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EXHIBIT 10.2
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HASTINGS BOOKS, MUSIC & VIDEO, INC.
$25,000,000
7.75% Series A Senior Notes due June 13, 2003
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NOTE PURCHASE AGREEMENT
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Dated June 13, 1996
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HASTINGS BOOKS, MUSIC & VIDEO, INC.
$25,000,000
7.75% SENIOR NOTES DUE JUNE 13, 2003
INDEX
1. Composite Conformed Copy of Note Purchase Agreement (with all Exhibits
and Schedules attached)
2. 7.75% Senior Notes due June 13, 2003
3. Legal Opinion of Counsel to Hastings
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TABLE OF CONTENTS
Section Page
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1. AUTHORIZATION OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. SALE AND PURCHASE OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4.1. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4.2. Performance; No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4.3. Compliance Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.4. Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.5. Purchase Permitted By Applicable Law, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.6. Sale of Other Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.7. Payment of Special Counsel Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.8. Private Placement Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.9. Changes in Corporate Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.10. Proceedings and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.11. Amendment of Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.1. Organization; Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.2. Authorization, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.3. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.4. Subsidiaries; Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.5. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.6. Compliance with Laws, Other Instruments, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.7. Governmental Authorizations, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.8. Litigation; Observance of Agreements, Statutes and Orders . . . . . . . . . . . . . . . . . . . . . 6
5.9. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.10. Title to Property; Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.11. Licenses, Permits, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
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5.12. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.13. Private Offering by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.14. Use of Proceeds; Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.15. Existing Indebtedness; Future Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.16. Foreign Assets Control Regulations, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.17. Status under Certain Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.18. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6. REPRESENTATIONS OF THE PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.1. Purchase for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.2. Source of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7. INFORMATION AS TO COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.1. Financial and Business Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.2. Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.3. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8. PREPAYMENT OF THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.1. Required Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.2. Optional Prepayments with Make-Whole Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.3. Allocation of Partial Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.4. Maturity; Surrender, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.5. Purchase of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.6. Right to Put . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.7. Make-Whole Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.1. Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.2. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.3. Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.4. Payment of Taxes and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.5. Corporate Existence, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.6. Parity with Other Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.7. Guaranteed Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.8. Covenant to Secure Notes Equally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.9. Information Required by Rule 144A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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10. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.1. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.2. Merger, Consolidation, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.3. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.4. Current Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.5. Adjusted Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.6. Fixed Charges Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.7. Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.8. Priority Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.9. Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.10. Restricted Payments and Restricted Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
12. REMEDIES ON DEFAULT, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.1. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.2. Other Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.3. Rescission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.4. No Waivers or Election of Remedies, Expenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 29
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
13.1. Registration of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
13.2. Transfer and Exchange of Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
13.3. Replacement of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
14. PAYMENTS ON NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
14.1. Place of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
14.2. Home Office Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
15. EXPENSES, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
15.1. Transaction Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
15.2. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 32
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17. AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
17.1. Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
17.2. Solicitation of Holders of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
17.3. Binding Effect, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
17.4. Notes held by Company, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
18. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
19. REPRODUCTION OF DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
20. CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
21. SUBSTITUTION OF PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
22. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
22.1. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
22.2. Payments Due on Non-Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
22.3. Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
22.4. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
22.5. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
22.6. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
22.7. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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SCHEDULE A -- Information Relating to Purchasers
SCHEDULE B -- Defined Terms
SCHEDULE 4.9 -- Changes in Corporate Structure
SCHEDULE 5.4 -- Affiliates of the Company and Directors and Senior
Officers of the Company
SCHEDULE 5.5 -- Financial Statements
SCHEDULE 5.8 -- Certain Litigation
SCHEDULE 5.11 -- Patents, etc.
SCHEDULE 5.14 -- Use of Proceeds
SCHEDULE 5.15 -- Existing Indebtedness
EXHIBIT 1 -- Form of 7.75% Series A Senior Note due June 13, 2003
EXHIBIT 4.4(a) -- Form of Opinion of Counsel for the Company
EXHIBIT 4.4(b) -- Form of Opinion of Special Counsel to the Purchasers
EXHIBIT 8.6(b) -- Form of Notice of Sale
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HASTINGS BOOKS, MUSIC & VIDEO, INC.
3601 Plains Blvd., Suite I
Amarillo, Texas 79120-2104
7.75% Series A Senior Notes due June 13, 2003
June 13, 1996
TO EACH OF THE PURCHASERS LISTED
IN THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
Hastings Books, Music & Video, Inc., a Texas corporation (the
"COMPANY"), agrees with you as follows:
1. AUTHORIZATION OF NOTES.
The Company will authorize the issue and sale of $25,000,000 aggregate
principal amount of its 7.75% Series A Senior Notes due June 13, 2003 (the
"NOTES," such term to include any such notes issued in substitution therefor
pursuant to Section 13 of this Agreement or the Other Agreement (as hereafter
defined)). The Notes shall be substantially in the form set out in Exhibit 1,
with such changes therefrom, if any, as may be approved by you and the Company.
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.
2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company
will issue and sell to you and you will purchase from the Company, at the
Closing provided for in Section 3, Notes in the principal amount specified
opposite your name in Schedule A at the purchase price of 100% of the principal
amount thereof. Contemporaneously with entering into this Agreement, the
Company is entering into a separate Note Purchase Agreement (the "OTHER
AGREEMENT") identical with this Agreement with the other purchaser named in
Schedule A (the "OTHER PURCHASER"), providing for the sale at such Closing to
the Other Purchaser of Notes in the principal amount specified opposite its
name in Schedule A. Your obligation hereunder and the obligations of the Other
Purchaser under the Other Agreement are several and not joint obligations and
you shall have no obligation under the Other Agreement and no liability to any
Person for the performance or nonperformance by the Other Purchaser thereunder.
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3. CLOSING.
The sale and purchase of the Notes to be purchased by you and the
Other Purchaser shall occur at the offices of Baker & Botts, L.L.P., Trammell
Crow Center, 2001 Ross Avenue, Suite 800, Dallas, Texas 75201, at 10:00 am.,
Central time, at a closing (the "CLOSING") on June 13, 1996 or on such other
Business Day thereafter on or prior to June 17, 1996 as may be agreed upon by
the Company and you and the Other Purchaser. At the Closing the Company will
deliver to you the Notes to be purchased by you in the form of a single Note
(or such greater number of Notes in denominations of at least $1,000,000 as you
may request) dated the date of the Closing and registered in your name (or in
the name of your nominee), against delivery by you to the Company or its order
of immediately available funds in the amount of the purchase price therefor by
wire transfer of immediately available funds for the account of the Company to
account number 101409997409 at The Boatmen's National Bank of St. Louis, ABA
number 081000032, Reference: Hastings Books, Music & Video, Inc., Attention:
Michelle L. Bammer. If at the Closing the Company shall fail to tender such
Notes to you as provided above in this Section 3, or any of the conditions
specified in Section 4 shall not have been fulfilled to your satisfaction, you
shall, at your election, be relieved of all further obligations under this
Agreement, without thereby waiving any rights you may have by reason of such
failure or such nonfulfillment.
4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be sold to you at
the Closing is subject to the fulfillment to your satisfaction, prior to or at
the Closing, of the following conditions:
4.1. REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company in this
Agreement shall be correct when made and at the time of the Closing.
4.2. PERFORMANCE; NO DEFAULT.
The Company shall have performed and complied with all
agreements and conditions contained in this Agreement required to be performed
or complied with by it prior to or at the Closing and after giving effect to
the issue and sale of the Notes (and the application of the proceeds thereof as
contemplated by Schedule 5.14) no Default or Event of Default shall have
occurred and be continuing. Neither the Company nor any Subsidiary shall have
entered into any transaction since the date of the Memorandum that would have
been prohibited by Section 10 hereof had such Section applied since such date.
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4.3. COMPLIANCE CERTIFICATES.
(a) Officer's Certificate. The Company shall have
delivered to you an Officer's Certificate, dated the date of the Closing,
certifying that the conditions specified in Sections 4.1, 4.2 and 4.9 have been
fulfilled.
(b) Secretary's Certificate. The Company shall have
delivered to you a certificate certifying as to the resolutions attached
thereto and other corporate proceedings relating to the authorization,
execution and delivery of the Notes, this Agreement and the Other Agreement.
4.4. OPINIONS OF COUNSEL.
You shall have received opinions in form and substance
satisfactory to you, dated the date of the Closing (a) from Sprouse, Mozola,
Smith & Rowley, P.C., counsel for the Company, covering the matters set forth
in Exhibit 4.4(a) and covering such other matters incident to the transactions
contemplated hereby as you or your counsel may reasonably request (and the
Company hereby instructs its counsel to deliver such opinion to you) and (b)
from Baker & Botts, L.L.P., your special counsel in connection with such
transactions, substantially in the form set forth in Exhibit 4.4(b) and
covering such other matters incident to such transactions as you may reasonably
request.
4.5. PURCHASE PERMITTED BY APPLICABLE LAW, ETC.
On the date of the Closing your purchase of Notes shall (i) be
permitted by the laws and regulations of each jurisdiction to which you are
subject, without recourse to provisions (such as Section 1405(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 applicable law or regulation (including, without limitation,
Regulation G, T or X of the Board of Governors of the Federal Reserve System)
and (iii) not subject you 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. If requested by you, you shall have received an Officer's
Certificate certifying as to such matters of fact as you may reasonably specify
to enable you to determine whether such purchase is so permitted.
4.6. SALE OF OTHER NOTES.
Contemporaneously with the Closing the Company shall sell to
the Other Purchaser and the Other Purchaser shall purchase the Notes to be
purchased by it at the Closing as specified in Schedule A.
4.7. PAYMENT OF SPECIAL COUNSEL FEES.
Without limiting the provisions of Section 15. 1, the Company shall
have paid on or before the Closing the reasonable fees, charges and
disbursements of your special counsel referred
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to in Section 4.4 to the extent reflected in a statement of such counsel
rendered to the Company at least two Business Days prior to the Closing.
4.8. PRIVATE PLACEMENT NUMBER.
A Private Placement Number issued by Standard & Poor's CUSIP
Service Bureau (in cooperation with the Securities Valuation Office of the
National Association of Insurance Commissioners) shall have been obtained for
the Notes.
4.9. CHANGES IN CORPORATE STRUCTURE.
Except as specified in Schedule 4.9, the Company shall not
have changed its jurisdiction of incorporation or been a party to any merger or
consolidation and shall not have succeeded to all or any substantial part of
the liabilities of any other entity, at any time following the date of the most
recent financial statements referred to in Schedule 5.5.
4.10. PROCEEDINGS AND DOCUMENTS.
All corporate and other proceedings in connection with the
transactions contemplated by this Agreement and all documents and instruments
incident to such transactions shall be satisfactory to you and your special
counsel, and you and your special counsel shall have received all such
counterpart originals or certified or other copies of such documents as you or
they may reasonably request.
4.11. AMENDMENT OF CREDIT AGREEMENT.
The Credit Agreement among the Company, The Boatmen's National
Bank of St. Louis, individually, as the Issuing Bank and as the Agent, and the
financial institutions parties thereto, dated December 12, 1994, as amended
from time to time, shall have been amended to permit the transactions
contemplated by this Agreement and the Other Agreement and to permit the
effective implementation of Sections 9.8 and 10.3 and related provisions.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you that:
5.1. ORGANIZATION; POWER AND AUTHORITY.
The Company is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation, and
is duly qualified as a foreign corporation and is in good standing in each
jurisdiction in which such qualification is required by law, other than those
jurisdictions as to which the failure to be so qualified or in good standing
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. The
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Company has the corporate power and authority to own or hold under lease the
properties it purports to own or hold under lease, to transact the business it
transacts and proposes to transact, to execute and deliver this Agreement and
the Other Agreement and the Notes and to perform the provisions hereof and
thereof.
5.2. AUTHORIZATION, ETC.
This Agreement and the Other Agreement and the Notes have been
duty authorized by all necessary corporate action on the part of the Company,
and this Agreement constitutes, and upon execution and delivery thereof each
Note will constitute, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (ii) general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law).
5.3. DISCLOSURE.
The Company, through its agent, Chase Securities Inc. has
delivered to you and the Other Purchaser a copy of a Confidential Offering
Memorandum, dated April, 1996 (the "MEMORANDUM"), relating to the transactions
contemplated hereby. The Memorandum fairly describes, in all material
respects, the general nature of the business and principal properties of the
Company. This Agreement, the Memorandum, the documents, certificates or other
writings delivered to you by or on behalf of the Company in connection with the
transactions contemplated hereby and the financial statements listed in
Schedule 5.5, taken as a whole, do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading in light of the circumstances under which
they were made. Except as disclosed in the Memorandum, or in one of the
documents, certificates or other writings identified therein, or in the
financial statements listed in Schedule 5.5, since January 31, 1996, there has
been no change in the financial condition, operations, business, properties or
prospects of the Company except changes that individually or in the aggregate
could not reasonably be expected to have a Material Adverse Effect. There is
no fact known to the Company that could reasonably be expected to have a
Material Adverse Effect that has not been set forth herein or in the Memorandum
or in the other documents, certificates and other writings delivered to you by
or on behalf of the Company specifically for use in connection with the
transactions contemplated hereby. The financial projections contained in the
Memorandum are reasonable based upon the assumptions contained therein and the
best information available to the Company.
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5.4. SUBSIDIARIES; AFFILIATES.
The Company has no Subsidiaries. Schedule 5.4 contains
(except as noted therein) complete and correct lists (i) of the Company's
Affiliates and (ii) of the Company's directors and senior officers.
5.5. FINANCIAL STATEMENTS.
The Company has delivered to you and the Other Purchaser
copies of the financial statements of the Company listed on Schedule 5.5. All
of said financial statements (including in each case the related schedules and
notes) fairly present in all material respects the financial position of the
Company as of the respective dates specified in such Schedule and the results
of its operations and cash flows for the respective periods so specified and
have been prepared in accordance with GAAP consistently applied throughout the
periods involved except as set forth in the notes thereto (subject, in the case
of any interim financial statements, to normal year-end adjustments).
5.6. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by the Company of this
Agreement and the Notes will not (i) contravene, result in any breach of, or
constitute a default under, or result in the creation of any Lien in respect of
any property of the Company under, any indenture, mortgage, deed of trust,
loan, purchase or credit agreement, lease, corporate charter or by-laws, or any
other agreement or instrument to which the Company is bound or by which the
Company or any of its properties may be bound or affected, (ii) conflict with
or result in a breach of any of the terms, conditions or provisions of any
order, judgment, decree, or ruling of any court, arbitrator or Governmental
Authority applicable to the Company or (iii) violate any provision of any
statute or other rule or regulation of any Governmental Authority applicable to
the Company.
5.7. GOVERNMENTAL AUTHORIZATIONS, ETC.
No consent, approval or authorization of, or registration,
filing or declaration with, any Governmental Authority is required in
connection with the execution, delivery or performance by the Company of this
Agreement or the Notes.
5.8. LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.
(a) Except as disclosed in Schedule 5.8, there are no
actions, suits or proceedings pending or, to the knowledge of the Company,
threatened against or affecting the Company or any property of the Company in
any court or before any arbitrator of any kind or before or by any Governmental
Authority that, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect.
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(b) The Company is not in default under any term of any
agreement or instrument to which it is a party or by which it is bound, or any
order, judgment, decree or ruling of any court, arbitrator or Governmental
Authority or is in violation of any applicable law, ordinance, rule or
regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
5.9. TAXES.
The Company has filed all tax returns that are required to
have been filed in any jurisdiction, and has paid all taxes shown to be due and
payable on such returns and all other taxes and assessments levied upon it or
its properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent,
except for any taxes and assessments (i) the amount of which is not
individually or in the aggregate Material or (ii) the amount, applicability or
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which the Company has established adequate
reserves in accordance with GAAP. The Company knows of no basis for any other
tax or assessment that could reasonably be expected to have a Material Adverse
Effect. The charges, accruals and reserves on the books of the Company in
respect of Federal, state or other taxes for all fiscal periods are adequate.
The Federal income tax liabilities of the Company have been determined by the
Internal Revenue Service and paid for all fiscal years up to and including the
fiscal year ended May 31, 1991.
5.10. TITLE TO PROPERTY; LEASES.
The Company has good and sufficient title to its properties
that individually or in the aggregate are Material, including all such
properties reflected in the most recent audited balance sheet referred to in
Section 5.5 or purported to have been acquired by the Company after said date
(except as sold or otherwise disposed of in the ordinary course of business),
in each case free and clear of Liens prohibited by this Agreement. All leases
that individually or in the aggregate are Material are valid and subsisting and
are in full force and effect in all material respects.
5.11. LICENSES, PERMITS, ETC.
Except as disclosed in Schedule 5.11,
(a) the Company owns or possesses all licenses, permits,
franchises, authorizations, patents, copyrights, service marks,
trademarks and trade names, or rights thereto, that individually or in
the aggregate are Material, without known conflict with the rights of
others;
(b) to the best knowledge of the Company, no product of
the Company infringes in any material respect any license, permit,
franchise, authorization, patent, copyright, service mark, trademark,
trade name or other right owned by any other Person; and
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(c) to the best knowledge of the Company, there is no
Material violation by any Person of any right of the Company with
respect to any patent, copyright, service mark, trademark, trade name
or other right owned or used by the Company.
5.12. COMPLIANCE WITH ERISA.
(a) The Company and each ERISA Affiliate have operated
and administered each Plan in compliance with all applicable laws except for
such instances of noncompliance as have not resulted in and could not
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any ERISA Affiliate has incurred any liability pursuant to Title I
or IV of ERISA or the penalty or excise tax provisions of the Code relating to
employee benefit plans (as defined in Section 3 of ERISA), and no event,
transaction or condition has occurred or exists that could reasonably be
expected to result in the incurrence of any such liability by the Company or
any ERISA Affiliate, or in the imposition of any Lien on any of the rights,
properties or assets of the Company or any ERISA Affiliate, in either case
pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions
or to Section 401(a)(29) or 412 of the Code, other than such liabilities or
Liens as would not be individually or in the aggregate Material.
(b) The present value of the aggregate benefit
liabilities under each of the Plans (other than Multiemployer Plans),
determined as of the end of such Plan's most recently ended plan year on the
basis of the actuarial assumptions specified for funding purposes in such
Plan's most recent actuarial valuation report, did not exceed the aggregate
current value of the assets of such Plan allocable to such benefit liabilities.
The term "BENEFIT LIABILITIES" has the meaning specified in section 4001 of
ERISA and the terms "CURRENT VALUE" and "present value" have the meaning
specified in section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not
incurred withdrawal liabilities (and are not subject to contingent withdrawal
liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer
Plans that individually or in the aggregate are Material.
(d) The expected pos-retirement benefit obligation
(determined as of the last day of the Company's most recently ended fiscal year
in accordance with Financial Accounting Standards Board Statement No. 106,
without regard to liabilities attributable to continuation coverage mandated by
section 4980B of the Code) of the Company and its Subsidiaries is not Material.
(e) The execution and delivery of this Agreement and the
issuance and sale of the Notes hereunder will not involve any transaction that
is subject to the prohibitions of section 406 of ERISA or in connection with
which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code.
The representation by the Company in the first sentence of this Section 5.12(e)
is made in reliance upon and subject to the accuracy of your representation in
Section 6.2 as to the sources of the funds used to pay the purchase price of
the Notes to be purchased by you.
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5.13. PRIVATE OFFERING BY THE COMPANY.
Neither the Company nor anyone acting on its behalf has
offered the Notes 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 you, the Other Purchaser and not more than
60 other Institutional Investors, each of which has been offered the Notes at a
private sale for investment. Neither the Company nor anyone acting on its
behalf has taken, or will take, any action that would subject the issuance or
sale of the Notes to the registration requirements of Section 5 of the
Securities Act.
5.14. USE OF PROCEEDS; MARGIN REGULATIONS.
The Company will apply the proceeds of the sale of the Notes
as set forth in Schedule 5.14. No part of the proceeds from the sale of the
Notes hereunder will be used, directly or indirectly, for the purpose of buying
or carrying any margin stock within the meaning of Regulation G of the Board of
Governors of the Federal Reserve System (12 CFR 207), or for the purpose of
buying or carrying or trading in any securities under such circumstances as to
involve the Company in a violation of Regulation X of said Board (12 CFR 224)
or to involve any broker or dealer in a violation of Regulation T of said Board
(12 CFR 220). Margin stock does not constitute more than 2% of the value of
the assets of the Company and the Company does not have any present intention
that margin stock will constitute more than 5% of the value of such assets. As
used in this Section, the terms "margin stock" and "purpose of buying or
carrying" shall have the meanings assigned to them in said Regulation G.
5.15. EXISTING INDEBTEDNESS; FUTURE LIENS.
(a) Except as described therein, Schedule 5.15 sets forth
a complete and correct list of all outstanding Indebtedness of the Company as
of April 30, 1996, since which date there has been no Material change in the
amounts, interest rates, sinking funds, installment payments or maturities of
the Indebtedness of the Company. The Company is not in default and no waiver
of default is currently in effect, in the payment of any principal or interest
on any Indebtedness of the Company and no event or condition exists with
respect to any Indebtedness of the Company that would permit (or that with
notice or the lapse of time, or both, would permit) one or more Persons to
cause such Indebtedness to become due and payable before its stated maturity or
before its regularly scheduled dates of payment.
(b) The Company has not agreed or consented to cause or
permit in the future (upon the happening of a contingency or otherwise) any of
its property, whether now owned or hereafter acquired, to be subject to a Lien
that secures Indebtedness.
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5.16. FOREIGN ASSETS CONTROL REGULATIONS, ETC.
Neither the sale of the Notes by the Company hereunder nor its
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 Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
5.17. STATUS UNDER CERTAIN STATUTES.
The Company is not 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.
5.18. ENVIRONMENTAL MATTERS.
The Company owns no real property. The Company has no
knowledge of any claim and has not received any notice of any claim, the
Company has no knowledge that any proceeding has been instituted raising any
claim against any of the real properties or other assets formerly owned, leased
or operated by it, and no proceeding has been instituted raising any claim
against the Company or any of its real properties or other assets now owned,
leased or operated by it, alleging in any of the foregoing cases any damage to
the environment or violation of any Environmental Laws, except such as could
not reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect. Except as otherwise disclosed to you in writing,
(a) the Company has no knowledge of any facts which would
give rise to any claim, public or private, of violation of
Environmental Laws or damage to the environment emanating from,
occurring on or in any way related to real properties now or formerly
owned, leased or operated by it or to other assets or their use,
except in each case, such as could not reasonably be expected to
result in a Material Adverse Effect;
(b) the Company has not stored any Hazardous Materials on
real properties now or formerly owned, leased or operated by it and
has not disposed of any Hazardous Materials in a manner contrary to
any Environmental Laws in each case in any manner that could
reasonably be expected to result in a Material Adverse Effect; and
(c) the portions of the buildings situated on all real
properties now, leased or operated by the Company are in compliance
with applicable Environmental Laws, except where failure to comply
could not reasonably be expected to result in a Material Adverse
Effect.
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6. REPRESENTATIONS OF THE PURCHASER.
6.1. PURCHASE FOR INVESTMENT.
You represent that you are purchasing the Notes for your own
account or for one or more separate accounts maintained by you 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 your or their property
shall at all times be within your or their control. You understand 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
the Company is not required to register the Notes.
6.2. SOURCE OF FUNDS.
You represent that at least one of the following statements is
an accurate representation as to each source of funds (a "Source") to be used
by you to pay the purchase price of the Notes to be purchased by you hereunder:
(a) the Source constitutes assets of a general account
maintained by an insurance company, and the use of such Source for the
purchase of the Notes is permitted by the terms of Prohibited
Transaction Class Exemption 95-60; or
(b) the Source is either (i) an insurance company pooled
separate account, within the meaning of Prohibited Transaction
Exemption ("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 you have disclosed to the
Company in writing pursuant to this paragraph (b), 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
(c) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of 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
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of all employee benefit plans whose assets are included in such
investment fund have been disclosed to the Company in writing pursuant
to this paragraph (c); or
(d) the Source is a governmental plan; or
(e) 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 the Company in
writing pursuant to this paragraph (e); or
(f) 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," "PARTY IN INTEREST" and "SEPARATE ACCOUNT" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
7. INFORMATION AS TO COMPANY.
7.1. FINANCIAL AND BUSINESS INFORMATION.
The Company shall deliver to each holder of Notes that is an
Institutional Investor:
(a) Quarterly Statements -- within 90 days after the end
of each quarterly fiscal period in each fiscal year of the Company
(other than the last quarterly fiscal period of each such fiscal
year), duplicate copies of
(i) a consolidated balance sheet of the Company
and its Subsidiaries as at the end of such quarter, and
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its
Subsidiaries for such quarter and (in the case of the second
and third quarters) for the portion of the fiscal year ending
with such quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly
financial statements generally, and certified by a Senior Financial
Officer as fairly presenting, in all material respects, the financial
position of the companies being reported on and their results of
operations and cash flows, subject to changes resulting from year-end
adjustments, provided that, in the event the Company is subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act,
delivery within the time period specified above of copies of the
Company's Quarterly Report on Form 10-Q prepared
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in compliance with the requirements therefor and filed with the
Securities and Exchange Commission shall be deemed to satisfy the
requirements of this Section 7.1(a);
(b) Annual Statements -- within 120 days after the end of
each fiscal year of the Company, duplicate copies of
(i) a consolidated balance sheet of the Company
and its Subsidiaries as at the end of such year, and
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its
Subsidiaries for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP, and accompanied
(A) by an opinion thereon of independent
certified public accountants of recognized national standing,
which opinion shall state that such financial statements
present fairly, in all material respects, the financial
position of the companies being reported upon and their
results of operations and cash flows and have been prepared in
conformity with GAAP, and that the examination of such
accountants in connection with such financial statements has
been made in accordance with generally accepted auditing
standards, and that such audit provides a reasonable basis for
such opinion in the circumstances, and
(B) by a written notice from such accountants
stating whether, in making their audit, they have become aware
of any condition or event that then constitutes a Default or
an Event of Default under Section 10 of this Agreement, and,
if they are aware that any such condition or event then
exists, specifying the nature and period of the existence
thereof (it being understood that such accountants shall not
be liable, directly or indirectly, for any failure to obtain
knowledge of any such Default or Event of Default unless such
accountants should have obtained knowledge thereof in making
an audit in accordance with generally accepted auditing
standards or did not make such an audit),
provided that, in the event the Company is subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the delivery within
the time period specified above of the Company's Annual Report on Form 10-K for
such fiscal year (together with the Company's annual report to shareholders, if
any, prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in
accordance with the requirements therefor and filed with the Securities and
Exchange Commission, together with the accountant's certificate described in
clause (B) above, shall be deemed to satisfy the requirements of this Section
7.1(b);
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(c) SEC and Other Reports - in the event the Company is
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, promptly upon their becoming available, one copy of (i) each financial
statement, report, notice or proxy statement sent by the Company or any
Subsidiary to public securities holders generally, and (ii) each regular or
periodic report, each registration statement (without exhibits except as
expressly requested by such holder), and each prospectus and all amendments
thereto filed by the Company or any Subsidiary with the Securities and Exchange
Commission and of all press releases and other statements made available
generally by the Company or any Subsidiary to the public concerning
developments that are Material;
(d) Notice of Default or Event of Default -- promptly,
and in any event within ten days after a Responsible Officer becoming aware of
the existence of any Default or Event of Default or that any Person has given
any notice or taken any action with respect to a claimed default hereunder or
that any Person has given any notice or taken any action with respect to a
claimed default of the type referred to in Section II(f), a written notice
specifying the nature and period of existence thereof and what action the
Company is taking or proposes to take with respect thereto;
(e) ERISA Matters -- promptly, and in any event within
five days after a Responsible Officer becoming aware of any of the following, a
written notice setting forth the nature thereof and the action, if any, that
the Company or an ERISA Affiliate proposes to take with respect thereto:
(i) with respect to any Plan, any reportable
event, as defined in section 4043(b) of ERISA and the
regulations thereunder, for which notice thereof has not been
waived pursuant to such regulations as in effect on the date
hereof; or
(ii) the taking by the PBGC of steps to institute,
or the threatening by the PBGC of the institution of,
proceedings under section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Plan,
or the receipt by the Company or any ERISA Affiliate of a
notice from a Multiemployer Plan that such action has been
taken by the PBGC with respect to such Multiemployer Plan; or
(iii) any event, transaction or condition that
could result in the incurrence of any liability by the Company
or any ERISA Affiliate pursuant to Title I or IV of ERISA or
the penalty or excise tax provisions of the Code relating to
employee benefit plans, or in the imposition of any Lien on
any of the rights, properties or assets of the Company or any
ERISA Affiliate pursuant to Title I or IV of ERISA or such
penalty or excise tax provisions, if such liability or Lien,
taken together with any other such liabilities or Liens then
existing, could reasonably be expected to have a Material
Adverse Effect;
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(f) Notices from Governmental Authority -- promptly, and
in any event within 30 days of receipt thereof, copies of any notice
to the Company or any Subsidiary from any Federal or state
Governmental Authority relating to any order, ruling, statute or other
law or regulation that could reasonably be expected to have a Material
Adverse Effect; and
(g) Requested Information -- with reasonable promptness,
such other data and information relating to the business, operations,
affairs, financial condition, assets or properties of the Company or
any of its Subsidiaries or relating to the ability of the Company to
perform its obligations hereunder and under the Notes as from time to
time may be reasonably requested by any such holder of Notes.
7.2. OFFICER'S CERTIFICATE.
Each set of financial statements delivered to a holder of
Notes pursuant to Section 7.1(a) or Section 7.1(b) hereof shall be accompanied
by a certificate of a Senior Financial Officer setting forth:
(a) Covenant Compliance -- the information (including
detailed calculations) required in order to establish whether the
Company was in compliance with the requirements of Section 10.2
through Section 10.10 hereof, inclusive, during the quarterly or
annual period covered by the statements then being furnished
(including with respect to each such Section, where applicable, the
calculations of the maximum or minimum amount, ratio or percentage, as
the case may be, permissible under the terms of such Sections, and the
calculation of the amount, ratio or percentage then in existence); and
(b) Event of Default -- a statement that such officer has
reviewed the relevant terms hereof and has made, or caused to be made,
under his or her supervision, a review of the transactions and
conditions of the Company and its Subsidiaries from the beginning of
the quarterly or annual period covered by the statements then being
furnished to the date of the certificate and that such review shall
not have disclosed the existence during such period of any condition
or event that constitutes a Default or an Event of Default or, if any
such condition or event existed or exists (including, without
limitation, any such event or condition resulting from the failure of
the Company or any Subsidiary to comply with any Environmental Law),
specifying the nature and period of existence thereof and what action
the Company shall have taken or proposes to take with respect thereto.
7.3. INSPECTION.
The Company shall permit the representatives of each holder of
Notes that is an Institutional Investor:
(a) No Default -- if no Default or Event of Default then
exists, at the expense of such holder and upon reasonable prior notice
to the Company, to visit the principal executive
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office of the Company, to discuss the affairs, finances and accounts
of the Company and its Subsidiaries with the Company's officers, and
(with the consent of the Company, which consent will not be
unreasonably withheld) its independent public accountants, and (with
the consent of the Company, which consent will not be unreasonably
withheld) to visit the other offices and properties of the Company and
each Subsidiary, all at such reasonable times and as often as may be
reasonably requested in writing; and
(b) Default -- if a Default or Event of Default then
exists, at the expense of the Company, which shall be deemed to
include the reasonable costs and expenses of counsel, accountants,
financial advisors and other third party advisors of such holder
incurred in connection with the exercise of the rights of such holder
pursuant to this Section 7.3(b), to visit and inspect any of the
offices or properties of the Company or any Subsidiary, to examine all
their respective books of account, records, reports and other papers,
to make copies and extracts therefrom, and to discuss their respective
affairs, finances and accounts with their respective officers and
independent public accountants (and by this provision the Company
authorizes said accountants to discuss the affairs, finances and
accounts of the Company and its Subsidiaries), all at such times and
as often as may be requested.
8. PREPAYMENT OF THE NOTES.
8.1. REQUIRED PREPAYMENTS.
On June 13, 1999 and on each June 13 thereafter to and
including June 13, 2002 the Company will prepay $5,000,000 principal amount (or
such lesser principal amount as shall then be outstanding) of the Notes at par
and without payment of the Make-Whole Amount or any premium, provided that upon
any partial prepayment of the Notes pursuant to Section 8.2 or purchase of the
Notes permitted by Section 8.5 or Section 8.6 the principal amount of each
required prepayment of the Notes becoming due under this Section 8.1 on and
after the date of such prepayment or purchase shall be reduced in the same
proportion as the aggregate unpaid principal amount of the Notes is reduced as
a result of such prepayment or purchase.
8.2. OPTIONAL PREPAYMENTS WITH MAKE-WHOLE AMOUNT.
The Company may, at its option, upon notice as provided below,
prepay at any time all, or from time to time any part of, the Notes, in an
amount not less than 20% of the aggregate principal amount of the Notes then
outstanding in the case of a partial prepayment, at 100% of the principal
amount so prepaid, plus the Make-Whole Amount determined for the prepayment
date with respect to such principal amount. The Company will give each holder
of Notes written notice of each optional prepayment under this Section 8.2 not
less than 30 days and not more than, 90 days prior to the date fixed for such
prepayment. Each such notice shall specify such date, the aggregate principal
amount of the Notes to be prepaid on such date, the principal amount of each
Note held by such holder to be prepaid (determined in accordance with Section
8.3), and the interest to be paid on the prepayment date with respect to such
principal amount being prepaid, and shall be
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accompanied by a certificate of a Senior Financial Officer as to the estimated
Make-Whole Amount due in connection with such prepayment (calculated as if the
date of such notice were the date of the prepayment), setting forth the details
of such computation. Two Business Days prior to such prepayment, the Company
shall deliver to each holder of Notes a certificate of a Senior Financial
Officer specifying the calculation of such Make-Whole Amount as of the
specified prepayment date.
8.3. ALLOCATION OF PARTIAL PREPAYMENTS.
In the case of each partial prepayment of the Notes, the
principal amount of the Notes to be prepaid shall be allocated among all of the
Notes at the time outstanding in proportion, as nearly as practicable, to the
respective unpaid principal amounts thereof not theretofore called for
prepayment.
8.4. MATURITY; SURRENDER, ETC.
In the case of each prepayment of Notes pursuant to this
Section 8, the principal amount of each Note to be prepaid shall mature and
become due and payable on the date fixed for such prepayment, together with
interest on such principal amount accrued to such date and the applicable
Make-Whole Amount, if any. From and after such date, unless the Company shall
fail to pay such principal amount when so due and payable, together with the
interest and Make-Whole Amount, if any, as aforesaid, interest on such
principal amount shall cease to accrue. Any Note paid or prepaid in full shall
be surrendered to the Company and cancelled and shall not be reissued, and no
Note shall be issued in lieu of any prepaid principal amount of any Note.
8.5. PURCHASE OF NOTES.
The Company will not and will not permit any Affiliate to
purchase, redeem, prepay or otherwise acquires directly or indirectly, any of
the outstanding Notes except upon the payment, prepayment or purchase of the
Notes in accordance with the terms of this Agreement and the Notes. The
Company will promptly cancel all Notes acquired by it or any Affiliate pursuant
to any payment, prepayment or purchase of Notes pursuant to any provision of
this Agreement and no Notes may be issued in substitution or exchange for any
such Notes.
8.6. RIGHT TO PUT.
(a) Granting of Put. The Company hereby gives and grants
to the holder of each Note the option, right and privilege (such option, right
and privilege herein collectively referred to as the "RIGHT TO PUT") to require
the Company, upon or after the occurrence of any Designated Event, to purchase
from such holder all Notes held by such holder on the terms and conditions
hereinafter set forth, and the Company agrees so to purchase from such holder,
for an amount equal to the aggregate outstanding principal amount of such Notes
and the accrued and unpaid interest thereon.
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(b) Exercise of Put. Within 10 Business Days after any
Responsible Officer of the Company has knowledge of the occurrence of any
Designated Event, the Company shall give the holder of each Note written notice
thereof describing such Designated Event, and the facts and circumstances
surrounding the occurrence thereof, in reasonable detail. At any time prior to
60 days after any holder shall receive such notice, such holder may exercise
its Right to Put by delivering to the Company, at the address provided by the
Company pursuant to Section 18 (if so provided), an irrevocable notice of sale
substantially in the form of Exhibit 8.6(b) hereto (a "NOTICE OF SALE");
provided, that the Company shall give the holder of each Note prompt written
notice of such Notice of Sale, whereupon the holder of each Note shall have
until the later of (x) the expiration of such sixty-day period or (y) 10 days
after its receipt of such notice from the Company to exercise its Right to Put
by delivering to the Company a Notice of Sale. If the holder of a Note shall
deliver a Notice of Sale pursuant to any provision of the preceding sentence,
the Company shall purchase the Notes then held by such holder on the date
specified in such notice (which shall be not less than 20 days after delivery
of such Notice of Sale), and such holder shall sell such Notes to the Company
without recourse, representation or warranty (other than as to such holder's
full right, title and interest to such Notes free of any adverse claim
thereto), at a price, payable in immediately available funds by wire transfer
to the account specified pursuant to Schedule A hereto or to such other account
as may be specified in such notice, equal to the aggregate outstanding
principal amount of the Notes of such holder and the accrued and unpaid
interest thereon; provided, that if more than one holder shall give a Notice of
Sale in compliance with the foregoing provisions of this Section 8.6(b), the
Company shall purchase the Notes held by all such holders on the same day,
which shall be the latest day specified in all such Notices of Sale but in no
event more than 90 days after the date of the Company's sending of notice of
the occurrence of the Designated Event giving rise thereto, and shall advise
the holder of each Note of such date and the aggregate principal amount of
Notes to be purchased by the Company. Each holder shall have the respective
rights specified in this Section 8.6 with respect to each Designated Event that
shall occur, regardless of any act or omission to act with respect to any
previous Designated Event.
8.7. MAKE-WHOLE AMOUNT.
The term "Make-Whole Amount" means, with respect to any Note,
an amount equal to the excess, if any, of the Discounted Value of the Remaining
Scheduled Payments with respect to the Called Principal of such Note over the
amount of such Called Principal, provided that the Make-Whole Amount may in no
event be less than zero. For the purposes of determining the Make-Whole
Amount, the following terms have the following meanings:
"CALLED PRINCIPAL" means, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to Section 8.2
or has become or is declared to be immediately due and payable
pursuant to Section 12.1, as the context requires.
"DISCOUNTED VALUE" means, with respect to the Called Principal
of any Note, the amount obtained by discounting all Remaining
Scheduled Payments with respect to such Called Principal from their
respective scheduled due dates to the Settlement Date with
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respect to such Called Principal, in accordance with accepted
financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on the Notes is payable)
equal to the Reinvestment Yield with respect to such Called Principal.
"REINVESTMENT YIELD" means, with respect to the Called
Principal of any Note, 0.50% over the yield to maturity implied by (i)
the yields reported, as of 10:00 A.M. (New York City time) on the
second Business Day preceding the Settlement Date with respect to such
Called Principal, on the display designated as "Page 500" on the
Telerate Access Service (or such other display as may replace Page 500
on Telerate Access Service) for actively traded U.S. Treasury
securities having a maturity equal to the Remaining Average Life of
such Called Principal as of such Settlement Date, or (ii) if such
yields are not reported as of such time or the yields reported as of
such time are not ascertainable, the Treasury Constant Maturity Series
Yields reported, for the latest day for which such yields have been so
reported as of the second Business Day preceding the Settlement Date
with respect to such Called Principal, in Federal Reserve Statistical
Release H.15 (519) (or any comparable successor publication) for
actively traded U.S. Treasury securities having a constant maturity
equal to the Remaining Average Life of such Called Principal as of
such Settlement Date. Such implied yield in clause (i) or clause (ii)
will be determined, (2) if necessary, by (x) converting U.S. Treasury
bill quotations to bond-equivalent yields in accordance with accepted
financial practice and (y) interpolating linearly between (1) the
actively traded U.S. Treasury security with the duration closest to
and greater than the Remaining Average Life and (2) the actively
traded U.S. Treasury security with the duration closest to and less
than the Remaining Average Life and (b) by converting all such implied
yields to a quarterly payment basis in accordance with accepted
financial practice.
"REMAINING AVERAGE LIFE" means, with respect to any Called
Principal, the number of years calculated to the nearest one-twelfth
year) obtained by dividing (i) such Called Principal into (ii) the sum
of the products obtained by multiplying (a) the principal component of
each Remaining Scheduled Payment with respect to such Called Principal
by (12) the number of years (calculated to the nearest one-twelfth
year) that will elapse between the Settlement Date with respect to
such Called Principal and the scheduled due date of such Remaining
Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" means, with respect to the
Called Principal of any Note, all payments of such Called Principal
and interest thereon that would be due after the Settlement Date with
respect to such Called Principal if no payment of such Called
Principal were made prior to its scheduled due date, provided that if
such Settlement Date is not a date on which interest payments are due
to be made under the terms of the Notes, then the amount of the next
succeeding scheduled interest payment will be reduced by the amount of
interest accrued to such Settlement Date and required to be paid on
such Settlement Date pursuant to Section 8.2 or 12.1.
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"SETTLEMENT DATE" means, with respect to the Called Principal
of any Note, the date on which such Called Principal is to be prepaid
pursuant to Section 8.2 or has become or is declared to be immediately
due and payable pursuant to Section 12.1, as the context requires.
9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
9.1. COMPLIANCE WITH LAW.
The Company will and will cause each of its Subsidiaries to
comply with all laws, ordinances or governmental rules or regulations to which
each of them is subject, including, without limitation, Environmental Laws, and
will obtain and maintain in effect all licenses, certificates, permits,
franchises and other governmental authorizations necessary to the ownership of
their respective properties or to the conduct of their respective businesses,
in each case to the extent necessary to ensure that non-compliance with such
laws, ordinances or governmental rules or regulations or failures to obtain or
maintain in effect such licenses, certificates, permits, franchises and other
governmental authorizations could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
9.2. INSURANCE.
The Company will and will cause each of its Subsidiaries to
maintain, with financially sound and reputable insurers, insurance with respect
to their respective properties and businesses against such casualties and
contingencies, of such types, on such terms and in such amounts (including
deductibles, co-insurance and self-insurance, if adequate reserves are
maintained with respect thereto) as is customary in the case of entities of
established reputations engaged in the same or a similar business and similarly
situated.
9.3. MAINTENANCE OF PROPERTIES.
The Company will and will cause each of its Subsidiaries to
maintain and keep, or cause to be maintained and kept, their respective
properties in good repair, working order and condition (other than ordinary
wear and tear), so that the business carried on in connection therewith may be
properly conducted at all times, provided that this Section shall not prevent
the Company or any Subsidiary from discontinuing the operation and the
maintenance of any of its properties if such discontinuance is desirable in the
conduct of its business and the Company has concluded that such discontinuance
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
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9.4. PAYMENT OF TAXES AND CLAIMS.
The Company will and will cause each of its Subsidiaries to
file all tax returns required to be filed in any jurisdiction and to pay and
discharge all taxes shown to be due and payable on such returns and all other
taxes, assessments, governmental charges, or levies imposed on them or any of
their properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent
and all claims for which sums, have become due and payable that have or might
become a Lien on properties or assets of the Company or any Subsidiary,
provided that neither the Company nor any Subsidiary need pay any such tax,
assessment or claim if (i) the amount, applicability or validity thereof is
contested by the Company or such Subsidiary on a timely basis in good faith and
in appropriate proceedings, and the Company or a Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of the Company
or such Subsidiary or (ii) the nonpayment of all such taxes, assessments or
claims in the aggregate could not reasonably be expected to have a Material
Adverse Effect.
9.5. CORPORATE EXISTENCE, ETC.
Subject to Section 10.2, the Company will at all times
preserve and keep in full force and effect its corporate existence. Subject to
Sections 10.2 and 10.9, the Company will at all times preserve and keep in full
force and effect the corporate existence of each of its Subsidiaries (unless
merged into the Company or a Subsidiary) and all rights and franchises of the
Company and its Subsidiaries unless, in the good faith judgment of the Company,
the termination of or failure to preserve and keep in fall force and effect
such corporate existence, right or franchise could not, individually or in the
aggregate, have a Material Adverse Effect.
9.6. PARITY WITH OTHER SENIOR INDEBTEDNESS.
The Company will, and will cause its Subsidiaries to, execute
all such documents and take such other actions (including such documents and
actions as the Required Holders may reasonably request) in order to assure that
at all times the Notes shall rank pari passu in right of payment with all
senior unsecured Indebtedness of the Company.
9.7. GUARANTEED OBLIGATIONS.
The Company covenants that if, at any time, any of its
Subsidiaries executes a Guaranty of any Indebtedness of the Company, the
Company will simultaneously cause such Subsidiary or Subsidiaries, as the case
may be, to execute and deliver to the holder of each Note a similar Guaranty in
form and substance reasonably satisfactory to the Required Holders with respect
to payment of the principal amount of the Notes, and any Make-Whole Amount and
interest thereon, which bears the same ratio to the total unpaid principal
amount of the Notes as the amount of such other Indebtedness which is subject
to a Guaranty bears to the total unpaid principal amount of such other
Indebtedness.
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9.8. COVENANT TO SECURE NOTES EQUALLY.
If the Company or any Subsidiary shall create or assume any
Lien upon any of its property or assets, whether now owned or hereafter
acquired, other than Liens permitted by Section 10.3 (unless prior written
consent to the creation or assumption thereof shall halve been obtained
pursuant to this Agreement), the Company will make or cause to be made
effective provision whereby the Notes will be secured by such Lien equally and
ratably with any and all other Indebtedness so long as such Indebtedness shall
be so secured pursuant to such agreements and instruments as shall be approved
by the Required Holders, and the Company will cause to be delivered to the
holder of each Note an opinion of independent counsel to the effect that such
agreements and instruments are enforceable in accordance with their terms and
that the Notes are equally and ratably secured with such other Indebtedness.
9.9. INFORMATION REQUIRED BY RULE 144A.
The Company will, upon the request of the holder of any Note,
provide such holder, and any qualified institutional buyer designated by such
holder, such financial and other information as such holder may reasonably
determine to be necessary in order to permit compliance with the information
requirements of Rule 144A under the Securities Act in connection with the
resale of Notes, except at such times as the Company is subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act. For the
purpose of this Section 9.9, the term "qualified institutional buyer" shall
have the meaning specified in Rule 144A under the Securities Act.
10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
10.1. TRANSACTIONS WITH AFFILIATES.
The Company will not and will not permit any Subsidiary to
enter into directly or indirectly any transaction or Material group of related
transactions (including without limitation the purchase, lease, sale or
exchange of properties of any kind or the rendering of any service) with any
Affiliate, except (a) in the ordinary course and pursuant to the reasonable
requirements of the Company's or such Subsidiary's business and upon fair and
reasonable terms no less favorable to the Company or such Subsidiary than would
be obtainable in a comparable arm's-length transaction with a Person not an
Affiliate, or (b) pursuant to the Stock Redemption Agreement.
10.2. MERGER, CONSOLIDATION, ETC.
The Company will not, and will not permit any of its
Subsidiaries to, consolidate with or merge with any other Person or convey,
transfer or lease substantially all of its assets in a single transaction or
series of transactions to any Person (except that a Subsidiary of the Company
may (x) consolidate with or merge with, or convey, transfer or lease
substantially all of its assets in a single
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transaction or series of transactions to, another Subsidiary of the Company or
the Company and (y) convey, transfer or lease all of its assets in compliance
with the provisions of Section 10.9), provided that the foregoing restriction
shall not apply to the consolidation or merger of the Company with, or the
conveyance, transfer or lease of substantially all of the assets of the Company
in a single transaction or series of transactions to, any Person so long as:
(a) the successor formed by such consolidation or the
survivor of such merger or the Person that acquires by conveyance,
transfer or lease substantially all of the assets of the Company as an
entirety, as the case may be, shall be a solvent corporation organized
and existing under the laws of the United States or any State thereof
(including the District of Columbia), and, if the Company is not such
corporation, such corporation shall have (i) executed and delivered to
each holder of Notes its assumption, in a form reasonably satisfactory
to the Required Holders, of the due and punctual performance and
observance of each covenant and condition of this Agreement, the Other
Agreement and the Notes and (ii) caused to be delivered to each holder
of Notes an opinion of nationally recognized independent counsel, or
other independent counsel reasonably satisfactory to the Required
Holders, to the effect that all agreements or instruments effecting
such assumption are enforceable in accordance with their terms and
comply with the terms hereof, and
(b) immediately after giving effect to such transaction,
no Default or Event of Default shall have occurred and be continuing.
No such conveyance, transfer or lease of substantially all of the assets of the
Company shall have the effect of releasing the Company or any successor
corporation that shall theretofore have become such in the manner prescribed in
this Section 10.2 from its liability under this Agreement or the Notes.
10.3. LIENS.
The Company will not, and will not permit any Subsidiary to,
directly or indirectly create, incur, assume or permit to exist (upon the
happening of a contingency or otherwise) any Lien on or with respect to any
property or asset (including, without limitation, any document or instrument in
respect of goods or accounts receivable) of the Company or any Subsidiary,
whether now owned or held or hereafter acquired, or any income or profits
therefrom or assign or otherwise convey any right to receive income or profits,
except:
(a) Liens existing on the date of the Closing and
securing the Indebtedness of the Company referred to in Schedule 5.15;
(b) Liens incidental to the conduct of business or the
ownership of properties of the Company and its Subsidiaries (including
Liens in connection with worker's compensation, unemployment insurance
and other like laws (other than ERISA Liens), warehousemen's and
mechanic's liens and statutory landlord's liens) and Liens to secure
the
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performance of bids, tenders or trade contracts, or to secure
statutory obligations, property taxes and assessments or governmental
charges, surety or appeal bonds or other Liens of like general nature
which are incurred in the ordinary course of business and not in
connection with the borrowing of money and which do not in any event
materially impair the value or use of the property encumbered thereby
in the operation of the business of the Company and its Subsidiaries;
provided in each case, that the obligation secured is not overdue or,
if overdue, is being contested in good faith by appropriate actions or
proceedings;
(c) any Lien created to secure all or any part of the
purchase price, or to secure Indebtedness incurred or assumed to pay
all or any part of the purchase price or cost of construction, of
tangible property (or any improvement thereon) acquired or constructed
by the Company or a Subsidiary after the date of the Closing, provided
that
(i) any such Lien shall extend solely to
the item or items of such property (or improvement
thereon) so acquired or constructed,
(ii) the principal amount of the
Indebtedness secured by any such Lien shall at no
time exceed an amount equal to the lesser of (A) the
cost to the Company or such Subsidiary of the
property (or improvement thereon) so acquired or
constructed and (B) the Fair Market Value (as
determined in good faith by the board of directors of
the Company) of such property (or improvement
thereon) at the time of such acquisition or
construction, and
(iii) any such Lien shall be created
contemporaneously with, or within 90 days after, the
acquisition or construction of such property; and
(d) Liens, other than those described in the foregoing
clauses securing Indebtedness of the Company or any Subsidiary,
provided that the aggregate principal amount of all such secured
Indebtedness plus the aggregate principal amount of all other Priority
Debt shall not at any time exceed 10% of Adjusted Net Worth.
10.4. CURRENT RATIO.
The Company will not, at any time, permit the ratio of
Consolidated Current Assets to Consolidated Current Liabilities to be less than
1 to 1.
10.5. ADJUSTED NET WORTH.
The Company will not permit Adjusted Net Worth (i) on April
30, 1996 to be less than $50,000,000 plus the greater of zero or 50% of
Consolidated Net Income for the period commencing on February 1, 1996 and
ending on such day, or (ii) on the last day of any subsequent fiscal quarter of
the Company, to be less than the minimum Adjusted Net Worth required by this
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Section 10.5 at the end of the immediately preceding fiscal quarter plus the
greater of zero or 50% of Consolidated Net Income for the fiscal quarter of the
Company ending on such day.
10.6. FIXED CHARGES COVERAGE RATIO.
The Company will not, at any time, permit the Fixed Charges
Coverage Ratio to be less than 1.5 to 1.
10.7. LIMITATION ON INDEBTEDNESS.
The Company will not, at any time, permit Consolidated Indebtedness to
exceed 60% of Consolidated Total Capitalization.
10.8. PRIORITY DEBT.
The Company will not at any time permit the aggregate
outstanding principal amount of Priority Debt to exceed 10% of Adjusted Net
Worth.
10.9. SALE OF ASSETS.
Except as permitted under Section 10.2, the Company will not,
and will not permit any of its Subsidiaries to, make any Asset Sale (a) other
than for Fair Market Value or (b) (i) if the Fair Market Value of the assets
that are the subject of such Asset Sale plus the Fair Market Value of the
assets that are the subjects of all other Asset Sales during the then current
fiscal year would exceed 10% of Consolidated Net Tangible Assets, or (ii) if
the Fair Market Value of the assets that are the subject of such Asset Sale
plus the Fair Market Value of the assets that are the subjects of all other
Asset Sales since the date of the Closing would exceed 25% of Consolidated Net
Tangible Assets. If the Net Proceeds Amount for any Asset Sale is applied to a
Debt Prepayment Application or a Property Reinvestment Application within 180
days after such Asset Sale, then such Asset Sale, only for the purpose of
determining compliance with the preceding sentence as of any date, shall be
deemed not to be an Asset Sale.
10.10. RESTRICTED PAYMENTS AND RESTRICTED INVESTMENTS.
(a) LIMITATION. The Company will not, and will not permit any of
its Subsidiaries to, declare, make or incur any liability to make any
Restricted Payment or make or authorize any Restricted Investment unless
immediately after giving effect to such action:
(i) the sum of (x) the aggregate value of all Restricted
Investments of the Company and its Subsidiaries (valued immediately
after such action), plus (y) the aggregate amount of Restricted
Payments of the Company and its Subsidiaries declared or made during
the period commencing on February 1, 1996, and ending on the date such
Restricted Payment or Restricted Investment is declared or made,
inclusive, would not exceed the sum of
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(A) $7,500,000, plus
(B) 50% of Consolidated Net Income for such
period (or minus 100% of Consolidated Net Income for such
period if Consolidated Net Income for such period is a loss),
plus
(C) the aggregate amount of Net Proceeds of
Common Stock for such period, and
(ii) no Default or Event of Default would exist.
(b) TIME OF PAYMENT. The Company will not, nor will it
permit any of its Subsidiaries to, authorize a Restricted Payment that is not
payable within 60 days of authorization.
11. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" shall exist if any of the following
conditions or events shall occur and be continuing:
(a) the Company defaults in the payment of any principal
or Make-Whole Amount, if any, on any Note when the same becomes due
and payable, whether at maturity or at a date fixed for prepayment or
by declaration or otherwise; or
(b) the Company defaults in the payment of any interest
on any Note for more than five days after the same becomes due and
payable; or
(c) the Company defaults in the performance of or
compliance with any term contained in Section 10 and such default is
not remedied within 15 days after the occurrence of such default; or
(d) the Company defaults in the performance of or
compliance with any term contained herein (other than those referred
to in paragraphs (a), (b) and (c) of this Section 11) and such default
is not remedied within 30 days after the earlier of (i) a Responsible
Officer obtaining actual knowledge of such default and (ii) the
Company receiving written notice of such default from any holder of a
Note (any such written notice to be identified as a "notice of
default" and to refer specifically to this paragraph (d) of Section
11); or
(e) any representation or warranty made in writing by or
on behalf of the Company or by any officer of the Company in this
Agreement or in any writing furnished in connection with the
transactions contemplated hereby proves to have been false or
incorrect in any material respect on the date as of which made; or
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(f) (i) The Company or any Subsidiary is in default (as
principal or as guarantor or other surety) in the payment of any
principal of or premium or make-whole amount or interest on any
Indebtedness that is outstanding in an aggregate principal amount of
at least $1,000,000 beyond any period of grace provided with respect
thereto, or (ii) the Company or any Subsidiary is in default in the
performance of or compliance with any term of any evidence of any
Indebtedness in an aggregate outstanding principal amount of at least
$1,000,000 or of any mortgage, indenture or other agreement relating
thereto or any other condition exists, and as a consequence of such
default or condition such Indebtedness has become, or has been
declared, due and payable before its stated maturity or before its
regularly scheduled dates of payment, or (iii) as a consequence of the
occurrence or continuation of any event or condition (other than the
passage of time or the right of the holder of Indebtedness to convert
such Indebtedness into equity interests), (x) the Company or any
Subsidiary has become obligated to purchase or repay Indebtedness
before its regular maturity or before its regularly scheduled dates of
payment in an aggregate outstanding principal amount of at least
$1,000,000, or (y) one or more Persons have the right to require the
Company or any Subsidiary so to purchase or repay such Indebtedness;
or
(g) the Company or any Subsidiary (i) is generally not
paying, or admits in writing its inability to pay, its debts as they
become due, (ii) files, or consents by answer or otherwise to the
filing against it of, a petition for relief or reorganization or
arrangement or any other petition in bankruptcy, for liquidation or to
take advantage of any bankruptcy, insolvency, reorganization,
moratorium or other similar law of any jurisdiction, (iii) makes an
assignment for the benefit of its creditors, (iv) consents to the
appointment of a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial
part of its property, (v) is adjudicated as insolvent or to be
liquidated, or (vi) takes corporate action for the purpose of any of
the foregoing; or
(h) a court or governmental authority of competent
jurisdiction enters an order appointing, without consent by the
Company or any of its Subsidiaries, a custodian, receiver, trustee or
other officer with similar powers with respect to it or with respect
to any substantial part of its property, or constituting an order for
relief or approving a petition for relief or reorganization or any
other petition in bankruptcy or for liquidation or to take advantage
of any bankruptcy or insolvency law of any jurisdiction, or ordering
the dissolution, winding-up or liquidation of the Company or any of
its Subsidiaries, or any such petition shall be filed against the
Company or any of its Subsidiaries and such petition shall not be
dismissed within 60 days; or
(i) a final judgment or judgments for the payment of
money aggregating in excess of $5,000,000 (exclusive of amounts which
financially sound and reputable insurers have unconditionally
acknowledged are covered by policies of insurance issued thereby) are
rendered against one or more of the Company and its Subsidiaries and
which judgments are not, within 45 days after entry thereof, bonded,
discharged or stayed pending appeal, or are not discharged within 45
days after the expiration of such stay; or
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(j) if (i) any Plan shall fail to satisfy the minimum
funding standards of ERISA or the Code for any plan year or part
thereof or a waiver of such standards or extension of any amortization
period is sought or granted under section 412 of the Code, (ii) a
notice of intent to terminate any Plan shall have been or is
reasonably expected to be filed with the PBGC or the PBGC shall have
instituted proceedings under ERISA section 4042 to terminate or
appoint a trustee to administer any Plan or the PBGC shall have
notified the Company or any ERISA Affiliate that a Plan may become a
subject of any such proceedings, (iii) the aggregate "amount of
unfunded benefit liabilities" (within the meaning of section
4001(a)(18) of ERISA) under all Plans, determined in accordance with
Title IV of ERISA, shall exceed $ 1,000,000, (iv) the Company or any
ERISA Affiliate shall have incurred or is reasonably expected to incur
any liability pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit plans,
(v) the Company or any ERISA Affiliate withdraws from any
Multiemployer Plan, or (vi) the Company or any Subsidiary establishes
or amends any employee welfare benefit plan that provides
postemployment welfare benefits in a manner that would increase the
liability of the Company or any Subsidiary thereunder; and any such
event or events described in clauses (i) through (vi) above, either
individually or together with any other such event or events, could
reasonably be expected to have a Material Adverse Effect.
As used in Section 11(j), the terms "EMPLOYEE BENEFIT PLAN" and "EMPLOYEE
WELFARE BENEFIT PLAN" shall have the respective meanings assigned to such terms
in Section 3 of ERISA.
12. REMEDIES ON DEFAULT, ETC.
12.1. ACCELERATION.
(a) If an Event of Default with respect to the Company
described in paragraph (g) or (h) of Section 11 (other than an Event of Default
described in clause (i) of paragraph (g) or described in clause (vi) of
paragraph (g) by virtue of the fact that such clause encompasses clause (i) of
paragraph (g)) has occurred, all the Notes then outstanding shall automatically
become immediately due and payable.
(b) If any other Event of Default has occurred and is
continuing, any holder or holders of more than 33 1/3% in principal amount of
the Notes at the time outstanding may at any time at its or their option, by
notice or notices to the Company, declare all the Notes then outstanding to be
immediately due and payable.
(c) If any Event of Default described in paragraph (a) or
(b) of Section 11 has occurred and is continuing, any holder or holders of
Notes at the time outstanding affected by such Event of Default may at any
time, at its or their option, by notice or notices to the Company, declare all
the Notes held by it or them to be immediately due and payable.
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36
Upon any Notes becoming due and payable under this Section
12.1, whether automatically or by declaration, such Notes will forthwith mature
and the entire unpaid principal amount of such Notes, plus (x) all accrued and
unpaid interest thereon and (y) the Make-Whole Amount determined in respect of
such principal amount (to the full extent permitted by applicable law), shall
all be immediately due and payable, in each and every case without presentment,
demand, protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the
Company (except as herein specifically provided for) and that the provision for
payment of a Make-Whole Amount by the Company in the event that the Notes are
prepaid or are accelerated as a result of an Event of Default, is intended to
provide compensation for the deprivation of such right under such
circumstances.
12.2. OTHER REMEDIES.
If any Default or Event of Default has occurred and is
continuing, and irrespective of whether any Notes have become or have been
declared immediately due and payable under Section 12.1, the holder of any Note
at the time outstanding may proceed to protect and enforce the rights of such
holder by an action at law, suit in equity or other appropriate proceeding,
whether for the specific performance of any agreement contained herein or in
any Note, or for an injunction against a violation of any of the terms hereof
or thereof, or in aid of the exercise of any power granted hereby or thereby or
by law or otherwise.
12.3. RESCISSION.
At any time after any Notes have been declared due and payable
pursuant to clause (b) or (c) of Section 12.1, the holders of not less than 66
2/3% in principal amount of the Notes then outstanding, by written notice to
the Company, may rescind and annul any such declaration and its consequences if
(a) the Company has paid all overdue interest on the Notes, all principal of
and Make-Whole Amount, if any, on any Notes that are due and payable and are
unpaid other than by reason of such declaration, and all interest on such
overdue principal and Make-Whole Amount, if any, and (to the extent permitted
by applicable law) any overdue interest in respect of the Notes, at the Default
Rate, (b) all Events of Default and Defaults, other than non-payment of amounts
that have become due solely by reason of such declaration, have been cured or
have been waived pursuant to Section 17, and (c) no judgment or decree has been
entered for the payment of any monies due pursuant hereto or to the Notes. No
rescission and annulment under this Section 12.3 will extend to or affect any
subsequent Event of Default or Default or impair any right consequent thereon.
12.4. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.
No course of dealing and no delay on the part of any holder of
any Note in exercising any right, power or remedy shall operate as a waiver
thereof or otherwise prejudice such holder's rights, powers or remedies. No
right, power or remedy conferred by this Agreement or by any Note
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37
upon any holder thereof shall be exclusive of any other right power or remedy
referred to herein or therein or now or hereafter available at law, in equity,
by statute or otherwise. Without limiting the obligations of the Company under
Section 15, the Company will pay to the holder of each Note on demand such
further amount as shall be sufficient to cover all costs and expenses of such
holder incurred in any enforcement or collection under this Section 12,
including, without limitation, reasonable attorneys' fees, expenses and
disbursements.
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
13.1. REGISTRATION OF NOTES.
The Company 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 the Company shall
not be affected by any notice or knowledge to the contrary. The Company shall
give to any holder of a Note that is an Institutional Investor promptly upon
request therefor, a complete and correct copy of the names and addresses of all
registered holders of Notes.
13.2. TRANSFER AND EXCHANGE OF NOTES.
Upon surrender of any Note at the principal executive office
of the Company 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 an attorney duly authorized in writing and accompanied by the address
for notices of each transferee of such Note or part thereof), the Company shall
execute and deliver, at the Company's 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. 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 Company 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 $ 1,000,000, provided that if
necessary to enable the registration of transfer by a holder of its entire
holding of Notes, one Note may be in a denomination of less than $1,000,000.
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 6.2.
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13.3. REPLACEMENT OF NOTES.
Upon receipt by the Company 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
(a) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to it (provided that if the holder
of such Note is you or your nominee or another holder of a Note with a
minimum net worth of at least $50,000,000, your or such other holder'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 Company 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.
14. PAYMENTS ON NOTES.
14.1. PLACE OF PAYMENT.
Subject to Section 14.2, payments of principal, Make-Whole
Amount, if any, and interest becoming due and payable on the Notes shall be
made in New York, New York at the principal office of The Chase Manhattan Bank,
N.A., in such jurisdiction. The Company 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.
14.2. HOME OFFICE PAYMENT.
So long as you or your nominee shall be the holder of any
Note, and notwithstanding anything contained in Section 14.1 or in such Note to
the contrary, the Company will pay all sums becoming due on such Note for
principal, Make-Whole Amount, if any, and interest by the method and at the
address specified for such purpose below your name in Schedule A, or by such
other method or at such other address as you shall have from time to time
specified to the Company 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 Company made concurrently with or reasonably
promptly after payment or prepayment in full of any Note, you shall surrender
such Note for cancellation, reasonably promptly after any such request, to the
Company at its principal executive office or at the place of payment most
recently designated by the Company pursuant to Section 14.1. Prior to any sale
or other disposition of any Note held by you or your nominee you will, at
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39
your 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 Company in exchange for a new Note or Notes pursuant to Section
13.2. The Company will afford the benefits of this Section 14.2 to any
Institutional Investor that is the direct or indirect transferee of any Note
purchased by you under this Agreement and that has made the same agreement
relating to such Note as you have made in this Section 14.2.
15. EXPENSES, ETC.
15.1. TRANSACTION EXPENSES.
Whether or not the transactions contemplated hereby are
consummated, the Company will pay all costs and expenses (including reasonable
attorneys' fees of a special counsel and, if reasonably required, local or
other counsel) incurred by you and each Other Purchaser or 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 (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 in responding to any subpoena or other legal process
or informal investigative demand issued in connection with this Agreement or
the Notes, 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 the Company or any Subsidiary or in connection with
any work-out or restructuring of the transactions contemplated hereby and by
the Notes. The Company will pay, and will save you 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 you).
15.2. SURVIVAL.
The obligations of the Company under this Section 15 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.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or
transfer by you 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 you or any
other holder of a Note. All statements contained in any certificate or other
instrument delivered by or on behalf of the Company pursuant to this Agreement
shall be deemed representations and warranties of the Company under this
Agreement. Subject to the preceding sentence, this Agreement
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40
and the Notes embody the entire agreement and understanding between you and the
Company and supersede all prior agreements and understandings relating to the
subject matter hereof.
17. AMENDMENT AND WAIVER.
17.1. REQUIREMENTS.
This Agreement and the Notes may be amended, and the
observance of any term hereof or of the Notes may be waived (either
retroactively or prospectively), with (and only with) the written consent of
the Company and the Required Holders, except that (a) no amendment or waiver of
any of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined
term (as it is used therein), will be effective as to you unless consented to
by you in writing, and (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 Section 12 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 or of the Make-Whole Amount 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, (iii) amend any of
Sections 8, 11(a), 11(b), 12, 17 or 20, or (iv) amend the definition of
"Designated Event" or the constituent definitions thereof.
17.2. SOLICITATION OF HOLDERS OF NOTES.
(a) Solicitation. The Company 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. The Company will deliver executed or
true and correct copies of each amendment, waiver or consent effected pursuant
to the provisions of this Section 17 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. The Company will not 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 or any waiver or amendment of any of the terms and provisions
hereof 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.
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41
17.3. BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in this
Section 17 applies equally to all holders of Notes and is binding upon them and
upon each future holder of any Note and upon the Company 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 the Company
and the holder of any Note nor any delay in exercising any rights hereunder or
under any Note 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.
17.4. NOTES HELD BY COMPANY, 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 have directed the taking of any
action provided herein or in the Notes 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 the Company or any of
its Affiliates shall be deemed not to be outstanding.
18. NOTICES.
All notices and communications provided for hereunder shall be
in writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the
address specified for such communications in Schedule A, or at such
other address as you or it shall have specified to the Company in
writing,
(ii) if to any other holder of any Note, to such holder at
such address as such other holder shall have specified to the Company
in writing, or
(iii) if to the Company, to the Company at its address set
forth at the beginning hereof to the attention of Chief Financial
Officer, or at such other address as the Company shall have specified
to the holder of each Note in writing.
Notices under this Section 18 will be deemed given only when actually received.
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42
19. 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 you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or
other similar process and you may destroy any original document so reproduced.
The Company agrees and stipulates 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 you
in the regular course of business) and any enlargement, facsimile or other
reproduction of such reproduction shall likewise be admissible in evidence.
This Section 19 shall not prohibit the Company 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.
20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "CONFIDENTIAL
INFORMATION" means information delivered to you by or on behalf of the Company
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
you as being confidential information of the Company or such Subsidiary,
provided that such term does not include information that (a) was publicly
known or otherwise known to you prior to the time of such disclosure, (b)
subsequently becomes publicly known through no act or omission by you or any
person acting on your behalf, (c) otherwise becomes known to you other than
through disclosure by the Company or any Subsidiary or (d) constitutes
financial statements delivered to you under Section 7.1 that are otherwise
publicly available. You will maintain the confidentiality of such Confidential
Information in accordance with procedures adopted by you in good faith to
protect confidential information of third parties delivered to you, provided
that you may deliver or disclose Confidential Information to (i) your
directors, officers, employees, agents, attorneys and affiliates (to the extent
such disclosure reasonably relates to the administration of the investment
represented by your Notes), (ii) your financial advisors and other professional
advisors who agree to hold confidential the Confidential Information
substantially in accordance with the terms of this Section 20, (iii) any other
holder of any Note, (iv) any Institutional Investor to which you sell or offer
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 20), (v) any Person
from which you offer to purchase any security of the Company (if such Person
has agreed in writing prior to its receipt of such Confidential Information to
be bound by the provisions of this Section 20), (vi) any federal or state
regulatory authority having jurisdiction over you, (vii) the National
Association of Insurance Commissioners or any similar organization, or any
nationally recognized rating agency that requires access to information about
your investment portfolio or (viii) any other Person to which such delivery or
disclosure may be necessary or appropriate (w) to
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43
effect compliance with any law, rule, regulation or order applicable to you,
(x) in response to any subpoena or other legal process, (y) in connection with
any litigation to which you are a party or (z) if an Event of Default has
occurred and is continuing, to the extent you 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 your Notes and this
Agreement. 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 20 as though it were a party to this Agreement. On reasonable request
by the Company 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 Company
embodying the provisions of this Section 20.
21. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your
Affiliates as the purchaser of the Notes that you have agreed to purchase
hereunder, by written notice to the Company, which notice shall be signed by
both you and such Affiliate, shall contain such Affiliate's agreement to be
bound by this Agreement and shall contain a confirmation by such Affiliate of
the accuracy with respect to it of the representations set forth in Section 6.
Upon receipt of such notice, wherever the word "you" is used in this Agreement
(other than in this Section 21), such word shall be deemed to refer to such
Affiliate in lieu of you. In the event that such Affiliate is so substituted
as a purchaser hereunder and such Affiliate thereafter transfers to you all of
the Notes then held by such Affiliate, upon receipt by the Company of notice of
such transfer, wherever the word "you" is used in this Agreement (other than in
this Section 21), such word shall no longer be deemed to refer to such
Affiliate, but shall refer to you, and you shall have all the rights of an
original holder of the Notes under this Agreement.
22. MISCELLANEOUS.
22.1. SUCCESSORS AND ASSIGNS.
All covenants and other agreements contained in this Agreement
by or on behalf of either 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.
22.2. PAYMENTS DUE ON NON-BUSINESS DAYS.
Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of principal of or Make-Whole Amount or interest
on any Note that is due on a date other than a Business Day shall be made on
the next succeeding Business Day without including the additional days elapsed
in the computation of the interest payable on such next succeeding Business
Day.
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22.3. ACCOUNTING MATTERS.
Wherever reference is made in any provision of this Agreement
to a consolidated balance sheet or other consolidated financial statement or
financial computation with respect to the Company and its Subsidiaries, if at
the time that any such provision is applicable the Company shall not have any
Subsidiary, such terms shall mean a balance sheet or other financial statement
or financial computation, as the case may be, with respect to the Company only.
22.4. 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.
22.5. 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.
22.6. COUNTERPARTS.
This Agreement may be executed in any number of counterparts,
each of which shall be an original but all of which together shall constitute
one instrument. Each counterpart may consist of a number of copies hereof,
each signed by less than all, but together signed by all, of the parties
hereto.
22.7. GOVERNING LAW.
This Agreement shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the law of the State
of New York excluding, to the extent permitted by the law of such State,
choice-of-law principles of the law of such State that would require the
application of the laws of a jurisdiction other than such State.
* * * *
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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 Company, whereupon the foregoing shall become a binding agreement between
you and the Company.
Very truly yours,
HASTINGS BOOKS, MUSIC & VIDEO, INC.
By: /s/ DENNIS MCGILL
-------------------------------------
Name: Dennis McGill
-----------------------------------
Title: Vice President
----------------------------------
The foregoing is hereby
agreed to as of the
date thereof.
METROPOLITAN LIFE INSURANCE COMPANY
By: /s/ JOHN R. ENDRES
-------------------------------------
Name: John R. Endres
-----------------------------------
Title: Assistant Vice-President
----------------------------------
-38-
46
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- ----------------------------- ---------------------
METROPOLITAN LIFE INSURANCE COMPANY $10,000,000
(1) All payments by wire transfer of immediately
available funds to:
The Chase Manhattan Bank, N.A.
33 East 23rd Street
New York, New York 100010
ABA No. 021000021
Account No. 002-2-410591
with sufficient information to identify the
source and application of such funds
(including the PPN of the Notes)
(2) All notices of payments and written
confirmation of such wire transfer:
Metropolitan Life Insurance Company
One Madison Avenue
New York, NY 10010
Attention: Treasurer
Telecopy: 212/578-3910
with a copy to:
Metropolitan Life Insurance Company
One Lincoln Center, Suite 800
Oakbrook Terrace, IL 60181
Attention: Assistant Vice President
Telecopy: 708/916-2575
1
Schedule A
47
SCHEDULE A
(3) All other communications:
Metropolitan Life Insurance Company
One Madison Avenue
New York, NY 10010
Attention: Treasurer
Telecopy: 212/578-3910
with a copy to:
Metropolitan Life Insurance Company
One Lincoln Center, Suite 800
Oakbrook Terrace, IL 60181
Attention: Assistant Vice President
Telecopy: 708/916-2575
Tax I.D. No. 13-5581829
2
Schedule A
48
SCHEDULE A
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- ----------------------------- ---------------------
METROPOLITAN INSURANCE AND ANNUITY COMPANY $15,000,000
(1) All payments by wire transfer of immediately
available funds to:
The Chase Manhattan Bank, N.A.
33 East 23rd Street
New York, New York 10010
ABA No. 021000021
Account No. 002-1-072301
with sufficient information to identify the
source and application of such funds
(including the PPN of the Notes)
(2) All notices of payments and written
confirmation of such wire transfer:
Metropolitan Insurance and Annuity Company
One Madison Avenue
New York, NY 10010
Attention: Treasurer
Telecopy: 212/578-3910
with a copy to:
Metropolitan Life Insurance Company
One Lincoln Center, Suite 800
Oakbrook Terrace, IL 60181
Attention: Assistant Vice President
Telecopy: 708/916-2575
3
Schedule A
49
SCHEDULE A
(3) All other communications:
Metropolitan Insurance and Annuity Company
One Madison Avenue
New York, NY 10010
Attention: Treasurer
Telecopy: 212/578-3910
with a copy to:
Metropolitan Life Insurance Company
One Lincoln Center, Suite 800
Oakbrook Terrace, IL 60181
Attention: Assistant Vice President
Telecopy: 708/916-2575
Tax I.D. No. 13-2876440
4
Schedule A
50
SCHEDULE B
DEFINED TERMS
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
"ADJUSTED NET WORTH" means, at any time, Consolidated Net
Worth plus the LIFO valuation reserve of the Company and its Subsidiaries
determined on a consolidated basis in accordance with GAAP.
"AFFILIATE" means, at any time, and with respect to any
Person, (a) any other Person that at such time directly or indirectly through
one or more intermediaries Controls, or is Controlled by, or is under common
Control with, such first Person, and (b) any Person beneficially owning or
holding, directly or indirectly, 10% or more of any class of voting or equity
interests of the Company or any Subsidiary or any corporation of which the
Company and its Subsidiaries beneficially own or hold, in the aggregate,
directly or indirectly, 10% or more of any class of voting or equity interests.
As used in this definition, "CONTROL" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise. Unless the context otherwise clearly requires, any
reference to an "AFFILIATE" is a reference to an Affiliate of the Company.
"ASSET SALE" means any conveyance, transfer, lease or other
disposition (including, without limitation, by means of a Sale-Leaseback
Transaction or by way of merger or consolidation) (collectively, for purposes
of this definition, a "transfer"), directly or indirectly, in one or a series
of related transactions, of (a) any Capital Stock of any Subsidiary (including,
without limitation, the issuance thereof by such Subsidiary to any Person other
than the Company or a Wholly-Owned Subsidiary); (b) all or substantially all of
the properties of any division or line of business of the Company or any
Subsidiary; or (c) any other properties of the Company or any Subsidiary (other
than (i) transfers of cash or cash equivalents, (ii) any sale in the ordinary
course of business for not less than Fair Market Value, (iii) any transfer of
properties that is made in compliance with the
1
Schedule B
51
SCHEDULE B
provisions of Section 10.2 hereof or (iv) any transfer of properties of any
Subsidiary to the Company or a Wholly-Owned Subsidiary.
"BOARD OF DIRECTORS" means, at any time, the board of
directors of the Company or any committee thereof which, in the instance, shall
have the lawful power to exercise the power and authority of such board of
directors.
"BUSINESS DAY" means (a) for the purposes of Section 8.7 only,
any day other than a Saturday, a Sunday or a day on which commercial banks in
New York City are required or authorized to be closed, and (b) for the purposes
of any other provision of this Agreement, any day other than a Saturday, a
Sunday or a day on which commercial banks in New York, New York, or Amarillo,
Texas are required or authorized to be closed.
"CAPITAL LEASE" means, at any time, a lease with respect to
which the lessee is required concurrently to recognize the acquisition of an
asset and the incurrence of a liability in accordance with GAAP.
"CAPITAL LEASE OBLIGATION" means, with respect to any Person
and a Capital Lease, the amount of the obligation of such Person as the lessee
under such Capital Lease which would, in accordance with GAAP, appear as a
liability on a balance sheet of such Person.
"CAPITAL STOCK" of any Person means any and all shares,
interests, participations or other equivalents in the equity interest (however
designated) in such Person and any rights (other than debt securities
convertible into an equity interest), warrants or options to acquire an equity
interest in such Person.
"CLOSING" is defined in Section 3.
"CODE" means the Internal Revenue Code of 1986, as amended
from time to time, and the rules and regulations promulgated thereunder from
time to time.
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SCHEDULE B
"COMPANY" means Hastings Books, Music & Video, Inc., a Texas
corporation, until a corporation becomes a successor in a transaction permitted
by Section 10.2, and thereafter shall mean any such successor corporation.
"CONFIDENTIAL INFORMATION" is defined in Section 20.
"CONSOLIDATED CURRENT ASSETS" means, at any time, (i) the
total assets of the Company and its Subsidiaries which would be shown as
current assets on a balance sheet of the Company and its Subsidiaries prepared
in accordance with GAAP at such time (without regard to the net book value of
prerecorded video tapes held for rental by the Company and its Subsidiaries)
plus (ii) an amount equal to the net book value of prerecorded video tapes held
for rental by the Company and its Subsidiaries.
"CONSOLIDATED CURRENT LIABILITIES" means, at any time, the
total liabilities of the Company and its Subsidiaries which would be shown as
current liabilities on a balance sheet of the Company and its Subsidiaries
prepared in accordance with GAAP at such time, but in any event including as
current liabilities, without limitation, Current Maturities of Funded
Indebtedness.
"CONSOLIDATED EBIRT" means, for any fiscal period, the sum of
(a) Consolidated Net Income for such period, plus (b) to the extent deducted in
determining Consolidated Net Income, Fixed Charges and Taxes for such period.
"CONSOLIDATED INDEBTEDNESS" means, as of any date of
determination, the total of all Indebtedness of the Company and its
Subsidiaries outstanding on such date, after eliminating all offsetting debits
and credits between the Company and its Subsidiaries and all other items
required to be eliminated in the course of the preparation of consolidated
financial statements of the Company and its Subsidiaries in accordance with
GAAP.
"CONSOLIDATED NET INCOME" means, with reference to any period,
the net income (or loss) of the Company and its Subsidiaries for such period
(taken as a cumulative whole), as determined in accordance with GAAP, after
eliminating all offsetting debits and credits between the
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SCHEDULE B
Company and its Subsidiaries and all other items required to be eliminated in
the course of the preparation of consolidated financial statements of the
Company and its Subsidiaries in accordance with GAAP, provided that there shall
be excluded any net income or gain and any net loss during such period from any
extraordinary items.
"CONSOLIDATED NET TANGIBLE ASSETS" means, at any time, the net
book value of the total assets of the Company and its Subsidiaries shown on the
most recent consolidated balance sheet of the Company and its Subsidiaries
delivered pursuant to Section 5.5, Section 7.1(a) or Section 7.1(b) (after
eliminating all amounts properly attributable to minority interests, if any, in
the stock and surplus of Subsidiaries) other than assets (net of reserves
applicable thereto) shown as intangible assets on such balance sheet.
"CONSOLIDATED NET WORTH" means, at any time,
(a) the total assets of the Company and its Subsidiaries
which would be shown as assets on a consolidated balance sheet of the
Company and its Subsidiaries as of such time prepared in accordance
with GAAP, after eliminating all amounts properly attributable to
minority interests, if any, in the stock, and surplus of Subsidiaries,
minus
(b) the total liabilities of the Company and its
Subsidiaries which would be shown as liabilities on a consolidated
balance sheet of the Company and its Subsidiaries as of such time
prepared in accordance with GAAP.
"CONSOLIDATED TOTAL CAPITALIZATION" means, at any time, the
sum of Adjusted Net Worth and Consolidated Indebtedness.
"CURRENT MATURITIES OF FUNDED INDEBTEDNESS" means, at any time
and with respect to any item of Funded Indebtedness, the portion of such Funded
Indebtedness outstanding at such time which by the terms of such Funded
Indebtedness or the terms of any instrument or agreement relating thereto is
due on demand or within one year from such time (whether by sinking fund, other
required prepayment or final payment at maturity) and is not directly or
indirectly renewable,
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SCHEDULE B
extendible or refundable at the option of the obligor under an agreement or
firm commitment in effect at such time to a date one year or more from such
time.
"DEBT PREPAYMENT APPLICATION" means, with respect to any Asset
Sale, the application by the Company or its Subsidiaries of cash in an amount
equal to the Net Proceeds Amount with respect to such Asset Sale to pay the
principal of Senior Funded Indebtedness for borrowed money of the Company
("QUALIFYING INDEBTEDNESS") (other than (a) mandatory prepayments or payments
at maturity of such Indebtedness, (b) Indebtedness owing to any Subsidiary or
any Affiliate and (c) Indebtedness in respect of any revolving credit or
similar credit facility providing the Company with the right to obtain loans or
other extensions of credit from time to time, except to the extent that in
connection with such payment of such Indebtedness the availability of credit
under such credit facility is permanently reduced by an amount not less than
the amount of such proceeds applied to the payment of such Indebtedness),
provided that in the course of making such application the Company shall prepay
each outstanding Note in accordance with Section 8.2 (other than the
requirement in the first sentence of such Section that partial prepayments be
in an amount not less than 20% of the aggregate principal amount of the Notes
then outstanding) in a principal amount which equals the Ratable Portion for
such Note. As used in this definition, "RATABLE PORTION" for any Note means an
amount equal to the product of (x) the Net Proceeds Amount being so applied to
the payment of principal of Qualifying Indebtedness multiplied by (y) a
fraction the numerator of which is the outstanding principal amount of such
Note and the denominator of which is the aggregate outstanding principal amount
of Qualifying Indebtedness.
"DEFAULT" means an event or condition the occurrence or
existence of which would, with the lapse of time or the giving of notice or
both, become an Event of Default.
"DEFAULT RATE" means that rate of interest that is the greater
(determined on a daily basis) of (i) 9.75% per annum or (ii) 2% over the rate
of interest publicly announced by The Chase Manhattan Bank, N.A. in New York,
New York as its "base" or "prime" rate.
"DESIGNATED EVENT" means (i) prior to the initial public
offering of the Capital Stock of the Company (the "OFFERING"), the failure of
the members of the Control Group (a) to own
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55
SCHEDULE B
more than 50% of the combined voting power of all then issued and outstanding
Voting Stock of the Company, or (b) to possess the power to elect, appoint or
cause the election or appointment of at least a majority of the members of the
Board of Directors, or (ii) subsequent to the Offering, (x) the failure of the
members of the Control Group to own at least 33 1/3% of the combined voting
power of all then issued and outstanding Voting Stock of the Company or (y)
following the election or removal of directors, a majority of the Board of
Directors consists of individuals who were not members of the Board of
Directors two years before such election or removal, unless the election of
each director who was not a director at the beginning of such two-year period
has been approved in advance by directors representing at least a majority of
the directors then in office who were directors at the beginning of the
two-year period.
As used in this definition, "CONTROL GROUP" means:
(a) (i) John H. Marmaduke, Walter McNeer, Phillip
Hill, Dennis McGill, Tim Hoelscher, Mike Woods, Robert Volpe, Steve S.
Marmaduke, Leonard L. Berry, Peter A. Dallas, Gaines L. Godfrey, Craig R.
Lentzsch, Jeffrey G. Shrader and Ron Stegall,
(ii) their respective parents, spouses, children
and lineal descendants, and
(iii) the estate, or any foundation or trust for
the benefit, of any of the foregoing persons;
(b) the John H. Marmaduke Family Limited Partnership and
the Stephen S. Marmaduke Family Limited Partnership, provided that
(i) at least 90% of the equity interests therein
are owned, legally and beneficially, by the spouse, children and lineal
descendants of Sam H. Marmaduke, or by the estate, or any foundation or trust
for the benefit, of any of the foregoing persons; and
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SCHEDULE B
(ii) each general partner therein is, or (if a
general partner is an entity) all of the equity interests in such general
partner are owned, legally and beneficially, by,one or more of the Persons
described in the foregoing clause (b)(i);
(c) Hastings Books, Music & Video Associate Stock
Ownership Plan; and
(d) Hastings Books, Music & Video Employee Profit Sharing
Plan & Trust.
"DISTRIBUTION" means, in respect of the Company or any
Subsidiary:
(a) dividends or other distributions or payments
in respect of its Capital Stock (except (i) in the case of the
Company, dividends or other distributions of its common stock
or warrants, rights or other options to purchase its common
stock, and (ii) in the case of a Subsidiary, dividends or
other distributions or payments in respect of its Capital
Stock to the Company or a Wholly-Owned Subsidiary); and
(b) the redemption or acquisition of its Capital
Stock or of warrants, rights or other options to purchase its
Capital Stock (except (i) in the case of the Company, when
solely in exchange for shares of its common stock or warrants,
rights or other options to purchase its common. stock, and
(ii) in the case of a Subsidiary, redemptions or acquisitions
from the Company or a Wholly-Owned Subsidiary).
"ENVIRONMENTAL LAWS" means any and all Federal, state, local
and foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
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SCHEDULE B
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the rules and regulations promulgated
thereunder from time to time in effect.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the Code.
"EVENT OF DEFAULT" is defined in Section 11.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FAIR MARKET VALUE" means, at any time and with respect to any
property, the sale value of such property that would be realized in an
arm's-length sale at such time between an informed and willing buyer and an
informed and willing seller (neither being under a compulsion to buy or sell).
For purposes of calculating such sale value in the case of an Asset Sale, the
amount shall be determined in good faith at the time of such Asset Sale by a
Senior Financial Officer.
"FIXED CHARGES" means, with respect to any period, the sum of
(a) Interest Charges for such period and (b) Lease Rentals for such period.
"FIXED CHARGES COVERAGE RATIO" means, at any time, the ratio
of (a) Consolidated EBIRT for the four fiscal quarters ending on, or most
recently ended prior to, such time to (b) Fixed Charges for such period.
"FUNDED INDEBTEDNESS" means, with respect to any Person, all
Indebtedness of such Person which by its terms or by the terms of any
instrument or agreement relating thereto matures, or which is otherwise payable
or unpaid, one year or more from, or is directly or indirectly renewable or
extendible at the option of the obligor in respect thereof to a date one year
or more (including, without limitation, an option of such obligor under a
revolving credit or similar agreement obligating the lender or lenders to
extend credit over a period of one year or more) from, the date of the creation
thereof.
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58
SCHEDULE B
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States of America.
"GOVERNMENTAL AUTHORITY" means
(a) the government of
(i) the United States of America or any State or
other political subdivision thereof, or
(ii) any jurisdiction in which the Company or any
Subsidiary conducts all or any part of its business, or which
asserts jurisdiction over any properties of the Company or any
Subsidiary, or
(b) any entity exercising executive, legislative,
judicial, regulatory or administrative functions of, or pertaining to,
any such government.
"GUARANTY" means, with respect to any Person, any obligation
(except the endorsement in the ordinary course of business of negotiable
instruments for deposit or collection) of such Person guaranteeing or in effect
guaranteeing any indebtedness, dividend or other obligation of any other Person
in any manner, whether directly or indirectly, including (without limitation)
obligations incurred through an agreement, contingent or otherwise, by such
Person:
(a) to purchase such indebtedness or obligation or any
property constituting security therefor;
(b) to advance or supply funds (i) for the purchase or
payment of such indebtedness or obligation, or (ii) to maintain any
working capital or other balance sheet condition or any income
statement condition of any other Person or otherwise to advance or
make available funds for the purchase or payment of such indebtedness
or obligation;
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SCHEDULE B
(c) to lease properties or to purchase properties or
services primarily for the purpose of assuring the owner of such
indebtedness or obligation of the ability of any other Person to make
payment of the indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or
obligation against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor
under any Guaranty, the indebtedness or other obligations that are the subject
of such Guaranty shall be assumed to be direct obligations of such obligor.
"HAZARDOUS MATERIAL" means any and all pollutants, toxic or
hazardous wastes or any other substances that might pose a hazard to health or
safety, the removal of which may be required or the generation, manufacture,
refining, production, processing, treatment, storage, handling, transportation,
transfer, use, disposal, release, discharge, spillage, seepage, or filtration
of which is or shall be restricted, prohibited or penalized by any applicable
law (including, without limitation, asbestos, urea formaldehyde foam insulation
and polychlorinated biphenyls).
"HOLDER" means, with respect to any Note, the Person in whose
name such Note is registered in the register maintained by the Company pursuant
to Section 13.1.
"INDEBTEDNESS" with respect to any Person means, at any time,
without duplication,
(a) its liabilities for borrowed money and its redemption
obligations in respect of mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of
property acquired by such Person (excluding accounts payable arising
in the ordinary course of business but including all liabilities
created or arising under any conditional sale or other title retention
agreement with respect to any such property);
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SCHEDULE B
(c) all liabilities appearing on its balance sheet in
accordance with GAAP in respect of Capital Leases;
(d) all liabilities for borrowed money secured by any
Lien with respect to any property owned by such Person (whether or not
it has assumed or otherwise become liable for such liabilities);
(e) all its liabilities in respect of letters of credit
or instruments serving a similar function issued or accepted for its
account by banks and other financial institutions (whether or not
representing obligations for borrowed money);
(f) Swaps of such Person; and
(g) any Guaranty of such Person with respect to
liabilities of a type described in any of clauses (a) through (f)
hereof.
Indebtedness of any Person shall include all obligations of such Person of the
character described in clauses (a) through (g) to the extent such Person
remains legally liable in respect thereof notwithstanding that any such
obligation is deemed to be extinguished under GAAP.
"Institutional Investor" means (a) any original purchaser of a
Note, (b) any holder of a Note holding more than 10% 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.
"INTEREST CHARGES" means, with respect to any period, the sum
(without duplication) of the following (in each case, eliminating all
offsetting debits and credits between the Company and its Subsidiaries and all
other items required to be eliminated in the course of the preparation of
consolidated financial statements of the Company and its Subsidiaries in
accordance with GAAP): (a) all interest in respect of Indebtedness of the
Company and its Subsidiaries (including imputed
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Schedule B
61
SCHEDULE B
interest on Capital Lease Obligations and net costs of interest rate Swaps)
deducted in determining Consolidated Net Income for such period, together with
all interest capitalized or deferred during such period and not deducted in
determining Consolidated Net Income for such period, and (b) all debt discount
and expense amortized or required to be amortized in the determination of
Consolidated Net Income for such period.
"INVESTMENT" means any investment, made in cash or by delivery
of property, by the Company or any of its Subsidiaries (i) in any Person,
whether by acquisition of Capital Stock, Indebtedness or other obligation or
Security, or by loan, Guaranty, advance, capital contribution or otherwise, or
(ii) in any property.
"LEASE RENTALS" means, with respect to any period, the sum of
the rental and other obligations required to be paid during such period by the
Company or any Subsidiary as lessee or sublessee under all leases of real or
personal property (other than Capital Leases), excluding any amount required to
be paid by the lessee or sublessee (whether or not therein designated as rental
or additional rental) on account of maintenance and repairs, insurance, taxes,
assessments, water rates and similar charges.
"LIEN" means, with respect to any Person, any mortgage, lien,
pledge, charge, security interest or other encumbrance, or any interest or
title of any vendor, lessor, lender or other secured party to or of such Person
under any conditional sale or other title retention agreement or Capital Lease,
upon or with respect to any property or asset of such Person (including in the
case of stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"MAKE-WHOLE AMOUNT" is defined in Section 8.7.
"MATERIAL" means material in relation to the business,
operations, affairs, financial condition, assets, properties or prospects of
the Company and its Subsidiaries taken as a whole.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
(a) the business, operations, affairs, financial condition, assets or
properties of the Company and its Subsidiaries taken
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Schedule B
62
SCHEDULE B
as a whole, or (b) the ability of the Company to perform its obligations under
this Agreement and the Notes, or (c) the validity or enforceability of this
Agreement or the Notes.
"MEMORANDUM" is defined in Section 5.3.
"MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA).
"NET PROCEEDS AMOUNT" means, with respect to any Asset Sale,
an amount equal to the difference of
(a) the aggregate amount of the consideration (valued at the
Fair Market Value of such consideration at the time of the
consummation of such Asset Sale) received by such Person in respect of
such Asset Sale, minus
(b) all ordinary and reasonable out-of-pocket costs and
expenses actually incurred by such Person in connection with such
Asset Sale.
"NET PROCEEDS OF COMMON STOCK" means, with respect to any
period, cash proceeds (net of all costs and out-of-pocket expenses in
connection therewith, including, without limitation, placement, underwriting
and brokerage fees and expenses), received by the Company and its Subsidiaries
during such period, from the sale of all common stock of the Company, including
in such net proceeds:
(a) the net amount paid upon issuance and exercise during
such period of any right to acquire any common stock, or paid during
such period to convert a convertible debt Security to common stock
(but excluding any amount paid to the Company upon issuance of such
convertible debt Security); and
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Schedule B
63
SCHEDULE B
(b) any amount paid to the Company upon issuance of any
convertible debt Security issued after January 31, 1996 and thereafter
converted to common stock during such period.
"NOTES" is defined in Section 1.
"OFFICER'S CERTIFICATE" means a certificate of a Senior
Financial Officer or of any other officer of the Company whose responsibilities
extend to the subject matter of such certificate.
"OTHER AGREEMENT" is defined in Section 2.
"OTHER PURCHASER" is defined in Section 2.
"PBGC" means the Pension Benefit Guaranty Corporation referred
to and defined in ERISA or any successor thereto.
"PERSON" means an individual, partnership, corporation,
limited liability company, association, trust, unincorporated organization, or
a government or agency or political subdivision thereof.
"PLAN" means an "employee benefit plan" (as defined in section
3(3) of ERISA) that is or, within the preceding five years, has been
established or maintained, or to which contributions are or, within the
preceding five years, have been made or required to be made, by the Company or
any ERISA Affiliate or with respect to which the Company or any ERISA Affiliate
may have any liability.
"PREFERRED STOCK" means any class of capital stock of a
corporation that is preferred over any other class of capital stock of such
corporation as to the payment of dividends or the payment of any amount upon
liquidation or dissolution of such corporation.
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SCHEDULE B
"PRIORITY DEBT" means, without duplication, (i) all
Indebtedness secured by Liens with respect to any property of the Company or
any of its Subsidiaries, other than Liens permitted by clauses (a), (b) and (c)
of Section 10.3, and (ii) all secured and unsecured Indebtedness of
Subsidiaries (except (a) Indebtedness held by the Company or a Wholly-Owned
Subsidiary, (b) the Guaranty by a Subsidiary of the Indebtedness of another
Subsidiary and (c) the Guaranty by a Subsidiary of the Notes pursuant to
Section 9.7).
"PROPERTY" or "PROPERTIES" means, unless otherwise
specifically limited, real or personal property of any kind, tangible or
intangible, choate or inchoate.
"PROPERTY REINVESTMENT APPLICATION" means, with respect to any
Asset Sale, the application of an amount equal to the Net Proceeds Amount with
respect to such Asset Sale to the acquisition by the Company or any Subsidiary
of operating assets of the Company or any Subsidiary to be used in the
principal business of such Person, provided such assets have a Fair Market
Value at least equal to such Net Proceeds Amount.
"QPAM EXEMPTION" means Prohibited Transaction Class Exemption
84-14 issued by the United States Department of Labor.
"REQUIRED HOLDERS" means, at any time, the holders of at least
66 2/3% in principal amount of the Notes at the time outstanding (exclusive of
Notes then owned by the Company or any of its Affiliates).
"RESPONSIBLE OFFICER" means any Senior Financial Officer and
any other officer of the Company with responsibility for the administration of
the relevant portion of this Agreement.
"RESTRICTED INVESTMENTS" means all Investments except the
following:
(a) Investments in United States Governmental
Securities, provided that such obligations mature within 365
days from the date of acquisition thereof;
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Schedule B
65
SCHEDULE B
(b) Investments in certificates of deposit or
banker's acceptances issued by an Acceptable Bank, "provided
that such obligations mature within 365 days from the date of
acquisition thereof;
(c) Investments in commercial paper given either
of the two highest ratings by a credit rating agency of
recognized national standing and maturing not more than 270
days from the date of creation thereof;
(d) Investments in Repurchase Agreements;
(e) Investments in demand deposits made in the
ordinary course of business of the Company or any Subsidiary;
and
(f) Investments in deposits or Eurodollar
deposits with any Acceptable Bank, provided that such deposits
mature within 365 days from the date of acquisition thereof.
As of any date of determination, each Restricted Investment shall be
valued at the greater of
(x) the amount at which such Restricted
Investment is shown on the books of the Company or any of its
Subsidiaries (or zero if such Restricted Investment is not
shown on any such books); and
(y) either
(i) in the case of any Guaranty of the
obligation of any Person, the amount which the
Company or any of its Subsidiaries has paid on
account of such obligation less any recoupment by the
Company or such Subsidiary of any such payments, or
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SCHEDULE B
(ii) in the case of any other Restricted
Investment, the excess of (x) the greater of (A) the
amount originally entered on the books of the Company
or any of its Subsidiaries with respect thereto and
(B) the cost thereof to the Company or its Subsidiary
over (y) any return of capital (after income taxes
applicable thereto) upon such Restricted Investment
through the sale or other liquidation thereof or part
thereof or otherwise.
As used in this definition of "Restricted Investments":
"Acceptable Bank" means any bank or trust company (i) which is
organized under the laws of the United States of America or any State
thereof, (ii) which has capital, surplus and undivided profits
aggregating at least $1,000,000,000, and (iii) whose long-term
unsecured debt obligations shall have been given a rating of "A" or
better by S&P, "AT" or better by Moody's or an equivalent rating by
any other credit rating agency of recognized national standing.
"Acceptable Broker-Dealer" means any Person other than a
natural person (i) which is registered as a broker or dealer pursuant
to the Exchange Act and (ii) whose long-term unsecured debt
obligations shall have been given a rating of "A" or better by S&P,
"AT" or better by Moody's or an equivalent rating by any other credit
rating agency of recognized national standing.
"Moody's" means Moody's Investors Service, Inc.
"Repurchase Agreement" means any written agreement
(a) that provides for (i) the transfer of one or
more United States Governmental Securities in an aggregate
principal amount at least equal to the amount of the Transfer
Price (defined below) to the Company or any of its
Subsidiaries from an Acceptable Bank or an Acceptable
Broker-Dealer against a transfer of funds (the "Transfer
Price") by the Company or such Subsidiary to such Acceptable
Bank or Acceptable Broker-Dealer, and (ii) a simultaneous
agreement by the Company or such Subsidiary, in connection
with such transfer of funds, to transfer to
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67
SCHEDULE B
such Acceptable Bank or Acceptable Broker-Dealer the same or
substantially similar United States Governmental Securities
for a price not less than the Transfer Price plus a reasonable
return thereon at a date certain not later than 365 days after
such transfer of funds,
(b) in respect of which the Company or such
Subsidiary shall have the right, whether by contract or
pursuant to applicable law, to liquidate such agreement upon
the occurrence of any default thereunder, and
(c) in connection with which the Company or such
Subsidiary, or an agent thereof, shall have taken all action
required by applicable law or regulations to perfect a Lien in
such United States Governmental Securities.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw Hill, Inc.
"United States Governmental Security" means any direct
obligation of, or obligation guaranteed by, the United States of America, or any
agency controlled or supervised by or acting as an instrumentality of the United
States of America pursuant to authority granted by the Congress of the United
States of America, so long as such obligation or guarantee shall have the
benefit of the full faith and credit of the United States of America which shall
have been pledged pursuant to authority granted by the Congress of the United
States of America.
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SCHEDULE B
"RESTRICTED PAYMENT" means
(a) any Distribution in respect of the Company or any
Subsidiary, including, without limitation, any Distribution resulting
in the acquisition by the Company of Securities which would constitute
treasury stock, and
(b) any payment, repayment, redemption, retirement,
repurchase or other acquisition, direct or indirect, by the Company or
any Subsidiary of, on account of, or in respect of, the principal of
any Subordinated Debt (or any installment thereof) prior to the
regularly scheduled final maturity date of such Subordinated Debt (as
in effect on the date such Subordinated Debt was originally incurred).
For purposes of this Agreement, the amount of any Restricted Payment
made in property shall be the greater of (x) the Fair Market Value of such
property (as determined in good faith by the board of directors (or equivalent
governing body) of the Person making such Restricted Payment) and (y) the net
book value thereof on the books of such Person, in each case determined as of
the date on which such Restricted Payment is made.
"RIGHT TO PUT" is defined in Section 8.6(a).
"SALE-LEASEBACK TRANSACTION" means, with respect to any Person, any
direct or indirect arrangement pursuant to which properties are sold or
transferred by such Person or a Subsidiary of such Person and are thereafter
leased back from the purchaser or transferee thereof by such Person or one of
its Subsidiaries.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time.
"SECURITY" has the meaning set forth in section 2(l) of the Securities
Act.
"SENIOR FINANCIAL OFFICER" means the chief financial officer,
principal accounting officer or treasurer of the Company.
19
Schedule B
69
SCHEDULE B
"SENIOR FUNDED INDEBTEDNESS" means Funded Indebtedness of the Company
other than Subordinated Debt.
"STOCK REDEMPTION AGREEMENT" means that certain Stock Redemption
Agreement, dated as of May 3, 1994, by and between John H. Marmaduke,
Independent Executor of the Estate of Sam H. Marmaduke, Deceased, and the
Company, as amended from time to time (if amended after the Closing to increase
(i) the repurchase price per share or (ii) the number of shares subject to
repurchase in any year, then only with the consent of the Required Holders).
"SUBORDINATED DEBT" means any Indebtedness of the Company that is in
any manner subordinated in right of payment or security to the Notes.
"SUBSIDIARY" means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries
or such Person and one or more of its Subsidiaries owns sufficient equity or
voting interests to enable it or them (as a group) ordinarily, in the absence
of contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person
or one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of
its Subsidiaries). Unless the context otherwise clearly requires, any
reference to a "Subsidiary" is a reference to a Subsidiary of the Company.
"SWAPS" means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount of
the obligation under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating to such
Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment
20
Schedule B
70
SCHEDULE B
of amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.
"TAXES" means, for any period, the sum of all U.S. Federal, state and
foreign income taxes of the Company and its Subsidiaries, all as determined on
a consolidated basis in accordance with GAAP.
"VOTING STOCK" shall mean securities or other equity interests of any
class or classes, the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors (or
persons performing similar functions in the case of business entities other
than corporations).
"WHOLLY-OWNED SUBSIDIARY" means, at any time, any Subsidiary one
hundred percent (100%) of all of the equity interests (except directors'
qualifying shares) and voting interests of which are owned by any one or more
of the Company and the Company's other Wholly-Owned Subsidiaries at such time.
21
Schedule B
71
Schedule 4.9
CHANGES IN CORPORATE STRUCTURE
None
Schedule 4.9 - Page 1
72
Schedule 5.4
SENIOR OFFICERS, DIRECTORS AND AFFILIATES
Senior Officers
The following table sets forth certain information about key personnel within
the Company:
Name Position
- ---- --------
John H. Marmaduke President and Chief Executive Officer
Walter McNeer Executive Vice President and Chief Operating Officer - Stores
Phillip Hill Senior Vice President and Chief Operating Officer - Systems and Support
Dennis McGill Vice President of Finance, Chief Financial Officer, Treasurer and Secretary
Tim Hoelscher Vice President of Real Estate/Construction
Mike Woods Vice President of Information Systems
Robert Volpe Vice President of Distribution
John H. Marmaduke, 48. Mr. Marmaduke has served as President and CEO of
Hastings for the last 20 years, and Chairman of the Board since 1993. Mr.
Marmaduke has been active in the entertainment industry with Hastings and its
predecessor company for over 24 years. He served as President of Hastings'
former parent company, Western Merchandisers, Inc. from 1982 through 1991.
Upon Wal-Mart's purchase of Western Merchandisers, Inc. in 1991, Mr. Marmaduke
continued as President through Wal-Mart's divestiture of the distribution
company in 1994.
Walter McNeer, 45. Mr. McNeer joined Hastings in 1974 and over his 22 years of
service has served in various operating capacities. Since 1983, Mr. McNeer has
served as Executive Vice President and Chief Operating Officer. Mr. McNeer was
elected to the Board of Directors in 1993.
Phillip Hill, 33. Mr. Hill joined Hastings in 1986 as District Manager and
held positions of Director of Store Operations and Director of Information
Services until 1992. Prior to joining Hastings, Mr. Hill served as the
Director of Operations for Gateway Books, a retail book chain, in Knoxville,
Tennessee. Mr. Hill has 17 years of retail industry experience.
Dennis McGill, 47. Mr. McGill joined Hastings as Vice President of Finance,
Chief Financial Officer, Treasurer and Secretary in 1995. From 1989 through
1994, Mr. McGill served as the President and Chief Executive Officer of the Bed
Outlet, an 18 store, bedroom furniture retailer in California. Mr. McGill was
the Senior Vice President-Finance and Chief Financial Officer for San
Francisco-based Lewis Galoob Toys, Inc. a NYSE listed, international toy
manufacturer from 1986 to 1989.
Tim Hoelscher, 38. Mr. Hoetscher joined Hastings in 1988 as Director of
Construction and accepted real estate responsibilities in August 1991. He was
promoted to Vice President of Real Estate Construction in October 1992. Prior
to joining Hastings, Mr. Hoelscher was employed by Brown Group, Inc. as Manager
of Construction, Specialty Retail Division. Mr. Hoelscher has a total of 23
years experience in retail store development.
Mike Woods, 34. Mr. Woods joined Hastings in 1989 as a programming specialist
and was promoted to Vice President of Information Systems in October 1992.
Prior to joining Hastings, Mr. Woods was employed as a systems consultant at
Bryan Technologies, a process automation firm, in Albuquerque, New Mexico. Mr.
Woods has 15 years experience in the information technology and systems
industry.
Robert Volpe, 44. Mr. Volpe joined Hastings as Vice President of Distribution
in 1994. From 1994 to 1993, Mr. Volpe was Senior Director of Distribution and
Operations with Pearle Vision, Inc. of Dallas, Texas.
Schedule 5.4 - Page 1
73
Outside Board of Directors
The following table is a listing of the Company's current outside Board of
Directors:
Name Year Elected
- ---- ------------
Leonard L Berry 1994
Peter A. Dallas 1971
Gaines L Godfrey 1991
Craig R. Lentszch 1994
Steve S. Marmaduke 1990
Jeffrey G. Shrader 1992
Ron Stegall 1996
Leonard L Berry, 53. Dr. Berry is a Professor of Marketing and the Director of
the Center for Retailing Studies in the College of Business Administration at
Texas A&M University. He holds the JC Penny Chair of Retailing Studies and is
editor of the Arthur Andersen Retailing Issues Letter. In addition, Dr. Berry
has served as the National President of the American Marketing Association.
Peter A. Dallas, 61. Mr. Dallas has served as a Director of Hastings since
1971. Mr. Dallas has served in various capacities at Boatmen's First National
Bank of Amarillo for 34 years. In addition, Mr. Dallas serves as a Director
for Satana Company, a private investment company in Amarillo, Texas.
Gaines L. Godfrey, 61. Mr. Godfrey has served as a Director of Hastings since
1991, and is the President of Santa Fe based Godfrey Ventures which he founded
in 1982. Prior to that, Mr. Godfrey served as Chief Financial Officer of Mesa
Petroleum in Amarillo, Texas.
Craig R. Lentzch, 47. Mr. Lentzsch was elected a Director of Hastings in 1994.
He is the President and Chief Executive Officer of Greyhound Lines, Inc. Mr.
Lentzsch served as Executive Vice President and Chief Financial Officer of
Motor Coach Industries, Inc. in Phoenix, Arizona. Prior to that, Mr. Lentzsch
served as president and Chief Executive Officer of Continental Asset Services.
Steve S. Marmaduke, 45. Mr. Marmaduke served as Vice President of Purchasing
for Western Merchandisers from 1985 to 1992. Mr. Marmaduke was elected to the
Hastings Board of Directors in 1990. Steve Marmaduke is the brother of John
Marmaduke, President and CEO of Hastings and the son of the late founder of
Western Merchandisers, Mr. Sam Marmaduke.
Jeffrey G. Shrader, 45. Mr. Shrader has served as a Director of Hastings since
1992 and since 1993 has been a shareholder with the law firm of Sprouse,
Mozola, Smith & Rowley, P.C. in Amarillo, Texas. For the five years prior
thereto, Mr. Shrader was a partner with the law firm of Gibson, Oschner, &
Adkins, L.L.P. in Amarillo, Texas.
Ron Stegall, 48. Mr. Stegall is the founder and CEO of Arlington Equity
Partners, Inc. He was also the founder, Chairman and CEO of BizMart Inc., one
of the largest and fastest growing U.S. retail chains of office products
superstores. Mr. Stegall had a 17 year career at Tandy Corporation where he
rose to become Senior Vice President in charge of the Business Products
Division. Mr. Stegall was elected to the Board of Directors in May, 1996.
Affiliates
The following is a list of the Affiliates:
John H. Marmaduke Family Limited Partnership
Steven S. Marmaduke Family Limited Partnership
Estate of Sam Marmaduke
Schedule 5.4 - Page 2
74
Schedule 5.5
Financial Statements
All financial statements contained in the Memorandum.
Unaudited Consolidated Balance Sheet and Income Statement for the
period ended April 30, 1996.
Schedule 5.5 - Page 1
75
Schedule 5.8
CERTAIN LITIGATION
None
Schedule 5.8 - Page 1
76
Schedule 5. 11
PATENTS, ETC
None
Schedule 5.11 - Page 1
77
Schedule 5.14
USE OF PROCEEDS
The proceeds from the issuance of Hastings Books, Music & Video, Inc. 7.75 %
Series.A Senior Notes are to be used to refinance existing senior indebtedness
and to provide for general corporate purposes.
Schedule 5.14 - Page 1
78
Schedule 5.15
Listing of Existing Indebtedness
As of April 30, 1996
Balance/ Effective
Creditor Amount Date Description
-------- ------ ---- -----------
Boatmen's National Bank of St. Louis $29,850,000 12/12/94 Unsecured Operating Line of Credit
Boatmen's National Bank of St. Louis $ 5,000,000 03/22196 Unsecured Term Note
Boatmen's National Bank of St. Louis $ 2,500,000 04/17/96 Unsecured Term Note
Boatmen's National Bank of St. Louis $ 2,500,000 05/02/96 Unsecured Term Note
First Interstate Bank of Texas $ 1,434,000 05/23/95 Purchase of Corporate Aircraft
Sable Realty, Inc., A Texas Corp. $ 827,217 06/08/92 Capital Lease on Retail Location
Othello Holdings, Inc., a Texas Corp. $ 952,074 05/29/91 Capital Lease on Retail Location
Other Financial Relationships
Effective
Relationship Amount Date Description
------------ ------ --------- -----------
Boatmen's National Bank of St. Louis $15,000,000 06/16/95 Unsecured Interest Rate Swap
(notional amount)
Softech Financial, an Illinois Corp. $0.00 05/29/91 Security Agreement on Software
Proceeds from the Notes will be applied first to pay accrued interest and
outstanding principal amounts of the Unsecured Term Notes with the balance of
the proceeds applied to the reduction of principal amounts outstanding of the
Unsecured Operating Line of Credit.
Schedule 5.15 - Page 1
79
EXHIBIT 1
[FORM OF NOTE]
HASTINGS BOOKS, MUSIC & VIDEO, INC.
7.75% SERIES A SENIOR NOTE DUE JUNE 13, 2003
NO. [______] [DATE]
$[_______] PPN 41834*AA4
FOR VALUE RECEIVED, the undersigned, Hastings Books, Music & Video,
Inc.(herein called the "Company"), a corporation organized and existing under
the laws of the State of Texas, hereby promises to pay to [__________________
], or registered assigns, the principal sum of [_____________________] DOLLARS
on June 13, 2003, with interest (computed on the basis of a 360-day year of
twelve 30-day months) (a) on the unpaid balance thereof at the rate of 7.75%
per annum from the date hereof, payable quarterly in arrears, on the 13th day
of March, June, September and December in each year, commencing with the 13th
day of March, June, September or December next succeeding the date hereof,
until the principal hereof shall have become due and payable, and (b) to the
extent permitted by law on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Make-Whole Amount (as defined in the Note Purchase Agreements
referred to below), payable quarterly in arrears as aforesaid (or, at the
option of the registered holder hereof, on demand), at a rate per annum from
time to time equal to the greater of (i) 9.75% or (ii) 2.0% over the rate of
interest publicly announced by The Chase Manhattan Bank, N.A. from time to time
in New York, New York as its "base" or "prime" rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the principal office of The Chase Manhattan Bank, N.A. in New York,
New York or at such other place as the Company shall have designated by written
notice to the holder of this Note as provided in the Note Purchase Agreements
referred to below.
This Note is one of a series of Senior Notes (herein called the
"Notes") issued pursuant to separate Note Purchase Agreements, dated June 13,
1996 (as from time to time amended,
Exhibit 1 - Page 1
80
the "Note Purchase Agreements"; the capitalized terms used but not defined
herein being used with the respective meanings specified in the Note Purchase
Agreements), between the Company and the respective Purchasers named therein
and is entitled to the benefits thereof Each holder of this Note will be
deemed, by its acceptance hereof, (i) to have agreed to the confidentiality
provisions set forth in Section 20 of the Note Purchase Agreements and (ii) to
have made the representation set forth in Section 6.2 of the Note Purchase
Agreements.
This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
This Note is subject to certain prepayments, in whole or from time to
time in part, at the times and on the terms specified in the Note Purchase
Agreements.
If an Event of Default occurs and is continuing, the principal of this
Note may be declared or otherwise become due and payable in the manner, at the
price (including any applicable Make-Whole Amount) and with the effect provided
in the Note Purchase Agreements.
This Note shall be construed in accordance with, and the rights of the
registered holder hereof and the Company shall be governed by, the law of the
State of New York excluding, to the extent permitted by the law of such State,
choice-of-law principles of the law of such State that would require the
application of the laws of a jurisdiction other than such State.
HASTINGS BOOKS, MUSIC & VIDEO, INC.
By:
-------------------------------------
[Title]
Exhibit 1 - Page 2
81
EXHIBIT 4.4(a)
FORM OF OPINION OF COUNSEL
FOR THE COMPANY
Matters To Be Covered In
Opinion of Counsel For The Company
1. The Company being duly incorporated, validly existing, in good
standing and having requisite corporate power and authority to conduct its
business and own its properties, to issue and sell the Notes, and to execute,
deliver and perform its obligations under this Agreement, the Other Agreement
and the Notes.
2. The Company being duly qualified and in good standing as a
foreign corporation in appropriate jurisdictions.
3. Due authorization and execution of this Agreement, the Other
Agreement and the Notes and such documents being legal, valid, binding and
enforceable under Texas and federal law.
4. No conflicts with charter documents, laws or other agreements.
5. All consents required to issue and sell the Notes and to
execute, deliver and perform this Agreement, the Other Agreement and the Notes
having been obtained.
6. No litigation questioning validity of this Agreement, the
Other Agreement or the Notes or in which, in the event of an adverse outcome,
there is a reasonable likelihood of a Material Adverse Effect.
Exhibit 4.4(a) - Page 1
82
7. The Notes not requiring registration under the Securities Act
of 1933, as amended; no need to qualify an indenture under the Trust Indenture
Act of 1939, as amended.
8. No violation of Regulations G, T or X of the Federal Reserve
Board.
9. Company not an "investment company", or a company "controlled"
by an "investment company", under the Investment Company Act of 1940, as
amended.
10. Texas state courts and federal courts applying Texas conflict
of laws principles giving effect to the choice of law provisions contained in
this Agreement, the Other Agreement and the Notes.
Exhibit 4.4(a) - Page 2
83
Exhibit 4.4(b)
FORM OF OPINION OF SPECIAL COUNSEL
TO THE PURCHASERS
Matters To Be Covered In
Opinion of Special Counsel To the Purchasers
1. The Company being duly incorporated, validly existing, in good
standing and having requisite corporate power and authority to issue and sell
the Notes and to execute, deliver and perform its obligations under this
Agreement, the Other Agreement and the Notes.
2. Due authorization and execution of this Agreement, the Other
Agreement and the Notes and such documents being legal, valid, binding and
enforceable.
3. No conflicts with charter documents or bylaws.
4. The Notes not requiring registration under the Securities Act
of 1933, as amended; no need to qualify an indenture under the Trust Indenture
Act of 1939, as amended.
5. The opinion of counsel to the Company being satisfactory in
form and scope and the purchasers of the Notes being justified in relying
thereon.
Exhibit 4.4(b) - Page 1
84
EXHIBIT 8.6(b)
FORM OF NOTICE OF SALE
Hastings Books, Music & Video, Inc.
3601 Plains Blvd., Suite I
Amarillo, Texas 79120-2104
Attention: Chief Financial Officer
Ladies and Gentlemen:
Reference is made to those certain separate Note Purchase Agreements,
each dated June 13, 1996 (the "Note Agreements", the capitalized terms herein
being used herein as therein defined), between Hastings Books, Music & Video,
Inc. (the "Company") and each of Metropolitan Life Insurance Company and
Metropolitan Insurance and Annuity Company which provide, among other things,
for the issuance and sale by the Company of its 7.75% Series A Senior Notes due
June 13, 2003 in the aggregate principal amount of $25,000,000. In accordance
with Section 8.6 of the Note Agreements, the undersigned hereby irrevocably
exercises its Right to Put with respect to all Notes held by it.
Please transfer in immediately available funds, on
________________________ [NOT LESS THAN 20 DAYS AFTER DELIVERY OF THIS NOTICE
OF SALE], the outstanding principal amount of the Notes held by the undersigned
and accrued and unpaid interest thereon with respect to the foregoing exercise
of the undersigned's Right to Put.
Exhibit 8.6(b) - Page 1
85
EXHIBIT 8.6(b)
Date:
[NAME OF HOLDER OF NOTES]
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Exhibit 8.6(b) - Page 2
86
HASTINGS BOOKS, MUSIC & VIDEO, INC.
7.75% SERIES A SENIOR NOTE DUE JUNE 13, 2003
No. AR-1 June 13, 1996
$10,000,000 PPN 41834*AA4
FOR VALUE RECEIVED, the undersigned, Hastings Books, Music & Video,
Inc. (herein called the "Company"), a corporation organized and existing under
the laws of the State of Texas, hereby promises to pay to METROPOLITAN LIFE
INSURANCE COMPANY, or registered assigns, the principal sum of TEN MILLION AND
No/100 DOLLARS on June 13, 2003, with interest (computed on the basis of a
360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the
rate of 7.75% per annum from the date hereof, payable quarterly in arrears, on
the 13th day of March, June, September and December in each year, commencing
with the 13th day of September next succeeding the date hereof, until the
principal hereof shall have become due and payable, and (b) to the extent
permitted by law on any overdue payment (including any overdue prepayment) of
principal, any overdue payment of interest and any overdue payment of any
Make-Whole Amount (as defined in the Note Purchase Agreements referred to
below), payable quarterly in arrears as aforesaid (or, at the option of the
registered holder hereof, on demand), at a rate per annum from time to time
equal to the greater of (i) 9.75% or (ii) 2.0% over the rate of interest
publicly announced by The Chase Manhattan Bank, N.A. from time to time in New
York, New York as its "base" or "prime" rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the principal office of The Chase Manhattan Bank, N.A. in New York,
New York or at such other place as the Company shall have designated by written
notice to the holder of this Note as provided in the Note Purchase Agreements
referred to below.
This Note is one of a series of Senior Notes (herein called the
"Notes") issued pursuant to separate Note Purchase Agreements, dated June 13,
1996 (as from time to time amended, the "Note Purchase Agreements"; the
capitalized terms used but not defined herein being used with the respective
meanings specified in the Note Purchase Agreements), between the Company and
the respective Purchasers named therein and is entitled to the benefits thereof
Each holder of this Note will be deemed, by its acceptance hereof, (i) to have
agreed to the confidentiality provisions set forth in Section 20 of the Note
Purchase Agreements and (ii) to have made the representation set forth in
Section 6.2 of the Note Purchase Agreements.
This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied
1
87
by a written instrument of transfer duly executed, by the registered holder
hereof or such holder's attorney duly authorized in writing, a new Note for a
like principal amount will be issued to, and registered in the name of, the
transferee. Prior to due presentment for registration of transfer, the Company
may treat the person in whose name this Note is registered as the owner hereof
for the purpose of receiving payment and for all other purposes, and the
Company will not be affected by any notice to the contrary.
This Note is subject to certain prepayments, in whole or from time to
time in part, at the times and on the terms specified in the Note Purchase
Agreements.
If an Event of Default occurs and is continuing, the principal of this
Note may be declared or otherwise become due and payable in the manner, at the
price (including any applicable Make-Whole Amount) and with the effect provided
in the Note Purchase Agreements.
This Note shall be construed in accordance with, and the rights of the
registered holder hereof and the Company shall be governed by, the law of the
State of New York excluding, to the extent permitted by the law of such State,
choice-of-law principles of the law of such State that would require the
application of the laws of a jurisdiction other than such State.
HASTINGS BOOKS, MUSIC & VIDEO, INC.
By: /s/ DENNIS McGILL
-------------------------------------
Name: Dennis McGill
-----------------------------------
Title: Vice President
----------------------------------
2
88
HASTINGS BOOKS, MUSIC & VIDEO, INC.
7.75% SERIES A SENIOR NOTE DUE JUNE 13, 2003
No. AR-2 June 13, 1996
$15,000,000 PPN 41834*AA4
FOR VALUE RECEIVED, the undersigned, Hastings Books, Music & Video,
Inc. (herein called the "Company"), a corporation organized and existing under
the laws of the State of Texas, hereby promises to pay to METROPOLITAN
INSURANCE AND ANNUITY COMPANY, or registered assigns, the principal sum of
FIFTEEN MILLION AND No/100 DOLLARS on June 13, 2003, with interest (computed on
the basis of a 3 60-day year of twelve 30-day months) (a) on the unpaid balance
thereof at the rate of 7.75% per annum from the date hereof, payable quarterly
in arrears, on the 13th day of March, June, September and December in each
year, commencing with the 13th day of September next succeeding the date
hereof, until the principal hereof shall have become due and payable, and (b)
to the extent permitted by law on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Make-Whole Amount (as defined in the Note Purchase Agreements
referred to below), payable quarterly in arrears as aforesaid (or at the option
of the registered holder hereof, on demand), at a rate per annum. from time to
time equal to the greater of (i) 9.75% or (ii) 2.0% over the rate of interest
publicly announced by The Chase Manhattan Bank, N.A. from time to time in New
York, New York as its "base" or prime" rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the principal office of The Chase Manhattan Bank, N.A. in New York,
New York or at such other shall have designated by written notice to the holder
of this Note as place as the Company provided in the Note Purchase Agreements
referred to below.
This Note is one of a series of Senior Notes (herein called the
"Notes") issued pursuant to separate Note Purchase Agreements, dated June 13,
1996 (as from time to time amended, the "Note Purchase Agreements"; the
capitalized terms used but not defined herein being used with the respective
meanings specified in the Note Purchase Agreements), between the Company and
the respective Purchasers named therein and is entitled to the benefits thereof
Each holder of this Note will be deemed, by its acceptance hereof, (i) to have
agreed to the confidentiality provisions set forth in Section 20 of the Note
Purchase Agreements and (ii) to have made the representation set forth in
Section 6.2 of the Note Purchase Agreements.
This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied
1
89
by a written instrument of transfer duly executed, by the registered holder
hereof or such holder's attorney duly authorized in writing, a new Note for a
like principal amount will be issued to, and registered in the name of, the
transferee. Prior to due presentment for registration of transfer, the Company
may treat the person in whose name this Note is registered as the owner hereof
for the purpose of receiving payment and for all other purposes, and the
Company will not be affected by any notice to the contrary.
This Note is subject to certain prepayments, in whole or from time to
time in part, at the times and on the terms specified in the Note Purchase
Agreements.
If an Event of Default occurs and is continuing, the principal of this
Note may be declared or otherwise become due and payable in the manner, at the
price (including any applicable Make-Whole Amount) and with the effect provided
in the Note Purchase Agreements.
This Note shall be construed in accordance with, and the rights of the
registered holder hereof and the Company shall be governed by, the law of the
State of New York excluding, to the extent permitted by the law of such State,
choice-of-law principles of the law of such State that would require the
application of the laws of a jurisdiction other than such State.
HASTINGS BOOKS, MUSIC & VIDEO, INC.
By: /s/ DENNIS McGILL
-------------------------------------
Name: Dennis McGill
-----------------------------------
Title: Vice President
----------------------------------
2
90
[SPROUSE, MOZOLA, SMITH & ROWLEY, P.C. LETTERHEAD]
June 13, 1996
Metropolitan Life Insurance Company
One Madison Avenue
New York, NY 10010
Metropolitan Insurance and
Annuity Company
One Madison Avenue
New York, NY 10010
Ladies and Gentlemen:
We have acted as counsel for Hastings Books, Music & Video, Inc., a
Texas corporation (the "Company"), in connection with the Note Purchase
Agreements, dated June 13, 1996, between the Company and each of you (the
"Agreements"), pursuant to which the Company has issued to you today 7.75%
Series A Senior Notes due June 13, 2003 of the Company in the aggregate
principal amount of $25,000,000 (the "Notes"). All terms used herein that are
defined in the Agreements have the respective meanings specified in the
Agreements. This opinion letter is being delivered to you in satisfaction of
the condition set forth in Section 4.4(a) of the Agreements and with the
understanding that you are purchasing the Notes in reliance upon the opinions
expressed herein.
In this connection, we have examined such certificates of public
officials, certificates of officers of the Company and copies certified to our
satisfaction of corporate documents and records of the Company and of other
papers, and have made such other investigations, as we have deemed relevant and
necessary as a basis for our opinions set forth below. We have relied upon
such certificates of public officials and of officers of the Company with
respect to the accuracy of material factual matters contained therein.
With respect to the opinion expressed in paragraph 6 below, we have
relied upon the representations made by you in Section 6.1 of the Agreements
and upon the letter dated June 3, 1996 from Chase Securities Inc. regarding the
limited nature of its offering of the Notes. With respect to the opinion
expressed in paragraph 7 below, we have relied on the representation made by
the Company in Section 5.14 of the Agreements. Moreover, we have assumed the
due authorization, execution, and delivery of the respective Agreements by each
of you.
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Metropolitan Life Insurance Company
Metropolitan Insurance and Annuity
Company
June 13, 1996
Page 3
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6. It is not necessary in connection with the offering, issuance,
sale and delivery of the Notes under the circumstances contemplated by the
Agreements to register the Notes under the Securities Act of 1933, as amended,
or to qualify an indenture in respect of the Notes under the Trust Indenture
Act of 1939, as amended.
7. The extension, arranging and obtaining of the credit
represented by the Notes do not result in any violation of Regulation G, T or X
of the Board of Governors of the Federal Reserve System.
8. The Company is not an "investment company" or a company
"controlled" by an "investment company" under the Investment Company Act of
1940, as amended.
9. Texas state courts and federal courts applying Texas conflict
of law principles would give effect to the choice of law provisions contained
in the Agreements and the Notes.
The foregoing opinion, with your concurrence, is predicated on and
qualified in its entirety by the following:
(a) The foregoing opinion is effective at and as of the date of
this letter, and we disclaim any undertaking to advise you of
changes which thereafter may be brought to our attention.
(b) The foregoing opinion is based on and is limited to the laws
of the State of Texas and the relevant laws of the United
States of America, and we render no opinion with respect to
the laws of any other jurisdiction.
(c) Whenever our opinion is based on circumstances "to our
knowledge after having made due inquiry," we have relied
exclusively on certificates or statements of officers, after
the discussion of the contents thereof with such officers of
the Company or certificates of public officials as to the
existence or non-existence of the circumstances upon which
such opinion is predicated. We have no reason to believe,
however, that any such certificate or statement is untrue or
inaccurate in any material respect.
(d) In rendering the opinions herein relating to the absence of
any litigation, investigation, or administrative proceeding,
we express no opinion with respect to the possible effect of
administrative and legislative actions, proceedings and
investigations as to which the Company is not a named party.
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Metropolitan Life Insurance Company
Metropolitan Insurance and Annuity
Company
June 13, 1996
Page 4
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The foregoing opinions may be relied upon by you, by each subsequent
institutional holder of the Notes, and by your special counsel, Baker & Botts,
L.L.P. Subject to the foregoing, this opinion is solely for the benefit of
you, each subsequent institutional holder of the notes, and Baker & Botts,
L.L.P., and may not be relied upon by any other Person without our prior
written consent.
Very truly yours,
SPROUSE, MOZOLA, SMITH & ROWLEY, P.C.
/s/ JERRY G. SHRADER
Jerry G. Shrader
JGS/sl