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REGIS CORPORATION
$35,000,000
PRIVATE SHELF AGREEMENT
Dated as of December 19, 1997
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TABLE OF CONTENTS
(Not Part of Agreement)
PAGE
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1. AUTHORIZATION OF ISSUE OF NOTES.......................................... 1
2. PURCHASE AND SALE OF NOTES............................................... 2
2A. Facility............................................................ 2
2B. Issuance Period..................................................... 2
2C. Request for Purchase................................................ 2
2D. Rate Quotes......................................................... 3
2E. Acceptance.......................................................... 3
2F. Market Disruption................................................... 3
2G. Note Closings....................................................... 4
2H. Fees................................................................ 5
2H(i). Facility Fee................................................. 5
2H(ii). Issuance Fee................................................ 5
2H(iii). Delayed Delivery Fee....................................... 5
2H(iv). Cancellation Fee............................................ 6
3. CONDITIONS OF CLOSING.................................................... 6
3A. Certain Documents................................................... 6
3B. Opinion of Purchaser's Special Counsel.............................. 7
3C. Representations and Warranties; No Default.......................... 7
3D. Purchase Permitted by Applicable Laws............................... 8
3E. Payment of Fees..................................................... 8
3F. Offset Sharing Agreement............................................ 8
3G. Change in Company's Position........................................ 8
3H. Other Loan Agreements............................................... 8
4. PREPAYMENTS.............................................................. 8
4A. Required Prepayments of Notes....................................... 8
4B(1). Optional Prepayment With Yield-Maintenance Amount............ 8
4B(2). Prepayment with Yield-Maintenance Amount Pursuant to
Offset Sharing Agreement.......................................... 9
4C. Notice of Optional Prepayment....................................... 9
4D. Application of Prepayments.......................................... 9
4E. Retirement of Notes................................................. 9
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5. AFFIRMATIVE COVENANTS................................................... 10
5A. Financial Statements: Notice of Defaults........................... 10
5B. Information Required by Rule 144A.................................. 14
5C. Inspection of Property............................................. 14
5D. Covenant to Secure Notes Equally................................... 14
5E. Keeping of Books and Bank Accounts................................. 14
5F. Incorporation of Other Debt Covenants.............................. 14
5G. Corporate Existence................................................ 15
5H. Payment of Taxes and Claims........................................ 15
5I. Compliance with Laws, Etc.......................................... 15
5J. Maintenance of Properties; Insurance............................... 16
5K. Offset Sharing Agreement Amendment................................. 16
6. NEGATIVE COVENANTS...................................................... 16
6A. Interest Coverage Ratio............................................ 16
6B. Consolidated Net Worth............................................. 16
6C. Lien, Debt and Other Restrictions.................................. 16
6C(1). Liens....................................................... 16
6C(2). Debt........................................................ 17
6C(3). Investments................................................. 17
6C(4). Sale of Stock and Debt of Subsidiaries...................... 18
6C(5). Merger and Consolidation.................................... 19
6C(6). Transfer of Assets.......................................... 19
6C(7). Sale or Discount of Receivables............................. 20
6C(8). Transactions with Affiliates................................ 20
6C(9). Restricted Subsidiary Dividend Restrictions................. 20
6C(10). Tax Consolidation.......................................... 20
6D. Transactions by Restricted Subsidiaries............................ 21
7. EVENTS OF DEFAULT....................................................... 21
7A. Acceleration....................................................... 21
7B. Rescission of Acceleration......................................... 24
7C. Notice of Acceleration or Rescission............................... 24
7D. Other Remedies..................................................... 24
8. REPRESENTATIONS, COVENANTS AND WARRANTIES............................... 25
8A. Organization....................................................... 25
8B. Financial Statements............................................... 25
8C. Actions Pending; Observance of Agreements, Statutes and Orders..... 26
8D. Outstanding Debt................................................... 26
8E. Title to Properties................................................ 26
8F. Taxes.............................................................. 27
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8G. Conflicting Agreements and Other Matters........................... 27
8H. Offering of Notes.................................................. 28
8I. Use of Proceeds.................................................... 28
8J. ERISA.............................................................. 28
8K. Governmental Consent............................................... 29
8L. Environmental Compliance........................................... 29
8M. Disclosure......................................................... 29
8N. Restricted Subsidiary Dividend Restrictions........................ 29
8O. Rule 144A.......................................................... 30
8P. Foreign Assets Control Regulations, etc............................ 30
8Q. Licenses Permits, etc.............................................. 30
9. REPRESENTATIONS OF THE PURCHASERS....................................... 30
9A. Nature of Purchase................................................. 30
9B. Source of Funds.................................................... 30
10. DEFINITIONS; ACCOUNTING MATTERS......................................... 30
10A. Yield-Maintenance Terms............................................ 31
10B. Other Terms........................................................ 32
10C. Accounting Principles, Terms and Determinations.................... 41
11. MISCELLANEOUS........................................................... 42
11A. Note Payments...................................................... 42
11B. Expenses........................................................... 42
11C. Consent to Amendments.............................................. 42
11D. Form, Registration, Transfer and Exchange of Notes; Lost Notes..... 43
11E. Persons Deemed Owners; Participation............................... 44
11F. Survival of Representations and Warranties; Entire Agreement....... 44
11G. Successors and Assigns............................................. 44
11H. Independence of Covenants.......................................... 45
11I. Notices............................................................ 45
11J. Payments Due on Non-Business Days.................................. 45
11K. Severability....................................................... 46
11L. Descriptive Headings............................................... 46
11M. Satisfaction Requirement........................................... 46
11N. Governing Law...................................................... 46
11O. Severalty of Obligations........................................... 46
11P. Counterparts....................................................... 46
11Q. Binding Agreement.................................................. 47
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INFORMATION SCHEDULE
EXHIBIT A -- FORM OF NOTE
EXHIBIT B -- FORM OF REQUEST FOR PURCHASE
EXHIBIT C -- FORM OF CONFIRMATION OF ACCEPTANCE
EXHIBIT D -- FORM OF OPINION OF COMPANY'S COUNSEL
SCHEDULE 8A -- LIST OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES
SCHEDULE 8G -- LIST OF AGREEMENTS RESTRICTING DEBT
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REGIS CORPORATION
7201 Metro Boulevard
Minneapolis, Minnesota 55439
As of December 19, 1997
Life Insurance Company of Georgia ("LOG")
Each ING Affiliate (as hereinafter
defined) which becomes bound by certain
provisions of this Agreement as hereinafter
provided (together with LOG,
the "PURCHASERS")
c/o ING Investment Management, Inc.
5780 Powers Ferry Road, N.W.
Suite 300
Atlanta, GA 30327-4349
Ladies and Gentlemen:
The undersigned, Regis Corporation (herein called the "COMPANY"), hereby
agrees with you as follows:
1. AUTHORIZATION OF ISSUE OF NOTES. The Company will authorize the
issue of its senior promissory notes (the "NOTES") in the aggregate principal
amount of $35,000,000, to be dated the date of issue thereof, to mature, in
the case of each Note so issued, no less than five and no more than ten years
after the date of original issuance thereof, to bear interest on the unpaid
balance thereof from the date thereof at the rate per annum, and to have such
other particular terms, as shall be set forth, in the case of each Note so
issued, in the Confirmation of Acceptance with respect to such Note delivered
pursuant to paragraph 2E and to be substantially in the form of EXHIBIT A
attached hereto. The terms "NOTE" and "NOTES" as used herein shall include
each Note delivered pursuant to any provision of this Agreement and each Note
delivered in substitution or exchange for any such Note pursuant to any such
provision. Notes which have (i) the same final maturity, (ii) the same
principal prepayment dates, (iii) the same principal prepayment amounts (as a
percentage of the original principal amount of each Note), (iv) the same
interest rate, (v) the same interest payment periods and (vi) the same date
of issuance (which, in the case of a Note issued in exchange for another
Note, shall be deemed for these purposes the date on which such Note's
ultimate predecessor Note was issued), are herein called a "SERIES" of Notes.
2. PURCHASE AND SALE OF NOTES.
2A. FACILITY. LOG is willing to consider, in its sole discretion and
within limits which may be authorized for purchase by LOG and ING Affiliates
from time to time, the purchase of Notes pursuant to this Agreement. The
willingness of LOG to consider such purchase of Notes is herein called the
"FACILITY". At any time, the aggregate principal amount of Notes stated in
paragraph 1, MINUS the aggregate principal amount of Notes purchased and sold
pursuant to this Agreement prior to such time, MINUS the aggregate principal
amount of Accepted Notes (as hereinafter defined) which have not yet been
purchased and sold hereunder prior to such time, MINUS the aggregate
principal amount of notes of the Company issued pursuant to the 1991
Agreement which are outstanding and held by LOG and ING Affiliates at such
time, is herein called the "AVAILABLE FACILITY AMOUNT" at such time.
NOTWITHSTANDING THE WILLINGNESS OF LOG TO CONSIDER PURCHASES OF NOTES, THIS
AGREEMENT IS ENTERED INTO ON THE EXPRESS UNDERSTANDING THAT NEITHER LOG NOR
ANY ING AFFILIATE SHALL BE OBLIGATED TO MAKE OR ACCEPT OFFERS TO PURCHASE
NOTES, OR TO QUOTE RATES, SPREADS OR OTHER TERMS WITH RESPECT TO SPECIFIC
PURCHASES OF NOTES, AND THE FACILITY SHALL IN NO WAY BE CONSTRUED AS A
COMMITMENT BY LOG OR ANY ING AFFILIATE.
2B. ISSUANCE PERIOD. Notes may be issued and sold pursuant to this
Agreement commencing December 19, 1997, and continuing until the earlier of
(i) December 18, 2000 and (ii) the thirtieth day after LOG shall have given
to the Company, or the Company shall have given to LOG, a notice stating that
it elects to terminate the issuance and sale of Notes pursuant to this
Agreement (or if such thirtieth day is not a Business Day, the Business Day
next preceding such thirtieth day). The period during which Notes may be
issued and sold pursuant to this Agreement is herein called the "ISSUANCE
PERIOD".
2C. REQUEST FOR PURCHASE. The Company may from time to time during the
Issuance Period make requests for purchases of Notes (each such request being
herein called a "REQUEST FOR PURCHASE"). Each Request for Purchase shall be
made to LOG by telecopier or overnight delivery service, and shall (i)
specify the aggregate principal amount of Notes covered thereby, which shall
not be less than $5,000,000 and not be greater than the Available Facility
Amount at the time such Request for Purchase is made, (ii) specify the
principal amounts, final maturities, principal prepayment dates and amounts,
and interest payment periods of the Notes covered thereby, (iii) specify the
use of proceeds of such Notes, (iv) specify the proposed day for the closing
of the purchase and sale of such Notes, which shall be a Business Day during
the Issuance Period not less than 10 days and not more than 25 days after the
making of such Request for Purchase, (v) specify the number of the account
and the name and address of the depository institution to which the purchase
prices of such Notes are to be transferred on the Closing Day for such
purchase and sale, (vi) certify that the representations and warranties
contained in paragraph 8 are true on and as of the date of such
2
Request for Purchase and that there exists on the date of such Request for
Purchase no Event of Default or Default, and (vii) be substantially in the
form of EXHIBIT B attached hereto. Each request for Purchase shall be in
writing and shall be deemed made when received by LOG.
2D. RATE QUOTES. Not later than five Business Days after the Company
shall have given LOG a Request for Purchase pursuant to paragraph 2C. LOG
may, but shall be under no obligation to, provide to the Company by telephone
or telecopier, in each case between 9:30 A.M. and 1:30 P.M. New York City
local time (or such later time as LOG may elect) interest rate quotes for the
several principal amounts, maturities, principal prepayment schedules and
interest payment periods of Notes specified in such Request for Purchase.
Each quote shall represent the interest rate per annum payable on the
outstanding principal balance of such Notes at which LOG or an ING Affiliate
would be willing to purchase such Notes at 100% of the principal amount
thereof.
2E. ACCEPTANCE. Within 30 minutes after LOG shall have provided any
interest rate quotes pursuant to paragraph 2D or such shorter period as LOG
may specify to the Company (such period herein called the "ACCEPTANCE
WINDOW"), the Company may, subject to paragraph 2F, elect to accept such
interest rate quotes as to not less than $5,000,000 aggregate principal
amount of the Notes specified in the related Request for Purchase. Such
election shall be made by an Authorized Officer of the Company notifying LOG
by telephone or telecopier within the Acceptance Window that the Company
elects to accept such interest rate quotes, specifying the Notes (each such
Note being herein called an "ACCEPTED NOTE") as to which acceptance (herein
called an "ACCEPTANCE") relates. The day the Company notifies LOG of an
Acceptance with respect to any Accepted Notes is herein called the
"ACCEPTANCE DAY" for such Accepted Notes. Any interest rate quotes as to
which LOG does not receive an Acceptance within the Acceptance Window shall
expire, and no purchase or sale of Notes hereunder shall be made based on
such expired interest rate quotes. Subject to paragraph 2F and the other
terms and conditions hereof, the Company agrees to sell to LOG or an ING
Affiliate, and LOG agrees to purchase, or to cause the purchase by an ING
Affiliate of, the Accepted Notes at 100% of the principal amount of
such Notes. As soon as practicable following the Acceptance Day, the Company,
LOG and each ING Affiliate which is to purchase any such Accepted Notes will
execute a confirmation of such Acceptance substantially in the form of
EXHIBIT C attached hereto (herein called a "CONFIRMATION OF ACCEPTANCE"). If
the Company should fail to execute and return to LOG within three Business
Days following receipt thereof a Confirmation of Acceptance with respect to
any Accepted Notes, LOG may at its election at any time prior to its receipt
thereof cancel the closing with respect to such Accepted Notes and terminate
all obligations to purchase such Accepted Notes by so notifying the Company
in writing.
2F. MARKET DISRUPTION. Notwithstanding the provisions of paragraph 2E,
if LOG shall have provided interest rate quotes pursuant to paragraph 2D and
thereafter prior to the
3
time an Acceptance with respect to such quotes shall have been notified to
LOG in accordance with paragraph 2E, the domestic market for U.S. Treasury
securities or derivatives shall have closed or there shall have occurred a
general suspension, material limitation, or significant disruption of trading
in securities generally on the New York Stock Exchange or in the domestic
market for U.S. Treasury securities or derivatives, then such interest rate
quotes shall expire, and no purchase or sale of Notes hereunder shall be made
based on such expired interest rate quotes. If the Company thereafter
notifies LOG of the Acceptance of any such interest rate quotes, such
Acceptance shall be ineffective for all purposes of this Agreement, and LOG
shall promptly notify the Company that the provisions of this paragraph 2F
are applicable with respect to such Acceptance.
2G. NOTE CLOSINGS. Not later than 11:30 A.M. (New York City local
time) on the Closing Day for any Accepted Notes, the Company will deliver to
each Purchaser listed in the Confirmation of Acceptance relating thereto at
the offices of ING Investment Management, Inc., at 5780 Powers Ferry Road,
Suite 300, Atlanta, Georgia 30327-4751, the Accepted Notes to be purchased by
such Purchaser in the form of one or more Notes in authorized denominations
as such Purchaser may request for each Series of Accepted Notes to be
purchased on the Closing Day, dated the Closing Day and registered in such
Purchaser's name (or in the name of its nominee), against payment of the
purchase price thereof by transfer of immediately available funds for credit
to the Company's account specified in the Request for Purchase of such Notes.
If the Company fails to tender to any Purchaser the Accepted Notes to be
purchased by such Purchaser on the scheduled Closing Day for such Accepted
Notes as provided above in this paragraph 2G, or any of the conditions
specified in paragraph 3 shall not have been fulfilled by the time required
on such scheduled Closing Day, the Company shall, prior to 1:00 P.M., New
York City local time, on such scheduled Closing Day notify LOG (which
notification shall be deemed received by each Purchaser) in writing whether
(i) such closing is to be rescheduled (such rescheduled date to be a Business
Day during the Issuance Period not less than one Business Day and not more
than 10 Business Days after such scheduled Closing Day (the "RESCHEDULED
CLOSING DAY") and certify to LOG (which certification shall be for the
benefit of each Purchaser) that the Company reasonably believes that it will
be able to comply with the conditions set forth in paragraph 3 on such
Rescheduled Closing Day and that the Company will pay the Delayed Delivery
Fee in accordance with paragraph 2H(iii) or (ii) such closing is to be
canceled and all obligations of each Purchaser to purchase the Accepted Notes
are terminated. In the event that the Company shall fail to give such notice
referred to in the preceding sentence, LOG (on behalf of each Purchaser) may
at its election, at any time after 1:00 P.M., New York City local time, on
such scheduled Closing Day, notify the Company in writing that such closing
is to be canceled and all obligations of each Purchaser to purchase the
Accepted Notes are terminated. Notwithstanding anything to the contrary
appearing in this Agreement, the Company may elect to reschedule a closing
with respect to any given Accepted Notes on not more than one occasion,
unless LOG shall have otherwise consented in writing.
4
2H. FEES.
2H(i). FACILITY FEE. At the time of the execution and delivery of
this Agreement by the Company and LOG, the Company will pay to LOG in
immediately available funds a fee (the "FACILITY FEE") in the amount of
$50,000. Payment shall be made to LOG's agent, ING Investment Management,
Inc., in accordance with the written wire transfer instructions provided by
ING Investment Management, Inc., to the Company on or before the date of this
Agreement. If following payment of the Facility Fee a Refund Event shall
occur, LOG shall refund or cause ING Investment Management, Inc., to refund
to the Company the Refundable Portion of the Facility Fee.
2H(ii). ISSUANCE FEE. The Company will pay to each Purchaser of any
Accepted Notes in immediately available funds a fee (herein called the
"ISSUANCE FEE") on the Closing Day with respect to such Accepted Notes in an
amount equal to 0.15% of the aggregate principal amount of such Accepted
Notes sold on such Closing Day.
2H(iii). DELAYED DELIVERY FEE. If the closing of the purchase and sale
of any Accepted Note is delayed for any reason beyond the original Closing
Day for such Accepted Note, the Company will pay to LOG for the benefit of
the Purchaser of the Accepted Note (a) on the Cancellation Date or actual
closing date of such purchase and sale and (b) if earlier, the next Business
Day following 90 days after the Acceptance Day for such Accepted Note and on
each Business Day following 90 days after the prior payment hereunder, a fee
(herein called the "DELAYED DELIVERY FEE") calculated as follows:
(BEY - MMY) X DTS/360 X PA
where "BEY" means Bond Equivalent Yield, I.E., the bond equivalent yield per
annum of such Accepted Note, "MMY" means Money Market Yield, I.E., the yield
per annum on a commercial paper investment of the highest quality selected by
LOG on the date LOG receives notice of the delay in the closing for such
Accepted Note having a maturity date or dates the same as, or closest to, the
Rescheduled Closing Day or Rescheduled Closing Days (a new alternative
investment being selected by LOG each time such closing is delayed); "DTS"
means Days to Settlement, I.E., the number of actual days elapsed from and
including the Original Closing Day with respect to such Accepted Note (in the
case of the first such payment with respect to such Accepted Note) or from
and including the date of the next preceding payment (in the case of any
subsequent delayed delivery fee payment with respect to such Accepted Note)
to but excluding the date of such payment; and "PA" means Principal Amount,
I.E., the principal amount of the Accepted Note for which such calculation is
being made. In no case shall the Delayed Delivery Fee be less than zero.
Nothing contained herein shall obligate any Purchaser to purchase any
Accepted Note on any day other than the Closing Day for such Accepted Note,
as the same may be rescheduled from time to time in compliance with paragraph
2G.
5
2H(iv). CANCELLATION FEE. If the Company at any time notifies LOG in
writing that the Company is canceling the closing of the purchase and sale of
any Accepted Note, or if LOG notifies the Company in writing under the
circumstances set forth in the last sentence of paragraph 2E or the
penultimate sentence of paragraph 2G that the closing of the purchase and
sale of such Accepted Note is to be canceled, or if the closing of the
purchase and sale of such Accepted Note is not consummated on or prior to the
last day of the Issuance Period (the date of any notification, or the last
day of the Issuance Period, as the case may be, being herein called the
"CANCELLATION DATE"), the Company will pay to LOG for the benefit of the
Purchaser of the Accepted Note in immediately available funds, in addition to
any Delayed Delivery Fee owing with respect to such Accepted Note, an amount
(the "CANCELLATION FEE") calculated as follows:
PI X PA
where "PI" means Price Increase, I.E., the quotient (expressed in decimals)
obtained by dividing (a) the excess of the ask price (as determined by LOG)
of the Hedge Treasury Note(s) on the Cancellation Date over the bid price (as
determined by LOG) of the Hedge Treasury Notes(s) on the Acceptance Day for
such Accepted Note by (b) such bid price; and "PA" has the meaning ascribed
to it in paragraph 2H(iii). The foregoing bid and ask prices shall be as
reported by Bloomberg Financial Markets Service (or, if such data for any
reason ceases to be available through Bloomberg Financial Markets Service,
any publicly available source of similar market data). Each price shall be
based on a U.S. Treasury security having a par value of $100.00 and shall be
rounded to the second decimal place. In no case shall the Cancellation Fee be
less than zero. Any Cancellation Fee shall be paid on demand made by LOG.
3. CONDITIONS OF CLOSING. The obligation of any Purchaser to purchase
and pay for any Notes is subject to the satisfaction, on or before the
Closing Date for such Notes, of the following conditions:
3.A. CERTAIN DOCUMENTS. Such Purchaser shall have received the
following, each dated the date of the applicable Closing Day:
(i) The Note(s) to be purchased by such Purchaser.
(ii) Certified copies of the resolutions of the Board of Directors
of the Company authorizing the execution and delivery of this Agreement
and the issuance of the Notes, and of all documents evidencing other
necessary corporate action and governmental approvals, if any, with
respect to this Agreement and the Notes.
(iii) A certificate of the Secretary or an Assistant Secretary and
one other officer of the Company certifying the names and true
signatures of the officers of the
6
Company authorized to sign this Agreement and the Notes and the other
documents to be delivered hereunder.
(iv) Certified copies of the Certificate of Incorporation and
By-laws of the Company.
(v) A favorable opinion of Phillips & Gross, P.A., special
counsel to the Company (or such other counsel designated by the Company
and acceptable to the Purchaser(s)) satisfactory to such Purchaser and
substantially in the form of EXHIBIT D attached hereto and as to such
other matters as such Purchaser may reasonably request. The Company
directs such counsel to deliver such opinion, agrees that the issuance
and sale of any Notes will constitute a reconfirmation of such
direction, and understands and agrees that each Purchaser receiving such
an opinion will and is hereby authorized to rely on such opinion.
(vi) A good standing certificate for the Company from the Secretary
of State of Minnesota dated as of a recent date and such other evidence of
the status of the Company as such Purchaser may reasonably request.
(vii) Certified copies of the Requests for Information or Copies
(Form UCC-11) or equivalent reports listing all effective financing
statements which name the Company or any Restricted Subsidiary (under
their present names and previous names) as debtor and which are filed
in the offices of the Secretaries of State of Minnesota and Colorado
together with copies of such financing statements.
(viii) Additional documents or certificates with respect to legal
matters or corporate or other proceedings related to the status of the
Company and its Subsidiaries or the transactions contemplated hereby as
may be reasonably requested by such Purchaser.
3B. OPINION OF PURCHASER'S SPECIAL COUNSEL. Such Purchaser shall have
received from Kilpatrick Stockton LLP, special counsel for LOG, or such other
counsel who is acting as counsel for it in connection with the transaction to
be closed a favorable opinion satisfactory to such Purchaser as to such
matters incident to the matters herein contemplated as it may reasonably
request.
3C. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The representations and
warranties contained in paragraph 8 shall be true on and as of such Closing
Day; there shall exist on such Closing Day no Event of Default or Default;
and the Company shall have delivered to such Purchaser an Officer's
Certificate, dated such Closing Day, to both such effects.
7
3D. PURCHASE PERMITTED BY APPLICABLE LAWS. The purchase of and payment
for the Notes to be purchased by such Purchaser on the terms and conditions
herein provided (including the use of the proceeds of such Notes by the
Company) shall not violate any applicable law or governmental regulation
(including, without limitation, Section 5 of the Securities Act or Regulation
G, T or X of the Board of Governors of the Federal Reserve System) and shall
not subject such Purchaser to any tax, penalty, liability or other onerous
condition under or pursuant to any applicable law or governmental regulation,
and such Purchaser shall have received such certificates or other evidence as
it may request to establish compliance with this condition.
3E. PAYMENT OF FEES. The Company shall have paid to LOG and its
Affiliates and all fees due it or them pursuant to or in connection with this
Agreement, including any Issuance Fee due pursuant to paragraph 2H(ii) and
any Delayed Delivery Fee due pursuant to paragraph 2H(iii).
3F. OFFSET SHARING AGREEMENT. If the Closing Day occurs after the
expiration of the period within which the Company is required to cause the
Offset Sharing Agreement to be amended, as provided in paragraph 5K, the
Offset Sharing Agreement shall have been so amended.
3G. CHANGE IN COMPANY'S POSITION. On the date of closing there shall
not have occurred or be threatened (i) a material and adverse change in the
Company's financial position, or (ii) any condition, event or act which would
materially and adversely affect the Company's business or its ability to
repay the Notes.
3H. OTHER LOAN AGREEMENTS. The Company shall have demonstrated its
compliance with the penultimate sentence of paragraph 8G to the satisfaction
of the Purchaser.
4. PREPAYMENTS. The Notes shall be subject to required prepayment as
and to the extent provided in paragraph 4A. The Notes shall also be subject
to prepayment under the circumstances set forth in paragraph 4B. Any
prepayment made by the Company pursuant to paragraph 4B shall not reduce or
otherwise affect its obligation to make any required prepayment as specified
in paragraph 4A. Except as set forth in paragraph 4B(1), the Notes shall not
be subject to prepayment at the option of the Company.
4A. REQUIRED PREPAYMENTS OF NOTES. Each Series of Notes shall be
subject to required prepayments, if any, set forth in the Notes of such
Series.
4B(1). OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE AMOUNT. The Notes of
each Series shall be subject to prepayment, in whole at any time or from time
to time in part (in integral multiples of $500,000) at the option of the
Company, at 100% of the principal amount so prepaid plus interest thereon to
the prepayment date and the Yield-Maintenance
8
Amount, if any, with respect to each such Note. Any partial prepayment of a
Series of Notes pursuant to this paragraph 4B(1) shall be applied in
satisfaction of required payments of principal in inverse order of their
scheduled due dates.
4B(2). PREPAYMENT WITH YIELD-MAINTENANCE AMOUNT PURSUANT TO OFFSET
SHARING AGREEMENT. If amounts are to be applied to the principal of the Notes
pursuant to the terms of an Offset Sharing Agreement, interest owing thereon
to the prepayment date and the Yield-Maintenance Amount, if any, with respect
to each Note shall be due and payable on such date. Any partial prepayment
of the Notes pursuant to this paragraph 4B(2) shall be applied in
satisfaction of required payments of principal in inverse order of their
scheduled due dates.
4C. NOTICE OF OPTIONAL PREPAYMENT. The Company shall give the
holder of each Note of a Series to be prepaid pursuant to paragraph 4B(1)
irrevocable written notice of such prepayment not less than 10 Business Days
prior to the prepayment date, specifying such prepayment date, the aggregate
principal amount of the Notes of such Series to be prepaid on such day, the
principal amount of the Notes of such Series held by such holder to be
prepaid on that date and that such prepayment is to be made pursuant to
paragraph 4B(1). Notice of prepayment having been given as aforesaid, the
principal amount of the Notes specified in such notice, together with
interest thereon to the prepayment date and together with the
Yield-Maintenance Amount, if any, herein provided, shall become due and
payable on such prepayment date. The Company shall, on or before the day on
which it gives written notice of any prepayment pursuant to paragraph 4B(1),
give telephonic notice of the principal amount of the Notes to be prepaid and
the prepayment day to each Significant Holder which shall have designated a
recipient for such notices in the Purchaser Schedule attached to the
applicable Confirmation of Acceptance or by notice in writing to the Company.
4D. APPLICATION OF PREPAYMENTS. In the case of each prepayment of
less than the entire unpaid principal amount of all outstanding Notes of any
Series, as the case may be, pursuant to paragraphs 4A, 4B(1) or 4B(2), the
amount to be prepaid shall be applied pro rata to all outstanding Notes or
all outstanding Notes of such Series, as the case may be (including, for the
purpose of this paragraph 4D only, all Notes prepaid or otherwise retired or
purchased or otherwise acquired by the Company or any of its Subsidiaries or
Affiliates other than by prepayment pursuant to paragraph 4A or 4B),
according to the respective unpaid principal amounts thereof.
4E. RETIREMENT OF NOTES. The Company shall not, and shall not permit
any of its Subsidiaries or Affiliates to, prepay or otherwise retire in whole
or in part prior to their stated final maturity (other than by prepayment
pursuant to paragraphs 4A or 4B or upon acceleration of such final maturity
pursuant to paragraph 7A), or purchase or otherwise acquire, directly or
indirectly, Notes of any Series held by any holder unless their Company or
such Subsidiary or Affiliate shall have offered to prepay or otherwise retire
or purchase or
9
otherwise acquire, as the case may be, the same proportion of the aggregate
principal amount of Notes of such Series held by each other holder of Notes
of such Series at the time outstanding upon the same terms and conditions.
Any Notes so prepaid or otherwise retired or purchased or otherwise acquired
by the Company or any of its Subsidiaries or Affiliates shall not be deemed
to be outstanding for any purpose under this Agreement, EXCEPT as provided in
paragraph 4D.
5. AFFIRMATIVE COVENANTS. During the Issuance Period and so long
thereafter as any Note is outstanding and unpaid, the Company covenants as
follows:
5A. FINANCIAL STATEMENTS; NOTICE OF DEFAULTS. The Company covenants
that it will deliver to LOG and each Significant Holder in triplicate:
(i) as soon as practicable and in any event within 45 days after
the end of each quarterly period (other than the last quarterly period) in
each fiscal year, a consolidated balance sheet of the Company and its
Subsidiaries and of the Company and its Restricted Subsidiaries as at
the end of such quarterly period and the related consolidated statements
of income and cash flows of the Company and its Subsidiaries and of the
Company and its Restricted Subsidiaries for such period setting forth,
in each case in comparative form, figures for the corresponding period in
the preceding fiscal year, all in reasonable detail and certified by the
chief financial officer or chief accounting officer of the Company as
fairly presenting the consolidated financial position of the Company and
its Subsidiaries and of the Company and its Restricted Subsidiaries as
at the dates indicated and the consolidated results of their respective
operations and cash flows, in each case for the periods indicated, in
conformity with generally accepted accounting principles applied on a
basis consistent with prior periods (except as disclosed in such
certificate), subject to changes resulting from year-end adjustments;
(ii) as soon as practicable and in any event within 90 days after
the end of each fiscal year, a consolidated and consolidating balance
sheet of the Company and its Subsidiaries as at the end of such year and
the related consolidated and consolidating statements of income and cash
flows of the Company and its Subsidiaries for such year, all in
reasonable detail and satisfactory in scope to the Required Holder(s),
and (a) in the case of such consolidated financial statements, setting
forth in each case in comparative form corresponding consolidated
figures for the preceding fiscal year, and accompanied by a report
thereon of independent public accountants of recognized national
standing selected by the Company, which report shall state that,
subject only to standard qualifications and limitations generally
contained in an unqualified audit report, such consolidated financial
statements present fairly the consolidated financial position of the
Company and its Subsidiaries as at the dates indicated and the
consolidated results of their operations and cash flows
10
for the periods indicated in conformity with generally accepted accounting
principles applied on a basis consistent with prior years (except as
otherwise specified in such report) and that the audit by such
accountants in connection with such consolidated financial statements
has been made in accordance with generally accepted auditing standards,
and (b) in the case of such consolidating financial statements, (w)
setting forth on supplemental schedules, in one column, the total
amounts for the Company and its Restricted Subsidiaries, and, in a
second column, the total amounts for the Company's other Subsidiaries, and
showing all eliminations and adjustments made in aggregating the amounts
of such columns to arrive at the Company's consolidated financial
statements, (x) setting forth in comparative form the corresponding
consolidated figures for the Company and its Restricted Subsidiaries for
the preceding fiscal year, (y) certified by the chief financial officer
or chief accounting officer of the Company as fairly presenting the
respective financial positions of the separate entities reported on as
at the dates indicated and the results of their respective operations
and cash flows for the period indicated, in conformity with generally
accepted accounting principles applied on a basis consistent with prior
periods (except as otherwise specified in such certificate), and (z)
accompanied by a report thereon of the independent public accountants
reporting on the consolidated financial statements of the Company and
its Subsidiaries for such fiscal year, which report shall state that,
subject to the qualifications and limitations contained in their report
on the consolidated financial statements of the Company and its
Subsidiaries, and to the further qualification that the principles of
consolidation followed in the preparation of such consolidated figures
for the Company and its Restricted Subsidiaries conform to the
provisions of this Agreement rather than to generally accepted
accounting principles, such consolidated figures for the Company and its
Restricted Subsidiaries present fairly the consolidated financial
position of the Company and its Restricted Subsidiaries as at the dates
indicated and the consolidated results of their operations and cash
flows for the periods indicated in conformity with generally accepted
accounting principles applied on a basis consistent with prior periods
(except as otherwise specified in such report);
(iii) as soon as practicable and in any event within (a) 45 days
after the end of each quarterly period (other than the last quarterly
period) in each fiscal year and (b) 120 days after the end of each
fiscal year, balance sheets (which in the case of the fiscal year end
shall be audited) of each Unrestricted Subsidiary as at the end of such
period and the related statements of income and cash flows of each such
Unrestricted Subsidiary for such period (which in the case of annual
statements shall be audited);
(iv) together with each delivery of financial statements
pursuant to clauses (i) and (ii) of this paragraph 5A, an Officer's
Certificate (a) stating that the signer has reviewed the terms of this
Agreement and the Notes and has made, or caused to be made under his or
her supervision, a review in reasonable detail of the transactions
11
and condition of the Company and its Restricted Subsidiaries during the
fiscal period covered by such financial statements and that such review
has not disclosed the existence during or at the end of such fiscal
period, and that the signer does not have knowledge of the existence as
at the date of the Officer's Certificate, of any condition or event
which constitutes a Default or Event of Default or, if any such
condition or event existed or exists, specifying the nature and period
of existence thereof and what action the Company has taken or is taking
or proposes to take with respect thereto, and (b) demonstrating (with
computations in reasonable detail) compliance by the Company with the
provisions of paragraphs 6A, 6B, 6C(1), 6C(2), 6C(3), 6C(4), 6C(6) and
6C(8) of this Agreement (herein called the "COMPUTATION PARAGRAPHS");
(v) together with each delivery of financial statements of the
Company and its Subsidiaries pursuant to clause (ii) of this paragraph
5A, a certificate by the Company's independent public accountants
stating (a) that their audit examination has included a review of the
terms of this Agreement and of the Notes as they relate to accounting
matters and that such review is sufficient to enable them to make the
statement referred to in subclause (c) of this clause (v), (b) whether
in the course of their audit examination there has been disclosed the
existence during the fiscal year covered by such financial statements
(and whether they have knowledge of the existence as of the date of such
accountants' certificate) of any condition or event which constitutes a
Default or Event of Default and if during their audit examination there
has been disclosed (or if they have knowledge of) such a condition or
event, specifying the nature and period of existence thereof (it being
understood, however, that such accountants shall not be liable to any
Person by reason of their failure to obtain knowledge of any Default or
Event of Default which would not be disclosed in the course of an audit
conducted in accordance with generally accepted auditing standards), and
(c) that based on their annual audit examination, including a review of
the Computation Paragraphs, nothing came to their attention which causes
them to believe that the information relating to the Computation
Paragraphs contained in the Officer's Certificate delivered therewith
pursuant to clause (iv) of this paragraph 5A is not correct or that the
matters set forth in such Officer's Certificate are not stated in
accordance with the terms of this Agreement;
(vi) promptly upon their becoming available, copies of all
financial statements, reports, notices and proxy statements sent or
made available generally by the Company and its Restricted Subsidiaries
to its security holders (other than the Company in the case of
Restricted Subsidiaries), of all regular and periodic reports and all
registration statements and prospectuses, if any, filed by the Company or
any of its Restricted Subsidiaries with any securities exchange or with
the Securities and Exchange Commission or with NASDAQ, and of all press
releases and other written statements made available generally by the
Company or any of its Restricted
12
Subsidiaries to the public concerning material developments in the
business of the Company and its Restricted Subsidiaries:
(vii) promptly upon receipt thereof by the Company, copies of
all reports submitted to the Company by independent public accountants
in connection with each annual, interim or special audit of the books of
the Company or any of its Restricted Subsidiaries made by such
accountants;
(viii) promptly upon any Responsible Officer obtaining knowledge
(a) that a condition or event exists that constitutes a Default or Event
of Default, (b) that the holder of any Note has given any notice or
taken any other action with respect to a claimed Default or Event of
Default under this Agreement, (c) of any condition or event which could
reasonably be expected to have a material adverse effect on the business,
condition (financial or other), assets, properties, operations or
prospects of the Company or the Company and its Restricted Subsidiaries
taken as a whole (other than matters of a general economic or political
nature which do not affect the Company or its Restricted Subsidiaries
uniquely), (d) that any Person has given any notice to the Company or
any Restricted Subsidiary or taken any other action with respect to a
claimed default or event or condition of the type referred to in clause
(iii) of paragraph 7A, (e) of the institution of any litigation
involving claims against the Company or any Restricted Subsidiary in
excess of the coverage provided under the Company's or such Restricted
Subsidiary's insurance policies (treating any portion of such coverage
which is subject to self-insurance or deductibles as a part of such
excess) if the amount of the excess of such claims individually exceeds
$500,000, or, when aggregated with the excess over insurance coverage of
all other outstanding claims, exceeds $1,000,000, (f) of the initiation
by the Securities and Exchange Commission of any proceeding against the
Company or any Restricted Subsidiary or of any investigation of the
Company or any Restricted Subsidiary or (g) of the initiation by any
other governmental agency of any proceeding against the Company or any
Restricted Subsidiary or of any investigation of the Company or any
Restricted Subsidiary involving allegations (or which could reasonably
be expected to result in allegations) of material illegal activities or
misconduct on the part of the Company or any Restricted Subsidiary, an
Officer's Certificate specifying the nature and period of existence of
any such condition or event, or specifying the notice given or action
taken by such holder or Person and the nature of such claimed Default,
Event of Default, event or condition, or specifying the nature of such
litigation, proceeding or investigation, and what action the Company has
taken, is taking or proposes to take with respect thereto; and
(ix) with reasonable promptness, such other information and data
with respect to the Company or any of its Subsidiaries as from time to
time may be reasonably requested by such Significant Holder.
13
5B. INFORMATION REQUIRED BY RULE 144A. The Company covenants that it
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 and in compliance with the reporting
requirements of section 13 or 15(d) of the Exchange Act. For the purpose of
this paragraph 5B, the term "QUALIFIED INSTITUTIONAL BUYER" shall have the
meaning specified in Rule 144A under the Securities Act.
5C. INSPECTION OF PROPERTY. The Company covenants that it will
permit any Person designated by any Significant Holder in writing, at such
Significant Holder's expense (unless a Default or Event of Default shall have
occurred and be continuing, in which case at the Company's expense), to visit
and inspect any of the properties of the Company and its Restricted
Subsidiaries, to examine the corporate books and financial records of the
Company and its Restricted Subsidiaries and make copies thereof or extracts
therefrom and to discuss the affairs, finances and accounts of any of such
corporations with the principal officers of the Company and its independent
public account, all at such reasonable times and as often as such Significant
Holder may reasonably request.
5D. COVENANT TO SECURE NOTES EQUALLY. The Company covenants that, if
it or any Restricted 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 the provisions of paragraph 6C(1) (unless prior written
consent to the creation or assumption thereof shall have been obtained
pursuant to paragraph 11C), it 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 obligations thereby secured so long as any such other
obligations shall be so secured.
5E. KEEPING OF BOOKS AND BANK ACCOUNTS. The Company covenants that it
will, and will cause each of its Restricted Subsidiaries to (i) keep separate
and proper books of record and account in which full and correct entries
shall be made of all transactions, including any transactions between the
Company or any Restricted Subsidiary and any Affiliate, all in accordance
with generally accepted accounting principles, and (ii) maintain bank accounts
which are separate and segregated from the bank accounts of any Unrestricted
Subsidiary or Affiliate.
5F. INCORPORATION OF OTHER DEBT COVENANTS. The Company covenants that
if it is or shall become subject to any operational or financial covenant in
any document evidencing or pertaining to Debt of the Company which is more
favorable to a lender or other beneficiary than those set forth in paragraph
6 hereof, then (i) this Agreement shall be deemed to be automatically amended
to include such more favorable covenant, (ii) the
14
Company shall promptly give each holder of Notes notice thereof and (iii) if
requested by LOG or the Required Holder(s) of the Notes, the Company shall
promptly execute and deliver a written amendment to this Agreement
specifically incorporating such covenant herein. Once any such covenant has
been included in this Agreement (whether or not pursuant to a written
amendment), it may only be modified or eliminated by an amendment hereto
entered into as contemplated by paragraph 11C hereof.
5G. CORPORATE EXISTENCE. The Company covenants that it will at all
times preserve and keep in full force and effect its corporate existence, and
rights and franchises material to its business, and those of each of its
Restricted Subsidiaries, except as otherwise specifically permitted by
paragraphs 6C(4) and 6C(5), and will qualify, and cause each of its
Restricted Subsidiaries to qualify, to do business in any jurisdiction where
the failure to do so would have a material adverse effect on the business,
condition (financial and other), assets, properties, prospects or operations
of the Company or the Company and its Restricted Subsidiaries taken as a
whole, PROVIDED that the corporate existence of any Restricted Subsidiary may
be terminated if, in the good faith judgment of the Board of Directors of the
Company, such termination is in the best interests of the Company.
5H. PAYMENT OF TAXES AND CLAIMS. The Company covenants that it will,
and will cause each of its Subsidiaries to, pay all income taxes before the
same shall become delinquent, except where such income taxes are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted, if adequate reserves therefor have been established on
the books of the Company or its Subsidiaries in accordance with generally
accepted accounting principles. The Company covenants that it will, and will
cause each of its Subsidiaries to, pay all other taxes, assessments and other
governmental charges imposed upon it or any of its properties or assets or in
respect of any of its franchises, business, income or profits before any
penalty accrues thereon, and all claims (including, without limitation,
claims for labor, services, materials and supplies) for sums which have
become due and payable and which by law have or may become a Lien upon any of
its properties or assets, PROVIDED that no such tax, assessment, charge or
claim need be paid if it is being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted and if such accrual
or other appropriate provision, if any, shall be required by generally
accepted accounting principles, shall have been made therefor.
5I. COMPLIANCE WITH LAWS, ETC. The Company covenants that it will, and
will cause each of it Restricted Subsidiaries to, comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority, the noncompliance with which would materially
adversely affect the business, condition (financial or other), assets
properties, operations or prospects of the Company or the Company and its
Restricted Subsidiaries taken as a whole.
15
5J. MAINTENANCE OF PROPERTIES; INSURANCE. The Company covenants that
it will, and will cause each of its Restricted Subsidiaries to, maintain or
cause to be maintained in good repair, working order and condition all
properties used or useful in the business of the Company and its Restricted
Subsidiaries and from time to time make or cause to be made all appropriate
repairs, renewals and replacements thereof. The Company will maintain or
cause to be maintained, with financially sound and reputable insurers, (i)
insurance with respect to its properties and business and the properties and
business of its Restricted Subsidiaries against loss or damage of the kinds
customarily insured against by corporations of established reputation engaged
in the same or similar business and similarly situated, of such types and in
such amounts as are customarily carried under similar circumstances by such
other corporations, and (ii) life insurance, with the Company as the owner
and named beneficiary, on the life of Myron Kunin in the amount (net of any
premium loans thereon and interest due in connection therewith) of not less
than $2,700,000, and on the life of Paul Finkelstein in the amount (net of
any premium loans thereon and interest due in connection therewith) of not
less than $2,400,000, each of which life insurance policies shall be free of
premium loans (except as specifically provided herein) and other Liens on or
offsets against proceeds payable to the Company.
5K. OFFSET SHARING AGREEMENT AMENDMENT. The Company covenants that
within 60 days from the date of this Agreement it shall cause the Offset
Sharing Agreement to be amended so as to apply to the Notes pursuant to a
document in form and content satisfactory to LOG and to any other holder of
any Notes at the time of such amendment.
6. NEGATIVE COVENANTS. During the Issuance Period and so long
thereafter as any Note or other amount due hereunder is outstanding and
unpaid, the Company covenants as follows:
6A. INTEREST COVERAGE RATIO. The Company will not permit the Interest
Coverage Ratio to be less than 2.0 to 1.0 at the end of any fiscal quarter.
6B. CONSOLIDATED NET WORTH. The Company will not permit: (i)
Consolidated Net Worth at any time to be less than $60,000,000 plus, to the
extent positive, 50% of Consolidated Net Income for the period (taken as one
accounting period) commencing July 1, 1995, and ending on the last day of the
fiscal quarter most recently ended as of any date of determination; or (ii)
Tangible Net Worth at the end of any fiscal quarter to be less than
$10,000,000.
6C. LIEN, DEBT AND OTHER RESTRICTIONS. The Company will not and will
not permit any Restricted Subsidiary to:
6C(1). LIENS. Create, assume or suffer to exist any Lien upon any of its
properties or assets, whether now owned or hereafter acquired (whether or not
provision is made for the
16
equal and ratable securing of the Notes in accordance with the provisions of
paragraph 5D) EXCEPT:
(i) Liens for taxes, assessments or governmental charges not yet
due or which are being actively contested in good faith by appropriate
proceedings,
(ii) Liens incidental to the conduct of its business or the
ownership of its property and assets which do not secure Debt and which
do not in the aggregate materially detract from the value of its
property or assets or materially impair the use thereof in the operation
of its business,
(iii) Liens on property or assets of a Restricted Subsidiary to
secure obligations of such Restricted Subsidiary to the Company or a
Wholly-Owned Restricted Subsidiary,
(iv) Liens which are the subject of an Offset Sharing Agreement,
and
(v) other Liens securing Debt permitted by paragraph 6C(2),
PROVIDED that Priority Debt shall at no time exceed 15% of Consolidated
Net Worth;
6C(2). DEBT. Create, incur, assume or suffer to exist any Debt, EXCEPT:
(i) Funded Debt evidenced by the Notes,
(ii) Funded Debt which is outstanding under the 1991 Agreement,
(iii) Current Debt, PROVIDED that any holder of such Current Debt
(other than a holder of Permitted Seller Current Debt) is party to an
Offset Sharing Agreement, and
(iv) other Funded Debt,
provided that at no time shall (a) the ratio of Total Debt to the sum of
Total Debt and Consolidated Net Worth exceed .50 to 1.00 or (b) Priority Debt
exceed 15% of Consolidated Net Worth;
6C(3). INVESTMENTS. Make or permit to remain outstanding any loan or
advance to, or extend credit to, or own, purchase or acquire any stock,
obligations or securities of, or any other interest in, or make any capital
contribution to, any Person (all of the foregoing being referred to herein as
"INVESTMENTS"), EXCEPT that the Company or any Restricted Subsidiary may:
17
(i) make or permit to remain outstanding Investments to or in any
Restricted Subsidiary or any corporation which immediately following
such Investment will be a Restricted Subsidiary,
(ii) own, purchase or acquire marketable direct obligations issued
or unconditionally guaranteed by the United States of America or any
agency thereof and maturing one year from the date of acquisition
thereof,
(iii) make demand deposits in banks in the ordinary course of
business, and make deposits or own certificates of deposit of United
States dollars maturing within one year from the date of acquisition
thereof issued by commercial banks chartered under the laws of the
United States of America or any state thereof or the District of
Columbia, each having at all times combined capital, surplus and
undivided profits of not less than $100,000,000 (determined in
accordance with generally accepted accounting principles),
(iv) own, purchase or acquire commercial paper maturing no more
than 270 days from the date of acquisition thereof and rated A-1 by
Standard & Poor's Corporation or P-1 by Moody's Investors Service, Inc.,
(v) make and own Investments in mutual funds which invest at least
95% of their assets in instruments described in clauses (ii), (iii) and
(iv) of this paragraph 6C(3),
(vi) endorse negotiable instruments for collection in the ordinary
course of business,
(vii) make or permit to remain outstanding Investments to or in any
Unrestricted Subsidiary, PROVIDED that (a) the aggregate amount (at
original cost) of all Investments in Unrestricted Subsidiaries shall at
no time exceed 10% of Consolidated Net Worth and (b) any Investment made
in an Unrestricted Subsidiary subsequent to June 30, 1995, shall only be
deemed an Investment for purposes of this paragraph 6C(3) to the extent
it involves a cash or other asset contribution or advance (net of any
return thereof), and
(viii) make or permit to remain outstanding other Investments
(exclusive of Investments in Unrestricted Subsidiaries), PROVIDED that
the aggregate amount thereof shall at no time exceed 5% of Consolidated
Net Worth.
6C(4). SALE OF STOCK AND DEBT OF SUBSIDIARIES. Sell or otherwise
dispose of, or part with control of, any shares of stock or Debt of any
Restricted Subsidiary, except to the Company or a Wholly-Owned Restricted
Subsidiary, and except that all shares of stock and Debt of any Restricted
Subsidiary at the time owned by or owed to the Company and all
18
Restricted Subsidiaries may be sold as an entirety for a cash consideration
which represents the fair value (as determined in good faith by the Board of
Directors of the Company) at the time of sale of the shares of stock and Debt
so sold; PROVIDED that (i) such sale or other disposition, if treated as a
Transfer of assets of such Restricted Subsidiary, would be permitted by
paragraph 6C(6) and (ii) at the time of such sale, such Restricted Subsidiary
shall not own, directly or indirectly, any shares of stock or Debt of any
other Restricted Subsidiary (unless all of the shares of Stock and Debt of
such other Restricted Subsidiary owned, directly or indirectly, by the
Company and all Restricted Subsidiaries are simultaneously being sold as
permitted by this paragraph 6C(4));
6C(5). MERGER AND CONSOLIDATION. Merge or consolidate with or into any
other Person, EXCEPT that:
(i) any Restricted Subsidiary may merge or consolidate with or
into the Company, PROVIDED that the Company is the continuing or surviving
corporation,
(ii) any Restricted Subsidiary may merge or consolidate with or
into another Restricted Subsidiary, PROVIDED that a Wholly-Owned Restricted
Subsidiary shall be the continuing or surviving corporation; and
(iii) the Company may merge or consolidate with any other
corporation, PROVIDED that (a) either (x) the Company shall be the
continuing or surviving corporation, or (y) the successor or acquiring
corporation shall be a corporation organized under the laws of any state of
the United States of America and shall expressly assume in writing all of
the obligations of the Company under this Agreement and on the Notes,
including all covenants herein and therein contained, and such successor
or acquiring corporation shall succeed to and be substituted for the
Company with the same effect as if it had been named herein as a party
hereto and (b) immediately after giving effect to such transaction, no
Default or Event of Default would exist hereunder (including a Default
or Event of Default under clause (iii) of paragraph 6C(2));
6C(6). TRANSFER OF ASSETS. Transfer any of its assets EXCEPT that:
(i) any Restricted Subsidiary may Transfer assets to the Company
or a Wholly-Owned Restricted Subsidiary,
(ii) the Company or any Restricted Subsidiary may sell inventory in
the ordinary course of business, and
(iii) the Company or any Restricted Subsidiary may otherwise
Transfer assets, PROVIDED that after giving effect to any Transfer (a) the
Aggregate Percentage of Earnings Capacity Transferred pursuant to this
clause (iii) during the period of
19
eight consecutive fiscal quarters ending on or most recently ended shall
not exceed 10% and (b) the Aggregate Percentage of Total Assets
Transferred pursuant to this clause (iii) during the period of eight
consecutive fiscal quarters ending on or most recently ended shall not
exceed 10%;
6C(7). SALE OR DISCOUNT OF RECEIVABLES. Sell with recourse, or discount
or otherwise sell for less than the face value thereof, any of its notes or
accounts receivable;
6C(8). TRANSACTIONS WITH AFFILIATES. Directly or indirectly, engage in
any transaction (including, without limitation, the purchase, sale or
exchange of assets or the rendering of any service) with any Affiliate,
unless (i) such transaction is in the ordinary course of and pursuant to the
reasonable requirements of the Company's or such Restricted Subsidiary's
business and upon fair and reasonable terms that are comparable to those
which might be obtained in an arm's-length transaction between unaffiliated
parties, and (ii) in the case of any such transaction in which the aggregate
value of the assets or services involved, or of the payments made, exceeds
$1,000,000, such transaction is authorized by a majority of the independent
members of the Board of Directors of the Company;
6C(9). RESTRICTED SUBSIDIARY DIVIDEND RESTRICTIONS. Enter into, or
otherwise be subject to, any contract or agreement (including its certificate
or articles of incorporation), which limits the amount of, or otherwise
imposes restrictions on the payment of, dividends by any Restricted
Subsidiary; or
6C(10). TAX CONSOLIDATION. Consent to or permit the filing of or be a
party to any consolidated income tax return with any Person, other than a
consolidated tax return of the Company and its Restricted Subsidiaries,
except that the Company may file a consolidated income tax return as the
common parent of an affiliated group that includes the Company, its
Restricted Subsidiaries and its Unrestricted Subsidiaries, provided that (i)
the Company and its Restricted Subsidiaries shall not at any time
collectively or individually pay or agree to pay any amount of the taxes
payable in respect of any such return in excess of the amount which the
Company would have been required to pay if it had filed a consolidated income
tax return for the Company and its Restricted Subsidiaries only (the
"RESTRICTED GROUP AMOUNT"), nor shall the Company and its Restricted
Subsidiaries become obligated to pay any such excess (net of any taxes
payable or reimbursable by a financially responsible Unrestricted
Subsidiary), and (ii) the Company shall have obtained and there shall at all
times remain in effect the written agreement of the Unrestricted Subsidiaries
to reimburse to the Company sums equal to any amount of the taxes payable in
respect of any such return paid by the Company and its Restricted
Subsidiaries collectively or individually in excess of the Restricted Group
Amount, subject to appropriate adjustment in the event that such taxes are
increased or reduced by reason of any audit by a taxing authority or any
successful claim for a refund.
20
6D. TRANSACTIONS BY RESTRICTED SUBSIDIARIES. The Company covenants that
it will not permit any Restricted Subsidiary (either directly, or indirectly
by the issuance of rights or options for, or securities convertible into,
such shares) to issue, sell or otherwise dispose of (i) any shares of any
class of its stock (other than Common Stock) except to the Company or another
Restricted Subsidiary or (ii) any shares of its Common Stock except (a) to
the Company or another Restricted Subsidiary and (b) concurrently with
dispositions under (a) above, to any minority shareholders of such Restricted
Subsidiary to the extent necessary to maintain such minority shareholders'
percentage ownership of outstanding shares of Common Stock of such Restricted
Subsidiary.
7. EVENTS OF DEFAULT.
7A. ACCELERATION. If any of the following events shall occur and be
continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(i) the Company defaults in the payment of any principal of, or
Yield-Maintenance Amount payable with respect to, any Note when the same
shall become due, either by the terms thereof or otherwise as herein
provided; or
(ii) the Company defaults in the payment of any interest on any
Note for more than 5 days after the date due; or
(iii) the Company or any Restricted Subsidiary defaults (whether as
primary obligor or as guarantor or other surety) in any payment of
principal of or interest on any other obligation for money borrowed (or
any Capitalized Lease Obligation, any obligation under a conditional
sale or other title retention agreement, any obligation issued or
assumed as full or partial payment for property whether or not secured
by a purchase money mortgage or any obligation under notes payable or
drafts accepted representing extensions of credit) beyond any period of
grace provided with respect thereto, or the Company or any Restricted
Subsidiary fails to perform or observe any other agreement, term or
condition contained in any agreement under which any such obligation is
created (or if any other event thereunder or under any such agreement
shall occur and be continuing) and the effect of such failure or other
event is to cause, or to permit the holder or holders of such obligation
(or a trustee on behalf of such holder or holders) to cause, such
obligation to become due (or to be repurchased by the Company or any
Restricted Subsidiary) prior to any stated maturity, PROVIDED that the
aggregate amount of all obligations as to which such a payment default
shall occur and be continuing or such a failure or other event causing
or permitting acceleration (or resale to the Company or any Restricted
Subsidiary) shall occur and be continuing exceeds $500,000; or
21
(iv) any representation or warranty made by the Company herein or
by the Company or any of its officers in any writing furnished in
connection with or pursuant to this Agreement shall be false in any
material respect on the day as of which made or repeated; or
(v) the Company fails to perform or observe any covenant or
agreement contained in paragraph 6 or incorporated by reference into
this Agreement pursuant to paragraph 5F; or
(vi) the Company fails to perform or observe any other
agreement, term or condition contained herein and such failure
shall not be remedied within 30 days after any Responsible Officer
obtains actual knowledge thereof; or
(vii) the Company or any Restricted Subsidiary makes an assignment
for the benefit of creditors or is generally not paying its debts as
such debts become due; or
(viii) any decree or order for relief in respect of the Company or
any Restricted Subsidiary is entered under any bankruptcy, reorganization,
compromise, arrangement, insolvency, readjustment of debt, dissolution
or liquidation or similar law, whether now or hereafter in effect
(herein called the "BANKRUPTCY LAW"), of any Jurisdiction; or
(ix) the Company or any Restricted Subsidiary petitions or
applies to any tribunal for, or consents to, the appointment of, or
taking possession by, a trustee, receiver, custodian, liquidator or
similar official of the Company or any Restricted Subsidiary, or of any
substantial part of the assets of the Company or any Restricted
Subsidiary, or commences a voluntary case under the Bankruptcy Law of
the United States or any proceedings (other than proceedings for the
voluntary liquidation and dissolution of a Restricted Subsidiary)
relating to the Company or any Restricted Subsidiary under the
Bankruptcy Law of any other jurisdiction; or
(x) any such petition or application is filed, or any such
proceedings are commenced, against the Company or any Restricted
Subsidiary and the Company or such Restricted Subsidiary by any act
indicates its approval thereof, consent thereto or acquiescence therein,
or an order, judgment or decree is entered appointing any such trustee,
receiver, custodian, liquidator or similar official, or approving the
petition in any such proceedings, and such order, judgment or decree
remains unstayed and in effect for more than 30 days; or
(xi) any order, judgment or decree is entered in any proceedings
against the Company decreeing the dissolution of the Company and such
order, judgment or decree remains unstayed and in effect for more than
60 days; or
22
(xii) any order, judgment or decree is entered in any proceedings
against the Company or any Restricted Subsidiary decreeing a split-up of
the Company or such Restricted Subsidiary which requires the divestiture
of assets representing a substantial part, or the divestiture of the
stock of a Restricted Subsidiary whose assets represents a substantial
part, of the consolidated assets of the Company and its Restricted
Subsidiaries (determined in accordance with generally accepted
accounting principles) or which requires the divestiture of assets, or
stock of a Restricted Subsidiary, which shall have contributed a
substantial part of Consolidated Net Income for any of the three fiscal
years then most recently ended, and such order, judgment or decree
remains unstayed and in effect for more than 60 days; or
(xiii) one or more final judgments in an aggregate amount in excess
of $500,000 is rendered against the Company or any Restricted Subsidiary
and, within 60 days after entry thereof, any such judgment is not
discharged or execution thereof stayed pending appeal, or within 60 days
after the expiration of any such stay, such judgment is not discharged;
or
(xiv) (a) 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, (b) 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 such proceedings, (c) 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 $500,000, (d) 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, (c) the
Company or any ERISA Affiliate withdraws from any Multiemployer Plan, or
(f) the Company or any Restricted Subsidiary establishes or amends any
employee welfare benefit plan that provides post-employment welfare
benefits in a manner that would increase the liability of the Company or
any Restricted Subsidiary thereunder; and any such event or events
described in clauses (a) through (f) above, either individually or
together with any other such event or events, could reasonably be
expected to have a material adverse effect on the business or condition
(financial or otherwise) of the Company and the Restricted Subsidiaries,
taken as a whole;
then (a) if such event is an Event of Default specified in clause (i) or
(ii) of this paragraph 7A, any holder of any Note may at its option during
the continuance of such Event of Default, by notice in writing to the
Company, declare all of the Notes held by such holder to
23
be, and all of the Notes held by such holder shall thereupon be and become,
immediately due and payable at par together with interest accrued thereon,
without presentment, demand, protest or notice of any kind, all of which are
hereby waived by the Company, (b) if such event is an Event of Default
specified in clause (viii), (ix) or (x) of this paragraph 7A with respect to
the Company, all of the Notes at the time outstanding shall automatically
become immediately due and payable together with interest accrued thereon and
together with the Yield-Maintenance Amount, if any, with respect to each Note,
without presentment, demand, protest or notice of any kind, all of which are
hereby waived by the Company, and (c) with respect to any event constituting
an Event of Default, the Required Holder(s) of the Notes of any Series may at
its or their option during the continuance of such Event of Default, by
notice in writing to the Company, declare all of the Notes of such Series to
be, and all of the Notes of such Series shall thereupon be and become,
immediately due and payable together with interest accrued thereon and
together with the Yield-Maintenance Amount, if any, with respect to each Note
of such Series, without presentment, demand, protest or notice of any kind,
all of which are hereby waived by the Company.
7B. RESCISSION OF ACCELERATION. At any time after any or all of the
Notes of any Series shall have been declared immediately due and payable
pursuant to paragraph 7A, the Required Holder(s) of the Notes of such Series
may, by notice in writing to the Company, rescind and annul such declaration
and its consequences if (i) the Company shall have paid all overdue interest
on the Notes of such Series, the principal of and Yield-Maintenance Amount,
if any, payable with respect to any Notes of such Series which have become
due otherwise than by reason of such declaration, and interest on such
overdue interest and overdue principal and Yield-Maintenance Amount at the
rate specified in the Notes of such Series, (ii) the Company shall not have
paid any amounts which have become due solely by reason of such declaration,
(iii) all Events of Default and Defaults, other than non-payment of amounts
which have become due solely by reason of such declaration, shall have been
cured or waived pursuant to paragraph 11C, and (iv) no judgment or decree
shall have been entered for the payment of any amounts due pursuant to the
Notes of such Series or this Agreement. No such rescission or annulment shall
extend to or affect any subsequent Event of Default or Default or impair any
right arising therefrom.
7C. NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note shall be
declared immediately due and payable pursuant to paragraph 7A or any such
declaration shall be rescinded and annulled pursuant to paragraph 7B, the
Company shall forthwith give written notice thereof to the holder of each
Note of each Series at the time outstanding.
7D. OTHER REMEDIES. If any Event of Default or Default shall occur
and be continuing, the holder of any Note may proceed to protect and enforce
its rights under this Agreement and such Note by exercising such remedies as
are available to such holder in respect thereof under applicable law, either
by suit in equity or by action at law, or both, whether for specific
performance of any covenant or other agreement contained in this
24
Agreement or in aid of the exercise of any power granted in this Agreement.
No remedy conferred in this Agreement upon the holder of any Note is intended
to be exclusive of any other remedy, and each and every such remedy shall be
cumulative and shall be in addition to every other remedy conferred herein or
now or hereafter existing at law or in Equity or by statute or otherwise.
8. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company
represents, covenants and warrants as follows:
8A. ORGANIZATION. The Company is a corporation duly organized and
existing in good standing under the laws of the State of Minnesota, each
Subsidiary is duly organized and existing in good standing under the laws of
the jurisdiction in which it is incorporated, and the Company has and each
Restricted Subsidiary has the corporate power to own its respective property
and to carry on its respective business as now being conducted. This
Agreement and the Notes have been duly authorized by all necessary corporate
action on the part of the Company and, when executed and delivered by the
Company, will constitute legal, valid and binding obligations 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). SCHEDULE 8A attached hereto lists all Restricted Subsidiaries and all
Unrestricted Subsidiaries. All of the outstanding stock (and all outstanding
warrants, options and similar rights to acquire stock) of each Restricted
Subsidiary is owned by the Company or a Restricted Subsidiary, except as
otherwise disclosed in SCHEDULE 8A, and has been validly issued and is fully
paid and nonassessable and free and clear of any Lien.
8B. FINANCIAL STATEMENTS. The Company has furnished each Purchaser of
any Accepted Notes with the following financial statements, identified by a
principal financial officer of the Company: (i) consolidating and
consolidated balance sheets of the Company and its Subsidiaries as at June 30
in each of the three fiscal years of the Company most recently completed
prior to the date as of which this representation is made or repeated to such
Purchaser (other than fiscal years completed within 90 days prior to such date
for which audited financial statements have not been released) and
consolidating and consolidated statements of income and cash flows and a
consolidated statement of shareholders' equity of the Company and its
Subsidiaries for each such year, all reported on by Coopers & Lybrand L.L.P
and (ii) a consolidated balance sheet of the Company and its Subsidiaries and
of the Company and its Restricted Subsidiaries as at the end of the quarterly
period (if any) most recently completed prior to such date and after the end
of such fiscal year (other than quarterly periods completed within 45 days
prior to such date for which financial statements have not been released) and
the comparable quarterly period in the preceding fiscal year and consolidated
statements of income and cash flows of the Company and Subsidiaries and of
25
the Company and its Restricted Subsidiaries for the periods from the
beginning of the fiscal years in which such quarterly periods are included to
the end of such quarterly periods, prepared by the Company. Such financial
statements (including any related schedules and/or notes) are true and
correct in all material respects (subject, as to interim statements, to
changes resulting from audits and year-end adjustments), have been prepared
in accordance with generally accepted accounting principles consistently
followed throughout the periods involved and show all liabilities, direct and
contingent, of the Company and its Subsidiaries of the Company and its
Restricted Subsidiaries (as the case may be) required to be shown in
accordance with such principles. The balance sheets fairly present the
condition of the Company and its Subsidiaries or the Company and its
Restricted Subsidiaries (as the case may be) as at the dates thereof, and the
statements of income, stockholders' equity and cash flows fairly present the
results of the operations of the Company and its Subsidiaries of the Company
and its Restricted Subsidiaries (as the case may be) and their cash flows for
the periods indicated. There has been no material adverse change in the
business, property or assets, condition (financial or otherwise), operations
or prospects of the Company and its Subsidiaries or the Company and its
Restricted Subsidiaries, in each case taken as a whole, since the end of the
most recent fiscal year for which such audited financial statements have been
furnished.
8C. ACTIONS PENDING; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.
There is no action, suit, investigation or proceeding pending or, to the
knowledge of the Company, threatened against the Company or any of its
Restricted Subsidiaries, or any properties or rights of the Company or any of
its Restricted Subsidiaries, by or before any court, arbitrator or
administrative or governmental body which might result in any material
adverse change in the business, property or assets, condition (financial or
otherwise) or operations of the Company and its Restricted Subsidiaries taken
as a whole. Neither the Company nor any Restricted Subsidiary is 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 administrative or governmental body 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 material adverse effect on the business, condition (financial or
otherwise), assets, properties, operations or prospects of the Company and
its Restricted Subsidiaries taken as a whole.
8D. OUTSTANDING DEBT. Neither the Company nor any of its Restricted
Subsidiaries has outstanding any Debt except as permitted by paragraph 6C(2).
There exists no default under the provisions of any instrument evidencing
such Debt or of any agreement relating thereto.
8E. TITLE TO PROPERTIES. The Company has and each of its Restricted
Subsidiaries has good and indefeasible title to its respective real
properties (other than properties which it
26
leases) and good title to all of its other respective properties and assets,
including the properties and assets reflected in the most recent audited
balance sheet referred to in paragraph 8B (other than properties and assets
disposed of in the ordinary course of business), subject to no Lien of any
kind except Liens permitted by paragraph 6C(1). All leases necessary in any
material respect for the conduct of the respective businesses of the Company
and its Restricted Subsidiaries are valid and subsisting and are in full
force and effect.
8F. TAXES. The Company has and each of its Restricted Subsidiaries
has filed all federal, state and other income tax returns which are required
to be filed, and each has paid all taxes as shown on such returns and on all
assessments received by it to the extent that such taxes have become due,
except such taxes as are being contested in good faith by appropriate
proceedings for which adequate reserves have been established in accordance
with generally accepted accounting principles. The Company knows of no basis
for any other tax or assessment that could reasonably be expected to have a
material adverse effect on the business, condition (financial or otherwise),
assets, properties, operations or prospects of the Company and its Restricted
Subsidiaries taken as a whole. The charges, accruals, and reserves on the
books of the Company and its Restricted Subsidiaries in respect of federal,
state or other taxes for all fiscal periods are adequate.
8G. CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither the Company nor
any of its Restricted Subsidiaries is a party to any contract or agreement or
subject to any charter or other corporate restriction which materially and
adversely affects its business, property or assets, condition (financial or
otherwise) or operations. Neither the execution nor delivery of this
Agreement or the Notes, nor the offering, issuance and sale of the Notes, nor
fulfillment of nor compliance with the terms and provisions hereof and of the
Notes will conflict with, or result in a breach of the terms, conditions or
provisions of, or constitute a default under, or result in any violation of,
or result in the creation of any Lien upon any of the properties or assets of
the Company or any of its Restricted Subsidies pursuant to, the charter or
by-laws of the Company or any of its Restricted Subsidiaries, any award of
any arbitrator or any agreement (including any agreement with stockholders),
instrument, order, judgement, decree, statute, law, rule or regulation to
which the Company or any of its Restricted Subsidiaries is subject. Neither
the Company nor any of its Restricted Subsidiaries is a party to, or
otherwise subject to any provision contained in any instrument evidencing
Debt of the Company or such Restricted Subsidiary, any agreement relating
thereto or any other contract or agreement (including its charter) which
limits the amount of, or otherwise imposes restrictions on the incurring of,
Debt of the Company of the type to be evidenced by the Notes except as set
forth in the agreements listed in SCHEDULE 8G attached hereto, true, correct
and complete copies of which (including all amendments thereto) have been
provided to each Purchaser of any Accepted Note. The Company is not party to
any agreement evidencing or pertaining to Debt of the Company which includes
any operational or financial covenant which is more favorable to a lender or
other beneficiary than those set forth in
27
paragraph 6 hereof. For purposes of the preceding sentence, no effect shall
be given to paragraph 5F hereof.
8H. OFFERING OF NOTES. Neither the Company nor any agent acting on
its behalf has, directly or indirectly, offered the Notes or any similar
security of the Company for sale to, or solicited any offers to buy the Notes
or any similar security of the Company from, or otherwise approached or
negotiated with respect thereto with, any Person other than institutional
investors, and neither the Company nor any agent acting on its behalf has
taken or will take any action which would subject the issuance or sale of the
Notes to the provisions of Section 5 of the Securities Act or to the
provisions of any securities or Blue Sky law of any applicable jurisdiction.
8I. USE OF PROCEEDS. None of the proceeds of the sale of any Notes
will be used, directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of purchasing or carrying any "margin stock" as
defined in Regulation G (12 CFR Part 207) of the Board of Governors of the
Federal Reserve System (herein called "MARGIN STOCK") or for the purpose of
maintaining, reducing or retiring any indebtedness which was originally
incurred to purchase or carry any stock that is currently a margin stock or
for any other purpose which might constitute the purchase of such Notes a
"purpose credit" within the meaning of such Regulation G, unless the Company
shall have delivered to the Purchaser which is purchasing such Notes, on the
Closing Day for such Notes, an opinion of counsel satisfactory to such
Purchaser stating that the purchase of such Notes does not constitute a
violation of such Regulation G. Neither the Company nor any agent acting on
its behalf has taken or will take any action which might cause this Agreement
or the Notes to violate Regulation G, Regulation T or any other regulation of
the Board of Governors of the Federal Reserve System to to violate the
Exchange Act, in each case as in effect now or as the same may hereafter be
in effect. Margin stock does not constitute more than 10% of the value of the
consolidated assets of the Company and its Subsidiaries and the Company does
not have any present intention that margin stock will constitute more than
10% of the value of such assets.
8J. ERISA. No accumulated funding deficiency (as defined in section
302 of ERISA and section 412 of the Code), whether or not waived, exists with
respect to any Plan (other than a Multiemployer Plan). No liability to the
Pension Benefit Guaranty Corporation has been or is expected by the Company
or any ERISA Affiliate to be incurred with respect to any Plan (other than a
Multiemployer Plan) by the Company, any Restricted Subsidiary or any ERISA
Affiliate which is or would be materially adverse to the business, property
or assets, condition (financial or otherwise) or operations of the Company
and its Restricted Subsidiaries taken as a whole. Neither the Company, any
Restricted Subsidiary nor any ERISA Affiliate has incurred or presently
expects to incur any withdrawal liability under Title IV of ERISA with
respect to any Multiemployer Plan which is or would be materially adverse to
the business, property or assets, condition (financial or otherwise) or
operations of
28
the Company and its Restricted Subsidiaries taken as a whole. The execution
and delivery of this Agreement and the issuance and sale of the Notes will be
exempt from or will not involve any transaction which is subject to the
prohibitions of section 406 of ERISA and will not involve any transaction in
connection with which a penalty could be imposed under section 502(i) of
ERISA or a tax could be imposed pursuant to section 4975 of the Code. The
representation by the Company in the next preceding sentence is made in
reliance upon and subject to the accuracy of the representation of each
Purchaser in paragraph 9B as to the source of funds to be used by it to
purchase any Notes.
8K. GOVERNMENTAL CONSENT. Neither the nature of the Company or of any
Restricted Subsidiary, nor any of their respective businesses or properties,
nor any relationship between the Company or any Restricted Subsidiary and any
other Person, nor any circumstance in connection with the offering, issuance,
sale or delivery of the Notes is such as to require any authorization,
consent, approval, exemption or any action by or notice to or filing with any
court or administrative or governmental body (other than routine filings
after the Closing Day for any Notes with the Securities and Exchange
Commission and/or state Blue Sky authorities) in connection with the
execution and delivery of this Agreement, the offering, issuance, sale or
delivery of the Notes or fulfillment of or compliance with the terms and
provisions hereof or of the Notes.
8L. ENVIRONMENTAL COMPLIANCE. The Company and its Restricted
Subsidiaries and all of their respective properties and facilities have
complied at all times and in all respects with all foreign, federal, state,
local and regional statutes, laws, ordinances and judicial or administrative
orders, judgments, rulings and regulations relating to protection of the
environment EXCEPT, in any such case, where failure to comply would not
result in a material adverse effect on the business, condition (financial or
otherwise) or operations of the Company and its Restricted Subsidiaries taken
as a whole.
8M. DISCLOSURE. Neither this Agreement nor any other document,
certificate or statement furnished to any Purchaser by or on behalf of the
Company in connection herewith contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the
statements contained herein and therein not misleading. There is no fact
peculiar to the Company or any of its Restricted Subsidiaries which
materially adversely affects or in the future may (so far as the Company can
now foresee) materially adversely affect the business, property or assets,
condition (financial or otherwise) or operations of the Company or any of its
Restricted Subsidiaries and which has not been set forth in this Agreement.
8N. RESTRICTED SUBSIDIARY DIVIDEND RESTRICTIONS. No Restricted
Subsidiary is a party to, or otherwise subject to, any contract or agreement
(including its certificate or articles of incorporation) which limits the
amount of, or otherwise imposes restrictions on the payment of, dividends.
29
8O. RULE 144A. The Notes are not of the same class as securities of
the Company, if any, listed on a national securities exchange registered
under Section 6 of the Exchange Act or quoted in a U.S. automated
inter-dealer quotation system.
8P. FOREIGN ASSETS CONTROL REGULATIONS, ETC. Neither the issue and
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.
8Q. LICENSES, PERMITS, ETC. The Company and its Restricted
Subsidiaries and its Subsidiaries own or possess all licenses, permits,
franchises, authorizations, patents, copyrights, service marks, trademarks
and trade names, or rights thereto, that individually or in the aggregate are
material to the business, property, assets, condition (financial or
otherwise) or operations of the Company and its Restricted Subsidiaries taken
as a whole, without known conflict with the rights of others. To the best
knowledge of the Company, no product or service of the Company or any
Restricted Subsidiary 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. To the best knowledge of the
Company, there is no material violation by any Person of any right of the
Company or any of its Restricted Subsidiaries with respect to any patent,
copyright, service mark, trademark, trade name or other right owned or used
by the Company or any of its Restricted Subsidiaries.
9. REPRESENTATIONS OF THE PURCHASERS.
Each Purchaser represents as follows:
9A. NATURE OF PURCHASE. Such Purchaser is not acquiring the Notes
purchased by it hereunder with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Acts, provided that
the disposition of such Purchaser's property shall at all times be and remain
within its control.
9B. SOURCE OF FUNDS. No part of the funds used by such Purchaser to
pay the purchase price of the Notes purchased by such Purchaser hereunder
constitutes assets allocated to any separate account maintained by such
Purchaser in which any employee benefit plan, other than employee benefit
plans identified on a list which has been furnished by such Purchaser to the
Company, participates to the extent of 10% or more. For the purpose of this
paragraph 9B, the terms "SEPARATE ACCOUNT" and "EMPLOYEE BENEFIT PLAN" shall
have the respective meanings specified in section 3 of ERISA.
10. DEFINITIONS; ACCOUNTING MATTERS. For the purpose of this
Agreement, the terms defined in paragraphs 10A and 10B (or within the text of
any other
30
paragraph) shall have the respective meanings specified therein and all
accounting matters shall be subject to determination as provided in paragraph
10C.
10A. YIELD-MAINTENANCE TERMS.
"CALLED PRINCIPAL" shall mean, with respect to any Note, the principal
of such Note that is to be prepaid pursuant to paragraph 4B or that becomes
or is declared to be immediately due and payable pursuant to paragraph 7A, as
the context requires.
"DISCOUNTED VALUE" shall mean, 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 respect to such Called Principal, in
accordance with accepted financial practice and at a discount factor (as
converted to reflect the periodic basis on which interest on such Note is
payable, if payable other than on a semi-annual basis) equal to the
Reinvestment Yield with respect to such Called Principal.
"REINVESTMENT YIELD" shall mean, with respect to the Called Principal of
any Note, the yield to maturity implied by (i) the yields reported, as of
10:00 A.M. (New York City local time) on the Business Day next preceding the
Settlement Date with respect to such Called Principal, by the Bloomberg
Financial Markets Service (or any successor 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 if such yields shall not
be reported as of such time or the yields reported as of such time shall not
be ascertainable, (ii) the Treasury Constant Maturity Series yields reported,
for the latest day for which such yields shall have been so reported as of
the Business Day next 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 shall be
determined, if necessary, by (a) converting U.S. Treasury bill quotations to
bond-equivalent yields in accordance with accepted financial practice and (b)
interpolating linearly between yields reported for various maturities.
"REMAINING AVERAGE LIFE" shall mean, with respect to the Called
Principal of any Note, 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) each Remaining Scheduled
Payment of such Called Principal (but not of interest thereon) by (b) the
number of years (calculated to the nearest one-twelfth year) which 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" shall mean, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due on
31
or 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.
"SETTLEMENT DATE" shall mean, with respect to the Called Principal of
any Note, the date on which such Called Principal is to be prepaid pursuant
to paragraph 4B or becomes or is declared to be immediately due and payable
pursuant to paragraph 7A, as the context requires.
"YIELD-MAINTENANCE AMOUNT" shall mean, with respect to any Note, an
amount equal to the excess, if any, of the Discounted Value of the Called
Principal of such Note over the sum of (i) such Called Principal plus (ii)
interest accrued thereon as of (including interest due on) the Settlement
Date with respect to such Called Principal. The Yield-Maintenance Amount
shall in no event be less than zero, or more than the maximum amount
allowable under Official Code of Georgia Annotated Section 7-4-18 as in
effect on the date hereof.
10B. OTHER TERMS.
"ACCEPTANCE" shall have the meaning specified in paragraph 2E.
"ACCEPTANCE DAY" shall have the meaning specified in paragraph 2E.
"ACCEPTANCE WINDOW" shall have the meaning specified in paragraph 2E.
"ACCEPTED NOTE" shall have the meaning specified in paragraph 2E.
"AFFILIATE" shall mean (i) any Responsible Officer or member of the
Board of Directors of the Company, (ii) any holder of at least 10% of the
total combined voting power of all classes of Voting Stock (or the
equivalent) of the Company or of any corporatoin or other entity which
directly or indirectly controls the Company, (iii) the spouse, any sibling
(by blood or adoption) or any descendant (by blood or adoption) of any
individual referred to in clause (i) or (ii) above, or any spouse of any such
sibling or descendant or any descendant of any such sibling, (iv) any trust
in which any Person referred to in clause (i), (ii) or (iii) above has a
substantial beneficial interest, (v) any corporation or other entity (a) of
which the Company or any Person referred to in clause (i), (ii), (iii) or
(iv) above holds at least 10% of the total combined economic interest of all
classes of Common Stock (or the equivalent) or at least 10% of the total
combined voting power of all classes of Voting Stock (or the equivalent) or
(b) directly or indirectly controlled by any Person referred to in clause
(i), (ii), (iii) or (iv) above, and (vi) any Person directly or indirectly
controlling, controlled by, or under direct or indirect common control with,
the Company, PROVIDED that a Restricted Subsidiary shall not be an Affiliate.
A Person shall be deemed to control a corporation or other entity if such
Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such corporation or other entity,
whether through the ownership of voting securities, by contract or otherwise.
32
"AGGREGATE PERCENTAGE OF EARNINGS CAPACITY TRANSFERRED" shall mean, with
respect to any eight consecutive fiscal quarter period, the sum of the
Percentages of Earnings Capacity Transferred for each asset of the Company
and its Restricted Subsidiaries that is Transferred during such period.
"AGGREGATE PERCENTAGE OF TOTAL ASSETS TRANSFERRED" shall mean, with
respect to any eight consecutive fiscal quarter period, the sum of the
Percentages of Total Assets Transferred for each asset of the Company and its
Restricted Subsidiaries that is Transferred during such period.
"AUTHORIZED OFFICER" shall mean (i) in the case of the Company, its
chief executive officer, its chief financial officer, any vice president of
the Company designated as an "Authorized Officer" of the Company in the
Information Schedule attached hereto or any vice president of the Company
designated as an "Authorized Officer" of the Company for the purpose of this
Agreement in an Officer's Certificate executed by the Company's chief
executive officer or chief financial officer and delivered to LOG, and (ii)
in the case of LOG, any officer of LOG designated as its "Authorized Officer"
in the Information Schedule or any officer of LOG designated as its
"Authorized Officer. for the purpose of this Agreement in a certificate
executed by one of its Authorized Officers. Any action taken under this
Agreement on behalf of the Company by any individual who on or after the date
of this Agreement shall have been an Authorized Officer of the Company and
whom LOG in good faith believes to be an Authorized Officer of the Company at
the time of such action shall be binding on the Company even though such
individual shall have ceased to be an Authorized Officer of the Company, and
any action taken under this Agreement on behalf of LOG by any individual who
on or after the date of this Agreement shall have been an Authorized Officer
of LOG and whom the Company in good faith believes to be an Authorized
Officer of LOG at the time of such action shall be binding on LOG even though
such individual shall have ceased to be an Authorized Officer of LOG.
"AVAILABLE FACILITY AMOUNT" shall have the meaning specified in
paragraph 2A.
"AVERAGE CONSOLIDATED NET INCOME" shall mean, as of any time of
determination thereof, the average Consolidated Net Income of the Company and
Restricted Subsidiaries for the three complete fiscal years of the Company
then most recently ended.
"BANKRUPTCY LAW" shall have the meaning specified in clause (viii) of
paragraph 7A.
"BUSINESS DAY" shall mean any day other than (i) a Saturday or a Sunday,
(ii) a day on which commercial banks in Atlanta, Georgia are required or
authorized to be closed and (iii) for purposes of paragraph 2C hereof only, a
day on which Life Insurance Company of Georgia is not open for business.
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"CANCELLATION DATE" shall have the meaning specified in paragraph 2H(iv).
"CANCELLATION FEE" shall have the meaning specified in paragraph 2H(iv).
"CAPITALIZED LEASE OBLIGATION" shall mean any rental obligation which,
under generally accepted accounting principles, is or will be required to be
capitalized on the books of the Company or any Restricted Subsidiary, taken
at the amount thereof accounted for as indebtedness (net of interest
expenses) in accordance with such principles.
"CLOSING DAY" shall mean, with respect to any Accepted Note, the
Business Day specified for the closing of the purchase and sale of such
Accepted Note in the Request for Purchase of such Accepted Note, PROVIDED
that (i) if the Company and the Purchaser which is obligated to purchase such
Accepted Note agree on an earlier Business Day for such closing, the
"CLOSING DAY" for such Accepted Note shall be such earlier Business Day, and
(ii) if the closing of the purchase and sale of such Accepted Note is
rescheduled pursuant to paragraph 2G, the Closing Day for such Accepted Note,
for all purposes of this Agreement except references to "Original Closing
Day" in paragraph 2H(iii), shall mean the Rescheduled Closing Day with
respect to such Accepted Note.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" shall mean, as applied to any corporation, shares of such
corporation which shall not be entitled to preference or priority over any
other shares of such corporation in respect of either the payment of
dividends or the distribution of assets upon liquidation.
"COMPUTATION PARAGRAPHS" shall have the meaning specified in paragraph
5A(iv).
"CONFIRMATION OF ACCEPTANCE" shall have the meaning specified in
paragraph 2E.
"CONSOLIDATED INTEREST EXPENSE" shall mean, as to any period,
consolidated interest expense of the Company and Restricted Subsidiaries for
such period, calculated to (i) include imputed interest on Capitalized Lease
Obligations and (ii) exclude amortization of debt discount to the extent not
actually paid in cash.
"CONSOLIDATED NET INCOME" shall mean, as to any period, the net income
of the Company and Restricted Subsidiaries on a consolidated basis.
"CONSOLIDATED NET WORTH" shall mean, as of any time of determination
thereof, (i) the shareholders' equity (or deficit) of the Company and its
Restricted Subsidiaries, as the same would be shown on a consolidated balance
sheet of the Company and its Restricted Subsidiaries, MINUS (ii) the
aggregate amount of Investments in Unrestricted Subsidiaries which are deemed
not to be Investments for purposes of paragraph 6C(3) as a result of clause
(vii)(b) thereof.
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"CURRENT DEBT" shall mean, with respect to any Person, all Indebtedness
of such Person for borrowed money which by its terms or by the terms of any
instrument or agreement relating thereto matures on demand or within one year
from the date of the creation thereof, PROVIDED that Indebtedness outstanding
under a revolving credit or similar agreement which obligates the lender or
lenders to extend credit over a period of more than one year shall constitute
Current Debt and not Funded Debt.
"DEBT" shall mean Current Debt and Funded Debt.
"DELAYED DELIVERY FEE" shall have the meaning specified in paragraph
2H(iii).
"EBIT" shall mean, as to any period, Consolidated Net Income for such
period plus (i) Consolidated Interest Expense for such period, PLUS or MINUS
(as appropriate) (ii) any provision for income taxes for such period.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA AFFILIATE" shall mean any corporation which is a member of the
same controlled group of corporations as the Company within the meaning of
section 414(b) of the Code, or any trade or business which is under common
control with the Company within the meaning of section 414(c) of the Code.
"EVENT OF DEFAULT" shall mean any of the events specified in paragraph
7A, provided that there has been satisfied any requirement in connection with
such event for the giving of notice, or the lapse of time, or the happening
of any further condition, event or act, and "DEFAULT" shall mean any of such
events, whether or not any such requirement has been satisfied.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"FACILITY" shall have the meaning specified in paragraph 2A.
"FACILITY FEE" shall have the meaning specified in paragraph 2H(i).
"FUNDED DEBT" shall mean with respect to any Person, all Indebtedness of
such Person which by it terms or by the terms of any instrument or agreement
relating thereto matures, or which is otherwise payable or unpaid, more than
one year from, or is directly or indirectly renewable or extendible at the
option of the debtor to a date more than one year from, the date of the
creation thereof, PROVIDED that Indebtedness outstanding under a revolving
credit or similar agreement which obligates the lender or lenders to extend
credit over a period of more than one year shall constitute Current Debt and
not Funded Debt.
35
"GENERAL INTANGIBLES" shall mean all choses in action, causes of action
and all other intangible property of the Company and its Restricted
Subsidiaries of every kind and nature now owned or hereafter acquired,
including, without limitation, corporate and other business records, deposit
accounts, inventions, designs, patents, patent and trademark registrations
and applications, trademarks, trade names, trade secrets, goodwill,
copyrights, registrations, licenses, franchises, deferred tax benefits, tax
refund claims, prepaid expenses, computer programs not included in Capital,
Property and Equipment on the annual audited consolidated financial
statements of the Company and its Restricted Subsidiaries, covenants not to
compete, customer lists and mailing lists, contract rights, indemnification
rights, and any letters of credit, guarantee claims, security interests or
other security held by or granted to the Company or its Restricted
Subsidiaries.
"GUARANTEE" shall mean, with respect to any Person, any direct or
indirect liability, contingent or otherwise, of such Person with respect to
any indebtedness, lease, dividend or other obligation of another, including,
without limitation, any such obligation directly or indirectly guaranteed,
endorsed (otherwise than for collection or deposit in the ordinary course of
business) or discounted or sold with recourse by such Person, or in respect
of which such Person is otherwise directly or indirectly liable, including,
without limitation, any such obligation in effect guaranteed by such Person
through any agreement (contingent or otherwise) to purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to provide
funds for the payment or discharge of such obligation (whether in the form of
loans, advances, stock purchases, capital contributions or otherwise), or to
maintain the solvency or any balance sheet or other financial condition of
the obligor of such obligation, or to make payment for any products,
materials or supplies or for any transportation or service, regardless of the
non-delivery or non-furnishing thereof, in any such case if the purpose or
intent of such agreement is to provide assurance that such obligation will be
paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such obligation will be protected against loss
in respect thereof. The amount of any Guarantee shall be equal to the
outstanding principal amount of the obligation guaranteed or such lesser
amount to which the maximum exposure of the guarantor shall have been
specifically limited.
"HEDGE TREASURY NOTE(S)" shall mean, with respect to any Accepted Note,
the United States Treasury Note or Notes whose duration (as determined by LOG
in accordance with its standard practice) most closely matches the duration
(as so determined) of such Accepted Note.
"INCLUDING" shall mean, unless the context clearly requires otherwise,
"including without limitation".
"INDEBTEDNESS" shall mean, with respect to any Person, without
duplication, (i) all items (excluding items of (a) contingency reserves, (b)
reserves for deferred income taxes,
36
(c) deferred compensation to the extent that such deferred compensation items
are fully funded by life insurance policies, (d) deferred rent, (e)
post-retirement benefit liabilities determined in accordance with Financial
Accounting Standards Board Statement No. 106 and (f) current liabilities for
trade payables, tax and payroll obligations) which in accordance with
generally accepted accounting principles would be included in determining
total liabilities as shown on the liability side of a balance sheet of such
Person as of the date on which Indebtedness is to be determined, (ii) all
indebtedness secured by any Lien on any property or asset owned or held by
such Person subject thereto, whether or not the indebtedness secured thereby
shall have benn assumed, and (iii) all indebtedness and other obligations of
others with respect to which such Person has become liable by way of
Guarantee.
"ING AFFILIATE" shall mean any corporation or other entity all of the
Voting Stock (or equivalent voting securities or interests) of which is owned
by the ultimate parent corporation of LOG, either directly or through ING
Affiliates.
"INTEREST COVERAGE RATIO" shall mean, as to any period, the ratio of (i)
EBIT for such period to (ii) Consolidated Interest Expense for such period.
"INVESTMENT" shall have the meaning specified in paragraph 6C(3).
"ISSUANCE FEE" shall have the meaning specified in paragraph 2H(ii).
"ISSUANCE PERIOD" shall have the meaning specified in paragraph 2B.
"LIEN" shall mean any mortgage, pledge, security interest, encumbrance,
lien (statutory or otherwise) or charge of any kind (including any agreement
to give any of the foregoing, any conditional sale or other title retention
agreement, any lease in the nature thereof, and the filing of or agreement to
give any financing statement under the Uniform Commercial Code of any
jurisdiction) or any other type of preferential arrangement for the purpose,
or having the effect, of protecting a creditor against loss or securing the
payment or performance of an obligation.
"LOG" shall mean Life Insurance Company of Georgia.
"MULTIEMPLOYER PLAN" shall mean any Plan which is a "multiemployer plan"
(as such term is defined in section 4001(a)(3) of ERISA).
"1991 AGREEMENT" shall mean the note agreement dated as of June 21, 1991
pursuant to which the Company issued its 11.52% promissory notes due June 30,
1998 in the original principal amount of $55,000,000.
"NOTES" shall have the meaning specified in paragraph 1.
37
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the name of
the Company by an Authorized Officer of the Company.
"OFFSET SHARING AGREEMENT" shall mean the offset agreement dated as of
June 21, 1994, among LOG, Prudential Life Insurance Company of America,
LaSalle National Bank, and the other lenders and institutional investors
named as parties thereto (as such agreement has been and may be amended from
time to time) as well as any similar agreement which hereafter may be entered
into by LOG, other holders of the Notes and other lenders to the Company.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor or replacement entity thereto under ERISA.
"PERCENTAGE(S) OF EARNINGS CAPACITY TRANSFERRED" shall mean, with
respect to each asset Transferred pursuant to clause (iii) of paragraph
6C(6), the ratio (expressed as a percentage) of (i) Consolidated Net Income
produced by, or attributable to, such asset during the four fiscal quarter
period most recently ended prior to the effective date of such Transfer to
(ii) Average Consolidated Net Income.
"PERCENTAGE(S) OF TOTAL ASSETS TRANSFERRED" shall mean, with respect to
each asset Transferred pursuant to clause (iii) of paragraph 6C(6), the ratio
(expressed as a percentage) of (i) the greater of such asset's fair market
value or net book value on the date of Transfer to (ii) the book value of the
consolidated assets of the Company and Restricted Subsidiaries as of the last
day of the fiscal quarter immediately preceding the day of Transfer.
"PERMITTED SELLER CURRENT DEBT" shall mean Seller Current Debt that (i)
does not exceed $5,000,000 in aggregate outstanding principal amount, either
individually or collectively with all other Seller Current Debt incurred in
connection with the same purchase of an operating business, and (ii) does not
collectively with all other outstanding Seller Current Debt exceed
$10,000,000 in aggregate outstanding principal amount.
"PERSON" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
"PLAN" shall mean any employee pension benefit plan (as such term is
defined in section 3 of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by the Company
or any ERISA Affiliate.
"PRIORITY DEBT" shall mean, as of any time of determination thereof, (i)
Debt of any Restricted Subsidiary, other than Debt owed to the Company or a
Wholly-Owned Restricted Subsidiary and (ii) Debt of the Company secured by
any Lien.
38
"PURCHASERS" shall mean with respect to any Accepted Notes, LOG and/or
the ING Affiliate(s), which are purchasing such Accepted Notes.
"REFUND EVENT" shall mean (i) a termination of the Facility resulting
from LOG's provision of a notice of termination as contemplated by clause
(ii) of paragraph 2B or (ii) a termination of the Facility resulting from the
Company's provision of a notice of termination as contemplated by clause (ii)
of paragraph 2B, if such notice is provided by the Company within five
Business Days following LOG's failure to provide an interest rate quote (as
contemplated by paragraph 2D), unless (a) the applicable Request for Purchase
failed to conform in all respects with the requirements of paragraph 2C, (b)
a Default or Event of Default existed at the time the applicable Request for
Purchase was received or would have existed upon the issuance of the Notes
described in the applicable Request for Purchase, (c) a market disrupting
event described in paragraph 2F existed at any time during the five Business
Day period following receipt of the applicable Request for Purchase, or (d)
upon the issuance of the Notes described in the applicable Request for
Purchase the Company's credit quality, as determined by LOG would have been
below investment grade.
"REFUNDABLE PORTION" shall mean, with respect to the Facility Fee,
that portion thereof determined by multiplying the amount of such fee by a
fraction, the denominator of which shall be 1,095 and the numerator of which
shall be the difference between 1,095 and the number of days elapsed between
the date of the Agreement and the date of the Refund Event.
"REQUEST FOR PURCHASE" shall have the meaning specified in paragraph 2C.
"REQUIRED HOLDER(S)" shall mean the holder or holders of at least 51%
of the aggregate principal amount of the Notes or of a Series of Notes, as
the context may require, from time to time outstanding.
"RESCHEDULED CLOSING DAY" shall have the meaning specified in
paragraph 2G.
"RESPONSIBLE OFFICER" shall mean the chief executive officer, chief
operating officer, chief financial officer or chief accounting officer of the
Company, general counsel of the Company or any other officer of the Company
involved principally in its financial administration or its controllership
function.
"RESTRICTED GROUP AMOUNT" shall have the meaning specified in
paragraph 6C(10).
"RESTRICTED SUBSIDIARY" shall mean any Subsidiary organized under the
laws of any state of the United States of America, Puerto Rico, Canada or any
province of Canada, which conducts substantially all of its business in the
United States of America, Puerto Rico or Canada, and at least 80% of the
total combined voting power of all classes of Voting Stock of which shall,
at the time as of which any determination is being made, be owned by the
39
Company either directly or through Restricted Subsidiaries, PROVIDED that no
such Subsidiary shall be a Restricted Subsidiary unless (i) it is listed as a
Restricted Subsidiary in Schedule 8A attached hereto or (ii) (a) the Board of
Directors of the Company hereafter designates such Subsidiary a Restricted
Subsidiary, (b) notice of such designation is given by the Company to the
holders of the Notes with the next succeeding delivery of financial
statements pursuant to paragraph 5A, and (c) on the date of and immediately
after giving effect to such designation, no Event of Default shall have
occurred and be continuing.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SELLER CURRENT DEBT" shall mean Current Debt of the Company or a
Restricted Subsidiary that is (i) incurred in connection with the purchase,
through asset purchase, stock purchase, merger, or consolidation, of any
operating business, (ii) is payable to the seller(s) of such business or to
the shareholders or other equity holders of the seller(s) of such business,
and (iii) represents deferred purchase price for the purchased business.
"SERIES" shall have the meaning specified in paragraph 1.
"SIGNIFICANT HOLDER" shall mean (i) LOG, so long as LOG or any ING
Affiliate shall hold (or be committed under this Agreement to purchase) any
Note, or (ii) any other holder of at least 5% of the aggregate principal
amount of the Notes of any Series from time to time outstanding.
"SUBSIDIARY" shall mean any corporation, association or other business
entity which is required to be consolidated in the financial statements of
the Company.
"TANGIBLE NET WORTH" shall mean, as of any time of determination
thereof, the net worth of the Company and its Restricted Subsidiaries
determined on a consolidated basis in accordance with generally accepted
accounting principles, PLUS, to the extent not included in the assets of the
Company and its Restricted Subsidiaries used in determining such net worth,
the amount of the cash surrender value of life insurance policies maintained
by the Company on the lives of executive officers, PLUS any amount of Funded
Debt of the Company that is subordinated to the Notes and to all of the
Company's obligations under this Agreement in a manner and form satisfactory
to LOG and the Required Holders in their sole discretion as to the right to
and time of payment of such Funded Debt, and as to any rights and remedies of
LOG and the holders of any Notes with respect to such Funded Debt, MINUS the
sum of (i) the amount of any General Intangibles, (ii) amounts due from
Affiliates and (iii) the amount of Investments in Unrestricted Subsidiaries.
"TOTAL DEBT" shall mean, as of any time of determination thereof, the
aggregate amount of (i) all Funded Debt of the Company and Restricted
Subsidiaries, PLUS (ii) the average outstanding daily balance of all Current
Debt of the Company and Restricted Subsidiaries during the twelve calendar
month period most recently ended as of any time of
40
determination, MINUS (iii) Debt of Restricted Subsidiaries owed to the
Company or a Wholly-Owned Restricted Subsidiary.
"TRANSFER" shall mean, with respect to any item, the sale, exchange,
conveyance, lease, transfer or other disposition of such item.
"TRANSFEREE" shall mean any direct or indirect transferee of all or
any part of any Note purchased by any Purchaser under this Agreement.
"UNRESTRICTED SUBSIDIARY" shall mean any Subsidiary other than a
Restricted Subsidiary. No Subsidiary which is or becomes a Restricted
Subsidiary shall at any time thereafter become or be an Unrestricted
Subsidiary. Notwithstanding the foregoing, solely for the purposes of clause
(iii) of paragraph 5A, Regis Mexico, S.A. shall not be deemed an Unrestricted
Subsidiary unless and until either it contributes greater than 5% of the
consolidated revenues of the Company and Subsidiaries for any fiscal year of
the Company or its assets constitute greater than 5% of the consolidated
assets of the Company and Subsidiaries as at the end of any fiscal year of
the Company.
"VOTING STOCK" shall mean, with respect to any corporation, any shares
of stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time stock of any other class or classes
shall have or might have voting power by reason of the happening of any
contingency).
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" shall mean a Restricted
Subsidiary all the outstanding shares (other than directors' qualifying
shares, if required by law) of every class of stock of which are at the time
owned by the Company or by one or more Wholly-Owned Restricted Subsidiaries.
10C. ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS. All references in
this Agreement to "generally accepted accounting principles" shall be
deemed to refer to generally accepted accounting principles in effect in the
United States at the time of application thereof. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all unaudited financial statements and certificates and reports as to
financial matters required to be furnished hereunder shall be prepared, in
accordance with generally accepted accounting principles applied on a basis
consistent with the most recent audited financial statements delivered
pursuant to clause (ii) of paragraph 5A or, if no such statements have been
so delivered, the most recent audited financial statements referred to in
clause (i) of paragraph 8B.
41
11. MISCELLANEOUS.
11A. NOTE PAYMENTS. The Company agrees that, so long as any Purchaser
shall hold any Note, it will make payments of principal of, interest on, and
any Yield-Maintenance Amount payable with respect to, such Note, which comply
with the terms of this Agreement, by wire transfer of immediately available
funds for credit (not later than 12:00 noon, New York City local time, on the
date due) to the account or accounts of such Purchaser specified in the
Purchaser Schedule specified in the Confirmation of Acceptance with respect
to such Note or such other account or accounts in the United States as such
Purchaser may from time to time designate in writing, notwithstanding any
contrary provision herein or in any Note with respect to the place of
payment. Each Purchaser agrees that, before disposing of any Note, it will
make a notation thereon (or on a schedule attached thereto) of all principal
payments previously made thereon and of the date to which interest thereon
has been paid. The Company agrees to afford the benefits of this paragraph
11A to any Transferee which shall have made the same agreement as the
Purchasers have made in this paragraph 11A.
11B. EXPENSES. The Company agrees, whether or not any of the
transactions contemplated hereby shall be consummated, to pay, and save LOG,
each Purchaser and any Transferee harmless against liability for the payment
of, all out-of-pocket expenses arising in connection with such transactions,
including (i) all document production and duplication charges and the fees
and expenses of any special counsel engaged by the Purchasers or any
Transferee in connection with this Agreement, the transactions contemplated
hereby (including in connection with the Offset Sharing Agreement amendment
contemplated by paragraph 5K) and any subsequent proposed modification of, or
proposed consent under, this Agreement, whether or not such proposed
modification shall be effected or proposed consent granted, and (ii) the
costs and expenses, including attorneys' fees, incurred by any Purchaser or
any Transferee in enforcing (or determining whether or how to enforce) 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 transactions contemplated hereby or by reason of
any Purchaser's or any Transferee's having acquired any Note, including
without limitation costs and expenses incurred in any bankruptcy case.
Payment of a Delayed Delivery Fee or Cancellation Fee with respect to any
Accepted Note shall not be deemed payment or satisfaction of any fees of
special counsel or other out-of-pocket fees or expenses incurred by any
Purchaser in connection with the anticipated purchase. The obligations of the
Company under this paragraph 11B shall survive the transfer of any Note or
portion thereof or interest therein by any Purchaser or any Transferee and
the payment of any Note.
11C. CONSENT TO AMENDMENTS. This Agreement may be amended, and the
Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, if the Company shall obtain the
written consent to such amendment, action or omission to act, of the Required
Holder(s) of the Notes of each Series except that,
42
(i) with the written consent of the holders of all Notes of a particular
Series, and if an Event of Default shall have occurred and be continuing, of
the holders of all Notes of all Series, at the time outstanding (and not
without such written consents), the Notes of such Series may be amended or
the provisions therof waived to change the maturity therof, to change or
affect the principal thereof, or to change or affect the rate or time of
payment of interest on or any Yield-Maintenance Amount payable with respect
to the Notes of such Series, (ii) without the written consent of the holder
or holders of all Notes at the time outstanding, no amendment to or waiver of
the provisions of this Agreement shall change or affect the provisions of
paragraph 7A or this paragraph 11C insofar as such provisions relate to
proportions of the principal amount of the Notes of any Series, or the rights
of any individual holder of Notes, required with respect to any declaration
of Notes to be due and payable or with respect to any consent, amendment,
waiver or declaration, (iii) with the written consent of LOG (and not without
the written consent of LOG) the provisions of paragraph 2 may be amended or
waived (except insofar as any such amendment or waiver would affect any
rights or obligations with respect to the purchase and sale of Notes which
shall have become Accepted Notes prior to such amendment or waiver), and (iv)
with the written consent of all of the Purchasers which shall have become
obligated to purchase Accepted Notes of any Series (and not without the
written consent of all such Purchasers), any of the provisions of paragraphs
2 and 3 may be amended or waived insofar as such amendment or waiver would
affect only rights or obligations with respect to the purchase and sale of
the Accepted Notes of such Series or the terms and provisions of such
Accepted Notes. Each holder of any Note at the time or thereafter outstanding
shall be bound by any consent authorized by this paragraph 11C, whether or
not such Note shall have been marked to indicate such consent, but any Notes
issued therafter may bear a notation referring to any such consent. 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 and in the
Notes, the term "THIS AGREEMENT" and references thereto shall mean this
Agreement as it may from time to time be amended or supplemented.
11D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST NOTES.
The Notes are issuable as registered notes without coupons in denominations
of at least $1,000,000, except as may be necessary to reflect any principal
amount not evenly divisible by $1,000,000. The Company shall keep at its
principal office a register in which the Company shall provide for the
registration of Notes and of transfers of Notes. Upon surrender for
registration of transfer of any Note at the principal office of the Company,
the Company shall, at its expense, execute and deliver one or more new Notes
of like tenor and of a like aggregate principal amount, registered in the
name of such transferee or transferees. At the option of the holder of any
Note, such Note may be exchanged for other Notes of like tenor and of any
authorized denominations, of a like aggregate principal amount, upon
surrender of the Note to be exchanged at the principal office of the Company.
Whenever any Notes are so surrendered for exchange, the Company shall, at its
expense, execute and deliver the Notes which the holder making the exchange
is entitled to receive. Each installment of
43
principal payable on each installment date upon each new Note issued upon any
such transfer or exchange shall be in the same proportion to the unpaid
principal amount of such new Note as the installment of principal payable on
such date on the Note surrendered for registration of transfer or exchange
bore to the unpaid principal amount of such Note. No reference need be made
in any such new Note to any installment or installments of principal
previously due and paid upon the Note surrendered for registration of
transfer or exchange. Every Note surrendered for registration of transfer or
exchange shall be duly endorsed, or be accompanied by a written instrument of
transfer duly executed, by the holder of such Note or such holder's attorney
duly authorized in writing. Any Note or Notes issued in exchange for any Note
or upon transfer thereof shall carry the rights to unpaid interest and
interest to accrue which were carried by the Note so exchanged or
transferred, so that neither gain nor loss of interest shall result from any
such transfer or exchange. Upon receipt of written notice from the holder of
any Note of the loss, theft, destruction or mutilation of such Note and, in
the case of any such loss, theft or destruction, upon receipt of such
holder's unsecured indemnity agreement, or in the case of any such mutilation
upon surrender and cancellation of such Note, the Company will make and
deliver a new Note, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Note.
11E. PERSONS DEEMED OWNERS; PARTICIPATION. Prior to due presentment for
registration of transfer, the Company may treat the Person in whose name any
Note is registered as the owner and holder of such Note for the purpose of
receiving payment of principal of and interest on, and any Yield-Maintenance
Amount payable with respect to, such Note and for all other purposes
whatsoever, whether or not such Note shall be overdue, and the Company shall
not be affected by notice to the contrary. Subject to the preceding sentence,
the holder of any Note may from time to time grant participations in all or
any part of such Note to any Person on such terms and conditions as may be
determined by such holder in its sole and absolute discretion.
11F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All
representations and warranties contained herein or made in writing by or on
behalf of the Company in connection herewith shall survive the execution and
delivery of this Agreement and the Notes, the transfer by any Purchaser of
any Note or portion thereof or interest therein and the payment of any Note,
and may be relied upon by any Transferee, regardless of any investigation
made at any time by or on behalf of any Purchaser or any Transferee. Subject
to the preceding sentence, this Agreement and the Notes embody the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersede all prior agreements and understandings
relating to such subject matter.
11G. SUCCESSORS AND ASSIGNS. All covenants and other agreements in
this Agreement contained by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto (including, without limitation, any Transferee) whether so
expressed or not.
44
11H. INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given
independent effect so that if a particular action or condition is prohibited
by any one of such covenants, the fact that it would be permitted by an
exception to, or otherwise be in compliance within the limitations of,
another covenant shall not (i) avoid the occurrence of an Event of Default or
Default if such action is taken or such condition exists or (ii) in any way
prejudice an attempt by a holder or the holders of the Notes to prohibit
(through equitable action or otherwise) the taking of any action by the
Company or a Restricted Subsidiary which would result in an Event of Default
or Default.
11I. NOTICES. All written communications provided for hereunder (other
than communications provided for under paragraph 2) shall be sent by first
class mail or nationwide overnight delivery service (with charges prepaid)
and (i) if to any Purchaser, addressed as specified for such communications
in the Purchaser Schedule attached to the applicable Confirmation of
Acceptance or at such other address as any such Purchaser shall have
specified to the Company in writing, (ii) if to any other holder of any Note,
addressed to it at such address as it shall have specified in writing to the
Company or, if any such holder shall not have so specified an address, then
addressed to such holder in care of the last holder of such Note which shall
have so specified an address to the Company and (iii) if to the Company,
addressed to it at 7201 Metro Boulevard, Minneapolis, Minnesota 55439,
Attention: Chief Financial Officer, PROVIDED, HOWEVER, that any such
communication to the Company may also, at the option of the Person sending
such communication, be delivered by any other means either to the Company at
its address specified above or to any Authorized Officer of the Company. Any
communication pursuant to paragraph 2 shall be made by the method specified
for such communication in paragraph 2, and shall be effective to create any
rights or obligations under this Agreement only if, in the case of a
telephone communication, an Authorized Officer of the party conveying the
information and of the party receiving the information are parties to the
telephone call, and in the case of a telecopier communication, the
communication is signed by an Authorized Officer of the party conveying the
information, addressed to the attention of an Authorized Officer of the party
receiving the information, and in fact received at the telecopier terminal
the number of which is listed for the party receiving the communication in
the Information Schedule or at such other telecopier terminal as the party
receiving the information shall have specified in writing to the party
sending such information.
11J. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or
the Notes to the contrary notwithstanding, any payment of principal of or
interest on, or Yield-Maintenance Amount payable with respect to, any Note
that is due on a date other than a Business Day shall be made on the next
succeeding Business Day. If the date for any payment is extended to the next
succeeding Business Day by reason of the preceding sentence, the period of
such extension shall be included in the computation of the interest payable
on such Business Day.
45
11K. SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11L. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
11M. SATISFACTION REQUIREMENT. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this
Agreement required to be satisfactory to any Purchaser, to any holder of
Notes or to the Required Holder(s), the determination of such satisfaction
shall be made by such Purchaser, such holder or the Required Holder(s), as
the case may be, in the sole and exclusive judgment (exercised in good faith)
of the Person or Persons making such determination.
11N. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE
INTERNAL LAW OF THE STATE OF GEORGIA.
11O. SEVERALTY OF OBLIGATIONS. The sales of Notes to the Purchasers are
to be several sales, and the obligations of LOG and the Purchasers under this
Agreement are several obligations. No failure by LOG or any Purchaser to
perform its obligations under this Agreement shall relieve any other
Purchaser or the Company of any of its obligations hereunder, and neither LOG
nor any Purchaser shall be responsible for the obligations of, or any action
taken or omitted by, and other such Person hereunder. LOG may, in its
discretion, authorize ING Investment Management, Inc., or any other LOG
Affiliate to exercise any of LOG's rights hereunder or to perform any of its
undertakings hereunder.
11P. 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.
46
11Q. BINDING AGREEMENT. When this Agreement is executed and delivered
by the Company and LOG, it shall become a binding agreement between the
Company and LOG. This Agreement shall also inure to the benefit of each
Purchaser which shall have executed and delivered a Confirmation of
Acceptance, and each such Purchaser shall be bound by this Agreement to the
extent provided in such Confirmation of Acceptance.
Very truly yours,
REGIS CORPORATION
By: /s/ Bert M. Gross
-----------------------------
Name: Bert M. Gross
Title: Assistant Secretary
(Signatures continued on following page.)
47
The foregoing Agreement is
hereby accepted as of the
date first above written.
LIFE INSURANCE COMPANY OF GEORGIA
By: ING INVESTMENT MANAGEMENT, INC., its agent
By:
-----------------------------------------------
Name: Fred C. Smith
Title: Senior Vice President and Managing Director
48
INFORMATION SCHEDULE
AUTHORIZED OFFICERS FOR LOG
Randal W. Ralph Scott Frost
Vice President Investment Manager
ING Investment Management, Inc. ING Investment Management, Inc.
5780 Powers Ferry Road 5780 Powers Ferry Road
Suite 300 Suite 300
Atlanta, Georgia 30327-4349 Atlanta, Georgia 30327-4349
Telephone: (770) 690-4754 Telephone: (770) 690-4747
Facsimile: (770) 690-4899 Facsimile: (770) 690-4899
AUTHORIZED OFFICERS FOR COMPANY
Paul Finkelstein Randy Pearce
Chief Operating Officer & President Vice President, Finance
Regis Corporation Regis Corporation
7201 Metro Boulevard 7201 Metro Boulevard
Minneapolis, Minnesota 55439 Minneapolis, Minnesota 55439
Telephone: (612) 947-7911 Telephone: (612) 947-7603
Facsimile: (612) 947-7900 Facsimile: (612) 947-7600
Frank Evangelist
Senior Vice President, Finance
Regis Corporation
Minneapolis, Minnesota 55439
Telephone: (612) 947-7699
Facsimile: (612) 947-7600
EXHIBIT A
[FORM OF NOTE]
REGIS CORPORATION
SENIOR SERIES _____ NOTE
No. __________
ORIGINAL PRINCIPAL AMOUNT:
ORIGINAL ISSUE DATE:
INTEREST RATE:
INTEREST PAYMENT DATES:
FINAL MATURITY DATE:
PRINCIPAL PREPAYMENT DATES AND AMOUNTS:
FOR VALUE RECEIVED, the undersigned, Regis Corporation (herein called
the "Company"), a corporation organized and existing under the laws of the
State of Minnesota, hereby promises to pay to _______________________, or
registered assigns, the principal sum of ______________________ DOLLARS [on
the Final Maturity Date specified above] [, payable on the Principal
Prepayment Dates and in the amounts specified above, and on the Final
Maturity Date specified above in an amount equal to the unpaid balance of the
principal hereof,] with interest (computed on the basis of a
360-day year--30-day month) (a) on the unpaid balance thereof at the
Interest Rate per annum specified above, payable on each Interest Payment
Date specified above and on the Final Maturity Date specified above,
commencing with the Interest Payment Date next succeeding the date hereof,
until the principal hereof shall have become due and payable, and (b) to the
extent permitted by applicable laws, on any overdue payment (including any
overdue prepayment) of principal, any overdue payment of Yield-Maintenance
Amount and any overdue payment of interest, payable on each Interest Payment
Date 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) 2%
over the Interest Rate specified above or (ii) 2% over the rate of interest
publicly announced Wachovia Bank of Georgia, N.A., from time to time in
Atlanta, Georgia, as its Prime Rate, such Prime Rate to change for purposes
of this Note when and as changes therein are made by such bank, provided that
in not event shall such rate at any time be greater than the maximum rate
permitted by applicable law.
Payments of principal, Yield-Maintenance Amount, if any, and interest
are to be made at the main office of Wachovia Bank of Georgia, N.A., or at
such other place as the holder hereof shall designate to the Company in
writing, in lawful money of the United States of America.
A-1
This Note is one of a series of Senior Notes (herein called the "Notes")
issued pursuant to a Private Shelf Agreement, dated as of [___________, 1997]
(herein called the "Agreement"), between the Company, on the one hand, and
Life Insurance Company of Georgia and each ING Affiliate (as defined in the
Agreement) which becomes a party thereto, on the other hand, and is entitled
to the benefits thereof.
This Note is subject to optional prepayment, in whole or from time to
time in part, on the terms and conditions specified in the Agreement.
This Note is a registered Note and, as provided in the Agreement, 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 the then outstanding 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 shall not be affected by
any notice to the contrary.
In case an Event of Default shall occur and be continuing, the principal
of this Note may be declared or otherwise become due and payable in the
manner and with the effect provided in the Agreement.
The Company agrees to pay, and save the holder hereof harmless against
any liability for the payment of, all costs and expenses, including
reasonable attorneys' fees, arising in connection with the enforcement by
such holder of any of its rights under this Note.
Capitalized terms used and not otherwise defined herein shall have the
meanings (if any) provided in the Agreement.
This Note is intended to be performed in the State of Georgia and shall
be construed and enforced in accordance with the internal law of such State.
Time is of the essence of this Note.
Except for any notice required by the Agreements, the Company expressly
waives notice (including, without limitation, notice of intention to
accelerate maturity, notice of acceleration of maturity, notice of
nonpayment, and notice of protest), demand, presentment for payment, protest,
bringing of suit, and diligence in taking any action to collect amounts owing
hereunder or in proceeding against any of the rights and properties securing
payment hereof.
REGIS CORPORATION
By:_____________________________
Title:__________________________
A-2
EXHIBIT B
[FORM OF REQUEST FOR PURCHASE]
REGIS CORPORATION
Reference is made to the Private Shelf Agreement (the "Agreement"),
dated as of [___________________, 1997] between Regis Corporation (the
"Company"), on the one hand, and Life Insurance Company of Georgia ("LOG")
and each ING Affiliate which becomes party thereto, on the other hand.
Capitalized terms used and not otherwise defined herein shall have the
respective meanings specified in the Agreement.
Pursuant to Paragraph 2C of the Agreement, the Company hereby makes the
following Request for Purchase:
1. Aggregate principal amount of
the Notes covered hereby
(the "Notes").................... $__________
2. Individual specifications of the Notes:
PRINCIPAL
FINAL PREPAYMENT INTEREST
PRINCIPAL MATURITY DATES AND PAYMENT
AMOUNT 1 DATE 2 AMOUNTS PERIOD
- --------- -------- ---------- --------
3. Use of proceeds of the Notes:
4. Proposed day for the closing of the purchase and sale of the
Notes:
5. The purchase price of the Notes is to be transferred to:
- --------------------------
1 Minimum principal amount of $5,000,000.
2 No less than five and nor more than ten years from the date of original
issuance.
B-1
NAME, ADDRESS
AND ABA ROUTING NUMBER OF
NUMBER OF BANK ACCOUNT
--------------- ---------
6. The Company certifies (a) that the representations and warranties
contained in paragraph 8 of the Agreement are true on and as of the
date of this Request for Purchase except to the extent of changes
caused by the transactions contemplated in the Agreement and (b)
that there exists on the date of this Request for Purchase no Event
of Default or Default.
Dated: REGIS CORPORATION
By:________________________________
Authorized Officer
B-2
EXHIBIT C
[FORM OF CONFIRMATION OF ACCEPTANCE]
REGIS CORPORATION
Reference is made to the Private Shelf Agreement (the "Agreement"),
dated as of December ____, 1997 between Regis Corporation (the "Company"), on
the one hand, and Life Insurance Company of Georgia ("LOG") and each ING
Affiliate which becomes a party thereto, on the other hand. All terms used
herein that are defined in the Agreement have the respective meanings
specified in the Agreement.
LOG or the ING Affiliate which is named below as a Purchaser of Notes
hereby confirms the representations as to such Notes set forth in paragraph 9
of the Agreement, and agrees to be bound by the provisions of paragraphs 2E
and 2G of the Agreement relating to the purchase and sale of such Notes and
by the provisions of the penultimate sentence of paragraph 11A of the
Agreement.
Pursuant to paragraph 2E of the Agreement, an Acceptance with respect to
the following Accepted Notes is hereby confirmed:
I. Accepted Notes: Aggregate principal amount $________________
(A) (a) Name of Purchaser:
(b) Principal amount:
(c) Final maturity date:
(d) Principal prepayment dates and amounts:
(e) Interest rate:
(f) Interest payment period:
(g) Payment and notice instructions: As set forth on attached
Purchaser Schedule
(B) (a) Name of Purchaser:
(b) Principal amount:
(c) Final maturity date:
(d) Principal prepayment dates and amounts:
(e) Interest rate:
(f) Interest payment period:
(g) Payment and notice instructions: As set forth on attached
Purchaser Schedule
[(C), (D)...............same information as above.]
C-1
II. Closing Day:
Dated: REGIS CORPORATION
By:________________________________
Title:_____________________________
[LIFE INSURANCE COMPANY OF GEORGIA]
By:________________________________
Title:_____________________________
[ING AFFILIATE]
By:________________________________
Title:_____________________________
C-2
EXHIBIT D
[FORM OF OPINION OF COMPANY'S COUNSEL]
[Date of Closing]
[Name(s) and address(es) of
purchaser(s)]
Ladies and Gentlemen:
We have acted as counsel for Regis Corporation (the "Company") in
connection with the Private Shelf Agreement, dated as of [____________, 1997]
(the "Agreement") between the Company, on the one hand, and Life Insurance
Company of Georgia and each ING Affiliate which becomes a party thereto, on
the other hand, pursuant to which the Company has issued to you today Senior
Series _____ Notes of the Company in the aggregate principal amount of
$__________ (the "Notes"). Capitalized terms used and not otherwise defined
herein shall have the meanings provided in the Agreement. This letter is
being delivered to you in satisfaction of the condition set forth in
paragraph 3A(v) of the Agreement and with the understanding that you are
purchasing the Notes in reliance on the opinions expressed herein.
In this connection, we have examined such certificates of public
officials, certificates of officers of the Company and copies certified so
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 opinion hereinafter set forth. 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 which were not independently established. With respect to the opinion
expressed in paragraph 3 below, we have also relied upon the representation
made by [each of] you in paragraph 9A of the Agreement.
Based on the foregoing, it is our opinion that:
1. The Company is a corporation duly organized and validly existing
in good standing under the laws of the State of Minnesota. Each Subsidiary
is a corporation duly organized and validly existing in good standing under
the laws of its jurisdiction of
D-1
incorporation. The Company and its Restricted Subsidiaries have the corporate
power to carry on its their respective businesses as now being conducted.
2. The Agreement and the Notes have been duly authorized by all
requisite corporate action and duly executed and delivered by authorized
officers of the Company, and are valid obligations of the Company, legally
binding upon and enforceable against the Company in accordance with their
respective terms, except as such enforceability may be limited by (a)
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and (b) general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
3. It is not necessary in connection with the offering, issuance, sale
and delivery of the Notes under the circumstances contemplated by the
Agreement to register the Notes under the Securities Act or to qualify an
indenture in respect of the Notes under the Trust Indenture Act of 1939, as
amended.
4. 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.
5. The execution and delivery of the Agreement and the Notes, the
offering, issuance and sale of the Notes and fulfillment of and compliance
with the respective provisions of the Agreement and the Notes do not
conflict with, or result in a breach of the terms, conditions or provisions
of, or constitute a default under, or result in any violation of, or result
in the creation of any Lien upon any of the properties or assets of the
Company or any of its Restricted Subsidiaries pursuant to, or require any
authorization, consent, approval, exemption or other action by or notice to
or filing with any court, administrative or governmental body or other Person
(other than routine filings after the date hereof with the Securities and
Exchange Commission and/or state Blue Sky authorities) pursuant to, the
charter or by-laws of the Company or any of its Restricted Subsidiaries, any
applicable law (including any securities or Blue Sky law), statute, rule or
regulation or (insofar as is known to us after having made due inquiry with
respect thereto) any agreement (including, without limitation, any agreement
listed in Schedule 8G to the Agreement), instrument, order, judgment or
decree to which the Company or any of its Restricted Subsidiaries is a party
or otherwise subject.
6. The amounts contracted to be received by [each of] you and any
subsequent holder under the Notes (including any subsequent Note issued in
substitution or replacement thereof) and the Agreement, which are or which
may be deemed to be interest or other charges for the use of money,
constitute lawful interest and charges that are not usurious or illegal under
the law of the State of Minnesota.
Very truly yours,
D-2
SCHEDULE 8A
REGIS CORPORATION
SCHEDULE OF SUBSIDIARIES
- --------------------------------------------------------------------------
Regis Hairstylists, Ltd. Restricted 100%
Trade Secret, Inc. Restricted 100%
Regis Europe, Ltd. Unrestricted 99%*
Regis Mexico, S.A. Unrestricted 100%
Regis South Africa (Proprietary) Limited Unrestricted 100%
Regis Hairstylists (Proprietary) Limited Unrestricted 100%
Regis Suisse, Ltd. Unrestricted 100%
- ---------------
* Borrower owns 9,998 shares of the 10,000 shares which are outstanding.
The two shares not controlled by Borrower are owned by two employees
of Regis Europe, Ltd.
SCHEDULE 8G
LISTING OF AGREEMENTS WHICH RESTRICT
THE ABILITY OF REGIS TO INCUR DEBT
1. 11.52% Senior Note Agreement, dated June 21, 1991 (as amended).
2. Bank Credit Agreement, dated June 21, 1994 (as amended).
3. $50,000,000 Private Shelf Agreement, dated as of July 25, 1995
(as amended).