify such amounts
upon request of the Collateral Agent. If any dispute or disagreement shall arise
as to the allocation of any sum of money received by the Collateral Agent
hereunder or under any other Note Document, the Collateral Agent shall have the
right to deliver such sum to a court of competent jurisdiction and therein
commence an action for interpleader.
16.7 Resignation or Removal of the Collateral Agent.
The Collateral Agent may at any time resign by giving sixty (60) days
prior written notice thereof to each Holder and the Administrative Obligor, and
the Collateral Agent may at any time be removed with or without cause
(consisting of fraud, gross misconduct, willful or reckless breach of this
Agreement or other just cause, as determined in their discretion by the Required
Holders) by sixty (60) days prior written notice thereof to the Collateral
Agent, each other Holder and the Administrative Obligor given by the Required
Holders, provided that in the case of fraud, gross misconduct or willful or
reckless breach of this Agreement such removal may be effective immediately upon
five (5) days after giving of such notice to the Collateral Agent and provided
further that no resignation or removal shall be effective until a successor for
the Collateral Agent is appointed. Upon such resignation or removal, the
Required Holders shall have the right to appoint a successor Collateral Agent.
If no successor Collateral Agent shall have been so appointed by the Required
Holders and shall have accepted such appointment within forty-five (45) days
after the retiring Collateral Agent's giving of notice of resignation or the
giving of notice of removal, as the case may be, then the retiring Collateral
Agent may, on behalf of the Holders, appoint a successor Collateral Agent, which
shall be a financial institution having a capital and surplus of not less than
$100,000,000. Upon the acceptance of any appointment as Collateral Agent
hereunder by a successor Collateral Agent, such successor Collateral Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Collateral Agent, and the retiring Collateral Agent
shall be discharged from its duties and obligations hereunder. After any
retiring Collateral Agent's resignation or removal, the provisions of this
Agreement and the other Note Documents shall continue in effect for its benefit
in respect of any actions taken or omitted to be taken by it while it was acting
as Collateral Agent. Any corporation into which the Collateral Agent may be
merged or with which it may be consolidated, or any corporation which acquires
all or substantially all of the corporate trust business of the Collateral
Agent, including the collateral agency established pursuant to this Agreement,
or any corporation resulting from any merger or consolidation to which the
Collateral Agent shall be a party, shall be the successor to the Collateral
Agent without any further acts, including the execution of any paper.
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16.8 Expenses and Indemnification.
(a) By executing this Agreement, the Obligors, jointly and severally,
agree (i) to reimburse the Collateral Agent, promptly, for any reasonable
expenses incurred by the Collateral Agent, including reasonable counsel fees and
disbursements and compensation of agents, arising out of, in any way connected
with, or as a result of, the execution or delivery of this Agreement or any
other Note Document or any agreement or instrument contemplated hereby or
thereby or the performance by the parties hereto or thereto of their respective
obligations hereunder or thereunder or in connection with the enforcement or
protection of the rights of the Collateral Agent and the Holders hereunder or
under the other Note Documents, and (ii) to indemnify and hold harmless the
Collateral Agent and its directors, officers, employees and agents, promptly,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, and reasonable costs, expenses or
disbursements of any kind or nature whatsoever ("Losses") which may be imposed
on, incurred by or asserted against the Collateral Agent in its capacity as the
Collateral Agent or any of them in any way relating to or arising out of this
Agreement or any other Note Document or any action taken or omitted by them
under this Agreement or any other Note Document; provided that the Obligors
shall not be liable to the Collateral Agent for any portion of such Losses
resulting from the gross negligence or willful misconduct of the Collateral
Agent or any of its directors, officers, employees or agents as determined by a
final non-appealable order of a court of competent jurisdiction. A statement by
the Collateral Agent that is submitted to the Administrative Obligor with
respect to the amount of such expenses and containing a basic description
thereof and/or the amount of its indemnification obligation shall be prima facie
evidence of the amount thereof owing to the Collateral Agent; provided, however,
that the Administrative Obligor shall nonetheless have the right to dispute any
such amount and, to the extent provided in this section 16.8 the reasonableness
thereof. Except as otherwise expressly provided herein, the Collateral Agent
shall be under no obligation to take any action to protect, preserve or enforce
any rights or interests in the Collateral or to take any action in connection
with the execution or enforcement of its duties hereunder, whether on its own
motion, or on request of any other Person, which in the opinion of the
Collateral Agent may involve loss, liability or expense to it, unless one or
more of the Holders shall offer and furnish security or indemnity, reasonably
satisfactory to the Collateral Agent in accordance herewith, against loss,
liability and expense to the Collateral Agent. Notwithstanding anything to the
contrary contained in this Agreement, or any Note Document, in the event that
the Collateral Agent is entitled or required to commence an action to foreclose
on such Note Document or other document, or otherwise exercise its remedies to
acquire control or possession of any property constituting all or part of the
Collateral, the Collateral Agent shall not be required to commence any such
action or exercise any such remedy if the Collateral Agent has determined in
good faith that it may incur liability under any federal or state environmental
or hazardous waste law, rule or regulation as the result of the presence at, or
release on or from, any property of any hazardous materials or waste, as defined
under such federal or state laws, unless it has received security or indemnity
from a Person, in an amount and in form, all satisfactory to the Collateral
Agent in its sole discretion, protecting the Collateral Agent from all such
liability.
(b) The indemnification provisions in this clause (b) and clause (c)
below are in addition to the indemnification provisions in clause (a) above.
Without limiting any indemnification the Companies or any other Obligor has
granted in any other provision of this Agreement or in any other Note Document,
the Companies and each other Obligor hereby jointly and severally indemnifies
and holds harmless the Collateral Agent and each of the Holders and their
respective directors, officers, employees and agents (collectively, the
"Indemnified Parties") from and against any and all Losses which may be imposed
on, incurred by or asserted against the Indemnified Parties or any of them as a
result of, arising out of, or relating to any claim, action or proceeding by any
third party (other than any Indemnified Party) with respect to (i) any accident,
injury to or death of persons or loss of or damage to or loss of the use of
property occurring on or about any Real Property Collateral or any part thereof
or the adjoining sidewalks, curbs, vaults and vault spaces, if any, streets,
alleys or ways, (ii) any use, non-use or condition
44
of any Real Property Collateral or any part thereof or the adjoining sidewalks,
curbs, vaults and vault spaces, if any, streets, alleys or ways, (iii) any
failure on the part of any Obligor to perform or comply with any of the terms of
any mortgage, (iv) performance of any labor or services or the furnishing of any
materials or other property in respect of any Real Property Collateral or any
part thereof made or suffered to be made by or on behalf of any Obligor, (v) any
negligence or tortious act on the part of any Obligor or any of its agents,
contractors, lessees, licensees or invitees, or (vi) any work in connection with
any alterations, changes, new construction or demolition of or additions to any
Real Property Collateral (collectively, the "Indemnified Losses"); provided,
however, that the Obligors shall not indemnify or hold harmless any Indemnified
Party against any Indemnified Liabilities arising (x) by reason of such
Indemnified Party's gross negligence or willful misconduct, or (y) in the case
of clauses (i), (ii), (iv) and (vi) above, after termination of the Obligors'
ownership or operation of any Real Property Collateral.
(c) In the event that (i) any Indemnified Party is made a party to any
action or proceeding by reason of the execution of this Agreement or any other
Note Document or (ii) any action or proceeding shall be commenced in which it
becomes necessary to defend or uphold the lien of any mortgage, all reasonable
sums paid by the Indemnified Parties for the expense of any litigation to
prosecute or defend the rights and lien created by any mortgage or otherwise
shall be paid by the Obligors to such Indemnified Parties, as hereinafter
provided. The Obligors will, jointly and severally, pay and save the Indemnified
Parties harmless against any and all liability with respect to any intangible
personal property tax or similar imposition of any jurisdiction or any
subdivision or authority thereof now or hereafter in effect, to the extent that
the same may be payable by the Indemnified Parties in respect of any mortgage or
any obligation secured thereby. In case any action, suit or proceeding is
brought against any Indemnified Party by reason of any such occurrence, the
Obligors, upon written request of such Indemnified Party, will, at the Obligors'
expense, resist and defend such action, suit or proceeding or cause the same to
be, resisted or defended by counsel designated by the Administrative Obligor and
approved by such Indemnified Party, which approval shall not be unreasonably
withheld or delayed. The obligations of the Obligors under this Section 16.8
shall survive any discharge or reconveyance of any mortgage and the payment in
full of the obligations secured thereby. If and to the extent that the foregoing
undertaking is unenforceable for any reason, each of the Obligors hereby agrees
to make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law.
(d) All amounts payable to the Indemnified Parties under this Section
16.8 shall be deemed indebtedness secured by the Note Documents and shall bear
interest at the highest interest rate for overdue payments provided for in any
of the Note Documents commencing 30 days after any Obligor's receipt of written
notice that such amounts are due and owing.
16.9 Expenses and Indemnification by Holders.
Each Noteholder severally agrees (i) to reimburse the Collateral
Agent, promptly, in the amount of its pro rata share for any expenses referred
to in the preceding Section 16.8 and reasonable fees due pursuant to Section
16.10 which shall not have been reimbursed or paid by the Obligors or paid from
the proceeds of Collateral or otherwise as provided herein or any other Note
Document and (ii) to indemnify and hold harmless the Collateral Agent, and its
directors, officers, employees and agents, promptly, in the amount of its pro
rata share, from and against any and all Losses referred to in Section 16.8, to
the extent the same shall not have been reimbursed by the Obligors or paid from
the proceeds of Collateral or otherwise as provided herein or any other Note
Document; provided that no Noteholder shall be liable to the Collateral Agent
for any portion of such Losses resulting from the gross negligence or willful
misconduct of the Collateral Agent or any of its directors, officers, employees
or agents, or the failure to perform any express duty undertaken under this
Agreement to be performed by the Collateral Agent or any of its directors,
officers, employees or agents. For purposes of this Section 16.9, the pro rata
share of
45
any Noteholder's claim for which a reimbursement or indemnity obligation arises
under this Section 16.9 shall be its percentage share of the sum of the
Obligations, as of the last day of the calendar month preceding the date on
which such claim was incurred and on which any Obligations were outstanding.
16.10 Collateral Agent's Fee.
By executing this Agreement, the Companies, jointly and severally,
agree to pay to the Collateral Agent for the Collateral Agent's own account, a
non-refundable Collateral Agent's fee, on the date hereof and an additional
yearly fee. Such yearly fees shall be payable in a separate letter agreement
between the Administrative Obligor and the Collateral Agent until the
Obligations have been paid in full in cash, and the Collateral Agent no longer
has any duties hereunder.
16.11 Collateral Agent in other Capacities.
Nothing herein shall preclude the Collateral Agent or any Affiliate
from being a creditor of any of the Obligors or having other business
relationships with any of the Obligors, and the parties hereto acknowledge that
the Collateral Agent has a lending relationship with the Obligors.
17. GENERAL PROVISIONS.
17.1 Successors and Assigns.
All covenants and other agreements contained in this Agreement by or
on behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any subsequent
Holder of a Note) whether so expressed or not.
17.2 Severability.
Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
17.3 Construction.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any Person,
or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
17.4 Effectiveness.
This Agreement shall be binding and deemed effective when executed and
delivered by the Obligors, the Collateral Agent, and each Noteholder whose
signature is provided for on the signature pages hereof.
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17.5 Section Headings.
Headings and numbers have been set forth herein for convenience only.
Unless the contrary is compelled by the context, everything contained in each
Section applies equally to this entire Agreement.
17.6 Interpretation.
Neither this Agreement nor any uncertainty or ambiguity herein shall
be construed or resolved against the Noteholder Group or Obligors, whether under
any rule of construction or otherwise. On the contrary, this Agreement has been
reviewed by all parties and shall be construed and interpreted according to the
ordinary meaning of the words used so as to accomplish fairly the purposes and
intentions of all parties hereto.
17.7 Counterparts; Telefacsimile Execution.
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same Agreement. Delivery of an
executed counterpart of this Agreement by telefacsimile shall be equally as
effective as delivery of an original executed counterpart of this Agreement. Any
party delivering an executed counterpart of this Agreement by telefacsimile also
shall deliver an original executed counterpart of this Agreement but the failure
to deliver an original executed counterpart shall not affect the validity,
enforceability, and binding effect of this Agreement. The foregoing shall apply
to each other Note Document mutatis mutandis.
17.8 Revival and Reinstatement of Obligations.
If the incurrence or payment of the Obligations by any Obligor or the
transfer to the Noteholder Group of any property should for any reason
subsequently be declared to be void or voidable under any state or federal law
relating to creditors' rights, including provisions of the Bankruptcy Code
relating to fraudulent conveyances, preferences, or other voidable or
recoverable payments of money or transfers of property (collectively, a
"Voidable Transfer"), and if the Noteholder Group is required to repay or
restore, in whole or in part, any such Voidable Transfer, or elects to do so
upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that the Noteholder Group is required or elects
to repay or restore, and as to all reasonable costs, expenses, and attorneys
fees of the Noteholder Group related thereto, the liability of each Obligor
automatically shall be revived, reinstated, and restored and shall exist as
though such Voidable Transfer had never been made.
17.9 MIC as Agent for Obligors.
Each Obligor hereby irrevocably appoints MIC as the agent and
attorney-in-fact for all Obligors (the "Administrative Obligor") which
appointment shall remain in full force and effect unless and until the
Collateral Agent shall have received prior written notice signed by each Obligor
that such appointment has been revoked and that another Obligor has been
appointed Administrative Obligor. Each Obligor hereby irrevocably appoints and
authorizes the Administrative Obligor (i) to provide the Noteholder Group with
all notices and instructions under this Agreement and (ii) to take such action
as the Administrative Obligor deems appropriate on its behalf to carry out the
purposes of this Agreement. It is understood that the handling of the Notes and
Collateral of Obligors in a combined fashion, as more fully set forth herein, is
done solely as an accommodation to Obligors in order to utilize the collective
borrowing powers of Obligors in the most efficient and economical manner and at
their request, and that Noteholder Group shall not incur liability to any
Obligor as a result hereof. Each Obligor expects to derive benefit, directly or
indirectly, from the handling of the Notes and the Collateral in a combined
47
fashion since the successful operation of each Obligor is dependent on the
continued successful performance of the integrated group. To induce the
Noteholder Group to do so, and in consideration thereof, each Obligor hereby
jointly and severally agrees to indemnify each member of the Noteholder Group
and hold each member of the Noteholder Group harmless against any and all
liability, expense, loss or claim of damage or injury, made against the
Noteholder Group by any Obligor or by any third party whosoever, arising from or
incurred by reason of (a) the handling of the Notes and Collateral of Obligors
as herein provided, (b) the Noteholder Group's relying on any instructions of
the Administrative Obligor, or (c) any other action taken by the Noteholder
Group hereunder or under the other Note Documents, except that Obligors will
have no liability to the relevant Agent-Related Person or Noteholder-Related
Person under this Section 17.9 with respect to any liability that has been
finally determined by a court of competent jurisdiction to have resulted solely
from the gross negligence or willful misconduct of such Agent-Related Person or
Noteholder-Related Person, as the case may be.
18. GUARANTY.
18.1 Guaranty; Limitation of Liability.
(a) Each Guarantor other than the Canadian Guarantors, it being understood
that, solely for the purposes of this Section 18, the Guarantors shall not
include the Canadian Guarantors, hereby unconditionally and irrevocably jointly
and severally guarantees the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, of all Obligations of Companies owing to
the Noteholders now or hereafter existing under any Note Document, whether for
principal, interest fees, expenses or otherwise (such obligations, to the extent
not paid by Companies, being the "Guaranteed Obligations"). Each Guarantor
hereby unconditionally and irrevocably jointly and severally agrees to pay any
and all reasonable expenses (including reasonable counsel fees and expenses)
incurred by the Noteholder Group in enforcing any rights under the guaranty set
forth in this Section 18. Without limiting the generality of the foregoing, the
Guarantors' liability shall extend to all amounts that constitute part of the
Guaranteed Obligations and would be owed by Companies to Noteholders under any
Note Document but for the fact that they are unenforceable or not allowable due
to the existence of a bankruptcy, reorganization or similar proceeding involving
any Company.
(b) Notwithstanding anything to the contrary contained in this Section 18,
the recourse of Agent for the Guaranteed Obligation of the Parent described in
paragraph (a) of this Section 18.1 is limited to the "Pledged Collateral" as
defined in the Pledge Agreement dated the date hereof owed by the Parent.
18.2 Guaranty Absolute.
Each Guarantor guarantees that the Guaranteed Obligations will be paid
strictly in accordance with the terms of the Note Documents, regardless of any
law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of Noteholders with respect thereto.
The obligations of each Guarantor under this Section 18 are independent of the
Obligations, and a separate action or actions may be brought and prosecuted
against each Guarantor to enforce such obligations, irrespective of whether any
action is brought against any Company or whether any Company is joined in any
such action or actions. The liability of each Guarantor under this Section 18
shall be irrevocable, absolute and unconditional irrespective of, and each
Guarantor hereby irrevocably waives any defenses it may now or hereafter have in
any way relating to, any or all of the following:
(a) any lack of validity or enforceability of any Note Document
or any agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Guaranteed Obligations, or any
other amendment or waiver of or any consent to departure from any Note
Document, including, without limitation, any increase in the
Guaranteed Obligations resulting from the extension of additional
credit to any Company or otherwise;
48
(c) any taking, exchange, release or non-perfection of any
Collateral, or any taking, release or amendment or waiver of or
consent to departure from any other guaranty, for all or any of the
Guaranteed Obligations;
(d) any change, restructuring or termination of the corporate
structure or existence of any Company or Guarantor; or
(e) any other circumstance (including, without limitation, any
statute of limitations) or any existence of or reliance on any
representation by Noteholders that might otherwise constitute a
defense available to, or a discharge of, any Guarantor, any Company or
any other guarantor or surety.
This Section 18 shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by Noteholders or any other Person, all as though
such payment had not been made.
18.3 Waiver.
Each Guarantor hereby waives promptness, diligence, notice of
acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Section 18 and any requirement that the Collateral Agent or
Noteholders exhaust any right or take any action against Companies or any other
Person or any Collateral. Each Guarantor acknowledges that it will receive
direct and indirect benefits from the financing arrangements contemplated herein
and that the waiver set forth in this Section 18 is knowingly made in
contemplation of such benefits. Each Guarantor hereby waives any right to revoke
this Section 18, and acknowledges that this Section 18 is continuing in nature
and applies to all Guaranteed Obligations, whether existing now or in the
future.
18.4 Continuing Guaranty; Assignments.
This Section 18 is a continuing guaranty and shall (a) remain in full
force and effect until the later of the cash payment in full of the Guaranteed
Obligations (other than indemnification obligations as to which no claim has
been made) and all other amounts payable under this Section 18 and the Maturity
Date, (b) be binding upon each Guarantor, their respective successors and
assigns and (c) inure to the benefit of and be enforceable by Collateral Agent
and Noteholders and its successors, pledgees, transferees and assigns. Without
limiting the generality of the foregoing clause(c), any Noteholder may pledge,
assign or otherwise transfer all or any portion of its rights and obligations
under this Agreement (including, without limitation, all or any portion of its
loans owing to it and any note held by it) to any other Person, and such other
Person shall thereupon become vested with all the benefits in respect thereof
granted such Noteholder herein or otherwise.
18.5 Subrogation.
No Guarantor will exercise any rights that it may now or hereafter
acquire against any Company or Guarantor or any other insider guarantor that
arise from the existence, payment, performance or enforcement of such
Guarantor's obligations under this Section 18, including, without limitation,
any right of subrogation, reimbursement, exoneration, contribution or
indemnification and any right to participate in any claim or remedy of
Noteholders against any Company or any other insider guarantor or any
Collateral, whether or not such claim, remedy or right arises in equity or under
contract, statute or common law, including, without limitation, the right to
take or receive from any Company or any other insider guarantor, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security solely on account of such claim, remedy or right, unless and
until all of the
49
Guaranteed Obligations and all other amounts payable under this Section 18 shall
have been paid in full in cash and this Agreement shall have terminated. If any
amount shall be paid to any Guarantor in violation of the immediately preceding
sentence at any time prior to the later of the payment in full in cash of the
Guaranteed Obligations and all other amounts payable under this Section 18 and
the termination of this Agreement, such amount shall be held in trust for the
benefit of Noteholders and shall forthwith be paid to Collateral Agent to be
credited and applied to the Guaranteed Obligations and all other amounts payable
under this Section 18, whether matured or unmatured, in accordance with the
terms of this Agreement, or to be held as collateral for any Guaranteed
Obligations or other amounts payable under this Section 18 thereafter arising.
If (i) any Guarantor shall make payment to Noteholders of all or any part of the
Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other
amounts payable under this Section 18 shall be paid in full in cash and (iii)
this Agreement has terminated, Noteholders will, at such Guarantor's request and
expense, execute and deliver to such Guarantor appropriate documents, without
recourse and without representation or warranty, necessary to evidence the
transfer by subrogation to such Guarantor of an interest in the Guaranteed
Obligations resulting from such payment by such Guarantor.
18.6 Joint and Several Obligations.
All of the Guaranteed Obligations of the Guarantors hereunder and the
other Note Documents are joint and several. Noteholders may, in their sole and
absolute discretion, enforce the provisions hereof against any of the
Guarantors, subject to Section 18.1(b), and shall not be required to proceed
against all Guarantors jointly or seek payment from the Guarantors ratably.
18.7 Judgment Currency.
The specification under this Agreement of US Dollars is of the
essence. Each Guarantor's obligations hereunder and under the other Note
Documents to make payments in US Dollars shall not be discharged or satisfied by
any tender or recovery pursuant to any judgment expressed in or converted into
any currency other than US Dollars, except to the extent that such tender or
recovery results in the effective receipt by Noteholder Group and Collateral
Agent of the full amount of US Dollars expressed to be payable to the Collateral
Agent and Noteholder Group under this Agreement or the other Note Documents. If,
for the purpose of obtaining or enforcing judgment in any court, it is necessary
to convert into or from any currency other than US Dollars (such other currency
being hereinafter referred to as the "Judgment Currency") an amount due in US
Dollars, the rate of exchange used shall be that at which Noteholder Group or
Collateral Agent could, in accordance with normal banking procedures, purchase
US Dollars with the Judgment Currency on the Business Day preceding that on
which final judgment is given. The obligation of each Guarantor in respect of
any such sum due from it to Noteholder Group or Collateral Agent hereunder
shall, notwithstanding any judgment in such Judgment Currency, be discharged
only to the extent that, on the Business Day immediately following the date on
which Noteholder Group or Collateral Agent receives any sum adjudged to be so
due in the Judgment Currency, Noteholder Group or Collateral Agent may, in
accordance with normal banking procedures, purchase US Dollars with the Judgment
Currency. If the US Dollars so purchased are less than the sum originally due to
Collateral Agent or Noteholder Group in US Dollars, each Guarantor agrees, as a
separate obligation and notwithstanding any such judgment, to indemnify
Noteholder Group and the Collateral Agents against such loss, and if the US
Dollars so purchased exceed the sum originally due to Noteholder Group or the
Collateral Agents in US Dollars, the applicable Noteholder and Collateral Agent
severally agree to remit to such Guarantor such excess.
50
18.8 Automatic Limitation.
It is understood that while the amount of the Guaranteed Obligations
guaranteed hereby is not limited, if in any action or proceeding involving any
state, federal or foreign bankruptcy, insolvency or other law affecting the
rights or creditors generally, this guaranty would be held or determined to be
void, invalid or unenforceable on account of the amount of the aggregate
liability under this guaranty, then, notwithstanding any other provision of this
guaranty to the contrary, the aggregate amount of such liability shall, without
any further action of the Collateral Agent, the Noteholders or any other Person,
be automatically limited and reduced to the highest amount which is valid and
enforceable as determined in such action or proceeding.
19. REPRESENTATIONS OF THE NOTEHOLDERS.
19.1 Purchase for Investment.
Each Noteholder represents that such Noteholder is purchasing the
Notes for its own account or for one or more separate accounts maintained by it
or for the account of one or more pension or trust funds and not with a view to
the distribution thereof, provided that the disposition of such Noteholder's or
their property shall at all times be within such Noteholder's or their control.
Each Noteholder understands that the Notes have not been registered under the
Securities Act and may be resold only if registered pursuant to the provisions
of the Securities Act or if an exemption from registration is available, except
under circumstances where neither such registration nor such an exemption is
required by law, and that no Company is required to register the Notes.
19.2 Source of Funds.
Each Noteholder represents that at least one of the following
statements is an accurate representation as to each source of funds (a "Source")
used by such Noteholder to pay the purchase price of the Existing Notes, the
principal amount of which is to be exchanged and cancelled in payment of the
purchase price for the Notes to be purchased by such Noteholder hereunder:
(a) the Source is an "insurance company general account" (as the
term is defined in PTE 95-60 (issued July 12, 1995)) in respect of
which the reserves and liabilities (as defined by the annual statement
for life insurance companies approved by the National Association of
Insurance Commissioners (the "NAIC Annual Statement")) for the general
account contract(s) held by or on behalf of any employee benefit plan
together with the amount of the reserves and liabilities for the
general account contract(s) held by or on behalf of any other employee
benefit plans maintained by the same employer (or affiliate thereof as
defined in PTE 95-60) or by the same employee organization in the
general account do not exceed 10% of the total reserves and
liabilities of the general account (exclusive of separate account
liabilities) plus surplus as set forth in the NAIC Annual Statement
filed with such Noteholder's state of domicile; or
(b) the Source is a separate account that is maintained solely in
connection with such Noteholder's fixed contractual obligations under
which the amounts payable, or credited, to any employee benefit plan
(or its related trust) that has any interest in such separate account
(or to any participant or beneficiary of such plan (including any
annuitant)) are not affected in any manner by the investment
performance of the separate account; or
(c) the Source is either (i) an insurance company pooled separate
account, within the meaning of PTE 90-1 (issued January 29, 1990), or
(ii) a bank collective investment fund, within the meaning of the PTE
91-38 (issued July 12, 1991) and, except as disclosed by such
Noteholder
51
to MIC in writing pursuant to this paragraph (c) at least two Business
Days prior to the date of the Closing, no employee benefit plan or
group of plans maintained by the same employer or employee
organization beneficially owns more than 10% of all assets allocated
to such pooled separate account or collective investment fund; or
(d) the Source constitutes assets of an "investment fund" (within
the meaning of Part V of the Prohibited Transaction Class Exemption
84-14 issued by the United States Department of Labor (the "QPAM
Exemption")) managed by a "qualified professional asset manager" or
"QPAM" (within the meaning of Part V of the QPAM Exemption), no
employee benefit plan's assets that are included in such investment
fund, when combined with the assets of all other employee benefit
plans established or maintained by the same employer or by an
affiliate (within the meaning of Section V(c)(1) of the QPAM
Exemption) of such employer or by the same employee organization and
managed by such QPAM, exceed 20% of the total client assets managed by
such QPAM, the conditions of Part 1(c) and (g) of the QPAM Exemption
are satisfied, neither the QPAM nor a person controlling or controlled
by the QPAM (applying the definition of "control" in Section V(e) of
the QPAM Exemption) owns a 5% or more interest in the Company and (i)
the identity of such QPAM and (ii) the names of all employee benefit
plans whose assets are included in such investment fund have been
disclosed to MIC in writing pursuant to this paragraph (d); or
(e) the Source is a governmental plan; or
(f) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee
benefit plans, each of which has been identified to MIC in writing
pursuant to this paragraph (f); or
(g) the Source does not include assets of any employee benefit
plan, other than a plan exempt from the coverage of ERISA.
As used in this Section 6.2, the terms "employee benefit plan",
"governmental plan" and "separate account" shall have the respective meanings
assigned to such terms in Section 3 of ERISA.
20. PAYMENTS ON NOTES.
Subject to the next succeeding paragraph, payments of principal and
interest becoming due and payable on the Notes shall be made in Chicago,
Illinois at the principal office of Bank One, NA in such jurisdiction. The
Companies may at any time, by notice to each Holder of a Note, change the place
of payment of the Notes so long as such place of payment shall be either the
principal office of the Company in such jurisdiction or the principal office of
a bank or trust company in such jurisdiction
So long as any Noteholder or any nominee of such Noteholder shall be
the Holder of any Note, and notwithstanding anything contained in this Agreement
or in such Note or any other Note Document to the contrary, the Obligors will
pay all sums becoming due on such Note by the method and at the address
specified for such purpose below such Noteholder's name in Schedule A, or by
such other method or at such other address as such Noteholder shall have from
time to time specified to the Administrative Obligor in writing for such
purpose, without the presentation or surrender of such Note or the making of any
notation thereon, except that upon written request of the Administrative Obligor
made concurrently with or reasonably promptly after payment or prepayment in
full of any Note, such Noteholder shall surrender such Note for cancellation,
reasonably promptly after any such request, to the Administrative Obligor at its
address for notices specified in this Agreement. Prior to any sale or other
disposition of any Note held by any Noteholder or any nominee of such
Noteholder, such Noteholder
52
will, at its election, either endorse thereon the amount of principal paid
thereon and the last date to which interest has been paid thereon or surrender
such Note to the Administrative Obligor in exchange for a new Note or Notes
pursuant to this Agreement. The Obligors will afford the benefits of this
Section to any Institutional Investor that is the direct or indirect transferee
of any Note purchased by any Noteholder under this Agreement and that has made
the same agreement relating to such Note as the Noteholders have made in this
Section.
No Obligor will, and no Obligor will permit any Affiliate, to
purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of
the outstanding Notes except upon the payment or prepayment of the Notes in
accordance with the terms of this Agreement.
21. EXPENSES, ETC.
21.1 Noteholder Group Expenses.
Whether or not the transactions contemplated hereby are consummated,
the Obligors will pay all costs and expenses (including reasonable attorneys'
fees of a single special counsel and, if reasonably required, local or other
counsel) incurred by the Collateral Agent and the Noteholders and each other
Holder of a Note in connection with such transactions and in connection with any
amendments, waivers or consents under or in respect of this Agreement or the
Notes and the other Note Documents (whether or not such amendment, waiver or
consent becomes effective), including, without limitation: (a) the costs and
expenses incurred in enforcing or defending (or determining whether or how to
enforce or defend) any rights under this Agreement or the Notes or any of the
other Note Documents or in responding to any subpoena or other legal process or
informal investigative demand issued in connection with this Agreement or the
Notes or any of the other Note Documents, or by reason of being a Holder of any
Note, and (b) the costs and expenses, including financial advisors' fees,
incurred in connection with the insolvency or bankruptcy of any Obligor or any
Subsidiary or in connection with any work-out or restructuring of the
transactions contemplated hereby and by the Notes (collectively, the "Noteholder
Group Expenses"). The Obligors will pay, and will save each Noteholder and each
other Holder of a Note harmless from, all claims in respect of any fees, costs
or expenses if any, of brokers and finders (other than those retained by such
Noteholder or other Holder).
21.2 Payment of Noteholder Group Expenses.
The Noteholder Group shall render statements regarding the Noteholder
Group expenses to the Administrative Obligor from time to time and such
statements shall be conclusively presumed to be correct and accurate and
constitute an account stated between the Obligors and the Noteholder Group
unless, within 30 days after receipt thereof by Administrative Obligor,
Administrative Obligor shall deliver to the Noteholder Group written objection
thereto describing the error or errors contained in any such statement. The
Obligors shall pay the Noteholder Group Expenses to the Noteholder Group on a
pro rata basis. If any such expenses are not paid when due, the Noteholder Group
may deduct the amount owed from the Noteholder Group Expense Fund, and the
Obligors shall pay into the Noteholder Group Expense Fund an amount sufficient
to maintain therein at all times no less than $250,000. Until the Obligations
have been paid in full in cash, any sum paid into the Noteholder Group Expense
Fund shall be the exclusive property of the Noteholder Group. The Collateral
Agent may invest amounts in the Noteholder Group Expense Fund in Cash
Equivalents and money market funds backed by items set forth in clauses (a), (b)
and (c) of the definition of "Cash Equivalents."
53
21.3 Survival.
The obligations of the Obligors under this Section 21 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement or the Notes, and the termination of this Agreement.
22. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement, the Notes and the other Note
Documents, the purchase or transfer by each Noteholder of any Note or portion
thereof or interest therein and the payment of any Note, and may be relied upon
by any subsequent Holder of a Note, regardless of any investigation made at any
time by or on behalf of any Noteholder or any other Holder of a Note. All
statements contained in any certificate or other instrument delivered by or on
behalf of any Obligor pursuant to this Agreement shall be deemed representations
and warranties of such Obligor under this Agreement. Subject to the preceding
sentence, this Agreement, the Notes and the other Note Documents embody the
entire agreement and understanding among the Noteholders, the Collateral Agent
and the Obligors and supersede all prior agreements and understandings relating
to the subject matter hereof.
23. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by any Noteholder at the Closing (except the
Notes themselves), and (c) financial statements, certificates and other
information previously or hereafter furnished to any Noteholder, may be
reproduced by such Noteholder by any photographic, photostatic, microfilm,
microcard, miniature photographic or other similar process and such Noteholder
may destroy any original document so reproduced. The Obligors agree and
stipulate that, to the extent permitted by applicable law, any such reproduction
shall be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made by such Noteholder in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section shall
not prohibit an Obligor or any other Holder of Notes from contesting any such
reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.
24. CONFIDENTIAL INFORMATION.
For the purposes of this Section, "Confidential Information" means
information delivered to the Collateral Agent or any Noteholder by or on behalf
of any Obligor or any Subsidiary in connection with the transactions
contemplated by or otherwise pursuant to this Agreement that is proprietary in
nature and that was clearly marked or labeled or otherwise adequately identified
when received by the Collateral Agent or such Noteholder as being confidential
information of such Obligor or such Subsidiary, provided that such term does not
include information that (a) was publicly known or otherwise known to the
Collateral Agent or such Noteholder prior to the tune of such disclosure, (b)
subsequently becomes publicly known through no act or omission by the Collateral
Agent or such Noteholder or any person acting on such Noteholder's behalf, (c)
otherwise becomes known to such Noteholder other than through disclosure by an
Obligor or any Subsidiary, or (d) constitutes financial statements delivered to
the Collateral Agent or such Noteholder under this Agreement that are otherwise
publicly available. The Collateral Agent and each Noteholder will maintain the
confidentiality of such Confidential Information in accordance with procedures
adopted by the Collateral Agent or such Noteholder in good faith to protect
confidential information of third parties delivered to the Collateral Agent or
such Noteholder, provided
54
that the Collateral Agent or such Noteholder may deliver or disclose
Confidential Information to (i) the Collateral Agent or such Noteholder's
directors, officers, employees, agents, attorneys and affiliates (to the extent
such disclosure reasonably relates to the administration of the investment
represented by such Noteholder's Notes), (ii) the Collateral Agent or such
Noteholder's financial advisors and other professional advisors who agree to
hold confidential the Confidential Information substantially in accordance with
the terms of this Section, (iii) any Institutional Investor to which the
Collateral Agent or such Noteholder sells or offers to sell such Note or any
part thereof or any participation therein (if such Person has agreed in writing
prior to its receipt of such Confidential Information to be bound by the
provisions of this Section), (iv) any Person from which the Collateral Agent or
such Noteholder offers to purchase any security of an Obligor (if such Person
has agreed in writing prior to its receipt of such Confidential Information to
be bound by the provisions of this Section 24, (v) any federal or state
regulatory authority having jurisdiction over the Collateral Agent and such
Noteholder, (vi) the National Association of Insurance Commissioners or any
similar organization, or any nationally recognized rating agency that requires
access to information about the Collateral Agent and such Noteholder's
investment portfolio or (vii) any other Person to which such delivery or
disclosure may be necessary or appropriate (w) to effect compliance with any
law, rule, regulation or order applicable to the Collateral Agent and such
Noteholder, (x) in response to any subpoena or other legal process, (y) in
connection with any litigation to which such Noteholder is a party or (z) if an
Event of Default has occurred and is continuing, to the extent such Noteholder
may reasonably determine such delivery and disclosure to be necessary or
appropriate in the enforcement or for the protection of the rights and remedies
under such Noteholder's Notes or this Agreement or the other Note Documents
(provided, that if the Collateral Agent or any Noteholder is required to
disclose any Confidential Information as provided in clauses (w), (x) or (y)
above, it is agreed that, to the extent permitted by law, the Collateral Agent
or such Noteholder will use its reasonable efforts to provide the Obligors with
prompt notice of such requirement so that the Obligors may seek an appropriate
protective order if they so desire). Each Holder of a Note, by its acceptance of
a Note, will be deemed to have agreed to be bound by and to be entitled to the
benefits of this Section as though it were a party to this Agreement. On
reasonable request by the Administrative Obligor in connection with the delivery
to any Holder of a Note of information required to be delivered to such Holder
under this Agreement or requested by such Holder (other than a Holder that is a
party to this Agreement or its nominee), such Holder will enter into an
agreement with the Administrative Obligor embodying the provisions of this
Section 24.
55
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Administrative Obligor, whereupon the foregoing shall become a binding agreement
between you and the Obligors.
Very truly yours,
COMPANIES:
MIDAS INTERNATIONAL CORPORATION,
a Delaware corporation
By:________________________________________
Name:
Title:
PARTS WAREHOUSE, INC.
By:________________________________________
Name:
Title:
DEALERS WHOLESALE, INC.
By:________________________________________
Name:
Title:
INTERNATIONAL PARTS CORPORATION
By:________________________________________
Name:
Title:
MUFFLER CORPORATION OF AMERICA
By:________________________________________
Name:
Title:
Counterpart Signature Page
Note, Guaranty and Security Agreement
HUTH, INC.
By:________________________________________
Name:
Title:
MIDAS PROPERTIES, INC.
By:________________________________________
Name:
Title:
MIDAS REALTY CORPORATION
By:________________________________________
Name:
Title:
COSMIC HOLDINGS LLC
By:________________________________________
Name:
Title:
COSMIC HOLDINGS CORPORATION
By:________________________________________
Name:
Title:
GUARANTORS:
MIDAS, INC.
By:________________________________________
Name:
Title:
Counterpart Signature Page
Note, Guaranty and Security Agreement
PROGRESSIVE AUTOMOTIVE SYSTEMS, INC.
By:________________________________________
Name:
Title:
MIDAS ILLINOIS, INC.
By:________________________________________
Name:
Title:
MIDAS INTERNATIONAL CORPORATION,
a Wyoming corporation
By:________________________________________
Name:
Title:
MIDAS CANADA HOLDINGS LIMITED
By:________________________________________
Name:
Title:
MIDAS CANADA, INC.
By:________________________________________
Name:
Title:
MIDAS REALTY CORPORATION OF CANADA, INC.
By:________________________________________
Name:
Title:
Counterpart Signature Page
Note, Guaranty and Security Agreement
APWI CANADA, INC.
By:________________________________________
Name:
Title:
MDS AUTOMOTIVE, B.V.,
A Netherlands corporation
By:________________________________________
Name:
Title: a Managing Director
MIDAS AUTOMOTIVE INTERNATIONAL, B.V.,
a Netherlands corporation
By:________________________________________
Name:
Title: a Managing Director
COLLATERAL AGENT:
U.S. BANK NATIONAL ASSOCIATION,
as Collateral Agent
By:________________________________________
Name:
Title:
Counterpart Signature Page
Note, Guaranty and Security Agreement
NOTEHOLDERS:
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By CIGNA Investments, Inc.
By:________________________________________
Name:
Title:
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
ON BEHALF OF ONE OR MORE
SEPARATE ACCOUNTS
By CIGNA Investments, Inc.
By:________________________________________
Name:
Title:
CANADA LIFE INSURANCE COMPANY OF AMERICA
By:________________________________________
Name:
Title:
CANADA LIFE INSURANCE COMPANY OF NEW YORK
By:________________________________________
Name:
Title:
SOUTHERN FARM BUREAU LIFE INSURANCE COMPANY
By:________________________________________
Name:
Title:
AMERICAN GENERAL LIFE INSURANCE COMPANY
THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK
By AIG Global Investment Corp.,
investment adviser
By:________________________________________
Name:
Title:
THE TRAVELERS INSURANCE COMPANY
By:________________________________________
Name:
Title:
FIRST TRENTON INDEMNITY COMPANY
By:________________________________________
Name:
Counterpart Signature Page
Note, Guaranty and Security Agreement
Schedule A
Information Relating to Noteholders
Schedule B
Defined Terms
As used in this Agreement, the following terms shall have the following
definitions:
"Account Debtor" means any Person who is or who may become
obligated under, with respect to, or on account of, an Account, chattel paper,
or a General Intangible.
"Accounts" means, as to any Person, all of such Person's now
owned or hereafter acquired right, title, and interest with respect to
"accounts" (as that term is defined in the Code), and any and all supporting
obligations in respect thereof.
"ACH Transactions" means any cash management or related
services (including the Automated Clearing House processing of electronic funds
transfers through the direct Federal Reserve Fedline system) provided by Bank
One or its Affiliates for the account of any Obligor.
"Additional Documents" has the meaning set forth in Section
4.4(c).
"Additional Revolver Fee" has the meaning set forth in Section
2.2.
"Administrative Obligor" has the meaning set forth in Section
17.9.
"Advances" has the meaning set forth in Section 2.1(a) of the
Bank Loan Agreement.
"Affiliate" means, as applied to any Person, any other Person
who, directly or indirectly, controls, is controlled by, or is under common
control with, such Person. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct the management and
policies of a Person, whether through the ownership of Stock, by contract, or
otherwise; provided, however, that, for purposes of Section 7.14 hereof: (a) any
Person which owns directly or indirectly 10% or more of the securities having
ordinary voting power for the election of directors or other members of the
governing body of a Person or 10% or more of the partnership or other ownership
interests of a Person (other than as a limited partner of such Person) shall be
deemed to control such Person; (b) each director (or comparable manager) of a
Person shall be deemed to be an Affiliate of such Person; and (c) each
partnership or joint venture in which a Person is a partner or joint venturer
shall be deemed to be an Affiliate of such Person. None of the Noteholders shall
be deemed to be an Affiliate of any Obligor.
"Agreement" has the meaning set forth in the preamble hereto.
"Approved Fund" means any Fund that is administered or managed
by (a) a Noteholder, (b) an Affiliate of a Noteholder or (c) an entity or an
Affiliate of an entity that administers or manages a Noteholder.
"APWI Canada" means APWI Canada, Inc., a corporation organized
under the laws of Canada.
"Availability" shall have the meaning given to such term in
the Bank Loan Agreement.
"Bank Agent" means Bank One, solely in its capacity as
administrative agent for the Lenders under the Bank Loan Agreement and not in
its individual capacity, and any successor thereto.
"Bank Loan Agreement" means the Loan and Security Agreement by
and among the Obligors, the Bank Agent and the Lenders dated March 27, 2003, as
amended, modified or restated from time to time, but without giving effect to
any such amendments, modifications or restatements made other than in compliance
with the Intercreditor Agreement.
"Bankruptcy Code" means, as applicable, (i) the United States
Bankruptcy Code, (ii) the Bankruptcy and Insolvency Act (Canada) or (iii) the
Companies' Creditors Arrangement Act (Canada), or any similar legislation in a
relevant jurisdiction, in each case as in effect from time to time.
"Bank One" means Bank One, NA, a national banking association
having its principal office in Chicago, Illinois, in its individual capacity
under the Bank Loan Agreement, and its successors.
"Bank Products" means any service or facility extended to
Parent or its Subsidiaries by Bank One or any Affiliate of Bank One including:
(a) credit cards, (b) credit card processing services, (c) debit cards, (d)
purchase cards, (e) ACH Transactions, (f) cash management, including controlled
disbursement, accounts or services, or (g) Hedge Agreements.
"Bank Product Agreements" means those certain cash management
service agreements entered into from time to time by Parent or its Subsidiaries
in connection with any of the Bank Products.
"Bank Product Obligations" means all obligations, liabilities,
contingent reimbursement obligations, fees, and expenses owing by Parent or its
Subsidiaries to Bank One or its Affiliates pursuant to or evidenced by the Bank
Product Agreements and irrespective of whether for the payment of money, whether
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising, and including all such amounts that an Obligor is
obligated to reimburse to Bank Collateral Agent or any member of the Lender
Group as a result of Bank Collateral Agent or such member of the Lender Group
purchasing participations or executing indemnities or reimbursement obligations
with respect to the Bank Products provided to Parent or its Subsidiaries
pursuant to the Bank Product Agreements.
"Benefit Plan" means a "defined benefit plan" (as defined in
Section 3(35) of ERISA) or a benefit plan under Canadian Employee Benefit Laws
for which any Obligor or any Subsidiary or ERISA Affiliate of any Obligor has
been an "employer" (as defined in Section 3(5) of ERISA) or has held equivalent
status under Canadian Employee Benefit Laws within the past six years.
"Board of Directors" means, with respect to any Person, the
board of directors (or comparable managers) of such Person or any committee
thereof duly authorized to act on behalf thereof.
"Books" means, as to any Person, all of such Person's now
owned or hereafter acquired books and records (including all of its Records
indicating, summarizing, or evidencing its assets (including the Collateral) or
liabilities, all of such Person's Records relating to its or their business
operations or financial condition, and all of its or their goods or General
Intangibles related to such information).
"Borrowing Base Certificate" shall have the meaning given to
such term in the Bank Loan Agreement.
"Business Day" means (i) with respect to any payment a day
(other than a Saturday or Sunday) on which banks generally are open in Chicago
and New York City for the conduct of substantially all of their commercial
lending activities, interbank wire transfers can be made on the Fedwire system
and dealings in United States dollars are carried on in the London interbank
market and (ii) for all other purposes, a day (other than a Saturday or Sunday)
on which banks generally are open in
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Chicago for the conduct of substantially all of their commercial lending
activities and interbank wire transfers can be made on the Fedwire system.
"Business Transformation Charges" means, with respect to
Parent and its Subsidiaries for any period and without duplication of amounts
included as special or restructuring charges determined in accordance with GAAP
for such period, operating expenses in respect of the Inventory Divestiture Plan
to the extent incurred as described on Schedule B-1 in an aggregate amount not
in excess of $5,700,336.
"Canadian Documents" means the Canadian Security Agreement,
the Canadian Pledge Agreement and the Canadian Guaranty.
"Canadian Employee Benefits Laws" means the Canadian Pension
Plan Act (Canada), the Pension Benefit Act (Ontario), the Health Insurance Act
(Ontario), the Employment Standard Act (Ontario), and any federal, provincial or
local counterparts or equivalents, in each case, as amended from time to time.
"Canadian Guaranty" means that certain Guaranty executed and
delivered by the Canadian Guarantors in favor of the Collateral Agent, for the
benefit of the Noteholders, in form and substance satisfactory to the Collateral
Agent and Noteholders.
"Canadian Guarantors" means collectively Midas Canada
Holdings, Midas Canada, Midas Canada Realty and APWI Canada.
"Canadian Income Tax Act" means the Income Tax Act (Canada),
R.S.C. 1985 C.1 (5th Supp), as amended.
"Canadian Pledge Agreement" means that certain Stock Pledge
Agreement executed and delivered by the Canadian Guarantors in favor of the
Collateral Agent, for the benefit of Noteholder Group, in form and substance
satisfactory to the Collateral Agent and Noteholders
"Canadian Security Agreement" means that certain Security
Agreement executed and delivered by the Canadian Guarantors in favor of
Collateral Agent, for the benefit of the Noteholders, in form and substance
satisfactory to Collateral Agent.
"Capital Expenditures" means, with respect to Parent and its
Subsidiaries for any period, the sum of (i) the aggregate of all expenditures by
Parent and its Subsidiaries during such period that in accordance with GAAP are
or should be included in "property, plant and equipment" or in a similar fixed
asset account on its balance sheet, whether such expenditures are paid in cash
or financed and including all Capitalized Lease Obligations paid or payable
during such period, and (ii) to the extent not covered by clause (i) above, the
aggregate of all expenditures by Parent and its Subsidiaries during such period
to acquire by purchase or otherwise the business or fixed assets of, or the
capital Stock of, any other Person.
"Capital Lease" means a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP.
"Capitalized Lease Obligation" means any Indebtedness
represented by obligations under a Capital Lease.
"Cash Equivalents" means (a) marketable direct obligations
issued or unconditionally guaranteed by the United States or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within 1 year from the date of acquisition thereof, (b)
marketable
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direct obligations issued by any state of the United States or any political
subdivision of any such state or any public instrumentality thereof maturing
within 1 year from the date of acquisition thereof and, at the time of
acquisition, having the highest rating obtainable from either S&P or Moody's,
(c) commercial paper maturing no more than 270 days from the date of acquisition
thereof and, at the time of acquisition, having a rating of A-1 or P-1, or
better, from S&P or Moody's, and (d) certificates of deposit or bankers'
acceptances maturing within 1 year from the date of acquisition thereof either
(i) issued by any bank organized under the laws of the United States or any
state thereof which bank has a rating of A or A2, or better, from S&P or
Moody's, or (ii) certificates of deposit less than or equal to $100,000 in the
aggregate issued by any other bank insured by the Federal Deposit Insurance
Corporation.
"Cash Restructuring Charges" means cash charges with respect
to the refinancing of Indebtedness, the exiting of the PWI business, the closing
of distribution centers, the closing or refranchising of Company-Owned Stores,
the closing and outsourcing of the manufacturing operations located in Hartford,
Wisconsin, and related corporate downsizing, including, but not limited to, cash
charges pertaining to the termination of lease commitments, decommissioning
charges, shipping and handling related to the closing of facilities, facility
abandonment, environmental and legal charges, severance and related costs and
contract termination charges, all such Cash Restructuring Charges subject to a
maximum aggregate amount not to exceed $12,600,000 for the fiscal year ended
December 28, 2002 and $35,000,000 for the two (2) fiscal year period ending
January 1, 2005. Cash Restructuring Charges shall include accruals for
outstanding warranty claims to the extent permitted by the Noteholders.
"Change of Control" means (a) any "person" or "group" (within
the meaning of Sections 13(d) and 14(d) of the Exchange Act) becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of 20%, or more, of the Stock of Parent having the right to vote for
the election of members of the Board of Directors, or (b) a majority of the
members of the Board of Directors do not constitute Continuing Directors, or (c)
any Obligor ceases to directly own and control 100% of the outstanding capital
Stock of each of its Subsidiaries extant as of the Closing Date.
"Closing" has the meaning given to such term in Section 2.1.
"Closing Date" has the meaning set forth in Section 2.1.
"Closing Date Business Plan" means the set of Projections of
the Obligors for the 2 year period following the Closing (on a month by month
basis), in form and substance (including as to scope and underlying assumptions
and giving effect to the Inventory Divestiture Plan) satisfactory to the
Collateral Agent.
"Code" means the Illinois Uniform Commercial Code, as in
effect from time to time.
"Collateral" means all assets and property of each Obligor,
including all of such Obligor's now owned or hereafter acquired right, title,
and interest in and to each of the following:
(a) Accounts,
(b) Books,
(c) Equipment,
(d) Deposit Accounts,
(e) General Intangibles,
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(f) Inventory,
(g) Investment Property,
(h) Negotiable Collateral,
(i) Real Property Collateral,
(j) money or other assets of each such Obligor, that
now or hereafter come into the possession, custody, or control of any
member of the Noteholder Group, and
(k) the proceeds and products, whether tangible or
intangible, of any of the foregoing, including proceeds of insurance
covering any or all of the foregoing, and any and all Accounts, Books,
Deposit Accounts, Equipment, General Intangibles, Inventory, Investment
Property, Negotiable Collateral, Real Property, money, deposit
accounts, or other tangible or intangible property resulting from the
sale, exchange, collection, or other disposition of any of the
foregoing, or any portion thereof or interest therein, and the proceeds
thereof.
"Collateral Access Agreement" has the meaning given to such
term in the Bank Loan Agreement.
"Collateral Agent" means U.S. Bank National Association,
solely in its capacity as the Collateral Agent for the Noteholders and not in
its individual capacity, and any successor thereto. As used in the Mortgages,
the term "Administrative Agent" shall mean the Collateral Agent under this
Agreement.
"Collateral Agent's Liens" means the Liens granted by the
Obligors to the Collateral Agent for the benefit of the Noteholders under this
Agreement or the other Note Documents.
"Collateral Agent-Related Persons" means the Collateral Agent
together with its Affiliates, officers, directors, employees, and agents.
"Collections" means all cash, checks, notes, instruments, and
other items of payment (including insurance proceeds, proceeds of cash sales,
rental proceeds, and tax refunds) received by any Obligor, regardless of whether
any such payment constitutes the proceeds of Collateral.
"Commercial Tort Claim Assignment" has the meaning set forth
in Section 4.4(b).
"Company and Companies" have the respective meanings set forth
in the preamble to this Agreement.
"Company-Owned Store" means a retail location owned and
operated by an Obligor.
"Compliance Certificate" means a certificate substantially in
the form of Exhibit C-1 delivered by a member of Senior Management of Parent to
the Noteholders.
"Confidential Information" has the meaning set forth in
Section 24.
"Consolidated Net Income" means, with respect to any Person
for any period, the net income (loss) of such Person and its Subsidiaries for
such period, determined on a consolidated basis and in accordance with GAAP.
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"Continuing Director" means (a) any member of the Board of
Directors of Parent who was a director (or comparable manager) of Parent on the
Closing Date, and (b) any individual who becomes a member of the Board of
Directors of Parent after the Closing Date if such individual was appointed or
nominated for election to the Board of Directors of Parent by a majority of the
Continuing Directors, but excluding any such individual originally proposed for
election in opposition to the Board of Directors of Parent in office at the
Closing Date in an actual or threatened election contest relating to the
election of the directors (or comparable managers) of Parent (as such terms are
used in Rule 14a-11 under the Exchange Act) and whose initial assumption of
office resulted from such contest or the settlement thereof.
"Control Agreement" has the meaning given to such term in the
Bank Loan Agreement.
"Copyright Security Agreement" means a copyright security
agreement executed and delivered by each Obligor and the Collateral Agent, the
form and substance of which is satisfactory to the Collateral Agent and the
Noteholders.
"Default" means an event, condition, or default that, with the
giving of notice, the passage of time, or both, would be an Event of Default.
"Disbursement Letter" means an instructional letter executed
and delivered by Administrative Obligor to the Collateral Agent and Noteholders
regarding the extensions of credit to be made on the Closing Date, the form and
substance of which is satisfactory to the Collateral Agent and Noteholders.
"Dollars" or "$" means United States dollars.
"EBITDA" means, with respect to any fiscal period, Parent's
and its Subsidiaries Consolidated Net Income, minus extraordinary gains, plus,
to the extent deducted in determining Consolidated Net Income, interest expense,
income taxes, Cash Restructuring Charges, depreciation and amortization, and
other non-cash charges, all for such period and all as determined in accordance
with GAAP. Solely for the purpose of calculating EBITDA for the financial
covenants set forth in Sections 7.20(a)(i), (ii) and (iii) and Section
7.20(b)(i), (x) Business Transformation Charges shall be an add-back to EBITDA
in amounts equal to $2,900,000 and $2,800,000 for the fiscal quarters ending
September 27, 2003 and January 3, 2004, respectively, and (y) an amount equal to
$975,000 will be an add-back to EBITDA for each of the fiscal quarters ending
June 29, 2002, September 28, 2002 and December 28, 2002.
"EBITDAR" means with respect to any fiscal period, EBITDA plus
Net Rent for such period, all as determined in accordance with GAAP.
"Environmental Actions" means any complaint, summons,
citation, notice, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter, or other communication from any
Governmental Authority, or any third party involving violations or alleged
violations of Environmental Law or releases of Hazardous Materials, (a) from any
assets, properties, or businesses of any Obligor or any predecessor in interest,
(b) from adjoining properties or businesses, or (c) from or onto any facilities
which received Hazardous Materials generated by any Obligor or any predecessor
in interest.
"Environmental Law" means any applicable federal, state,
provincial, foreign or local statute, law, rule, regulation, ordinance, code,
permit, binding and enforceable guideline, binding and enforceable written
policy or rule of common law now or hereafter in effect and in each case as
amended,
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or, to the extent binding on any Obligor, any judicial or administrative
interpretation thereof, including any judicial or administrative order, consent
decree or judgment relating to the environment, human health, employee health
and safety, or Hazardous Materials, including CERCLA; RCRA; the Federal Water
Pollution Control Act, 33 USCss. 1251 et seq.; the Toxic Substances Control Act,
15 USC,ss. 2601 et seq.; the Clean Air Act, 42 USCss. 7401 et seq.; the Safe
Drinking Water Act, 42 USC.ss. 3803 et seq.; the Oil Pollution Act of 1990, 33
USC.ss. 2701 et seq.; the Emergency Planning and the Community Right-to-Know Act
of 1986, 42 USC. ss. 11001 et seq.; the Hazardous Material Transportation Act,
49 USCss. 1801 et seq.; and the Occupational Safety and Health Act, 29 USC. ss.
651 et seq. (to the extent it regulates occupational exposure to Hazardous
Materials); the Canadian Environmental Protection Act (Canada); the Fisheries
Act (Canada); the Transportation of Dangerous Goods Act (Canada); the
Environmental Protection Act (Ontario); the Water Resource Act (Ontario); the
Waste Management Act (British Columbia); the Environmental Quality Act (Quebec);
and any federal, state, provincial, local or foreign counterparts or
equivalents, in each case as amended from time to time.
"Environmental Liabilities and Costs" means all liabilities,
monetary obligations, Remedial Actions, losses, damages, punitive damages,
consequential damages, treble damages, costs and expenses (including all
reasonable fees, disbursements and expenses of counsel, experts, or consultants,
and costs of investigation and feasibility studies), fines, penalties,
sanctions, and interest incurred as a result of any claim or demand by any
Governmental Authority or any third party, and which relate to any Environmental
Action.
"Environmental Lien" means any Lien in favor of any
Governmental Authority for Environmental Liabilities and Costs.
"Equipment" means, as to any Person, all of such Person's now
owned or hereafter acquired right, title, and interest with respect to
equipment, machinery, machine tools, motors, furniture, furnishings, fixtures,
vehicles (including motor vehicles), tools, parts, goods (other than consumer
goods, farm products, or Inventory), wherever located, including all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute thereto.
"ERISA Affiliate" means (a) any Person subject to ERISA whose
employees are treated as employed by the same employer as the employees of an
Obligor under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
an Obligor under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which an Obligor is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any Person subject to ERISA that is a party to an arrangement
with an Obligor and whose employees are aggregated with the employees of an
Obligor under IRC Section 414(o).
"ERISA Event" means (a) a Reportable Event with respect to any
Benefit Plan or Multiemployer Plan, (b) the withdrawal of an Obligor, any of its
Subsidiaries or ERISA Affiliates from a Benefit Plan during a plan year in which
it was a "substantial employer" (as defined in Section 4001(a)(2) of ERISA), (c)
the providing of notice of intent to terminate a Benefit Plan in a distress
termination (as described in Section 4041(c) of ERISA), (d) the institution by
the PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan, (e)
any event or condition (i) that provides a basis under Section 4042(a)(1), (2),
or (3) of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan or Multiemployer Plan, or (ii) that may result in
termination of a
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Multiemployer Plan pursuant to Section 4041A of ERISA, (f) the partial or
complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of an
Obligor, any of its Subsidiaries or ERISA Affiliates from a Multiemployer Plan,
(g) the providing of any security to any Plan under Section 401(a)(29) of the
IRC by an Obligor or its Subsidiaries or any of their ERISA Affiliates or (h)
any equivalent event, action, condition, proceeding or otherwise under Canadian
Employee Benefit Laws.
"Event of Default" has the meaning set forth in Section 8.
"Excess Cash Flow" means, for any fiscal period of Parent, (i)
EBITDAR for such period less (ii) Fixed Charges for such period less (iii)
optional principal payments on Indebtedness during such period, less (iv) Cash
Restructuring Charges paid during such period to the extent not included in the
determination of Fixed Charges for such period.
"Exchange Act" means the Securities Exchange Act of 1934, as
in effect from time to time.
"Existing Collateral Agent" means Bank One, NA, as agent for
the Existing Noteholders.
"Existing Credit Agreement" means the Credit Agreement dated
as of January 22, 1998, by and among the Parent and MIC, as borrowers, Credit
Suisse First Boston, as co-agent, the lenders named therein and the Existing
Collateral Agent, as modified, amended and supplemented prior to the Closing.
"Existing Lenders" means the lenders party to the Existing
Credit Agreement.
"Existing Note Agreement" has the meaning set forth in Section
1.1.
"Existing Noteholders" means the holders of the Existing
Notes.
"Existing Notes" means the 6.89% Guaranteed Senior Notes due
2005 issued by MIC to the Existing Noteholders in the initial aggregate
principal amount of $75,000,000.
"Extraordinary Receipts" means any Collections received by the
Parent or any of its Subsidiaries not in the ordinary course of business (and
not consisting of proceeds described in Section 2.4(b) hereof), including, (i)
foreign, United States, state or local tax refunds, (ii) pension plan
reversions, (iii) proceeds of insurance (including proceeds of the key man life
insurance policies), but excluding insurance with respect to Accounts and
Inventory, (iv) judgments, proceeds of settlements or other consideration of any
kind in connection with any cause of action, except in connection with the
settlement of Accounts in the ordinary course of business, (v) condemnation
awards (and payments in lieu thereof), but excluding condemnation awards with
respect to Inventory, (vi) indemnity payments and (vii) any purchase price
adjustment received in connection with any purchase agreement.
"FEIN" means Federal Employer Identification Number.
"Fiat Magneti Agreements" means (i) the Agreement for
Strategic Alliance, dated October 1, 1998, by and between MIC and Magneti SpA,
and (ii) the License Agreement and the other agreements and documents executed
and delivered in connection therewith, each as amended or otherwise modified
from time to time.
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"Fiscal Year" means the fiscal year of the Parent and its
Subsidiaries consisting of the accounting period of 52 or 53 weeks ending on the
last Saturday of December or the first Saturday of January in each calendar
year.
"Fixed Charges" means for any fiscal period of Parent, without
duplication, (i) Capital Expenditures (net of third party financing), plus (ii)
cash taxes paid, cash interest expense, scheduled principal payments on
Indebtedness (including, without limitation, payments in respect of Capital
Leases and finance leases) made during such period, payments made pursuant to
Section 2.4(d), dividends, Net Rent and Cash Restructuring Charges in excess
of budgeted amounts provided in the Closing Date Business Plan, all for such
period and all as determined in accordance with GAAP.
"Fixed Rate Breakage Fee" has the meaning set forth in Section
2.11.
"Franchise Agreement" means any franchise agreement to which
an Obligor is a party as a franchisor and which is related to the franchising of
the business of operating automotive specialty shops and any other agreements,
documents and leases executed and delivered in connection therewith.
"Fund" means any Person (other than a natural person) that is
(or will be) engaged in making, purchasing, holding or otherwise investing in
commercial loans and similar extensions of credit in the ordinary course of its
business.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.
"General Intangibles" means with respect to any Person, all of
such Person's now owned or hereafter acquired right, title, and interest with
respect to general intangibles (including payment intangibles, contract rights,
rights to payment, judgments, rights arising under common law, statutes, or
regulations, choses or things in action, goodwill, patents, designs, inventions,
trade secrets, trade names, d/b/a's, Internet domain names, logos, trademarks,
servicemarks, copyrights, blueprints, drawings, purchase orders, customer lists,
monies due or recoverable from pension funds, route lists, rights to payment and
other rights under any royalty or licensing agreements, infringement claims,
computer programs, information contained on computer disks or tapes, software,
literature, reports, catalogs, money, deposit accounts, insurance premium
rebates, tax refunds, and tax refund claims), and any and all supporting
obligations in respect thereof, and any other non-tangible personal property
other than goods, Accounts, Investment Property, and Negotiable Collateral.
"Governing Documents" means, with respect to any Person, the
certificate or articles of incorporation, by-laws, or other organizational
documents of such Person.
"Governmental Authority" means any federal (including the
federal government of Canada), provincial, state, local, or other governmental
or administrative body, instrumentality, department, agency, any court,
tribunal, administrative hearing body, arbitration panel, commission, or other
similar dispute-resolving panel or body.
"Guaranteed Obligations" has the meaning set forth in Section
18.1.
"Guarantor" means each person named on the signature pages
hereto as a "Guarantor," and each Person that guarantees, pursuant to Section
6.17 or otherwise, all or any part of the Obligations.
"Guaranty" means the Guaranty set forth in Section 18 hereof,
the Canadian Guaranty and any other guaranty executed and delivered by a
Guarantor in favor of the Collateral Agent, for the
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benefit of the Noteholders, in form and substance satisfactory to the Collateral
Agent and the Noteholders.
"Hazardous Materials" means (a) substances that are defined or
listed in, or otherwise classified pursuant to, any applicable laws or
regulations (including any Environmental Law) as "hazardous substances,"
"hazardous materials," "hazardous wastes," "toxic substances," or any other
formulation intended to define, list, or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, reproductive toxicity, or "EP toxicity", (b) oil, petroleum, or
petroleum derived substances, natural gas, natural gas liquids, synthetic gas,
drilling fluids, produced waters, and other wastes associated with the
exploration, development, or production of crude oil, natural gas, or geothermal
resources, (c) any flammable substances or explosives or any radioactive
materials, (d) asbestos in any form or electrical equipment that contains any
oil or dielectric fluid containing levels of polychlorinated biphenyls in excess
of 50 parts per million, and (e) any other substance, the storage, manufacture,
disposal, treatment, generation, use, transportation, remediation, release into
or concentration in the environment of which is prohibited, controlled,
regulated or licensed by any Governmental Authority under any Environmental Law.
"Hedge Agreement" means any and all transactions, agreements,
or documents now existing or hereafter entered into between Parent or its
Subsidiaries and Bank One or its Affiliates, which provide for an interest rate,
credit, commodity or equity swap, cap, floor, collar, forward foreign exchange
transaction, currency swap, cross currency rate swap, currency option, or any
combination of, or option with respect to, these or similar transactions, for
the purpose of hedging Parent's or its Subsidiaries' exposure to fluctuations in
interest or exchange rates, loan, credit exchange, security or currency
valuations or commodity prices.
"Holder" and "Holders" have the meanings given to such terms
in the preamble to this Agreement.
"Indebtedness" means, with respect to any Person, (a) all
obligations for borrowed money, (b) all obligations evidenced by bonds,
debentures, notes, or other similar instruments and all reimbursement or other
obligations in respect of letters of credit, bankers acceptances, interest rate
swaps, or other financial products, (c) all obligations under Capital Leases,
(d) all obligations or liabilities of others secured by a Lien on any asset of a
Person or its Subsidiaries, irrespective of whether such obligation or liability
is assumed, (e) all obligations for the deferred purchase price of assets (other
than trade debt incurred in the ordinary course of business and repayable in
accordance with customary trade practices), (f) all obligations with respect to
sale-leaseback transactions, and (g) any obligation guaranteeing or intended to
guarantee (whether directly or indirectly guaranteed, endorsed, co-made,
discounted, or sold with recourse) any obligation, or any agreement to maintain
the net worth or working capital or financial condition, of any other Person;
provided, however, that solely for the purpose of calculating the total leverage
ratio set forth in Section 7.20(a)(i), (x) contingent obligations in respect of
guarantees by an Obligor of Indebtedness of its franchisees shall constitute
Indebtedness only to the extent that such contingent obligations exceed
$5,000,000 in the aggregate and (y) obligations in respect of sale-leaseback
transactions shall constitute Indebtedness only to the extent that the present
value of such obligations exceeds $39,000,000 in the aggregate.
"Indemnified Liabilities" has the meaning set forth in Section
11.3.
"Indemnified Losses" has the meaning set forth in Section
16.8(b).
"Indemnified Parties" has the meaning set forth in Section
16.8(b).
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"Indemnified Person" has the meaning set forth in Section
11.3.
"Insolvency Proceeding" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code (including the
Bankruptcy and Insolvency Act (Canada) and the Companies Creditors Arrangement
Act (Canada) or under any other state or federal bankruptcy or insolvency law,
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extensions generally with creditors, or proceedings seeking
reorganization, arrangement, or other similar relief.
"Institutional Investor" has the meaning set forth in Section
5.2.
"Insurance Service Management" means Insurance Service
Management, Inc., a Delaware corporation.
"Intercompany Subordination Agreement" means a subordination
agreement executed and delivered by the Obligors and the Collateral Agent and
the Noteholders, the form and substance of which is satisfactory to the
Collateral Agent and the Noteholders.
"Intercreditor Agreement" means the Intercreditor Agreement
among Bank Agent (in its capacity as agent for the Revolver Lenders and as agent
for the Term Loan Lenders), the Revolver Lenders, the Term Lenders, the
Noteholders, U.S. Bank National Association, as Collateral Agent for the
Noteholders, and acknowledged and consented to by the Obligors, the form and
substance of which is satisfactory to the Noteholders
"Inventory" means all Obligors' now owned or hereafter
acquired right, title, and interest with respect to inventory, including goods
held for sale or lease or to be furnished under a contract of service, goods
that are leased by and Obligor as lessor, goods that are furnished by an Obligor
under a contract of service, and raw materials, work in process, or materials
used or consumed in an Obligor's business.
"Inventory Divestiture Plan" means the plan delivered to the
Noteholders on the Closing Date, ;the form and substance of which is
satisfactory the Noteholders in their reasonable discretion.
"Investment" means, with respect to any Person, any investment
by such Person in any other Person (including Affiliates) in the form of loans,
guarantees, advances, or capital contributions (excluding (a) commission,
travel, and similar advances to officers and employees of such Person made in
the ordinary course of business, and (b) bona fide Accounts arising in the
ordinary course of business consistent with past practices), purchases or other
acquisitions for consideration of Indebtedness or Stock, and any other items
that are or would be classified as investments on a balance sheet prepared in
accordance with GAAP.
"Investment Property" means, with respect to any Person, all
of such Person's now owned or hereafter acquired right, title, and interest with
respect to "investment property" as that term is defined in the Code, and any
and all supporting obligations in respect thereof.
"IRC" means the Internal Revenue Code of 1986, as in effect
from time to time.
"Leased Real Property" means any leasehold interests in real
property now held or hereafter acquired by an Obligor and the improvements
thereto.
B-11
"Lender" and "Lenders" shall have the meaning given to such
term in the Bank Loan Agreement.
"Lender Group" shall have the meaning given to such term in
the Bank Loan Agreement.
"Lien" means any interest in an asset securing an obligation
owed to, or a claim by, any Person other than the owner of the asset, whether
such interest shall be based on the common law, statute, or contract, whether
such interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including the lien, right of
distraint or security interest arising from a mortgage, deed of trust,
encumbrance, pledge, hypothecation, assignment, deposit arrangement, security
agreement, conditional sale or trust receipt, or from a lease, consignment, or
bailment for security purposes and also including reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases, and other title exceptions and encumbrances affecting Real Property.
"Lien Enforcement Action" means (a) any action by the
Collateral Agent to foreclose on any of Collateral Agent's Liens in any
Collateral, (b) any action by Collateral Agent to take possession of, sell or
otherwise realize (judicially or non-judicially) upon any Collateral (including,
without limitation, by setoff or notification of account debtors), and/or (c)
the commencement by the Collateral Agent of any legal proceedings to facilitate
any of the actions described in (a) and (b) above.
"Loan Documents" has the meaning set forth in Section 1.1 of
the Bank Loan Agreement.
"Losses" has the meaning set forth in Section 16.8.
"Magneti SpA" means Magneti Marelli Services S.p.A (as
successor to Magneti Marelli, S.p.A).
"Material Adverse Change" means (a) a material adverse change
in the business, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of an Obligor individually, or
the Obligors taken as a whole, (b) a material impairment of an Obligor's ability
to perform its obligations under the Note Documents to which it is a party or of
the Collateral Agent's or the Noteholders' ability to enforce the Obligations or
realize upon the Collateral, or (c) a material impairment of the enforceability
or priority of the Collateral Agent's Liens with respect to the Collateral;
provided that the consummation of the transactions contemplated by the Inventory
Divestiture Plan shall not, solely by itself constitute a Material Adverse
Change.
"Material Contracts" means any agreement or contract of any
Obligor which (a) involves consideration to such Obligor of $500,000 or more in
any year, (b) involves consideration by such Obligor of $500,000 or more in any
year, (c) imposes financial obligations on any Obligor of $500,000 or more in
any year (other than any agreement that by its terms may be terminated by any
Company or any Subsidiary upon sixty (60) days' notice or less, but including
any franchise agreement which would otherwise constitute a Material Contract) or
(d) is otherwise material (or, together with related agreements and contracts,
is material) to the business, operations, financial condition, performance or
properties of the Obligors, taken as a whole, excluding, however, customer
purchase orders or purchase orders to any vendor, in each case entered into in
the ordinary course of an Obligor's business. The Material Contracts shall in
any event include the Fiat Magneti Agreements and the Loan Documents.
"Maturity Date" has the meaning set forth in Section 3.4.
B-12
"MIC" means Midas International Corporation, a Delaware
corporation.
"Midas Canada" means Midas Canada Inc., a corporation
organized under the laws of Ontario.
"Midas Canada Holdings" means Midas Canada Holdings Limited, a
corporation organized under the laws of Ontario.
"Midas Canada Realty" means Midas Realty Corporation of Canada
Inc., a corporation organized under the laws of Ontario.
"Minimum Liquidity" shall have the meaning given to such term
in the Bank Loan Agreement.
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"Mortgages" means, individually and collectively, one or more
mortgages, deeds of trust, or deeds to secure debt, executed and delivered by an
Obligor in favor of Collateral Agent, for the benefit of the Noteholder Group,
in form and substance satisfactory to Collateral Agent, that encumber the Real
Property Collateral and the related improvements thereto.
"Multiemployer Plan" means a "multiemployer plan" (as defined
in Section 4001(a)(3) of ERISA) or such equivalent plan under Canadian Employee
Benefit Laws to which an Obligor, any of its Subsidiaries, or any ERISA
Affiliate has contributed, or was obligated to contribute, within the past six
years.
"Negotiable Collateral" means, with respect to any Person, all
of such Person's now owned and hereafter acquired right, title, and interest
with respect to letters of credit, letter of credit rights, instruments,
promissory notes, drafts, documents, and chattel paper (including electronic
chattel paper and tangible chattel paper), and any and all supporting
obligations in respect thereof.
"Net Cash Proceeds" means (a) with respect to any event
described in Section 2.4(b) (a "Sale Event"), the sum of cash or readily
marketable cash equivalents received (including by way of a cash generating sale
or discounting of a note or receivable, but excluding any other consideration
received in the form of assumption by the acquiring Person of debt or other
obligations relating to the properties or assets so disposed of or received in
any other non-cash form) therefrom, whether at the time of such disposition or
subsequent thereto, or (b) with respect to any event described in Section
2.4(e), cash or readily marketable cash equivalents received (but excluding any
other non-cash form) therefrom, whether at the time of such disposition, sale or
issuance or subsequent thereto, net, in either case, of all legal, title and
recording tax expenses, commissions and other fees and all costs and expenses
incurred and all federal state, local and other taxes required to be accrued as
a liability as a consequence of such transactions and, in the case of a Sale
Event, net of all payments made by any Obligor on any Indebtedness which is
secured by such assets pursuant to a Permitted Lien (other than Collateral
Agent's Liens) upon or with respect to such assets or which must by the terms of
such Lien, or in order to obtain a necessary consent to such Sale Event, or by
applicable law be repaid out of the proceeds from such Sale Event.
"Net Liquidation Percentage" means the percentage of the book
value of Companies' Inventory that is estimated to be recoverable in an orderly
liquidation of such Inventory, such percentage to be as determined from time to
time by a qualified appraisal company approved by Collateral Agent.
B-13
"Net Rent" means, with respect to any fiscal period,
(i) Parent's and its Subsidiaries, (a) gross rent expense, less (b) sublease
rental income from franchisees and other Persons which are not Affiliates that
reduced gross rent expense, as presented in the relevant footnotes to the most
recent annual financial statements of Parent, divided by (ii) four (4).
"Net Restructuring Charges" means Cash Restructuring Charges,
net of all tax benefits in respect thereof.
"Net Worth" means, at any date of determination, the
consolidated shareholders' equity of Parent and its consolidated Subsidiaries,
plus minority interest, as determined in accordance with GAAP.
"Note Documents" means this Agreement, the Copyright Security
Agreement, the Disbursement Letter, each Guaranty, the Mortgages, the Canadian
Documents, the Warrants, the Warrant Agreement, the Patent Security Agreement,
the Pledge Agreement, the Trademark Security Agreement, the Intercompany
Subordination Agreement, the Intercreditor Agreement, the Notes, and any other
agreement entered into, now or in the future, by any Obligor and/or the
Collateral Agent or the Noteholders in connection with this Agreement.
"Note" and "Notes" have the meanings given to such term in
Section 1.2.
"Noteholder Equivalent" has the meaning given to such term in
Section 2.2(d).
"Noteholder Group" means, individually and collectively, each
of the Noteholders and the Collateral Agent.
"Noteholder Group Expense Fund" means a fund maintained by the
Collateral Agent or its designee to be used solely for the payment of Noteholder
Group Expenses, into which the Obligors shall pay $250,000 on the Closing Date
"Noteholder Group Expenses" has the meaning given to such term
in Section 21.1.
"Noteholder-Related Person" means, with respect to any
Noteholder, such Noteholder, together with such Noteholder's Affiliates, and the
officers, directors, employees, and agents of such Noteholder.
"Noteholders" means the Holders of the Notes.
"Obligations" means (a) the due and punctual payment of the
principal of and premium, if any, and interest on (including any interest
accruing after the commencement of any action or proceeding under the federal
bankruptcy laws, as now or hereafter constituted, or any other applicable
domestic or foreign federal or state bankruptcy, insolvency or other similar
law, and any other interest that would have accrued but for the commencement of
such proceeding, whether or not any such interest is allowed as an enforceable
claim in any such proceeding) and fees and other amounts payable with respect to
the Notes and the Guaranteed Obligations; and (b) the due and punctual payment
and performance of any and all other indebtedness and obligations of the
Obligors related to the Notes (or any of them) and the Guaranteed Obligations
arising under this Agreement and/or under any of the other Note Documents,
including, without limitation, all fees and expenses of the Noteholders and/or
the Collateral Agent and/or any provision of any of the Note Documents relating
to indemnification, reimbursement of expenses and the like. Any reference in
this Agreement or in the Note Documents to the Obligations shall include all
amendments, changes, extensions, modifications, renewals, replacements,
substitutions, and supplements, thereto and thereof, as applicable, both prior
and subsequent to any Insolvency Proceeding.
B-14
"Operating Lease" means, with respect to any Person, any lease
(including leases which may be terminated by the lessee at any time) of any
property (whether real, personal or mixed) which is not a Capital Lease other
than any such lease in which that Person is the lessor or sublessor.
"Owned Real Property" means any fee interests in real property
now owned or hereafter acquired by any Obligor and the improvements thereto.
"Parent" has the meaning set forth in the preamble to this
Agreement.
"Patent Security Agreement" means a patent security agreement
executed and delivered by the Obligors and the Collateral Agent, the form and
substance of which is satisfactory to the Collateral Agent and the Noteholders.
"PBGC" means the Pension Benefit Guaranty Corporation as
defined in Title IV of ERISA, or any successor thereto or equivalent entity
under Canadian Employee Benefit Laws.
"Permitted Dispositions" means (a) sales or other dispositions
by an Obligor or its Subsidiary of Equipment that is substantially worn,
damaged, or obsolete in the ordinary course of business, (b) sales by an Obligor
or its Subsidiary of Inventory to buyers in the ordinary course of business, (c)
the sale or other disposition of Inventory and Equipment pursuant to the
Inventory Divestiture Plan for which a Noteholder receives cash consideration at
the closing of any transaction or otherwise consummated on terms and conditions
acceptable to the Noteholders in their reasonable discretion, (d) the use or
transfer of money or Cash Equivalents by an Obligor or its Subsidiaries in a
manner that is not prohibited by the terms of this Agreement or the other Note
Documents, (e) the licensing by any Obligor or its Subsidiaries, on a
non-exclusive basis, of patents, trademarks, copyrights, and other intellectual
property rights in the ordinary course of business, (f) the sale or closing of
Company-Owned Stores which are not profitable, (g) so long as no Event of
Default has occurred and is continuing, the sale of Real Property Collateral, or
any part thereof, not used by any Obligor, (h) the sale of motor vehicles for
fair market value, (i) the refranchising of Company-Owned Stores, (j) leases of
Owned Real Property of the Obligors in the ordinary course of business
consistent with past practices and (k) the disposition and outsourcing of the
Obligors' manufacturing operations located in Hartford, Wisconsin.
"Permitted Investments" means (a) investments in Cash
Equivalents, (b) investments in negotiable instruments for collection, (c)
advances made in connection with purchases of goods or services in the ordinary
course of business, (d) investments by any Company in any other Company or any
US Guarantor in the ordinary course of business consistent with past practices
provided that if any such investment is in the form of Indebtedness, such
Indebtedness investment shall be subject to the terms and conditions of the
Intercompany Subordination Agreement and, upon request of the Collateral Agent
at any time, such Indebtedness shall be evidenced by promissory notes acceptable
to the Collateral Agent which shall be pledged and delivered to Collateral Agent
as security for the Obligations, and (e) investments in the form of securities
of publicly-held companies in an amount not in excess of $10,000 in the
aggregate.
"Permitted Liens" means (a) Liens held by the Collateral Agent
for the benefit of the Collateral Agent and the Noteholders, (b) Liens for
unpaid taxes that either (i) are not yet due or delinquent, or (ii) do not
constitute an Event of Default hereunder and are the subject of Permitted
Protests, (c) Liens set forth on Schedule P-1, (d) the interests of lessors
under Operating Leases, (e) purchase money Liens or the interests of lessors
under Capital Leases to the extent that such Liens or interests secure Permitted
Purchase Money Indebtedness and so long as such Lien attaches only to the asset
purchased or acquired and the proceeds thereof, (f) Liens arising by operation
of law in favor of
B-15
warehousemen, landlords, carriers, mechanics, materialmen, laborers, or
suppliers, incurred in the ordinary course of business and not in connection
with the borrowing of money, and which Liens either (i) are for sums not yet
delinquent, or (ii) are the subject of Permitted Protests, (g) Liens arising
from deposits made in connection with obtaining worker's compensation or other
unemployment insurance, (h) Liens or deposits to secure performance of bids,
tenders, or leases incurred in the ordinary course of business and not in
connection with the borrowing of money, (i) Liens granted as security for surety
or appeal bonds in connection with obtaining such bonds in the ordinary course
of business, (j) Liens resulting from any judgment or award that is not an Event
of Default hereunder, (k) with respect to the Real Property Collateral, Liens,
encumbrances, easements, rights of way, restrictions of record, and zoning
restrictions that are exceptions to the policies for title insurance issued in
connection with the Mortgages, as accepted by the Collateral Agent, (l) with
respect to any Real Property for which the Collateral Agent has elected not to
obtain a policy for title insurance, encumbrances, title defects, title
exceptions, easements, rights of way, restrictions of record, and zoning
restrictions that do not materially interfere with or impair the use or
operation thereof, (m) Liens arising from leases and subleases with franchisees
entered into in the ordinary course of business consistent with past practices,
(n) licenses of intellectual property granted by the Obligors under Franchise
Agreements in the ordinary course of business consistent with past practices and
(o) Liens in favor of the Bank Collateral Agent securing the Revolver
Obligations and the Term Loan Obligations, in each case subject to the
Intercreditor Agreement.
"Permitted Protest" means the right of Parent or any of its
Subsidiaries, as applicable) to protest any Lien (other than any such Lien that
secures the Obligations), taxes (other than payroll taxes or taxes that are the
subject of a United States or Canadian federal tax lien), or rental payment,
provided that (a) a reserve with respect to such obligation is established on
the Books in such amount as is required under GAAP, (b) any such protest is
instituted promptly and prosecuted diligently by Parent or any of its
Subsidiaries, as applicable, in good faith, and (c) the Collateral Agent is
satisfied that, while any such protest is pending, there will be no impairment
of the enforceability, validity, or priority of any of the Collateral Agent's
Liens.
"Permitted Purchase Money Indebtedness" means, as of any date
of determination, Purchase Money Indebtedness incurred after the Closing Date in
an aggregate amount outstanding at any one time not in excess of $5,000,000.
"Person" means natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts, or
other organizations, irrespective of whether they are legal entities, and
governments and agencies and political subdivisions thereof.
"Personal Property Collateral" means all Collateral other than
Real Property.
"Plan" means any employee benefit plan, program, or
arrangement maintained or contributed to by an Obligor or with respect to which
it may incur liability subject to ERISA.
"Pledge Agreement" means a pledge and security agreement, in
form and substance satisfactory to Collateral Agent and the Noteholders,
executed and delivered by each Obligor (including the Parent) that owns Stock of
a Subsidiary of Parent or that is the holder of any promissory notes to be
delivered to Collateral Agent pursuant to Section 4.2.
"PPSA" means the Personal Property Security Act of the
applicable Canadian province or provinces in respect of the Canadian Guarantors.
B-16
"Priority Event" has the meaning given to such term is the
Intercreditor Agreement.
"Projections" means the Obligors' forecasted (a) balance
sheets, (b) profit and loss statements, and (c) cash flow statements, all
prepared on a consistent basis with the Obligors' historical financial
statements, together with appropriate supporting details and a statement of
underlying assumptions.
"Purchase Money Indebtedness" means Indebtedness (other than
the Obligations, but including Capitalized Lease Obligations), incurred at the
time of, or within 20 days after, the acquisition of any fixed assets for the
purpose of financing all or any part of the acquisition cost thereof.
"PWI" means Parts Warehouse, Inc., a Delaware corporation.
"Real Property" means any estates or interests in real
property now owned or hereafter acquired by any Obligor and the improvements
thereto.
"Real Property Collateral" means the parcel or parcels of Real
Property identified on Schedule R-1 and any Real Property hereafter acquired by
an Obligor.
"Records" means information that is inscribed on a tangible
medium or which is stored in an electronic or other medium and is retrievable in
perceivable form.
"Remedial Action" means all actions taken to (a) clean up,
remove, remediate, contain, treat, monitor, assess, evaluate, or in any way
address Hazardous Materials in the indoor or outdoor environment, (b) prevent or
minimize a release or threatened release of Hazardous Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment, (c) perform any pre-remedial studies,
investigations, or post-remedial operation and maintenance activities, or (d)
conduct any other actions identified at 42 USC ss.ss. 9601 (23-24).
"Remedies Notice" means a written notice delivered pursuant to
the Intercreditor Agreement which instructs the Collateral Agent to accelerate
the Obligations and/or to commence the taking of other remedies.
"Report" has the meaning given to such term in the Bank Loan
Agreement.
"Reportable Event" means any of the events described in
Section 4043(c) of ERISA or the regulations thereunder other than a Reportable
Event as to which the provision of 30 days' notice to the PBGC is waived under
applicable regulations.
"Required Noteholders" or "Required Holders" have the meanings
given to such terms in Section 15.1.
"Required Liquidity" has the meaning given to such term is the
Bank Loan Agreement.
"Responsible Officer" means an officer in the Corporate Trust
Services Division of the Collateral Agent.
"Revolver Rate Increase" shall have the meaning given to such
term in Section 2.2.
"S&P" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, and its successors.
B-17
"SEC" means the United States Securities and Exchange
Commission and any successor thereto.
"Securities Account" means a "securities account" as that term
is defined in the Code.
"Securities Act" shall have the meaning given to such term in
Section 5.2.
"Senior Management" means, with respect to any Obligor, any of
the chief executive officer, the chief financial officer, the treasurer, any
assistant treasurer and/or the controller of such Obligor.
"Solvent" means, with respect to any Person on a particular
date, that on such date (a) the fair value of the assets of such Person, at a
fair valuation, will exceed the debts and liabilities, subordinated, contingent
or otherwise, of such Person; (b) the present fair saleable value of the assets
of such Person will be greater than the amount that will be required to pay the
probable liability of such Person on its debts and other liabilities,
subordinated, contingent or otherwise, as such debts and other liabilities
become absolute and matured; (c) such Person will be able to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and (d) such Person will not have
unreasonably small capital with which to conduct the businesses in which it is
engaged as such businesses are now conducted and are proposed to be conducted.
"Stock" means all shares, options, warrants, interests,
participations, or other equivalents (regardless of how designated) of or in a
Person, whether voting or nonvoting, including common stock, preferred stock, or
any other "equity security" (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the SEC under the Exchange Act).
"Subsidiary" of a Person means a corporation, partnership,
limited liability company, or other entity in which that Person directly or
indirectly owns or controls the shares of Stock having ordinary voting power to
elect a majority of the board of directors (or appoint other comparable
managers) of such corporation, partnership, limited liability company, or other
entity.
"Term A Notes" has the meaning set forth in Section 1.2.
"Term A Rate" has the meaning set forth in Section 2.2.
"Term B Note PIK Amount" means, as of any date of
determination, the amount of all interest accrued with respect to the Term B
Notes that has been paid in kind by being added to the balance thereof in
accordance with Section 2.2(b).
"Term B Note" has the meaning set forth in Section 1.2.
"Term B Rate" has the meaning set forth in Section 2.2.
"Term Loans" has the meaning given to such term in the Bank
Loan Agreement.
"Term Note Repayment Trigger" means the Companies' failure to
repay the Notes and the Term Loans (through internally generated funds and
mandatory prepayments described in Section 2.4 and without the making of any
Advance under the Bank Loan Agreement used for optional prepayment) in an
aggregate principal amount of at least $33,000,000 by January 4, 2004.
B-18
"Termination Event" means (i) a Reportable Event with respect
to any Benefit Plan, (ii) any event that causes any Obligor or any of its ERISA
Affiliates to incur liability under Section 409, 502(i), 502(l), 515, 4062,
4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 4971 or 4975 of the
IRC, (iii) the filing of a notice of intent to terminate a Benefit Plan or the
treatment of a Benefit Plan amendment as a termination under Section 4041 of
ERISA, (iv) the institution of proceedings by the PBGC to terminate a Benefit
Plan, (v) any other event or condition which might constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan, or (vi) any equivalent event, action, condition,
proceeding or otherwise under Canadian Employee Benefit Laws.
"Trademark Security Agreement" means a trademark security
agreement executed and delivered by each Obligor and the Collateral Agent, the
form and substance of which is satisfactory to the Collateral Agent and the
Noteholders Collateral Agent.
"UCC Filing Authorization Letter" means a letter executed by
each Obligor authorizing the Collateral Agent to file appropriate financing
statements on Form UCC-1 in such office or offices as may be necessary or, in
the opinion of the Collateral Agent, desirable to perfect the Liens to be
created by each applicable Note Document.
"US Guarantor" means a Guarantor, other than Parent or any
Canadian Guarantor.
"Voidable Transfer" has the meaning set forth in Section 17.8.
"Warrants" means the detachable warrants to purchase common
stock of Parent issued pursuant to the Warrant Agreement.
"Warrant Agreement" means the Warrant Agreement dated as of
the Closing Date among Parent and the Noteholders, the form and substance of
which is satisfactory to the Noteholders.
B-19
Exhibit 1-A
[Form of Term A Note]
Exhibit 1-B
[Form of Term B Note]
Exhibit 3
Conditions to Closing
The obligation of the Noteholder Group (or any member thereof) to enter
into this Agreement (or otherwise to extend any credit provided for hereunder,
including by converting such Noteholder's Existing Notes to Notes hereunder), is
subject to the fulfillment, to the satisfaction of the Noteholder Group, of each
of the conditions precedent set forth below:
(a) the Noteholder Group shall have received (i) satisfactory evidence
of the filing of all UCC and PPSA financing statements with respect to the
Liens created hereunder in such office or offices as may be necessary or,
in the opinion of Collateral Agent, desirable to perfect the security
interests purported to be created by each applicable Note Document, and
(ii) the results of its UCC, PPSA, judgment and tax lien searches, which
searches shall not have revealed any Liens on the assets or properties of
the Obligors other than Permitted Liens and Liens to be terminated on the
Closing Date;
(b) the Noteholder Group shall have received each of the following
documents, in form and substance satisfactory to Collateral Agent and
Noteholders, duly executed, and each such document shall be in full force
and effect:
(1) the Notes,
(2) the Intercreditor Agreement,
(3) the Control Agreements,
(4) the Copyright Security Agreement,
(5) the Collateral Agent fee letter referenced in Section 16.10,
(6) the Disbursement Letter,
(7) each Guaranty,
(8) the Mortgages,
(9) the Patent Security Agreement,
(10) the Warrant Agreement and the Warrants in favor of the
Noteholders;
(11) UCC termination statements and other documentation
evidencing the termination by the Existing Collateral Agent of its
Liens in and to and control over the properties and assets of the
Obligors,
(12) the Pledge Agreement, together with evidence that the
following has been delivered to the Bank Agent (A) all certificates
representing the shares of Stock pledged thereunder, as well as Stock
powers with respect thereto endorsed in blank and (B) all promissory
notes pledged thereunder, as well as allonges thereto or other
appropriate transfer certificates endorsed in blank,
(13) the Canadian Documents, together with (A) all certificates
representing the shares of Stock pledged thereunder, as well as Stock
powers with respect thereto endorsed in blank and (B) all promissory
notes pledged thereunder, as well as allonges thereto or other
appropriate transfer certificates endorsed in blank,
(14) the Trademark Security Agreement, and
(15) the Intercompany Subordination Agreement;
(c) the Noteholder Group shall have received a certificate from the
Secretary of each Company attesting to the resolutions of such Company's
Board of Directors authorizing its execution, delivery, and performance of
this Agreement and the other Note Documents to which such Company is a
party and authorizing specific officers of such Company to execute the
same;
(d) the Noteholder Group shall have received copies of each Company's
Governing Documents, as amended, modified, or supplemented to the Closing
Date, certified by the Secretary of such Company;
(e) the Noteholder Group shall have received a certificate of status
with respect to each Company, dated within 10 days of the Closing Date,
such certificate to be issued by the appropriate officer of the
jurisdiction of organization of such Company, which certificate shall
indicate that such Company is in good standing in such jurisdiction;
(f) the Noteholder Group shall have received certificates of status
with respect to each Company, each dated within 30 days of the Closing
Date, such certificates to be issued by the appropriate officer of the
jurisdictions (other than the jurisdiction of organization of such Company)
in which its failure to be duly qualified or licensed would constitute a
Material Adverse Change, which certificates shall indicate that such
Company is in good standing in such jurisdictions;
(g) the Noteholder Group shall have received a certificate from the
Secretary of each Guarantor attesting to the resolutions of such
Guarantor's Board of Directors authorizing its execution, delivery, and
performance of the Note Documents to which such Guarantor is a party and
authorizing specific officers of such Guarantor to execute the same;
(h) the Noteholder Group shall have received copies of each
Guarantor's Governing Documents, as amended, modified, or supplemented to
the Closing Date, certified by the Secretary of such Guarantor;
(i) the Noteholder Group shall have received a certificate of status
with respect to each Guarantor, dated within 10 days of the Closing Date,
such certificate to be issued by the appropriate officer of the
jurisdiction of organization of such Guarantor, which certificate shall
indicate that such Guarantor is in good standing in such jurisdiction;
(j) the Noteholder Group shall have received certificates of status
with respect to each Guarantor, each dated within 30 days of the Closing
Date, such certificates to be issued by the appropriate officer of the
jurisdictions (other than the jurisdiction of organization of such
Guarantor) in which its failure to be duly qualified or licensed would
constitute a Material Adverse Change, which certificates shall indicate
that such Guarantor is in good standing in such jurisdictions;
B-23
(k) the Collateral Agent shall have received a certificate of
insurance, together with the endorsements thereto, as are required by
Section 6.8, the form and substance of which shall be satisfactory to the
Noteholder Group;
(l) the Noteholder Group shall have received opinions of Obligors'
counsel in form and substance satisfactory to the Noteholder Group;
(m) the Noteholder Group shall have received satisfactory evidence
(including a certificate of the chief financial officer of Parent) that all
tax returns required to be filed by the Obligors have been timely filed and
all taxes upon the Obligors or their properties, assets, income, and
franchises (including Real Property taxes and payroll taxes) have been paid
prior to delinquency, except such taxes that are the subject of a Permitted
Protest;
(n) the Noteholder Group shall have received in cash: (i) all fees and
expenses required to be paid by the Companies on the Closing Date under
this Agreement and the other Note Documents, including without limitation a
closing fee equal to 1.70% of the aggregate principal amount of the Notes,
which closing fee shall be fully earned when paid and not refundable under
any circumstance; (ii) $1,000,000 in full satisfaction of the "make-whole"
premium required under the Existing Note Agreement; and (iii) $250,000 to
be paid into the Noteholder Group Expense Fund.
(o) Companies shall pay all Noteholder Group Expenses incurred in
connection with the transactions evidenced by this Agreement;
(p) Collateral Agent shall have received (i) mortgagee title insurance
policies (or marked commitments to issue the same) for the Real Property
listed on Schedule R-1 issued by a title insurance company satisfactory to
Collateral Agent (each a "Mortgage Policy" and, collectively, the "Mortgage
Policies") in amounts satisfactory to the Noteholder Group assuring
Collateral Agent that the Mortgages on such Real Property Collateral are
valid and enforceable mortgage Liens (second in priority only to the Liens
granted on the Real Property to secure the Revolver Obligations under the
Bank Loan Agreement) on such Real Property Collateral free and clear of all
defects and encumbrances except Permitted Liens, and the Mortgage Policies
otherwise shall be in form and substance satisfactory to the Noteholder
Group;
(q) the Collateral Agent shall have received any existing surveys of
the Real Property Collateral to the extent such surveys are available on
the Closing Date;
(r) the Obligors shall have received all licenses, approvals or
evidence of other actions required by any Governmental Authority in
connection with the execution and delivery by Companies of this Agreement
or any other Note Document or with the consummation of the transactions
contemplated hereby and thereby;
(s) Collateral Agent shall have received a certificate from an
Authorized Person certifying (i) as to (A) the truth and accuracy of the
representations and warranties of the Obligors contained in Section 5 and
(B) the absence of any Defaults or Events of Default, (ii) that after
giving effect to the incurrence of Indebtedness under this Agreement and
the issuance of the Notes, the Obligors, taken as a whole, are Solvent and
(iii) as to a true and complete copy of the Inventory Divestiture Plan
attached thereto;
(t) if so requested by the Collateral Agent, Magneti SpA shall have
executed an agreement in favor of the Collateral Agent acknowledging
Collateral Agent's Lien on any royalty
B-24
payments payable to any Obligor under the Fiat Magneti Agreements and
Collateral Agent's right to receive such payments directly after the
occurrence and during the continuance of an Event of Default, such
agreement to be in form and substance satisfactory to the Noteholder Group;
(u) there shall exist no claim, action, suit, investigation,
litigation or proceeding, pending or threatened in any court or before any
arbitrator or governmental instrumentality which relates to this Agreement
or the transactions contemplated hereby or which, in the opinion of
Noteholder Group, has any reasonable likelihood of having a Material
Adverse Effect;
(v) the Collateral Agent shall have received satisfactory evidence of:
(i) the refinancing of all amounts owing under, and the termination of, the
Existing Credit Agreement, and (ii) the satisfaction of all conditions
precedent to the effectives of the Bank Loan Agreement and the making of
the Initial Extension of Credit thereunder;
(w) the Collateral Agent shall have received a certificate from an
Authorized Person certifying as to a true and complete copy of the Loan
Documents attached thereto;
(x) Companies shall have paid to the Existing Noteholders all accrued
and unpaid interest and fees owing under the Existing Notes; and
(y) all other documents and legal matters in connection with the
transactions contemplated by this Agreement shall have been delivered,
executed, or recorded and shall be in form and substance satisfactory to
the Noteholder Group.
B-25
Exhibit 5
Representations and Warranties
In order to induce the Noteholder Group to enter into this Agreement, each
Obligor makes the following representations and warranties to the Noteholder
Group which shall be true, correct, and complete, in all material respects, as
of the date hereof, and shall be true, correct, and complete, in all material
respects, as of the Closing Date, and such representations and warranties shall
survive the execution and delivery of this Agreement:
5.1 No Encumbrances. Each Obligor has good and indefeasible title to its
Collateral and the Real Property, free and clear of Liens except for Permitted
Liens.
5.2 Reserved.
5.3 Reserved
5.4 Equipment. Except as set forth on Schedule 5.4, all of the Equipment is
used or held for use in Obligors' business and is fit for such purposes.
5.5 Location of Inventory and Equipment. The Inventory and Equipment are
located only at the locations identified on Schedule 5.5 (as updated in
accordance with Section 6.8) and such Schedule identifies whether such Inventory
and Equipment is stored with a bailee, warehouseman or similar party.
5.6 Inventory Records. Each Obligor keeps correct and accurate records
itemizing and describing the type, quality, and quantity of its Inventory and
the book value thereof.
5.7 Location of Chief Executive Office; FEIN.
(a) The chief executive office of each Obligor is located at the
address indicated in Schedule 5.7.
(b) Each Obligor's FEIN and organizational identification number (if
any) is identified in Schedule 5.7.
(c) None of the Obligors holds any commercial tort claims as of the
date hereof, except as identified in Schedule 5.7.
5.8 Due Organization and Qualification; Subsidiaries.
(a) Each Obligor is duly organized and existing and in good standing
under the laws of the jurisdiction of its organization and qualified to do
business in any state or province where the failure to be so qualified
reasonably could be expected to have a Material Adverse Change.
(b) Set forth on Schedule 5.8(b), is a complete and accurate
description of the authorized capital Stock of each Obligor, by class, and,
as of the Closing Date, a description of the number of shares of each such
class that are issued and outstanding. Other than as described on Schedule
5.8(b) or as otherwise permitted under this Agreement, there are no
subscriptions, options, warrants, or calls relating to any shares of each
Obligor's capital Stock, including any right of conversion or exchange
under any outstanding security or other instrument. No Obligor is subject
to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire
any shares of its capital Stock or any security convertible into or
exchangeable for any of its capital Stock.
(c) Set forth on Schedule 5.8(c), is a complete and accurate list of
each Obligor's direct and indirect Subsidiaries, showing: (i) the
jurisdiction of their organization; (ii) the number of shares of each class
of common and preferred Stock authorized for each of such Subsidiaries; and
(iii) the number and the percentage of the outstanding shares of each such
class owned directly or indirectly by the applicable Obligor. All of the
outstanding capital Stock of each such Subsidiary has been validly issued
and is fully paid and non-assessable.
(d) Except as set forth on Schedule 5.8(c), there are no
subscriptions, options, warrants, or calls relating to any shares of any
Obligor's Subsidiaries' capital Stock, including any right of conversion or
exchange under any outstanding security or other instrument. No Obligor or
any of its respective Subsidiaries is subject to any obligation (contingent
or otherwise) to repurchase or otherwise acquire or retire any shares of
any Obligor's Subsidiaries' capital Stock or any security convertible into
or exchangeable for any such capital Stock.
5.9 Due Authorization; No Conflict.
(a) As to each Company, the execution, delivery, and performance by
such Company of this Agreement and the Note Documents to which it is a
party have been duly authorized by all necessary action on the part of such
Company.
(b) As to each Company, the execution, delivery, and performance by
such Company of this Agreement and the Note Documents to which it is a
party do not and will not (i) violate any provision of federal, state, or
local law or regulation applicable to any Company, the Governing Documents
of any Company, including, without limitation, any laws, rules and
regulations related to franchising and licensing applicable to the Obligors
and their business, assets and properties, or any order, judgment, or
decree of any court or other Governmental Authority binding on any Company,
(ii) conflict with, result in a breach of, or constitute (with due notice
or lapse of time or both) a default under any material contractual
obligation of any Company (including any franchise agreement), (iii) result
in or require the creation or imposition of any Lien of any nature
whatsoever upon any properties or assets of Company, other than Permitted
Liens, or (iv) require any approval of any Company's interestholders or
franchisees, or any approval or consent of any Person under any material
contractual obligation of any Company (including any franchise agreement).
(c) Other than the filing of financing statements, fixture filings,
and Mortgages, the execution, delivery, and performance by each Company of
this Agreement and the Note Documents to which such Company is a party do
not and will not require any registration with, consent, or approval of, or
notice to, or other action with or by, any Governmental Authority or other
Person.
(d) As to each Company, this Agreement and the other Note Documents to
which such Company is a party, and all other documents contemplated hereby
and thereby, when executed and delivered by such Company will be the
legally valid and binding obligations of such Company, enforceable against
such Company in accordance with their respective terms, except as
enforcement may be limited by equitable principles or by bankruptcy,
insolvency, reorganization, moratorium, or similar laws relating to or
limiting creditors' rights generally.
(e) The Collateral Agent's Liens are validly created, perfected Liens,
subject only to Permitted Liens.
B-27
(f) The execution, delivery, and performance by each Guarantor of the
Note Documents to which it is a party have been duly authorized by all
necessary action on the part of Guarantor.
(g) The execution, delivery, and performance by each Guarantor of the
Note Documents to which it is a party do not and will not (i) violate any
provision of federal, provincial, state, or local law or regulation
applicable to such Guarantor, including without limitation, any laws, rules
and regulations related to franchising and licensing applicable to the
Obligors, the Governing Documents of such Guarantor, or any order,
judgment, or decree of any court or other Governmental Authority binding on
such Guarantor, (ii) conflict with, result in a breach of, or constitute
(with due notice or lapse of time or both) a default under any material
contractual obligation of such Guarantor (including any franchise
agreement), (iii) result in or require the creation or imposition of any
Lien of any nature whatsoever upon any properties or assets of such
Guarantor, other than Permitted Liens, or (iv) require any approval of such
Guarantor's interestholders or any approval or consent of any Person under
any material contractual obligation of such Guarantor (including any
franchise agreement).
(h) The execution, delivery, and performance by each Guarantor of the
Note Documents to which such Guarantor is a party do not and will not
require any registration with, consent, or approval of, or notice to, or
other action with or by, any Governmental Authority or other Person.
(i) The Note Documents to which each Guarantor is a party, and all
other documents contemplated hereby and thereby, when executed and
delivered by such Guarantor will be legally valid and binding obligations
of such Guarantor, enforceable against such Guarantor in accordance with
their respective terms, except as enforcement may be limited by equitable
principles or by bankruptcy, insolvency, reorganization, moratorium, or
similar laws relating to or limiting creditors' rights generally.
5.10 Litigation. Other than those matters disclosed on Schedule 5.10, there
are no actions, suits, or proceedings pending or, to the best knowledge of
Obligors, threatened against any of the Obligors, or any of their Subsidiaries,
as applicable, except for (a) matters that are fully covered by insurance
(subject to customary deductibles), and (b) matters arising after the Closing
Date that, if decided adversely to any Obligor, or any of their Subsidiaries, as
applicable, reasonably could not be expected to result in a Material Adverse
Change.
5.11 No Material Adverse Change. All financial statements relating to the
Obligors that have been delivered by the Obligors to the Noteholder Group have
been prepared in accordance with GAAP (except, in the case of unaudited
financial statements, for the lack of footnotes and being subject to year-end
audit adjustments) and present fairly in all material respects, the Obligors'
financial condition as of the date thereof and results of operations for the
period then ended. There has not been a Material Adverse Change with respect to
the Obligors since the date of the latest financial statements submitted to the
Noteholder Group on or before the Closing Date.
5.12 Fraudulent Transfer.
(a) Each of MIC and Midas Realty Corporation is Solvent.
(b) No transfer of property is being made by any Obligor and no
obligation is being incurred by any Obligor in connection with the
transactions contemplated by this Agreement or the other Note Documents
with the intent to hinder, delay, or defraud either present or future
creditors of Obligors.
5.13 Employee Benefits. None of the Obligors, any of their Subsidiaries, or
any of their ERISA Affiliates maintains or contributes to any Benefit Plan,
other than those listed on Schedule 5.13.
B-28
Each Obligor, each of its Subsidiaries and each ERISA Affiliate have
satisfied the minimum funding standards of ERISA, the IRC and Canadian Employee
Benefits Laws, as applicable, with respect to each Benefit Plan to which it is
obligated to contribute. No ERISA Event has occurred nor has any other event
occurred that may result in an ERISA Event that reasonably could be expected to
result in a Material Adverse Change. No Company or its Subsidiaries or any ERISA
Affiliate is required to provide security to any Benefit Plan under Section
401(a)(29) of the IRC.
5.14 Environmental Condition. Except as set forth on Schedule 5.14, (a) to
Obligors' knowledge, none of Obligors' properties or assets has ever been used
by any Obligor or by previous owners or operators in the disposal of, or to
produce, store, handle, treat, release, or transport, any Hazardous Materials,
where such production, storage, handling, treatment, release or transport was in
violation, in any material respect, of applicable Environmental Law, (b) to
Obligors' knowledge, none of Obligors' properties or assets has ever been
designated or identified in any manner pursuant to any Environmental Law as a
Hazardous Materials disposal site, (c) none of Obligors have received notice
that a Lien arising under any Environmental Law has attached to any revenues or
to any Real Property owned, leased or operated by Obligors, and (d) none of
Obligors have been identified in, or been the subject of, any Environmental
Action.
5.15 Brokerage Fees. The Obligors have not utilized the services of any
broker or finder in connection with Obligors' obtaining financing from the
Noteholder Group under this Agreement and no brokerage commission or finders fee
is payable by Obligors in connection herewith.
5.16 Intellectual Property. Each Obligor owns, or holds licenses in, all
trademarks, trade names, copyrights, patents, patent rights and licenses that
are necessary to the conduct of its business as currently conducted. Attached
hereto as Schedule 5.16 is a true, correct, and complete listing of all material
patents, patent applications, trademarks, trademark applications, copyrights,
and copyright registrations as to which any Obligor is the owner or is an
exclusive licensee.
5.17 Leases. The Obligors enjoy peaceful and undisturbed possession under
all leases material to the business of the Obligors and to which the Obligors
are a party or under which the Obligors are operating. All of such leases are
valid and subsisting and no material default by the Obligors exists under any of
them.
5.18 DDAs. Set forth on Schedule 5.18 are all of the DDAs of each Obligor,
including, with respect to each depository (i) the name and address of that
depository, and (ii) the account numbers of the accounts maintained with such
depository.
5.19 Complete Disclosure. All factual information (taken as a whole)
furnished by or on behalf of the Obligors in writing to Collateral Agent or any
Noteholder (including all information contained in the Schedules hereto or in
the other Note Documents) for purposes of or in connection with this Agreement,
the other Note Documents or any transaction contemplated herein or therein is,
and all other such factual information (taken as a whole) hereafter furnished by
or on behalf of the Obligors in writing to the Collateral Agent or any
Noteholder will be, true and accurate in all material respects on the date as of
which such information is dated or certified and not incomplete by omitting to
state any fact necessary to make such information (taken as a whole) not
misleading in any material respect at such time in light of the circumstances
under which such information was provided. On the Closing Date, the Closing Date
Business Plan represents, and as of the date on which any other Projections are
delivered to Collateral Agent, such additional Projections represent the
Obligors' good faith best estimate of their future performance for the periods
covered thereby.
B-29
5.20 Indebtedness. Set forth on Schedule 5.20 is a true and complete list
of all Indebtedness of each Obligor outstanding immediately prior to the Closing
Date that is to remain outstanding after the Closing Date (including
Indebtedness evidenced by the Notes) and such Schedule accurately reflects the
aggregate principal amount of such Indebtedness and the principal terms thereof.
5.21 Regulation U. None of the Obligors is or will be engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulations T, U or X of the Board of Governors of
the Federal Reserve System), and no proceeds of any Note issued hereunder will
be used to purchase or carry any margin stock or to extend credit to others for
the purpose of purchasing or carrying any margin stock.
5.22 Permits, Etc. Each Obligor has, and is in compliance with, all
permits, licenses, franchises, authorizations, approvals, entitlements and
accreditations required for such Person lawfully to own, lease, manage or
operate, or to acquire, each business and the Real Property currently owned,
leased, managed or operated, or to be acquired, by such Person except for such
permits, licenses, franchises, authorizations, approvals, entitlements and
accreditations the absence of which could not reasonably be expected to result
in a Material Adverse Change. No condition exists or event has occurred which,
in itself or with the giving of notice or lapse of time or both, would result in
the suspension, revocation, impairment, forfeiture or non-renewal of any such
permit, license, franchises, authorization, approval, entitlement or
accreditation, and to Obligors' knowledge, there is no claim that any thereof is
not in full force and effect.
5.23 Material Contracts. Set forth on Schedule 5.23 is a complete and
accurate list as of the Closing Date of all Material Contracts of the Obligors,
showing the parties and subject matter thereof and amendments and modifications
thereto. Each such Material Contract (i) is in full force and effect and is
binding upon and enforceable against each Obligor that is a party thereto and,
to Obligors' knowledge, all other parties thereto in accordance with its terms,
(ii) has not been otherwise amended or modified, and (iii) is not in default due
to the action of any Obligor or, to Obligors' knowledge, any other party
thereto, except for such defaults that could not reasonably be expected to
result in a Material Adverse Change.
5.24 Employee and Labor Matters. Except as set forth on Schedule 5.24,
there is (a) no unfair labor practice complaint pending or, to Obligors'
knowledge, threatened against any Obligor before any Governmental Authority and
no grievance or arbitration proceeding pending or threatened against any Obligor
which arises out of or under any collective bargaining agreement, (b) no strike,
labor dispute, slowdown, stoppage or similar action or grievance pending or, to
the best knowledge of Obligors, threatened against any Obligor and (c) no union
representation question existing with respect to the employees of any Obligor
and no union organizing activity taking place with respect to any of the
employees of any of them. Neither any Obligor nor any ERISA Affiliate of any
Obligor has incurred any liability or obligation under the Worker Adjustment and
Retraining Notification Act ("WARN") or similar state law, which remains unpaid
or unsatisfied. The hours worked and payments made to employees of each Obligor
have not been in violation of the Fair Labor Standards Act or any other
applicable legal requirements. All material payments due from any Obligor on
account of workers compensation, wages and employee health and welfare insurance
and other benefits have been paid or accrued as a liability on the books of such
Obligor.
5.25 Franchisees, Customers and Suppliers. There exists no actual or, to
Obligors' knowledge, threatened termination, cancellation or limitation of, or
modification to or change in, the business relationship between (a) any Obligor,
on the one hand, and any franchisees, or any group thereof, on the other hand,
(b) any Obligor, on the one hand, and any municipality, customer or any group
thereof, on the other hand or (c) any Obligor, on the one hand, and any supplier
thereof or distributor therefor, on the other hand, which termination,
cancellation, limitation, modification or change in any such case could,
B-30
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Change. Set forth on Schedule 5.25 is a true and complete list of each
Obligor's Account Debtors as of the Closing Date and a list of all franchisees
for which any Obligor has received a notice of or otherwise has knowledge of the
cancellation of a Franchise Agreement from December 31, 2002 through the Closing
Date.
5.26 Properties.
(a) General. Each Obligor has good, marketable and insurable fee
simple title (or, in the case of Leased Real Property, good, marketable and
insurable leasehold title) to each parcel of Real Property Collateral, free
and clear of all Liens except for Permitted Liens. The Permitted Liens
encumbering the Real Property (x) do not include any deeds of trust in
favor of any party other than Collateral Agent (other than in the case of
deeds of trust permitted under clause (m) of the definition of Permitted
Liens), (y) do not and will not adversely affect the value, operation or
use of the applicable Real Property (as currently used) or any Obligor's
ability to repay any of the Obligations, and (z) could not, either
individually or in the aggregate, reasonably be expected to result in a
Material Adverse Change. As of the Closing Date, no Obligor owns any Real
Property that is not listed on Schedule R-1 hereto or leases or has any
other interest in any Real Property that is not listed on Schedule L-1.
(b) Mortgages. Each Mortgage (A) when executed and properly recorded
in the appropriate records, will create a valid, perfected Lien on the Real
Property described in such Mortgage and (B) when executed and when all
Uniform Commercial Code and PPSA financing statements required to be filed
in connection therewith are properly filed, will create a valid, perfected
Lien in and to, and perfected collateral assignments of, all personalty
(including all leases and rents referred to therein) described in such
Mortgage, all in accordance with the terms thereof, in each case subject
only to any applicable Permitted Liens. There are no claims for payment for
work, labor or materials affecting any real properties to be encumbered by
the Mortgages which are or may become a lien prior to, or of equal priority
with, the Liens created by the Mortgages and which, either individually or
in the aggregate, could reasonably be expected to result in a Material
Adverse Change.
(c) Compliance. The Real Property and the use thereof complies in all
respects with (A) all applicable federal, state, county, municipal and
other governmental statutes, laws, rules, orders, regulations, ordinances,
judgments, decrees and injunctions of Governmental Authorities affecting
such property or any part thereof, or the construction, use, alteration or
operation thereof, or any part thereof including, without limitation,
building and zoning ordinances and codes; (B) all permits, licenses and
authorizations and regulations relating thereto; and (C) all covenants,
agreements, leases, restrictions and encumbrances contained in any
instruments, either of record or otherwise enforceable against any Obligor,
affecting such property or any part thereof, including, without limitation,
any which may require repairs, modifications or alterations in or to such
property or any part thereof or in any way limit the use and enjoyment
thereof, except in each case to the extent any such failure to comply,
either individually or in the aggregate, could not reasonably be expected
to result in a Material Adverse Change. No Obligor is in default or
violation of any requirement of any Governmental Authority, except to the
extent such default or violation, either individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Change.
There has not been committed by any Obligor, or by any other Person in
occupancy of or involved with the operation or use of the Real Property,
any act or omission affording the federal government or any other
Governmental Authority the right of forfeiture as against any such property
or any part thereof or any monies paid in performance of the Obligors'
obligations under any of the Note Documents.
B-31
(d) Condemnation. No temporary or permanent taking by any Governmental
Authority as the result or in lieu or in anticipation of the exercise of
the right of condemnation or eminent domain or other proceeding has been
commenced or, to the best knowledge of each Obligor, is threatened or
contemplated with respect to all or any portion of any parcel of Real
Property or for the relocation of roadways providing access to any parcel
of Real Property, except to the extent any such taking, either individually
or in the aggregate, could not reasonably be expected to result in a
Material Adverse Change.
(e) Utilities and Public Access. Each parcel of Real Property has
rights of access to public ways and is served by water, sewer, sanitary
sewer and storm drain facilities adequate to service such property for its
respective intended uses, except to the extent such lack of rights or
service, either individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Change. All public utilities
necessary to the full use and enjoyment of each parcel of Real Property are
located either in the public right-of-way abutting such property (which are
connected so as to serve such property without passing over other property)
or in recorded easements serving such property, except to the extent the
foregoing, either individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Change. All roads necessary for
the use of each parcel of Real Property for its current purpose have been
completed and dedicated to public use and accepted by all Governmental
Authorities, except to the extent such lack of such roads, either
individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Change.
(f) Separate Lots. The Real Property owned by each Obligor comprises
an entire, separate and distinct tax lot (or series of lots) and does not
include a portion of any tax lot that includes any Real Property that is
not owned by such Obligor.
(g) Boundaries. Except as disclosed on the surveys delivered to
Collateral Agent on or prior to the Closing Date and the title commitments
for the Real Property Collateral, all improvements located on each parcel
of Real Property lie wholly within the boundaries and building restriction
lines of such property, and no improvements on adjoining properties
encroach upon such property, and no easements or other encumbrances upon
the applicable property encroach upon any of the improvements, so as to
affect the value or marketability of the applicable property, except to the
extent any such encroachment, either individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Change.
(h) Filing and Recording Taxes. All mortgage, mortgage recording,
stamp, intangible or other similar tax required to be paid by any Person
under applicable legal requirements currently in effect in connection with
the execution, delivery, recordation, filing, registration, perfection or
enforcement of any of the Note Documents, including, without limitation,
the Mortgages, have been paid, and, under current legal requirements, each
of the Mortgages is enforceable in accordance with their respective terms
by the holder thereof, subject to principles of bankruptcy, insolvency and
other laws generally applicable to creditors' rights and the enforcement of
debtors' obligations.
(i) Certificate of Occupancy; Licenses. All certifications, permits,
licenses and approvals, including, without limitation, certificates of
completion and occupancy permits and any applicable liquor license required
for the legal use, occupancy and operation of each parcel of Real Property
in the business and operations of the Obligors have been obtained and are
in full force and effect. The use being made of each such property is in
conformity with the certificate of occupancy issued for such property.
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(j) Mortgage Provisions. Nothing contained in this Section 5.26 shall
limit any representation or warranty of any Obligor as may be set forth in
its Mortgage, including, without limitation, Section 4.05 thereof;
provided, however, that the following provisions shall apply as to each
applicable Mortgage: (x) exceptions disclosed by any Obligor as expressly
set forth in Schedule 5.26(c) hereof shall be deemed exceptions to the
representations and warranties made by such Obligor in its Mortgage and (y)
a breach by any Obligor of a provision contained in Section 4.05 of its
Mortgage shall not, in and of itself, constitute an Event of Default,
unless Collateral Agent determines, in its Permitted Discretion, that such
breach, when considered individually or in the aggregate with other
breaches of such section or any other facts that may then exist, may result
in a Material Adverse Change.
5.27 Taxes. All tax payments, returns and reports, assessments for
worker's compensation, pension plan payments, unemployment insurance payments,
employment standards payments (including claims by employees for unpaid wages,
vacation pay and overtime), excise taxes, health insurance premiums and any
other statutory payments required to be made by an Obligor pursuant to
applicable law (including all federal, state, provincial and local tax returns)
have been made when due and/or properly filed on a timely basis and are true,
complete and correct, except to the extent that the validity of such assessments
or taxes are the subject of a Permitted Protest.
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