As filed with the Securities and Exchange Commission on March 19, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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DOMINO'S, INC.
(Exact name of registrant as specified in its charter)
Delaware 5812 38-3025165
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction Classification Code Number) Identification Number)
of incorporation or
organization)
---------------
30 Frank Lloyd Wright Drive
Ann Arbor, Michigan 48106
(734) 930-3030
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
---------------
Harry J. Silverman
Domino's, Inc.
30 Frank Lloyd Wright Drive
Ann Arbor, Michigan 48106
(734) 930-3030
(Address, including zip code, and telephone number,
including area code, of agent for service)
---------------
copy to:
Mary E. Weber, Esq.
Ropes & Gray
One International Place
Boston, Massachusetts 02110
(617) 951-7000
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act Registration Statement number of the earlier effective
Registration Statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. [_]
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Proposed Proposed
Maximum Maximum
Title of each Class of Amount Offering Aggregate Amount of
Securities to be to be Price Offering Registration
Registered Registered Per Unit(1) Price Fee
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10 3/8% Series B Senior
Subordinated Notes due
2009 ................ $275,000,000 100% $275,000,000 $76,450.00
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Guarantees of 10 3/8%
Series B Senior
Subordinated
Notes due 2009(2)... N/A N/A N/A N/A
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(1) Estimated solely for the purpose of calculating the Registration Fee in
accordance with Rule 457(f)(2) under the Securities Act of 1933, as
amended, based upon the book value of the Notes as of March 19, 1999.
(2) The Guarantee by each of Domino's Pizza, Inc., Domino's Franchise Holding
Co., Metro Detroit Pizza, Inc., Domino's Pizza International, Inc.,
Domino's Pizza International Payroll Services, Inc. and Domino's Pizza-
Government Services Division, Inc. of the principal and interest on the
Notes is also being registered hereby. No separate consideration will be
received for the Guarantees. Pursuant to Rule 457(n) under the Securities
Act of 1933, as amended, no separate Registration Fee is payable with
respect to the Guarantees.
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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CONTINUED FROM PREVIOUS PAGE
DOMINO'S PIZZA, INC.
(Exact name of registrant as specified in its charter)
Michigan 5812 38-1741243
(Primary Standard (I.R.S. Employer
(State or other Industrial Identification Number)
jurisdiction Classification Code
of incorporation or Number)
organization)
DOMINO'S FRANCHISE HOLDING CO.
(Exact name of registrant as specified in its charter)
Michigan 5812 38-3401169
(Primary Standard (I.R.S. Employer
(State or other Industrial Identification Number)
jurisdiction Classification Code
of incorporation or Number)
organization)
METRO DETROIT PIZZA, INC.
(Exact name of registrant as specified in its charter)
Michigan 5812 38-3068735
(Primary Standard (I.R.S. Employer
(State or other Industrial Identification Number)
jurisdiction Classification Code
of incorporation or Number)
organization)
DOMINO'S PIZZA INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 5812 52-1291464
(Primary Standard (I.R.S. Employer
(State or other Industrial Identification Number)
jurisdiction Classification Code
of incorporation or Number)
organization)
DOMINO'S PIZZA INTERNATIONAL PAYROLL SERVICES, INC.
(Exact name of registrant as specified in its charter)
Florida 5812 38-2978908
(Primary Standard (I.R.S. Employer
(State or other Industrial Identification Number)
jurisdiction Classification Code
of incorporation or Number)
organization)
DOMINO'S PIZZA--GOVERNMENT SERVICES DIVISION, INC.
(Exact name of registrant as specified in its charter)
Texas 5812 38-3105323
(State or other (Primary Standard (I.R.S. Employer
jurisdiction Industrial Identification Number)
of incorporation or Classification Code
organization) Number)
PROSPECTUS [LOGO]
Domino's, Inc.
Offer to Exchange All Outstanding
10 3/8% Senior Subordinated Notes Due 2009
($275,000,000 Aggregate Principal Amount Outstanding)
for
10 3/8% Series B Senior Subordinated Notes Due 2009
We are offering to exchange $1,000 principal amount of our 10 3/8% Series B
Senior Subordinated Notes due 2009 (the "Exchange Notes") for each $1,000
principal amount of our outstanding 10 3/8% Senior Subordinated Notes due 2009
(the "Notes"). We are making this offer on the terms and conditions set forth
in this Prospectus and the accompanying Letter of Transmittal. The Exchange
Notes have been registered under the Securities Act of 1933, as amended, while
the Notes have not been registered. An aggregate principal amount of
$275,000,000 of the Notes is outstanding. The form and terms of the Exchange
Notes and the Notes are identical in all material respects, except for certain
transfer restrictions and registration rights relating to the Notes.
We will accept for exchange any and all outstanding Notes validly tendered and
not withdrawn prior to 5:00 p.m., New York City time, on , 1999, unless we
decide to extend the time for tendering the Notes. You may withdraw the tender
of your Notes at any time prior to such date and time. Although our offer is
subject to certain customary conditions, it is not conditioned upon any minimum
principal amount of Notes being tendered for exchange.
Neither we nor our subsidiary guarantors will receive any proceeds from the
issuance of the Exchange Notes. We will pay all the expenses incurred by us or
our subsidiary guarantors in connection with the offer and issuance of the
Exchange Notes.
See "Risk Factors" beginning on page 15 for a discussion of certain matters
that should be considered in connection with our offer and an investment in the
Exchange Notes.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of our offer or the Exchange Notes or
determined that this Prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
The date of this Prospectus is , 1999
This offer is not being made to, and we will not accept surrenders for exchange
from, holders of the outstanding Notes in any jurisdiction in which this offer
or its acceptance would not comply with the securities or blue sky laws of such
jurisdiction.
All resales must be made in compliance with state securities or "blue sky"
laws. Such compliance may require that the Exchange Notes be registered or
qualified in a state or that the resales be made by or through a licensed
broker-dealer, unless exemptions from these requirements are available. The
Company assumes no responsibility with regard to compliance with these
requirements.
This Prospectus and the accompanying Letter of Transmittal contain important
information. You should carefully read this Prospectus and the Letter of
Transmittal before deciding whether to tender your Notes.
This Prospectus incorporates important business and financial information about
us and our subsidiary guarantors that is not included in or delivered with this
Prospectus. We will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon written or oral request of any such person,
a copy of any and all of such information. Requests for such copies should be
directed to the Chief Financial Officer, Domino's, Inc., 30 Frank Lloyd Wright
Drive, Ann Arbor, Michigan 48106 (Telephone Number (734) 930-3030). You should
request any such information at least five days in advance of the date on which
you expect to make your decision with respect to this offer. In any event, you
must request such information prior to , 1999.
TRADEMARKS
The Domino's(R) trademark referred to in this Prospectus is federally
registered in the United States under applicable intellectual property laws and
the Domino's HeatWave(TM) trademark referred to in this Prospectus is subject
to a pending application for registration. These trademarks are the property of
Domino's or its parent or subsidiaries. Other registered trademarks used in
this Prospectus are the property of their respective owners.
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INDUSTRY DATA
In this Prospectus, we rely on and refer to information regarding the pizza
market and its segments and our competitors from the 1997 NPD Food Service
Information Group's Crest Survey, market research reports, analyst reports and
other publicly available information. Information regarding brand recognition
and market perception is from the Brand Equity Study we commissioned in 1998.
Although we believe this information is reliable, we cannot guarantee the
accuracy and completeness of the information and have not independently
verified it.
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FORWARD-LOOKING STATEMENTS
This Prospectus includes various forward-looking statements about Domino's that
are subject to risks and uncertainties. Forward-looking statements include
information concerning future results of operations, cost savings and business
strategy. Also, statements that contain words such as "believes," "expects,"
"anticipates," "intends," "estimated" or similar expressions are forward-
looking statements. We have based these forward-looking statements on our
current expectations and projections about future events. While we believe
these expectations and projections are reasonable, such forward-looking
statements are inherently subject to risks, uncertainties and assumptions about
us, including, among other things:
.Our ability to grow and implement cost-saving strategies;
.Increases in our operating costs, including commodity costs and the
minimum wage;
.Our ability to compete domestically and internationally;
.Our ability to retain or replace our executive officers and other key
members of management;
.Our ability to pay principal and interest on our substantial debt;
.Our ability to borrow in the future;
. Our ability and the ability of our franchisees, suppliers and vendors to
implement an effective Year 2000 readiness program;
.Adverse legislation or regulation;
.Our ability to sustain or increase historical revenues and profit margins;
and
.Continuation of certain trends and general economic conditions in our
industry.
Accordingly, actual results may differ materially from those expressed or
implied by such forward-looking statements contained in this Prospectus. We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this Prospectus might not occur.
i
AVAILABLE INFORMATION
We and our subsidiary guarantors have filed a Registration Statement on Form S-
4 under the Securities Act with respect to the Exchange Notes. This Prospectus,
which forms a part of the Registration Statement, does not contain all of the
information included in the Registration Statement. Certain parts of this
Registration Statement are omitted in accordance with the rules and regulations
of the Securities and Exchange Commission. For further information with respect
to us, our subsidiary guarantors and the Exchange Notes, we refer you to the
Registration Statement. You should be aware that statements made in this
Prospectus as to the contents of any agreement or other document filed as an
exhibit to the Registration Statement are not necessarily complete. We refer
you to the copy of such documents filed as exhibits to the Registration
Statement. Each such statement is qualified in all respects by such reference.
We are not currently subject to the periodic reporting and other informational
requirements of the Securities Exchange Act of 1934, as amended. We have agreed
that, whether or not we are required to do so by the rules and regulations of
the Commission, for so long as any of the Exchange Notes remain outstanding, we
will furnish to the holders of the Exchange Notes and, if permitted, will file
with the Commission (i) all quarterly and annual financial information that
would be required to be contained in a filing with the Commission on Forms 10-Q
and 10-K if we were required to file such forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by our certified
independent accountants, and (ii) all reports that would be required to be
filed with the Commission on Form 8-K if we were required to file such reports,
in each case within the time periods specified in the rules and regulations of
the Commission.
Any reports or documents we file with the Commission, including the
Registration Statement, may be inspected and copied at the Public Reference
Section of the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Regional Offices of the Commission at 7 World Trade
Center, 13th Floor, New York, New York 10048 and Citicorp Center, 14th Floor,
500 West Madison Street, Chicago, Illinois 60661. Copies of such reports or
other documents may be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. In
addition, the Commission maintains a Web site that contains reports and other
information that is filed through the Commission's Electronic Data Gathering
Analysis and Retrieval System. The Web site can be accessed at
http://www.sec.gov.
A-1
Summary
The following summary contains basic information about Domino's, Inc. and this
offer. It may not contain all the information that may be important to you. You
should read this entire Prospectus, including the financial data and related
notes, and the documents to which we have referred you before making an
investment decision. The terms "the Company," "Domino's," "we," "our," and
"us," as used in this Prospectus refer to Domino's, Inc. and its subsidiaries
as a combined entity, except where it is clear that such terms mean only
Domino's, Inc. The terms "the Parent" and "TISM" refer to our parent TISM, Inc.
All references to "system-wide" sales in this Prospectus mean the net retail
sales of our corporate-owned and franchise stores. Unless otherwise indicated,
all information set forth in this Prospectus is as of January 3, 1999. Our
fiscal year generally consists of thirteen four-week periods ending on the
Sunday closest to December 31. Fiscal year 1998 included 53 weeks and ended on
January 3, 1999. Investors should carefully consider the information set forth
under "Risk Factors." In addition, certain statements include forward-looking
information which involve risks and uncertainties. See "Forward-Looking
Statements" on page (i).
Company Overview
Domino's is the leading pizza delivery company in the United States. We operate
through a world-wide network of over 6,200 franchise and corporate-owned stores
which generated system-wide sales of $3.2 billion for the fiscal year ended
January 3, 1999. System-wide sales by our domestic franchise and corporate-
owned stores accounted for approximately 30% of the United States pizza
delivery market in 1997. This market leadership position was nearly one and a
half times the market share of our nearest competitor.
Domino's offers a focused menu of high quality, value-priced pizza with three
types of crust (Hand-Tossed, Thin Crust and Deep Dish), along with buffalo
wings, cheesy bread and bread sticks. Our original pizza is made from fresh
dough produced in our regional distribution centers. We prepare every pizza
using real mozzarella cheese, pizza sauce made from fresh tomatoes and a choice
of high quality meat and vegetable toppings in generous portions. Our focused
menu and use of premium ingredients enables us to consistently and efficiently
produce high quality pizza.
Over the 38 years since our founding, we have developed a simple, cost-
efficient model. In addition to offering a limited menu, our stores are
designed for delivery and do not offer eat-in service. As a result, our stores
require relatively small (1,000-1,200 square feet), low rent locations and
limited capital expenditures. Our simple operating model helps to ensure
consistent, quality product and to reduce store expenses and capital
commitments.
The Domino's brand is widely recognized and identified by consumers in the
United States as the leader in pizza delivery. We have built this successful
brand image and recognition through extensive national and local television,
print and direct mail campaigns. Over the past four years, Domino's and its
franchisees have invested an estimated $750 million on national, cooperative
and local advertising in the United States. The Domino's brand name is one of
Ad Age's "100 Megabrands," a list which includes other prominent brands such as
Coke(R), Campbell's(R), Kodak(R) and Wrigley(R).
Domino's operates through three business segments:
.Domestic Stores, consisting of:
.Corporate, which operates our domestic network of 642 corporate-owned
stores;
.Franchise, which oversees our domestic network of 3,847 franchise
stores;
. Distribution, which operates our eighteen regional distribution centers
and one equipment distribution center that sell food, equipment and
supplies to our domestic corporate-owned and franchise stores and
equipment to international stores; and
. International, which oversees our network of 1,730 franchise stores in
64 international and off-shore markets, including Alaska, Hawaii, Puerto
Rico, the U.S. Virgin Islands and Guam, and distributes food to stores
in Alaska, Hawaii and Canada.
Our principal executive offices are located at 30 Frank Lloyd Wright Drive, Ann
Arbor, MI 48106 (Telephone: 734-930-3030).
1
Industry Overview
The United States pizza market had sales of approximately $20.5 billion in
1997. This market has three segments: eat-in, carry-out and delivery. We focus
on the delivery segment, which accounted for approximately $5.9 billion or 29%
of the total United States pizza market in 1997. Pizza delivery has been the
fastest growing segment of this market, with compound annual growth of 8.2%
between 1995 and 1997, as compared to 4.1% for the eat-in segment and 4.3% for
the carry-out segment over the same period.
Domestic pizza delivery sales have not only grown quickly, but have also shown
stable growth. From 1988 through 1997, pizza delivery sales in the United
States grew at a compound annual rate of 6.2%. Even in the recessionary period
during 1990 and 1991, pizza delivery sales in the United States continued to
grow at an annual compound rate of 2.5%.
We believe that growth and stability in the pizza delivery market will persist
as a result of several continuing demographic factors. In particular, we
believe that longer work schedules and the prevalence of dual career families
have led to rapid growth in the demand for delivered food. We believe that
delivered pizza is well positioned to capitalize on these trends as other food
products have difficulty matching pizza's value, consistency and timeliness of
delivery.
Domino's is the market leader in pizza delivery, with system-wide sales by our
corporate-owned and domestic franchise stores constituting 30% of the United
States pizza delivery market in 1997. Three national chains, Pizza Hut, Papa
John's and, to a lesser extent, Little Caesar's, compete directly with us in
the delivery business. In 1997, these national chain competitors had a combined
36% share of the domestic pizza delivery market. The remainder of the pizza
delivery market is highly fragmented, with regional and local competitors
representing approximately 34% of the delivery market in 1997. We believe that
many of these competitors lack the scale, brand recognition, resources and
efficiency to compete effectively with larger chains. We view fragmented
competition in the pizza delivery market as an opportunity for
continued growth.
Competitive Strengths
Leading Market Position. Domino's is the leading pizza delivery company in the
United States. System-wide sales by our corporate-owned and domestic franchise
stores accounted for approximately 30% of the United States pizza delivery
market in 1997. This market leadership position represented nearly one and a
half times the market share of our nearest competitor. Through our world-wide
network of over 6,200 franchise and corporate-owned stores, we deliver
consistent, high quality pizza to consumers across the contiguous United States
and in 64 international and off-shore markets, including Alaska, Hawaii, Puerto
Rico, the U.S. Virgin Islands and Guam. Our leadership position and geographic
presence provide significant cost and marketing advantages relative to smaller
delivery competitors.
Strong Brand Equity. Our brand name is widely recognized by consumers in the
United States as the leader in pizza delivery. Over the past four years,
Domino's and its franchisees have invested an estimated $750 million on
national, cooperative and local advertising in the United States. The strength
of our brand is reflected in its selection as one of Ad Age's "100 Megabrands,"
a list which includes other prominent brands such as Coke(R), Campbell's(R),
Kodak(R) and Wrigley(R). We continue to reinforce the strength of our brand
name recognition with extensive advertising through national and local
television, print and direct mail. Our strong brand name in pizza delivery
provides significant marketing strength.
Focused and Cost-efficient Operating System. We have focused on pizza delivery
since our founding in 1960. Over this time, we have developed a simple, cost-
efficient operating system for producing a streamlined menu offering. Our
limited menu, efficient food production process and extensive employee training
program allow us to produce our pizza in approximately ten minutes. The
simplicity and efficiency of our store operations gives us significant
advantages over competitors that also participate significantly in the carry-
out or eat-in segments of the pizza market and, as a result, have more complex
operations. Consequently, we believe these competitors have a difficult time
matching Domino's value, quality and consistency in the delivery segment.
Limited Capital Requirements. We have limited capital expenditure and working
capital requirements. Our capital expenditures are minimal because we focus on
delivery and because our franchisees fund all capital expenditures for their
stores. Since our stores do not offer eat-in service, they do not require
expensive locations, are relatively small
2
(1,000-1,200 square feet) and are inexpensive to build and furnish as compared
to other fast food establishments. A new Domino's store typically requires only
$125,000 to $175,000 in initial capital and minimal annual maintenance, far
less than typical establishments of many of our major competitors. Because over
85% of our domestic stores are franchised, our share of system-wide capital
expenditures is small. In addition, Domino's requires minimal working capital
as we collect approximately 98% of our royalties from domestic franchisees
within three weeks of when the royalty is generated and achieve more than 50
inventory turns per year in our regional distribution centers. We believe these
minimal working capital requirements are advantageous for funding our continued
growth.
Strong Franchise Relationships. We believe our strong relationships with
franchisees are a critical component of our success. We support our franchisees
by providing the training, infrastructure and financial incentives that have
resulted in very low failure rates. We employ an owner-operator model that
results in our franchisees owning an average of three stores, considerably
fewer than most franchise models. We also believe that our franchise owners
enjoy some of the most attractive economics within the fast food industry. The
average payback on a new franchise store investment is less than three years.
Our strong cooperation with our franchisees is demonstrated by an over 96%
voluntary participation rate in our U.S. distribution system and strong
franchisee participation in co-operative advertising programs. Because we
experience a contract renewal rate of over 99% and currently maintain a list of
over 120 pending or approved new franchise applications, we believe our
franchise system will continue to be a stable and growing component of our
business.
Efficient National Distribution System. We operate a nationwide network of
eighteen regional distribution centers. Each is generally located within a 300-
mile radius of the stores it serves. Our distribution system takes advantage of
volume purchasing of food and supplies, and provides consistency and
efficiencies of scale in food production. We serve all corporate-owned stores
and over 96% of our domestic franchise stores with an on-time accuracy rate of
over 98%. Our low-cost distribution system allows our store managers to focus
on food production and customer service.
Experienced Management Team. Domino's is managed by an experienced team that
averages nearly 13 years of service with the Company. Domino's founder, Thomas
Monaghan, recruited and promoted this team in the mid-1990s. This team
possesses strong leadership skills in marketing, corporate, franchise,
international, distribution, and finance and has driven our strong financial
performance over the past four years. In connection with the recapitalization
of our parent corporation, TISM, Inc., by Bain Capital, Inc., Thomas Monaghan
retired as Chief Executive Officer and now serves as a director of TISM and
Domino's.
Business Strategy
Our business strategy has been to grow revenues and profitability by focusing
on prompt delivery of high quality product, operational excellence and brand
recognition through strong promotional advertising. This strategy has resulted
in our leading market position and track record of profitable growth. We intend
to achieve further growth and strengthen our competitive position through the
continued implementation of this strategy and the following initiatives:
Capitalize on Strong Industry Dynamics. We believe that the pizza delivery
market will continue to show strong growth and stability as a result of several
positive demographic trends. These trends include more dual career families,
longer work weeks and increased consumer emphasis on convenience. In addition,
we believe that the low cost and high value of pizza will support continued
industry growth even during an economic slowdown. Domino's is well positioned
to take advantage of these dynamics, given our market leadership position,
strong brand name and cost-efficient operating model.
Leverage Market Leadership Position and High Brand Awareness. Domino's is the
leading pizza delivery company in the United States. System-wide sales by our
corporate-owned and domestic franchise stores accounted for approximately 30%
of the United States pizza delivery market in 1997. This market leadership
position represented nearly one and a half times the market share of our
nearest competitor. Our market leadership position and strong brand give us
significant marketing strength relative to our smaller competitors. We believe
strong brand recognition is important in the pizza delivery industry because
consumer decisions are strongly influenced by brand awareness. We intend to
continue investments that promote our brand name and enhance our recognition as
the pizza delivery leader.
Implement Cost Reduction Opportunities. Historically, the profitability of a
typical corporate-owned store has lagged the profitability of a typical
franchise store. We are implementing the following cost reduction programs to
increase the profitability of our corporate-owned stores:
3
. Corporate Store Rationalization. We sold to franchisees or closed 142 of
our under-performing corporate-owned stores prior to December 31, 1998.
. Corporate Store Labor Reductions. We are reducing the labor costs at our
corporate-owned stores by improving shift schedules, adjusting incentive
programs and minimizing overtime.
. Distribution Profit Sharing. At the beginning of fiscal year 1999,
corporate-owned stores began participating in the profit sharing program
of our Distribution division. This profit sharing plan was recently
amended to increase our rebates to participating stores from
approximately 45% to approximately 50% of their regional distribution
center's pre-tax profits. Although corporate-owned stores had the right
to participate in the program, historically only domestic franchise
stores participated.
Expand Store Base. We plan to continue expanding our base of traditional
domestic stores, increase our network of international stores and enter new
markets with non-traditional stores. From 1995 to 1998, we increased our
domestic store base by approximately 1.9% per year. We plan to grow our
traditional domestic store base primarily by franchising new stores to existing
franchisees. We also believe that a significant opportunity exists to open new
franchise stores in under-penetrated international markets. We have also
successfully tested a new venue concept for non-traditional stores called
Domino's Delivery Express which provide both delivery and carry-out services
from locations in convenience stores and are designed for lightly populated
markets.
Recent Developments
On December 21, 1998, investors, including funds associated with Bain Capital,
management and others, acquired a controlling interest in Domino's through a
series of transactions, including a merger of a special purpose corporation
organized by Bain Capital into TISM, Inc., the parent corporation of Domino's.
Specifically:
. Investors, including the Bain Capital funds, management and others,
invested $229.7 million to acquire common stock of TISM, which
represented approximately 93% of its outstanding common stock
immediately following the recapitalization, and $101.1 million to
acquire cumulative preferred stock of TISM.
. The prior stockholders of TISM retained a portion of their voting common
stock in TISM equal to $17.5 million, or approximately 7% of the
outstanding common stock of TISM immediately following the
recapitalization. In the merger, these stockholders received $903.2
million for their remaining common stock and TISM contingent notes
payable for up to an aggregate of $15 million in certain circumstances
upon the sale or transfer to non-affiliates by the Bain Capital funds of
more than 50% of their initial common stock ownership in TISM.
The recapitalization and related expenses were financed in part through the
sale of the equity securities and the retention of the common stock discussed
above. The remaining financing was obtained through:
. Borrowings under our new senior credit facilities in the aggregate
principal amount of $545 million, consisting of $445 million in term
loans and a revolving credit facility of up to $100 million, and
. The sale of the Notes.
In connection with the sale of the outstanding Notes, we agreed to register the
Exchange Notes under the Securities Act and offer them in exchange for the
Notes.
4
Sources and Uses
The following table sets forth the sources and uses of funds in connection with
the recapitalization as of December 21, 1998.
Dollars in Millions
Sources: ---------
Senior Credit Facilities
Revolving Credit Facility(1)....................................... $ 2.1
Term Loan Facilities(2)............................................ 445.0
Notes................................................................ 275.0
Equity Investment in TISM(3)......................................... 330.8
Rollover of Equity by Existing Stockholders.......................... 17.5
---------
Total Sources.................................................... $ 1,070.4
=========
Uses:
Redemption of Capital Stock of TISM(4)............................... $ 903.2
Repayment of Existing Liabilities(5)................................. 49.9
Rollover of Equity by Existing Stockholders.......................... 17.5
Noncompete Agreement................................................. 50.0
Transaction Fees and Expenses(6)..................................... 49.8
---------
Total Uses....................................................... $ 1,070.4
=========
- ---------
(1) As of March 16, 1999, we had $92.5 million available under our new
revolving credit facility.
(2) Includes a syndicated senior secured Tranche A term loan facility of $175
million, a syndicated senior secured Tranche B term loan facility of $135
million and a syndicated senior secured Tranche C term loan facility of
$135 million. See "Description of Senior Credit Facilities".
(3) Includes (i) investments in the aggregate amount of $229.7 million in the
common stock of TISM by funds associated with Bain Capital, Inc., Chase
Equity Associates, L.P., CIBC WG Argosy Merchant Fund 2, LLC, Caravelle
Investment Fund, LLC and J.P. Morgan Capital and management and (ii)
investments in the aggregate amount of $101.1 million in cumulative
preferred stock of TISM by funds associated with Bain Capital, Inc., Chase
Equity Associates, L.P., CIBC WG Argosy Merchant Fund 2, LLC, Caravelle
Investment Fund, LLC and J.P. Morgan Capital. The cumulative preferred
stock has a liquidation preference of $104.8 million.
(4) Excludes contingent notes of TISM issued to existing stockholders in the
merger which are payable in certain circumstances upon the sale or other
transfers to non-affiliates by the Bain Capital funds of more than fifty
percent (50%) of their initial common stock ownership in TISM.
(5) Includes the repayment of bank indebtedness as well as other obligations
paid in connection with the recapitalization.
(6) Includes commitment, placement, financial advisory and other fees, and
legal, accounting and other professional fees. See "Certain Relationships
and Related Transactions."
5
The Exchange Offer
The Exchange Offer relates to the exchange of up to $275,000,000 aggregate
principal amount of our outstanding 10 3/8% Senior Subordinated Notes due 2009
for an equal aggregate principal amount of our new 10 3/8% Series B Senior
Subordinated Notes due 2009. The Exchange Notes will be obligations of the
Company entitled to the benefits of the indenture governing the outstanding
Notes.
Registration Rights Agreement...... You are entitled to exchange your
outstanding Notes for registered notes
with terms that are identical in all
material respects. This offer is intended
to satisfy these rights. After this offer
is complete, you will no longer be
entitled to the benefits of the exchange
or registration rights granted under the
registration rights agreement which we
entered into as part of the offering of
the Notes.
The Exchange Offer................. We are offering to exchange $1,000
principal amount of 10 3/8% Series B
Senior Subordinated Notes due 2009 which
have been registered under the Securities
Act for each $1,000 principal amount of
our outstanding 10 3/8% Senior
Subordinated Notes due 2009 which were
issued on December 21, 1998 in a
transaction exempt from registration
under the Securities Act in accordance
with Rule 144A. Your outstanding Note
must be properly tendered and accepted in
order to be exchanged. All outstanding
Notes that are validly tendered and not
validly withdrawn will be exchanged.
As of this date, there are $275,000,000
in aggregate principal amount of our
Notes outstanding.
We will issue the Exchange Notes, which
have been registered under the Securities
Act, on or promptly after the expiration
of this offer.
Expiration Date.................... This offer will expire at 5:00 p.m., New
York City time, on , 1999, unless
we decide to extend the expiration date.
Conditions to the Offer............ This offer is subject to the condition
that it does not violate applicable law
or staff interpretations of the
Commission. If we determine that this
offer is not permitted by applicable
federal law, we may terminate the offer.
This offer is not conditioned upon any
minimum principal amount of our
outstanding Notes being tendered. The
holders of our outstanding Notes have
certain rights against us under the
registration rights agreement should we
fail to consummate this offer.
Resale of the Exchange Notes....... Based on an interpretation by the staff
of the Commission set forth in no-action
letters issued to third parties, we
believe that the Exchange Notes issued
pursuant to this offer in exchange for
our outstanding Notes may be offered for
resale, resold and otherwise transferred
by you without compliance with the
registration and prospectus delivery
provisions of the Securities Act,
provided that:
. you are acquiring the Exchange Notes
in the ordinary course of business;
6
. you are not participating, do not
intend to participate, and have no
arrangement or understanding with any
person to participate, in the
distribution of the Exchange Notes
issued to you pursuant to this offer;
. you are not a broker-dealer who
purchased your outstanding Notes
directly from us for resale pursuant
to Rule 144A or any other available
exemption under the Securities Act;
and
. you are not an "affiliate" of ours
within the meaning of Rule 405 under
the Securities Act.
If our belief is inaccurate and you
transfer any Exchange Note issued to you
in pursuant to this offer in violation of
the prospectus delivery provisions of the
Securities Act or without an exemption
from registration thereunder, you may
incur liability under the Securities Act.
We do not assume or indemnify you against
any such liability.
Each broker-dealer that is issued
Exchange Notes pursuant to this offer for
its own account in exchange for
outstanding Notes which were acquired by
such broker-dealer as a result of market-
making or other trading activities must
acknowledge that it will deliver a
prospectus meeting the requirements of
the Securities Act in connection with any
resale of such Exchange Notes. The Letter
of Transmittal states that a broker-
dealer who makes this acknowledgement and
delivers such a prospectus will not be
deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. A broker-dealer may use
this Prospectus for an offer to resell,
resale or other retransfer of the
Exchange Notes issued to it pursuant to
this offer. We have agreed that, for a
period of 180 days after the date this
offer is completed, we will make this
Prospectus and any amendment or
supplement to this Prospectus available
to any such broker-dealer for use in
connection with any such resales. We
believe that no registered holder of the
outstanding Notes is an affiliate of
Domino's within the meaning of Rule 405
under Securities Act.
This offer is not being made to, nor will
we accept surrenders for exchange from,
holders of outstanding Notes in any
jurisdiction in which this offer or its
acceptance would not comply with the
securities or blue sky laws of such
jurisdiction. Furthermore, persons who
acquire the Exchange Notes are
responsible for compliance with these
securities or blue sky laws regarding
resales. We assume no responsibility for
compliance with these requirements.
Accrued Interest on the Exchange
Notes and the Outstanding Notes...
Each Exchange Note will bear interest
from its issuance date. The holders of
Notes that are accepted for exchange will
receive, in cash, accrued interest on
such Notes to, but not including, the
issuance date of the Exchange Notes. Such
interest will be paid with the first
interest payment on the Exchange Notes.
Interest on the Notes accepted for
exchange will cease to accrue upon
issuance of the Exchange Notes.
7
Consequently, those holders who exchange
their outstanding Notes for Exchange
Notes will receive the same interest
payment on July 15, 1999 (the first
interest payment date with respect to the
outstanding Notes and the Exchange Notes
to be issued pursuant to this offer) that
they would have received had they not
accepted this offer.
Procedures for Tendering Notes..... If you wish to tender your Notes for
exchange pursuant to this offer, you must
transmit to IBJ Whitehall Bank & Trust
Company, as Exchange Agent, on or prior
to the Expiration Date either:
. a properly completed and duly
executed copy of the Letter of
Transmittal accompanying this
Prospectus, or a facsimile of such
Letter of Transmittal, together with
your outstanding Notes and any other
documentation required by such Letter
of Transmittal, at the address set
forth on the cover page of the Letter
of Transmittal; or
. if you are effecting delivery by
book-entry transfer, a computer-
generated message transmitted by
means of the Automated Tender Offer
Program System of the Depository
Trust Company in which you
acknowledge and agree to be bound by
the terms of the Letter of
Transmittal and which, when received
by the Exchange Agent, forms a part
of a confirmation of book-entry
transfer;
In addition, you must deliver to the
Exchange Agent on or prior to the
Expiration Date:
. if you are effecting delivery by
book-entry transfer, a timely
confirmation of book-entry transfer
of your outstanding Notes into the
account of the Exchange Agent at The
Depository Trust Company pursuant to
the procedures for book-entry
transfers described in this
Prospectus under the heading "The
Exchange Offer--Procedures for
Tendering;" or
. if necessary, the documents required
for compliance with the guaranteed
delivery procedures described in this
Prospectus under the heading "The
Exchange Offer--Guaranteed Delivery
Procedure".
By executing and delivering the
accompanying Letter of Transmittal or
effecting delivery by book-entry
transfer, you are representing to us
that, among other things, (i) the person
receiving the Exchange Notes pursuant to
this offer, whether or not such person is
the holder, is receiving them in the
ordinary course of business, (ii) neither
the holder nor any such other person has
an arrangement or understanding with any
person to participate in the distribution
of such Exchange Notes and that such
holder is not engaged in, and does not
intend to engage in, a distribution of
the Exchange Notes and (iii) neither the
holder nor any such other person is an
"affiliate" of ours within the meaning of
Rule 405 under the Securities Act.
8
Special Procedures for Beneficial If you are a beneficial owner of the
Owners............................ Notes and your name does not appear on a
security listing of the Depository Trust
Company as the holder of such Notes or if
you are a beneficial owner of Notes that
are registered in the name of a broker,
dealer, commercial bank, trust company or
other nominee and you wish to tender such
Notes in this offer, you should promptly
contact the person in whose name your
Notes are registered and instruct such
person to tender on your behalf. If you,
as a beneficial holder, wish to tender on
your own behalf you must, prior to
completing and executing the Letter of
Transmittal and delivering your
outstanding Notes, either make
appropriate arrangements to register
ownership of the outstanding Notes in
your name or obtain a properly completed
bond power from the registered holder.
The transfer of record ownership may take
considerable time.
Guaranteed Delivery Procedures..... If you wish to tender your outstanding
Notes and time will not permit the Letter
of Transmittal or any of the documents
required by the Letter of Transmittal to
reach the Exchange Agent by the
Expiration Date, or the procedure for
book-entry transfer cannot be completed
on time or certificates for your Notes
cannot be delivered on time, you may
tender your Notes pursuant to the
guaranteed delivery procedures described
in this Prospectus under the heading "The
Exchange Offer--Guaranteed Delivery
Procedures."
Shelf Registration Statement....... If any changes in law or of the
applicable interpretation of the staff of
the Commission do not permit us to effect
this offer or upon the request of any
holder of our outstanding Notes under
certain circumstances, we have agreed to
register the Notes on a shelf
registration statement and use our best
efforts to cause such shelf registration
statement to be declared effective by
the Commission. We have agreed to
maintain the effectiveness of the shelf
registration statement for, under certain
circumstances, at least two years from
the date of the original issuance of the
outstanding Notes to cover resales of
such Notes held by such holders.
Withdrawal Rights.................. You may withdraw the tender of your
outstanding Notes at any time prior to
5:00 p.m., New York City time, on the
Expiration Date.
Acceptance of Outstanding Notes
and Delivery of Exchange Notes....
Subject to certain conditions, we will
accept for exchange any and all
outstanding Notes which are properly
tendered and not validly withdrawn prior
to 5:00 p.m., New York City time, on the
Expiration Date. The Exchange Notes
issued pursuant to this offer will be
delivered promptly following the
Expiration Date.
Certain U.S. Federal Income Tax The exchange of your outstanding Notes
Consequences...................... for the Exchange Notes should not be a
taxable exchange for United States
federal income tax purposes. See "Certain
Federal Tax Considerations."
Use of Proceeds.................... We will not receive any proceeds from the
issuance of the Exchange Notes pursuant
to this offer. We will pay all of our and
our subsidiary guarantors' expenses
relating to this offer.
9
Exchange Agent..................... IBJ Whitehall Bank & Trust Company is
serving as Exchange Agent in connection
with this offer. The Exchange Agent can
be reached at One State Street, New York,
New York 10004. For more information with
respect to this offer, please contact the
Exchange Agent at (212) 858-2103 or send
your questions by facsimile to the
Exchange Agent at (212) 858-2611.
10
The Exchange Notes
General............................ The form and terms of the Exchange Notes
are identical in all material respects to
the form and terms of the outstanding
Notes except that (i) the Exchange Notes
will bear a Series B designation, (ii)
the Exchange Notes have been registered
under the Securities Act and, therefore,
will generally not bear legends
restricting their transfer and (iii) the
holders of Exchange Notes will not be
entitled to rights under the registration
rights agreement. The Exchange Notes will
evidence the same debt as the outstanding
Notes and will be entitled to the
benefits of the indenture under which the
Notes were issued.
Issuer............................. Domino's, Inc.
Securities Offered................. $275,000,000 in aggregate principal
amount of 10 3/8% Series B Senior
Subordinated Notes due 2009.
Maturity........................... January 15, 2009.
Interest........................... Annual fixed rate of 10 3/8%, payable
every six months, beginning July 15,
1999.
Subsidiary Guarantors.............. Each of our domestic subsidiaries will be
a guarantor of the Exchange Notes. Our
foreign subsidiaries are not guarantors
of the Exchange Notes. If we cannot make
payments on the Exchange Notes when they
are due, our guarantor subsidiaries must
make them instead.
Ranking............................ The Exchange Notes and the subsidiary
guarantees are senior subordinated debts.
They rank behind substantially all
current and future indebtedness of
Domino's and its guarantor subsidiaries,
except for trade payables and
indebtedness that expressly provides that
it is not senior to the Exchange Notes
and the subsidiary guarantees. They also
effectively rank behind all current and
future indebtedness of our foreign
subsidiaries. As of January 3, 1999, the
Exchange Notes and the subsidiary
guarantees would have been subordinated
to $446.7 million of senior debt.
Optional Redemption................ We may redeem some or all of the Exchange
Notes at any time after January 15, 2004,
at the redemption prices listed in the
section entitled "Description of Exchange
Notes" under the heading "Optional
Redemption."
Before January 15, 2002, we may redeem up
to 35% of the Exchange Notes with the
proceeds of certain offerings of equity
of Domino's or its parent corporation at
the price listed in the section entitled
"Description of Exchange Notes" under the
heading "Optional Redemption."
In addition, before January 15, 2004, if
we experience specific kinds of changes
in control, we may also redeem all, but
not part, of the Exchange Notes at the
redemption prices listed in the section
entitled "Description of Exchange Notes"
under the heading "Optional Redemption."
11
Mandatory Offer to Repurchase...... If we sell certain assets or experience
specific kinds of changes of control, we
must offer to repurchase the Exchange
Notes at the price listed in the section
entitled "Description of Exchange Notes."
Basic Covenants of Indenture....... We will issue the Exchange Notes under
the indenture with IBJ Whitehall Bank &
Trust Company. The indenture restricts,
among other things, our ability and the
ability of our subsidiaries to:
.borrow money;
. pay dividends on, redeem or
repurchase our capital stock;
.make investments;
.use assets as security in other
transactions; and
. sell certain assets or merge with or
into other companies.
These covenants are subject to important
exceptions and qualifications which are
described in the section entitled
"Description of Exchange Notes" under the
heading "Certain Covenants."
Risk Factors
See "Risk Factors" for a discussion of certain factors that should be
considered in connection with our offer and an investment in the Exchange
Notes.
12
Summary Historical and Pro Forma Consolidated Financial Data
Set forth below are summary historical and pro forma consolidated financial
data of Domino's, Inc. and subsidiaries at the dates and for the periods
indicated. The summary historical consolidated statements of income data for
the fiscal years ended December 29, 1996, December 28, 1997 and January 3, 1999
and the summary historical balance sheet data as of December 28, 1997 and
January 3, 1999 were derived from historical financial statements that were
audited by Arthur Andersen LLP, whose report appears elsewhere in this
Prospectus. The summary historical balance sheet data as of December 29, 1996
was derived from unaudited consolidated financial statements which, in the
opinion of management, include all adjustments necessary for a fair
presentation. The summary unaudited pro forma consolidated financial data set
forth below give effect in the manner described under "Unaudited Pro Forma
Consolidated Financial Data" and the notes thereto to the recapitalization as
if it occurred on December 29, 1997 in the case of the pro forma statements of
income data, and as of January 3, 1999 in the case of the unaudited pro forma
balance sheet data. The unaudited pro forma consolidated statements of income
do not purport to represent what our results of operations would have been if
the recapitalization had occurred as of the date indicated or what such results
will be for future periods. The information presented below should be read in
conjunction with, and is qualified by reference to, "Management's Discussion
and Analysis of Financial Condition and Results of Operations," "Unaudited Pro
Forma Consolidated Financial Data," "Selected Historical Consolidated Financial
Data" and the audited consolidated financial statements and accompanying notes
thereto included elsewhere in this Prospectus.
---------------------------------------------
Pro
Fiscal Year(a) Forma(b)
--------------------------------- ---------
1996 1997 1998 1998
Dollars in Millions --------- --------- --------- ---------
System-wide Sales (unaudited):
Domestic....................... $ 2,110.3 $ 2,294.2 $ 2,506.0 $ 2,498.8
International.................. 524.5 633.9 717.7 717.7
--------- --------- --------- ---------
Total.......................... $ 2,634.8 $ 2,928.1 $ 3,223.7 $ 3,216.5
========= ========= ========= =========
Statement of Income Data:
Corporate stores............... $ 336.6 $ 376.8 $ 409.4 $ 369.7
Domestic franchise royalties... 93.4 102.4 112.3 113.6
Domestic distribution.......... 494.2 513.1 599.1 599.1
International.................. 45.7 52.5 56.0 56.0
--------- --------- --------- ---------
Revenues....................... 969.9 1,044.8 1,176.8 1,138.4
Cost of sales.................. 717.2 757.6 858.4 826.1
--------- --------- --------- ---------
Gross profit................... 252.7 287.2 318.4 312.3
General and administrative..... 196.2 222.2 248.1 237.4
--------- --------- --------- ---------
Income from operations......... 56.5 65.0 70.3 74.9
Interest income................ (0.4) (0.4) (0.7) (0.7)
Interest expense............... 6.3 3.9 7.0 72.6
--------- --------- --------- ---------
Income before provision
(benefit) for income taxes.... 50.6 61.5 64.0 3.0
Provision (benefit) for income
taxes(c)...................... 30.9 0.4 (12.9) 1.2
--------- --------- --------- ---------
Net income..................... $ 19.7 $ 61.1 $ 76.9 $ 1.8
========= ========= ========= =========
Other Financial Data
(unaudited):
EBITDA(d)...................... $ 72.3 $ 83.1 $ 95.0 $ 130.6
Depreciation and other non-cash
items......................... 15.8 18.1 24.7 55.7
Capital expenditures........... 19.9 45.4 50.0 50.0
Ratio of earnings to fixed
charges(e).................... 4.3x 5.7x 4.9x 1.0x
Ratio of Pro Forma EBITDA to
cash interest expense......... -- -- -- 2.0x
Store Operating Data
(unaudited):
Same Store Sales Growth:
Corporate.................... 2.6% 4.5% 4.0% --
Franchise.................... 7.6 7.3 4.6 --
International(f)............. 5.2 11.1 3.4 3.4%
Stores (end of period):
Corporate.................... 704 767 642 642
Franchise.................... 3,612 3,664 3,847 3,847
International................ 1,250 1,520 1,730 1,730
Balance Sheet Data (unaudited):
Total assets................... $ 155.5 $ 213.0 $ 387.9 $ 387.9
Long-term debt................. 46.2 36.4 720.5 720.5
Total debt..................... 70.1 44.4 728.1 728.1
Stockholder's equity (deficit). (34.9) 26.1 (483.8) (483.8)
See Notes to Summary Historical Consolidated Financial Data
13
Notes to Summary Historical and Pro Forma Consolidated Financial Data
(a) Our fiscal year generally consists of thirteen four-week periods and ends
on the Sunday closest to December 31. The 1996 fiscal year ended December
29, 1996; the 1997 fiscal year ended December 28, 1997; and the 1998 fiscal
year, which consisted of fifty-three weeks, ended January 3, 1999.
(b) See "Unaudited Pro Forma Consolidated Financial Data."
(c) Subsequent to December 1996, the Company elected to be an "S" Corporation
for federal income tax purposes. The Company reverted to "C" Corporation
status on December 21, 1998. On a pro forma basis had the Company been a "C"
Corporation throughout this period, income tax expense would have been
higher by the following amounts: fiscal year ended December 28, 1997--$18
million; fiscal year ended January 3, 1999--$18.9 million.
(d) EBITDA represents earnings before interest, taxes, depreciation,
amortization, and loss on sale of assets (net). EBITDA is presented because
we believe it is frequently used by security analysts in the evaluation of
companies and is an important financial measure in our indenture and credit
agreements. However, EBITDA should not be considered as an alternative to
cash flow from operating activities as a measure of liquidity or as an
alternative to net income as an indicator of our operating performance or
any other measure of performance in accordance with generally accepted
accounting principles.
The following table sets forth a reconciliation of Historical EBITDA to Pro
Forma EBITDA (see Notes to "Unaudited Pro Forma Consolidated Statement of
Income" for additional detail):
---------------
Year Ended
January 3, 1999
---------------
Dollars in Millions
Historical EBITDA............................................... $ 95.0
Related party transactions...................................... 20.9
Store rationalization program................................... 4.0
Recapitalization-related non-recurring charges ................. 12.6
Shareholder advisory fee........................................ (1.9)
--------
Pro Forma EBITDA................................................ $ 130.6
========
(e) For purposes of calculating the ratio of earnings to fixed charges,
earnings consist of earnings before income taxes, plus fixed charges. Fixed
charges consist of interest expense, including amortization of financing
costs and the portion of operating rental expense which management believes
is representative of the interest component of rent expense.
(f) Based on constant dollar. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
14
Risk Factors
You should carefully consider the following factors in addition to the other
information set forth in this Prospectus before making an investment in the
Exchange Notes.
Our substantial indebtedness could adversely affect our financial health and
severely limit our ability to plan for or respond to changes in our business.
In addition, we are permitted to incur substantially more debt in the future,
which could aggravate the risks described below.
To finance the recapitalization, we have incurred a significant amount of
indebtedness, including the Notes. As of January 3, 1999, our consolidated
indebtedness was $728.1 million, of which $446.7 million was senior
indebtedness. After giving pro forma effect to the recapitalization as if it
had been completed on December 29, 1997, our ratio of earnings to fixed charges
for the fiscal year ended January 3, 1999 would have been 1.0. Further, the
terms of the indenture permit us to incur substantial indebtedness in the
future, including up to an additional $98.3 million under our new revolving
credit facility.
Our ability to make payments on and to refinance our indebtedness, including
the Exchange Notes, will depend on our ability to generate cash in the future.
This, to a certain extent, is subject to general economic, financial,
competitive, legislative, regulatory and other factors that are beyond our
control. Based on our current level of operations and anticipated cost savings
and operating improvements, we believe our cash flow from operations and
available borrowings under our new revolving credit facility will be adequate
to meet our liquidity needs over the next several years.
We cannot assure you, however, that our business will generate sufficient cash
flow from operations, that currently anticipated cost savings and operating
improvements will be realized on schedule, in the amounts projected or at all,
or that future borrowings will be available to us under our new revolving
credit facility in amounts sufficient to enable us to pay our indebtedness,
including the Exchange Notes, or to fund our other liquidity needs. If we
cannot generate sufficient cash flow from operations to make scheduled payments
on the Exchange Notes in the future, we may need to refinance all or a portion
of our indebtedness, including the Exchange Notes, on or before maturity, sell
assets, delay capital expenditures, or seek additional equity. We cannot assure
you that we will be able to refinance any of our indebtedness, including the
Exchange Notes, on commercially reasonable terms or at all or that any other
action can be effected on satisfactory terms, if at all.
Our substantial indebtedness could have other important consequences to you.
For example, it could:
.make it more difficult for us to satisfy our obligations with respect to
the Exchange Notes;
.increase our vulnerability to general adverse economic and industry
conditions;
. require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow for other purposes;
. limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate, thereby placing us at a
competitive disadvantage compared to our competitors that may have less
debt;
. limit, by the financial and other restrictive covenants in the Exchange
Notes and the outstanding Notes, together with those in the senior
credit facilities, among other things, our ability to borrow additional
funds; and
. have a material adverse effect on us if we fail to comply with the
covenants in the Exchange Notes, the outstanding Notes and senior credit
facilities, because such failure could result in an event of default
which, if not cured or waived, could result in a substantial amount of
our indebtedness becoming immediately due and payable.
See "Description of Senior Credit Facilities" and "Description of Exchange
Notes."
Your right to receive payments on the Exchange Notes will be junior to our
existing indebtedness and possibly all of our future borrowings. The guarantees
of the Exchange Notes will also be junior to all of our and our subsidiary
guarantors' existing indebtedness and possibly to all of our and their future
borrowings.
The Exchange Notes and the subsidiary guarantees rank behind substantially all
of our and our subsidiary guarantors' existing indebtedness and all of our and
their future borrowings, except for trade payables, any future indebtedness
that
15
expressly provides that it ranks equal with, or is subordinated in right of
payment to, the Exchange Notes and the subsidiary guarantees, and any Notes
that are not exchanged which will rank equal with the Exchange Notes. As a
result, upon any distribution to our creditors or the creditors of our
subsidiary guarantors in a bankruptcy, liquidation or reorganization or similar
proceeding relating to us or our subsidiaries or our or their property, the
holders of our and our subsidiary guarantors' senior debt will be entitled to
be paid in full in cash before any payment may be made with respect to the
Exchange Notes or the subsidiary guarantees. As of January 3, 1999, the
Exchange Notes and the subsidiary guarantees would have been subordinated to
approximately $446.7 million of senior debt. Up to $98.3 million was available
for borrowing as additional senior debt under our new revolving credit
facility. All payments on the Exchange Notes and the guarantees will be blocked
in the event of a payment default on our or our subsidiary guarantors' senior
debt and may be blocked for up to 179 of 360 consecutive days in the event of
certain non-payment defaults on such senior debt.
In the event of a bankruptcy, liquidation or reorganization or similar
proceeding relating to us or our subsidiary guarantors, the holders of the
Exchange Notes will participate with trade creditors and all other holders of
subordinated indebtedness of us and of our subsidiary guarantors in the assets
remaining after we and the subsidiary guarantors have paid all of the senior
debt. Because the indenture requires that amounts otherwise payable to holders
of the Exchange Notes in a bankruptcy or similar proceeding be paid to holders
of senior debt instead, holders of the Exchange Notes may receive less,
ratably, than holders of trade payables in any such proceeding. In any of these
cases, we and our subsidiary guarantors may not have sufficient assets or funds
to pay all of our creditors and holders of Exchange Notes may receive less,
ratably, than the holders of senior debt.
Our foreign subsidiaries will not guarantee the Exchange Notes. In the event of
a bankruptcy, liquidation or reorganization of any of our non-guarantor
subsidiaries, holders of their indebtedness and their trade creditors will be
entitled to payment of their claims from the assets of those subsidiaries
before any assets are made available for distribution to us. The non-guarantor
subsidiaries generated less than 1% of our consolidated revenues for the fiscal
year ended January 3, 1999 and held less than 1% of our consolidated assets as
of January 3, 1999.
The Exchange Notes will not be secured by any of our assets or those of our
subsidiaries. We have granted a security interest to the senior credit
facilities lenders in all of the capital stock of our domestic subsidiaries and
in 65% of the capital stock of our foreign subsidiaries, as well as in all of
our tangible and intangible assets and those of our domestic subsidiaries. If
we become insolvent or are liquidated, or if the senior credit facilities
lenders accelerate payment under any of the senior credit facilities, they will
have a prior claim with respect to these assets.
The pizza delivery market is highly competitive, and increased competition
could adversely affect our operating results.
We believe we compete on the basis of product quality, delivery time, service
and price. We compete in the United States against three national chains, Pizza
Hut, Papa John's and, to a lesser extent, Little Caesar's, along with regional
and local concerns. Although we believe we are well positioned to compete
because of our leading market position, focus and expertise in the pizza
delivery business and strong national brand name recognition, we could
experience increased competition from existing or new companies and loss of
market share, which could have an adverse effect on our operating results.
We also compete on a broader scale with other international, national, regional
and local restaurants and quick-service eating establishments. No reasonable
estimate can be made of the number of competitors on this scale. The overall
food service industry and the quick service eating establishment segment are
intensely competitive with respect to food quality, price, service, convenience
and concept, and are often affected by changes in: consumer tastes; national,
regional or local economic conditions; currency fluctuations to the extent
international operations are involved; demographic trends; and disposable
purchasing power. We compete within the food service industry and the quick
service eating establishment segment not only for customers, but also for
management and hourly personnel, suitable real estate sites and qualified
franchisees.
We do not have written contracts with most of our suppliers, and as a result
they could seek to significantly increase prices or fail to deliver as
required.
We have historically had long-lasting relationships with our suppliers. More
than half of our major suppliers have been with us for over 14 years. As a
result, we typically rely on oral rather than written contracts with our
suppliers. In the case of cheese, where we have only one supplier, we have a
written agreement. Although we have not experienced significant problems with
our suppliers, there can be no assurance that our suppliers will not implement
significant price increases or that suppliers will meet our requirements in a
timely fashion, if at all. The occurrence of any of the foregoing could have a
material adverse effect on our operating results.
16
Increases in food, labor and other costs could adversely affect our
profitability and operating results.
An increase in our operating costs could adversely affect our profitability.
Factors such as inflation, increased food costs, increased labor and employee
benefit costs and the availability of qualified management and hourly employees
may adversely affect our operating costs. Most of the factors affecting costs
are beyond our control. Most products used in our pizza, particularly cheese,
are subject to price fluctuations, seasonality, weather, demand and other
factors. Labor costs are primarily a function of minimum wage and availability
of labor. Cheese and labor costs of a typical store represent 9.0% and 30.2% of
store sales, although we only bear such costs at our corporate-owned stores.
If we fail to successfully implement our growth strategy, our ability to
increase our revenues and operating profit could be adversely affected.
We have grown rapidly in recent periods. We intend to continue our growth
strategy primarily by increasing the number of our domestic and international
stores. We and our franchisees face many challenges in opening new stores,
including, among others:
. selection and availability of suitable store locations;
. negotiation of acceptable lease or financing terms;
. securing of required domestic or foreign governmental permits and
approvals; and
. employment and training of qualified personnel.
The opening of additional franchises also depends, in part, upon the
availability of prospective franchisees who meet our criteria. Our failure to
add a significant number of new stores would adversely effect our ability to
increase revenue and operating income. In addition, although we have
successfully tested the Delivery Express concept, we have not yet opened a
significant number of Delivery Express stores and cannot predict with certainty
the success of the concept on a widespread basis.
Our international operations subject us to additional risks which may differ in
each country in which we do business.
Our financial condition and results of operation may be adversely affected when
global markets in which our franchised stores compete are affected by changes
in political, economic or other factors. These factors over which neither we
nor our franchisees have control may include changes in exchange rates,
inflation rates, recessionary or expansive trends, tax changes, legal and
regulatory changes or other external factors. We are currently planning to
expand our international operations which may increase the effect of these
factors.
A third party has filed a patent infringement claim against us relating to the
Domino's HeatWave Hot Bag.
On September 10, 1998, Vesture Corporation and R.G. Barry Corporation, its
corporate parent, brought suit in the United States District Court for the
Middle District of North Carolina against Domino's and Phase Change
Laboratories, Inc., the exclusive supplier of the heat retention cores inside
the Domino's HeatWave Hot Bag, our pizza delivery warming device. The
plaintiffs asserted that the heat retention cores inside the Domino's HeatWave
Hot Bag infringe a patent owned by Vesture. Our agreement with Phase Change
Laboratories gives us exclusive marketing, sales, use and distribution rights
in the pizza delivery market to the heat retention cores inside the Domino's
HeatWave Hot Bag. In addition to damages, the plaintiffs are seeking an
injunction to enjoin the manufacture, sale or use of the heat retention cores
inside the Domino's HeatWave Hot Bag. Although we intend to vigorously defend
against the claim, we cannot predict the ultimate outcome of the claim.
Our relationships with franchisees are regulated at the federal and state
levels.
We are subject to various federal, state and local laws affecting the operation
of our business, as are our franchisees. Each store is subject to licensing and
regulation by a number of governmental authorities, which include zoning,
health, safety, sanitation, building and fire agencies in the jurisdiction in
which the store is located. Difficulties in obtaining, or the failure to
obtain, required licenses or approvals can delay or prevent the opening of a
new store in any particular area. Our store operations are also subject to
federal and state laws governing such matters as wages, working conditions,
citizenship requirements and overtime. Some states have set minimum wage
requirements higher than the federal level.
17
We are also subject to the rules and regulations of the Federal Trade
Commission and various state laws regulating the offer and sale of franchises.
The FTC and various state laws require us to furnish to prospective franchisees
a franchise offering circular containing prescribed information. A number of
states in which we are currently franchising or may consider franchising
regulate the sale of franchises and require registration of the franchise
offering circular with state authorities and the delivery of a franchise
offering circular to prospective franchisees. We are operating under exemptions
from registration in several of these states based upon our net worth and
experience. Substantive state laws that regulate the franchisor-franchisee
relationship presently exist in a substantial number of states, and bills have
been introduced in Congress from time to time which provide for federal
regulation of the franchisor-franchisee relationship in certain respects. The
state laws often limit, among other things, the duration and scope of non-
competition provisions, the ability of a franchisor to terminate or refuse to
renew a franchise and the ability of a franchisor to designate sources of
supply.
Internationally, our franchise stores are subject to national and local laws
and regulations which are similar to those affecting our domestic stores,
including laws and regulations concerning franchises, labor, health, sanitation
and safety. Our international franchise stores are also subject to tariffs and
regulations on imported commodities and equipment and laws regulating foreign
investment.
Our business depends on retention of our current senior executives and key
personnel and the success of a new chief executive officer.
Our success will continue to depend to a significant extent on our executive
team and other key management personnel. We have entered into employment
agreements with certain of our executive officers. There can be no assurance
that we will be able to retain our executive officers and key personnel or
attract additional qualified management. In connection with the completion of
the recapitalization, Mr. Monaghan, our founder and chief executive officer,
retired and became a director. Although we are currently recruiting a new chief
executive officer, we can not assure you of the success of a new chief
executive officer.
The ability of the Company to take major corporate actions is limited by the
TISM stockholders agreement.
In connection with the recapitalization, all of the stockholders of TISM
entered into a stockholders agreement which provides, among other things, that
the approval of the holders of a majority of the voting stock of TISM subject
to the stockholders agreement will be required for TISM or its subsidiaries,
including the Company, to take various specified actions, including among
others, major corporate transactions such as a sale or initial public offering,
acquisitions and divestitures, financings, recapitalizations and mergers, as
well as other actions such as hiring and firing senior managers, setting
management compensation and establishing capital and operating budgets and
business plans. Pursuant to the stockholders agreement and the Articles of
Incorporation of TISM, the Bain Capital funds will have the power to block any
such transaction or action and to elect up to half of the Board of Directors of
TISM. The Bain Capital funds may have different interests as equity holders
than those of holders of the Exchange Notes. See "Certain Relationships and
Related Transactions."
Our business may be adversely affected if our critical computer systems, or
those of our suppliers and vendors, do not properly handle date information in
Year 2000.
Upon completion of the implementation of certain new computer systems by
September 30, 1999, we believe that all of our critical internal information
systems will operate correctly with regard to the import, export, and
processing of date information, including correct handling of leap years, in
connection with the change in the calendar year from 1999 to 2000. We also plan
to inventory and address other less critical equipment and machinery, such as
facility equipment, that may contain embedded technology with Year 2000
compliance problems. We expect to complete this effort no later than June 30,
1999. We also have material relationships with franchisees, suppliers and
vendors that may not have adequately addressed the Year 2000 issue with respect
to their equipment or information systems. Although we are attempting to assess
the extent of their compliance efforts, we have not received any written
assurances and, accordingly, cannot determine the risk to our business. In the
event that we are unable to complete planned upgrades or implement replacements
systems prior to December 31, 1999 or in the event our franchisees, suppliers
and vendors do not adequately address the Year 2000 issue before such date, we
may experience significant disruption or delays in our operations, which in
turn could have a material adverse effect on our business.
We may not have the ability to raise the funds necessary to finance the change
of control offer required by our indenture.
Upon the occurrence of certain specific kinds of change of control events, we
must offer to repurchase all outstanding Exchange Notes. It is possible,
however, that we will not have sufficient funds at the time of the change of
control to make
18
the required repurchase of the Exchange Notes or that restrictions in our
senior credit facilities will not allow such repurchases. In addition, certain
important corporate events, such as leveraged recapitalizations that would
increase the level of our indebtedness, would not constitute a change of
control under the indenture. See "Repurchase at the Option of Holders" under
the heading "Description of Exchange Notes."
The occurrence of certain of the events that would constitute a change of
control under the indenture would constitute a default under the senior credit
facilities. Our senior indebtedness and the senior indebtedness of our
subsidiaries may also contain prohibitions of certain events that would
constitute a change of control. Moreover, the exercise by the holders of the
Exchange Notes of their right to require us to repurchase the Exchange Notes
could cause a default under such senior indebtedness, even if the change of
control itself does not, due to the financial effect on us of such repurchase.
The terms of the senior credit facilities will, and other senior debt may,
prohibit the prepayment of the Notes by us prior to their scheduled maturity.
Consequently, if we are not able to prepay the indebtedness under the senior
credit facilities and any other senior indebtedness containing similar
restrictions, we will be unable to fulfill our repurchase obligations if
holders of the Notes exercise their repurchase rights following a change of
control, thereby resulting in a default under the indenture.
Under federal and state laws, the Exchange Notes and the guarantees might,
under special circumstances, be voided and the holders of the Exchange Notes
might be required to return any payments received from us or our subsidiary
guarantors.
Under the federal bankruptcy law and comparable provisions of state fraudulent
transfer laws, the Exchange Notes and the subsidiary guarantees could be
voided, or claims in respect of the Exchange Notes or the subsidiary guarantees
could be subordinated to all other debts of us or any subsidiary guarantor if,
among other things, Domino's or any of its subsidiary guarantors, at the time
the indebtedness evidenced by the Notes or the guarantee was incurred:
. received less than reasonably equivalent value or fair consideration for
the incurrence of such indebtedness;
. was insolvent or rendered insolvent by reason of such incurrence;
. was engaged in a business or transaction for which we or such
guarantor's remaining assets constituted unreasonably small capital; or
. intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they mature.
In addition, any payment by Domino's or a subsidiary guarantor pursuant to the
Exchange Notes or any subsidiary guarantee could be voided and required to be
returned to Domino's or such subsidiary guarantor or to a fund for the benefit
of the creditors of Domino's or such subsidiary guarantor.
The measures of insolvency for purposes of these fraudulent transfer laws will
vary depending upon the law applied in any proceeding to determine whether a
fraudulent transfer has occurred. Generally, however, we or a subsidiary
guarantor would be considered insolvent if:
. the sum of our or such subsidiary guarantor's debts, including
contingent liabilities, were greater than the fair saleable value of all
of our or such subsidiary's assets;
. the present fair saleable value of our or such subsidiary guarantor's
assets were less than the amount that would be required to pay our or
such subsidiary guarantor's probable liability on existing debts,
including contingent liabilities, as they become absolute and mature; or
. we or any subsidiary guarantor could not pay debts as they become due.
Based on historical financial information, recent operating history and other
factors, neither Domino's nor any of its subsidiary guarantors believes that,
after giving effect to the indebtedness incurred in connection with the
recapitalization, it was insolvent, had unreasonably small capital for the
business in which it is engaged or had incurred debts beyond its ability to pay
such debts as they mature. There can be no assurance, however, as to what
standard a court would apply in making such determinations or that a court
would agree with Domino's or its subsidiary guarantors' conclusions in this
regard.
We cannot assure you that an active trading market for the Exchange Notes will
develop.
The Exchange Notes are new securities for which there currently is no market.
Although J.P. Morgan & Co. and Goldman, Sachs & Co., the initial purchasers of
the outstanding Notes, have informed us that they intend to make a market in
the
19
Exchange Notes, they are not obligated to do so and any such market making may
be discontinued at any time without notice. Accordingly, there can be no
assurance as to the development or liquidity of any market for the Exchange
Notes. The Exchange Notes are expected to be eligible for trading by qualified
buyers in the PORTAL market. We do not intend to apply for listing of the
Exchange Notes on any securities exchange or for quotation through The Nasdaq
National Market.
In addition, the liquidity of, and trading market for, the Exchange Notes also
may be adversely affected by general declines in the market for similar
securities. Such a decline may adversely affect such liquidity and trading
markets independent of our financial performance and prospects.
Your ability to resell your Notes will remain restricted if you fail to
exchange them in this offer.
Untendered outstanding Notes that are not exchanged for the registered Exchange
Notes pursuant to this offer will remain restricted securities, subject to the
following restrictions on transfer:
. the Notes may be resold only if registered pursuant to the Securities
Act or if an exemption from registration is available;
. the Notes will bear a legend restricting transfer in the absence of
registration or an exemption; and
. a holder of the Notes who wants to sell or otherwise dispose of all or
any part of its Notes under an exemption from registration under the
Securities Act, if requested by us, must deliver to us an opinion of
independent counsel experienced in Securities Act matters, reasonably
satisfactory in form and substance to us, that such exemption is
available.
20
Recent Developments
On December 21, 1998, investors, including funds associated with Bain Capital,
management and others, acquired a controlling interest in Domino's through a
series of transactions, including a merger of a special purpose corporation
organized by Bain Capital into TISM, Inc., the parent corporation of Domino's.
Specifically:
. Investors, including the Bain Capital funds, management and others,
invested $229.7 million to acquire common stock of TISM, which
represented approximately 93% of its outstanding common stock
immediately following the recapitalization, and $101.1 million to
acquire cumulative preferred stock of TISM.
. The prior stockholders of TISM retained a portion of their voting common
stock in TISM equal to $17.5 million, or approximately 7% of the
outstanding common stock of TISM immediately following the
recapitalization. In the merger, these stockholders received
$903.2 million for their remaining common stock and TISM contingent
notes payable for up to an aggregate of $15 million in certain
circumstances upon the sale or transfer to non-affiliates by the Bain
Capital funds of more than 50% of their initial common stock ownership
in TISM.
The recapitalization and related expenses were financed in part through the
sale of the equity securities and retention of the common stock discussed
above. The remaining financing was obtained through:
. Borrowings under our new senior credit facilities in the aggregate
principal amount of $545 million, consisting of $445 million in term
loans and a revolving credit facility of up to $100 million, and
. The sale of the Notes.
In connection with the sale of the outstanding Notes, we agreed to register the
Exchange Notes under the Securities Act and offer them in exchange for
the Notes.
21
Use of Proceeds
There will be no proceeds from the issuance of the Exchange Notes.
The gross proceeds of $330.8 million from the investment in the common stock
and cumulative preferred stock of TISM, $275 million from the sale of the
outstanding Notes and borrowings under the senior credit facilities were used
to complete the merger, repay certain existing indebtedness, pay $50 million in
connection with a non-compete agreement with Thomas S. Monaghan and pay
approximately $49.8 million in fees and expenses related to the
recapitalization.
22
Capitalization
The following table sets forth cash and cash equivalents and capitalization of
Domino's as of January 3, 1999. The information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the audited consolidated financial statements and
accompanying notes thereto appearing elsewhere in this Prospectus.
---------------
Dollars in Thousands January 3, 1999
Cash and cash equivalents....................................... $ 115
============
Long-term debt (including current portion)
Revolving Credit Facility(a).................................. 1,700
Senior Term A................................................. 175,000
Senior Term B................................................. 135,000
Senior Term C................................................. 135,000
Notes......................................................... 275,000
Existing debt and other obligations........................... 6,426
============
Total long-term debt (including current portion)............ 728,126
------------
Stockholder's deficit........................................... (483,775)
------------
Total capitalization............................................ $ 244,351
============
- ---------
(a) The revolving credit facility has total availability of $100 million, with
$1.7 million drawn at January 3, 1999 and letters of credit issued for a
total of $10.8 million.
23
Unaudited Pro Forma Consolidated Financial Data
The unaudited pro forma consolidated financial data are based on the historical
consolidated financial statements of Domino's and its subsidiaries and
adjustments described in the accompanying notes. See Notes to "Unaudited Pro
Forma Consolidated Balance Sheet."
The following unaudited pro forma consolidated statement of income for the
fiscal year ended January 3, 1999 gives effect to the recapitalization as if it
had occurred on December 29, 1997. See "Recent Developments." The pro forma
adjustments are based upon available data and certain assumptions that our
management believes are reasonable. The unaudited pro forma consolidated
statement of income does not purport to represent what our results of
operations would have been if the recapitalization had occurred as of the date
indicated or what such results will be for any future periods. The unaudited
pro forma consolidated financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operation" and the consolidated financial statements and notes thereto included
elsewhere in this Prospectus.
24
Unaudited Pro Forma Consolidated Statement of Income
For the Fiscal Year Ended January 3, 1999(a)
--------------------------------------------------------
Reorganization, Adjustments
Acquisitions and for the
Historical Divestitures Transactions Pro Forma
Dollars in Thousands ---------- ---------------- ------------ ---------
Revenues:
Corporate stores........ $ 409,413 $ (39,750)(c) $ -- $369,663
Domestic franchise
royalties.............. 112,222 (367)(b) -- 113,582
1,727 (c)
Domestic distribution... 599,121 -- -- 599,121
International........... 56,022 -- -- 56,022
--------- ----------- --------- ---------
Revenues................ 1,176,778 (38,390) -- 1,138,388
Cost of sales........... 858,411 (141)(b) -- 826,129
(32,141)(c)
--------- ----------- --------- ---------
Gross profit............ 318,367 (6,108) -- 312,259
General and
administrative......... 248,098 (21,089)(b) 1,923 (d) 237,341
(11,032)(c) 32,051 (e)
(12,610)(f)
--------- ----------- --------- ---------
Income from operations.. 70,269 26,013 (21,364) 74,918
Interest income......... (730) -- -- (730)
Interest expense........ 7,051 -- 65,518 (g) 72,569
--------- ----------- --------- ---------
Income before provision
(benefit) for income
taxes.................. 63,948 26,013 (86,882) 3,079
Provision (benefit) for
income taxes........... (12,928) 48,913 (h) (34,753)(h) 1,232
--------- ----------- --------- ---------
Net income.............. $ 76,876 $ (22,900) $(52,129) $ 1,847
========= =========== ========= =========
Other Data:
Pro Forma EBITDA(i).............................................. $130,629
Depreciation and other non-cash items............................ 55,711
Capital expenditures............................................. 49,976
Ratio of Pro Forma EBITDA to cash interest expense............... 2.0x
Ratio of earnings to fixed charges(j)............................ 1.0x
See Notes to Unaudited Pro Forma Consolidated Statement of Income
25
Notes to Unaudited Pro Forma Consolidated Statement of Income
Fiscal Year ended January 3, 1999
(a) Our fiscal year ended January 3, 1999 and consisted of fifty-three weeks.
(b) Reflects the elimination of income and expenses related to the following
transactions between related parties and reflects the accounting on an
ongoing basis.
Domino's Farms Office Park (DFOP)--In connection with the recapitalization,
the Company entered into a five-year lease agreement with DFOP for
warehouse and office space occupied by the Company (approximately 185,000
feet). Historically, the Company leased the entire complex (approximately
520,000 square feet) from DFOP and subleased unused space to third parties.
This adjustment reflects the exclusion of general and administrative
expenses related to DFOP which historically were borne by us and are now
being replaced by the lease agreement.
Mater Christi Foundation--Reflects the elimination of discretionary
charitable contributions made at the direction of the former principal
stockholder of TISM to the Mater Christi Foundation, a charitable
organization founded and managed by the former principal stockholder of
TISM which will not be part of the ongoing operations, in addition to
certain expenses incurred by us on behalf of the Foundation. The Company is
under no obligation and does not intend to establish a similar foundation.
CEO Retirement--Reflects the net effect of the retirement of the Company's
former chief executive officer ($3,396), who was also the principal
stockholder of TISM from the Company's inception through the completion of
the recapitalization, and the estimated base compensation for a new chief
executive officer ($600).
Domino's Farms Land Development Limited Partnership (DFLD)--Reflects the
elimination of equity income and rent expense related to the Company's
investment in DFLD. The DFLD investment was distributed to the former
principal stockholder of TISM in December 1998 and accordingly, will not be
part of the ongoing operations of the Company. DFLD owns various properties
in Ann Arbor, Michigan and the surrounding area. Historically, the Company
leased various parcels of land from DFLD even though such properties were
non-income producing.
Advisory Boards--Reflects the elimination of the estimated net effect of
the termination of the Company's finance and marketing advisory boards
($229) and the estimated costs necessary to compensate a new board of
directors ($50).
Food Distribution Center Acquisitions--Reflects the elimination of
historical rent expense associated with two distribution centers that were
purchased by the Company in August 1998 from the former principal
stockholder of TISM and members of his family. This adjustment also records
depreciation expense to reflect the costs of owning the purchased
distribution center facilities.
The following table summarizes the impact on income from operations of the
elimination of transactions between related parties:
----------
Year Ended
January 3,
1999
----------
Dollars in Thousands
DFOP.............................................................. $ 8,551
Mater Christi Foundation.......................................... 8,204
CEO Retirement.................................................... 2,796
DFLD.............................................................. 992
Advisory Boards................................................... 179
Food Distribution Center Acquisitions............................. 141
----------
Impact on income from operations (includes depreciation).......... 20,863
Depreciation impact included in above adjustments................. 109
----------
Impact excluding depreciation..................................... $ 20,972
==========
26
Notes to Unaudited Pro Forma Consolidated Statement of Income
Fiscal Year ended January 3, 1999
(c) In anticipation of the recapitalization, management instituted the
following formal program:
Store Rationalization Program--Reflects the elimination of net sales, cost
of goods sold and general and administrative expenses related to the store
rationalization program introduced in July, 1998. These adjustments reflect
the impact of the store rationalization program as if it were fully
implemented on December 29, 1997. The store rationalization program
involved the sale of 103 corporate-owned stores to franchisees and the
closure of 39 additional corporate-owned stores. As of January 3, 1999, the
entire program had been completed. The impact of the sale of corporate-
owned stores to franchisees will result in ongoing royalties at the
standard franchise rate from the new franchisees where previously
corporate-owned store revenues and the related costs of operations were
recorded.
The following table summarizes the impact on income from operations of the
store rationalization program:
----------
January 3,
1999
Dollars in Thousands ----------
Impact on income from operations (includes depreciation)......... $ 5,150
Depreciation impact included in the above adjustment............. (1,142)
----------
Impact excluding depreciation.................................... $ 4,008
==========
(d) Reflects the net adjustment necessary to reflect the $2,000 shareholder
advisory fee for consulting and financial services provided to the Company.
See "Certain Relationships and Related Transactions--Management Services
Agreement."
(e) Reflects the amortization expense associated with the non-compete agreement
entered into between TISM and the former principal stockholder of TISM in
conjunction with the recapitalization. The covenant not to compete payment
of $50,000 is being amortized using an accelerated method over the term of
the agreement of three years.
(f) Represents the reduction in general and administrative expenses as a result
of the following non-recurring charges recorded in connection with the
recapitalization: (i) $12.1 million of incentive compensation granted to
certain executives in connection with the recapitalization and (ii) $0.5
million of principal stockholder expenses.
(g) The increase in pro forma interest expense as a result of the
recapitalization is as follows:
----------
January 3,
1999
Dollars in Thousands ----------
Elimination of historical interest expense..................... $ (7,051)
----------
Interest on new borrowings
Cash interest expense at a weighted average interest rate of
9.21% (1)..................................................... 66,476
Amortization of deferred financing costs (2)................... 6,093
----------
Total interest from the debt requirements of the
recapitalization.............................................. 72,569
----------
Net increase in interest expense............................... $ 65,518
==========
---------
(1) A 0.125% increase or decrease in the assumed weighted average interest
rate on the senior credit facilities would change pro forma interest
expense by $559 for the fiscal year ended January 3, 1999.
(2) Represents annual amortization expense utilizing the effective interest
rate method over the terms of the respective borrowings.
27
Notes to Unaudited Pro Forma Consolidated Statement of Income
Fiscal Year ended January 3, 1999
(h) Represents the income tax adjustment required to result in a pro forma
income tax provision based on: (i) the Company's historical tax provision
using historical amounts, (ii) the tax effects of the reversion to "C"
Corporation status and (iii) the tax effects of the pro forma adjustments
described above at an estimated 40% effective tax rate.
(i) EBITDA represents earnings before interest, taxes, depreciation,
amortization and loss on sale of assets (net). EBITDA is presented because
the Company believes it is frequently used by security analysts in the
evaluation of companies and is an important financial measure in our
indenture and credit agreements. However, EBITDA should not be considered
as an alternative to cash flow from operating activities as a measure of
liquidity or as an alternative to net income as an indicator of our
operating performance or any other measure of performance in accordance
with generally accepted accounting principles.
The following table sets forth a reconciliation of Historical EBITDA to Pro
Forma EBITDA:
---------------
Year Ended
January 3, 1999
---------------
Dollars in Thousands
Historical EBITDA............................................... $ 94,962
Related-party transactions...................................... 20,972
Store rationalization program................................... 4,008
Non-recurring charges........................................... 12,610
Shareholder advisory fee........................................ (1,923)
--------
Pro Forma EBITDA................................................ $130,629
========
(j) For purposes of calculating the ratio of earnings to fixed charges,
earnings consist of earnings before income taxes, plus fixed charges. Fixed
charges consist of interest expense, including amortization of financing
costs and the portion of operating rental expense which management believes
is representative of the interest component of rent expense.
28
Selected Historical Consolidated Financial Data
Set forth below are selected historical consolidated financial data of
Domino's, Inc. and subsidiaries at the dates and for the periods indicated. The
selected historical consolidated statements of income data of Domino's, Inc.
and subsidiaries for the fiscal years ended December 29, 1996, December 28,
1997 and January 3, 1999 and the selected historical balance sheet data as of
December 28, 1997 and January 3, 1999 were derived from the historical
consolidated financial statements of Domino's, Inc. and subsidiaries that were
audited by Arthur Andersen LLP, whose report appears elsewhere in this
Prospectus. The selected historical consolidated financial data of Domino's,
Inc. and subsidiaries as of and for the fiscal years ended January 1, 1995 and
December 31, 1995 and the historical balance sheet data as of December 29, 1996
are derived from unaudited consolidated financial statements of Domino's, Inc.
and subsidiaries which, in the opinion of management, include all adjustments
necessary for a fair presentation. The selected historical consolidated
financial data set forth below should be read in conjunction with, and is
qualified by reference to, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the audited consolidated financial
statements and accompanying notes thereto included elsewhere in this
Prospectus.
-----------------------------------
Fiscal Year(a)
-----------------------------------------------------------
1994 1995 1996 1997 1998
Dollars in Thousands ---------- ---------- ---------- ---------- -----------
(unaudited)
System-wide Sales (unau-
dited):
Domestic................ $1,910,465 $1,952,398 $2,110,324 $2,294,224 $ 2,505,991
International........... 383,758 441,108 524,496 633,857 717,694
---------- ---------- ---------- ---------- -----------
Total................... $2,294,223 $2,393,506 $2,634,820 $2,928,081 $ 3,223,685
========== ========== ========== ========== ===========
Statement of Income Da-
ta:
Corporate stores........ $ 326,890 $ 324,181 $ 336,585 $ 376,837 $ 409,413
Domestic franchise roy-
alties................. 80,333 85,495 93,404 102,360 112,222
Domestic distribution... 423,406 452,151 494,173 513,097 599,121
International........... 44,124 43,392 45,775 52,496 56,022
---------- ---------- ---------- ---------- -----------
Revenues................ 874,753 905,219 969,937 1,044,790 1,176,778
Cost of sales........... 666,066 677,644 717,214 757,604 858,411
---------- ---------- ---------- ---------- -----------
Gross profit............ 208,687 227,575 252,723 287,186 318,367
General and administra-
tive................... 184,325 177,771 196,222 222,182 248,098
---------- ---------- ---------- ---------- -----------
Income from operations.. 24,362 49,804 56,501 65,004 70,269
Interest income......... (999) (606) (411) (447) (730)
Interest expense........ 15,851 13,166 6,301 3,980 7,051
---------- ---------- ---------- ---------- -----------
Income before provision
(benefit) for income
taxes, minority
interest and
extraordinary loss..... 9,510 37,244 50,611 61,471 63,948
Provision (benefit) for
income taxes(b)........ 6,713 9,353 30,884 366 (12,928)
Minority interest in net
loss of subsidiary..... (6) -- -- -- --
---------- ---------- ---------- ---------- -----------
Income before extraordi-
nary loss.............. 2,803 27,891 19,727 61,105 76,876
Extraordinary loss due
to refinancing of debt,
net of applicable in-
come taxes............. 2,661 2,576 -- -- --
---------- ---------- ---------- ---------- -----------
Net income.............. $ 142 $ 25,315 $ 19,727 $ 61,105 $ 76,876
========== ========== ========== ========== ===========
Other Financial Data
(unaudited):
EBITDA(c)............... $ 45,187 $ 67,367 $ 72,340 $ 83,140 $ 94,962
Net cash provided by op-
erating activities..... 27,795 37,012 53,225 73,081 64,343
Depreciation and other
non-cash items......... 20,825 17,563 15,839 18,136 24,693
Capital expenditures.... 13,979 14,770 19,887 45,412 49,976
Ratio of earnings to
fixed charges(d)....... 1.4x 2.6x 4.3x 5.7x 4.9x
Balance Sheet Data (un-
audited):
Total assets............ $ 169,772 $ 164,041 $ 155,454 $ 212,978 $ 387,891
Long-term debt.......... 114,529 84,146 46,224 36,438 720,480
Total debt.............. 141,836 110,018 70,067 44,408 728,126
Stockholder's equity
(deficit).............. (79,571) (54,199) (34,868) 26,118 (483,775)
See Notes to Selected Historical Consolidated Financial Data
29
Notes to Selected Historical Consolidated Financial Data
(a) Domino's, Inc.'s fiscal year generally consists of thirteen four-week
periods and ends on the Sunday closest to December 31. The 1994 fiscal year
ended January 1, 1995; the 1995 fiscal year ended December 31, 1995; the
1996 fiscal year ended December 29, 1996; the 1997 fiscal year ended
December 28, 1997; and the 1998 fiscal year, which consisted of fifty-three
weeks, ended January 3, 1999.
(b) Subsequent to December 1996, the Company elected to be an "S" Corporation
for federal income tax purposes. The Company reverted to "C" Corporation
status on December 21, 1998. On a pro forma basis had the Company been a
"C" Corporation throughout this period, income tax expense would have been
higher by the following amounts: fiscal year ended December 28, 1997 -- $18
million; fiscal year ended January 3, 1999 -- $18.9 million.
(c) EBITDA represents earnings before interest, taxes, depreciation,
amortization and loss on sale of assets (net). EBITDA is presented because
we believe it is frequently used by security analysts in the evaluation of
companies and is an important financial measure in our indenture and credit
agreements. However, EBITDA should not be considered as an alternative to
cash flow from operating activities as a measure of liquidity or as an
alternative to net income as an indicator of our operating performance or
any other measure of performance in accordance with generally accepted
accounting principles.
The following table sets forth a reconciliation of income from operations
to EBITDA:
------------------------------------------
Fiscal Year
------------------------------------------
1994 1995 1996 1997 1998
Dollars in Thousands ------- ------- ------- ------- -------
Income from operations.......... $24,362 $49,804 $56,501 $65,004 $70,269
Loss on sale of assets (net).... 2,083 104 353 1,197 1,570
Depreciation and amortization... 18,742 17,459 15,486 16,939 23,123
------- ------- ------- ------- -------
EBITDA.......................... 45,187 67,367 72,340 83,140 94,962
======= ======= ======= ======= =======
(d) For purposes of calculating the ratio of earnings to fixed charges,
earnings represent income before income tax plus fixed charges. Fixed
charges consist of interest expense, including amortization of financing
costs and the portion of operating rental expense which management believes
is representative of the interest component of rent expense.
30
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following discussion and analysis of the financial condition and results of
operations relates substantially to periods prior to completion of the
recapitalization. As a result of the recapitalization, the Company entered into
financing arrangements and, accordingly, has a different capital structure.
Accordingly, the results of operations for periods subsequent to the
consummation of the recapitalization will not necessarily be comparable to
prior periods. See "Recent Developments," "Capitalization," "Description of
Senior Credit Facilities," "Selected Historical Consolidated Financial Data,"
"Unaudited Pro Forma Consolidated Financial Data," and the audited consolidated
financial statements and notes thereto included elsewhere in this Prospectus.
Overview
Domino's is the leading pizza delivery company in the United States. We operate
through a world-wide network of over 6,200 franchise and corporate-owned
stores. Our Distribution division's eighteen regional food distribution centers
and one equipment distribution center supply food, store equipment and supplies
to corporate-owned and domestic franchise stores and equipment to international
stores.
Year Ended January 3, 1999 Compared to Year Ended December 28, 1997
Revenues
General. Revenues include sales by corporate-owned stores, royalty fees from
domestic and international franchises and sales by our Distribution
commissaries to domestic and international franchises. Total revenues increased
$132.0 million, or 12.6%, to $1,176.8 million for the year ended January 3,
1999 from $1,044.8 million for the year ended December 28, 1997. The increase
in total revenues is principally attributed to increases in domestic and
international same store sales, a net increase in the average number of
domestic and international stores and one additional week in the year ended
January 3, 1999 as compared to the year ended December 28, 1997.
Corporate. Revenues from Corporate Store operations increased $32.6 million, or
8.7%, to $409.4 million for the year ended January 3, 1999 from $376.8 million
for the year ended December 28, 1997. The increase is principally attributed to
a 4.0% increase in same store sales as well as a slight increase in the average
number of corporate-owned stores. Ending corporate-owned stores, however,
decreased by 125 to 642 as of January 3, 1999 from 767 as of December 28, 1997
as a result of significant store rationalization program activity that occurred
between September 1998 and December 1998.
Franchise. Revenues from Domestic Franchise operations are derived primarily
from royalty income. Revenues from Franchise operations increased $9.8 million,
or 9.6%, to $112.2 million for the year ended January 3, 1999 from $102.4
million for the year ended December 28, 1997. This increase in revenues
resulted mainly from a 4.6 % increase in same store sales and an increase in
the average number of franchise stores. Ending franchise stores increased by
183 to 3,847 as of January 3, 1999 from 3,664 as of December 28, 1997.
Distribution. Revenues from Domestic Distribution operations are derived
primarily from the sale of food, equipment and supplies to domestic franchise
stores and, to a lesser extent, the sale of equipment to international stores,
and excludes sales to corporate-owned stores. Revenues from Distribution
operations increased $86.0 million, or 16.8%, to $599.1 million for the year
ended January 3, 1999 from $513.1 million for the year ended December 28, 1997.
The increase in revenues is principally due to the increase in franchise stores
sales noted above, an increase in cheese prices, and an increase in equipment
and supply sales to franchisees to roll out the Domino's HeatWave Hot Bag
technology in Spring 1998, partially offset by increases in Distribution's
profit sharing, profit capitation and volume discount programs which are netted
against revenues.
International. Revenues from International operations, which are derived mainly
from food sales to international franchises, master franchise agreement
royalties and, to a lesser extent, franchise and development fees, increased
$3.5 million, or 6.7%, to $56.0 million for the year ended January 3, 1999 from
$52.5 million for the year ended December 28, 1997. The increase was partially
driven by a 12.6% increase in international franchise royalty revenues that was
caused by an increase in the ending number of international franchise stores to
1,730 at January 3, 1999 from 1,520 at December 28, 1997, partially offset by a
decrease in average store sales caused by unfavorable changes in foreign
currency exchange rates, primarily in Asian markets and Mexico. On a constant
dollar basis, same store sales for the year ended January 3, 1999 increased
3.4% from the year ended December 28, 1997. Sales of commissary products to
international franchisees increased $1.1 million, or 3.3%, to $34.2 million for
the year ended January 3, 1999 from $33.1 million for the year ended December
28, 1997.
31
Gross Profit. Gross profit increased $31.2 million, or 10.9%, to $318.4 million
for the year ended January 3, 1999 from $287.2 million for the year ended
December 28, 1997. This increase was driven primarily by the increase in
revenues. As a percentage of revenues, gross profit decreased 0.4% to 27.1% for
the year ended January 3, 1999 from 27.5% for the year ended December 28, 1997.
This decrease resulted primarily from lower margin distribution revenues
growing faster than revenues of other divisions and higher Corporate operations
costs due to increases in the price of cheese and the minimum wage, partially
offset by a $6.7 million credit to insurance expense due to a reduction in the
actuarial calculation of our required insurance reserves.
General and Administrative. General and administrative expenses consists
primarily of regional support offices, corporate administrative functions,
corporate store and distribution facility management costs and advertising and
promotional expenses. General and administrative expenses increased $25.9
million, or 11.7%, to $248.1 million for the year ended January 3, 1999 from
$222.2 million for the year ended December 28, 1997. This increase is due
primarily to incentive compensation to certain executives in connection with
the recapitalization and an increase in costs that coincide with increased
business volume, including administrative and corporate store manager
compensation, computer expenses, advertising and professional service fees,
partially offset by a decrease in bad debt expenses. As a percentage of net
revenues, general and administrative expenses decreased to 21.1% for the year
ended January 3, 1999 compared to 21.3% for the year ended December 28, 1997,
due primarily to economies of scale created by an increase in overall business
volume and the decrease in bad debt expenses, partially offset by the
recapitalization incentive compensation.
Interest Expense. Interest expense increased $3.1 million, or 77.5%, to $7.1
million for the year ended January 3, 1999 from $4 million for the year ended
December 28, 1997 primarily as a result of a December 1998 increase in debt to
fund the recapitalization.
Provision (Benefit) for Income Taxes. The provision (benefit) for income taxes
decreased to a benefit of $12.9 million for the year ended January 3, 1999 from
a provision of $0.4 million for the year ended December 28, 1997 driven
primarily by establishment of a $27.9 million deferred tax asset upon the
conversion of the Company to "C" Corporation status from "S" Corporation status
for federal income tax reporting purposes partially offset by the establishment
of tax reserves.
Net Income. Net income increased $15.8 million, or 25.9%, to $76.9 million for
the year ended January 3, 1999 from $61.1 million for the year ended December
28, 1997. This increase was due primarily to the factors described above.
Year Ended December 28, 1997 Compared to Year Ended December 29, 1996
Revenues.
General. Total revenues increased $74.9 million, or 7.7%, to $1,044.8 million
for the year ended December 28, 1997 from $969.9 for the year ended December
29, 1996.
Corporate. Revenues from Corporate Store operations increased $40.2 million, or
11.9%, to $376.8 million for the year ended December 28, 1997 from $336.6
million for the year ended December 29, 1996. The increase is principally
attributed to a 4.5% increase in same store sales as well as an increase in the
average number of corporate-owned stores. Ending corporate-owned stores
increased by 63 to 767 as of December 28, 1997 from 704 as of December 29,
1996.
Franchise. Revenues from Domestic Franchise operations increased $9 million, or
9.6%, to $102.4 million for the year ended December 28, 1997 from $93.4 million
for the year ended December 29, 1996. The increase in revenues resulted mainly
from a 7.3% increase in same store sales and an increase in the average number
of franchise stores. Ending franchise stores increased by 52 to 3,664 as of
December 28, 1997 from 3,612 as of December 29, 1996.
Distribution. Revenues from Domestic Distribution operations increased $18.9
million, or 3.8%, to $513.1 million for the year ended December 28, 1997 from
$494.2 million for the year December 29, 1996. The increase in revenues is
principally attributed to the increase in franchise store sales noted above and
an increase in equipment and supply sales to franchisees, partially offset by a
decrease in cheese prices during the year ended December 28, 1997 and increases
in profit sharing, profit capitation and volume discount programs which are
netted against revenues.
International. Revenues from International operations increased $6.7 million,
or 14.6%, to $52.5 million for the year ended December 28, 1997 from $45.8
million for the year ended December 29, 1996. The increase was partially driven
by a 16.6% increase in international franchise royalty revenues that was caused
by an increase in the ending number of international franchise stores to 1,520
at December 28, 1997 from 1,250 at December 29, 1996, partially offset by a
32
decrease in average store sales caused by unfavorable changes in foreign
currency exchange rates, primarily in Japan and Mexico, and a slight decrease
in the overall effective royalty rate due to discounted royalties programs
intended to stimulate franchise store growth. On a constant dollar basis, same
store sales for the year ended December 28, 1997 increased 11.1% from the year
ended December 29, 1996. Sales of commissary products to international
franchisees increased $4.8 million, or 17%, to $33.1 million for the year ended
December 28, 1997 from $28.3 million for the year December 29, 1996.
Gross Profit. Gross profit increased $34.5 million, or 13.7%, to $287.2 million
for the year ended December 28, 1997 from $252.7 million for the year ended
December 29, 1996. This increase was driven primarily by the increase in
revenues. As a percentage of net revenues, gross profit increased 1.4% to 27.5%
for the year ended December 28, 1997 from 26.1% for the year ended December 29,
1996. This increase resulted primarily from decreases in insurance costs and
the price of cheese and lower margin distribution revenues growing at a slower
rate than revenues of other divisions, partially offset by an increase in the
minimum wage.
General and Administrative Expense. General and administrative expenses
increased $26.0 million, or 13.3%, to $222.2 million for the year ended
December 28, 1997 from $196.2 million for the year ended December 29, 1996.
This increase was due primarily to cost increases that coincide with increased
business volume, including administrative and corporate store manager
compensation, advertising and promotional expenses, travel, awards and
incentives, research and development and professional service fees. As a
percentage of net revenues, general and administrative expenses increased to
21.3% for the year ended December 28, 1997 compared to 20.2% for the year ended
December 29, 1996, due primarily to (i) an increase in Corporate and Franchise
revenues as a percentage of total revenues which demonstrate relatively higher
general and administrative expenses as a percentage of revenues than our other
divisions, (ii) increased litigation costs and (iii) an increase in charitable
contributions.
Interest Expense. Interest expense decreased $2.3 million, or 36.5%, to $4
million for the year ended December 28, 1997 from $6.3 million for the year
ended December 29, 1996 as a result of decreased average debt levels.
Net Income. Net income increased $41.4 million, or 210.2%, to $61.1 million for
the year ended December 28, 1997 from $19.7 million for the year ended December
29, 1996. This increase was due primarily to the factors described above and a
$30.5 million decrease in our provision for income taxes to $0.4 million for
the year ended December 28, 1997 from $30.9 million for the year ended December
29, 1996, due mainly to our "S" Corporation election effective December 30,
1996. Also due to our "S" Corporation election, we recorded an $8.2 million
charge to provision for income taxes in 1996 to fully reserve against our
remaining deferred tax asset.
Liquidity and Capital Resources
Historical
Historically, we have required limited levels of working capital to fund
growth. As of January 3, 1999, our working capital balance was negative. In
addition, our sales are not typically seasonal, which further limits our
working capital requirements.
Net cash provided by operating activities was $64.3 million, $73.1 million and
$53.2 million for the years ended January 3, 1999, December 28, 1997 and
December 29, 1996, respectively. The decrease in cash flows from operations for
the year ended January 3, 1999 was primarily due to the impact of a $27.6
million benefit for deferred federal income taxes, partially offset by an
increase in net income. The improvement in cash flows from operating activities
for the year ended December 28, 1997 was primarily attributable to an increase
in net income, partially offset by a net increase in working capital that
resulted from a $10.2 million increase in the Domino's HeatWave Hot Bag
inventories in anticipation of the domestic roll-out of that product to
franchisees in early 1998.
Net cash used in investing activities consists primarily of capital
expenditures and investments in marketable securities, partially offset by
proceeds from asset sales and collections on notes receivable from franchisees.
Net cash used in investing activities was $38.8 million, $46.5 million and
$15.0 million for the years ended January 3, 1999, December 28, 1997 and
December 29, 1996, respectively. The decrease in cash used in investing
activities for the year ended January 3, 1999 is primarily attributable to
increased proceeds from asset sales that resulted from our store
rationalization program and liquidation of our investments in marketable
securities that had been placed in trusts to fund our executive and managerial
deferred compensation plans, which were terminated in December 1998, partially
offset by an increase in
33
capital expenditures. The increase in cash used in investing activities for the
year ended December 28, 1997 was primarily attributable to an increase in
capital expenditures.
Capital expenditures were $50.0 million, $45.4 million and $19.9 million for
the years ended January 3, 1999, December 28, 1997 and December 29, 1996,
respectively. The higher capital expenditures for the years ended January 3,
1999 and December 28, 1997 as compared to the year ended December 29, 1996 were
primarily attributable to significant acquisitions of franchise stores and
commissary businesses, spending related to the Domino's 2000 reimaging and
relocation program and purchase and development costs associated with our new
financial and supply chain systems. Capital expenditures for the year ended
January 3, 1999 included $10.5 million of development costs for our financial
and supply chain systems, $10.1 million for the Domino's 2000 reimaging and
relocation program, $4.2 million for the acquisition of distribution centers in
Georgia and Northern California and $2.6 million to implement the Domino's
HeatWave Hot Bags in corporate-owned stores. Capital expenditures for the year
ended December 28, 1997 included $13.8 million for acquisitions of franchise
store and commissary businesses, primarily in the Salt Lake City, Utah and
Arlington, Texas areas, $8.8 million for the Domino's 2000 reimaging and
relocation program and $3.3 million for purchase and development of our
financial and supply chain systems modules. Capital expenditures for the year
ended December 29, 1996 included $3.5 million for the Domino's 2000 reimaging
and relocation program and $4.4 million for acquisitions of franchise store and
commissary businesses.
Net cash used in financing activities was $25.6 million, $26.5 million and
$40.4 million for the years ended January 3, 1999, December 28, 1997 and
December 29, 1996, respectively. Net cash used in financing activities for the
year ended January 3, 1999 included borrowings of $722.1 million to provide
funding for transactions pursuant to the recapitalization, which primarily
included $629.8 million of shareholder distributions pursuant to the
recapitalization, retirement of $39.9 million of debt under our previous credit
facilities and payment of $43.3 million of deferred financing costs. Also
included in cash used in financing activities for the year ended January 3,
1999 was $36.2 million in distributions to pay our stockholders' "S"
Corporation income taxes for both the year ended December 28, 1997 and a
portion of the year ended January 3, 1999. Net cash used in financing
activities for the years ended December 28, 1997 and December 29, 1996 was
comprised mainly of net repayment of long-term debt.
After the Recapitalization
Following the recapitalization, our primary sources of liquidity continue to be
cash flow from operations and borrowings under our new revolving credit
facility. We expect that ongoing requirements for debt service and capital
expenditures will be funded from these sources.
We incurred substantial indebtedness in connection with the recapitalization.
As of January 3, 1999, we had $728.1 million of indebtedness outstanding as
compared to $46.3 million of indebtedness outstanding immediately prior to the
recapitalization. In addition, we have a stockholders' deficit of $483.8
million as of January 3, 1999, as compared to stockholders' equity of $41.8
million immediately prior to the recapitalization. Our significant debt service
obligations following the recapitalization could, under certain circumstances,
have material consequences to our security holders, including holders of the
Exchange Notes. See "Risk Factors."
Concurrent with the recapitalization, we issued the Notes and entered into the
senior credit facilities. The term loan facilities provide for multiple tranche
term loans in the aggregate principal amount of $445 million. The revolving
credit facility provides revolving loans in an aggregate amount of up to $100
million. Upon closing of the recapitalization, we borrowed the full amount
available under the term loan facility and approximately $2.1 million under the
revolving credit facility. As of January 3, 1999, borrowings under the
revolving credit facility were $1.7 million and letters of credit issued
thereunder were $10.8 million. The borrowings under the revolving credit
facility will be available to fund our working capital requirements, capital
expenditures and other general corporate purposes. Amortization on the term
loans begins on December 31, 1999. The Tranche A facility matures in quarterly
installments from March 31, 2000 through 2004. The Tranche B facility matures
in quarterly installments from December 31, 1999 through 2006. The Tranche C
facility matures in quarterly installments from December 31, 1999 through 2007.
See "Description of Senior Credit Facilities."
We recently implemented a store reimaging and relocation campaign called
Domino's 2000. The reimaging program involves a variety of store improvements
including upgrading store interiors, adding new signage to draw attention to
the store and providing contemporary uniforms for our employees. We believe
that the per store capital expenditures for the reimaging campaign will not
exceed an average of $30,000. The cost of relocating a corporate store is not
expected to exceed an average of $160,000 per store. Domino's will incur these
capital expenditures on a discretionary basis and only with respect to its
corporate-owned stores. Capital expenditures are expected to be funded from
internally generated cash flows and by borrowings under our revolving credit
facility.
34
Effective February 1, 1999, we terminated the Distribution profit capitation
program. Under this program, our Distribution division had rebated to
participating franchisees all Distribution pre-tax profits in excess of 2% of
gross revenues from sales to corporate-owned and domestic franchise stores. In
addition, at the beginning of fiscal year 1999 corporate-owned stores began
participating in the profit sharing program of our Distribution division. This
profit sharing plan was recently amended to increase rebates to participating
stores from approximately 45% to approximately 50% of their regional
distribution center's pre-tax profits. Although corporate-owned stores had the
right to participate in the program, historically only domestic franchise
stores participated. We agreed that the aggregate funds available for rebate to
participating franchisees in 1999 under the profit sharing plan would be at
least $1 million more than the aggregate payments made to franchisees under the
profit sharing and profit capitation programs in fiscal year 1998. We agreed to
pay any deficiency to participating franchisees on a pro rata basis.
Based upon the current level of operations and anticipated growth, we believe
that cash generated from operations and amounts available under the revolving
credit facility will be adequate to meet our anticipated debt services
requirements, capital expenditures and working capital needs for the next
several years. There can be no assurance, however, that our business will
generate sufficient cash flow from operations or that future borrowings will be
available under the senior credit facilities or otherwise to enable us to
service our indebtedness, including the senior credit facilities and the Notes,
to redeem or refinance the Cumulative Preferred Stock when required or to make
anticipated capital expenditures. Our future operating performance and our
ability to service or refinance the Notes, to service, extend or refinance the
senior credit facilities and to redeem or refinance the Cumulative Preferred
Stock will be subject to future economic conditions and to financial, business
and other factors, many of which are beyond our control.
Impact of Inflation
We believe that our results of operations are not dependent upon moderate
changes in the inflation rate. Inflation and changing prices did not have a
material impact on our operations in 1996, 1997 and 1998. Severe increases in
inflation, however, could affect the global and United States economy and could
have an impact on our business, financial condition and results of operations.
Year 2000 Readiness Disclosure
We have recently either replaced or upgraded a majority of our core information
systems, including the franchise royalties system, franchise legal system,
information warehouse system and ULTRA store system which is the point-of-sale
and operating system for corporate-owned stores. In addition, we are in the
process of implementing a full suite of financial and distribution supply chain
systems, which we expect will be completed no later than September 30, 1999.
Upon completion of this project, we believe that all of our critical internal
information systems will operate correctly with regard to the import, export,
and processing of date information, including correct handling of leap years,
in connection with the change in the calendar year from 1999 to 2000. Each of
these upgrades were part of our budgeted expenses for upgrading our computer
infrastructure and were not primarily part of an attempt to address the Year
2000 issue. We have, however, complemented our system upgrades with an internal
compliance team responsible for testing all of our information systems for Year
2000 compliance.
We are also planning to inventory and address other less critical equipment and
machinery, such as facility equipment, that may contain embedded technology
with Year 2000 compliance problems. We expect to complete this effort no later
than June 30, 1999. We also have material relationships with franchisees,
suppliers and vendors and other significant entities, such as public utilities,
that may not have adequately addressed the Year 2000 issue with respect to
their equipment or information systems. Although we are attempting to assess
the extent of their compliance efforts, we have not received any written
assurances and, accordingly, can not determine the risk to our business.
For the fiscal year ended January 3, 1999, we spent approximately $256,000
addressing the Year 2000 issue. For the year ending January 2, 2000, we
estimate spending approximately $520,000 addressing the Year 2000 issue. These
amounts do not reflect the cost of our internal compliance team or the cost of
planned replacement systems, such as the financial and distribution supply
chain system software, which may have a positive impact on resolving the Year
2000 Issue. We do not expect that additional costs required to address the Year
2000 issue will have a significant impact on our business or operating results.
In the event, however, that we are unable to complete planned upgrades or
implement replacements systems prior to December 31, 1999 or in the event our
franchisees, suppliers and vendors do not adequately address the Year 2000
issue before such date, we may experience significant disruption or delays in
our operations, which in turn could have a material adverse effect on our
business.
35
Changes in Accounting Principles
The Financial Accounting Standards Board ("FASB") has issued SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information," which
requires financial and descriptive information about an enterprise's reportable
operating segments. Operating segments are components of an enterprise about
which separate financial information is available and evaluated regularly by
the chief operating decision maker in deciding how to allocate resources and in
assessing performance. As required, we adopted this statement in the fiscal
year ended January 3, 1999. This adoption did not affect our results of
operations or financial position but did affect the disclosure of segment
information.
FASB has also issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," which requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value. This statement is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. We have not determined the reporting
impact, if any, of the adoption of this statement.
36
Business
General
Domino's is the leading pizza delivery company in the United States. We operate
through a world-wide network of over 6,200 franchise and corporate-owned stores
which generated system-wide sales of $3.2 billion for the fiscal year ended
January 3, 1999. System-wide sales by our domestic franchise and corporate-
owned stores accounted for approximately 30% of the United States pizza
delivery market in 1997. This market leadership position was nearly one and a
half times the market share of our nearest competitor.
Domino's offers a focused menu of high quality, value-priced pizza with three
types of crust (Hand-Tossed, Thin Crust and Deep Dish), along with buffalo
wings, cheesy bread and bread sticks. Our original pizza is made from fresh
dough produced in our regional distribution centers. We prepare every pizza
using real mozzarella cheese, pizza sauce made from fresh tomatoes and a choice
of high quality meat and vegetable toppings in generous portions. Our focused
menu and use of premium ingredients enables us to consistently and efficiently
produce high quality pizza.
Over the 38 years since our founding, we have developed a simple, cost-
efficient model. In addition to offering a limited menu, our stores are
designed for delivery and do not offer eat-in service. As a result, our stores
require relatively small (1,000-1,200 square feet), low rent locations and
limited capital expenditures. Our simple operating model helps to ensure
consistent, quality product and to reduce store expenses and capital
commitments.
The Domino's brand is widely recognized and identified by consumers in the
United States as the leader in pizza delivery. We have built this successful
brand image and recognition through extensive national and local television,
print and direct mail campaigns. Over the past four years, Domino's and its
franchisees have invested an estimated $750 million on national, cooperative
and local advertising in the United States. The Domino's brand name is one of
Ad Age's "100 Megabrands," a list which includes other prominent brands such as
Coke(R), Campbell's(R), Kodak(R) and Wrigley(R).
Domino's operates through three business segments:
.Domestic Stores, consisting of:
.Corporate, which operates our domestic network of 642 corporate-owned
stores;
.Franchise, which oversees our domestic network of 3,847 franchise
stores;
. Distribution, which operates our eighteen regional distribution centers
and one equipment distribution center that sell food, equipment and
supplies to our domestic corporate-owned and franchise stores and
equipment to international stores; and
. International, which oversees our network of 1,730 franchise stores in
64 international and off-shore markets, including Alaska, Hawaii, Puerto
Rico, the U.S. Virgin Islands and Guam, and distributes food to stores
in Alaska, Hawaii and Canada.
Industry Overview
The United States pizza market had sales of approximately $20.5 billion in
1997. This market has three segments: eat-in, carry-out and delivery. We focus
on the delivery segment, which accounted for approximately $5.9 billion or 29%
of the total United States pizza market in 1997. Pizza delivery has been the
fastest growing segment of this market, with compound annual growth of 8.2%
between 1995 and 1997, as compared to 4.1% for the eat-in segment and 4.3% for
the carry-out segment over the same period.
Domestic pizza delivery sales have not only grown quickly, but have also shown
stable growth. From 1988 through 1997, pizza delivery sales in the United
States grew at a compound annual rate of 6.2%. Even in the recessionary period
during 1990 and 1991, pizza delivery sales in the United States continued to
grow at an annual compound rate of 2.5%.
We believe that growth and stability in the pizza delivery market will persist
as a result of several continuing demographic factors. In particular, we
believe that longer work schedules and the prevalence of dual career families
have led to rapid growth in the demand for delivered food. We believe that
delivered pizza is well positioned to capitalize on these trends as other food
products have difficulty matching pizza's value, consistency and timeliness of
delivery.
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Competitive Strengths
Leading Market Position. Domino's is the leading pizza delivery company in the
United States. System-wide sales by our corporate-owned and domestic franchise
stores accounted for approximately 30% of the United States pizza delivery
market in 1997. This market leadership position represented nearly one and a
half times the market share of our nearest competitor. Through our world-wide
network of over 6,200 franchise and corporate-owned stores, we deliver
consistent, high quality pizza to consumers across the contiguous United States
and in 64 international and off-shore markets, including Alaska, Hawaii, Puerto
Rico, the U.S. Virgin Islands and Guam. Our leadership position and geographic
presence provide significant cost and marketing advantages relative to smaller
delivery competitors.
Strong Brand Equity. Our brand name is widely recognized by consumers in the
United States as the leader in pizza delivery. Over the past four years,
Domino's and its franchisees have invested an estimated $750 million on
national, cooperative and local advertising in the United States. The strength
of our brand is reflected in its selection as one of Ad Age's "100 Megabrands,"
a list which includes other prominent brands such as Coke(R), Campbell's(R),
Kodak(R) and Wrigley(R). We continue to reinforce the strength of our brand
name recognition with extensive advertising through national and local
television, print and direct mail. Our strong brand name in pizza delivery
provides significant marketing strength.
Focused and Cost-efficient Operating System. We have focused on pizza delivery
since our founding in 1960. Over this time, we have developed a simple, cost-
efficient operating system for producing a streamlined menu offering. Our
limited menu, efficient food production process and extensive employee training
program allow us to produce our pizza in approximately ten minutes. The
simplicity and efficiency of our store operations gives us significant
advantages over competitors that also participate significantly in the carry-
out or eat-in segments of the pizza market and, as a result, have more complex
operations. Consequently, we believe these competitors have a difficult time
matching Domino's value, quality and consistency in the delivery segment.
Limited Capital Requirements. We have limited capital expenditure and working
capital requirements. Our capital expenditures are minimal because we focus on
delivery and because our franchisees fund all capital expenditures for their
stores. Since our stores do not offer eat-in service, they do not require
expensive locations, are relatively small (1,000-1,200 square feet) and are
inexpensive to build and furnish as compared to other fast food establishments.
A new Domino's store typically requires only $125,000 to $175,000 in initial
capital and minimal annual maintenance, far less than typical establishments of
many of our major competitors. Because over 85% of our domestic stores are
franchised, our share of system-wide capital expenditures is small. In
addition, Domino's requires minimal working capital as we collect approximately
98% of our royalties from domestic franchisees within three weeks of when the
royalty is generated and achieve more than 50 inventory turns per year in our
regional distribution centers. We believe these minimal working capital
requirements are advantageous for funding our continued growth.
Strong Franchise Relationships. We believe our strong relationships with
franchisees are a critical component of our success. We support our franchisees
by providing the training, infrastructure and financial incentives that have
resulted in very low failure rates. We employ an owner-operator model that
results in our franchisees owning an average of three stores, considerably
fewer than most franchise models. We also believe that our franchise owners
enjoy some of the most attractive economics within the fast food industry. The
average payback on a new franchise store investment is less than three years.
Our strong cooperation with our franchisees is demonstrated by an over 96%
voluntary participation rate in our U.S. distribution system and strong
franchisee participation in co-operative advertising programs. Because we
experience a contract renewal rate of over 99% and currently maintain a list of
over 120 pending or approved new franchise applications, we believe our
franchise system will continue to be a stable and growing component of our
business.
Efficient National Distribution System. We operate a nationwide network of
eighteen regional distribution centers. Each is generally located within a 300-
mile radius of the stores it serves. Our distribution system takes advantage of
volume purchasing of food and supplies, and provides consistency and
efficiencies of scale in food production. We serve all corporate-owned stores
and over 96% of our domestic franchise stores with an on-time accuracy rate of
over 98%. Our low-cost distribution system allows our store managers to focus
on food production and customer service.
Experienced Management Team. Domino's is managed by an experienced team that
averages nearly 13 years of service with the Company. Domino's founder, Thomas
Monaghan, recruited and promoted this team in the mid-1990s. This team
possesses strong leadership skills in marketing, corporate, franchise,
international, distribution, and finance and has driven our strong financial
performance over the past four years. In connection with the recapitalization
of our parent company, TISM, Inc., by Bain Capital, Inc., Thomas Monaghan
retired as Chief Executive Officer and now serves as a director of TISM and
Domino's.
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Business Strategy
Our business strategy has been to grow revenues and profitability by focusing
on prompt delivery of high quality product, operational excellence and brand
recognition through strong promotional advertising. This strategy has resulted
in our leading market position and track record of profitable growth. We intend
to achieve further growth and strengthen our competitive position through the
continued implementation of this strategy and the following initiatives:
Capitalize on Strong Industry Dynamics. We believe that the pizza delivery
market will continue to show strong growth and stability as a result of several
positive demographic trends. These trends include more dual career families,
longer work weeks and increased consumer emphasis on convenience. In addition,
we believe that the low cost and high value of pizza will support continued
industry growth even during an economic slowdown. Domino's is well positioned
to take advantage of these dynamics, given our market leadership position,
strong brand name and cost-efficient operating model.
Leverage Market Leadership Position and High Brand Awareness. Domino's is the
leading pizza delivery company in the United States. System-wide sales by our
corporate-owned and domestic franchise stores accounted for approximately 30%
of the United States pizza delivery market in 1997. This market leadership
position represented nearly one and a half times the market share of our
nearest competitor. Our market leadership position and strong brand give us
significant marketing strength relative to our smaller competitors. We believe
strong brand recognition is important in the pizza delivery industry because
consumer decisions are strongly influenced by brand awareness. We intend to
continue investments that promote our brand name and enhance our recognition as
the pizza delivery leader.
Implement Cost Reduction Opportunities. Historically, the profitability of a
typical corporate-owned store has lagged the profitability of a typical
franchise store. We are implementing the following cost reduction programs to
increase the profitability of our corporate-owned stores:
. Corporate Store Rationalization. We sold to franchisees or closed 142 of
our under-performing corporate-owned stores prior to December 31, 1998.
. Corporate Store Labor Reductions. We are reducing the labor costs at our
corporate-owned stores by improving shift schedules, adjusting incentive
programs and minimizing overtime.
. Distribution Profit Sharing. At the beginning of fiscal year 1999,
corporate-owned stores began participating in the profit sharing program
of our Distribution division. This profit sharing plan was recently
amended to increase our rebates to participating stores from
approximately 45% to approximately 50% of their regional distribution
center's pre-tax profits. Although corporate-owned stores had the right
to participate in the program, historically only domestic franchise
stores participated.
Expand Store Base. We plan to continue expanding our base of traditional
domestic stores, increase our network of international stores and enter new
markets with non-traditional stores. From 1995 to 1998, we increased our
domestic store base by approximately 1.9% per year. We plan to grow our
traditional domestic store base primarily by franchising new stores to existing
franchisees. We also believe that a significant opportunity exists to open new
franchise stores in under-penetrated international markets. We have also
successfully tested a new venue concept for non-traditional stores called
Domino's Delivery Express which provide both delivery and carry-out services
from locations in convenience stores and are designed for lightly populated
markets.
Operations
General. We believe our operating model is differentiated from other pizza
competitors that are not focused primarily on the delivery business. Our
business model has certain competitive advantages, including production-
oriented store design, efficient and consistent operational processes,
strategic location to minimize delivery time, favorable store economics and a
focused menu. We have also identified a number of cost reduction opportunities
to enhance profitability at our corporate-owned stores.
Production-Oriented Store Design. Our typical store is small, occupying
approximately 1,000 to 1,200 square feet, and is designed with a focus on
efficient and timely production of consistent, high-quality pizza for delivery.
Our stores are production facilities and, accordingly, do not have an eat-in
section.
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Efficient Processes. Each store executes an operational process which includes
order taking, pizza preparation, cooking (via automated, conveyor-driven
ovens), boxing, and delivery. The entire pizza production process is designed
for completion in less than ten minutes to allow sufficient time for safe
delivery within 25 to 30 minutes of ordering. This simple and focused
operational process has been achieved through years of continuous improvement,
resulting in a high level of efficiency.
Strategic Store Locations. We locate our stores strategically to facilitate
quality delivery service to our customers. The majority of our stores are
located in urban areas, suburban areas adjacent to large or mid-size cities, or
on or near college campuses or military bases. The majority of our stores serve
from 5,000 to 15,000 addresses. In order to facilitate expansion into smaller
markets, we have recently developed Delivery Express outlets, which provide
both delivery and carry-out from internal locations at convenience stores and
are designed for markets that are lightly populated.
Favorable Store Economics. Because our stores do not offer eat-in service or
rely heavily on carry-out, the stores typically do not require expensive real
estate, are relatively small, and are inexpensive to build-out and furnish. A
new Domino's store typically requires only $125,000 to $175,000 in initial
capital, far less than typical establishments of many of our major competitors.
Our stores also benefit from lower maintenance costs as store assets are long-
lived and updates are not frequently required.
Focused Menu. We maintain a focused menu that is designed to present an
attractive, high quality offering to customers, while expediting delivery and
avoiding unnecessary errors in the order process. The menu has three simple
components: pizza size, pizza type and pizza toppings. Most stores carry two
sizes of traditional Hand-Tossed, Deep Dish and Thin Crust pizza. The typical
store also offers bread sticks, cheesy bread and buffalo wings. We believe that
our focused menu creates a strong identity among consumers, improves operating
efficiency and maintains food quality and consistency.
Cost Reduction Opportunities. Our management has identified a number of cost
reduction opportunities to enhance the profitability of our corporate-owned
stores. Traditionally, the profitability of our typical corporate-owned store
has lagged that of a typical franchise store. We are currently implementing our
corporate store rationalization program, corporate store labor reduction plan,
and Distribution profit sharing program for corporate stores.
Divisional Overview
General. We operate through four main divisions: (i) Corporate, which operates
our network of 642 corporate-owned stores; (ii) Franchise, which oversees our
domestic network of 3,847 franchise stores; (iii) Distribution, whose eighteen
regional food distribution centers and one equipment distribution center supply
food, store equipment and supplies to corporate-owned and domestic franchise
stores and equipment to international stores; and (iv) International, which
oversees our network of 1,730 international franchise stores in 64
international and off-shore markets including Alaska, Hawaii, Puerto Rico, the
U.S. Virgin Islands and Guam, and includes distribution operations for Alaska,
Hawaii and Canada.
Corporate. Our network of corporate-owned stores plays an important strategic
role in our predominately franchised system. In particular, we utilize our
corporate-owned stores as a forum for training new store managers and
prospective franchisees, and as a test site for new products and store
operational improvements. We also believe that our corporate-owned stores add
economies of scale for advertising, marketing and other fixed costs
traditionally borne by franchisees. Corporate is divided into three geographic
regions and is managed through fifteen field offices in the contiguous United
States.
Franchise. Our domestic franchisees own and operate a network of 3,847 stores
in the contiguous United States. Our domestic franchises are operated by highly
qualified entrepreneurs who own and operate an average of three stores. Our
principal sources of revenue from domestic franchise store operations are
royalty payments and, to a much lesser extent, fees for store openings and
transfers.
Our domestic franchises are managed through five regional offices located in
Dallas, Texas; Atlanta, Georgia; Santa Ana, California; Linthicum, Maryland;
and Ann Arbor, Michigan. The regional offices provide training, financial
analysis, store development, store operational audits and marketing strategy
services for the franchisees. We maintain a close relationship and direct link
with the franchise stores through regional franchise executive teams, an array
of computer-based training materials that ensure franchise stores operate in
compliance with specified standards, and franchise advisory groups that
facilitate communications between us and our franchisees.
Distribution. Distribution operates one equipment distribution center and
eighteen regional food distribution centers located throughout the United
States that order, receive, store and deliver uniform, high-quality pizza-
related supplies to
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both domestic franchise and corporate-owned stores. Each regional food
distribution center serves an average of 250 stores, generally located within a
300-mile radius.
Distribution services all of the corporate-owned stores and over 96% of the
domestic franchise stores, even though we give our domestic franchisees the
option of satisfying their food and equipment needs through approved
independent suppliers. Distribution supplies products ranging from fresh dough
and basic food items to pizza boxes and cleaning supplies. Distribution drivers
also unload supplies and stock store shelves after hours, thereby minimizing
disruption of store operations during the day. We believe that franchisees
choose to obtain supplies from us because we provide the most efficient and
cost-effective alternative.
At the beginning of fiscal year 1999, Distribution implemented new profit
sharing arrangements with our corporate stores and nearly all of our eligible
franchisees. We believe these arrangements strengthen our ties with these
franchisees, secure a stable source of revenue and provide incentives for
franchisees to work closely with us to reduce costs. These profit sharing
arrangements provide corporate stores and participating franchisees with
approximately 50% of their regional distribution center's pre-tax profits.
Previously, Distribution had a profit capitation program whereby our
Distribution division rebated all Distribution pre-tax profits in excess of 2%
of gross revenues from sales to corporate-owned and domestic franchise stores
to participating franchisees.
Distribution's information systems are an integral part of its superior
customer service. Distribution employs routing strategies to reduce the
frequency of late deliveries, utilizing software to determine store routes on a
daily basis for optimal efficiency. Through our strategic distribution center
locations and proven routing systems, we have achieved on-time delivery rates
of over 98%. Our food distribution centers currently achieve inventory turns in
excess of 50 per year.
International. International oversees our network of over 1,730 stores in 64
international and off-shore markets, including Alaska, Hawaii, Puerto Rico, the
U.S. Virgin Islands and Guam. We have over 100 franchise stores in each of
Mexico, Canada, Japan, Australia, the United Kingdom, and Taiwan. The principal
sources of revenues from international operations are royalty payments by
franchisees, food sales to franchisees, and fees from master franchise
agreements and store openings.
We grant international franchises through master franchise agreements to well-
capitalized entities who have knowledge of the local market. These master
franchise agreements generally grant the franchisee exclusive rights to develop
or sub-franchise stores in a particular geographic area and contain growth
clauses requiring franchisees to open a minimum number of stores within a
specified period. We also seek to expand internationally by selectively
converting regional and local competitors' stores to Domino's franchises and
have completed such conversions successfully in Australia and the United
Kingdom.
Franchise Program
General. The success of our unique franchise formula, together with the
relatively low initial capital investment required to open a franchise store,
has enabled us to attract a large number of highly motivated entrepreneurs as
franchisees. We consider franchisees to be a vital part of our continued growth
and believe our relationships with franchisees are excellent. The franchise
program consists of a network of domestic and international franchise stores.
As of January 3, 1999, there were 1,308 franchisees operating 3,847 franchise
stores in the contiguous United States and 440 franchisees operating 1,730
stores in 64 international and off-shore markets, including Alaska, Hawaii,
Puerto Rico, the U.S. Virgin Islands and Guam.
Franchisee Selection. We maintain the strength of our franchise store base by
seeking franchisees who are willing to commit themselves full-time to operating
franchise stores and by applying rigorous standards to prospective franchisees.
Specifically, we require all prospective domestic franchisees to manage a store
for at least one year before being granted a franchise. This enables us to
observe the operational and financial performance of domestic franchisees prior
to entering into a long-term contract. We also restrict the ability of domestic
franchisees to become involved in outside business investments, which focuses
the franchisees on operating their franchise stores. We believe these standards
are unique to the franchise industry and result in highly qualified and focused
store operators, while helping to maintain the strength of the Domino's brand.
Standard Domestic Franchise Agreements. We enter into franchise agreements with
domestic franchisees under which the franchisee is granted the right to operate
a store for a term of ten years, with an option to renew for an additional ten
years. We are currently experiencing franchise renewal rates in excess of 99%.
Under the current standard franchise agreement,
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we assign an exclusive Area of Primary Responsibility to each franchise store.
During the term of the franchise agreement, the franchisee is generally
required to pay a 5.5% royalty fee, subject in certain instances to lower rates
based on area development agreements, sales initiatives and new store
incentives. The current standard franchise agreement permits us to
electronically debit the franchisee's bank account for the payment of royalty
fees and advertising contributions. We have the contractual right, subject to
state law, to terminate a franchise agreement for a variety of reasons,
including a franchisee's failure to make payments when due or failure to adhere
to specified policies and standards.
Standard International Franchise Agreements. We enter into master franchise
agreements with our international franchisees under which the master franchisee
may open and operate a franchise or enter into sub-franchise agreements for a
term of ten to twenty years, with an option to renew for an additional ten year
term. The master franchisee is required to pay an initial, one-time franchisee
fee, as well as a store franchise fee upon the opening of each store. These
fees vary by contract. In addition, the master franchisee is required to pay a
continuing royalty fee as a percentage of sales, which also varies.
Franchisee Store Development. We furnish each domestic franchisee with
assistance in selecting sites, developing stores and conforming to the physical
specifications for typical stores. Each domestic franchisee is responsible for
selecting the location for a store but must obtain approval for store design
and location based on accessibility and visibility of the site and targeted
demographic factors, including population density, income, age and traffic. We
provide design plans, fixtures and equipment for most franchisee locations at
competitive prices.
Franchisee Loan Programs. We have an established financing program to assist
domestic franchisees in opening stores. We generally provide financing of up to
$100,000 for the purpose of opening new stores to domestic franchisees who are
creditworthy and have a minimum of $10,000 of working capital. The franchisees
may use the funds to purchase equipment, supplies, store fixtures or leasehold
improvements, with the condition that store fixtures and leasehold improvements
cannot exceed $35,000. We have also historically financed the sale of corporate
stores to domestic franchisees and the implementation of new products and
programs, such as the Domino's HeatWave Hot Bag. At January 3, 1999, loans
outstanding under the franchisee loan programs totaled $20.4 million.
Franchise Training and Support. We consider training of our store managers and
employees to be a critical component of our success. We require all domestic
franchisees to complete initial and ongoing training programs that we provide.
In addition, under the current standard domestic franchise agreement, domestic
franchisees are required to implement training programs for their store
employees. We assist our franchisees by providing training services for store
managers and employees, including CD-ROM based training materials,
comprehensive operations manuals and franchise development classes.
Franchise Operations. We maintain strict control over franchise operations to
protect our brand name and image. All franchisees are required to operate their
stores in compliance with written policies, standards and specifications,
including matters such as menu items, ingredients, materials, supplies,
services, fixtures, furnishings, decor and signs. Each franchisee has full
discretion to determine the prices to be charged to its customers. We also
provide support to our franchisees, including training, marketing assistance
and consultation to franchisees who experience financial or operational
difficulties. We have established several advisory boards through which
franchisees can contribute to corporate level initiatives.
Domino's 2000 Campaign
We recently implemented a reimaging and relocation campaign called Domino's
2000. This new strategy is aimed at increasing store sales through greater
brand awareness. The reimaging program involves a variety of store
improvements, including upgrading store interiors, adding new signage to draw
attention to the store and providing contemporary uniforms for its employees.
We believe that the per store capital expenditures for the reimaging campaign
will not exceed an average of $30,000. The relocation program is also designed
to increase store sales by choosing store sites that are in more accessible
locations. The cost of relocating a corporate store is not expected to exceed
an average of $160,000 per store. We will incur these capital expenditures on a
discretionary basis and only with respect to our corporate-owned stores.
Marketing Operations
We coordinate the domestic advertising and marketing efforts at the national
and cooperative market levels. We require corporate and domestic franchise
stores to contribute 3% of their net sales to fund national marketing and
advertising campaigns. The national advertising fund is used primarily to
purchase television advertising, but also supports market research, field
communications, commercial production, talent payments and other activities
supporting the brand. We can require stores to contribute a minimum of 1% of
net sales to cooperative media campaigns. Store contributions to cooperative
media campaigns currently average 2.4% of net sales in our top 40 markets.
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Our management estimates that corporate and domestic franchise stores also
spend an additional 3% to 5% of their net sales on local store marketing,
including targeted database mailings, saturation print mailings to households
in a given area and community involvement through school and civic
organizations. The National Print Program offers subsidized print materials as
an incentive for franchisees to use the marketing material that we recommend,
helping ensure that our national advertising strategy is reflected at the local
level.
By communicating common themes at the national, cooperative and local market
levels, we create a consistent marketing message to our customers. Over the
past four years, we estimate that we and our domestic franchisees have invested
over $750 million in system-wide advertising at the national, cooperative and
local levels.
We also create business plans for new or improved products, price promotions,
and tie-in events with leading brands. For example, we recently entered into a
partnership with General Mills, Inc. whereby coupons for Domino's pizza were
distributed on the back of Cheerios brand cereal packages. We estimate that at
least 20% of the coupon redemptions from this campaign came from new customers.
Suppliers
We believe that the length and quality of our relationships with suppliers
provides us with priority service at competitive prices. We have maintained
active relationships of over 14 years with more than half of our major
suppliers. As a result, we have typically relied on oral rather than written
contracts with our suppliers, except where we maintain only one supplier for a
product, such as cheese. In addition, we believe that two factors have been
critical to maintaining long- lasting relationships and keeping our purchasing
costs low. First, we are one of the largest volume purchasers of pizza-related
products such as flour, cheese, sauce, and pizza boxes, which enables us to
maximize leverage with our suppliers. Second, in four of our five key product
categories (which include cheese, meats, dough and parbaked shells, boxes and
sauce), we generally retain active purchasing relationships with at least three
suppliers. This purchasing strategy allows us to shift purchases among
suppliers based on quality, price and timeliness of delivery. For the year
ended January 3, 1999, no single supplier represented more than 10% of cost of
sales, except for our cheese supplier which accounted for 25.7% of cost of
sales.
Government Regulation
We are subject to various federal, state and local laws affecting the operation
of our business, as are our franchisees. Each store is subject to licensing and
regulation by a number of governmental authorities, which include zoning,
health, safety, sanitation, building and fire agencies in the jurisdiction in
which the store is located. Difficulties in obtaining, or the failure to
obtain, required licenses or approvals can delay or prevent the opening of a
new store in a particular area. Our commissary and distribution facilities are
licensed and subject to regulation by federal, state and local health and fire
codes. The operation of our trucks is subject to Department of Transportation
regulations. From time to time, we and our franchisees also encounter issues
relating to the presence of pollutants or hazardous substances at owned or
leased property. We do not believe that any such issues will result in a
material impact to our business.
We are subject to the rules and regulations of the FTC and various state laws
regulating the offer and sale of franchises. The FTC and various state laws
require that we furnish to prospective franchisees a franchise offering
circular containing prescribed information. A number of states in which we are
currently franchising or may consider franchising regulate the sale of
franchises and require registration of the franchise offering circular with
state authorities and the delivery of a franchise offering circular to
prospective franchisees. We are operating under exemptions from registration in
several of these states based upon our net worth and experience. Substantive
state laws that regulate the franchisor-franchisee relationship presently exist
in a substantial number of states, and bills have been introduced in Congress
from time to time which would provide for federal regulation of the franchisor-
franchisee relationship in certain respects. The state laws often limit, among
other things, the duration and scope of non-competition provisions, the ability
of a franchisor to terminate or refuse to renew a franchise and the ability of
a franchisor to designate sources of supply.
Our store operations and our relationships with franchisees are subject to the
federal and state antitrust laws. Our store operations are also subject to
federal and state laws governing such matters as wages, working conditions,
citizenship requirements and overtime. Some states have set minimum wage
requirements higher than the federal level.
Internationally, our franchise stores are subject to national and local laws
and regulations which are similar to those affecting our domestic stores,
including laws and regulations concerning franchises, labor, health, sanitation
and safety. Our international franchise stores are also subject to tariffs and
regulations on imported commodities and equipment and laws regulating foreign
investment.
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Trademarks
Domino's has several trademarks and service marks and believes that many of
these marks have significant value and are materially important to our
business. Our policy is to pursue registration of our important trademarks
whenever possible and to vigorously oppose the infringement of any our
registered or unregistered trademarks.
Facilities
We own the facilities at fourteen corporate stores and five commissary
facilities. We also own and lease store facilities to seven domestic
franchisees. There are no mortgages on any of these facilities other than
mortgages on the commissary facilities granted in connection with our new
senior credit facilities. All other corporate-owned stores and facilities are
leased, typically with five-year leases with one or two five-year renewal
options. The franchise stores are leased directly by the franchisee and we are
generally not a party to the leases, except with respect to the seven
facilities that we own and lease to the franchisees.
We lease approximately 185,000 square feet for our executive offices, world
headquarters and Michigan Distribution Center located in Ann Arbor, Michigan
under an operating lease with Domino's Farms Office Park Limited Partnership
for a term of five years commencing December 21, 1998, with options to renew
for two five-year terms. We believe that this lease is on terms no less
favorable than are obtainable from unrelated third parties.
Employees
As of January 3, 1999, we had approximately 14,200 employees, excluding
employees of franchise-operated stores. Approximately 10,200 of this total are
store employees that work part-time and are employed on an hourly basis. None
of our domestic employees are represented by unions. We have not experienced
any labor problems resulting in a work stoppage and we believe we have good
relations with our employees.
Insurance
Through December 19, 1998, we self-insured our commercial general liability,
automobile liability, and workers' compensation liability exposures up to
levels ranging from $500,000 to $1 million per occurrence, and maintained
excess and umbrella insurance coverage above those levels up to amounts ranging
from $60 million to $105 million per annum on our commercial general liability
and automobile liability policies and up to statutory limits on our workers'
compensation policies. Effective December 20, 1998, we acquired first-dollar
insurance coverage for all of the above exposures, with total coverage of $105
million per occurrence on our commercial general liability and automobile
liability policies and up to statutory limits on our workers' compensation
policies. We also maintain commercial property liability insurance. These
policies provide a variety of coverages and are subject to various limitations,
exclusions and deductibles. There can be no assurance that such liability
limitations will be adequate, that insurance premiums for such coverage will
not increase or that in the future we will be able to obtain insurance at
acceptable rates, if at all. Any such inadequacy of or inability to obtain
insurance coverage could have a material adverse effect on our business,
financial condition and results of operations.
Legal Proceedings
We are party to various legal actions arising in the ordinary course of our
business. These legal actions cover a broad variety of claims spanning our
entire business. The following is a brief description of the more significant
categories of legal actions brought against us.
Franchising. We franchise a substantial number of stores to independent
business people operating under arrangements with our Corporate or
International divisions. Disputes with our franchisees occasionally arise in
the ordinary course of the franchise relationship relating to a broad range of
subjects including, without limitation, quality and service contentions
regarding grants or termination of franchises, franchisee claims for additional
franchises or rewrites of franchise agreements, antitrust violations and
delinquent payments.
Employees. We employ thousands of persons at our corporate-owned stores,
distribution facilities and corporate headquarters. In addition, thousands of
persons, from time to time, seek employment with us in various capacities.
Disputes occasionally arise in the ordinary course of business regarding
hiring, firing, working conditions and promotion practices.
Automobile Accidents. We are and have been a party to a number of suits
relating to automobile accidents involving our own or one of our franchisees'
delivery drivers. The plaintiffs in these suits have sought and may seek both
compensatory and punitive damages, the latter of which may, and in the past has
been, significant in amount.
44
Intellectual Property. On September 10, 1998, Vesture Corporation and R.G.
Barry Corporation, its corporate parent, brought suit in the United States
District Court for the Middle District of North Carolina against Domino's and
Phase Change Laboratories, Inc., the exclusive supplier of the heat retention
cores inside the Domino's HeatWave Hot Bag, our pizza delivery warming device.
The plaintiffs asserted that the heat retention cores inside the Domino's
HeatWave Hot Bag infringe a patent owned by Vesture. Our agreement with Phase
Change Laboratories gives us exclusive marketing, sales, use and distribution
rights in the pizza delivery market to the heat retention cores inside the
Domino's HeatWave Hot Bag. In addition to damages, the plaintiffs are seeking
an injunction to enjoin the manufacture, sale or use of the heat retention
cores inside the Domino's HeatWave Hot Bag. On November 4, 1998, we filed our
answer, denying the material allegations of the plaintiffs. In addition, we
asserted a counterclaim against Vesture Corporation and R.G. Barry Corporation
seeking a declaratory judgment that we have not infringed Vesture Corporation's
patent and further that Vesture Corporation's patent is invalid and
unenforceable. We also brought a cross-claim against Phase Change Laboratories
for indemnification and for breach of warranty. Phase Change Laboratories filed
its answer and its counterclaim for a declaratory judgment on November 5, 1998.
Although we intend to vigorously defend against the claim, we cannot predict
the ultimate outcome of the claim.
45
Management
Directors and Executive Officers
The following table sets forth certain information regarding each person who is
a director or executive officer of TISM, Inc., Domino's, Inc. and each of our
subsidiary guarantors.
- --------------------------------------------------------------------------------
Name Age Position
- ------------------------------------------------------------------------------------------------------
Thomas S. Monaghan 61 Director of TISM, Inc. and Domino's, Inc.
Harry J. Silverman 40 Chief Financial Officer, Executive Vice President, Finance and Administration
and Director of Domino's Pizza, Inc.; Vice President of TISM, Inc. and
Domino's, Inc.; President and Director of each of the guarantor subsidiaries
other than Domino's Pizza, Inc.
Cheryl A. Bachelder 42 Executive Vice President, Marketing and Product Development of
Domino's Pizza, Inc.
Patrick Kelly 46 Executive Vice President, Corporate of Domino's Pizza, Inc.
Stuart K. Mathis 43 Executive Vice President, Franchise of Domino's Pizza, Inc.
Gary M. McCausland 47 Executive Vice President, International of Domino's Pizza, Inc.
Michael D. Soignet 39 Executive Vice President, Distribution of Domino's Pizza, Inc.
Mark E. Nunnelly 40 Director of TISM, Inc. and Domino's, Inc.
Robert F. White 43 Director of TISM, Inc. and Domino's, Inc.
Jonas L. Steinman 33 Director of TISM, Inc. and Domino's, Inc.
Thomas S. Monaghan founded Domino's Pizza, Inc. in 1960 and served as its
President and Chief Executive Officer through July, 1989 and from December 6,
1991 to December 21, 1998. Mr. Monaghan now serves as a Director of TISM, Inc.
and Domino's, Inc. Mr. Monaghan has served as a Director of TISM, Inc. since
1960 and as a Director of Domino's, Inc. since February, 1999.
Harry J. Silverman has been Chief Financial Officer and Executive Vice
President of Finance and Administration for Domino's Pizza, Inc. since 1993.
Mr. Silverman has served as Vice President of TISM, Inc. and Domino's Inc., as
President and Director of each of the guarantor subsidiaries other than
Domino's Pizza, Inc. and as a Director of Domino's Pizza, Inc. since December,
1998. Mr. Silverman joined Domino's Pizza, Inc. in 1985 as Controller for the
Chicago Regional Office. Mr. Silverman was named National Operations Controller
in 1988 and later Vice President of Finance for Domino's Pizza, Inc. Prior to
joining the Company, Mr. Silverman was employed by Grant Thornton.
Cheryl A. Bachelder joined Domino's Pizza, Inc. in May, 1995 as Executive Vice
President of Marketing and Product Development, overseeing all marketing,
public relations, product development and quality assurance programs. Prior to
that time, Ms. Bachelder served as President of Bachelder & Associates, a
management consulting firm founded by Ms. Bachelder in 1992. From 1984 to 1992,
Ms. Bachelder served in various positions with the Nabisco Foods Group of RJR
Nabisco, Inc., including Vice President and General Manager of the LifeSavers
Division from 1991 to 1992. From 1981 to 1984, Ms. Bachelder worked in brand
management at the PaperMate Division of The Gillette Company. From 1978 to
1981, Ms. Bachelder held training and brand management posts at the Procter &
Gamble Company.
Patrick Kelly has served as Executive Vice President of Corporate of Domino's
Pizza, Inc. since November, 1994. Mr. Kelly joined Domino's Pizza, Inc. in 1978
as a manager trainee and has held various positions with the Company since that
time, including Vice President of Corporate and Franchise for the United States
Western and Eastern Regions, Vice President of International and Vice President
of Corporate in the Northern Region.
Stuart K. Mathis joined Domino's Pizza, Inc. in 1985 as Controller for the
Northeastern Regional Office. Mr. Mathis has served as Executive Vice President
of Franchise since August, 1992. Prior to that time, Mr. Mathis held various
positions in Domino's, including Vice President of Field Administration. From
1983 to 1985, Mr. Mathis was Controller for Six Flags Over Mid-America in St.
Louis.
Gary M. McCausland has been Executive Vice President of International of
Domino's Pizza, Inc. since December, 1991, overseeing all store operations and
development outside the contiguous United States. Mr. McCausland previously
served as Vice President of Finance and Administration for International and
Corporate Controller. Prior to joining Domino's, he held a number of
international management positions with Unisys Corp., including Director of
Finance to its subsidiary in the United Kingdom. Mr. McCausland, a Certified
Public Accountant, also served six years with Price Waterhouse LLP.
46
Michael D. Soignet has been Executive Vice President of Distribution of
Domino's Pizza, Inc., overseeing United States and international commissary
operations and the Equipment & Supply Division of the Company since 1993. Mr.
Soignet joined the Company in 1981 and since then has held various positions,
including Distribution Center General Manager, Assistant to the DNC General
Manager, Region Manager, Distribution Vice President, and most recently Vice
President of Distribution Operations until his appointment to the executive
team in 1993.
Mark E. Nunnelly has served as a Director of TISM, Inc. since December 21, 1998
and as a Director of Domino's, Inc. since February, 1999. Mr. Nunnelly has been
a Managing Director of Bain Capital since 1990. Prior to that time, Mr.
Nunnelly was a partner at Bain & Company, where he managed several
relationships in the manufacturing sector, and was employed by Procter & Gamble
Company Inc. in product management. Mr. Nunnelly serves on the Board of
Directors of several companies, including Stream International, Inc., The
Learning Company and DoubleClick, Inc.
Robert F. White has served as a Director of TISM, Inc. since December 21, 1998
and as a Director of Domino's, Inc. since February, 1999. Mr. White joined Bain
Capital at its inception in 1984. He has been a Managing Director since 1985.
Mr. White has served as the Chief Financial Officer and a founder of
MediVision, a medical services company founded and financed by Bain Capital.
Prior to joining Bain Capital, Mr. White was a Manager at Bain & Company and a
Senior Accountant with Price Waterhouse LLP. Mr. White serves on the Board of
Directors of Stream International, Inc., totes/Isotoner Inc., and Brookstone,
Inc.
Jonas L. Steinman has served as a Director of TISM, Inc. since December 21,
1998 and as a Director of Domino's, Inc. since February, 1999. Mr. Steinman has
been a principal of Chase Capital Partners since 1995 and was an associate at
Chase Capital Partners from 1993 to 1995. Prior to joining Chase Capital
Partners, Mr. Steinman was employed by Anthem Partners, Booz, Allen & Hamilton
and Drexel Burnham Lambert. Mr. Steinman currently serves on the Board of
Directors of Sealy Corporation, C.A. Muer Corporation, Cove Healthcare,
UtiliMed, Inc., USHealthWorks, Inc. and WPP Holdings, Inc.
All directors of TISM, Inc. and Domino's serve until a successor is duly
elected and qualified or until the earlier of his or her death, resignation or
removal. There are no family relationships between any of the directors or
executive officers of TISM, Inc. or Domino's, Inc. The executive officers of
TISM, Inc. and Domino's, Inc. are elected by and serve at the discretion of
their respective Boards of Directors. See "Certain Relationships and Related
Transactions" for information on the stockholders agreement which governs
composition of the Board of Directors of TISM, Inc.
47
Executive Compensation
The following table sets forth information concerning the compensation for the
fiscal year ended January 3, 1999 of Thomas S. Monaghan, the Chief Executive
Officer and President of TISM through December 21, 1998, and the four other
most highly compensated executive officers of TISM and its consolidated
subsidiaries (collectively, the "Named Executive Officers").
Summary Compensation Table
--------------------------------------------------------------------
Long Term
Compensation
------------
Annual Compensation
---------------------------------------
Number of
Securities
Other Annual Underlying All Other
Name and Position Salary Bonus(1) Compensation(2) Options(3) Compensation(4)
- ----------------- ---------- ---------- --------------- ------------ ---------------
Thomas S. Monaghan(5)... $3,334,615 $ -- $2,594 -- $ 5,000
Chief Executive Officer
and President
Stuart K. Mathis........ 366,588 1,776,597 1,169 116,710 56,333
Executive Vice
President, Franchise
Michael D. Soignet...... 246,496 1,832,497 912 111,111 59,276
Executive Vice
President,
Distribution
Harry J. Silverman...... 268,578 3,076,538 866 111,111 55,656
Chief Financial
Officer, Executive
Vice President,
Finance and
Administration
Cheryl A. Bachelder..... 287,300 1,805,657 1,103 -- 49,173
Executive Vice
President, Marketing
and Product
Development
- ---------
(1) These amounts include bonuses of $1,637,697 for each of Ms. Bachelder and
Messrs. Mathis and Soignet under bonus agreements entered into with each
such person and $2,851,078 under a bonus agreement entered into with
Mr. Silverman. Ms. Bachelder received her entire bonus at the closing of
the recapitalization. A portion of each other bonus was paid in cash at the
closing of the recapitalization, and the receipt of the remaining portion
of each other bonus was deferred under the Senior Executive Deferred Bonus
Plan. See "Senior Executive Deferred Bonus Plan."
(2) These amounts include reimbursements during the fiscal year for the payment
of taxes related to insurance premiums paid on behalf of the Named
Executive Officers.
(3) The options are options granted in connection with the recapitalization to
purchase shares of common stock of TISM, Inc., except Mr. Mathis' options
also include options to purchase 2,064 shares of cumulative preferred stock
of TISM, Inc.
(4) These amounts represent matching funds contributed by us pursuant to our
pre-recapitalization deferred compensation plan and 401(k) plan and term
life insurance premiums paid by the Company for the benefit of the Named
Executive Officers.
(5)Mr. Monaghan served as Chief Executive Officer through December 21, 1998.
48
Option Grants in Last Fiscal Year
The table below sets forth information for the Named Executive Officers with
respect to grants of stock options of TISM during the fiscal year ended January
3, 1999.
Option Grants in Fiscal Year 1998
------------------------------------------------------------------
Potential Realizable
Value at Assumed
Annual Rates
of Stock Price
Appreciation
Individual Grants for Option Term(5)
--------------------------------- ---------------------
Number of
Securities % of Total Exercise
Underlying Options to Price Expiration
Name Options Employees ($/share) Date 5%($) 10%($)
- ---- ---------- ---------- --------- ---------- ---------- ----------
Thomas S. Monaghan...... -- -- -- -- -- --
Chief Executive Officer
and President
Stuart K. Mathis........ 103,181(1) 16% $ .50 12/21/08 $ 32,445 $ 82,545
Executive Vice
President, Franchise 11,465(2) 2% 40.50 12/21/09 329,848 860,448
2,064(3) 100%(4) 101.33 12/21/09
Michael D. Soignet...... 100,000(1) 16% .50 12/21/08 31,000 80,000
Executive Vice
President,
Distribution 11,111(2) 2% 40.50 12/21/09 319,663 833,881
Harry J. Silverman...... 100,000(1) 16% .50 12/21/08 31,000 80,000
Chief Financial
Officer, Executive
Vice 11,111(2) 2% 40.50 12/21/09 319,663 833,881
President, Finance and
Administration
Cheryl A. Bachelder..... -- -- -- -- -- --
Executive Vice
President, Marketing
and Product
Development
- ---------
(1) These represent options to purchase shares of Class A Common Stock of TISM.
(2)These represent options to purchase shares of Class L Common Stock of TISM.
(3)These represent options to purchase cumulative preferred stock of TISM.
(4) This represents the percentage of total options granted to employees to
purchase cumulative preferred stock, while the other percentages in the
column represent the percentage of total options granted to purchase shares
of Class A and Class L Common Stock.
(5) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compound rates of appreciation (5% and 10%) on
the market value of the common stock or cumulative preferred stock, as the
case may be, on the date of option grant over the term of the options.
These numbers are calculated based on rules promulgated by the Securities
and Exchange Commission and do not reflect our estimate of future stock
price growth. Actual gains, if any, on stock option exercises are dependent
on the timing of such exercise and the future performance of the common
stock or cumulative preferred stock, as the case may be. There can be no
assurance that the rates of appreciation assumed in this table can be
achieved or that the amounts reflected will be received by the individuals.
49
Fiscal Year-End Option Values
The table below sets forth certain information concerning the number and value
of unexercised stock options of TISM held by each of the Named Executive
Officers as of January 3, 1999.
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal Year In-the-Money Options at
End Fiscal Year End(1)
------------------------- -------------------------
Exercisable Unexercisable Exercisable Unexercisable
Name (#) (#) ($) ($)
- ---- ----------- ------------- ----------- -------------
Thomas S. Monaghan.......... -- -- -- --
Stuart K. Mathis(2)......... 116,710 -- 0 --
Michael D. Soignet.......... 111,111 -- 0 --
Harry J. Silverman.......... 111,111 -- 0 --
Cheryl A. Bachelder......... -- -- -- --
- ---------
(1) There was no public trading market for the common stock and cumulative
preferred stock of TISM as of January 3, 1999. Accordingly, these values
have been calculated on the basis of the fair market value of such
securities on January 3, 1999, less the applicable exercise price.
(2)Includes options to purchase 2,064 shares of cumulative preferred stock of
TISM.
Consulting Agreement with Thomas S. Monaghan
In connection with the closing of the recapitalization, Mr. Monaghan entered
into a Consulting Agreement with Domino's Pizza, Inc. The Consulting Agreement
has a term of ten years, is terminable by either Domino's Pizza, Inc. or
Mr. Monaghan upon thirty days prior written notice, and may be extended or
renewed by written agreement. Under the Consulting Agreement, Mr. Monaghan may
be required to make himself available to Domino's Pizza, Inc. on a limited
basis. Mr. Monaghan will receive a retainer of $1 million for the first twelve
months of the agreement and $0.5 million per year for the remainder of the term
of the agreement. If we terminate the agreement for any reason, we are required
to remit to Mr. Monaghan a lump sum payment within thirty days of the
termination of the agreement in the full amount of the retainer payable for the
remainder of the term of the Consulting Agreement. As a consultant, Mr.
Monaghan is entitled to reimbursement of travel and other expenses incurred in
performance of his duties but is not entitled to participate in any of our
employee benefit plans or other benefits or conditions of employment available
to our employees.
Deferred Compensation Plan
Domino's Pizza, Inc. has adopted a Deferred Compensation Plan for the benefit
of certain of its executive and managerial employees, including the Named
Executive Officers. Under the Deferred Compensation Plan, eligible employees
are permitted to defer up to 40% of their compensation. Domino's Pizza, Inc. is
required to match 30% of the amount deferred by a participant under the plan
with respect to the first 15%, 20% or 25% of the participant's compensation,
depending on the employee. Domino's may be obligated to make a supplemental
contribution, in addition to the matching contribution, of up to 20% of the
first 15%, 20% or 25% of the deferred amounts. The amounts under the plan are
required to be paid out upon termination of employment or a change in control
of Domino's Pizza, Inc.
Senior Executive Deferred Bonus Plan
Prior to the recapitalization, Domino's Pizza, Inc. entered into bonus
agreements with certain members of management, including the Named Executive
Officers. The bonus agreements, as amended, provided for bonus payments, a
portion of which were payable in cash upon the closing of the recapitalization
and a portion of which were deferred under the Senior Executive Deferred Bonus
Plan. Domino's Pizza, Inc. adopted a Senior Executive Deferred Bonus Plan,
effective December 21, 1998, which established deferred bonus accounts for the
benefit of executives, including the Named Executive Officers (except for Ms.
Bachelder). Domino's Pizza, Inc. must pay the deferred amounts in each account
to the respective executive upon the earlier of (i) a change of control, (ii) a
qualified public offering, (iii) the cancellation or forfeiture of stock
options held by such executive or (iv) ten years and 180 days after December
21, 1998. If the board of directors of Domino's Pizza, Inc. terminates the
plan, it may pay the amounts in the deferred bonus accounts to the
participating executives at that time or make the payments as if the plan had
continued to be in effect.
Severance Agreements
On August 4, 1998, Domino's Pizza, Inc. entered into severance agreements with
certain members of management, including the Named Executive Officers. Under
the agreements with the Named Executive Officers, Domino's Pizza, Inc. will pay
certain severance benefits to such executives who are terminated without cause
or due to death or disability or who
50
terminate employment for good reason within two years after the closing of the
recapitalization or who resign at or within 30 days after the first anniversary
of the closing of the recapitalization. The severance benefits include a
severance payment that equals three times the employee's base severance amount
if employment terminates prior to December 21, 1999 or two times such base
severance amount if the employee's employment terminates after December 21,
1999 but prior to December 21, 2000. In addition, Domino's Pizza, Inc. is
required to make monthly payments for a maximum of three years, depending upon
when the employee is terminated, to the terminated executive in an amount
sufficient for the executive to purchase health insurance benefits equivalent
to those benefits provided to the executive by Domino's Pizza, Inc. at the time
of termination. In consideration of the benefits provided under the severance
agreements, the executives agreed to certain non-competition, non-solicitation
and confidentiality provisions.
Compensation of Directors
TISM and Domino's reimburse members of the board of directors for any out-of-
pocket expenses incurred by them in connection with services provided in such
capacity. In addition, TISM and Domino's may compensate independent members of
the board of directors for services provided in such capacity.
51
Principal Stockholders
All of Domino's issued and outstanding common stock is owned by TISM. The
issued and outstanding capital stock of TISM consists of (i) 49,436,819 shares
of Class A Common Stock, of which 9,641,874 shares are of Class A-1 Common
Stock, par value $0.001 per share, 9,866,633 shares are Class A-2 Common Stock,
par value $0.001 per share, and 29,928,312 shares are Class A-3 Common Stock,
par value $0.001 per share, (ii) 5,492,981 shares of Class L Common Stock, par
value $0.001 per share, and (iii) 997,936 shares of 11.5% Cumulative Preferred
Stock. The three classes of Class A Common Stock have different rights with
respect to the election of members of the Board of Directors. The shares of
Class A-1 Common Stock entitle the holder to one vote per share on all matters
to be voted upon by the stockholders of TISM. The shares of Class A-2 Common
Stock and Class A-3 Common Stock are non-voting. The Class L Common Stock is
identical to the Class A Common Stock except that the Class L Common Stock is
nonvoting and is entitled to a preference over the Class A Common Stock, with
respect to any distribution by TISM to holders of its capital stock, equal to
the original cost of such share plus an amount which accrues at a rate of 12%
per annum, compounded quarterly. The Class L Common Stock is convertible upon
an initial public offering, or certain other dispositions, of TISM into Class A
Common Stock upon a vote of the board of directors of TISM. The Cumulative
Preferred Stock has no voting rights except as required by law.
The following table sets forth certain information as of January 3, 1999
regarding the approximate beneficial ownership of: (i) each person known to
TISM to own more than five percent of the outstanding voting securities of TISM
and (ii) the voting securities of TISM held by each Director of TISM, each
Named Executive Officer and all of such Directors and Named Executive Officers
as a group. Unless otherwise noted, to our knowledge, each of such stockholders
has sole voting and investment power as to the shares shown. Unless otherwise
indicated, the address of each Director and Named Executive Officer is 30 Frank
Lloyd Wright Drive, Ann Arbor, MI 48106.
-----------------
Percentage of Outstanding
Name and Address Voting Securities
-----------------
Principal Stockholders:
Bain Capital Funds(1)................................ 49.0%
c/o Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Directors and Named Executive Officers:
Thomas S. Monaghan+*(2).............................. 36.3%
Mark E. Nunnelly+(3)................................. 49.0%
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Harry J. Silverman*.................................. -
Cheryl A. Bachelder*................................. -
Michael D. Soignet*.................................. -
Stuart K. Mathis*.................................... -
Robert F. White+(4).................................. 49.0%
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Jonas L. Steinman+(5)................................ 4.9%
c/o Chase Capital Partners
380 Madison Avenue, 12th Floor
New York, NY 10017
All Directors and Named Executive
Officers as a Group (8 Persons)..................... 90.2%
- ---------
+ Director
* Named Executive Officer
(1) Includes shares of Class A-1 Common Stock owned by Bain Capital Fund VI,
L.P., ("Fund VI"); Bain Capital VI Coinvestment Fund, L.P. ("Coinvest
Fund"); Sankaty High Yield Asset Partners, L.P. ("Sankaty"); Brookside
Capital Partners Fund, L.P. ("Brookside"); PEP Investments PTY Ltd.
("PTY"); BCIP Associates II ("BCIP II"); BCIP Trust
52
Associates II, L.P. ("BCIP Trust II"); BCIP Associates II-B ("BCIP II-B");
BCIP Trust Associates II-B, L.P. ("BCIP Trust II-B"); and BCIP Associates
II-C ("BCIP II-C" and collectively with BCIP II, BCIP Trust II, BCIP II-B
and BCIP Trust II-B, the "BCIPs" and the BCIPs, Fund VI, Coinvest Fund,
Sankaty, Brookside and PTY, collectively, the "Bain Capital funds.")
(2) Includes shares of Class A-1 Common Stock owned by Mrs. Monaghan.
(3) Mr. Nunnelly is a limited partner of Bain Capital Partners VI, L.P., the
sole general partner of Fund VI and the Coinvest Fund, and a Managing
Director of Bain Capital Investors VI, Inc., the sole general partner of
Bain Capital Partners VI, L.P. In addition, Bain Capital, Inc., of which
Mr. Nunnelly is a Managing Director, is the managing general partner of
all of the BCIPs and Mr. Nunnelly (or an affiliated entity) is also a
general partner of BCIP II, BCIP II-C and BCIP Trust II. Accordingly, Mr.
Nunnelly may be deemed to beneficially own all of the shares owned by the
Bain Capital funds, and the share ownership chart reflects such possible
beneficial ownership. Mr. Nunnelly disclaims beneficial ownership of any
shares owned by the Bain Capital funds in which he does not have a
pecuniary interest.
(4) Mr. White is a limited partner of Bain Capital Partners VI, L.P., the sole
general partner of Fund VI and the Coinvest Fund and a Managing Director
of Bain Capital Investors VI, Inc., the sole general partner of Bain
Capital Partners VI, L.P. In addition, Bain Capital, Inc., of which Mr.
White is a Managing Director, is the managing general partner of all the
BCIPs and Mr. White (or an affiliated entity) is a general partner of BCIP
II, BCIP II-C and BCIP Trust II. Accordingly, Mr. White may be deemed to
beneficially own all of the shares owned by the Bain Capital funds, and
the share ownership chart reflects such possible beneficial ownership. Mr.
White disclaims beneficial ownership of any shares owned by the Bain
Capital funds in which he does not have a pecuniary interest.
(5) Mr. Steinman is a principal of Chase Capital Partners, the general partner
of Chase Equity Associates, L.P. Accordingly, Mr. Steinman may be deemed
to beneficially own shares beneficially owned by Chase Capital Partners.
Mr. Steinman disclaims beneficial ownership of any such shares in which he
does not have a pecuniary interest.
53
Certain Relationships and Related Transactions
Because this is a summary, it does not contain all of the information that may
be important to you. You should read the complete documents before making an
investment decision.
Stockholders Agreement
In connection with the recapitalization, TISM, certain of its subsidiaries,
including the Company, and all of the equity holders of TISM (including the
Bain Capital funds), entered into a stockholders agreement that, among other
things, provides for tag-along rights, drag-along rights, registration rights,
restrictions on the transfer of shares held by parties to the stockholders
agreement and certain preemptive rights for certain stockholders. Under the
terms of the stockholders agreement, the approval of the Bain Capital funds
will be required for TISM, its subsidiaries, including the Company, and its
stockholders to take various specified actions, including major corporate
transactions such as a sale or initial public offering, acquisitions,
divestitures, financings, recapitalizations and mergers, as well as other
actions such as hiring and firing senior managers, setting management
compensation and establishing capital and operating budgets and business plans.
Pursuant to the stockholders agreement and TISM's Articles of Incorporation,
the Bain Capital funds have the power to elect up to half of the Board of
Directors of TISM. The stockholders agreement includes customary
indemnification provisions in favor of controlling persons against liabilities
under the Securities Act.
Management Agreement
In connection with the recapitalization, TISM and certain of its direct and
indirect subsidiaries entered into a management agreement with Bain Capital
Partners VI, L.P. pursuant to which it provides financial, management and
operation consulting services. In exchange for such services, Bain Capital
Partners VI, L.P. is entitled to an annual management fee of $2 million plus
the reasonable and out-of-pocket expenses of Bain Capital Partners VI, L.P. and
its affiliates. In addition, in exchange for assisting the Company in
negotiating the senior financing for any recapitalization, acquisition or other
similar transaction, Bain Capital Partners VI, L.P. is entitled to a
transaction fee equal to 1% of the gross purchase price, including assumed
liabilities, for such transaction, irrespective of whether such senior
financing is actually committed or drawn upon. In connection with the
recapitalization, Bain Capital Partners VI, L.P. received a fee of $11.75
million. The management agreement will continue in full force and effect for as
long as Bain Capital Partners VI, L.P. continues to provide such services. The
management agreement, however, may be terminated (i) by mutual consent of the
parties, (ii) by either party following a material breach of the management
agreement by the other party and the failure of such other party to cure the
breach within thirty days of written notice of such breach or (iii) by Bain
Capital Partners VI, L.P. upon sixty days written notice. The management
agreement includes customary indemnification provisions in favor of Bain
Capital Partners VI, L.P. and its affiliates.
Lease Agreement
In connection with the recapitalization, Domino's entered into a new lease
agreement with Domino's Farms Office Park Limited Partnership with respect to
its executive offices, world headquarters and Michigan distribution center. The
lease provides for lease payments of $4.3 million in the first year, increasing
annually to approximately $4.7 million in the fifth year. Thomas Monaghan, who
is a director of TISM and Domino's, is the ultimate general partner of Domino's
Farms Office Park Limited Partnership.
Purchases by Affiliates
One or more of the Bain Capital funds have purchased $30 million in aggregate
principal amount of the Tranche B and Tranche C senior credit facilities at a
discount of 2%, $20 million in aggregate principal amount of the Notes at a
discount of 3% and $70.2 million of the Cumulative Preferred Stock of TISM at
the liquidation preference less a discount of 3.5%..
54
Description of Senior Credit Facilities
Domino's, Inc. and Domino's Franchise Holding Co. (collectively, the
"Borrowers") have entered into an agreement with various banks and financial
institutions, including Morgan Guaranty Trust Company, an affiliate of one of
the Initial Purchasers, as a bank lender and as agent for the bank lenders'
syndicate thereto, providing for the senior credit facilities, which consist of
(i) the Tranche A facility of $175 million in term loans; (ii) the Tranche B
facility of $135 million in term loans; (iii) the Tranche C facility of $135
million in term loans; and (iv) the revolving credit facility of up to $100
million in revolving credit loans and letters of credit.
The proceeds of the loans made under the senior credit facilities are to be
used (i) to finance a portion of the recapitalization and related transaction
expenses, (ii) to refinance approximately $49.9 million of outstanding
indebtedness and other liabilities and (iii) for general corporate purposes
including working capital.
The Borrowers are jointly and severally obligated with respect to all amounts
owing under the senior credit facilities. In addition, the senior credit
facilities are (i) guaranteed by TISM, (ii) jointly and severally guaranteed by
each of our domestic subsidiaries and (iii) secured by a first priority lien on
certain real property and substantially all of the tangible and intangible
personal property of the Borrowers and their domestic subsidiaries and by a
pledge of all of the capital stock of the Borrowers and their domestic
subsidiaries and a pledge of 65% of the capital stock of our foreign
subsidiaries. Our future domestic subsidiaries will guarantee the senior credit
facilities and secure that guarantee with certain of their real property and
substantially all of their tangible and intangible personal property.
The senior credit facilities require the Borrowers to meet certain financial
tests, including without limitation, maximum leverage ratio, minimum interest
coverage and minimum levels of EBITDA. In addition, the senior credit
facilities contain certain negative covenants limiting, among other things,
additional liens, indebtedness, capital expenditures, transactions with
affiliates, mergers and consolidations, liquidations and dissolutions, sales of
assets, dividends, investments, loans and advances, prepayments and
modifications of debt instruments and other matters customarily restricted in
such agreements. The senior credit facilities contain customary events of
default, including without limitation, payment defaults, breaches of
representations and warranties, covenant defaults, certain events of bankruptcy
and insolvency, failure of any guaranty or security document supporting the
senior credit facilities to be in full force and effect and change of control
of TISM or either of the Borrowers.
The Tranche A facility matures in quarterly installments from March 31, 2000
through 2004. The Tranche B facility matures in quarterly installments from
December 31, 1999 through 2006. The Tranche C facility matures in quarterly
installments from December 31, 1999 through 2007. The revolving credit facility
terminates in 2004.
The borrowings under the senior credit facilities bear interest at a floating
rate and may be maintained as base rate loans or as Eurodollar loans. Base rate
loans bear interest at the base rate (defined as the higher of (x) the
applicable prime lending rate of Morgan Guaranty or (y) the Federal Reserve
reported overnight funds rate plus 1/2 of 1%), plus the applicable margin (as
defined in the senior credit facilities). Eurodollar loans bear interest at the
Eurodollar rate (as described in the senior credit facilities) plus the
applicable margin.
The applicable margin with respect to the revolving credit facility and the
Tranche A facility will vary from time to time in accordance with the terms
thereof and an agreed upon pricing grid based on our leverage ratio. The
initial applicable margin with respect to the revolving credit facility and the
Tranche A facility is (i) 2.0%, in the case of base rate loans and (ii) 3.0% in
the case of Eurodollar loans. The applicable margin with respect to the Tranche
B facility is (i) 2.50% in the case of base rate loans and (ii) 3.50% in the
case of Eurodollar loans. The applicable margin with respect to the Tranche C
facility is (i) 2.75% in the case of base rate loans and (ii) 3.75% in the case
of Eurodollar loans.
With respect to letters of credit (which are to be issued as a part of the
revolving loan commitment) the revolver lenders are entitled to receive a
commission equal to the applicable margin which applies from time to time to
Eurodollar loans under the revolving credit facility. In addition, the issuing
bank is entitled to receive a fronting fee of 0.25% per annum plus its other
standard and customary processing charges. Such commission and fronting fees
are payable quarterly in arrears based on the aggregate undrawn amount of each
letter of credit issued from time to time under the revolver.
An initial commitment fee of 0.50% applies to the unused portion of the
revolving loan commitments. This commitment fee is subject to decrease and will
vary from time to time in accordance with an agreed upon pricing grid based
upon our leverage ratio.
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The senior credit facilities prescribe that certain amounts must be used to
prepay the term loan facilities and reduce commitments under the revolving
credit facility including (a) 100% of the net proceeds of any issuance of
indebtedness after the closing date by TISM and its subsidiaries, subject to
certain exceptions for permitted debt; (b) 50% of the net proceeds of any
issuance of equity by TISM and its subsidiaries, subject to certain exceptions;
(c) 100% of the net proceeds of any sale or other disposition by TISM and its
subsidiaries of any assets, subject to certain exceptions if the aggregate
amount of such net proceeds does not exceed a figure to be agreed upon with the
senior lenders and such proceeds are reinvested in similar replacement assets;
(d) 75% of excess cash flow (as defined in the senior credit facilities) for
each fiscal year commencing with the fiscal year ending January 2, 2000,
provided, that the foregoing percentage will be reduced to 50% upon
satisfaction of certain financial ratios; and (e) 100% of the net proceeds of
casualty insurance, condemnation awards or other recoveries, subject to certain
negotiated exceptions. Voluntary prepayments of the senior credit facilities
are permitted at any time.
In general, mandatory prepayments described above will be applied, first to
prepay the term loan facilities and second, to reduce commitments under the
revolving credit facility (if the amount of revolving loans then outstanding
exceeds the commitments as so reduced, then that excess amount must be
prepaid). Prepayments of the term loan facilities, optional or mandatory, will
be applied pro rata to the Tranche A facility, the Tranche B facility and the
Tranche C facility, and ratably to the respective installments thereof.
56
Description of Exchange Notes
You can find the definitions of certain terms used in this description under
the subheading "Certain Definitions." In this description, the word "Company"
refers only to Domino's, Inc. and not to any of its subsidiaries.
The Company will issue the Exchange Notes pursuant to the Indenture (the
"Indenture") dated December 21, 1998 by and among itself, the Guarantors and
IBJ Whitehall Bank & Trust Company, as trustee (the "Trustee"). The terms of
the Exchange Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act").
The form and terms of the Exchange Notes are identical in all material respects
to the form and terms of the outstanding Notes except that (i) the Exchange
Notes will bear a Series B designation, (ii) the Exchange Notes have been
registered under the Securities Act and, therefore, will generally not bear
legends restricting their transfer and (iii) the holders of the Exchange Notes
will not be entitled to certain rights under the Registration Rights Agreement
dated as of December 21, 1998 by and among us, our subsidiary guarantors, J.P.
Morgan Securities, Inc. and Goldman, Sachs & Co., including the provision
providing for liquidated damages in certain circumstances relating to the
timing of this offer. The Exchange Notes will evidence the same debt as the
outstanding Notes and will be entitled to the benefits of the Indenture. The
Exchange Notes will be pari passu with the outstanding Notes if all of such
outstanding Notes are not exchanged pursuant to this offer.
The following description is a summary of the material provisions of the
Indenture, which is filed as an exhibit to the Registration Statement of which
this Prospectus forms a part. The description does not restate the Indenture in
its entirety. We urge you to read the Indenture because it, and not this
description, defines your rights as holders of the Exchange Notes. Copies of
the Indenture are available as set forth below under the subheading "Additional
Information."
Brief Description of the Exchange Notes and the Subsidiary Guarantees
The Exchange Notes. These Exchange Notes:
.are general unsecured obligations of the Company;
.are subordinated in right of payment to all existing and future Senior
Debt of the Company; and
.are senior in right of payment to any future junior subordinated
Indebtedness of the Company.
The Subsidiary Guarantees. These Exchange Notes are guaranteed by each domestic
subsidiary of the Company.
These Subsidiary Guarantees:
.are general unsecured obligations of each Guarantor;
.are subordinated in right of payment to all existing and future Senior
Debt of each Guarantor; and
.are senior in right of payment to any future junior subordinated
Indebtedness of each Guarantor.
As of January 3, 1999 the Company and the Guarantors had total Senior Debt of
approximately $446.7 million. As indicated above and as discussed in detail
below under the subheading "Subordination," payments on the Exchange Notes and
under the Subsidiary Guarantees will be subordinated to the prior payment in
full in cash or Cash Equivalents (other than cash equivalents of the type
referred to in clauses (3) and (4) of the definition thereof) of all Senior
Debt. The Indenture will permit us and the Guarantors to incur additional
Senior Debt.
Not all of our "Restricted Subsidiaries" will guarantee these Exchange Notes
since our Foreign Subsidiaries will not be Guarantors. In the event of a
bankruptcy, liquidation or reorganization of any of these non-guarantor
subsidiaries, these non-guarantor subsidiaries will pay the holders of their
debt and their trade creditors before they will be able to distribute any of
their assets to us. The non-guarantor subsidiaries generated less than 1% of
our consolidated revenues for the fiscal year ended January 3, 1999 and held
less than 1% of our consolidated assets as of January 3, 1999.
As of the date of the Indenture, all of our subsidiaries were "Restricted
Subsidiaries." However, under the circumstances described below under the
subheading "Certain Covenants--Designation of Restricted and Unrestricted
Subsidiaries," we will be permitted to designate certain of our subsidiaries as
"Unrestricted Subsidiaries." Unrestricted Subsidiaries will not be subject to
many of the restrictive covenants in the Indenture. Unrestricted Subsidiaries
will not guarantee these Exchange Notes.
57
Principal, Maturity and Interest
The Exchange Notes will be limited in aggregate principal amount to $400.0
million, of which $275.0 million are expected to be issued in this offer. The
Company will issue the Exchange Notes in denominations of $1,000 and integral
multiples of $1,000. The Exchange Notes will mature on January 15, 2009.
Interest on these Exchange Notes will accrue at the rate of 10 3/8% per annum
and will be payable semi-annually in arrears on January 15 and July 15,
commencing on July 15, 1999. The Company will make each interest payment to the
Holders of record of these Exchange Notes on the immediately preceding January
1 and July 1.
Each Exchange Note will bear interest from its issuance date. The holders of
Notes that are accepted for exchange will receive, in cash, accrued interest on
such Notes to, but not including, the issuance date of the Exchange Notes. Such
interest will be paid with the first interest payment on the Exchange Notes.
Interest on the Notes accepted for exchange will cease to accrue upon issuance
of the Exchange Notes.
Methods of Receiving Payments on the Exchange Notes
If a Holder has given wire transfer instructions to the Company, the Company
will make all principal, premium and interest and Liquidated Damages, if any,
payments on those Exchange Notes in accordance with those instructions. All
other payments on these Exchange Notes will be made at the office or agency of
the Paying Agent and Registrar within the City and State of New York unless the
Company elects to make interest payments by check mailed to the Holders at
their address set forth in the register of Holders.
Paying Agent and Registrar for the Notes
The Trustee will initially act as Paying Agent and Registrar. The Company may
change the Paying Agent or Registrar without prior notice to the Holders of the
Exchange Notes, and the Company or any of its Subsidiaries may act as Paying
Agent or Registrar.
Transfer and Exchange
A Holder may transfer or exchange Exchange Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or exchange
any Exchange Note selected for redemption. Also, the Company is not required to
transfer or exchange any Exchange Note for a period of 15 days before a
selection of Exchange Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
Subsidiary Guarantees
The Guarantors will jointly and severally guarantee, on a senior subordinated
basis, the Company's obligations under the Exchange Notes. Each Subsidiary
Guarantee will be subordinated to the prior payment in full in cash or Cash
Equivalents (other than cash equivalents of the type referred to in clauses (3)
and (4) of the definition thereof) of all Senior Debt of that Guarantor. The
subordination provisions applicable to the Subsidiary Guarantees will be
substantially similar to the subordination provisions applicable to the
Exchange Notes as set forth below under "Subordination." The obligations of
each Guarantor under its Subsidiary Guarantee will be limited as necessary to
seek to prevent that Subsidiary Guarantee from constituting a fraudulent
conveyance under applicable law.
A Guarantor may not sell or otherwise dispose of all or substantially all of
its assets, or consolidate with or merge with or into (whether or not such
Guarantor is the surviving Person), another Person unless:
(1) immediately after giving effect to that transaction, no Default or
Event of Default exists; and
(2) either:
(a) the Person acquiring the property in any such sale or disposition or
the Person formed by or surviving any such consolidation or merger
assumes all the obligations of that Guarantor pursuant to a supplemental
indenture satisfactory to the Trustee; or
(b) the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture.
58
The Subsidiary Guarantee of a Guarantor will be released:
(1) in connection with any sale or other disposition of all or
substantially all of the assets of that Guarantor (including by way of
merger or consolidation), if the disposition is to the Company or another
Guarantor or if the Company applies the Net Proceeds of that sale or other
disposition in accordance with the applicable provisions of the Indenture;
or
(2) in connection with any sale of all of the capital stock of a Guarantor,
if the Company applies the Net Proceeds of that sale in accordance with the
applicable provisions of the Indenture;
(3) if the Company designates any Restricted Subsidiary that is a Guarantor
as an Unrestricted Subsidiary; or
(4) upon the release or discharge of all guarantees of such Guarantor, and
all pledges of property or assets of such Guarantor securing, all other
Indebtedness of the Company and the other Guarantors.
See "Repurchase at the Option of Holders--Asset Sales."
Subordination
The payment of principal, premium, interest, Liquidated Damages, if any, and
any other Obligations on, or relating to, these Exchange Notes will be
subordinated to the prior payment in full in cash or Cash Equivalents (other
than cash equivalents of the type referred to in clauses (3) and (4) of the
definition thereof) of all Senior Debt of the Company.
The holders of Senior Debt will be entitled to receive payment in full in cash
or Cash Equivalents (other than cash equivalents of the type referred to in
clauses (3) and (4) of the definition thereof) of all Obligations due in
respect of Senior Debt (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior Debt, whether or not
such interest is an allowable claim) before the Holders of the Exchange Notes
will be entitled to receive any payment or distribution of any kind or
character with respect to any Obligations on, or relating to, the Exchange
Notes (except that Holders of the Exchange Notes may receive and retain
Permitted Junior Securities and payments made from the trust described under
"Legal Defeasance and Covenant Defeasance" so long as the deposit of amounts
therein satisfied the relevant conditions specified in the Indenture at the
time of such deposit), in the event of any distribution to creditors of the
Company:
(1) in a liquidation or dissolution of the Company;
(2) in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company or its property;
(3) in an assignment for the benefit of creditors; or
(4) in any marshalling of the Company's assets and liabilities.
The Company also may not make any payment or distribution of any kind or
character with respect to any Obligations on, or with respect to, the Exchange
Notes or acquire any of the Exchange Notes for cash or property or otherwise
(except in Permitted Junior Securities or from the trust described under "--
Legal Defeasance and Covenant Defeasance") if:
(1) a payment default on Designated Senior Debt occurs and is continuing;
or
(2) any other default occurs and is continuing on Designated Senior Debt
that permits holders of such Designated Senior Debt to accelerate its
maturity and the Trustee receives a notice of such default (a "Payment
Blockage Notice") from the holders or the Representative of any Designated
Senior Debt.
Payments on the Exchange Notes may and shall be resumed:
(1) in the case of a payment default, upon the date on which such default
is cured or waived; and
(2) in case of a nonpayment default, the earlier of (x) the date on which
all nonpayment defaults are cured or waived, (y) 179 days after the date of
delivery of the applicable Payment Blockage Notice or (z) the Trustee
receives notice from the Representative for such Designated Senior Debt
rescinding the Payment Blockage Notice, unless the maturity of any
Designated Senior Debt has been accelerated.
No new Payment Blockage Notice may be delivered unless and until 360 days have
elapsed since the effectiveness of the immediately prior Payment Blockage
Notice.
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No nonpayment default that existed or was continuing on the date of delivery of
any Payment Blockage Notice to the Trustee shall be, or be made, the basis for
a subsequent Payment Blockage Notice unless such default shall have been cured
or waived for a period of not less than 90 consecutive days.
The Company must promptly notify holders of Senior Debt if payment of the
Exchange Notes is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event of a
bankruptcy, liquidation or reorganization of the Company, Holders of these
Exchange Notes may recover less ratably than creditors of the Company who are
holders of Senior Debt.
Optional Redemption
Before January 15, 2002, the Company may on any one or more occasions redeem up
to 35% of the aggregate principal amount of the Exchange Notes originally
issued under the Indenture at a redemption price of 110.375% of the principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the
redemption date, with the net cash proceeds of one or more Equity Offerings;
provided that:
(1) at least 65% of the aggregate principal amount of the Exchange Notes
issued under the Indenture remains outstanding immediately after the
occurrence of such redemption (excluding the Exchange Notes held by the
Company and its Subsidiaries); and
(2) the redemption must occur within 120 days of the date of the closing of
the Equity Offering.
Before January 15, 2004, the Company may also redeem these Exchange Notes, as a
whole but not in part, upon the occurrence of a Change of Control, upon not
less than 30 nor more than 60 days' prior notice (but in no event may any such
redemption occur more than 90 days after the occurrence of such Change of
Control), at a redemption price equal to 100% of the principal amount thereof
plus the Applicable Premium as of, and accrued and unpaid interest thereon, if
any, to, the date of redemption (the "Redemption Date").
Except pursuant to the preceding paragraphs, the Exchange Notes will not be
redeemable at the Company's option prior to January 15, 2004.
On or after January 15, 2004, the Company may redeem all or a part of these
Exchange Notes upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth
below plus accrued and unpaid interest thereon, if any, to the applicable
redemption date, if redeemed during the twelve-month period beginning on
January 15 of the years indicated below:
Year Percentage
---- ----------
2004.............................. 105.1875%
2005.............................. 103.4583%
2006.............................. 101.7292%
2007 and thereafter............... 100.0000%
Mandatory Redemption
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Exchange Notes.
Repurchase at the Option of Holders
Change of Control
If a Change of Control occurs, each Holder of Exchange Notes will have the
right to require the Company to repurchase all or any part (equal to $1,000 or
an integral multiple thereof) of that Holder's Exchange Notes pursuant to the
Change of Control Offer. In the Change of Control Offer, the Company will offer
a Change of Control Payment in cash equal to 101% of the aggregate principal
amount of Exchange Notes repurchased plus accrued and unpaid interest thereon,
if any, to the date of purchase (the "Change of Control Payment"). Within 30
days following any Change of Control, the Company will mail a notice to each
Holder describing the transaction or transactions that constitute the Change of
Control and offering to repurchase Notes on the purchase date specified in such
notice (which must be no earlier than 30 days nor later than 45 days from the
date such notice is mailed, other than as required by law (the "Change of
Control Payment Date")), pursuant
60
to the procedures required by the Indenture and described in such notice. The
Company will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in connection with the repurchase of the
Exchange Notes as a result of a Change of Control. The Company will publicly
announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The Indenture will provide that, prior to the mailing of the notice referred to
above, but in any event within 30 days following any Change of Control, the
Company covenants to:
(1) repay in full and terminate all commitments under Indebtedness under
the Senior Credit Facilities and all other Senior Debt the terms of which
require repayment upon a Change of Control or offer to repay in full and
terminate all commitments under all Indebtedness under the Senior Credit
Facilities and all other such Senior Debt and to repay the Indebtedness
owed to each lender which has accepted such offer; or
(2) obtain the requisite consents under the Senior Credit Facilities and
all other such Senior Debt to permit the repurchase of the Exchange Notes
as provided below.
The Company shall first comply with the covenant in the immediately preceding
sentence before it shall be required to repurchase Exchange Notes pursuant to
the provisions described below. The Company's failure to comply with the
covenant described in the immediately preceding sentence may (with notice and
lapse of time) constitute an Event of Default described in clause (3) but shall
not constitute an Event of Default described in clause (2), under "Events of
Default" below.
On the Change of Control Payment Date, the Company will, to the extent lawful:
(1) accept for payment all Exchange Notes or portions thereof properly
tendered pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of Control
Payment in respect of all Exchange Notes or portions thereof so tendered;
and
(3) deliver or cause to be delivered to the Trustee the Notes so accepted
together with an Officers' Certificate stating the aggregate principal
amount of Exchange Notes or portions thereof being purchased by the
Company.
The Paying Agent will promptly mail to each Holder of Exchange Notes so
tendered the Change of Control Payment for such Exchange Notes, and the Trustee
will promptly authenticate and mail (or cause to be transferred by book entry)
to each Holder a new Exchange Note equal in principal amount to any unpurchased
portion of the Exchange Notes surrendered, if any; provided that each such new
Exchange Note will be in a principal amount of $1,000 or an integral multiple
thereof.
The provisions described above that require the Company to make a Change of
Control Offer following a Change of Control will be applicable regardless of
whether or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the Holders of the Exchange Notes to require
that the Company repurchase or redeem the Exchange Notes in the event of a
takeover, recapitalization or similar transaction.
The Company's outstanding Senior Debt currently prohibits the Company from
purchasing any Exchange Notes, and also provides that certain change of control
events with respect to the Company would constitute a default under the
agreements governing the Senior Debt. Any future credit agreements or other
agreements relating to Senior Debt to which the Company becomes a party may
contain similar restrictions and provisions. In the event a Change of Control
occurs at a time when the Company is prohibited from purchasing Exchange Notes,
the Company could seek the consent of its senior lenders to the purchase of
Exchange Notes or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from purchasing Exchange Notes.
In such case, the Company's failure to purchase tendered Exchange Notes would
constitute an Event of Default under the Indenture which would, in turn,
constitute a default under such Senior Debt. In such circumstances, the
subordination provisions in the Indenture would likely restrict payments to the
Holders of Exchange Notes.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the
61
Indenture applicable to a Change of Control Offer made by the Company and
purchases all Exchange Notes validly tendered and not withdrawn under such
Change of Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Restricted Subsidiaries taken as a whole.
Although there is a limited body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a Holder of Exchange Notes to
require the Company to repurchase such Exchange Notes as a result of a sale,
lease, transfer, conveyance or other disposition of less than all of the assets
of the Company and its Restricted Subsidiaries taken as a whole to another
Person or group may be uncertain.
Asset Sales
The Company will not, and will not permit any of its Restricted Subsidiaries
to, consummate an Asset Sale unless:
(1) the Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair
market value of the assets or Equity Interests issued or sold or otherwise
disposed of;
(2) such fair market value is determined by the Company's Board of
Directors and evidenced by a resolution of the Board of Directors set forth
in an Officers' Certificate delivered to the Trustee; and
(3) at least 75% of the consideration therefor received by the Company or
such Restricted Subsidiary is in the form of cash or Cash Equivalents. For
purposes of this provision, each of the following shall be deemed to be
cash:
(a) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet), of the Company or any
Restricted Subsidiary (other than contingent liabilities and liabilities
that are by their terms subordinated to the Exchange Notes or any
Subsidiary Guarantee) that are assumed by the transferee of any such
assets pursuant to a customary novation agreement that releases the
Company or such Restricted Subsidiary from further liability;
(b) any securities, notes or other obligations received by the Company
or any such Restricted Subsidiary from such transferee that are
contemporaneously (subject to ordinary settlement periods) converted by
the Company or such Restricted Subsidiary into cash (to the extent of
the cash received in that conversion); and
(c) any Designated Noncash Consideration received by the Company or any
of its Restricted Subsidiaries in such Asset Sale having an aggregate
fair market value, taken together with all other Designated Noncash
Consideration received since the date of the Indenture pursuant to this
clause (c) that is at that time outstanding, not to exceed 10% of Total
Assets at the time of the receipt of such Designated Noncash
Consideration (with the fair market value of each item of Designated
Noncash Consideration being measured at the time received and without
giving effect to subsequent changes in value).
Within 365 days after the receipt of any Net Proceeds from an Asset Sale, the
Company may apply such Net Proceeds at its option:
(1) to repay Senior Debt (and to correspondingly reduce commitments if the
Senior Debt repaid is revolving credit borrowings);
(2) to acquire all or substantially all of the assets of, or a majority of
the Voting Stock of, another Permitted Business;
(3) to make a capital expenditure; and/or
(4) to acquire assets that are used or useable in a Permitted Business.
Pending the final application of any such Net Proceeds, the Company may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as provided
in the preceding paragraph will constitute Excess Proceeds. When the aggregate
amount of Excess Proceeds exceeds $10.0 million, the Company will make an Asset
Sale Offer to all Holders of Exchange Notes and all holders of other
Indebtedness that is pari passu with the Exchange Notes containing provisions
similar to those set forth in the Indenture with respect to offers to purchase
or redeem with the proceeds of sales of assets to purchase the maximum
principal amount of Exchange Notes and such other pari passu Indebtedness that
may be purchased out of the Excess Proceeds. The offer price in any Asset Sale
Offer will be equal to 100% of the principal amount plus accrued and unpaid
interest thereon, if any, to the date of purchase, and will be payable in cash.
If any Excess Proceeds remain after consummation of an Asset Sale Offer, the
Company may use such
62
Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If
the aggregate principal amount of Exchange Notes and such other pari passu
Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess
Proceeds, the Trustee shall select the Exchange Notes and such other pari passu
Indebtedness to be purchased on a pro rata basis. Upon completion of each Asset
Sale Offer, the amount of Excess Proceeds shall be reset at zero.
Selection and Notice
If less than all of the Exchange Notes are to be redeemed at any time, the
Trustee will select Exchange Notes for redemption as follows:
(1) if the Exchange Notes are listed, in compliance with the requirements
of the principal national securities exchange on which the Exchange Notes
are listed; or
(2) if the Exchange Notes are not so listed, on a pro rata basis, by lot or
by such method as the Trustee shall deem fair and appropriate.
No Exchange Notes of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than 60
days before the redemption date to each Holder of Exchange Notes to be redeemed
at its registered address. Notices of redemption may not be conditional.
If any Exchange Note is to be redeemed in part only, the notice of redemption
that relates to that Exchange Note shall state the portion of the principal
amount thereof to be redeemed. A new Exchange Note in principal amount equal to
the unredeemed portion of the original Exchange Note will be issued in the name
of the Holder thereof upon cancellation of the original Exchange Note. Exchange
Notes called for redemption become due on the date fixed for redemption. On and
after the redemption date, interest ceases to accrue on Exchange Notes or
portions of them called for redemption.
Certain Covenants
Restricted Payments
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or distribution
on account of the Company's Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation
involving the Company or any of its Restricted Subsidiaries) or to the
direct or indirect holders of the Company's Equity Interests in their
capacity as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company);
(2) purchase, redeem or otherwise acquire or retire for value (including,
without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company or any direct or
indirect parent of the Company (other than any such Equity Interests owned
by the Company or any Restricted Subsidiary of the Company);
(3) make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is subordinated
to the Exchange Notes or the Subsidiary Guarantees, except a payment of
interest or principal at the Stated Maturity thereof; or
(4) make any Restricted Investment (all such payments and other actions set
forth in clauses (1) through (4) above being collectively referred to as
"Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(1) no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof; and
(2) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described below under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock;" and
(3) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Indenture (excluding Restricted Payments
permitted by clauses (2), (3), (5), (6), (7) and (8) of the next succeeding
paragraph), is less than the sum, without duplication, of
63
(a) 50% of the Consolidated Net Income of the Company for the period (taken
as one accounting period) from the beginning of the first fiscal quarter
commencing after the date of the Indenture to the end of the Company's most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated
Net Income for such period is a deficit, less 100% of such deficit), plus
(b) 100% of the aggregate net cash proceeds received by the Company (other
than from a Restricted Subsidiary) since the date of the Indenture as a
contribution to its common equity capital or from the issue or sale of
Equity Interests of the Company (other than Disqualified Stock) or from the
issue or sale of convertible or exchangeable Disqualified Stock or
convertible or exchangeable debt securities of the Company that have been
converted into or exchanged for such Equity Interests (other than Equity
Interests (or Disqualified Stock or debt securities) sold to a Subsidiary
of the Company), plus
(c) to the extent that any Restricted Investment that was made after the
date of the Indenture is sold for cash or otherwise liquidated or repaid
for cash, the lesser of (i) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (ii) the
initial amount of such Restricted Investment.
The preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the Indenture;
(2) the redemption, repurchase, retirement, defeasance or other acquisition
of any subordinated Indebtedness of the Company or any Guarantor or of any
Equity Interests of the Company or any Restricted Subsidiary in exchange
for, or out of the net cash proceeds of the substantially concurrent sale
(other than to a Subsidiary of the Company) of, Equity Interests of the
Company (other than Disqualified Stock); provided that the amount of any
such net cash proceeds that are utilized for any such redemption,
repurchase, retirement, defeasance or other acquisition shall be excluded
from clause (3) (b) of the preceding paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness of the Company or any Guarantor with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness;
(4) payments to any direct or indirect parent corporation of the Company
for the purpose of permitting, and in an amount equal to the amount
required to permit, such direct or indirect parent corporation of the
Company to redeem or repurchase such direct or indirect parent corporation
of the Company's common equity or options in respect thereof, in each case
in connection with the repurchase provisions of employee stock option or
stock purchase agreements or other agreements to compensate management
employees; provided that all such redemptions or repurchases pursuant to
this clause (4) shall not exceed $17.5 million in the aggregate since the
date of the Indenture (which amount shall be increased (A) by the amount of
any net cash proceeds received from the sale since the date of the
Indenture of Equity Interests (other than Disqualified Stock) to members of
the Company's management team that have not otherwise been applied to the
payment of Restricted Payments pursuant to the terms of clause (3)(b) of
the preceding paragraph and (B) by the cash proceeds of any "key-man" life
insurance policies that are used to make such redemptions or repurchases);
and provided, further, that the cancellation of Indebtedness owing to the
Company from members of management of the Company or any of its Restricted
Subsidiaries in connection with such a repurchase of Capital Stock of any
direct or indirect parent corporation of the Company will not be deemed to
constitute a Restricted Payment under the Indenture;
(5) the making of distributions, loans or advances to any direct or
indirect parent corporation of the Company in an amount not to exceed $1.5
million per annum in order to permit such direct or indirect parent
corporation of the Company to pay the ordinary operating expenses of such
direct or indirect parent corporation of the Company (including, without
limitation, directors' fees, indemnification obligations, professional fees
and expenses);
(6) payments to any direct or indirect parent corporation of the Company in
respect of (A) federal income taxes for the tax periods for which a federal
consolidated return is filed by such direct or indirect parent corporation
of the Company for a consolidated group of which such direct or indirect
parent corporation of the Company is the parent and the Company and its
Subsidiaries are members, in an amount not to exceed the hypothetical
federal income taxes that the Company would have paid if the Company and
its Restricted Subsidiaries filed a separate consolidated return with the
Company as the parent, taking into account carryovers and carrybacks of tax
attributes (including net operating losses) that would have been allowed if
such separate consolidated return had been filed, (B) state income tax for
the tax periods for which a state combined, consolidated or unitary return
is filed by such direct or indirect parent corporation of the Company for a
combined, consolidated or unitary group of which such direct or indirect
parent corporation of the Company is the parent and the Company and its
Subsidiaries are members, in an amount not
64
to exceed the hypothetical state income taxes that the Company would have
paid if the Company and its Restricted Subsidiaries had filed a separate
combined, consolidated or unitary return taking into account carryovers and
carrybacks of tax attributes (including net operating losses) that would
have been allowed if such separate combined return had been filed and (C)
capital stock, net worth, or other similar taxes (but for the avoidance of
doubt, excluding any taxes based on net or gross income) payable by such
direct or indirect parent corporation of the Company based on or
attributable to its investment in or ownership of the Company and its
Restricted Subsidiaries; provided, however, that in no event shall any such
tax payment pursuant to this clause (6) exceed the amount of federal (or
state, as the case may be) income tax that is, at the time the Company
makes such tax payments, actually due and payable by such direct or
indirect parent corporation of the Company to the relevant taxing
authorities or to become due and payable within 30 days of such payment by
the Company; provided, further, that for purposes of this clause (6),
payments made by an Unrestricted Subsidiary to a Restricted Subsidiary or
the Company which are in turn distributed by such Restricted Subsidiary or
the Company to any direct or indirect parent corporation of the Company
shall be disregarded;
(7) if no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof, the declaration and payment of
dividends to holders of any class or series of Designated Preferred Stock
(other than Disqualified Stock) of the Company or any Restricted Subsidiary
issued after the date of the Indenture; provided that, at the time of such
issuance, the Company, after giving effect to such issuance on a pro forma
basis, would have had a Fixed Charge Coverage Ratio of at least 2.0 to 1.0
for the most recent Four-Quarter Period;
(8) distributions made by the Company on the Issue Date that are utilized
solely to consummate the Recapitalization and distributions made subsequent
to the Issue Date in order to make payments pursuant to the Merger
Agreement, as in effect on the Issue Date and as amended or modified from
time to time so long as any such amendment or modification is, in the good
faith judgment of the Board of Directors of the Company, not more
disadvantageous to the Holders of Exchange Notes in any material respects
than the Merger Agreement as in effect on the Issue Date;
(9) the repurchase, redemption or other acquisition or retirement for value
of subordinated Indebtedness or the [Cumulative Preferred Stock] with
Excess Proceeds to the extent such Excess Proceeds are permitted to be used
for general corporate purposes under the covenant entitled "Asset Sales;"
and
(10) if no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof and the Company would be
permitted to incur at least $1.00 of additional Indebtedness (other than
Permitted Debt) in compliance with the covenant described below under the
caption "--Incurrence of Indebtedness and Issuance of Preferred Stock,"
other Restricted Payments in an aggregate amount not to exceed $15.0
million since the date of the Indenture.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any assets or securities that are required to be
valued by this covenant shall be determined by the Board of Directors whose
resolution with respect thereto shall be delivered to the Trustee. The Board of
Directors' determination must be based upon an opinion or appraisal issued by
an accounting, appraisal or investment banking firm of national standing if the
fair market value exceeds $10.0 million. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this "Restricted Payments"
covenant were computed, together with a copy of any fairness opinion or
appraisal required by the Indenture.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guarantee or
otherwise become directly or indirectly liable, contingently or otherwise, with
respect to (collectively, "incur") any Indebtedness (including Acquired Debt),
and the Company will not issue any Disqualified Stock and will not permit any
of its Restricted Subsidiaries to issue any shares of preferred stock;
provided, however, that the Company and any Guarantor may incur Indebtedness
(including Acquired Debt) or issue Disqualified Stock, and any Guarantor may
issue preferred stock, if in each case the Fixed Charge Coverage Ratio for the
Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock or preferred
stock is issued would have been at least 2.0 to 1.0, determined on a pro forma
basis (including a pro forma application of the net proceeds therefrom and as
otherwise provided in accordance with the provisions contained in the
definition of "Fixed Charge Coverage Ratio"), as if the
65
additional Indebtedness had been incurred, or the Disqualified Stock or
preferred stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The first paragraph of this covenant will not prohibit the incurrence of any of
the following items of Indebtedness (collectively, "Permitted Debt"):
(1) the incurrence by the Company and any Guarantor of Indebtedness
pursuant to the Senior Credit Facilities in an aggregate principal amount
at any time outstanding (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of the Company
and its Subsidiaries thereunder) not to exceed $545.0 million less the
aggregate amount of all Net Proceeds of Asset Sales applied by the Company
or any of its Restricted Subsidiaries to permanently repay Indebtedness
under the Senior Credit Facilities pursuant to the covenant described above
under the caption "--Asset Sales;" provided that the amount of Indebtedness
permitted to be incurred pursuant to the Senior Credit Facilities in
accordance with this clause (1) shall be in addition to any Indebtedness
permitted to be incurred pursuant to the Senior Credit Facilities in
reliance on, and in accordance with, clauses (4) and (14) below;
(2) the incurrence by the Company and its Restricted Subsidiaries of the
Existing Indebtedness;
(3) the incurrence by the Company and the Guarantors of Indebtedness
represented by the outstanding Notes issued on the date of the Indenture,
the Subsidiary Guarantees of such outstanding Notes, these Exchange Notes
issued in exchange for such outstanding Notes and the Subsidiary Guarantees
thereof;
(4) the incurrence by the Company or any of its Restricted Subsidiaries of
Indebtedness (including Capitalized Lease Obligations) to finance the
purchase, lease or improvement of property (real or personal) or equipment
(whether through the direct purchase of assets or the Capital Stock of any
Person owning such assets) within 180 days after such purchase, lease or
improvement in an aggregate principal amount outstanding (which amount may,
but need not, be incurred in whole or in part under the Senior Credit
Facilities) not to exceed the greater of (a) $30.0 million or (b) 7.5% of
Total Assets at the time of any incurrence thereof, including any Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (4);
(5) the incurrence by the Company or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace, Indebtedness (other than
intercompany Indebtedness) that was permitted by the Indenture to be
incurred under the first paragraph of this covenant or clauses (2), (3),
(4) or (14) of this paragraph;
(6) the incurrence by the Company or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among the Company and any of its
Restricted Subsidiaries; provided, however, that:
(a) if the Company or any Guarantor is the obligor on such Indebtedness
and the obligee is not the Company or any Guarantor, such Indebtedness
must be expressly subordinated to the prior payment in full in cash of
all Obligations with respect to the Exchange Notes, in the case of the
Company, or the Subsidiary Guarantee of such Guarantor, in the case of a
Guarantor; and
(b) (i) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than the
Company or a Restricted Subsidiary thereof and (ii) any sale or other
transfer of any such Indebtedness to a Person that is not either the
Company or a Restricted Subsidiary thereof; shall be deemed, in each
case, to constitute an incurrence of such Indebtedness by the Company or
such Restricted Subsidiary, as the case may be, that was not permitted
by this clause (6);
(7) the incurrence by the Company or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
(i) interest rate risk with respect to any floating or fixed rate
Indebtedness that is permitted by the terms of the Indenture to be
outstanding or (ii) the value of foreign currencies purchased or received
by the Company in the ordinary course of business;
(8) the guarantee by the Company or any of the Guarantors of Indebtedness
of the Company or a Guarantor that was permitted to be incurred by another
provision of this covenant;
(9) the incurrence of Indebtedness and/or the issuance of preferred stock
by Foreign Subsidiaries of the Company, which together with the aggregate
principal amount of Indebtedness incurred pursuant to this clause (9) and
the aggregate liquidation value of all preferred stock issued pursuant to
this clause (9), does not exceed $20.0 million at any one time outstanding;
provided that such amount shall increase to $40.0 million upon the
consummation of an Initial Public Offering;
66
(10) the accrual of interest, accretion or amortization of original issue
discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of dividends
on Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock; provided, in each such case, that the amount thereof is
included in Fixed Charges of the Company as accrued;
(11) Indebtedness incurred by the Company or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to letters
of credit issued in the ordinary course of business including, without
limitation, in respect of workers' compensation claims or self insurance,
or other Indebtedness with respect to reimbursement type obligations
regarding workers' compensation claims;
(12) Indebtedness arising from agreements of the Company or a Restricted
Subsidiary of the Company providing for indemnification, adjustment of
purchase price, earn out or other similar obligations, in each case,
incurred or assumed in connection with the disposition of any business,
assets or a Restricted Subsidiary of the Company, other than guarantees of
Indebtedness incurred by any Person acquiring all or any portion of such
business, assets or Restricted Subsidiary for the purpose of financing such
acquisition; provided that the maximum assumable liability in respect of
all such Indebtedness shall at no time exceed the gross proceeds actually
received by the Company and its Restricted Subsidiaries in connection with
such disposition;
(13) obligations in respect of performance and surety bonds and completion
guarantees provided by the Company or any Restricted Subsidiary of the
Company in the ordinary course of business; and
(14) the incurrence by the Company or any of its Restricted Subsidiaries of
additional Indebtedness, and/or the issuance by any Guarantor of preferred
stock, in an aggregate principal amount (or accreted value, as applicable)
or aggregate liquidation value, as applicable, at any time outstanding
(which amount may, but need not, be incurred in whole or in part under the
Senior Credit Facilities), including all Permitted Refinancing Indebtedness
incurred to refund, refinance or replace any Indebtedness incurred or
preferred stock issued pursuant to this clause (14), not to exceed $40.0
million at any one time outstanding; provided that such amount shall
increase to $60.0 million upon the consummation of an Initial Public
Offering.
For purposes of determining compliance with this "Incurrence of Indebtedness
and Issuance of Preferred Stock" covenant, in the event that an item of
proposed Indebtedness meets the criteria of more than one of the categories of
Permitted Debt described in clauses (1) through (14) above, or is entitled to
be incurred pursuant to the first paragraph of this covenant, the Company will
be permitted to classify such item of Indebtedness on the date of its
incurrence in any manner that complies with this covenant. All borrowings
outstanding on the date of the Indenture under the Senior Credit Facilities
will be deemed to have been borrowed pursuant to clause (1) of the definition
of Permitted Debt.
No Senior Subordinated Debt
The Company will not incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is subordinate or junior in right of
payment to any Indebtedness of the Company and senior in any respect in right
of payment to the Exchange Notes. No Guarantor will incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Indebtedness of such Guarantor
and senior in any respect in right of payment to such Guarantor's Subsidiary
Guarantee.
Liens
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, assume or suffer to exist any Lien
of any kind securing Indebtedness, or trade payables on any asset now owned or
hereafter acquired, except Permitted Liens, unless all payments due under the
Indenture and the Exchange Notes are secured on an equal and ratable basis with
the Indebtedness so secured until such time as such is no longer secured by a
Lien; provided that if such Indebtedness is by its terms expressly subordinated
to the Exchange Notes or any Subsidiary Guarantee, the Lien securing such
Indebtedness shall be subordinate and junior to the Lien securing the Exchange
Notes and the Subsidiary Guarantees with the same relative priority as such
subordinate or junior Indebtedness shall have with respect to the Exchange
Notes and the Subsidiary Guarantees.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create or permit to exist or become effective any
encumbrance or restriction on the ability of any Restricted Subsidiary to:
67
(1) pay dividends or make any other distributions on its Capital Stock to
the Company or any of the Company's Restricted Subsidiaries, or with
respect to any other interest or participation in, or measured by, its
profits, or pay any indebtedness owed to the Company or any of the
Company's Restricted Subsidiaries;
(2) make loans or advances to the Company or any of the Company's
Restricted Subsidiaries; or
(3) transfer any of its properties or assets to the Company or any of the
Company's Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) Existing Indebtedness as in effect on the date of the Indenture;
(2) the Indenture and the Exchange Notes;
(3) the Senior Credit Facilities;
(4) applicable law;
(5) any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Company or any of its Restricted Subsidiaries as in effect
at the time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property
or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the Indenture
to be incurred;
(6) non-assignment provisions in leases, licenses or similar agreements
entered into in the ordinary course of business and consistent with past
practices;
(7) purchase money obligations for property acquired in the ordinary course
of business that impose restrictions on the property so acquired of the
nature described in clause (3) of the preceding paragraph;
(8) any agreement for the sale or other disposition of a Restricted
Subsidiary that restricts distributions by such Restricted Subsidiary
pending its sale or other disposition;
(9) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are not materially more restrictive, in the good faith
judgment of the Board of Directors of the Company, taken as a whole, than
those contained in the agreements governing the Indebtedness being
refinanced;
(10) restrictions on the transfer of assets subject to any Lien permitted
under the Indenture imposed by the holder of such Lien;
(11) Liens securing Indebtedness otherwise permitted to be incurred
pursuant to the provisions of the covenant described above under the
caption "--Liens" that limit the right of the Company or any of its
Restricted Subsidiaries to dispose of the assets subject to such Lien;
(12) provisions with respect to the disposition or distribution of assets
or property in joint venture agreements and other similar agreements
entered into in the ordinary course of business;
(13) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business;
(14) any agreement or instrument governing Indebtedness or preferred stock
(whether or not outstanding) of Foreign Subsidiaries of the Company that
was permitted by the Indenture to be incurred;
(15) Indebtedness incurred after the Issue Date in accordance with the
terms of the Indenture; provided that the restrictions contained in the
agreements governing such new Indebtedness are, in the good faith judgment
of the Board of Directors of the Company, not materially less favorable,
taken as a whole, to the Holders of the Notes than those contained in the
agreements governing Indebtedness on the Issue Date; and
(16) any encumbrances or restrictions imposed by any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings of the contracts, instruments or obligations
referred to in clauses (1) through (15) above; provided that such
amendments, modifications restatements, renewals, increases, supplements,
refundings, replacements or refinancings are, in the good faith judgment of
the Board of Directors of the Company, not materially more restrictive with
respect to such dividend and other payment restrictions than those
68
contained in the dividends or other payment restrictions prior to such
amendment, modification, restatement, renewal, increase, supplement,
refunding, replacement or refinancing.
Merger, Consolidation, or Sale of Assets
The Company may not, directly or indirectly: (1) consolidate or merge with or
into another Person (whether or not the Company is the surviving corporation);
or (2) sell, assign, transfer, convey or otherwise dispose of all or
substantially all of its properties or assets, in one or more related
transactions, to another Person; unless:
(1) either: (a) the Company is the surviving corporation; or (b) the Person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, conveyance or other
disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia;
(2) the Person formed by or surviving any such consolidation or merger (if
other than the Company) or the Person to which such sale, assignment,
transfer, conveyance or other disposition shall have been made assumes all
the obligations of the Company under the Notes, the Indenture and the
Registration Rights Agreement pursuant to agreements reasonably
satisfactory to the Trustee;
(3) immediately after such transaction no Default or Event of Default
exists; and
(4) the Company or the Person formed by or surviving any such consolidation
or merger (if other than the Company) will, on the date of such transaction
after giving pro forma effect thereto and any related financing
transactions as if the same had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in
the first paragraph of the covenant described above under the caption "--
Incurrence of Indebtedness and Issuance of Preferred Stock."
In addition, the Company may not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related
transactions, to any other Person. This "Merger, Consolidation, or Sale of
Assets" covenant will not apply to a sale, assignment, transfer, conveyance or
other disposition of assets between or among the Company and any of its Wholly
Owned Restricted Subsidiaries.
Transactions with Affiliates
The Company will not, and will not permit any of its Restricted Subsidiaries
to, make any payment to, or sell, lease, transfer or otherwise dispose of any
of its properties or assets to, or purchase any property or assets from, or
enter into or make or amend any transaction, contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would
have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person; and
(2) the Company delivers to the Trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$5.0 million, a resolution of the Board of Directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction
complies with this covenant and that such Affiliate Transaction has been
approved by a majority of the disinterested members of the Board of
Directors; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$10.0 million, an opinion as to the fairness to the Holders of such
Affiliate Transaction from a financial point of view issued by an
accounting, appraisal or investment banking firm of national standing.
The following items shall not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) reasonable fees and compensation paid to and indemnity provided on
behalf of, officers, directors, employee or consultants of the Company or
any Subsidiary as determined in good faith by the Board of Directors of the
Company or senior management;
(2) transactions between or among the Company and/or its Restricted
Subsidiaries;
69
(3) any agreement or instrument as in effect as of the date of the
Indenture or any amendment or replacement thereto or any transaction
contemplated thereby (including pursuant to any amendment or replacement
thereto) so long as any such amendment or replacement agreement or
instrument is, in the good faith judgment of the Board of Directors of the
Company, not more disadvantageous to the Holders of Exchange Notes in any
material respect than the original agreement or instrument as in effect on
the date of the Indenture;
(4) the payment of customary management, consulting and advisory fees and
related expenses to the Principals and their Affiliates made pursuant to
any financial advisory, financing, underwriting or placement agreement or
in respect of other investment banking activities, including, without
limitation, in connection with acquisitions or divestitures which are
approved by the Board of Directors of the Company or such Restricted
Subsidiary in good faith;
(5) payments or loans to employees or consultants that are approved by the
Board of Directors of the Company in good faith;
(6) the existence of, or the performance by the Company or any of its
Restricted Subsidiaries of its obligations under the terms of, any
stockholders agreement (including any registration rights agreement or
purchase agreement related thereto) to which it is a party as of the date
of the Indenture and any similar agreements which it may enter into
thereafter; provided, however, that the existence of, or the performance by
the Company or any of its Restricted Subsidiaries of obligations under, any
future amendment to any such existing agreement or under any similar
agreement entered into after the date of the Indenture shall only be
permitted by this clause (6) to the extent that the terms of any such
amendment or new agreement are not disadvantageous to the Holders of
Exchange Notes in any material respect;
(7) transactions with customers, clients, suppliers, joint venture partners
or purchasers or sellers of goods or services, in each case in the ordinary
course of business (including, without limitation, pursuant to joint
venture agreements) and otherwise in compliance with the terms of the
Indenture which are fair to the Company or its Restricted Subsidiaries, in
the reasonable determination of the Board of Directors of the Company or
the senior management thereof, or are on terms at least as favorable as
might reasonably have been obtained at such time from an unaffiliated
party; and
(8) Restricted Payments that are permitted by the provisions of the
Indenture described above under the caption "--Restricted Payments."
Designation of Restricted and Unrestricted Subsidiaries
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default. If a
Restricted Subsidiary is designated as an Unrestricted Subsidiary, all
outstanding Investments owned by the Company and its Restricted Subsidiaries in
the Subsidiary so designated will be deemed to be an Investment made as of the
time of such designation and will reduce the amount available for Restricted
Payments under clause (3)(b) [?] of the first paragraph of the covenant
described above under the caption "--Restricted Payments" or Permitted
Investments, as applicable. All such outstanding Investments will be valued at
their fair market value at the time of such designation. That designation will
only be permitted if such Restricted Payment would be permitted at that time
and if such Restricted Subsidiary otherwise meets the definition of an
Unrestricted Subsidiary. The Board of Directors may redesignate any
Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation
would not cause a Default.
Limitations on Issuances of Guarantees of Indebtedness
The Company will not permit any Restricted Subsidiary that is not a Guarantor,
directly or indirectly, to Guarantee or pledge any assets to secure the payment
of any other Indebtedness of the Company or any Guarantor (other than such
Restricted Subsidiary) unless such Restricted Subsidiary simultaneously
executes and delivers a supplemental indenture providing for the Guarantee of
the payment of the Exchange Notes by such Subsidiary, which Guarantee shall be
senior to or pari passu with such Restricted Subsidiary's Guarantee of or
pledge to secure such other Indebtedness, unless such other Indebtedness is
Senior Debt, in which case the Guarantee of the Exchange Notes shall be
subordinated to the Guarantee of such Senior Debt to the same extent as the
Exchange Notes are subordinated to such Senior Debt.
Notwithstanding the preceding paragraph, any Subsidiary Guarantee of the
Exchange Notes will provide by its terms that it will be automatically and
unconditionally released and discharged under the circumstances described above
under the caption "--Subsidiary Guarantees." The form of the Subsidiary
Guarantee is attached as an exhibit to the Indenture.
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Business Activities
The Company will not, and will not permit any Subsidiary to, engage in any
business other than Permitted Businesses.
Reports
Whether or not required by the Commission, so long as any Exchange Notes are
outstanding, the Company will furnish to the Holders of such Exchange Notes,
within the time periods specified in the Commission's rules and regulations:
(1) all quarterly and annual financial information that would be required
to be contained in a filing with the Commission on Forms 10-Q and 10-K if
the Company were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and, with respect to the annual information only, a report on the annual
financial statements by the Company's certified independent accountants;
and
(2) all current reports that would be required to be filed with the
Commission on Form 8-K if the Company were required to file such reports.
If the Company has designated any of its Subsidiaries as Unrestricted
Subsidiaries, then the quarterly and annual financial information required by
the preceding paragraph shall include a reasonably detailed presentation,
either on the face of the financial statements or in the footnotes thereto, and
in Management's Discussion and Analysis of Financial Condition and Results of
Operations, of the financial condition and results of operations of the Company
and its Restricted Subsidiaries separate from the financial condition and
results of operations of the Unrestricted Subsidiaries of the Company.
In addition, whether or not required by the Commission, the Company will file a
copy of all of the information and reports referred to in clauses (1) and (2)
above with the Commission for public availability within the time periods
specified in the Commission's rules and regulations (unless the Commission will
not accept such a filing) and make such information available to securities
analysts and prospective investors upon request. Moreover, the Company has
agreed, and any Guarantor will agree, that, for so long as any Exchange Notes
remain outstanding, it will furnish to the Holders and to securities analysts
and prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Events of Default and Remedies
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on the Notes,
whether or not prohibited by the subordination provisions of the Indenture;
(2) default in payment when due of the principal of or premium, if any, on
the Exchange Notes, whether or not prohibited by the subordination
provisions of the Indenture;
(3) failure by the Company or any of its Restricted Subsidiaries for 30
days after specified notice from the Trustee or the Holders of at least 25%
of the outstanding principal amount of the Exchange Notes to comply with
any of the other agreements in the Indenture or the Exchange Notes;
(4) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Restricted Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the date of the Indenture, if that default:
(a) is caused by a failure to pay principal at the final stated maturity
of such Indebtedness (a "Payment Default"); or
(b) results in the acceleration of such Indebtedness prior to its
express maturity,
and, in each case, the principal amount of any such Indebtedness, together
with the principal amount of any other such Indebtedness under which there
has been a Payment Default or the maturity of which has been so
accelerated, aggregates $15.0 million or more;
(5) failure by the Company or any of its Restricted Subsidiaries to pay
final judgments aggregating in excess of $15.0 million, which judgments are
not paid, discharged or stayed for a period of 60 consecutive days after
such judgments become final and non-appealable; and
(6) certain events of bankruptcy or insolvency with respect to the Company
or any of its Significant Restricted Subsidiaries.
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In the case of an Event of Default arising from certain events of bankruptcy or
insolvency with respect to the Company, all outstanding Exchange Notes will
become due and payable immediately without further action or notice. If any
other Event of Default specified in the Indenture occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of outstanding
Exchange Notes may declare the principal of and accrued interest on the
Exchange Notes to be due any payable by notice in writing to the Company and
the Trustee specifying the respective Event of Default and that such notice is
a "notice of acceleration" (the "Acceleration Notice"), and the same (i) shall
become immediately due and payable or (ii) if there are any amounts outstanding
under the Senior Credit Facilities, shall become immediately due and payable
upon the first to occur of an acceleration under the Senior Credit Facilities
or five Business Days after receipt by the Company and the Representative under
the Senior Credit Facilities of such Acceleration Notice but only if such Event
of Default is then continuing.
Holders of the Exchange Notes may not enforce the Indenture or the Exchange
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Exchange
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Exchange Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest) if it determines that withholding notice
is in their interest.
The Holders of a majority in aggregate principal amount of the Exchange Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all
of the Exchange Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the Exchange Notes.
In the case of any Event of Default occurring by reason of any willful action
or inaction taken or not taken by or on behalf of the Company with the
intention of avoiding payment of the premium that the Company would have had to
pay if the Company then had elected to redeem the Exchange Notes pursuant to
the optional redemption provisions of the Indenture, an equivalent premium
shall also become and be immediately due and payable to the extent permitted by
law upon the acceleration of the Exchange Notes. If an Event of Default occurs
prior to January 15, 2004, by reason of any willful action (or inaction) taken
(or not taken) by or on behalf of the Company with the intention of avoiding
the prohibition on redemption of the Exchange Notes prior to January 15, 2004,
then the premium specified in the Indenture shall also become immediately due
and payable to the extent permitted by law upon the acceleration of the
Exchange Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture. Upon becoming aware of any Default or
Event of Default, the Company is required to deliver to the Trustee a statement
specifying such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of the Company, any
direct or indirect parent corporation of the Company or any Guarantor, as such,
shall have any liability for any obligations of the Company or the Guarantors
under the Exchange Notes, the Indenture, the Subsidiary Guarantees or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Exchange Notes by accepting an Exchange Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Exchange Notes. The waiver may not be
effective to waive liabilities under the federal securities laws.
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Exchange Notes and all
obligations of the Guarantors discharged with respect to their Subsidiary
Guarantees ("Legal Defeasance") except for:
(1) the rights of Holders of outstanding Exchange Notes to receive payments
in respect of the principal of, premium, if any, and interest on such
Exchange Notes when such payments are due from the trust referred to below;
(2) the Company's obligations with respect to the Exchange Notes concerning
issuing temporary Exchange Notes, registration of Exchange Notes,
mutilated, destroyed, lost or stolen Exchange Notes and the maintenance of
an office or agency for payment and money for security payments held in
trust;
(3) the rights, powers, trusts, duties and immunities of the Trustee, and
the Company's obligations in connection therewith; and
(4) the Legal Defeasance provisions of the Indenture.
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In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company and the Guarantors released with respect to certain
covenants that are described in the Indenture ("Covenant Defeasance") and
thereafter any omission to comply with those covenants shall not constitute a
Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (including non-payment of other indebtedness,
bankruptcy, receivership, rehabilitation and insolvency events described under
"Events of Default" and the limitations contained in clauses (3) and (4) of
"Merger, Consolidation, or Sale of Assets") will no longer constitute an Event
of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders of the Exchange Notes, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of, premium,
if any, and interest on the outstanding Exchange Notes on the stated
maturity or on the applicable redemption date, as the case may be, and the
Company must specify whether the Exchange Notes are being defeased to
maturity or to a particular redemption date;
(2) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee an Opinion of Counsel reasonably acceptable to the Trustee
confirming that (a) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (b) since the date
of the Indenture, there has been a change in the applicable federal income
tax law, in either case to the effect that, and based thereon such opinion
of counsel shall confirm that, the Holders of the outstanding Exchange
Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not
occurred;
(3) in the case of Covenant Defeasance, the Company shall have delivered to
the Trustee an Opinion of Counsel reasonably acceptable to the Trustee
confirming that the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be continuing
either: (a) on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such
deposit); or (b) insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st day
after the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under the Senior Credit
Facilities or any other material agreement or instrument (other than the
Indenture) to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound;
(6) the Company must have delivered to the Trustee an opinion of counsel to
the effect that after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
(7) the Company must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders of Notes over the other creditors of the Company
with the intent of defeating, hindering, delaying or defrauding creditors
of the Company or others; and
(8) the Company must deliver to the Trustee an Officers' Certificate and an
opinion of counsel, each stating that all conditions precedent relating to
the Legal Defeasance or the Covenant Defeasance have been complied with.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the Indenture and the
Exchange Notes may be amended or supplemented with the consent of the Holders
of at least a majority in principal amount of the Exchange Notes (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Exchange Notes), and any existing default
or compliance with any provision of the Indenture or the Exchange Notes may be
waived with the consent of the Holders of a majority in principal amount of the
then outstanding Exchange Notes (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange offer
for, Exchange Notes).
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Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Exchange Notes held by a non-consenting Holder):
(1) reduce the principal amount of Exchange Notes whose Holders must
consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any Exchange
Note or alter the provisions with respect to the redemption of the Exchange
Notes (other than provisions relating to the covenants described above
under the caption "Repurchase at the Option of Holders");
(3) reduce the rate of or change the time for payment of interest on any
Exchange Note;
(4) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Exchange Notes (except a rescission of
acceleration of the Exchange Notes by the Holders of at least a majority in
aggregate principal amount of the Exchange Notes and a waiver of the
payment default that resulted from such acceleration);
(5) make any Exchange Note payable in money other than that stated in the
Exchange Notes;
(6) make any change in the provisions of the Indenture relating to waivers
of past Defaults or the rights of Holders of Exchange Notes to receive
payments of principal of or premium, if any, or interest on the Exchange
Notes;
(7) waive a redemption payment with respect to any Exchange Note (other
than a payment required by one of the covenants described above under the
caption "Repurchase at the Option of Holders"); or
(8) make any change in the preceding amendment and waiver provisions.
In addition, any amendment to, or waiver of, the provisions of the Indenture
relating to subordination that adversely affects the rights of the Holders of
the Exchange Notes will require the consent of the Holders of at least 75% in
aggregate principal amount of Exchange Notes then outstanding.
Notwithstanding the preceding, without the consent of any Holder of Exchange
Notes, the Company, or any Guarantor, with respect to its Subsidiary Guarantee
or the Indenture, and the Trustee may amend or supplement the Indenture or the
Exchange Notes or any Subsidiary Guarantee:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Exchange Notes in addition to or in place
of certificated Exchange Notes;
(3) to provide for the assumption of the Company's, or any Guarantor's,
obligations to Holders of Exchange Notes in the case of a merger or
consolidation or sale of all or substantially all of the Company's, or such
Guarantor's, as the case may be, assets;
(4) to make any change that would provide any additional rights or benefits
to the Holders of Exchange Notes, including providing for additional
Subsidiary Guarantees, or that does not adversely affect the legal rights
under the Indenture of any such Holder; or
(5) to comply with requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act.
Concerning the Trustee
If the Trustee becomes a creditor of the Company or any Guarantor, the
Indenture limits its right to obtain payment of claims in certain cases, or to
realize on certain property received in respect of any such claim as security
or otherwise. The Trustee will be permitted to engage in other transactions;
however, if it acquires any conflicting interest it must eliminate such
conflict within 90 days, apply to the Commission for permission to continue or
resign.
The Holders of a majority in principal amount of the then outstanding Exchange
Notes will have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur and be continuing, the Trustee will be required, in the exercise of
its power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
Holder of Exchange Notes, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
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Additional Information
Anyone who receives this Prospectus may obtain a copy of the Indenture without
charge by writing to Domino's Inc., 30 Frank Lloyd Wright Drive, P.O. Box 997,
Ann Arbor, Michigan 48106-0997, Attention: Chief Financial Officer.
Book-Entry, Delivery and Form
The certificates representing the Exchange Notes will be issued in fully
registered form, without coupons. Except as described below, the Exchange Notes
will be deposited with, or on behalf of, The Depository Trust Company ("DTC"),
in New York, New York, and registered in the name of DTC or its nominee in the
form of one or more global certificates (the "Global Notes") or will remain in
the custody of the Trustee pursuant to a FAST Balance Certificate Agreement
between DTC and the Trustee.
Except as set forth below, the Global Notes may be transferred, in whole and
not in part, only to DTC or another nominee of DTC or to a successor of DTC or
its nominee. Except in the limited circumstances described below, owners of
beneficial interests in the Global Notes will not be entitled to receive
physical delivery of Certificated Notes (as defined below). See "--Exchange of
Book-Entry Notes for Certificated Notes." In addition, transfers of beneficial
interests in the Global Notes will be subject to the applicable rules and
procedures of DTC and its direct or indirect participants (including, if
applicable, those of Euroclear and Cedel), which may change from time to time.
Initially, the Trustee will act as Paying Agent and Registrar. The Exchange
Notes may be presented for registration of transfer and exchange at the offices
of the Registrar.
Depository Procedures
The following description of the operations and procedures of DTC are provided
solely as a matter of convenience. These operations and procedures are solely
within the control of the settlement system of DTC and are subject to changes
by DTC from time to time. The Company takes no responsibility for these
operations and procedures and urges investors to contact DTC or its
participants directly to discuss these matters.
DTC is a limited-purpose trust company created to hold securities for its
participating organizations (collectively, the "Participants") and to
facilitate the clearance and settlement of transactions in those securities
between Participants through electronic book-entry changes in accounts of its
Participants. The Participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations. Access
to DTC's system is also available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may beneficially
own securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interests in, and transfers of ownership
interests in, each security held by or on behalf of DTC are recorded on the
records of the Participants and Indirect Participants.
Pursuant to procedures established by DTC:
(1) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the Trustee with portions of the principal
amount of the Global Notes; and
(2) ownership of such interests in the Global Notes will be shown on, and
the transfer of ownership thereof will be effected only through, records
maintained by DTC (with respect to the Participants) or by the Participants
and the Indirect Participants (with respect to other owners of beneficial
interest in the Global Notes).
All interests in a Global Note may be subject to the procedures and
requirements of DTC. The laws of some states require that certain persons take
physical delivery in definitive form of securities that they own. Consequently,
the ability to transfer beneficial interests in a Global Note to such persons
will be limited to that extent. Because DTC can act only on behalf of
Participants, which in turn act on behalf of Indirect Participants and certain
banks, the ability of a person having beneficial interests in a Global Note to
pledge such interests to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interests, may be affected
by the lack of a physical certificate evidencing such interests.
Except as described below, owners of interest in the Global Notes will not have
Exchange Notes registered in their names, will not receive physical delivery of
Exchange Notes in certificated form and will not be considered the registered
owners or "Holders" thereof under the Indenture for any purpose.
75
Payments in respect of the principal of, and premium, if any, and interest on a
Global Note registered in the name of DTC or its nominee will be payable to DTC
in its capacity as the registered Holder under the Indenture. Under the terms
of the Indenture, the Company and the Trustee will treat the persons in whose
names the Exchange Notes, including the Global Notes, are registered as the
owners thereof for the purpose of receiving such payments and for any and all
other purposes whatsoever. Consequently, neither the Company, the Trustee nor
any agent of the Company or the Trustee has or will have any responsibility or
liability for:
(1) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interest in the Global Notes, or for maintaining, supervising or
reviewing any of DTC's records or any Participant's or Indirect
Participant's records relating to the beneficial ownership interests in the
Global Notes; or
(2) any other matter relating to the actions and practices of DTC or any of
its Participants or Indirect Participants.
DTC's current practice, upon receipt of any payment in respect of securities
such as the Exchange Notes (including principal and interest), is to credit the
accounts of the relevant Participants with the payment on the payment date, in
amounts proportionate to their respective holdings in the principal amount of
beneficial interest in the relevant security as shown on the records of DTC
unless DTC has reason to believe it will not receive payment on such payment
date.
Payments by the Participants and the Indirect Participants to the beneficial
owners of Exchange Notes will be governed by standing instructions and
customary practices and will be the responsibility of the Participants or the
Indirect Participants and will not be the responsibility of DTC, the Trustee or
the Company. Neither the Company nor the Trustee will be liable for any delay
by DTC or any of its Participants in identifying the beneficial owners of the
Exchange Notes, and the Company and the Trustee may conclusively rely on and
will be protected in relying on instructions from DTC or its nominee for all
purposes.
DTC will take any action permitted to be taken by a Holder of Exchange Notes
only at the direction of one or more Participants to whose account DTC has
credited the interests in the Global Notes and only in respect of such portion
of the aggregate principal amount of the Exchange Notes as to which such
Participant or Participants has or have given such direction. However, if there
is an Event of Default under the Exchange Notes, DTC reserves the right to
exchange the Global Notes for Exchange Notes in certificated form, and to
distribute such Exchange Notes to its Participants.
Exchange of Book-Entry Notes for Certificated Notes
A Global Note is exchangeable for definitive Exchange Notes in registered
certificated form ("Certificated Notes") if:
(1) DTC:
(a) notifies the Company that it is unwilling or unable to continue as
depositary for the Global Notes and the Company thereupon fails to
appoint a successor depositary; or
(b) has ceased to be a clearing agency registered under the Exchange
Act;
(2) the Company, at its option, notifies the Trustee in writing that it
elects to cause the issuance of the Certificated Notes; or
(3) there shall have occurred and be continuing a Default or Event of
Default with respect to the Exchange Notes.
In addition, beneficial interests in a Global Note may be exchanged for
Certificated Notes upon request but only upon prior written notice given to the
Trustee by or on behalf of DTC in accordance with the Indenture. In all cases,
Certificated Notes delivered in exchange for any Global Note or beneficial
interests therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of DTC in accordance with its
customary procedures.
Same Day Settlement and Payment
The Indenture requires that payments in respect of the Exchange Notes
represented by the Global Notes (including principal, premium, if any, and
interest) be made by wire transfer of immediately available funds to the
accounts specified by the Global Note Holder. With respect to Exchange Notes in
certificated form, the Company will make all payments of principal, premium, if
any, and interest by wire transfer of immediately available funds to the
accounts specified by the Holders thereof or, if no such account is specified,
by mailing a check to each such Holder's registered address. The Exchange Notes
represented by the Global Notes are expected to be eligible to trade in the
PORTAL market and to trade
76
in DTC's Same-Day Funds Settlement System, and any permitted secondary market
trading activity in such Exchange Notes will, therefore, be required by DTC to
be settled in immediately available funds. The Company expects that secondary
trading in any Certificated Notes will also be settled in immediately available
funds.
Certain Definitions
Set forth below are certain defined terms used in the Indenture. Reference is
made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other Person
is merged with or into or became a Subsidiary of such specified Person,
whether or not such Indebtedness is incurred in connection with, or in
contemplation of, such other Person merging with or into, or becoming a
Subsidiary of, such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise. For purposes of this definition, the terms
"controlling," "controlled by" and "under common control with" shall have
correlative meanings.
"Applicable Premium" means, with respect to any Note on any Redemption Date,
the greater of (i) 1.0% of the principal amount of such Exchange Note or (ii)
the excess of (A) the present value at such Redemption Date of (1) the
redemption price of such Exchange Note at January 15, 2004 (such redemption
price being set forth in the table above), plus (2) all required interest
payments due on such Exchange Note through January 15, 2004 (excluding accrued
but unpaid interest), computed using a discount rate equal to the Treasury Rate
at such Redemption Date plus 50 basis points over (B) the principal amount of
such Exchange Note, if greater.
"Asset Acquisition" means (a) an Investment by the Company or any Restricted
Subsidiary of the Company in any other Person if, as a result of such
Investment, such Person shall become a Restricted Subsidiary of the Company, or
shall be merged with or into the Company or any Restricted Subsidiary of the
Company, or (b) the acquisition by the Company or any Restricted Subsidiary of
the Company of all or substantially all of the assets of any other Person or
any division or line of business of any other Person.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights (including, without limitation, by way of a sale and leaseback),
other than sales or leases in the ordinary course of business; provided
that the sale, conveyance or other disposition of all or substantially all
of the assets of the Company and its Restricted Subsidiaries taken as a
whole will be governed by the provisions of the Indenture described above
under the caption "--Change of Control" and/or the provisions described
above under the caption "--Merger, Consolidation or Sale of Assets" and not
by the provisions of the Asset Sale covenant; and
(2) the issuance of Equity Interests by any of the Company's Restricted
Subsidiaries or the sale of Equity Interests in any of its Subsidiaries.
Notwithstanding the preceding, the following items shall not be deemed to be
Asset Sales:
(1) any single transaction or series of related transactions that: (a)
involves assets having a fair market value of less than $1.0 million; or
(b) results in net proceeds to the Company and its Subsidiaries of less
than $1.0 million;
(2) disposals or replacements of obsolete equipment in the ordinary course
of business;
(3) the sale, lease conveyance, disposition or other transfer by the
Company or any Restricted Subsidiary of assets or property or Equity
Interests of any Restricted Subsidiary to one or more Restricted
Subsidiaries in connection with Investments permitted by the covenant
described under the caption "--Restricted Payments;"
(4) a transfer of assets between or among the Company and its Wholly Owned
Restricted Subsidiaries,
77
(5) an issuance of Equity Interests by a Wholly Owned Restricted Subsidiary
to the Company or to another Wholly Owned Restricted Subsidiary; and
(6) a Restricted Payment that is permitted by the covenant described above
under the caption "--Restricted Payments."
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and Rule
13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as such term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial
ownership of all securities that such "person" has the right to acquire,
whether such right is currently exercisable or is exercisable only upon the
occurrence of a subsequent condition.
"Capital Lease Obligation" means, at the time any determination thereof is to
be made, the amount of the liability in respect of a capital lease that would
at that time be required to be capitalized on a balance sheet in accordance
with GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated)
of corporate stock;
(3) in the case of a partnership or limited liability company, partnership
or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the right
to receive a share of the profits and losses of, or distributions of assets
of, the issuing Person.
"Cash Equivalents" means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality thereof (provided
that the full faith and credit of the United States is pledged in support
thereof) having maturities of not more than twelve months from the date of
acquisition;
(3) certificates of deposit and eurodollar time deposits with maturities of
six months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding twelve months and overnight bank deposits, in each
case, with any lender party to the Senior Credit Facilities or, with any
commercial bank having capital and surplus in excess of $500 million and a
Thompson Bank Watch Rating of "B" or better;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the qualifications
specified in clause (3) above;
(5) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Corporation and in each case
maturing within twelve months after the date of acquisition; and
(6) money market funds substantially all of the assets of which constitute
Cash Equivalents of the kinds described in clauses (1) through (5) of this
definition.
"Change of Control" means the occurrence of any of the following:
(1) the sale, lease, transfer, conveyance or other disposition (other than
by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and
its Restricted Subsidiaries taken as a whole to any "person" (as such term
is used in Section 13(d)(3) of the Exchange Act) other than a Principal;
(2) the adoption of a plan relating to the liquidation or dissolution of
the Company;
(3) the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person" (as
defined above), other than the Principals or any Permitted Group, becomes
the
78
Beneficial Owner, directly or indirectly, of more than 50% of the Voting
Stock of the Company, measured by voting power rather than number of
shares;
(4) the first day on which a majority of the members of the Board of
Directors of the Company are not Continuing Directors; or
(5) the Company consolidates with, or merges with or into, any Person, or
any Person consolidates with, or merges with or into, the Company, in any
such event pursuant to a transaction in which any of the outstanding Voting
Stock of the Company is converted into or exchanged for cash, securities or
other property, other than any such transaction where the Voting Stock of
the Company outstanding immediately prior to such transaction is converted
into or exchanged for Voting Stock (other than Disqualified Stock) of the
surviving or transferee Person constituting a majority of the outstanding
shares of such Voting Stock of such surviving or transferee Person
(immediately after giving effect to such issuance).
"Consolidated Cash Flow" means, with respect to any Person for any period, the
Consolidated Net Income of such Person for such period plus:
(1) provision for taxes based on income or profits of such Person and its
Restricted Subsidiaries for such period, to the extent that such provision
for taxes was deducted in computing such Consolidated Net Income; plus
(2) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance
costs, original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of
all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of
credit or bankers' acceptance financings, and net payments, if any,
pursuant to Hedging Obligations), to the extent that any such expense was
deducted in computing such Consolidated Net Income; plus
(3) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses that
were paid in a prior period) and other non-cash expenses (excluding any
such non-cash expense to the extent that it represents an accrual of or
reserve for cash expenses in any future period or amortization of a prepaid
cash expense that was paid in a prior period) of such Person and its
Restricted Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income; plus
(4) the costs and expenses of the Company and its Subsidiaries incurred in
connection with the Transactions to the extent that such costs and expenses
were deducted in computing Consolidated Net Income, in each case, on a
consolidated basis and determined in accordance with GAAP; minus
(5) non-cash items increasing such Consolidated Net Income for such period,
other than (i) items that were accrued in the ordinary course of business
and (ii) the reversal of reserves in the ordinary course of business, in
each case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the preceding, the provision for taxes based on the income or
profits of, and the depreciation and amortization and other non-cash charges
of, a Restricted Subsidiary of the Company shall be added to Consolidated Net
Income to compute Consolidated Cash Flow of the Company only to the extent that
a corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Restricted Subsidiary without prior approval
(that has not been obtained), pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Restricted Subsidiary or its
stockholders.
"Consolidated Net Income" of the Company means, for any period, the aggregate
net income (or loss) of the Company and its Restricted Subsidiaries for such
period on a consolidated basis, determined in accordance with GAAP, provided
that there shall be excluded therefrom:
(1) gains and losses from Asset Sales (without regard to the $1.0 million
limitation set forth in the definition thereof) and the related tax effects
according to GAAP;
(2) gains and losses due solely to fluctuations in currency values and the
related tax effects according to GAAP;
(3) items classified as extraordinary, unusual or nonrecurring gains and
losses (including, without limitation, severance, relocation and other
restructuring costs), and the related tax effects according to GAAP;
79
(4) the net income (or loss) of any Person acquired in a pooling of
interests transaction accrued prior to the date it becomes a Restricted
Subsidiary of the Company or is merged or consolidated with the Company or
any Restricted Subsidiary of the Company;
(5) the net income of any Restricted Subsidiary of the Company to the
extent that the declaration of dividends or similar distributions by that
Restricted Subsidiary of the Company of that income is restricted by
contract, operation, operation of law or otherwise;
(6) the net loss of any Person, other than a Restricted Subsidiary of the
Company;
(7) the net income of any Person, that is not a Restricted Subsidiary of
the Company, except to the extent of cash dividends or distributions paid
to the Company or a Restricted Subsidiary of the Company by such Person;
and
(8) one time non-cash compensation charges, including any arising from
existing stock options resulting from any merger or recapitalization
transaction.
"Consulting Agreement" means that certain consulting agreement by and between
Domino's Pizza, Inc. and Thomas S. Monaghan, dated as of the Issue Date, as in
effect on the Issue Date.
"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors of the Company who:
(1) was a member of such Board of Directors on the date of the Indenture;
or
(2) was nominated for election or elected to such Board of Directors with
the approval of a majority of the Continuing Directors who were members of
such Board at the time of such nomination or election.
"Cumulative Preferred Stock" means the 11.5% Cumulative Preferred Stock of
TISM, Inc.
"Default" means any event that is, or with the passage of time or the giving of
notice or both would be, an Event of Default.
"Designated Noncash Consideration" means any non-cash consideration received by
the Company or one of its Restricted Subsidiaries in connection with an Asset
Sale that is designated as Designated Noncash Consideration pursuant to an
Officers' Certificate executed by the principal executive officer and the
principal financial officer of the Company or such Restricted Subsidiary. Such
Officers' Certificate shall state the basis of such valuation, which shall be a
report of a nationally recognized investment banking firm with respect to the
receipt in one or a series of related transactions of Designated Noncash
Consideration with a fair market value in excess of $10.0 million. A particular
item of Designated Noncash Consideration shall no longer be considered to be
outstanding when it has been sold for cash or redeemed or paid in full in the
case of non-cash consideration in the form of promissory notes or equity.
"Designated Preferred Stock" means preferred stock that is designated as
Designated Preferred Stock, pursuant to an Officers' Certificate executed by
the principal executive officer and the principal financial officer of the
Company, on the issuance date thereof, the cash proceeds of which are excluded
from the calculation set forth in clause (3)(b) of the second paragraph of the
covenant entitled "Restricted Payments."
"Designated Senior Debt" means:
(1) any Indebtedness under or in respect of the Senior Credit Facilities;
and
(2) any other Senior Debt permitted under the Indenture the principal
amount of which is $25 million or more and that has been designated by the
Company in the instrument or agreement relating to the same as "Designated
Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature. Notwithstanding the preceding sentence, any
Capital Stock that would constitute Disqualified Stock solely because the
holders thereof have the right to require the Company to repurchase such
Capital Stock upon the occurrence of a change of control or an asset sale shall
not constitute Disqualified Stock if the terms of such Capital Stock provide
that the Company may not repurchase or redeem any such Capital Stock pursuant
to such provisions unless such repurchase or redemption complies with the
covenant described above under the caption "Certain Covenants--Restricted
Payments."
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"Domestic Subsidiary" means, with respect to the Company, any Restricted
Subsidiary of the Company that was formed under the laws of the United States
of America or that guarantees or otherwise provides direct credit support for
any Indebtedness of the Company.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means any offering of Qualified Capital Stock of any direct
or indirect parent corporation of the Company or the Company; provided that, in
the event of any Equity Offering by any direct or indirect parent corporation
of the Company, such direct or indirect parent corporation of the Company
contributes to the common equity capital of the Company (other than as
Disqualified Stock) the portion of the net cash proceeds of such Equity
Offering necessary to pay the aggregate redemption price (plus accrued interest
to the redemption date) of the Exchange Notes to be redeemed pursuant to the
first paragraph under the subheading "Optional Redemption."
"Existing Indebtedness" means Indebtedness of the Company and its Subsidiaries
(other than Indebtedness under the Senior Credit Facilities) in existence on
the date of the Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of:
(1) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued, including, without
limitation, original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations other than any such
interest component in respect of obligations under the Consulting
Agreement, the interest component of all payments associated with Capital
Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings,
and net payments, if any, pursuant to Hedging Obligations, but excluding
amortization or write-off of debt issuance costs; plus
(2) the consolidated interest expense of such Person and its Restricted
Subsidiaries that was capitalized during such period; plus
(3) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or secured
by a Lien on assets of such Person or one of its Restricted Subsidiaries,
whether or not such Guarantee or Lien is called upon; plus
(4) the product of (a) all dividend payments, whether or not in cash, on
any series of preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests to the
extent paid in Equity Interests of the Company (other than Disqualified
Stock) or to the Company or a Restricted Subsidiary of the Company, times
(b) a fraction, the numerator of which is one and the denominator of which
is one minus the then current combined federal, state and local statutory
tax rate of such Person, expressed as a decimal, in each case, on a
consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means, with respect to any Person as of any date,
the ratio of the Consolidated Cash Flow of such Person during the most recent
four full fiscal quarters for which internal financial statements are available
(the "Four-Quarter Period") ending on or prior to such date (the "Transaction
Date") to the Fixed Charges of such Person for the Four-Quarter Period.
In addition to and without limitation of the preceding paragraph, for purposes
of this definition, Consolidated Cash Flow and Fixed Charges shall be
calculated after giving effect on a pro forma basis for the period of such
calculation to:
(1) the incurrence of any Indebtedness or the issuance of any preferred
stock of such Person or any of its Restricted Subsidiaries (and the
application of the proceeds thereof) and any repayment of other
Indebtedness or redemption of other preferred stock occurring during the
Four-Quarter Period or at any time subsequent to the last day of the Four-
Quarter Period and on or prior to the Transaction Date, as if such
incurrence, repayment, issuance or redemption, as the case may be (and the
application of the proceeds thereof), occurred on the first day of the
Four-Quarter Period; and
(2) any Asset Sales or Asset Acquisitions (including, without limitation,
any Asset Acquisition giving rise to the need to make such calculation as a
result of such Person or one of its Restricted Subsidiaries (including any
Person who becomes a Restricted Subsidiary as a result of the Asset
Acquisition) incurring, assuming or otherwise being liable for Acquired
Debt and also including any Consolidated Cash Flow (including any Pro Forma
Cost Savings) occurring
81
during the Four-Quarter Period or at any time subsequent to the last day of
the Four-Quarter Period and on or prior to the Transaction Date, as if such
Asset Sale or Asset Acquisition (including the incurrence, assumption or
liability for any such Indebtedness or Acquired Debt) occurred on the first
day of the Four-Quarter Period.
If such Person or any of its Restricted Subsidiaries directly or indirectly
Guarantees Indebtedness of a third Person, the preceding sentence shall give
effect to the incurrence of such guaranteed Indebtedness as if such Person or
any Restricted Subsidiary of such Person had directly incurred or otherwise
assumed such guaranteed Indebtedness. Furthermore, in calculating Fixed Charges
for purposes of determining the denominator (but not the numerator) of this
Fixed Charge Coverage Ratio:
(1) interest on outstanding Indebtedness determined on a fluctuating basis
as of the Transaction Date and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal
to the rate of interest on such Indebtedness in effect on the Transaction
Date;
(2) if interest on any Indebtedness actually incurred on the Transaction
Date may optionally be determined at an interest rate based upon a factor
of a prime or similar rate, a eurocurrency interbank offered rate, or other
rates, then the interest rate in effect on the Transaction Date will be
deemed to have been in effect during the Four-Quarter Period; and
(3) notwithstanding clause (1) above, interest on Indebtedness determined
on a fluctuating basis, to the extent such interest is covered by
agreements relating to Hedging Obligations, shall be deemed to accrue at
the rate per annum resulting after giving effect to the operation of such
agreements.
"Foreign Subsidiary" means any Subsidiary of the Company that is not a Domestic
Subsidiary.
"GAAP" means generally accepted accounting principles set forth in the opinions
and pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other
entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date.
"Guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
"Guarantors" means each of:
(1) each domestic Subsidiary of the Company on the Issue Date; and
(2) any other Restricted Subsidiary that executes a Subsidiary Guarantee in
accordance with the provisions of the Indenture;
and their respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the net obligations of
such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates or the value of foreign currencies.
"Indebtedness" means, with respect to any specified Person, any indebtedness of
such Person, whether or not contingent, in respect of:
(1) borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement agreements in respect thereof);
(3) banker's acceptances;
(4) representing Capital Lease Obligations;
82
(5) the balance deferred and unpaid of the purchase price of any property,
except any such balance that constitutes an accrued expense or trade
payable; or
(6) the net amount owing under Hedging Obligations,
if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of
the specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included, the Guarantee
by such Person of any Indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued with
original issue discount; and
(2) the principal amount thereof, in the case of any other Indebtedness.
"Initial Public Offering" means the first underwritten public offering of
Qualified Capital Stock by any direct or indirect parent corporation of the
Company or by the Company pursuant to a registration statement filed with the
Commission in accordance with the Securities Act for aggregate net cash
proceeds of at least $65.0 million; provided that in the event the Initial
Public Offering is consummated by any direct or indirect parent corporation of
the Company, such direct or indirect parent corporation of the Company
contributes to the common equity capital of the Company at least $65.0 million
of the net cash proceeds of the Initial Public Offering.
"Investments" means, with respect to any Person, all investments by such Person
in other Persons (including Affiliates) in the forms of direct or indirect
loans (including guarantees of Indebtedness or other obligations), advances or
capital contributions (excluding commission, travel and similar advances to
officers and employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If the Company
or any Subsidiary of the Company sells or otherwise disposes of any Equity
Interests of any direct or indirect Subsidiary of the Company such that, after
giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the covenant described
above under the caption "Certain Covenants--Restricted Payments."
"Issue Date" means the closing date for the sale and original issuance of the
outstanding Notes under the Indenture.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law, including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"Marketable Securities" means publicly traded debt or equity securities that
are listed for trading on a national securities exchange and that were issued
by a corporation whose debt securities are rated in one of the three highest
rating categories by either S&P or Moody's.
"Moody's" means Moody's Investors Service, Inc.
"Net Proceeds" means the aggregate cash proceeds received by the Company or any
of its Restricted Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-
cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale, including, without limitation, legal, accounting
and investment banking fees, and sales commissions, and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof, in
each case after taking into account any available tax credits or deductions and
any tax sharing arrangements and amounts required to be applied to the
repayment of Indebtedness, other than debt under the Senior Credit Facilities,
secured by a Lien on the asset or assets that were the subject of such Asset
Sale.
83
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither the Company nor any of its Restricted Subsidiaries
(a) provides credit support of any kind (including any undertaking,
agreement or instrument that would constitute Indebtedness), (b) is
directly or indirectly liable as a guarantor or otherwise, or (c)
constitutes the lender;
(2) no default with respect to which (including any rights that the holders
thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice, lapse of time or both any holder of
any other Indebtedness (other than the Notes) of the Company or any of its
Restricted Subsidiaries to declare a default on such other Indebtedness or
cause the payment thereof to be accelerated or payable prior to its stated
maturity; and
(3) as to which the lenders have been notified in writing that they will
not have any recourse to the stock or assets of the Company or any of its
Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees, indemnifications,
expenses, reimbursements, damages and other liabilities payable under the
documentation governing any Indebtedness.
"Permitted Business" means the business conducted by the Company and its
Restricted Subsidiaries on the Issue Date and businesses which derive a
majority of their revenues from products and activities reasonably related
thereto.
"Permitted Group" means any group of investors if deemed to be a "person" (as
such term is used in Section 13(d)(3) of the Exchange Act) by virtue of the
Stockholders Agreement, as the same may be amended, modified or supplemented
from time to time, provided that (i) the Principals are party to such
Stockholders Agreement, (ii) the persons party to the Stockholders Agreement as
so amended, supplemented or modified from time to time that were not parties,
and are not Affiliates of persons who were parties, to the Stockholders
Agreement on the Issue Date, together with their respective Affiliates
(collectively the "New Investors") are not the direct or indirect Beneficial
Owners (determined without reference to the Stockholders Agreement) of more
than 50% of the Voting Stock owned by all parties to the Stockholders Agreement
as so amended, supplemented of modified and (iii) the New Investors,
individually or in the aggregate, do not, directly or indirectly, have the
right, pursuant to the Stockholders Agreement (as so amended, supplemented or
modified) or otherwise to designate more than one-half of the directors of the
Board of Directors of the Company or any direct or indirect parent entity of
the Company.
"Permitted Investments" means:
(1) any Investment in the Company or in a Restricted Subsidiary of the
Company that is a Guarantor or a Foreign Subsidiary;
(2) any Investment in Cash Equivalents;
(3) any Investment by the Company or any Restricted Subsidiary of the
Company in a Person, if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of the Company that is a
Guarantor or a Foreign Subsidiary; or
(b) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Restricted Subsidiary of the Company
that is a Guarantor or a Foreign Subsidiary;
(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption "Repurchase
at the Option of Holders--Asset Sales;"
(5) investments existing on the date of the Indenture;
(6) loans and advances to employees and officers of the Company and its
Restricted Subsidiaries in the ordinary course of business;
(7) any acquisition of assets to the extent acquired in exchange for the
issuance of Equity Interests (other than Disqualified Stock) of the
Company;
(8) Investments in securities of trade creditors or customers received in
compromise of obligations of such persons incurred in the ordinary course
of business, including pursuant to any plan of reorganization or similar
arrangement upon the bankruptcy or insolvency of such trade creditors or
customers;
84
(9) Investments in a Permitted Business in an aggregate amount at any time
outstanding not to exceed $10.0 million; and
(10) other Investments in any Person having an aggregate fair market value
(measured on the date each such Investment was made and without giving
effect to subsequent changes in value), when taken together with all other
Investments made pursuant to this clause (10) that are at the time
outstanding, not to exceed the greater of (a) $35.0 million or (b) 10% of
Total Assets.
"Permitted Junior Securities" means debt or equity securities of the Company or
any successor corporation issued pursuant to a plan of reorganization or
readjustment of the Company that are subordinated to the payment of all then
outstanding Senior Debt of the Company at least to the same extent that the
Notes are subordinated to the payment of all Senior Debt of the Company on the
date of the Indenture, so long as:
(1) the effect of the use of this defined term in the subordination
provisions contained in Article 10 of the Indenture is not to cause the
Notes to be treated as part of:
(a) the same class of claims as the Senior Debt of the Company; or
(b) any class or claims pari passu with, or senior to, the Senior Debt
of the Company for any payment or distribution in any case or proceeding
or similar event relating to the liquidation, insolvency, bankruptcy,
dissolution, winding up or reorganization of the Company; and
(2) to the extent that any Senior Debt of the Company outstanding on the
date of consummation of any such plan of reorganization or readjustment is
not paid in full in cash on such date, either:
(a) the holders of any such Senior Debt not so paid in full in cash have
consented to the terms of such plan of reorganization or readjustment;
or
(b) such holders receive securities which constitute Senior Debt of the
Company (which are guaranteed pursuant to guarantees constituting Senior
Debt of each Guarantor) and which have been determined by the relevant
court to constitute satisfaction in full in money or money's worth of
any Senior Debt of the Company (and any related Senior Debt of the
Guarantors) not paid in full in cash.
"Permitted Liens" means:
(1) Liens on assets of the Company and any Guarantor securing Indebtedness
and other Obligations under the Senior Credit Facilities that were
permitted by the terms of the Indenture to be incurred;
(2) Liens in favor of the Company or the Guarantors;
(3) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any Subsidiary of
the Company; provided that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Company or the Subsidiary;
(4) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security, including any Lien securing letters of credit
issued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(5) judgment Liens not giving rise to an Event of Default;
(6) easements, rights-of-way, zoning restrictions and other similar charges
or encumbrances in respect of real property not interfering in any material
respect with the ordinary conduct of the business of the Company or any of
its Restricted Subsidiaries;
(7) any interest or title of a lessor under any Capitalized Lease
Obligation;
(8) Liens upon specific items of inventory or other goods and proceeds of
any Person securing such Person's obligations in respect of bankers'
acceptance issued or created for the account of such Person to facilitate
the purchase, shipment, or storage of such inventory or other goods;
(9) Lien securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to
such letters of credit and products and proceeds thereof;
85
(10) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the Company
or any of its Restricted Subsidiaries, including rights of offset and set-
off;
(11) leases or subleases granted to others that do not materially interfere
with the ordinary course of business of the Company and its Restricted
Subsidiaries;
(12) Liens arising from filing Uniform Commercial Code financing statements
regarding leases;
(13) Liens in favor of customs and revenue authorities arising as a matter
of law to secure payment of customer duties in connection with the
importation of goods;
(14) Liens on property existing at the time of acquisition thereof by the
Company or any Subsidiary of the Company, provided that such Liens were in
existence prior to the contemplation of such acquisition;
(15) Liens to secure the performance of statutory obligations and Liens
imposed by law, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business;
(16) Liens securing Hedging Obligations which Hedging Obligations relate to
Indebtedness that is otherwise permitted under the Indenture;
(17) Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by clause (4) of the second paragraph of the covenant entitled
"Incurrence of Indebtedness and Issuance of Preferred Stock" covering only
the assets acquired with such Indebtedness;
(18) Liens existing on the date of the Indenture, together with any Liens
securing Indebtedness incurred in reliance on clause (5) of the second
paragraph of the covenant entitled "Incurrence of Indebtedness and Issuance
of Preferred Stock" in order to refinance the Indebtedness secured by Liens
existing on the date of the Indenture; provided that the Liens securing the
refinancing Indebtedness shall not extend to property other than that
pledged under the Liens securing the Indebtedness being refinanced;
(19) Liens on assets of the Company and its Restricted Subsidiaries to
secure Senior Debt of the Company or such Restricted Subsidiary, as the
case may be, that was permitted by the Indenture to be incurred;
(20) Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(21) Liens incurred in the ordinary course of business of the Company or
any Restricted Subsidiary of the Company with respect to obligations that
do not exceed $10.0 million at any one time outstanding; and
(22) Liens securing Indebtedness of foreign Restricted Subsidiaries of the
Company incurred in accordance with the Indenture.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company or
any of its Restricted Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Restricted Subsidiaries (other than
intercompany Indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount of
(or accreted value, if applicable), plus accrued interest on, the
Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable costs and expenses incurred in
connection therewith);
(2) such Permitted Refinancing Indebtedness has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of,
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the Notes, such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the
Notes on terms at least as favorable to the Holders of Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and
(4) such Indebtedness is incurred either by the Company or by the
Restricted Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
86
"Principals" means Bain Capital, Inc. and any of its Affiliates.
"Pro Forma Cost Savings" means, with respect to any period, the reduction in
costs and related adjustments that occurred during the Four-Quarter Period or
after the end of the Four-Quarter Period and on or prior to the Transaction
Date that were (i) directly attributable to an Asset Acquisition or Asset Sale
and calculated on a basis that is consistent with Regulation S-X under the
Securities Act as in effect and applied as of the Issue Date or (ii)
implemented by the business that was the subject of any such Asset Acquisition
or Asset Sale within six months of the date of the Asset Acquisition or Asset
Sale and that are supportable and quantifiable by the underlying accounting
records of such business, as if, in the case of each of clause (i) and (ii),
all such reductions in costs and related adjustments had been effected as of
the beginning of such period.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Stock.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt; provided that if, and
for so long as, any Designated Senior Debt lacks such a representative, then
the Representative for such Designated Senior Debt shall at all times
constitute the holders of a majority in outstanding principal amount of such
Designated Senior Debt in respect of any Designated Senior Debt.
"Restricted Investment" means an Investment other than a Permitted Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent Person
that is not an Unrestricted Subsidiary.
"S&P" means Standard & Poor's.
"Senior Credit Facilities" means one or more credit agreements from time to
time in effect, including that certain Credit Agreement, to be dated as of
December 21, 1998, by and among the Company and Morgan Guaranty Trust Company
of New York, as administrative agent, and the other lenders party thereto,
together with the related documents thereto (including, without limitation, any
guarantee agreements and security documents), in each case as such agreements
may be amended (including any amendment and restatement thereof), supplemented
or otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
increasing the amount of available borrowings thereunder (provided that such
increase in borrowings is permitted by the covenant entitled "Incurrence of
Indebtedness and Issuance of Preferred Stock") or adding Restricted
Subsidiaries of the Company as additional borrowers or guarantors thereunder)
all or any portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agent, lender or
group of lenders.
"Senior Debt" means:
(1) all Indebtedness outstanding under Senior Credit Facilities and all
Hedging Obligations (including guarantees thereof) with respect thereto of
the Company and the Guarantors, whether outstanding on the date of the
Indenture or thereafter incurred;
(2) any other Indebtedness incurred by the Company and the Guarantors,
unless the instrument under which such Indebtedness is incurred expressly
provides that it is on a parity with or subordinated in right of payment to
the Exchange Notes or the Subsidiary Guarantees, as the case may be; and
(3) all Obligations with respect to the items listed in the preceding
clauses (1) and (2) (including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law).
Notwithstanding anything to the contrary in the preceding, Senior Debt will not
include:
(1) any liability for federal, state, local or other taxes owed or owing by
the Company or the Guarantors;
(2) any Indebtedness of the Company or any Guarantor to any of its
Subsidiaries or other Affiliates;
(3) any trade payables;
(4) any Indebtedness that is incurred in violation of the Indenture (but
only to the extent so incurred);
(5) any Capitalized Lease Obligations; or
(6) notes payable to franchisee captive insurers.
87
"Significant Restricted Subsidiary" means any Restricted Subsidiary that would
be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation
S-X, promulgated pursuant to the Securities Act, as such Regulation is in
effect on the date hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Stockholders Agreement" means that certain stockholders agreement that may be
entered into by and among the Principals, TISM and the other stockholders of
TISM referred to therein, as in effect from time to time.
"Subsidiary" means, with respect to any Person:
(1) any corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the
other Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing general
partner of which is such Person or a Subsidiary of such Person or (b) the
only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Total Assets" means the total consolidated assets of the Company and its
Restricted Subsidiaries, as set forth on the Company's most recent consolidated
balance sheet.
"Treasury Rate" means, as of any Redemption Date, the yield to maturity as of
such Redemption Date of United States Treasury securities with a constant
maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least two
Business Days prior to such Redemption Date (or, if such Statistical Release is
no longer published, any publicly available source of similar market data))
most nearly equal to the period from such Redemption Date to January 15, 2004;
provided, however, that if the period from such Redemption Date to January 15,
2004 is less than one year, the weekly average yield on actually traded United
States Treasury securities adjusted to a constant maturity of one year shall be
used.
"Unrestricted Subsidiary" means any Subsidiary of the Company that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to
a Board Resolution, but only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or understanding
with the Company or any Restricted Subsidiary of the Company unless the
terms of any such agreement, contract, arrangement or understanding are no
less favorable to the Company or such Restricted Subsidiary than those that
might be obtained at the time from Persons who are not Affiliates of the
Company;
(3) is a Person with respect to which neither the Company nor any of its
Restricted Subsidiaries has any direct or indirect obligation (a) to
subscribe for additional Equity Interests or (b) to maintain or preserve
such Person's financial condition or to cause such Person to achieve any
specified levels of operating results; and
(4) has not guaranteed or otherwise directly or indirectly provided credit
support for any Indebtedness of the Company or any of its Restricted
Subsidiaries.
Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary
shall be evidenced to the Trustee by filing with the Trustee a certified copy
of the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the preceding
conditions and was permitted by the covenant described above under the caption
"Certain Covenants--Restricted Payments." If, at any time, any Unrestricted
Subsidiary would fail to meet the preceding requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the Indenture and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of the Company as of such date
and, if such Indebtedness is not permitted to be incurred as of such date under
the covenant described under the caption "Incurrence of Indebtedness and
Issuance of Preferred Stock," the Company shall be in default of such covenant.
The Board of Directors of the Company may at any time designate any
Unrestricted
88
Subsidiary to be a Restricted Subsidiary; provided that such designation shall
be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the
Company of any outstanding Indebtedness of such Unrestricted Subsidiary and
such designation shall only be permitted if (1) such Indebtedness is permitted
under the covenant described under the caption "Certain Covenants--Incurrence
of Indebtedness and Issuance of Preferred Stock," calculated on a pro forma
basis as if such designation had occurred at the beginning of the four-quarter
reference period; and (2) no Default or Event of Default would be in existence
following such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness at
any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of each
then remaining installment, sinking fund, serial maturity or other required
payments of principal, including payment at final maturity, in respect
thereof, by (b) the number of years (calculated to the nearest one-twelfth)
that will elapse between such date and the making of such payment; by
(2) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person and/or by one or more Wholly Owned Restricted
Subsidiaries of such Person.
89
The Exchange Offer
Purpose and Effect of the Exchange Offer
The Company originally sold the Notes to J.P. Morgan Securities, Inc. and
Goldman, Sachs & Co. (the "Initial Purchasers") pursuant to the Purchase
Agreement dated December 21, 1998. The Initial Purchasers subsequently resold
the Notes to qualified institutional buyers in reliance on Rule 144A under the
Securities Act and to a limited number of persons outside the United States
under Regulation S. As a condition to the Purchase Agreement, the Company
entered into a registration rights agreement with the Initial Purchasers in
which it agreed to:
(1) file a registration statement registering the Exchange Notes with the
Commission within 90 days after the original issuance of the Notes;
(2) use its best efforts to have the registration statement relating to the
Exchange Notes declared effective by the Commission within 150 days after
the original issuance of the Notes;
(3) unless the exchange offer would not be permitted by applicable law or
Commission policy, commence the offer and use its best efforts to issue
within 30 business days after the date on which the registration statement
relating to the Exchange Notes was declared effective by the Commission,
Exchange Notes in exchange for all Notes tendered prior to the Expiration
Date; and
(4) if obligated to file a shelf registration statement, use its best
efforts to file the shelf registration statement with the Commission within
90 days after such filing obligation arises, to cause the shelf
registration statement to be declared effective by the Commission within
150 days after such obligation arises and to use its best efforts to keep
effective the shelf registration statement for at least two years after the
original issuance of the Notes or such shorter period that will terminate
when all securities covered by the shelf registration statement have been
sold pursuant to the shelf registration statement.
The Company has agreed to keep its offer open for not less than 20 business
days (or longer if required by applicable law) after the date on which notice
of the offer is mailed to the holders of the Notes. The registration rights
agreement also requires the Company to include in the prospectus for the offer
certain information necessary to allow broker-dealers who hold Notes, other
than Notes purchased directly from the Company or an affiliate of the Company,
to exchange such Notes pursuant to the offer and to satisfy the prospectus
delivery requirements in connection with resales of the Exchange Notes received
by such broker-dealers in the offer.
This prospectus covers the offer and sale of the Exchange Notes pursuant to
this offer and the resale of Exchange Notes received in the offer by any
broker-dealer who held Notes, other than Notes purchased directly from the
Company or one of its affiliates.
For each Note surrendered to the Company pursuant to this offer, the holder of
such Note will receive an Exchange Note having a principal amount equal to that
of the surrendered Note. Interest on each Exchange Note will accrue from the
date of issuance of such Exchange Note. The holders of Notes that are accepted
for exchange will receive, in cash, accrued interest on such Notes to, but not
including, the issuance date of the Exchange Notes. Such interest will be paid
with the first interest payment on the Exchange Notes. Interest on the Notes
accepted for exchange will cease to accrue upon issuance of the Exchange Notes.
Under existing interpretations of the staff of the Commission contained in
several no-action letters to third parties, we believe the Exchange Notes would
in general be freely tradeable after the offer without further registration
under the Securities Act. Any purchaser of the Notes, however, who is either an
"affiliate" of the Company, a broker-dealer who purchased Notes directly from
the Company or an affiliate of the Company for resale, or who intends to
participate in the offer for the purpose of distributing the Exchange Notes (i)
will not be able to rely on the interpretation of the staff of the Commission,
(ii) will not be able to tender its Notes in the offer and (iii) must comply
with the registration and prospectus delivery requirements of the Securities
Act in connection with any sale or transfer of the Notes, unless such sale or
transfer is made pursuant to an exemption from such requirements.
The Company has agreed to file with the Commission a shelf registration
statement to cover resales of the Notes by Holders who satisfy certain
conditions relating to the provision of information in connection with the
shelf registration statement if:
(1) the Company is not required to file the registration statement for the
exchange offer or permitted to consummate the exchange offer because it is
not permitted by applicable law or Commission policy; or
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(2) any holder of Transfer Restricted Securities notifies the Company prior
to the 20th day following consummation of the exchange offer that:
(a) it is prohibited by law or Commission policy from participating in
such offer;
(b) that it may not resell the Exchange Notes acquired by it in the offer
to the public without delivering a prospectus and the prospectus
contained in the registration statement relating to the exchange offer is
not appropriate or available for such resales; or
(c) that it is a broker-dealer that purchased Notes directly from the
Company or an affiliate of the Company for resale.
For purposes of the foregoing, "Transfer Restricted Securities" means each
Note until the earliest to occur of:
(1) the date on which such Note has been exchanged by a person other than a
broker-dealer for an Exchange Note;
(2) following the exchange by a broker-dealer in this offer of a Note for
an Exchange Note, the date on which such Exchange Note is sold to a
purchaser who receives from such broker-dealer before the date of such sale
a copy of the prospectus contained in the registration statement relating
to the exchange offer;
(3) the date on which such Note has been effectively registered under the
Securities Act and disposed of in accordance with the shelf registration
statement; or
(4) the date on which such Note is distributed to the public pursuant to
Rule 144 under the Securities Act.
The Company will pay liquidated damages to each holder of Notes if:
(1) the Company fails to file any of the registration statements on or
before the date specified for such filing;
(2) any of such registration statements is not declared effective by the
Commission before the date specified for such effectiveness (the
"Effectiveness Target Date");
(3) the Company fails to consummate the exchange offer within 30 business
days of the Effectiveness Target Date with respect to the registration
statement relating to the exchange offer ;
(4) the shelf registration statement or the registration statement relating
to the exchange offer is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted
Securities during the periods specified in the registration rights
agreement (each such event referred to in clauses (1) through (4) above a
"Registration Default").
The amount of liquidated damages will be $.05 per week per $1,000 in principal
amount of Notes held by each holder, with respect to the first 90-day period
immediately following the occurrence of the first Registration Default.
Liquidated damages will increase by $.05 per week per $1,000 principal amount
of Notes with respect to each subsequent 90-day period until all Registration
Defaults have been cured, up to a maximum amount of liquidated damages for all
Registration Defaults of $.50 per week per $1,000 principal amount of Notes.
All accrued liquidated damages will be paid by the Company on each interest
payment date in the manner provided for the payment of interest in the
indenture. Following the cure of all Registration Defaults, the accrual of
liquidated damages will cease.
Each holder of Notes (other than certain specified holders) who wishes to
exchange Notes for Exchange Notes in the exchange offer will be required to
make certain representations, including that (i) it is not an affiliate of the
Company (ii) any Exchange Notes to be received by it were acquired in the
ordinary course of its business and (iii) it has no arrangement with any
person to participate in the distribution of the Exchange Notes. If the holder
is a broker-dealer that will receive Exchange Notes for its own account in
exchange for Notes that were acquired as a result of market-making activities
or other trading activities, it will be required to acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes.
The Commission has taken the position that participating broker-dealers may
fulfill their prospectus delivery requirements with respect to the Exchange
Notes (other than a resale of an unsold allotment from the original sale of
the Notes) with a prospectus contained in the registration statement relating
to the exchange offer. Under the registration rights agreement, the Company is
required to allow broker-dealers to use the prospectus contained in the
registration statement relating to this offer in connection with the resale of
such Exchange Notes.
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The Company will, in the event of the filing of a shelf registration statement,
provide to each holder of Notes eligible to participate in such shelf
registration statement copies of the prospectus which is a part of the shelf
registration statement, notify each such holder when the shelf registration
statement for the Notes has become effective and take certain other actions as
are required to permit resales of the Notes. A holder of Notes that sells such
Notes pursuant to the shelf registration statement generally will be required
to be named as a selling securityholder in the related prospectus and to
deliver a prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Securities Act in connection with such sales and
will be bound by the provisions of the registration rights agreement which are
applicable to such a holder, including certain indemnification obligations. In
addition, each such holder will be required to deliver information to be used
in connection with the shelf registration statement and to provide comments on
the shelf registration statement within the time periods set forth in the
registration rights agreement in order to have their Notes included in the
shelf registration statement and to benefit from the provisions regarding
liquidated damages.
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this prospectus and
the accompanying Letter of Transmittal, the Company will accept all Notes
validly tendered prior to 5:00 p.m., New York City time, on the Expiration
Date. The Company will issue $1,000 principal amount of Exchange Notes in
exchange for each $1,000 principal amount of outstanding Notes accepted in the
offer. Holders may tender some or all of their Notes pursuant to this offer in
integral multiples of $1,000.
The form and terms of the Exchange Notes are identical to the Notes except for
the following:
(1) the Exchange Notes bear a Series B designation and a different CUSIP
number from the Notes;
(2) the Exchange Notes have been registered under the Securities Act and,
therefore, will not bear legends restricting their transfer; and
(3) the holders of the Exchange Notes will not be entitled to certain
rights under the registration rights agreement, including the provisions
providing for an increase in the interest rate on the Notes in certain
circumstances relating to the timing of the offer, all of which rights will
terminate when this offer is terminated.
The Exchange Notes will evidence the same debt as the Notes and will be
entitled to the benefits of the indenture under which the Notes were issued. As
of the date of this prospectus, $275 million aggregate principal amount of the
Notes is outstanding. Solely for reasons of administration and no other reason,
the Company has fixed the close of business on , 1999 as the record
date for the exchange offer for purposes of determining the persons to whom
this prospectus and the Letter of Transmittal will be mailed initially. Only a
registered holder of Notes (or such holder's legal representative or attorney-
in-fact) as reflected on the records of the trustee under the governing
indenture may participate in the exchange offer. There will be no fixed record
date, however, for determining registered holders of the Notes entitled to
participate in the exchange offer.
The holders of Notes do not have any appraisal or dissenters' rights under the
General Corporation Law of Delaware or the indenture governing the Notes in
connection with the exchange offer. The Company intends to conduct the exchange
offer in accordance with the applicable requirements of the Exchange Act and
the rules and regulations of the Commission promulgated thereunder.
The Company shall be deemed to have accepted validly tendered Notes when, as
and if it has given oral or written notice thereof to the Exchange Agent. The
Exchange Agent will act as agent for the tendering holders for the purpose of
receiving the Exchange Notes from the Company.
If any tendered Notes are not accepted for exchange because of an invalid
tender, the occurrence of certain other events set forth in this prospectus or
otherwise, the certificates for any such unaccepted Notes will be returned,
without expense, to the tendering holder as promptly as practicable after the
Expiration Date.
Those holders who tender Notes in the exchange offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Notes. The
Company will pay all charges and expenses, other than certain applicable taxes,
in connection with the exchange offer. See "--Fees and Expenses."
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Expiration Dates; Extensions; Amendments
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on ,
1999 unless the Company, in its sole discretion, extends this offer, in which
case the term "Expiration Date" shall mean the latest date to which this offer
is extended. Notwithstanding the foregoing, the Company will not extend the
expiration date beyond , 1999.
The Company has no current plans to extend the exchange offer. In order to
extend the Expiration Date, the Company will notify the Exchange Agent of any
extension by oral or written notice and will make a public announcement of such
extension, in each case prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date.
The Company reserves the right, in its sole discretion, to (i) delay accepting
any Notes, (ii) extend this offer or (iii) terminate the offer if any of the
conditions set forth below under "--Conditions of the Exchange Offer" shall not
have been satisfied, in each case by giving oral or written notice of such
delay, extension or termination to the Exchange Agent, and to amend the terms
of this offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by a
public announcement thereof. If the exchange offer is amended in a manner
determined by the Company to constitute a material change, it will promptly
disclose such amendment by means of a prospectus supplement that will be
distributed to the registered holders of the Notes and the offer will be
extended for a period of five to ten business days, as required by law,
depending upon the significance of the amendment and the manner of disclosure
to the registered holders, assuming the exchange offer would otherwise expire
during such five to ten business day period.
Without limiting the manner in which the Company may choose to make public
announcement of any delay, extension, termination or amendment of its offer,
the Company shall not have an obligation to publish, advertise, or otherwise
communicate any such public announcement other than by making a timely release
thereof to the Dow Jones News Service.
Interest on the Exchange Notes
The Exchange Notes will bear interest from their date of issuance. Interest is
payable semiannually on January 15 and July 15 of each year commencing on July
15, 1999, at the rate of 10 3/8% per annum. The holders of Notes that are
accepted for exchange will receive, in cash, accrued interest on such Notes to,
but not including, the issuance date of the Exchange Notes. Such interest will
be paid with the first interest payment on the Exchange Notes. Consequently,
holders who exchange their Notes for Exchange Notes will receive the same
interest payment on July 15, 1999 (the first interest payment date with respect
to the Notes and the Exchange Notes) that they would have received had they not
accepted the exchange offer. Interest on the Notes accepted for exchange will
cease to accrue upon issuance of the Exchange Notes.
Procedures for Tendering
Only a registered holder of Notes may tender such Notes in this offer. To
effectively tender in the offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the Notes
and any other required documents, to the Exchange Agent at the address set
forth below under "--Exchange Agent" for receipt prior to 5:00 p.m., New York
City time, on the Expiration Date. Delivery of the Notes also may be made by
book-entry transfer in accordance with the procedures described below. If you
are effecting delivery by book-entry transfer, (i) confirmation of such book-
entry transfer must be received by the Exchange Agent prior to the Expiration
Date and (ii) you must also transmit to the Exchange Agent on or prior to the
Expiration Date, a computer-generated message transmitted by means of the
Automated Tender Offer Program System of the Depository Trust Company in which
you acknowledge and agree to be bound by the terms of the Letter of Transmittal
and which, when received by the Exchange Agent, forms a part of the
confirmation of book-entry transfer.
By executing the Letter of Transmittal or effecting delivery by book-entry
transfer, each holder is making to the Company those representations set forth
under the heading "--Resale of the Exchange Notes."
The tender by a holder of Notes will constitute an agreement between such
holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
The method of delivery of outstanding Notes and the Letter of Transmittal and
all other required documents to the Exchange Agent is at the election and sole
risk of the holder. As an alternative to delivery by mail, holders may wish to
consider overnight or hand delivery service. In all cases, sufficient time
should be allowed to assure delivery to the
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Exchange Agent before the Expiration Date. No Letter of Transmittal or Notes
should be sent to the Company. Holders may request that their respective
brokers, dealers, commercial banks, trust companies or nominees effect the
above transactions for such holders.
Only a registered holder of Notes may tender such Notes in connection with this
offer. The term "holder" with respect to this offer means any person in whose
name Notes are registered on the books of the Company or any other person who
has obtained a properly completed bond power from the registered holder, or any
person whose Notes are held of record by DTC who desires to deliver such Notes
by book-entry transfer at DTC.
Any beneficial holder whose Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
tender should promptly contact the person in whose name your Notes are
registered and instruct such registered holder to tender on your behalf. If, as
a beneficial owner, you wish to tender on your own behalf, you must, prior to
completing and executing the Letter of Transmittal and delivering your Notes,
either make appropriate arrangements to register ownership of the Notes in your
name or obtain a properly completed bond power from the registered holder. The
transfer of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (defined below) unless
the Notes tendered are tendered (i) by a registered holder who has not
completed the box entitled "Special Registration Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution. In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantee must be by a participant in a recognized signature
guarantee medallion program within the meaning of Rule 17Ad-15 under the
Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Notes listed therein, such Notes must be endorsed or accompanied
by a properly completed bond powers, signed by such registered holder as such
registered holder's name appears on such Notes with the signature thereon
guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and submit with the Letter of
Transmittal evidence satisfactory to the Company of their authority to so act.
The Company understands that the Exchange Agent will make a request, promptly
after the date of this prospectus, to establish accounts with respect to the
Notes at the book-entry transfer facility of DTC for the purpose of
facilitating this exchange offer, and subject to the establishment of these
accounts, any financial institution that is a participant in the book-entry
transfer facility system may make book-entry delivery of Notes by causing the
transfer of such Notes into the Exchange Agent's account with respect to the
Notes in accordance with DTC's procedures for such transfer. Although delivery
of the Notes may be effected through book-entry transfer into the Exchange
Agent's account at the book-entry transfer facility, unless the holder complies
with the procedures described in the following paragraph an appropriate Letter
of Transmittal properly completed and duly executed with any required signature
guarantee and all other required documents must in each case be transmitted to
and received or confirmed by the Exchange Agent at its address set forth below
before the Expiration Date, or the guaranteed delivery procedures described
below must be complied with. The delivery of documents to the book-entry
transfer facility does not constitute delivery to the Exchange Agent.
The Exchange Agent and DTC have confirmed that the exchange offer is eligible
for the Automated Tender Offer Program ("ATOP") of DTC. Accordingly, DTC
participants may electronically transmit their acceptance of this offer by
causing DTC to transfer Notes to the Exchange Agent in accordance with the
procedures for transfer established under ATOP. DTC will then send an Agent's
Message to the Exchange Agent. The term "Agent's Message" means a message
transmitted by DTC, which when received by the Exchange Agent forms part of the
confirmation of a book-entry transfer, and which states that DTC has received
an express acknowledgment from the participant in DTC tendering Notes which are
the subject of such book-entry confirmation that such participant has received
and agrees to be bound by the terms of the Letter of Transmittal and that the
Company may enforce such agreement against such participant. In the case of an
Agent's Message relating to guaranteed delivery, the term means a message
transmitted by DTC and received by the Exchange Agent which states that DTC has
received an express acknowledgment from the participant in DTC tendering Notes
that such participant has received and agrees to be bound by the Notice of
Guaranteed Delivery.
All questions as to the validity, form, eligibility (including time of receipt)
acceptance and withdrawal of the tendered Notes will be determined by the
Company in its sole discretion, which determinations will be final and binding.
The
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Company reserves the absolute right to reject any and all Notes not validly
tendered or any Notes the acceptance of which would, in the opinion of the
Company's counsel, be unlawful. The Company also reserves the absolute right to
waive any defects, irregularities or conditions of tender as to particular
Notes. The Company's interpretation of the terms and conditions of the exchange
offer, including the instructions in the Letter of Transmittal, will be final
and binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Notes must be cured within such time as the Company
shall determine. Although the Company intends to notify holders of defects or
irregularities with respect to the tenders of Notes, neither the Company, the
Exchange Agent nor any other person shall incur any liability for failure to
give such notification. Tenders of Notes will not be deemed to have been made
until such defects or irregularities have been cured or waived. Any Notes
received by the Exchange Agent that are not validly tendered and as to which
the defects or irregularities have not been cured or waived, or if Notes are
submitted in a principal amount greater than the principal amount of Notes
being tendered by such tendering holder, such unaccepted or non-exchanged Notes
will be returned by the Exchange Agent to the tendering holders (or, in the
case of Notes tendered by book-entry transfer into the Exchange Agent's account
at the book-entry transfer facility pursuant to the book-entry transfer
procedures described above, such unaccepted or non-exchanged Notes will be
credited to an account maintained with such book-entry transfer facility),
unless otherwise provided in the Letter of Transmittal designated for such
Notes, as soon as practicable following the Expiration Date.
Guaranteed Delivery Procedures
Those holders who wish to tender their Notes and (i) whose Notes are not
immediately available, or (ii) who cannot deliver their Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent before the
Expiration Date, or (iii) who cannot complete the procedures for book-entry
transfer before the Expiration Date, may effect a tender if:
(1) the tender is made through an Eligible Institution;
(2) before the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number or
numbers of such Notes and the principal amount of Notes tendered, stating
that the tender is being made thereby, and guaranteeing that, within five
business days after the Expiration Date, either (A) the Letter of
Transmittal, or facsimile thereof, together with the certificate(s)
representing the Notes and any other documents required by the Letter of
Transmittal, will be deposited by the Eligible Institution with the
Exchange Agent or (B) that a confirmation of book-entry transfer of such
Notes into the Exchange Agent's account at DTC, will be delivered to the
Exchange Agent; and
(3) either (A) such properly completed and executed Letter of Transmittal,
or facsimile thereof, together with the certificate(s) representing all
tendered Notes in proper form for transfer and all other documents required
by the Letter of Transmittal or (B) if applicable, confirmation of a book-
entry transfer into the Exchange Agent's account at DTC, are actually
received by the Exchange Agent within five business days after the
Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Notes according to the guaranteed
delivery procedures set forth above.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date.
To effectively withdraw a tender of Notes in the exchange offer, the Exchange
Agent must receive a telegram, telex, letter or facsimile transmission notice
of withdrawal at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. Any such notice of withdrawal must:
(1) specify the name of the person having deposited the Notes to be
withdrawn (the "Depositor");
(2) identify the Notes to be withdrawn, including the certificate number or
numbers and the aggregate principal amount of such Notes or, in the case of
Notes transferred by book-entry transfer, the name and number of the
account at DTC to be credited;
(3) be signed by the holder in the same manner as the original signature on
the Letter of Transmittal by which such Notes were tendered, including any
required signature guarantees, or be accompanied by documents of transfers
sufficient to permit the Trustee with respect to the Notes to register the
transfer of such Notes into the name of the person withdrawing the tender;
and
95
(4) specify the name in which any such Notes are to be registered, if
different from that of the Depositor.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company, and its
determination shall be final and binding on all parties. Any Notes so withdrawn
will be deemed not to have been validly tendered for purposes of the exchange
offer and no Exchange Notes will be issued with respect thereto unless the
Notes so withdrawn are validly retendered. Any Notes which have been tendered
but which are not accepted for exchange due to the rejection of the tender due
to uncured defects or the prior termination of the exchange offer, or which
have been validly withdrawn, will be returned to the holder thereof without
cost to such holder as soon as practicable after withdrawal, rejection of
tender or termination of the offer. Properly withdrawn Notes may be retendered
by following one of the procedures described above under "--Procedures for
Tendering" at any time prior to the Expiration Date.
Conditions of the Exchange Offer
The offer is subject to the condition that the offer, or the making of any
exchange by a holder, does not violate applicable law or any applicable
interpretation of the staff of the Commission. If there has been a change in
policy of the Commission such that in the reasonable opinion of counsel to the
Company there is a substantial question whether the offer is permitted by
applicable federal law, the Company has agreed to seek a no-action letter or
other favorable decision from the Commission allowing the Company to consummate
the offer.
If the Company determines that the offer is not permitted by applicable federal
law, it may terminate the offer. In connection such termination the Company may
(i) refuse to accept any Notes and return any Notes that have been tendered by
the holders thereof, (ii) extend the offer and retain all Notes tendered prior
to the Expiration Date, subject to the rights of such holders of tendered Notes
to withdraw their tendered Notes or (iii) waive such termination event with
respect to the offer and accept all properly tendered Notes that have not been
properly withdrawn. If such waiver constitutes a material change in the offer,
the Company will disclose such change by means of a supplement to this
prospectus that will be distributed to each registered holder of Notes, and the
Company will extend the offer for a period of five to ten business days,
depending upon the significance of the waiver, if the offer would otherwise
expire during such period.
Exchange Agent
IBJ Whitehall Bank & Trust Company, the Trustee under the indenture governing
the Notes, has been appointed as Exchange Agent for the offer. Questions and
requests for assistance, requests for additional copies of this prospectus or
the Letter of Transmittal and requests for the Notice of Guaranteed Delivery
should be directed to the Exchange Agent addressed as follows:
By Registered or Certified Mail or Hand
Delivery:
IBJ Whitehall Bank & Trust Company
One State Street
New York, NY 10004
Attention: Corporate Finance Trust Services
Facsimile Transmission:(212) 858-2952
Confirm by Telephone:(212) 858-2657
Any requests or deliveries to an address or facsimile number other than as
set forth above will not constitute a valid delivery.
Fees and Expenses
The expenses of soliciting tenders will be borne by the Company. The principal
solicitation for tenders is being made by mail. Additional solicitations,
however, may be made by officers and regular employees of the Company and its
affiliates in person, by telegraph or telephone.
The Company has not retained any dealer-manager in connection with the offer
and will not make any payments to brokers, dealers or other persons soliciting
acceptances of the offer. The Company will pay the Exchange Agent, however,
reasonable and customary fees for its services and will reimburse the Exchange
Agent for its reasonable out-of-pocket expenses in connection with the offer.
The cash expenses to be incurred in connection with the offer will be paid by
the Company. Such expenses include fees and expenses of the Exchange Agent and
the Trustee, accounting and legal fees and printing costs, among others.
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The Company will pay all transfer taxes, if any, applicable to the exchange of
the Notes pursuant to the offer. If, however, a transfer tax is imposed for any
reason other than the exchange of the Notes pursuant to the offer, then the
amount of any such transfer taxes, whether imposed on the registered holder or
any other persons, will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted with
the Letter of Transmittal, the amount of such transfer taxes will be billed
directly to such tendering holder.
Accounting Treatment
The Exchange Notes will be recorded at the same carrying value as the Notes,
which is face value, as reflected in the accounting records of the Company on
the date of exchange. Accordingly, the Company will not recognize any gain or
loss for accounting purposes. The expenses of the exchange offer will be
amortized over the term of the Exchange Notes.
Consequences of Failure to Exchange
The Notes that are not exchanged for Exchange Notes pursuant to this offer will
remain transfer restricted securities. Accordingly, such Notes may be resold
only as follows:
(1) to the Company, upon redemption thereof or otherwise;
(2) (A) so long as the Notes are eligible for resale pursuant to Rule 144A,
to a person inside the United States whom the seller reasonably believes is
a qualified institutional buyer within the meaning of Rule 144A under the
Securities Act in a transaction meeting the requirements of Rule 144A, (B)
in accordance with Rule 144 under the Securities Act, or (C) pursuant to
another exemption from the registration requirements of the Securities Act
and based upon an opinion of counsel reasonably acceptable to the Company;
(3) outside the United States to a foreign person in a transaction meeting
the requirements of Rule 904 under the Securities Act; or
(4) pursuant to an effective registration statement under the Securities
Act.
Resale of the Exchange Notes
Based on no-action letters issued by the staff of the Commission to third
parties, the Company believes the Exchange Notes issued pursuant to the offer
in exchange for the Notes may be offered for resale, resold and otherwise
transferred by any holder thereof (other than (i) a broker-dealer who purchased
such Notes directly from the Company for resale pursuant to Rule 144A or any
other available exemption under the Securities Act or (ii) a person that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided, however, that the holder is
acquiring the Exchange Notes in its ordinary course of business and is not
participating, and has no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes. In the event that the
Company's belief is inaccurate, holders of Exchange Notes who transfer Exchange
Notes in violation of the prospectus delivery provisions of the Securities Act
and without an exemption from registration thereunder may incur liability under
the Securities Act. The Company does not assume or indemnify holders against
such liability.
If, however, any holder acquires Exchange Notes in this offer for the purpose
of distributing or participating in a distribution of the Exchange Notes, such
holder cannot rely on the position of the staff of the Commission enunciated in
the referenced no-action letters or any similar interpretive letters, and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction, unless an exemption
from registration is otherwise available. Further, each participating broker-
dealer that receives Exchange Notes for its own account in exchange for Notes,
where such Notes were acquired by such participating broker-dealer as a result
of market-making activities or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of the Exchange
Notes. Although a broker-dealer may be an "underwriter" within the meaning of
the Securities Act, the Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act. This
prospectus, as it may amended or supplemented from time to time, may be used by
a broker-dealer in connection with resales of Exchange Notes received in
exchange for Notes.
As contemplated by these no-action letters and the registration rights
agreement, each holder tendering Notes in this offer is required to represent
to the Company in the Letter of Transmittal, that, among things:
(1) the person receiving the Exchange Notes pursuant to this offer, whether
or not such person is the holder, is receiving them in the ordinary course
of business;
97
(2) neither the holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes and that such holder is not engaged in, and does not intend
to engage in, a distribution of Exchange Notes;
(3) neither the holder nor any such other person is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act;
(4) the holder acknowledges and agrees that (A) any person participating in
this offer for the purpose of distributing the Exchange Notes must comply
with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction with
respect to the Exchange Notes acquired by such person and cannot rely on
the position of the staff of the Commission set forth in no-action letters
that are discussed above and under the heading "--Purpose and Effect of the
Exchange Offer," and (B) any broker-dealer that receives Exchange Notes for
its own account in exchange for Notes pursuant to this offer must deliver a
prospectus in connection with any resale of such Exchange Notes, but by so
acknowledging, the holder shall not be deemed to admit that, by delivering
a prospectus, it is an "underwriter" within the meaning of the Securities
Act; and
(5) the holder understands that a secondary resale transaction described in
clause (4)(A) above should be covered by an effective registration
statement containing the selling securityholder information required by
Item 507 of Regulation S-K of the Commission.
Persons who acquire the Exchange Notes are responsible for compliance with the
state securities or blue sky laws regarding resales. The Company assumes no
responsibility for compliance with these requirements.
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Certain Federal Tax Considerations
Scope of Discussion
This general discussion of certain United States federal income and estate tax
consequences applies to you if you acquired outstanding Notes at original issue
for cash and you exchange those Notes for Exchange Notes in this offer. This
discussion only applies to you if you hold the Exchange Notes as a "capital
asset," generally, for investment, under Section 1221 of the Internal Revenue
Code of 1986, as amended (the "Code"). This summary, however, does not consider
state, local or foreign tax laws. In addition, it does not include all of the
rules which may affect the United States tax treatment of your investment in
the Exchange Notes. For example, special rules not discussed here may apply to
you if you are:
. a broker-dealer, a dealer in securities or a financial institution;
. an S corporation;
. an insurance company;
. a tax-exempt organization;
. subject to the alternative minimum tax provisions of the Code;
. holding the Exchange Notes as part of a hedge, straddle or other risk
reduction or constructive sale transaction; or
. a nonresident alien or foreign corporation subject to net-basis United
States federal income tax on income or gain derived from an Exchange
Note because such income or gain is effectively connected with the
conduct of a United States trade or business.
This discussion only represents our best attempt to describe certain federal
income tax consequences that may apply to you based on current United States
federal tax law. This discussion may in the end inaccurately describe the
federal income tax consequences which are applicable to you because the law may
change, possibly retroactively, and because the Internal Revenue Service
("IRS") or any court may disagree with this discussion.
This summary may not cover your particular circumstances because it does not
consider foreign, state or local tax rules, disregards certain federal tax
rules, and does not describe future changes in federal tax rules. Please
consult your tax advisor rather than relying on this general description.
United States Holders
If you are a "United States Holder," as defined below, this section applies to
you. Otherwise, the next section, "Non-United States Holders," applies to you.
Definition of United States Holder. You are a "United States Holder" if you
hold the Notes and you are:
. a citizen or resident of the United States, including an alien
individual who is a lawful permanent resident of the United States or
meets the "substantial presence" test under Section 7701(b) of the Code;
. a corporation or partnership created or organized in the United States
or under the laws of the United States or of any political subdivision;
. an estate the income of which is subject to United States federal income
tax regardless of its source; or
. a trust, if a United States court can exercise primary supervision over
the administration of the trust and one or more United States persons
can control all substantial decisions of the trust, or if the trust was
in existence on August 20, 1996 and has properly elected to continue to
be treated as a United States person.
Receipt of Exchange Notes. Because the economic terms of the Exchange Notes and
the Notes are identical, your exchange of Notes for Exchange Notes under this
offer will not constitute a taxable exchange of the Notes. Even if you received
Exchange Notes in exchange for Notes on which additional interest was paid
because of a registration default, the exchange should not be taxable because
the exchange would occur by operation of the Notes' original terms. As a
result:
. you should not recognize taxable gain or loss when you receive Exchange
Notes in exchange for Notes;
. your holding period in the Exchange Notes should include your holding
period in the Notes; and
99
. your basis in the Exchange Notes should equal your basis in the Notes.
Taxation of Stated Interest. You must generally pay federal income tax on the
interest on the Exchange Notes:
. when it accrues, if you use the accrual method of accounting for United
States federal income tax purposes; or
. when you receive it, if you use the cash method of accounting for United
States federal income tax purposes.
Redemption and Repurchase Rights. As described elsewhere in this Prospectus, we
may under certain circumstances be required to repurchase the Exchange Notes
and we have the option to redeem some or all of the Exchange Notes at certain
times under certain circumstances.
Based on our current expectations, the chance that we will repurchase or redeem
the Exchange Notes is remote. Accordingly, we intend to take the position that
the payments contingent on the repurchase or redemption of the Exchange Notes
do not, as of the issue date, cause the Exchange Notes to have original issue
discount ("OID") and do not affect the yield to maturity or the maturity date
of the Exchange Notes. You may not take a contrary position unless you disclose
your contrary position in the proper manner to the IRS.
You should consult your tax adviser with respect to the contingent payments
described above. If, contrary to our expectations, we repurchase or redeem the
notes, or if the IRS takes the position that the contingent payments described
were not remote as of the issue date, the amount and timing of interest income
you must include in taxable income may have to be redetermined.
Sale or Other Taxable Disposition of the Exchange Notes. You must recognize
taxable gain or loss on the sale, exchange, redemption, retirement or other
taxable disposition of an Exchange Note. The amount of your gain or loss equals
the difference between the amount you receive for the Exchange Note (in cash or
other property, valued at fair market value), minus the amount attributable to
accrued interest on the Exchange Note, minus your adjusted tax basis in the
Exchange Note. Your initial tax basis in an Exchange Note equals the price you
paid for the outstanding Note which you exchanged for the Exchange Note.
Your gain or loss will generally be a long-term capital gain or loss if your
holding period in the Exchange Note is more than one year. Otherwise, it will
be a short-term capital gain or loss. Payments attributable to accrued interest
which you have not yet included in income will be taxed as ordinary interest
income.
Backup Withholding. You may be subject to a 31% backup withholding tax when you
receive interest payments on the Exchange Note or proceeds upon the sale or
other disposition of an Exchange Note. Certain holders (including, among
others, corporations and certain tax-exempt organizations) are generally not
subject to backup withholding. In addition, the 31% backup withholding tax will
not apply to you if you provide your taxpayer identification number ("TIN") in
the prescribed manner unless:
. the IRS notifies us or our agent that the TIN you provided is incorrect;
. you fail to report interest and dividend payments that you receive on
your tax return and the IRS notifies us or our agent that withholding is
required; or
. you fail to certify under penalties of perjury that you are not subject
to backup withholding.
If the 31% backup withholding tax does apply to you, you may use the amounts
withheld as a refund or credit against your United States federal income tax
liability as long as you provide certain information to the IRS.
Non-United States Holders
Definition of Non-United States Holder. A "Non-United States Holder" is any
person other than a United States Holder. If you are subject to United States
federal income tax on a net basis on income or gain with respect to an Exchange
Note because such income or gain is effectively connected with the conduct of a
United States trade or business, this disclosure does not cover the United
States federal tax rules that apply to you.
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Interest.
Portfolio Interest Exemption. You will generally not have to pay United States
federal income tax on interest (or OID on the Exchange Notes, if any) paid on
the Exchange Notes because of the "portfolio interest exemption" if either:
. you represent that you are not a United States person for United States
federal income tax purposes and you provide the your name and address to
us or our paying agent on a properly executed IRS Form W-8 (or a
suitable substitute form) signed under penalties of perjury; or
. a securities clearing organization, bank, or other financial institution
that holds customers' securities in the ordinary course of its business
holds the Exchange Note on your behalf, certifies to us or our agent
under penalties of perjury that it has received IRS Form W-8 (or a
suitable substitute) from you or from another qualifying financial
institution intermediary, and provides a copy to us or our agent.
You will not, however, qualify for the portfolio interest exemption described
above if:
. you own, actually or constructively, 10% or more of the total combined
voting power of all classes of our capital stock;
. you are a controlled foreign corporation with respect to which we are a
"related person" within the meaning of Section 864(d)(4) of the Code; or
. you are a bank receiving interest described in Section 881(c)(3)(A) of
the Code.
Withholding Tax if the Interest Is Not Portfolio Interest. If you do not claim,
or do not qualify for, the benefit of the portfolio interest exemption, you may
be subject to 30% withholding tax on interest payments made on the Exchange
Notes. However, you may be able to claim the benefit of a reduced withholding
tax rate under an applicable income tax treaty. The required information for
claiming treaty benefits is generally submitted under current regulations on
Form 1001. Successor forms will require additional information, as discussed
below. See "Non-United States Holders--New Withholding Regulations."
Reporting. We may report annually to the IRS and to you the amount of interest
paid to, and the tax withheld, if any, with respect to you.
Sale or Other Disposition of the Exchange Notes. You will generally not be
subject to United States federal income tax or withholding tax on gain
recognized on a sale, exchange, redemption, retirement, or other disposition of
a Note. You may, however, be subject to tax on such gain if:
. you are an individual who was present in the United States for 183 days
or more in the taxable year of the disposition, in which case you may
have to pay a United States federal income tax of 30% (or a reduced
treaty rate) on such gain, and you may also be subject to withholding
tax; or
. you are an individual who is a former citizen or resident of the United
States, your loss of citizenship or residency occurred within the last
ten years (and, if you are a former resident, on or after February 6,
1995), and it had as one of its principal purposes the avoidance of
United States tax, in which case you may be taxed on the net gain
derived from the sale under the graduated United States federal income
tax rates that are applicable to United States citizens and resident
aliens, and you may be subject to withholding under certain
circumstances.
Even if you are an individual described in one of the two paragraphs above, you
should not recognize gain subject to United States federal income tax as a
result of exchanging Notes for Exchange Notes under this offer. See the more
complete discussion above under "United States Holders--Receipt of Exchange
Notes."
United States Federal Estate Taxes. If you qualify for the portfolio interest
exemption under the rules described above when you die, the Exchange Notes will
not be included in your estate for United States federal estate tax purposes.
Back-up Withholding and Information Reporting.
Payments From United States Office. If you receive payments of interest or
principal directly from us or through the United States office of a custodian,
nominee, agent or broker, there is a possibility that you will be subject to
both backup withholding at a rate of 31% and information reporting.
101
With respect to interest payments made on the Exchange Note, however, back-up
withholding and information reporting will not apply if you certify, generally
on a Form W-8 or substitute form, that you are not a United States person in
the manner described above. See "Non-United States Holders--Interest."
Moreover, with respect to proceeds received on the sale, exchange, redemption,
or other disposition of an Exchange Note, back-up withholding or information
reporting generally will not apply if you properly provide, generally on Form
W-8 or a substitute form, a statement that you are an "exempt foreign person"
for purposes of the broker reporting rules, and other required information. If
you are not subject to United States federal income or withholding tax on the
sale or other disposition of an Exchange Note, as described above under the
heading "Non-United States Holders--Sale or Other Disposition of Exchange
Notes," you will generally qualify as an "exempt foreign person" for purposes
of the broker reporting rules.
Payments From Foreign Office. If payments of principal and interest are made to
you outside the United States by or through the foreign office of your foreign
custodian, nominee or other agent, or if you receive the proceeds of the sale
of an Exchange Note through a foreign office of a "broker," as defined in the
pertinent United States Treasury Regulations, you will generally not be subject
to backup withholding or information reporting. You will, however, be subject
to backup withholding and information reporting if the foreign custodian,
nominee, agent or broker has actual knowledge or reason to know that the payee
is a United States person. You will also be subject to information reporting,
but not backup withholding, if the payment is made by a foreign office of a
custodian, nominee, agent or broker that is a United States person or a
controlled foreign corporation for United States federal income tax purposes,
or that derives 50% or more of its gross income from the conduct of a United
States trade or business for a specified three year period, unless the broker
has in its records documentary evidence that you are a Non-United States Holder
and certain other conditions are met.
Refunds. Any amounts withheld under the backup withholding rules may be
refunded or credited against the Non-United States Holder's United States
federal income tax liability, provided that the required information is
furnished to the IRS.
New Withholding Regulations. New regulations relating to withholding tax on
income paid to foreign persons (the "New Withholding Regulations") will
generally be effective for payments made after December 31, 1999, subject to
certain transition rules. The New Withholding Regulations modify and, in
general, unify the way in which you establish your status as a non-United
States "beneficial owner" eligible for withholding exemptions including the
portfolio interest exemption, a reduced treaty rate or an exemption from backup
withholding. For example, the new regulations will require new forms, which you
will generally have to provide earlier than you would have had to provide
replacements for expiring existing forms.
The New Withholding Regulations clarify withholding agents' reliance standards.
They also require additional certifications for claiming treaty benefits. For
example, you may be required to provide a TIN, and you may have to certify that
you "derive" the income with respect to which the treaty benefit is claimed
within the meaning of applicable regulations. The New Withholding Regulations
also provide somewhat different procedures for foreign intermediaries and flow-
through entities (such as foreign partnerships) to claim the benefit of
applicable exemptions on behalf of non-United States beneficial owners for
which or for whom they receive payments. The New Withholding Regulations also
amend the foreign broker office definition as it applies to partnerships.
The New Withholding Regulations are complex and this summary does not
completely describe them. Please consult your tax advisor to determine how the
New Withholding Regulations will affect your particular circumstances.
102
Plan of Distribution
Each broker-dealer that receives Exchange Notes for its own account pursuant to
this offer in exchange for outstanding Notes which were acquired by such
broker-dealer as a result of market-making or other trading activities must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. This Prospectus, as it may be amended or supplemented from
time to time, may be used by any such broker-dealer in connection with resales
of Exchange Notes received in exchange for outstanding Notes. We have agreed
that for a period of 180 days after this offer is completed, it will make this
Prospectus, as amended or supplemented, available to any such broker-dealer for
use in connection with any such resale. All resales must be made in compliance
with state securities or blue sky laws. We assume no responsibility with regard
to compliance with these requirements.
We will not receive any proceeds from any sales of the Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own account
pursuant to this offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to the purchaser or to or through brokers or dealers who
may receive compensation in the form of commissions or concessions from any
such broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells the Exchange Notes that were received by it for its
own account pursuant to this offer and any broker or dealer that participates
in a distribution of such Exchange Notes may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
Exchange Notes and any commissions or concessions received by any such persons
may be deemed to be underwriting compensation under the Securities Act. The
Letter of Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after this offer is completed, we will promptly send
additional copies of this Prospectus and any amendment or supplement to this
Prospectus to any broker-dealer that requests such documents in the Letter of
Transmittal.
We have been advised by J.P. Morgan Securities, Inc. and Goldman, Sachs & Co.,
the initial purchasers of the outstanding Notes, that following completion of
this offer they intend to make a market in the Exchange Notes. Such entities,
however, are under no obligation to do so and any market activities with
respect to the Exchange Notes may be discontinued at any time.
103
Legal Matters
Certain legal matters in connection with the issuance of the Exchange Notes
will be passed upon for the Company by Ropes & Gray, Boston, Massachusetts and
Honigman Miller Schwartz and Cohn, Detroit, Michigan.
Independent Public Accountants
The consolidated financial statements and schedule of Domino's Inc. and its
subsidiaries as of January 3, 1999 and December 28, 1997 and for each of the
three years in the period ended January 3, 1999 included in this Prospectus and
elsewhere in the Registration Statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said report.
104
Index to Consolidated Financial Statements
Page
----
Consolidated Financial Statements:
Report of Independent Public Accountants................................. F-2
Consolidated Balance Sheets as of January 3, 1999 and December 28, 1997 . F-3
Consolidated Statements of Income for the years ended January 3, 1999,
December 28, 1997 and
December 29, 1996 ...................................................... F-4
Consolidated Statements of Comprehensive Income for the years ended
January 3, 1999, December 28, 1997 and December 29, 1996 ............... F-5
Consolidated Statements of Stockholder's Equity (Deficit) for the years
ended January 3, 1999, December 28, 1997 and December 29, 1996.......... F-6
Consolidated Statements of Cash Flows for the years ended January 3,
1999, December 28, 1997 and
December 29, 1996....................................................... F-7
Notes to Consolidated Financial Statements............................... F-8
Schedule II--Valuation and Qualifying Accounts........................... II-4
F-1
Report of Independent Public Accountants
To Domino's, Inc.:
We have audited the accompanying consolidated balance sheets of Domino's, Inc.
(a Delaware corporation) and subsidiaries as of December 28, 1997 and January
3, 1999, and the related consolidated statements of income, comprehensive
income, stockholder's equity (deficit) and cash flows for each of the three
years in the period ended January 3, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Domino's, Inc. and
subsidiaries as of December 28, 1997 and January 3, 1999, and the results of
their operations and their cash flows for each of the three years in the period
ended January 3, 1999 in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the accompanying
index is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
Detroit, Michigan,
February 19, 1999.
F-2
Domino's, Inc. and Subsidiaries
Consolidated Balance Sheets
------------------------
December 28, January 3,
Dollars in thousands, except share and per share 1997 1999
amounts ------------ ----------
Assets
Current Assets:
Cash................................................. $ 105 $ 115
Accounts receivable, net of reserves of $3,978 in
1997 and $2,794 in 1998............................. 44,954 48,858
Notes receivable, net of reserves of $235 in 1997 and
$124 in 1998........................................ 3,201 8,271
Inventories........................................... 31,971 20,134
Prepaid expenses and other............................ 6,671 9,656
Deferred tax assets................................... -- 9,811
---------- ----------
Total current assets................................ 86,902 96,845
---------- ----------
Plant and Equipment, at cost:
Land, buildings and improvements..................... 12,709 14,605
Leasehold and other improvements..................... 56,187 52,248
Equipment............................................ 111,605 109,048
Vehicles............................................. 563 469
Construction in progress............................. 4,652 5,486
---------- ----------
185,716 181,856
Less--Accumulated depreciation....................... 131,553 116,890
---------- ----------
Plant and equipment, net............................ 54,163 64,966
---------- ----------
Other Assets:
Notes receivable, net of reserves of $5,473 in 1997
and $3,041 in 1998.................................. 11,688 18,461
Investments in marketable securities, restricted..... 5,597 --
Investment in related party limited partnership...... 16,233 --
Deferred tax assets.................................. -- 71,776
Deferred financing costs, net of accumulated amorti-
zation of $0 in 1997 and $234 in 1998............... 293 43,046
Goodwill, net of accumulated amortization of $6,128
in 1997 and $7,139 in 1998.......................... 17,356 14,179
Covenants not-to-compete, net of accumulated amorti-
zation of $9,781 in 1997 and $10,009 in 1998........ 2,189 50,058
Capitalized software, net of accumulated amortization
of $7,925 in 1997 and $9,932 in 1998................ 11,674 22,593
Other assets, net of accumulated amortization of
$6,186 in 1997 and $6,163 in 1998................... 6,883 5,967
---------- ----------
Total other assets.................................. 71,913 226,080
---------- ----------
$ 212,978 $ 387,891
========== ==========
Liabilities and Stockholder's Equity (Deficit)
Current Liabilities:
Current portion of long-term debt, including related
party debt of $417 in 1997.......................... $ 7,970 $ 7,646
Accounts payable..................................... 46,050 44,596
Insurance reserves................................... 10,202 9,633
Accrued compensation................................. 11,788 16,295
Accrued income taxes................................. 8,414 6,501
Other accrued liabilities............................ 27,431 30,398
---------- ----------
Total current liabilities........................... 111,855 115,069
---------- ----------
Long-term Liabilities:
Long-term debt, less current portion above........... 36,438 720,480
Insurance reserves................................... 27,256 15,132
Other accrued liabilities............................ 11,311 20,985
---------- ----------
Total long-term liabilities......................... 75,005 756,597
---------- ----------
Commitments and Contingencies
Stockholder's Equity (Deficit):
Common stock, par value $0.01 per share; 3,000 shares
authorized; 10 shares issued and outstanding........ -- --
Additional paid-in capital........................... -- 114,737
Retained earnings (deficit).......................... 25,910 (598,209)
Accumulated other comprehensive income............... 208 (303)
---------- ----------
Total stockholder's equity (deficit)................ 26,118 (483,775)
---------- ----------
$ 212,978 $ 387,891
========== ==========
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
Domino's, Inc. and Subsidiaries
Consolidated Statements of Income
------------------------------------
For the Years Ended
------------------------------------
December 29, December 28, January 3,
1996 1997 1999
Dollars in thousands ------------ ------------ ----------
Revenues:
Corporate stores........................ $ 336,585 $ 376,837 $ 409,413
Domestic franchise royalties............ 93,404 102,360 112,222
Domestic distribution................... 494,173 513,097 599,121
International........................... 45,775 52,496 56,022
---------- ---------- ----------
Total revenues......................... 969,937 1,044,790 1,176,778
---------- ---------- ----------
Operating Expenses:
Cost of sales........................... 717,214 757,604 858,411
General and administrative.............. 196,222 222,182 248,098
---------- ---------- ----------
Total operating expenses............... 913,436 979,786 1,106,509
---------- ---------- ----------
Income from Operations 56,501 65,004 70,269
Interest Income.......................... 411 447 730
Interest Expense......................... 6,301 3,980 7,051
---------- ---------- ----------
Income Before Provision (benefit) for
Income Taxes............................ 50,611 61,471 63,948
Provision (benefit) for income taxes.... 30,884 366 (12,928)
---------- ---------- ----------
Net Income............................... $ 19,727 $ 61,105 $ 76,876
========== ========== ==========
The accompanying notes are an integral part of these consolidated statements.
F-4
Domino's, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
------------------------------------
For the Years Ended
------------------------------------
December 29, December 28, January 3,
1996 1997 1999
Dollars in thousands ------------ ------------ ----------
Net Income............................... $ 19,727 $ 61,105 $ 76,876
Other Comprehensive Income, Before Tax:
Currency translation adjustment......... (124) (120) (44)
Unrealized gain (loss) on investments in
marketable securities.................. 57 439 (497)
---------- ---------- ----------
(67) 319 (541)
Tax Attributes of Items of Other
Comprehensive Income: (3) (26) 30
---------- ---------- ----------
Other Comprehensive Income, net of tax... (70) 293 (511)
---------- ---------- ----------
Comprehensive Income..................... $ 19,657 $ 61,398 $ 76,365
========== ========== ==========
The accompanying notes are an integral part of these consolidated statements.
F-5
Domino's, Inc. and Subsidiaries
Consolidated Statements of Stockholder's Equity (Deficit)
------------------------------------------------------------
Accumulated Other
Comprehensive Income
--------------------------
Unrealized
Gain (Loss)
Additional Retained Currency on Investments
Common Paid-in Earnings Translation in Marketable
Stock Capital (Deficit) Adjustment Securities
Dollars in thousands --------- ---------- --------- ----------- --------------
Balance at December 31,
1995................... $ -- $ -- $ (54,510) $ (15) $ --
Net income.............. -- -- 19,727 -- --
Currency translation
adjustment............. -- -- -- (124) --
Unrealized gain on
investments in
marketable securities.. -- -- -- -- 54
--------- --------- --------- --------- ---------
Balance at December 29,
1996................... -- -- (34,783) (139) 54
Net income.............. -- -- 61,105 -- --
Distributions to Parent. -- -- (412) -- --
Currency translation
adjustment............. -- -- -- (120) --
Unrealized gain on
investments in
marketable securities.. -- -- -- -- 413
--------- --------- --------- --------- ---------
Balance at December 28,
1997................... -- -- 25,910 (259) 467
Net income.............. -- -- 76,876 -- --
Capital contributions
from Parent............ 50,430 -- -- --
Distributions to Parent. -- -- (690,688) -- --
Currency translation
adjustment............. -- -- -- (44) --
Unrealized loss on
investments in
marketable securities.. -- -- -- -- (467)
Recognition of deferred
tax assets as part of
Recapitalization....... -- -- 54,000 -- --
Reclassification of S
Corporation
undistributed earnings
upon conversion to C
Corporation............ -- 64,307 (64,307) -- --
--------- --------- --------- --------- ---------
Balance at January 3,
1999................... $ -- $ 114,737 $(598,209) $ (303) $ --
========= ========= ========= ========= =========
The accompanying notes are an integral part of these consolidated statements.
F-6
Domino's, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
-------------------------------------
For the Years Ended
-------------------------------------
December 29, December 28, January 3,
1996 1997 1999
------------ ------------ ---------
Dollars in Thousands
Cash Flows from Operating Activities:
Net income............................ $ 19,727 $ 61,105 $ 76,876
Adjustments to reconcile net income to
net cash provided by operating
activities--
Depreciation and amortization....... 15,486 16,939 23,123
Provision (benefit) for losses on
accounts and notes receivable...... 942 1,131 (3,212)
Loss on sale of plant and equipment. 353 1,197 1,570
Provision (benefit) for deferred
Federal income taxes............... 12,204 -- (27,587)
Changes in operating assets and
liabilities--
Increase in accounts receivable.... (4,297) (13,130) (6,254)
(Increase) decrease in inventories
and prepaid expenses and other.... (3,987) (15,512) 4,531
Increase in accounts payable and
accrued liabilities............... 19,495 26,156 7,989
Decrease in insurance reserves..... (6,698) (4,805) (12,693)
--------- --------- ---------
Net cash provided by operating
activities....................... 53,225 73,081 64,343
--------- --------- ---------
Cash Flows from Investing Activities:
(Increase) decrease in other assets... 3,125 (790) 2
Repayments of notes receivable........ 2,340 2,381 414
Proceeds from sale of plant and
equipment............................ 784 52 5,587
Purchases of franchise stores and
commissaries......................... (3,513) (13,692) (1,534)
Purchases of plant and equipment...... (15,472) (31,625) (48,359)
(Purchases) sales of investments in
marketable securities................ (2,248) (2,832) 5,130
--------- --------- ---------
Net cash used in investing
activities....................... (14,984) (46,506) (38,760)
--------- --------- ---------
Cash Flows from Financing Activities:
Proceeds from issuance of long-term
debt................................. -- 35,800 722,056
Cash paid for financing costs......... -- (293) (43,280)
Distributions to Parent............... -- (412) (666,020)
Repayments of long-term debt.......... (40,402) (61,583) (38,338)
--------- --------- ---------
Net cash used in financing
activities....................... (40,402) (26,488) (25,582)
--------- --------- ---------
Effect of Exchange Rate Changes on
Cash.................................. (19) (214) 9
--------- --------- ---------
Increase (decrease) in Cash............ (2,180) (127) 10
Cash, at beginning of year............. 2,412 232 105
--------- --------- ---------
Cash, at end of year................... $ 232 $ 105 $ 115
========= ========= =========
The accompanying notes are an integral part of these consolidated statements.
F-7
Domino's, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Domino's, Inc. (formerly known as Domino's Pizza International Payroll
Services, Inc.) (Domino's), a Delaware corporation, and its wholly-owned
subsidiaries (collectively, the Company). All significant intercompany accounts
and transactions have been eliminated. Domino's is a wholly-owned subsidiary of
TISM, Inc. (the Parent).
Parent's Recapitalization
On December 21, 1998, the Parent effected a merger with TM Transitory Merger
Corporation (TMTMC) in a leveraged recapitalization transaction whereby TMTMC
was merged with and into the Parent with the Parent being the surviving entity
(the Recapitalization). TMTMC had no operations and was formed solely for the
purpose of effecting the Recapitalization. As part of the Recapitalization, the
Company incurred significant debt and distributed significantly all of the
proceeds to the Parent, which used those proceeds, along with proceeds from the
issuance of two classes of common stock and one class of preferred stock, to
fund the purchase of 93% of the outstanding common stock of the Parent from a
Company Director and certain members of his family.
As part of the Recapitalization, the Company entered into a consulting
agreement under which it is committed to pay a Company Director and former
majority Parent stockholder $1 million in fiscal 1999 and an additional $4.5
million over nine years beginning in fiscal 2000. The entire $5.5 million has
been recorded as a charge to retained earnings as a component of purchase price
for the common stock.
As part of the Recapitalization, certain Company executives received stock
options for the purchase of Parent common stock and preferred stock.
Prior to December 1998, Domino's was an indirectly wholly-owned subsidiary of
Domino's Pizza, Inc. (DPI). During December 1998 and before the
Recapitalization, DPI distributed its ownership interest in Domino's to the
Parent. The Parent then contributed its ownership interest in DPI, which had
been a wholly-owned subsidiary of the Parent, to Domino's, effectively
converting Domino's from a subsidiary of DPI into DPI's parent.
The accompanying consolidated financial statements and these Notes to
Consolidated Financial Statements include the results of operations of DPI and
its wholly-owned subsidiaries (including Domino's) for the periods prior to the
Recapitalization.
Domino's amended its charter in December 1998 to increase the total number of
authorized shares of common stock from 1,000 to 3,000 and decreased the par
value of these shares from $1.00 per share to $0.01 per share. Shares of common
stock issued and outstanding were 10 for the years ended December 29, 1996,
December 28, 1997 and January 3, 1999.
Fiscal Year
The Company's fiscal year ends on the Sunday closest to December 31. The 1996
fiscal year ended December 29, 1996; the 1997 fiscal year ended December 28,
1997; and the 1998 fiscal year ended January 3, 1999. Each of the fiscal years
consists of fifty-two weeks except for fiscal year 1998 which consists of
fifty-three weeks.
F-8
Domino's, Inc. and Subsidiaries
Notes to Consolidated Financial Statements -- (Continued)
Inventories
Inventories are valued at the lower of cost (on a first-in, first-out basis) or
market.
Inventories at December 28, 1997 and January 3, 1999 are comprised of the
following (In thousands):
--------------------
1997 1998
--------- ---------
Equipment and supplies for sale to stores................. $ 20,968 $ 9,947
Food inventory............................................ 11,840 12,039
--------- ---------
32,808 21,986
Less--Inventory reserves.................................. 837 1,852
--------- ---------
Inventories, net.......................................... $ 31,971 $ 20,134
========= =========
Notes Receivable
During the normal course of business, the Company often provides financing to
franchisees (i) to stimulate new franchise store growth, (ii) to finance the
sale of corporate stores to franchisees and (iii) to facilitate rapid new
equipment rollouts. Substantially all of the related notes receivable require
monthly payments of principal and interest, or monthly payments of interest
only, generally ranging from 8% to 14%, with balloon payments of the remaining
principal due one to ten years from the original issuance date. Such notes are
generally secured by the assets sold. In financing these transactions, the
Company derives benefits other than interest income. Given the nature of these
borrower/lender relationships, the Company, in essence, makes its own market in
these notes. The carrying amounts of these notes approximate fair value.
During 1998, the Company modified certain criteria it uses to determine
allowance for bad debts for notes receivable. As a result of this change, the
Company recognized a benefit for losses on notes receivable of approximately
$3.7 million during fiscal 1998 which is reflected in the accompanying 1998
consolidated statement of income.
Plant and Equipment
Additions to plant and equipment are recorded at cost. Depreciation for
financial reporting purposes is provided using the straight-line method over
the estimated useful lives of the related assets. Such lives are generally
three to seven years for equipment, twenty years for buildings and
improvements, three years for vehicles and five years or the term of the lease
including renewal options, whichever is shorter, for leasehold and other
improvements. Depreciation expense was approximately $11,798,000, $13,358,000
and $16,593,000 in 1996, 1997 and 1998, respectively.
Investments in Marketable Securities
The Company accounts for its investments in marketable securities in accordance
with Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting
for Certain Investments in Debt and Equity Securities."
As of December 28, 1997, the Company had investments in marketable securities
of $5,597,000, comprised of both debt and equity securities. These investments
were classified as available-for-sale and were stated at aggregate fair value
in the accompanying 1997 consolidated balance sheet. Unrealized gains at
December 28, 1997 were $536,000 and unrealized losses were $69,000, both net of
tax. For purposes of determining realized gains and losses, the cost of
securities sold is based upon the specific identification method.
The Company had placed these investments in "rabbi trusts", whereby the amounts
were irrevocably set aside to fund the Company's obligations under its
nonqualified executive and managerial deferred compensation plans (Note 5).
These plans were terminated during 1998 and all related investments in
marketable securities were sold with the proceeds being paid to the
participants in the plans.
Deferred Financing Costs
Deferred financing costs include debt issuance costs primarily incurred by the
Company as part of the Recapitalization. Amortization is provided using the
effective interest rate method over the terms of the respective debt
instruments to which the costs relate and is included in interest expense in
the accompanying consolidated statements of income.
F-9
Domino's, Inc. and Subsidiaries
Notes to Consolidated Financial Statements -- (Continued)
As part of the Recapitalization, the Company paid financing costs to affiliates
of Parent stockholders of approximately $21.1 million. Approximately $14.4
million of these expenditures were treated by the Company as capitalizable
deferred financing costs while approximately $6.7 million of these expenditures
were made on behalf of the Parent and were treated as distributions to the
Parent.
Goodwill and Covenants Not-to-Compete
Goodwill arising primarily from franchise acquisitions has been recorded at
cost and is being amortized using the straight-line method over periods not
exceeding twenty years. Amortization of goodwill was approximately $901,000,
$1,437,000 and $1,957,000 in 1996, 1997 and 1998, respectively.
Covenants not-to-compete, primarily obtained as a part of the Recapitalization
(Note 7), have been recorded at cost and are being amortized using an
accelerated method over a three year period for the covenant not-to-compete
with a Company Director and former majority Parent stockholder. Other covenants
not-to-compete are being amortized using the straight-line method over periods
not exceeding twenty years. Amortization of covenants not-to-compete was
approximately $668,000, $756,000 and $2,222,000 in 1996, 1997 and 1998,
respectively.
Management reviews the realizability of goodwill and covenants not-to-compete
annually by comparing the future cash flows expected to result from these
assets to the carrying amounts of the related assets.
Capitalized Software
The American Institute of Certified Public Accountants has issued Statement of
Position (SOP) 98-1, "Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use", which requires entities to capitalize and
amortize certain costs and currently expense certain other costs incurred for
software developed or obtained for internal use. Adoption of this SOP did not
have a significant impact on the accompanying consolidated financial
statements.
Capitalized software is recorded at cost and includes purchased, internally
developed and externally developed software used in the Company's operations.
Amortization for financial reporting purposes is provided using the straight-
line method over the estimated useful lives of the software, which range from
two to seven years. Amortization expense was approximately $1,472,000, $823,000
and $1,978,000 in 1996, 1997 and 1998, respectively.
Other Assets
Other assets primarily include equity investments in international franchisees,
organizational costs, deposits and other intangibles primarily arising from
franchise acquisitions. Amortization of organizational costs and other
intangibles is provided using the straight-line method over the estimated
useful lives of the amortizable assets. Amortization expense was approximately
$647,000, $564,000 and $376,000 in 1996, 1997 and 1998, respectively.
Other Accrued Liabilities
Current and long-term other accrued liabilities primarily include accruals for
sales, income and other taxes, legal reserves, marketing and advertising
expenses, store operating expenses, deferred revenues, deferred compensation
and a consulting fee payable to a Company Director and former majority Parent
stockholder.
Revenue Recognition
Corporate store revenues are comprised of retail sales of food through Company-
owned stores located in the contiguous U.S. and are recognized when the food is
delivered to or carried out by customers.
Domestic franchise royalties are primarily comprised of royalties and fees from
franchisees with operations in the contiguous U.S. and are recognized as
revenue when earned.
Domestic distribution revenues are comprised of sales of food, equipment and
supplies to franchised stores located in the contiguous U.S. and are recognized
as revenue upon shipment of the related products to franchisees.
International revenues are primarily comprised of sales of food and royalties
and fees from foreign, Alaskan and Hawaiian franchisees and are recognized
consistently with the policies applied for revenues generated in the contiguous
U.S.
F-10
Domino's, Inc. and Subsidiaries
Notes to Consolidated Financial Statements -- (Continued)
Advertising Costs
Advertising costs are expensed as incurred. Advertising expense was
approximately $38.1 million, $40.5 million and $41.2 million during 1996, 1997
and 1998, respectively, and is included in general and administrative expenses
in the accompanying consolidated statements of income.
Self-Insurance
The Company is partially self-insured for property and health insurance risks
and, for periods up to December 20, 1998, was partially self-insured for
workers' compensation, general liability and owned and non-owned auto programs.
The Company's health insurance program provides coverage for life, medical,
dental and accidental death and dismemberment (AD&D) claims. Self-insurance
limitations for medical and dental per a covered individual's lifetime were
$2.0 million in 1996, 1997 and 1998. The AD&D and life insurance components of
the health insurance program are fully insured by the Company through third-
party insurance carriers.
Effective July 1, 1995 through June 30, 1996, the self-insurance limitations
per occurrence for the workers' compensation, general liability and owned and
non-owned auto programs were $500,000, plus a one-time otherwise recoverable
amount of $500,000 in excess of $500,000 on the combined general liability,
owned and non-owned auto programs and an additional one-time otherwise
recoverable amount of $350,000 in excess of $1.0 million on the combined owned
and non-owned auto programs.
Effective July 1, 1996 through December 19, 1998, the self-insurance
limitations per occurrence for the workers' compensation, general liability and
owned and non-owned auto programs were $500,000, plus a one-time otherwise
recoverable amount of $500,000 in excess of $500,000 on the combined general
liability, owned and non-owned auto programs for each policy year, except for
the period from July 1, 1998 through December 19, 1998 for which there was no
otherwise recoverable amount.
Total excess insurance limits for all periods were $105.0 million per
occurrence under the workers' compensation, general liability and owned and
non-owned auto programs.
Self-insurance reserves are determined using actuarial estimates. These
estimates are based on historical information along with certain assumptions
about future events. Changes in assumptions for such things as medical costs
and legal actions, as well as changes in actual experience, could cause these
estimates to change in the near term. In management's opinion, the accrued
insurance reserves at January 3, 1999 are sufficient to cover potential
aggregate losses.
Paid claims under the Company's self-insurance programs were $23.3 million in
1996, $20.0 million in 1997 and $23.4 million in 1998. Total insurance expense
was approximately $25.3 million, $20.0 million and $15.9 million in 1996, 1997
and 1998, respectively, and is included in cost of sales in the accompanying
consolidated statements of income. During 1998, the Company reduced self-
insurance reserves by $6.7 million due to a reduction in the actuarial
calculations. This reduction in expense is reflected in the 1998 insurance
expense amount above.
As of January 3, 1999, the Company had deposits totaling approximately $1.0
million with the Company's third-party insurance claims administrator. This
amount is included in other assets in the accompanying consolidated balance
sheets.
During December 1998, the Company entered into a guaranteed cost, combined
casualty insurance program that is effective for the period December 20, 1998
to December 20, 2001. The new program covers insurance claims on a first dollar
basis for workers' compensation, general liability and owned and non-owned auto
liability. Total insurance limits under the new program are $106.0 million per
occurrence for general liability and owned and non-owned auto liability and up
to the applicable statutory limits for workers' compensation. Under this
program and as of January 3, 1999, the Company is required to make minimum
premium payments of approximately $9.6 million during the first year of the
policy period.
F-11
Domino's, Inc. and Subsidiaries
Notes to Consolidated Financial Statements -- (Continued)
Foreign Currency Translation
The Company's foreign entities use their local currency or the U.S. dollar as
the functional currency, in accordance with the provisions of SFAS No. 52,
"Foreign Currency Translation." Where the functional currency is the local
currency, the Company translates net assets into U.S. dollars at yearend
exchange rates, while income and expense accounts are translated at average
exchange rates. Translation adjustments are included in accumulated other
comprehensive income in the accompanying consolidated statements of
stockholder's equity (deficit) and other foreign currency transaction gains and
losses are included in determining net income.
Financial Derivatives
Subsequent to January 3, 1999, the Company entered into two interest-rate swap
agreements (the 1999 Swap Agreements) to effectively convert the Eurodollar
component of the interest rate on a portion of the Company's debt under Term
Loans A, B and C (Note 2) to a fixed rate of 5.12% beginning in January 1999
and continuing through December 2001, in an effort to reduce the impact of
interest rate changes on income. The total notional amount under the 1999 Swap
Agreements is initially $179 million and decreasing over time to a total
notional amount of $167 million in December 2001.
As a result of generating royalty revenues from franchised operations in Japan,
the Company is exposed to the effect of exchange rate fluctuations between the
Japanese yen and U.S. dollar. During 1995, the Company entered into contracts
to sell 12,200,000 Japanese yen every two weeks, which expired in December
1996. During 1996, the Company entered into contracts to sell 36,000,000
Japanese yen every four weeks, which expired in December 1997. During 1997, the
Company entered into contracts to sell 35,000,000 Japanese yen every four
weeks, which expired in December 1998. During 1998, the Company entered into
contracts to sell 30,000,000 Japanese yen every four weeks, which will expire
in December 1999.
Using foreign currency forward contracts enables management to minimize the
effect of a fluctuating Japanese yen on its reported income. Gains and losses
with respect to these contracts are recognized in income at each balance sheet
date based on the exchange rate in effect at that time. No significant gains or
losses were recognized under these contracts during 1996, 1997 or 1998. The
carrying value of these contracts approximates fair value.
Supplemental Disclosures of Cash Flow Information
The Company paid interest of approximately $6.2 million, $3.9 million and $4.6
million during 1996, 1997 and 1998, respectively. Additionally, cash paid for
Federal income taxes was approximately $10.0 million in 1996 and approximately
$2.7 million in 1998. No cash was paid for Federal income taxes in 1997.
The Company made non-cash distributions to the Parent of approximately $16.6
million representing the Company's investment in a related party limited
partnership and approximately $2.6 million representing various leaseholds and
other assets. The Company also assumed a $5.5 million consulting agreement
liability from the Parent during 1998.
Comprehensive Income
The Financial Accounting Standards Board has issued SFAS No. 130, "Reporting
Comprehensive Income", which establishes standards for reporting comprehensive
income and its components in a full set of financial statements. Comprehensive
income is defined as the total of net income and all other non-owner changes in
equity. The Company adopted this Statement in 1997. Adoption of this Statement
only affects the presentation of the consolidated financial statements.
Segment Reporting
The Financial Accounting Standards Board has issued SFAS No. 131, "Disclosures
About Segments of an Enterprise and Related Information", which supercedes SFAS
No. 14, "Financial Reporting for Segments of a Business Enterprise", replacing
the "industry segment" approach of reporting segment information with the
"management" approach. The "management" approach designates the internal
organization that is used by management for making operating decisions and
assessing performance as the source of the reportable segments. The Company
adopted this Statement in 1998. Adoption of this Statement only affects the
presentation of these Notes to Consolidated Financial Statements.
F-12
Domino's, Inc. and Subsidiaries
Notes to Consolidated Financial Statements -- (Continued)
Accounting for Derivative Instruments and Hedging Activities
The Financial Accounting Standards Board has issued SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities", which requires that an
entity recognize all derivatives as either assets or liabilities in the balance
sheet and measure those instruments at fair value. This Statement is effective
for fiscal years beginning after June 15, 1999. Management has not yet
quantified the impact, if any, of adopting this Statement.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassifications
Certain amounts from fiscal 1996 and 1997 have been reclassified to conform to
the fiscal 1998 presentation.
(2) Long-Term Debt
At December 28, 1997 and January 3, 1999, long-term debt consisted of the
following (In thousands):
---------------------
1997 1998
--------- ---------
Term Loan A (see below).................................. $ -- $ 175,000
Term Loan B (see below).................................. -- 135,000
Term Loan C (see below).................................. -- 135,000
Revolving credit facility (see below).................... -- 1,700
Notes payable to franchise insurance captive, interest
ranging up to prime plus 1.5%, due on demand, maturing
at varying amounts through September 1999............... 7,350 6,426
Senior subordinated notes, 10 3/8% (see below)........... -- 275,000
Revolving credit notes payable to banks (see below),
repaid during 1998...................................... 35,800 --
Notes payable to related party, repaid during 1998....... 417 --
Other notes, mortgages and long-term contracts payable,
repaid during 1998...................................... 841 --
--------- ---------
44,408 728,126
Less--Current portion.................................... 7,970 7,646
--------- ---------
$ 36,438 $ 720,480
========= =========
On November 24, 1997, DPI refinanced all obligations remaining under a
previously existing credit facility through a new credit agreement (the 1997
Agreement). The 1997 Agreement provided a $93 million six-year unsecured
revolving credit facility, of which up to $35 million was available for letter
of credit advances. On December 21, 1998, all outstanding borrowings and
accrued interest under the 1997 Agreement were repaid in full and the 1997
Agreement was terminated.
On December 21, 1998, Domino's and a subsidiary entered into a new credit
agreement (the 1998 Agreement) with a consortium of banks primarily to finance
a portion of the Recapitalization, to repay existing indebtedness under the
1997 Agreement and to provide available borrowings for use in the normal course
of business.
The 1998 Agreement provides the following credit facilities: three term loans
(Term Loan A, Term Loan B and Term Loan C) and a revolving credit facility (the
Revolver). The aggregate borrowings available under the 1998 Agreement are $545
million.
The 1998 Agreement provides for borrowings of $175 million under Term Loan A,
$135 million under Term Loan B and $135 million under Term Loan C. Under the
terms of the 1998 Agreement, the borrowings under Term Loans A, B and C bear
interest, payable at least quarterly, at either (i) the higher of (a) the
specified bank's prime rate (7.75% at January 3,
F-13
Domino's, Inc. and Subsidiaries
Notes to Consolidated Financial Statements -- (Continued)
1999) and (b) 0.5% above the Federal Reserve reported overnight funds rate,
each plus an applicable margin of between 0.50% to 2.75% or (ii) the Eurodollar
rate (5.25% at January 3, 1999) plus an applicable margin of between 1.50% to
3.75%, with margins determined based upon the Company's ratio of indebtedness
to earnings before interest, taxes, depreciation and amortization (EBITDA), as
defined. At January 3, 1999, the Company's effective borrowing rates were
8.25%, 8.75% and 9.00% for Term Loans A, B and C, respectively. As of January
3, 1999, all borrowings under Term Loans A, B and C were under Eurodollar
contracts with interest periods of 90 days. Principal payments are required
under Term Loans A, B and C, commencing at varied dates and continuing
quarterly thereafter until maturity. The final scheduled principal payments on
the outstanding borrowings under Term Loans A, B and C are due in December
2004, December 2006 and December 2007, respectively.
The 1998 Agreement also provides for borrowings of up to $100 million under the
Revolver, of which up to $35.0 million is available for letter of credit
advances and $10.0 million is available for swing-line loans. Borrowings under
the Revolver (excluding the letters of credit and swing-line loans) bear
interest, payable at least quarterly, at either (i) the higher of (a) the
specified bank's prime rate (7.75% at January 3, 1999) and (b) 0.5% above the
Federal Reserve reported overnight funds rate, each plus an applicable margin
of between 0.50% to 2.00% or (ii) the Eurodollar rate (5.25% at January 3,
1999) plus an applicable margin of between 1.50% to 3.00%, with margins
determined based upon the Company's ratio of indebtedness to EBITDA, as
defined. Borrowings under the swing-line portion of the Revolver bear interest,
payable at least quarterly, at the higher of (a) the specified bank's prime
rate (7.75% at January 3, 1999) and (b) 0.5% above the Federal Reserve reported
overnight funds rate, each plus an applicable margin of between 0.50% to 2.00%
based upon the Company's ratio of indebtedness to EBITDA, as defined. At
January 3, 1999, the Company's effective borrowing rate on swing-line loans was
9.75%. The Company also pays a commitment fee on the unused portion of the
Revolver ranging from 0.25% to 0.50%, determined based upon the Company's ratio
of indebtedness to EBITDA, as defined. At January 3, 1999 the commitment fee
for such unused borrowings was 0.50%. The fee for letter of credit amounts
outstanding at January 3, 1999 was 3.25%. As of January 3, 1999 there were
$87.5 in available borrowings under the Revolver, with $10.8 million of letters
of credit and $1.7 million of swing-line borrowings outstanding. The Revolver
expires in December 2004.
The credit facilities included in the 1998 Agreement are (i) guaranteed by the
Parent, (ii) jointly and severally guaranteed by each of Domino's domestic
subsidiaries and (iii) secured by a first priority lien on substantially all of
the assets of the Company.
The 1998 Agreement contains certain financial and non-financial covenants that,
among other things, require the maintenance of minimum interest coverage ratios
and consolidated adjusted EBITDA and maximum leverage ratios, all as defined in
the 1998 Agreement, and restrict the Company's ability to pay dividends on or
redeem or repurchase the Company's capital stock, incur additional
indebtedness, issue preferred stock, make investments, use assets as security
in other transactions and sell certain assets or merge with or into other
companies.
On December 21, 1998, Domino's issued $275 million of 10 3/8% Senior
Subordinated Notes due 2009 (the Notes) requiring semi-annual interest payments
beginning July 15, 1999. Prior to January 15, 2002, the Company may redeem, at
a fixed price, up to 35% of the Notes with the proceeds of equity offerings, if
any, by the Parent or the Company. Before January 15, 2004, Domino's may redeem
all, but not part, of the Notes if a change in control occurs, as defined in
the Notes. Beginning January 15, 2004, Domino's may redeem some or all of the
Notes at fixed redemption prices, ranging from 105.1875% of par in 2004 to 100%
of par in 2007 and thereafter. In the event of a change of control, as defined
in the Notes, Domino's will be obligated to repurchase Notes tendered by the
holders at a fixed price. The Notes are guaranteed by each of Domino's domestic
subsidiaries (non-domestic subsidiaries do not represent a material amount of
revenues and assets) and are subordinated in right of payment to all existing
and future senior debt of the Company.
The indenture related to the Notes restricts Domino's and its restricted
subsidiaries from paying dividends or redeeming equity interests (including
those of the Parent), with certain specified exceptions, unless a minimum fixed
charge coverage ratio is met and such payments are limited to 50% of cumulative
net income of the Company from January 4, 1999 to the payment date plus the net
proceeds from any capital contributions or the sale of equity interests.
The carrying amounts of the Company's debt approximate fair value. The Company
received $30 million under Term Loans B and C from a stockholder of the Parent.
The Company also issued $20 million of the Notes to this stockholder.
F-14
Domino's, Inc. and Subsidiaries
Notes to Consolidated Financial Statements -- (Continued)
As of January 3, 1999, maturities of long-term debt are as follows (In
thousands):
---------
1999................................................................. $ 7,646
2000................................................................. 12,220
2001................................................................. 15,165
2002................................................................. 35,017
2003................................................................. 50,068
Thereafter........................................................... 608,010
---------
$ 728,126
=========
(3) Commitments and Contingencies
Lease Commitments
The Company leases various equipment, store and commissary locations and its
corporate headquarters under operating leases with expiration dates through
2009. Rent expenses totaled approximately $26.0 million, $26.9 million and
$27.4 million during 1996, 1997 and 1998, respectively. As of January 3, 1999,
the future minimum rental commitments for all noncancellable leases, which
include approximately $22.3 million in commitments to related parties and is
net of approximately $3.1 million in future minimum rental commitments which
have been assigned to certain franchises, are as follows (In thousands):
-------
1999.................................................................... $17,269
2000.................................................................... 12,922
2001.................................................................... 10,910
2002.................................................................... 9,615
2003.................................................................... 7,716
Thereafter.............................................................. 8,554
-------
$66,986
=======
Legal Proceedings and Related Matters
The Company is a party to lawsuits, revenue agent reviews by taxing authorities
and legal proceedings, of which the majority involve workers' compensation,
employment practices liability, general liability, automobile and franchisee
claims arising in the ordinary course of business. In the opinion of the
Company's management, these matters, individually and in the aggregate, will
not have a material adverse effect on the financial condition and results of
operations of the Company, and the established reserves adequately provide for
the estimated resolution of such claims.
(4) Income Taxes
For fiscal year 1996, Domino's and its qualifying subsidiaries filed a
consolidated Federal C Corporation income tax return with the Parent. Under the
terms of a tax-sharing agreement with the Parent, the Company recorded its
Federal income tax provision and liability as if it filed its own consolidated
Federal income tax return. Domino's and its qualifying subsidiaries and the
Parent elected S Corporation status, effective December 30, 1996, whereby the
taxable income of the Company was included in the income tax returns of the
Parent's shareholders. Accordingly, the tax benefit of deferred tax deductions
would not accrue to the Company but rather to the Parent's shareholders. Due to
the S Corporation election, the Company's 1996 provision for income taxes
includes an additional $8.2 million to fully reserve its net deferred tax asset
as of December 29, 1996.
As a result of the Recapitalization, the Parent, Domino's and its qualifying
subsidiaries reverted to C Corporation status effective December 21, 1998 and
will file a consolidated Federal income tax return. The Company recorded its
Federal income tax provision and related liability for the last two weeks of
fiscal year 1998 as if it filed its own consolidated
F-15
Domino's, Inc. and Subsidiaries
Notes to Consolidated Financial Statements -- (Continued)
Federal income tax return in accordance with a December 1998 tax-sharing
agreement. As such, the amounts classified as deferred tax assets in the
accompanying 1998 consolidated balance sheet are receivable from the Parent as
the ultimate taxpayer. The Company has recorded its net deferred tax asset
position on the effective date of C Corporation conversion. These amounts are
reflected in the accompanying 1998 consolidated balance sheet and statement of
income.
Just prior to the Recapitalization, certain Domino's subsidiaries sold certain
tangible and intangible assets to another Domino's subsidiary, which had
revoked its S Corporation election. The gain on this transaction, while not
reflected for financial reporting purposes, resulted in a Federal deferred tax
asset to the Company of $54 million due to the difference in book and tax
bases. This amount is reflected in deferred tax assets in the accompanying 1998
consolidated balance sheet and was credited directly to retained earnings in
accordance with EITF 94-10.
The differences between the United States Federal statutory income tax rate of
35% and the consolidated effective income tax rate for fiscal year 1996 and for
fiscal year 1998 (only two weeks of which was a C Corporation period) are
summarized as follows (In thousands):
------------------------
For the Years Ended
------------------------
December 29, January 3,
1996 1999
------------ ----------
Federal income tax expense based on the statutory
rate................................................ $ 17,714 $ 22,382
State and local taxes, net of related Federal income
taxes............................................... 1,979 1,594
Non-resident withholding and foreign income taxes.... 2,040 2,530
Non-deductible expenses.............................. 580 578
Other, net........................................... 2,556 (317)
Foreign tax and other tax credits.................... (2,169) (2,885)
Tax reserves......................................... -- 10,000
Federal deferred benefit recorded upon conversion to
C Corporation in 1998............................... -- (27,905)
Exclusion of income earned during S Corporation
period in 1998...................................... -- (18,900)
Change in valuation allowance........................ 8,184 --
---------- ----------
$ 30,884 $ (12,928)
========== ==========
The components of the 1996, 1997 and 1998 provision for income taxes are as
follows (In thousands):
--------------------------------
1996 1997 1998
--------- --------- ---------
Provision (benefit) for Federal income
taxes--
Current provision (benefit)................. $ 13,595 $ (7,419) $ 9,676
Deferred--
Deferred provision (benefit) .............. 4,020 -- (27,587)
Change in valuation allowance.............. 8,184 -- --
--------- --------- ---------
Total provision (benefit) for federal
income taxes............................. 25,799 (7,419) (17,911)
Provision for state and local income taxes... 3,045 5,719 2,453
Provision for non-resident withholding and
foreign taxes............................... 2,040 2,066 2,530
--------- --------- ---------
Provision (benefit) for income taxes......... $ 30,884 $ 366 $ (12,928)
========= ========= =========
During 1996, deferred income taxes arose from temporary differences in the
recognition of certain items for income tax and financial reporting purposes.
During 1997, the Company reversed certain tax reserves for Federal income tax
exposures it believed no longer exist. The amount of the reserves reversed was
approximately $7.4 million and is included in the accompanying 1997
consolidated statement of income.
F-16
Domino's, Inc. and Subsidiaries
Notes to Consolidated Financial Statements -- (Continued)
During 1998, deferred income taxes arose primarily from the basis difference
created by the intercompany asset sale and the reversion to C Corporation
status referred to above.
Realization of the Company's deferred tax assets is dependent upon many
factors, including, but not limited to, the ability of the Company to generate
sufficient taxable income. Although realization of the Company's deferred tax
assets is not assured, management believes it is more likely than not that the
deferred tax assets will be realized. On an ongoing basis, management will
assess whether it remains more likely than not that the deferred tax assets
will be realized.
As of January 3, 1999, the components of the net deferred tax asset were as
follows (In thousands):
---------
Deferred Federal income tax assets--
Step-up of basis on subsidiaries sale of certain assets............. $ 52,374
Self-insurance reserves............................................. 8,447
Accruals and other reserves......................................... 8,096
Bad debt reserves................................................... 2,189
Depreciation, amortization and asset basis differences.............. 7,422
Deferred revenue.................................................... 1,595
Other............................................................... 3,501
---------
83,624
---------
Deferred Federal income tax liabilities--
Capitalized development costs....................................... 3,105
Other............................................................... 1,077
---------
4,182
---------
Net deferred Federal income tax asset................................ $ 79,442
=========
Net deferred state tax asset......................................... $ 2,145
=========
As of January 3, 1999, the classification of the net deferred tax asset is
summarized as follows: (In thousands):
-------------------------------
Current Long-term Total
--------- --------- ---------
Deferred tax assets............................ $ 10,830 $ 74,939 $ 85,769
Deferred tax liabilities....................... 1,019 3,163 4,182
--------- --------- ---------
Net deferred tax asset......................... $ 9,811 $ 71,776 $ 81,587
========= ========= =========
(5) Employee Benefits
The Company has a deferred salary reduction plan which qualifies under Internal
Revenue Code Section 401(k). All full-time salaried and certain hourly
employees of the Company who have completed one year of service and are at
least 21 years of age are eligible to participate in the plan. Such employees
may be able to participate in the plan after only 6 months of service if they
are employed in a position regularly scheduled to work at least 1,000 hours
annually. The plan requires the employer to match 50% of the first 6% of
employee contributions per participant. These matching contributions vest
immediately. The charges to operations for Company contributions to the plan
were $883,000, $1,183,000 and $2,449,000 for 1996, 1997 and 1998, respectively.
Through December 20, 1998, the Company also had a nonqualified executive
deferred compensation plan (the executive plan) available for certain
executives and other key employees and a nonqualified managerial deferred
compensation plan (the managerial plan) available for certain managerial
employees. Under the executive plan, certain eligible executives could defer up
to 25% of their annual compensation, and all other eligible participants could
defer up to 20% of their annual compensation. Under the managerial plan,
certain eligible employees could defer up to 15% of their annual
F-17
Domino's, Inc. and Subsidiaries
Notes to Consolidated Financial Statements -- (Continued)
compensation. Both plans required a Company match of either 30% of employee
contributions per participant or the Company match percentage under the Company
401(k) plan, whichever was less, with additional Company contributions
permitted at the discretion of the Company. Both plans also required the
Company to credit each participant's account monthly at an annualized rate
equal to the prime rate of interest, as defined, plus 2%. The charges to
operations for Company contributions to these plans, including interest, were
$757,000, $1,326,000 and $1,883,000 in 1996, 1997 and 1998, respectively. The
liability under these plans of approximately $6.0 million is included in long-
term liabilities in the accompanying 1997 consolidated balance sheet. The
Company terminated both the executive plan and the managerial plan and paid out
the related liabilities on December 20, 1998.
Effective January 4, 1999, the Company established a nonqualified deferred
compensation plan available for the members of the Company's executive team,
certain other key executives and certain managerial employees. Under this plan,
the participants may defer up to 40% of their annual compensation. The plan
requires the Company to match 30% with respect to the first 15%, 20%, or 25% of
participant salary deferrals, depending on the employee. The plan requires the
Company to credit the participants' accounts following each pay period. The
Company may be required to make supplemental contributions to participants'
accounts depending on the earnings of the Company as defined in the plan. The
participants direct the investment of their deferred compensation within seven
mutual funds.
(6) Financial Instruments with Off-Balance Sheet Risk
The Company is party to stand-by letters of credit with off-balance sheet risk.
The Company's exposure to credit loss for stand-by letters of credit and
financial guarantees is represented by the contractual amount of these
instruments. The Company uses the same credit policies in making conditional
obligations as it does for on-balance sheet instruments. Total conditional
commitments under letters of credit as of January 3, 1999, net of $2.4 million
of a letter of credit for which the Company has recorded a liability on the
accompanying 1998 consolidated balance sheet, are $8.4 million.
(7) Related Party Transactions
Leases
The Company leases its corporate headquarters under a long-term operating lease
agreement with a partnership owned by a Company Director and former majority
Parent stockholder. The current lease, dated December 21, 1998, replaced a
previous lease agreement with the same partnership. The Company also leased two
commissary locations from partnerships owned by this Company Director and
former majority Parent stockholder and his family during 1996, 1997 and until
August 1998 when the Company purchased the commissaries and terminated the
respective leases. Total lease expense for the aforementioned leases was $14.4
million, $13.8 million and $13.6 million for 1996, 1997 and 1998, respectively,
the majority of which is included in general and administrative expenses in the
accompanying consolidated statements of income.
The Company was party to an agreement with an affiliated company which was
owned by a Company Director and former majority Parent stockholder and members
of his family, whereby the Company obtained a 50% limited partner interest in a
real estate partnership which owns certain land surrounding the Company's
corporate headquarters. The Company accounted for this investment using the
equity method, whereby the original investment was recorded at cost and was
adjusted by the Company's share of the partnership's undistributed earnings and
losses, based on a formula defined in the agreement. Under the terms of this
agreement, the Company leased certain of the land owned by the partnership.
Total lease expense was $1.2 million for 1996, $1.3 million for 1997 and $1.4
million for 1998. In December 1998, the Company distributed its investment in
the partnership to the Parent.
Aggregate future commitments under these leases are as follows (In thousands):
-------
1999.................................................................... $ 4,258
2000.................................................................... 4,371
2001.................................................................... 4,486
2002.................................................................... 4,606
2003.................................................................... 4,544
-------
$22,265
=======
F-18
Domino's, Inc. and Subsidiaries
Notes to Consolidated Financial Statements -- (Continued)
Charitable Contributions
The Company made contributions of approximately $5.6 million, $6.8 million and
$7.7 million in 1996, 1997 and 1998, respectively, to a charitable foundation
founded and operated by a Company Director and former majority Parent
stockholder. These expenses are included in general and administrative expenses
in the accompanying consolidated statements of income.
Covenant Not-to-Compete
As part of the Recapitalization, the Parent entered into a covenant not-to-
compete with its former majority stockholder and current Company Director. The
Parent contributed this asset to the Company during 1998. The Company has
capitalized the $50 million paid in consideration for the covenant not-to-
compete and is amortizing this amount over the three-year term of the covenant
using an accelerated amortization method. Amortization expense for 1998 was
approximately $1,282,000. The net asset amount is included in covenants not-to-
compete in the accompanying 1998 consolidated balance sheet.
Management Agreement
As part of the Recapitalization, the Parent and its subsidiaries (collectively,
the Group) entered into a management agreement with an affiliate of a
stockholder of the Parent to provide the Group with certain management
services. The Company is committed to pay an amount not to exceed $2.0 million
per year on an ongoing basis for management services as defined in the
management agreement. The Company made a prepayment of $0.5 million in 1998
related to these ongoing managerial services for 1999. Furthermore, the Group
must allow the affiliate to participate in the negotiation and consummation of
future senior financing and pay the affiliate a fixed fee, as defined in the
management agreement.
(8) Segment Data
The Company has three reportable segments as determined by management using the
"management" approach as defined in SFAS No. 131: (1) Domestic Stores, (2)
Domestic Distribution and (3) International. The Company's operations are
organized by management on the combined bases of line of business and
geography. The Domestic Stores segment includes Company operations with respect
to all franchised and Company-owned Domino's Pizza stores throughout the
contiguous United States. The Domestic Distribution segment includes the
distribution of food, equipment and supplies to franchised and Company-owned
Domino's Pizza stores throughout the contiguous United States. The
International segment includes Company operations related to its franchising
business in foreign and non-contiguous United States markets and its food
distribution business in Canada, Puerto Rico, Alaska and Hawaii.
The accounting policies of the reportable segments are the same as those
described in Note 1. The Company evaluates the performance of its segments and
allocates resources to them based on EBITDA.
F-19
Domino's, Inc. and Subsidiaries
Notes to Consolidated Financial Statements -- (Continued)
The tables below summarize the financial information concerning the Company's
reportable segments for fiscal years 1996, 1997 and 1998. Intersegment Revenues
are comprised of sales of food, equipment and supplies from the Domestic
Distribution segment to the Domestic Stores segment. Intersegment sales prices
are market based. The "Other" column as it relates to EBITDA information below
includes charitable contributions, a Company Director's and former majority
Parent Stockholder's salary and other corporate headquarter costs that
management does not allocate to any of the reportable segments. The "Other"
column as it relates to capital expenditures primarily includes capitalized
software and leasehold improvements that management does not allocate to any of
the reportable segments. All amounts presented below are in thousands.
--------------------------------------------------------------------------
Domestic Domestic Intersegment
Stores Distribution International Revenues Other Total
--------- ------------ ------------- ------------ ---------- ----------
Revenues--
1998................... $ 521,635 $ 716,802 $ 56,022 $ (117,681) $ -- $1,176,778
1997................... 479,197 617,057 52,496 (103,960) -- 1,044,790
1996................... 429,989 587,080 45,775 (92,907) -- 969,937
EBITDA--
1998................... 121,890 17,972 8,685 -- (53,585) 94,962
1997................... 106,831 15,496 8,617 -- (47,804) 83,140
1996................... 93,700 13,503 6,867 -- (41,730) 72,340
Capital Expenditures--
1998................... 21,795 6,825 249 -- 21,107 49,976
1997................... 26,474 7,322 511 -- 11,105 45,412
1996................... 11,898 1,616 291 -- 6,082 19,887
The following table reconciles Total EBITDA above to consolidated income before
provision (benefit) for income taxes:
----------------------------------
1996 1997 1998
---------- ---------- ----------
Total EBITDA............................... $ 72,340 $ 83,140 $ 94,962
Depreciation and amortization.............. (15,486) (16,939) (23,123)
Interest expense........................... (6,301) (3,980) (7,051)
Interest income............................ 411 447 730
Loss on sale of plant and equipment........ (353) (1,197) (1,570)
---------- ---------- ----------
Income before provision (benefit) for
income taxes.............................. $ 50,611 $ 61,471 $ 63,948
========== ========== ==========
The following table presents the Company's geographic identifiable asset
information for fiscal years 1996, 1997 and 1998 and a reconciliation to total
consolidated assets:
--------------------------------
1996 1997 1998
---------- ---------- ----------
Contiguous United States...................... $ 138,900 $ 184,482 $ 304,373
International................................. 9,290 10,932 17,879
Unallocated Assets............................ 7,264 17,564 65,639
---------- ---------- ----------
Total Consolidated Assets..................... $ 155,454 $ 212,978 $ 387,891
========== ========== ==========
Unallocated assets include assets that management does not attribute to either
the Contiguous United States or the International segments above and includes
marketable securities, deferred financing costs and capitalized software.
No customer accounted for more than 10% of total consolidated revenues in the
fiscal years ended 1996, 1997 and 1998.
F-20
Domino's, Inc. and Subsidiaries
Notes to Consolidated Financial Statements -- (Continued)
(9) Periodic Financial Data (Unaudited)
The Company's convention with respect to reporting periodic financial data is
such that each of the first three periods consists of twelve weeks while the
last period presented consists of sixteen or seventeen weeks depending on the
number of weeks in the fiscal year (See Note 1).
-----------------------------------------------
Sixteen
Twelve Weeks Ended Weeks Ended
March 23, June 15, September 7, December 28,
1997 1997 1997 1997
Dollars in thousands --------- --------- ------------ ------------
Total revenues................. $ 230,229 $ 235,934 $ 234,085 $ 344,542
========= ========= ========= =========
Income before provision for
income taxes.................. $ 13,928 $ 14,888 $ 12,650 $ 20,005
========= ========= ========= =========
Net income..................... $ 13,240 $ 13,993 $ 11,225 $ 22,647
========= ========= ========= =========
-----------------------------------------------
Seventeen
Twelve Weeks Ended Weeks Ended
March 22, June 14, September 6, January 3,
1998 1998 1998 1999
Dollars in thousands --------- --------- ------------ ------------
Total revenues................. $ 255,856 $ 262,302 $ 265,268 $ 393,352
========= ========= ========= =========
Income before provision
(benefit) for income taxes.... $ 13,801 $ 15,517 $ 15,289 $ 19,341
========= ========= ========= =========
Net income..................... $ 12,651 $ 14,381 $ 14,133 $ 35,711
========= ========= ========= =========
(10) Pro Forma Financial Data (Unaudited)
The following unaudited pro forma financial data is presented to illustrate the
estimated effects on net income if the Company had not elected S Corporation
status for fiscal year 1997 and substantially all of fiscal year 1998.
Management estimates that the provision for income taxes would have increased
and net income would have decreased by approximately $18.0 million in 1997 and
approximately $18.9 million in 1998 had the Company remained a C Corporation
for those periods.
----------------------------------
1997 1997 Pro
Company Forma 1997 Pro
Historical Adjustments Forma
Dollars in thousands ---------- ----------- ----------
Total revenues.............................. $1,044,790 $ -- $1,044,790
Income before provision for income taxes.... 61,471 -- 61,471
Provision for income taxes.................. 366 18,000 18,366
---------- --------- ----------
Net income.................................. $ 61,105 $ (18,000) $ 43,105
========== ========= ==========
Comprehensive income........................ $ 61,398 $ (18,144) $ 43,254
========== ========= ==========
----------------------------------
1998 1998 Pro
Company Forma 1998 Pro
Historical Adjustments Forma
Dollars in thousands ---------- ----------- ----------
Total revenues.............................. $1,176,778 $ -- $1,176,778
Income before provision (benefit) for income
taxes...................................... 63,948 -- 63,948
Provision (benefit) for income taxes........ (12,928) 18,900 5,972
---------- --------- ----------
Net income.................................. $ 76,876 $ (18,900) $ 57,976
========== ========= ==========
Comprehensive income........................ $ 76,365 $ (18,736) $ 57,629
========== ========= ==========
F-21
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
You should rely only upon the information contained in this prospectus. We
have not authorized any other person to provide you with different informa-
tion. If anyone provides you with different or inconsistent information, you
should not rely on it. We are not making an offer to sell these securities in
any jurisdiction where the offer or sale is not permitted. You should assume
that the information appearing in this prospectus is accurate as of the date
on the front cover of this prospectus only. Our business, financial condition,
results of operations and prospects may have changed since that date.
----------------
TABLE OF CONTENTS
Page
----
Prospectus Summary...................................................................... 1
Risk Factors............................................................................ 15
Recent Developments .................................................................... 21
Use of Proceeds......................................................................... 22
Capitalization.......................................................................... 23
Unaudited Pro Forma Condensed Consolidated Financial Data .............................. 24
Selected Historical Consolidated Financial Data......................................... 29
Management's Discussion and Analysis of Financial Condition and Results of Operations .. 31
Business................................................................................ 37
Management ............................................................................. 46
Principal Stockholders.................................................................. 52
Certain Relationships and Related Transactions.......................................... 54
Description of Senior Credit Facilities................................................. 55
Description of Exchange Notes........................................................... 57
The Exchange Offer...................................................................... 90
Certain Federal Income Tax Consequences................................................. 99
Plan of Distribution ................................................................... 103
Legal Matters........................................................................... 104
Independent Public Accountants.......................................................... 104
Index to Consolidated Financial Statements.............................................. F-1
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Domino's, Inc.
Exchange Offer
$275,000,000
10 3/8% Series B
Senior Subordinated
Notes due 2009
----------------
PROSPECTUS
----------------
March , 1999
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20 Indemnification of Directors and Officers.
The Certificate of Incorporation, as amended, and by-laws of each of Domino's,
Inc. and Domino's Pizza International, Inc. provide that each corporation shall
indemnify its respective directors and officers to the maximum extent permitted
from time to time by the Delaware General Corporation Law ("DGCL").
Section 145 of the DGCL provides that a corporation may indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Section 145 further
provides that a corporation similarly may indemnify any such person serving in
any such capacity who was or is a party or is threatened to be made a party to
any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor, against expenses actually and
reasonably incurred in connection with the defense or settlement of such action
or suit if he acted in good faith and in a manner he reasonably believed to be
in, or not opposed to, the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or such other
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 102(b)(7) permits a corporation to include in its certificate of
incorporation a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, provided, however, that such provision shall
not eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the DGCL, which relates
to unlawful payment of dividends and unlawful stock purchases and redemptions,
or (iv) for any transaction from which the director derived an improper
personal benefit.
The by-laws of each of Domino's Pizza, Inc., Metro Detroit Pizza, Inc. and
Domino's Franchise Holding Co. provide that each such corporation shall
indemnify its respective directors and officers to the fullest extent
authorized or permitted by the Michigan Business Corporation Act. Section
450.1561 of the Michigan Business Corporation Act permits a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to a threatened, pending or completed action, suit, or proceeding, whether
civil, criminal, administrative or investigative and whether formal or
informal, other than an action by or in the right of the corporation, by reason
of the fact that he or she is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust or other enterprise,
whether for profit or not, against expenses, including attorneys' fees,
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with the action, suit, or
proceeding, if the person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation or its shareholders, and with respect to a criminal action or
proceeding, if the person had no reasonable cause to believe his or her conduct
was unlawful.
Section 450.1562 of the Michigan Business Corporation Act further provides that
a corporation may indemnify any such person serving in such capacity who was or
is a party or is threatened to be made a party to a threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment its favor, against expenses (including attorneys' fees) and amounts
paid in settlement actually and reasonably incurred in connection with the
action or suit if the person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation or
its shareholders, except that no indemnification shall be made for a claim,
issue or matter in which the person has been found liable to the corporation
except to the extent authorized by the court upon application for
indemnification pursuant to Section 450.1564c.
II-1
The Articles of Incorporation of Domino's Pizza International Payroll Services,
Inc. empowers the corporation to broadly indemnify its directors and officers.
Section 607.0850 of the Florida Business Corporation Act permits a corporation
to indemnify, in a case-by-case determination) any person who is or was a party
to any proceeding by reason of the fact that such person is or was a director,
officer, employee or agent of the corporation or serving in such a capacity at
the request of the corporation for another corporation, or other specified
business entity, in which such person acted in good faith and in a manner
reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reason to believe his conduct was unlawful, for the amount of liability
incurred in connection with such proceeding and any appeal thereof.
The directors and officers of Domino's, Domino's Pizza, Inc., Domino's
Franchise Holding Co., Metro Detroit Pizza, Inc., Domino's Pizza International,
Inc., Domino's Pizza International Payroll Services, Inc. and Domino's Pizza-
Government Services Division, Inc. are covered under directors' and officers'
liability insurance policies maintained by TISM, Inc.
Item 21 Exhibits and Financial Statement Schedules.
(a) Exhibits
Exhibit
Number Description
------- -----------
2.1 Agreement and Plan of Merger dated as of September 25, 1998.
2.2 Amendment No. 1 to Agreement and Plan of Merger dated as of November
24, 1998.
2.3 Amendment No. 2 to Agreement and Plan of Merger dated as of November
24, 1998.
2.4 Amendment No. 3 to Agreement and Plan of Merger dated December 18,
1998.
3.1 Domino's, Inc. Amended and Restated Certificate of Incorporation.
3.2 Domino's, Inc. Amended and Restated By-Laws.
3.3 Domino's Pizza, Inc. Restated Articles of Incorporation.
3.4 Domino's Pizza, Inc. By-laws.
3.5 Metro Detroit Pizza, Inc. Restated Articles of Incorporation.
3.6 Metro Detroit Pizza, Inc. By-Laws.
3.7 Domino's Franchise Holding Co. Articles of Incorporation.
3.8 Domino's Franchise Holding Co. By-Laws.
3.9 Domino's Pizza International, Inc. Amended and Restated Certificate of
Incorporation.
3.10 Domino's Pizza International, Inc. Amended and Restated By-Laws.
3.11 Domino's Pizza International Payroll Services, Inc. Articles of
Incorporation.
3.12 Domino's Pizza International Payroll Services, Inc. By-Laws.
3.13 Domino's Pizza-Government Services Division, Inc. Articles of
Incorporation.
3.14 Domino's Pizza-Government Services Division, Inc. By-Laws.
4.1 Indenture dated as of December 21, 1998 by and among Domino's Inc.,
Domino's Pizza, Inc., Metro Detroit Pizza, Bluefence, Inc., Domino's
Pizza International, Inc., Domino's Pizza International Payroll
Services, Inc., Domino's Pizza--Government Services Division, Inc. and
IBJ Schroder Bank and Trust Company.
4.2 Registration Rights Agreement dated as of December 21, 1998 by and
among Domino's, Inc., Domino's Pizza, Inc., Metro Detroit Pizza, Inc.,
Bluefence, Inc., Domino's Pizza International, Inc., Domino's Pizza
International Payroll Services, Inc., Domino's Pizza--Government
Services Division, Inc., J.P. Morgan Securities, Inc. and Goldman,
Sachs & Co.
5.1 Opinion of Ropes & Gray.
5.2 Opinion of Honigman Miller Schwartz and Cohn.
10.1 Amended and Restated Purchase Agreement dated December 21, 1998 by and
among Domino's Inc., Domino's Pizza, Inc., Metro Detroit Pizza, Inc.,
Bluefence, Inc., Domino's Pizza International, Inc., Domino's Pizza
International Payroll Services, Inc., Domino's Pizza--Government
Services Division, Inc., J.P. Morgan Securities, Inc. and Goldman,
Sachs & Co.
II-2
Exhibit
Number Description
------- -----------
10.2 Consulting Agreement dated December 21, 1998 by and between Domino's
Pizza, Inc. and Thomas S. Monaghan.
10.3 Lease Agreement dated as of December 21, 1998 by and between Domino's
Farms Office Park Limited Partnership and Domino's Pizza, Inc.
10.4 Management Agreement by and among TISM, Inc., each of its direct and
indirect subsidiaries and Bain Capital Partners VI, L.P.
10.5 Stockholders Agreement dated as of December 21, 1998 by and among
TISM, Inc., Domino's, Inc., Bain Capital Fund VI, L.P., Bain Capital
VI Coinvestment Fund, L.P., BCIP, PEP Investments PTY Ltd., Sankaty
High Yield Asset Partners, L.P., Brookside Capital Partners Fund,
L.P., RGIP, LLC, DP Investors I, LLC, DP Investors II, LLC, J.P.
Morgan Capital Corporation, Sixty Wall Street Fund, L.P., DP
Transitory Corporation, Thomas S. Monaghan, individually and in his
capacity as trustee, and Marjorie Monaghan, individually and in her
capacity as trustee, Harry J. Silverman, Michael D. Soignet, Stuart K.
Mathis, Patrick Kelly, Gary M. McCausland and Cheryl Bachelder.
10.6 Senior Executive Deferred Bonus Plan of Domino's, Inc. dated as of
December 21, 1998.
10.7 Domino's Pizza, Inc. Deferred Compensation Plan adopted effective
January 4, 1999.
10.8 TISM, Inc. Stock Option Plan.
10.9 Severance Agreement dated as of August 4, 1998 between Domino's Pizza,
Inc. and Stuart Mathis.
10.10 Severance Agreement dated as of August 4, 1998 between Domino's Pizza,
Inc. and Pat Kelly.
10.11 Severance Agreement dated as of August 4, 1998 between Domino's Pizza,
Inc. and Harry J. Silverman.
10.12 Severance Agreement dated as of August 4, 1998 between Domino's Pizza,
Inc. and Gary McCausland.
10.13 Severance Agreement dated as of August 4, 1998 between Domino's Pizza,
Inc. and Cheryl Bachelder.
10.14 Severance Agreement dated as of August 4, 1998 between Domino's Pizza,
Inc. and Michael D. Soignet.
10.15 Credit Agreement dated as of December 21, 1998 by and among Domino's,
Inc., Bluefence, Inc., J.P. Morgan Securities, Inc., Morgan Guaranty
Trust Company of New York, Bank One and Comerica Bank.
10.16 Borrower Pledge Agreement dated as of December 21, 1998 by and among
Domino's, Inc., Bluefence, Inc. and Morgan Guaranty Trust Company of
New York, as Collateral Agent.
10.17 Subsidiary Pledge Agreement dated as of December 21, 1998 by and among
Domino's Pizza, Inc., Metro Detroit Pizza, Inc., Domino's Pizza
International, Inc., Domino's Pizza International Payroll Services,
Inc., Domino's Pizza--Government Services Division, Inc. and Morgan
Guaranty Trust Company of New York, as Collateral Agent.
10.18 Borrower Security Agreement dated as of December 21, 1998 by and among
Domino's, Inc., and Morgan Guaranty Trust Company of New York, as
Collateral Agent.
10.19 Subsidiary Security Agreement dated as of December 21, 1998 by and
among Domino's Pizza, Inc., Metro Detroit Pizza, Inc., Domino's Pizza
International, Inc., Domino's Pizza International Payroll Services,
Inc., Domino's Pizza--Government Services Division, Inc. and Morgan
Guaranty Trust Company of New York, as Collateral Agent.
10.20 Collateral Account Agreement dated as of December 21, 1998 by and
among Domino's, Inc., Bluefence, Inc. and Morgan Guaranty Trust
Company of New York, as Collateral Agent.
12.1 Statement Regarding Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Ropes & Gray (See Exhibit 5.1).
23.3 Consent of Honigman Miller Schwartz and Cohn (See Exhibit 5.2).
24.1 Powers of Attorney (See Signature Pages).
25.1 Statement of Eligibility on Form T-1 of IBJ Whitehall Bank & Trust
Company as Trustee under the Indenture.
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Exchange Agent Agreement.*
- ---------
* To be filed by amendment.
II-3
(b) The following Consolidated Financial Statement Schedules of Domino's, Inc.
for the Three Years Ended January 3, 1999 are included in this Registration
Statement.
DOMINO'S, INC. and SUBSIDIARIES
SCHEDULE II--VALUATION and QUALIFYING ACCOUNTS
(Dollars In Thousands)
Balance * Additions/ Balance
Beginning Provision Deductions Translation End of
of Year (Benefit) from Reserves Adjustments Year
--------- --------- ------------- ----------- -------
Allowance for doubtful
accounts receivable
1998.................. 3,978 174 (1,362) 4 2,794
1997.................. 5,223 904 (2,128) (21) 3,978
1996.................. 5,235 1,140 (1,138) (14) 5,223
Allowance for doubtful
notes receivable
1998.................. 5,708 (3,386) 837 6 3,165
1997.................. 5,725 227 (222) (22) 5,708
1996.................. 4,522 (198) 1,397 4 5,725
- ---------
*Consists primarily of write-offs and recoveries of bad debts
Item 22 Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrants, pursuant to the foregoing provisions, or otherwise, the
Registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrants of expenses incurred or paid by a director, officer
or controlling person of the Registrants in the successful defense of any
action, suit or proceeding) is asserted by any such director, officer or
controlling person in connection with the securities being registered, the
Registrants will, unless in the opinion of their counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether or not such indemnification is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
The undersigned registrants hereby undertake:
(1) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
(2) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(3) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(4) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Domino's, Inc. has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Ann Arbor, State of
Michigan, on the 19th day of March, 1999.
Domino's, Inc.
/s/ Harry J. Silverman
By: ____________________________________
Name: Harry J. Silverman
Title: Vice President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated on the 19th day of March, 1999. KNOW ALL MEN BY THESE PRESENTS that
each officer and director of Domino's, Inc. whose signature appears below
constitutes and appoints Harry J. Silverman, Mark E. Nunnelly and Robert F.
White, and each of them, his or her true and lawful attorney-in-fact and agent,
with full power of substitution and revocation, for him or her and in his or
her name, place and stead, in any and all capacities, to execute any and all
amendments, including any post-effective amendments and supplements to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said attorney-
in-fact and agent, or his or her substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Signature Title
--------- -----
/s/ Harry J. Silverman Vice President
______________________________________ (Principal
Harry J. Silverman Executive,
Financial and
Accounting
Officer)
/s/ Thomas S. Monaghan Director
______________________________________
Thomas S. Monaghan
/s/ Mark E. Nunnelly Director
______________________________________
Mark E. Nunnelly
/s/ Robert F. White Director
______________________________________
Robert F. White
/s/ Jonas L. Steinman Director
______________________________________
Jonas L. Steinman
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Domino's Pizza,
Inc. has duly caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Ann Arbor, State of
Michigan, on the 19th day of March, 1999.
Domino's Pizza, Inc.
/s/ Harry J. Silverman
By: ____________________________________
Name: Harry J. Silverman
Title: Vice President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated on the 19th day of March, 1999.
Signature Title
--------- -----
/s/ Harry J. Silverman Director and Vice
______________________________________ President
Harry J. Silverman (Principal
Executive,
Financial and
Accounting
Officer)
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Metro Detroit
Pizza, has duly caused this Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Ann Arbor, State
of Michigan, on the 19th day of March, 1999.
Metro Detroit Pizza, Inc.
/s/ Harry J. Silverman
By: ____________________________________
Name: Harry J. Silverman
Title: President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated on the 19th day of March, 1999.
Signature Title
--------- -----
/s/ Harry J. Silverman Director and
______________________________________ President
Harry J. Silverman (Principal
Executive,
Financial and
Accounting
Officer)
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Domino's, Franchise
Holding Co. has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Ann Arbor,
State of Michigan, on the 19th day of March, 1999.
Domino's Franchise Holding Co.
/s/ Harry J. Silverman
By: ____________________________________
Name: Harry J. Silverman
Title: President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated on the 19th day of March, 1999.
Signature Title
--------- -----
/s/ Harry J. Silverman Director and
______________________________________ President
Harry J. Silverman (Principal
Executive,
Financial and
Accounting
Officer)
II-8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Domino's Pizza
International, Inc. has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Ann
Arbor, State of Michigan, on the 19th day of March, 1999.
Domino's Pizza International, Inc.
/s/ Harry J. Silverman
By: ____________________________________
Name: Harry J. Silverman
Title: President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated on the 19th day of March, 1999.
Signature Title
--------- -----
/s/ Harry J. Silverman Director and
______________________________________ President
Harry J. Silverman (Principal
Executive,
Financial and
Accounting
Officer)
II-9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Domino's Pizza
International Payroll Services, Inc. has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Ann Arbor, State of Michigan, on the 19th day of
March, 1999.
Domino's Pizza International Payroll
Services, Inc.
/s/ Harry J. Silverman
By: ____________________________________
Name: Harry J. Silverman
Title: President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated on the 19th day of March, 1999.
Signature Title
--------- -----
/s/ Harry J. Silverman Director and
______________________________________ President
Harry J. Silverman (Principal
Executive,
Financial and
Accounting
Officer)
II-10
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Domino's Pizza--
Government Services Division, Inc. has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Ann Arbor, State of Michigan, on the 19th day of March, 1999.
Domino's Pizza--Government Services
Division, Inc.
/s/ Harry J. Silverman
By: ____________________________________
Name: Harry J. Silverman
Title: President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated on the 19th day of March, 1999.
Signature Title
--------- -----
/s/ Harry J. Silverman Director and
______________________________________ President
Harry J. Silverman (Principal
Executive,
Financial and
Accounting
Officer)
II-11
EXHIBITS
Exhibit
Number Description
------- -----------
2.1 Agreement and Plan of Merger dated as of September 25, 1998.
2.2 Amendment No. 1 to Agreement and Plan of Merger dated as of November
24, 1998.
2.3 Amendment No. 2 to Agreement and Plan of Merger dated as of November
24, 1998.
2.4 Amendment No. 3 to Agreement and Plan of Merger dated December 18,
1998.
3.1 Domino's, Inc. Amended and Restated Certificate of Incorporation.
3.2 Domino's, Inc. Amended and Restated By-Laws.
3.3 Domino's Pizza, Inc. Restated Articles of Incorporation.
3.4 Domino's Pizza, Inc. By-laws.
3.5 Metro Detroit Pizza, Inc. Restated Articles of Incorporation.
3.6 Metro Detroit Pizza, Inc. By-Laws.
3.7 Domino's Franchise Holding Co. Articles of Incorporation.
3.8 Domino's Franchise Holding Co. By-Laws.
3.9 Domino's Pizza International, Inc. Amended and Restated Certificate of
Incorporation.
3.10 Domino's Pizza International, Inc. Amended and Restated By-Laws.
3.11 Domino's Pizza International Payroll Services, Inc. Articles of
Incorporation.
3.12 Domino's Pizza International Payroll Services, Inc. By-Laws.
3.13 Domino's Pizza-Government Services Division, Inc. Articles of
Incorporation.
3.14 Domino's Pizza-Government Services Division, Inc. By-Laws.
4.1 Indenture dated as of December 21, 1998 by and among Domino's Inc.,
Domino's Pizza, Inc., Metro Detroit Pizza, Bluefence, Inc., Domino's
Pizza International, Inc., Domino's Pizza International Payroll
Services, Inc., Domino's Pizza--Government Services Division, Inc. and
IBJ Schroder Bank and Trust Company.
4.2 Registration Rights Agreement dated as of December 21, 1998 by and
among Domino's, Inc., Domino's Pizza, Inc., Metro Detroit Pizza, Inc.,
Bluefence, Inc., Domino's Pizza International, Inc., Domino's Pizza
International Payroll Services, Inc., Domino's Pizza--Government
Services Division, Inc., J.P. Morgan Securities, Inc. and Goldman,
Sachs & Co.
5.1 Opinion of Ropes & Gray.
5.2 Opinion of Honigman Miller Schwartz and Cohn.
10.1 Amended and Restated Purchase Agreement dated December 21, 1998 by and
among Domino's Inc., Domino's Pizza, Inc., Metro Detroit Pizza, Inc.,
Bluefence, Inc., Domino's Pizza International, Inc., Domino's Pizza
International Payroll Services, Inc., Domino's Pizza--Government
Services Division, Inc., J.P. Morgan Securities, Inc. and Goldman,
Sachs & Co.
10.2 Consulting Agreement dated December 21, 1998 by and between Domino's
Pizza, Inc. and Thomas S. Monaghan.
10.3 Lease Agreement dated as of December 21, 1998 by and between Domino's
Farms Office Park Limited Partnership and Domino's Pizza, Inc.
10.4 Management Agreement by and among TISM, Inc., each of its direct and
indirect subsidiaries and Bain Capital Partners VI, L.P.
10.5 Stockholders Agreement dated as of December 21, 1998 by and among
TISM, Inc., Domino's, Inc., Bain Capital Fund VI, L.P., Bain Capital
VI Coinvestment Fund, L.P., BCIP, PEP Investments PTY Ltd., Sankaty
High Yield Asset Partners, L.P., Brookside Capital Partners Fund,
L.P., RGIP, LLC, DP Investors I, LLC, DP Investors II, LLC, J.P.
Morgan Capital Corporation, Sixty Wall Street Fund, L.P., DP
Transitory Corporation, Thomas S. Monaghan, individually and in his
capacity as trustee, and Marjorie Monaghan, individually and in her
capacity as trustee, Harry J. Silverman, Michael D. Soignet, Stuart K.
Mathis, Patrick Kelly, Gary M. McCausland and Cheryl Bachelder.
Exhibit
Number Description
------- -----------
10.6 Senior Executive Deferred Bonus Plan of Domino's, Inc. dated as of
December 21, 1998.
10.7 Domino's Pizza, Inc. Deferred Compensation Plan adopted effective
January 4, 1999.
10.8 TISM, Inc. Stock Option Plan.
10.9 Severance Agreement dated as of August 4, 1998 between Domino's Pizza,
Inc. and Stuart Mathis.
10.10 Severance Agreement dated as of August 4, 1998 between Domino's Pizza,
Inc. and Pat Kelly.
10.11 Severance Agreement dated as of August 4, 1998 between Domino's Pizza,
Inc. and Harry J. Silverman.
10.12 Severance Agreement dated as of August 4, 1998 between Domino's Pizza,
Inc. and Gary McCausland.
10.13 Severance Agreement dated as of August 4, 1998 between Domino's Pizza,
Inc. and Cheryl Bachelder.
10.14 Severance Agreement dated as of August 4, 1998 between Domino's Pizza,
Inc. and Michael D. Soignet.
10.15 Credit Agreement dated as of December 21, 1998 by and among Domino's,
Inc., Bluefence, Inc., J.P. Morgan Securities, Inc., Morgan Guaranty
Trust Company of New York, Bank One and Comerica Bank.
10.16 Borrower Pledge Agreement dated as of December 21, 1998 by and among
Domino's, Inc., Bluefence, Inc. and Morgan Guaranty Trust Company of
New York, as Collateral Agent.
10.17 Subsidiary Pledge Agreement dated as of December 21, 1998 by and among
Domino's Pizza, Inc., Metro Detroit Pizza, Inc., Domino's Pizza
International, Inc., Domino's Pizza International Payroll Services,
Inc., Domino's Pizza--Government Services Division, Inc. and Morgan
Guaranty Trust Company of New York, as Collateral Agent.
10.18 Borrower Security Agreement dated as of December 21, 1998 by and among
Domino's, Inc., and Morgan Guaranty Trust Company of New York, as
Collateral Agent.
10.19 Subsidiary Security Agreement dated as of December 21, 1998 by and
among Domino's Pizza, Inc., Metro Detroit Pizza, Inc., Domino's Pizza
International, Inc., Domino's Pizza International Payroll Services,
Inc., Domino's Pizza--Government Services Division, Inc. and Morgan
Guaranty Trust Company of New York, as Collateral Agent.
10.20 Collateral Account Agreement dated as of December 21, 1998 by and
among Domino's, Inc., Bluefence, Inc. and Morgan Guaranty Trust
Company of New York, as Collateral Agent.
12.1 Statement Regarding Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Ropes & Gray (See Exhibit 5.1).
23.3 Consent of Honigman Miller Schwartz and Cohn (See Exhibit 5.2).
24.1 Powers of Attorney (See Signature Pages).
25.1 Statement of Eligibility on Form T-1 of IBJ Whitehall Bank & Trust
Company as Trustee under the Indenture.
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Exchange Agent Agreement.*
- ---------
* To be filed by amendment.
Exhibit 2.1
[EXECUTION COPY]
AGREEMENT AND PLAN OF MERGER
dated as of
September 25, 1998
among
TM TRANSITORY MERGER CORPORATION,
TISM, INC.
and
THOMAS S. MONAGHAN,
Individually and as Trustee
of The Thomas S. Monaghan Living Trust
TABLE OF CONTENTS
PAGE
----
ARTICLE 1
---------
DEFINITIONS
-----------
Section 1.01. Definitions...................................... 1
-
ARTICLE 2
---------
THE MERGER
----------
Section 2.01. The Merger....................................... 7
-
Section 2.02. Conversion (and Retention) of Shares............. 8
-
Section 2.03. Escrow Account; Closing.......................... 8
-
Section 2.04. Surrender and Payment............................ 8
-
Section 2.05. Closing Balance Sheet............................ 8
-
Section 2.06. Adjustment of Purchase Price..................... 11
--
Section 2.07. Dissenting Shares................................ 12
--
ARTICLE 3
---------
THE SURVIVING CORPORATION
-------------------------
Section 3.01. Articles of Incorporation........................ 12
--
Section 3.02. Bylaws........................................... 13
--
Section 3.03. Directors and Officers........................... 13
--
ARTICLE 4
---------
REPRESENTATIONS AND WARRANTIES OF TISM
--------------------------------------
Section 4.01. Corporate Existence and Power.................... 13
--
Section 4.02. Corporate Authorization.......................... 13
--
Section 4.03. Governmental Authorization....................... 13
--
Section 4.04. Noncontravention................................. 14
--
Section 4.05. TISM............................................. 14
--
Section 4.06. Ownership of Capital Stock of the Company........ 15
--
Section 4.07. Subsidiaries..................................... 15
--
Section 4.08. Financial Statements............................. 15
--
Section 4.09. Absence of Certain Changes....................... 16
--
Section 4.10. No Undisclosed Material Liabilities.............. 17
--
Section 4.11. Intercompany Accounts............................ 18
--
Section 4.12. Material Contracts............................... 18
--
Section 4.13. Litigation....................................... 20
--
PAGE
----
Section 4.14. Compliance with Laws and Court Orders............ 20
--
Section 4.15. Properties....................................... 21
--
Section 4.16. Facilities....................................... 21
--
Section 4.17. Intellectual Property............................ 22
--
Section 4.18. Insurance Coverage............................... 23
--
Section 4.19. Finders' Fees.................................... 23
--
Section 4.20. Employees........................................ 23
--
Section 4.21. Labor Matters.................................... 23
--
Section 4.22. Environmental Matters............................ 24
--
Section 4.23. Suppliers........................................ 25
--
Section 4.24. No Material Misstatements........................ 25
--
Section 4.25. Purchase for Investment.......................... 25
--
ARTICLE 5
---------
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Section 5.01. Corporate Existence and Power.................... 25
--
Section 5.02. Corporate Authorization.......................... 26
--
Section 5.03. Governmental Authorization....................... 26
--
Section 5.04. Noncontravention................................. 26
--
Section 5.05. Financing........................................ 26
--
Section 5.06. Purchase for Investment.......................... 27
--
Section 5.07. Litigation....................................... 28
--
Section 5.08. Finders' Fees.................................... 28
--
Section 5.09. Inspections; No Other Representations............ 28
--
Section 5.10. Retained Interest................................ 28
--
ARTICLE 6
COVENANTS OF TISM AND THE PRINCIPAL STOCKHOLDER
-----------------------------------------------
Section 6.01. Conduct of the Company.......................... 29
--
Section 6.02. Access to Information; Confidentiality.......... 30
--
Section 6.03. Notices of Certain Events....................... 30
--
Section 6.04. Noncompetition.................................. 30
--
Section 6.05. The Option...................................... 32
--
Section 6.06. Stockholder Consent............................. 32
--
Section 6.07. Escrow Agreement................................ 32
--
Section 6.08. Lease Agreement................................. 32
--
Section 6.09. Consulting Agreement............................ 32
--
Section 6.10. TISM Financial Information...................... 32
--
Section 6.11. Confidentiality................................. 33
--
ii
PAGE
----
Section 6.12. Closing Debt Amount; Company Transaction
Expenses....................................... 33
--
ARTICLE 7
---------
COVENANTS OF BUYER
------------------
Section 7.01. Confidentiality................................. 34
--
Section 7.02. Access.......................................... 34
--
Section 7.03. Financing....................................... 34
--
Section 7.04. Escrow Agreement................................ 35
--
Section 7.05. Lease Agreement................................. 35
--
Section 7.06. Consulting Agreement............................ 35
--
Section 7.07. Confirmation of Stock Consideration
Value Adjustment Amount........................ 35
--
ARTICLE 8
---------
COVENANTS OF BUYER AND TISM
---------------------------
Section 8.01. Best Efforts; Further Assurances................ 35
--
Section 8.02. Certain Filings................................. 36
--
Section 8.03. Public Announcements............................ 36
--
Section 8.04. Intercompany Accounts........................... 36
--
Section 8.05. Trademarks; Tradenames.......................... 37
--
Section 8.06. Transfer of Certain Assets...................... 37
--
ARTICLE 9
---------
TAX MATTERS
-----------
Section 9.01. Tax Definitions................................. 38
--
Section 9.02. Tax Representations............................. 38
--
Section 9.03. Tax Covenants................................... 40
--
Section 9.04. Cooperation on Tax Matters...................... 42
--
Section 9.05. Indemnification................................. 42
--
ARTICLE 10
----------
EMPLOYEE BENEFITS
-----------------
Section 10.01. Employee Benefits Definitions.................. 44
--
Section 10.02. ERISA Representations.......................... 45
--
Section 10.03. Maintenance of Employee Benefits............... 46
--
Section 10.04. Employee Agreements and Change of Control...... 47
--
iii
PAGE
----
ARTICLE 11
----------
CONDITIONS TO THE MERGER
------------------------
Section 11.01. Conditions to Obligations of Buyer and TISM...... 47
--
Section 11.02. Conditions to Obligations of Buyer............... 48
--
Section 11.03. Conditions to Obligations of TISM and the
Principal Stockholder........................... 49
--
ARTICLE 12
----------
SURVIVAL; INDEMNIFICATION
-------------------------
Section 12.01. Survival......................................... 50
--
Section 12.02. Indemnification.................................. 50
--
Section 12.03. Procedures....................................... 51
--
Section 12.04. Calculation of Damages........................... 52
--
Section 12.05. Assignment of Claims............................. 53
--
Section 12.06. Other Indemnification............................ 53
--
Section 12.07. Exclusivity...................................... 54
--
Section 12.08. Escrow Account................................... 55
--
ARTICLE 13
----------
TERMINATION
-----------
Section 13.01. Grounds for Termination.......................... 55
--
Section 13.02. Effect of Termination............................ 56
--
ARTICLE 14
----------
MISCELLANEOUS
-------------
Section 14.01. Notices.......................................... 56
--
Section 14.02. Amendments and Waivers........................... 57
--
Section 14.03. Expenses......................................... 57
--
Section 14.04. Successors and Assigns........................... 57
--
Section 14.05. Governing Law.................................... 58
--
Section 14.06. Jurisdiction..................................... 58
--
Section 14.07. WAIVER OF JURY TRIAL............................. 58
--
Section 14.08. Counterparts; Third Party Beneficiaries.......... 58
--
Section 14.09. Entire Agreement................................. 58
--
Section 14.10. Captions, Etc.................................... 59
--
Section 14.11. Limitation on Remedies........................... 59
--
Section 14.12. Disclosure Schedules............................. 59
--
iv
PAGE
----
Section 14.13. Cooperation on Certain Matters................... 59
--
Section 14.14. Timeliness of Performance........................ 60
--
EXHIBIT A - Form of Lease Agreement
EXHIBIT B - Term Sheet for Contingent Note
EXHIBIT C - Form of Escrow Agreement
EXHIBIT D - Term Sheet for Stockholders' Agreement
EXHIBIT E - Form of Consulting Agreement
EXHIBIT F - Balance Sheet
v
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of September 25, 1998 among TM
Transitory Merger Corporation, a Michigan corporation ("BUYER"), TISM, Inc., a
Michigan corporation ("TISM") and Mr. Thomas S. Monaghan (the "PRINCIPAL
STOCKHOLDER"), individually and as trustee of The Thomas S. Monaghan Living
Trust.
W I T N E S S E T H :
WHEREAS, TISM is the record and beneficial owner of 100% of the outstanding
common stock of Domino's Pizza, Inc., a Michigan corporation (the "COMPANY");
WHEREAS, it is intended that the Merger (as defined in Section 2.01) be
----
recorded as a recapitalization for financial reporting purposes;
WHEREAS, Domino's Farms Office Park Limited Partnership ("DOMINO'S FARMS"),
an affiliate of TISM, is the owner of certain real property and related assets
and has agreed to lease a portion of such property to the Company following the
Merger, and Buyer has agreed that the Company shall lease a portion of such
property from Domino's Farms, pursuant to a lease agreement (the "LEASE
AGREEMENT") between the Company and Domino's Farms in the form attached as
Exhibit A hereto;
The parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.0. Definitions. (a) The following terms, as used herein, have
the following meanings:
"AFFILIATE" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with such Person.
"AFFILIATE GROUP" means each Stockholder, each of Harry Silverman, Michael
Soignet, Cheryl Bachelder, Gary McCausland, Stuart Mathis and Pat
Kelly, each Member of the Immediate Family of each of the foregoing and each
Affiliate of each of the foregoing.
"BALANCE SHEET" means the unaudited interim consolidated balance sheet of
the Company and the Subsidiaries as of August 9, 1998, a copy of which is
attached hereto as Exhibit F.
"BALANCE SHEET DATE" means August 9, 1998.
"CASH CONSIDERATION" means an amount equal to (i) the Net Purchase Price
less $30,375,000 plus (ii) any additional amounts paid to the Principal
Stockholder for distribution to the Stockholders pursuant to Section 2.06 or
----
9.03 hereof or under the Escrow Agreement, divided by the aggregate number of
- ----
shares of Common Stock outstanding as of the Effective Time.
"CLOSING DATE" means the date on which the Effective Time occurs.
"CLOSING DEBT AMOUNT" means the total Indebtedness of TISM, the Company and
the Subsidiaries on a consolidated basis as of immediately prior to the
Effective Time (including, without limitation, principal, any and all accrued
but unpaid interest, and all prepayment premiums or penalties and expenses
payable in connection with any repayment of Indebtedness contemplated hereby or
otherwise required as a consequence of the consummation of the transactions
contemplated by this Agreement and the Financing Agreements).
"CODE" means the United States Internal Revenue Code of 1986, as amended.
"COMMON STOCK" means the common stock, par value $0.01 per share, of TISM.
"COMPANY TRANSACTION EXPENSES" means, collectively: (i) any and all legal,
accounting, investment banking, financial advisory, brokerage and other fees and
expenses incurred by TISM, the Company or any of the Subsidiaries (or for which
any of them may become liable as a result of the actions of the Principal
Stockholder, TISM, the Company or the Subsidiaries) in connection with this
Agreement, the Merger or any of the other transactions contemplated hereby; and
(ii) any and all stay pay, completion bonus, success bonus, severance or other
compensation obligations that are contingent upon, or may be or become payable
as a result of, the consummation of the transactions contemplated by this
Agreement that are incurred or assumed by TISM, the Company or any of the
Subsidiaries (other than severance payments under (x) the Domino's Pizza, Inc.
Retention Plan, (y) the separate Severance Agreements each dated as of August 4,
2
1998 between the Company and each of six (6) different executives, and (z) any
other severance plan or policy of the Company or any Subsidiary furnished to
Buyer except for plans at the store level involving immaterial amounts).
"CONTINGENT NOTE" means a promissory note or notes of TISM payable to the
Stockholders on substantially the terms set forth in Exhibit B hereto.
"DISCLOSURE SCHEDULES" means the disclosure schedules provided to Buyer
pursuant to this Agreement on or prior to the date hereof.
"ESCROW AGENT" means the agent under the Escrow Agreement.
"ESCROW AGREEMENT" means the escrow agreement among Buyer, the Principal
Stockholder and the Escrow Agent substantially in the form of Exhibit C hereto.
"GOVERNMENTAL ENTITY" means any federal, state, local or foreign government
or any court of competent jurisdiction, administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign.
"INDEBTEDNESS" means all obligations: (i) for borrowed money (including,
without limitation, principal, accrued but unpaid interest, prepayment premiums
or penalties and expenses), (ii) evidenced by notes, bonds, debentures or
similar instruments, (iii) for the deferred purchase price of goods or services
(other than trade payables or accruals incurred and paid in the ordinary course
of business, but only to the extent that such payables or accruals are not
interest-bearing), (iv) for deferred compensation (to the extent that such
obligations exceed the value set aside in trusts therefor) calculated in
accordance with generally accepted accounting principles, (v) under capital
leases and (vi) to pay dividends or other distributions declared or set aside
and not yet paid or to pay any amounts in respect of the redemption of any
securities.
"KNOWLEDGE OF TISM", "TISM'S KNOWLEDGE" or any other similar knowledge
qualification in this Agreement means to the actual knowledge of Thomas Monaghan
or of any of the following officers of the Company: Cheryl Bachelder, Executive
Vice President -- Marketing and Product Research; Pat Kelly, Executive Vice
President -- Corporate Operations; Stuart Mathis, Executive Vice President --
Franchise Operations; Gary McCausland, Executive Vice President --
International; Harry Silverman, Executive Vice President and Chief Financial
Officer; Michael Soignet, Executive Vice President -- Distribution; Steven
Benrubi, Vice President and Corporate Controller; Mike
3
Marcantonio, Vice President -- Tax; or Edwin Pear, counsel to the Company (as to
matters relating to insurance, employee claims or franchise litigation).
"LIEN" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest or encumbrance in respect of such property or
asset.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the business,
assets or results of operations of TISM, the Company and the Subsidiaries, taken
as a whole, except any such effect resulting from or arising in connection with
(i) changes or conditions affecting the quick service restaurant industry
generally or (ii) changes in economic, regulatory or political conditions
generally.
"MERGER CONSIDERATION" means the Cash Consideration, the Stock
Consideration and the Note Consideration.
"MEMBERS OF THE IMMEDIATE FAMILY", with respect to any Person, means each
member of the "immediate family" (as defined in Rule 16a-1 of the Securities
Exchange Act of 1934 as in effect on the date hereof) of such Person and each
other Person which is an "associate" (as defined in Rule 12b-2 of the Securities
Exchange Act of 1934 as in effect on the date hereof) of any of the foregoing
Persons.
"NET PURCHASE PRICE" means (i) the Purchase Price minus (ii) the total
Indebtedness of TISM, the Company and the Subsidiaries immediately prior to the
Effective Time.
"NOTE CONSIDERATION" means an interest in the Contingent Note in a
proportion equal to one divided by the aggregate number of shares of Common
Stock outstanding as of the Effective Time.
"PERSON" means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"PURCHASE PRICE" means $962,500,000 plus or minus (as appropriate) the
Stock Consideration Value Adjustment Amount (if any).
"SHARES" means shares of Common Stock.
"STOCK CONSIDERATION" means a number of shares of each class of Surviving
Corporation Common Stock equal to (i) seven percent of the aggregate
4
number of shares of such class of Surviving Corporation Common Stock outstanding
immediately following the Effective Time (other than shares, if any, issued in
connection with the debt Financing or any replacement debt financing) divided by
(ii) the aggregate number of shares of Common Stock outstanding as of the
Effective Time.
"STOCK CONSIDERATION VALUE ADJUSTMENT AMOUNT" means the amount, if any, by
which the value of the aggregate Stock Consideration (based upon the per share
price paid for such shares by affiliates of Bain Capital, Inc. in connection
with the equity financing for the transactions contemplated hereby) exceeds or
is less than $17.5 million.
"STOCKHOLDERS" means the stockholders of TISM from time to time at or prior
to the Effective Time.
"STORE RATIONALIZATION PROGRAM" means the Company's Store Rationalization
Program, a true and correct copy of which has been provided by the Company to
the Buyer.
"SUBSIDIARY" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time directly
or indirectly owned by the Company or TISM.
"SURVIVING CORPORATION COMMON STOCK" means any class of common stock of the
Surviving Corporation.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
TERM SECTION
---- -------
Accounting Referee 2.05
----
Base Capitalization Amount 2.06
----
Benefit Arrangement 10.01
-----
Business 6.04
----
Buyer Subsidiary 2.01
----
Closing Balance Sheet 2.05
----
Closing Capitalization Amount 2.05
----
Company Recitals
Company Intellectual Property Rights 4.17
----
Confidential Supply Agreements 6.11
----
Confidentiality Agreement 7.01
----
5
TERM SECTION
---- -------
Consulting Agreement 6.09
----
Damages 12.02
-----
December Balance Sheet 4.08
----
Deferred Compensation Plans 10.01
-----
Dissenting Shares 2.07
----
Domino's Farms Recitals
Effective Time 2.01
----
Employee Plan 10.01
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Environmental Law 4.22
----
ERISA 10.01
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ERISA Affiliate 10.01
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Escrow Account 2.03
----
Facilities 4.16
----
Final Capitalization Amount 2.06
----
Financial Statements 4.08
----
Financing 5.05
----
Financing Agreements 5.05
----
Financing Entities 5.05
----
Franchisee 4.12
----
Franchise Agreements 4.12
----
Hazardous Materials 4.22
----
HSR Act 4.03
----
Indemnified Party 12.03
-----
Indemnifying Party 12.03
-----
Intellectual Property Right 4.17
----
JPMSI 5.05
----
Laws 4.14
----
Lease Agreement Recitals
Loss 9.05
----
Merger 2.01
----
Michigan Law 2.01
----
Morgan 5.05
----
Noncompete Consideration 6.04
----
Option 4.05
----
Permitted Liens 4.15
----
Phase Change Damages 12.06
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Potential Contributor 12.05
-----
Post-Closing Tax Period 9.01
----
Pre-Closing Tax Period 9.01
----
Required Amounts 5.05
----
Retained Shares 5.10
----
Returns 9.02
----
6
TERM SECTION
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Surviving Corporation 2.01
----
Tax 9.01
----
Tax Benefit 9.05
----
Taxing Authority 9.01
----
Third Party Claim 12.03
-----
Unaudited TISM Year End Financials 4.08
----
ARTICLE 2
The Merger
Section 2.01. The Merger. (a) At the Effective Time, Buyer shall be
merged (the "MERGER") with and into TISM in accordance with the corporations law
of the State of Michigan ("MICHIGAN LAW"), whereupon the separate existence of
Buyer shall cease, and TISM shall be the surviving corporation (the "SURVIVING
CORPORATION").
(b) As soon as practicable after satisfaction or, to the extent permitted
hereunder, waiver of all conditions to the Merger, TISM and Buyer will file a
certificate of merger with the Department of Consumer and Industry Services,
Corporations, Securities and Land Development Bureau of Michigan and make all
other filings or recordings required by Michigan Law in connection with the
Merger. The Merger shall become effective at such time as the certificate of
merger is duly filed with the Department of Consumer and Industry Services,
Corporations, Securities and Land Development Bureau of the State of Michigan or
at such later time as is specified in the certificate of merger (the "EFFECTIVE
TIME").
(c) Immediately following the Merger, the Surviving Corporation will cause
a wholly owned indirect subsidiary of Buyer to be formed by Buyer ("BUYER
SUBSIDIARY") to merge with and into the Company. The Company shall be the
surviving corporation in such merger, and from and after the effective time
thereof shall possess all the rights, privileges, powers and franchises and be
subject to all of the restrictions, disabilities and duties of the Company and
Buyer Subsidiary, all as provided under Michigan Law.
(d) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises and be subject to all
of the restrictions, disabilities and duties of TISM and Buyer, all as provided
under Michigan Law.
7
Section 2.02. Conversion (and Retention) of Shares. At the Effective
Time:
(i) each Share held by TISM as treasury stock as of immediately
prior to the Effective Time shall be canceled, and no payment shall be made
with respect thereto;
(ii) each share of any class of common stock of Buyer outstanding
immediately prior to the Effective Time shall be converted into and become
one share of the corresponding class of Surviving Corporation Common Stock
with the same rights, powers and privileges as the shares so converted; and
(iii) each Share outstanding immediately prior to the Effective Time
shall, except as otherwise provided in Section 2.02(a)(I) or as provided in
----------
Section 2.07 with respect to Shares as to which dissenters' rights have
----
been exercised, be converted into the right to receive the Merger
Consideration. Any additional cash amounts that become part of the Merger
Consideration subsequent to the Effective Time shall be promptly
distributed pro rata to the Stockholders.
Section 2.03. Escrow Account; Closing. At the Effective Time, Buyer shall
(i) cause the Surviving Corporation to deposit with the Escrow Agent, in
immediately available funds to an account mutually agreed by Buyer and TISM (the
"ESCROW ACCOUNT") $30,375,000, to be held and distributed by the Escrow Agent as
provided in the Escrow Agreement and (ii) deliver the remainder of the Net
Purchase Price together with the Stock Consideration and the Note Consideration
upon the surrender of Shares pursuant to Section 2.04.
----
Section 2.04. Surrender and Payment. Each holder of Shares that have been
converted into a right to receive the Merger Consideration, upon surrender to
the Surviving Corporation of a certificate or certificates representing such
Shares, will be entitled to receive the Merger Consideration payable in respect
of such Shares. Until so surrendered, each such certificate shall, after the
Effective Time, represent for all purposes, only the right to receive such
Merger Consideration. No interest will be paid or will accrue on any cash
payable as Merger Consideration, except pursuant to the Escrow Agreement.
Section 2.05. Closing Balance Sheet. (a) As promptly as practicable, but
no later than 60 days, after the Closing Date, the Principal Stockholder will
cause to be prepared and delivered to the Surviving Corporation the Closing
Balance Sheet, together with (subject to the next sentence) an unqualified
report of Arthur Andersen & Co. thereon, and a certificate based on such Closing
8
Balance Sheet setting forth the Principal Stockholder's calculation of the
Closing Capitalization Amount, specifying the Closing Debt Amount. The Closing
Balance Sheet (the "CLOSING BALANCE SHEET") shall, except as set forth on
Schedule 2.05(a), (x) fairly present the consolidated financial position of the
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Company and the Subsidiaries as at the close of business on the Closing Date in
accordance with generally accepted accounting principles applied on a basis
consistent with those used in the preparation of the December Balance Sheet, (y)
be prepared in accordance with accounting policies and practices consistent with
those used in the preparation of the December Balance Sheet, and (z) include
line items substantially consistent with those in the December Balance Sheet.
"CLOSING CAPITALIZATION AMOUNT" means the sum of the consolidated stockholder's
equity of the Company and the Subsidiaries as shown on the Closing Balance Sheet
plus the Closing Debt Amount minus $500,000 plus an amount (not greater than
$100,000) equal to the out-of-pocket costs contemplated by Section 8.06(ii),
----
with the following adjustments: excluding (A) the effect (including the Tax
effect) of any act, event or transaction occurring after the Effective Time and
not in the ordinary course of business of the Company or any Subsidiary or
relating to the transactions contemplated by this Agreement and the Financing
Agreements (it being understood, however, that this clause (A) is not intended
and shall not be construed to alter the inclusion of any prepayment penalties,
premiums fees or expenses in the calculation of Closing Debt Amount), (B) any
liabilities, reserves and asset accounts established for income Taxes (including
the Michigan Single Business Tax) with respect to TISM, the Company or any of
the Subsidiaries, (C) any reserves with respect to current or proposed
dispositions or closures of corporate stores provided that such reserves are in
accordance with the Store Rationalization Program, (D) the effects of any
transactional gains or losses resulting from the sale or closure of corporate
stores or from the sale of other assets from the Balance Sheet Date to the
Closing Date (other than sales of inventory in the ordinary course of business
consistent with past practice and normal trading activity in connection with
Rabbi Trust assets in the ordinary course of business consistent with past
practice), (E) any reserves established with respect to the patent infringement
claim described in Section 12.06(a), and (F) any increase in net worth during
--------
the period from the Balance Sheet Date to the Closing Date resulting from the
release of excess reserves into income other than in accordance with past
practice in the ordinary course as a result of events transpiring after the
Balance Sheet Date and (1) in no event will the long term self-insurance reserve
reflected in the Closing Balance Sheet be overaccrued by less than $11,156,000
and (2) in no event will the domestic notes receivable reserve reflected in the
Closing Balance Sheet be overaccrued by less than $5,000,000.
(b) If Buyer disagrees with the Closing Balance Sheet or the Principal
Stockholder's calculation of Closing Capitalization Amount delivered pursuant to
9
Section 2.05(a), Buyer may, within 20 days after delivery of the documents
-------
referred to in Section 2.05(a), deliver a written notice to the Principal
-------
Stockholder disagreeing with such calculation and setting forth Buyer's
calculation of such amounts. Any such notice of disagreement shall specify those
items or amounts as to which Buyer disagrees, and Buyer shall be deemed, solely
for purposes of Sections 2.05 and 2.06, to have agreed with all other items and
---- ----
amounts contained in the Closing Balance Sheet and the calculation of Closing
Capitalization Amount delivered pursuant to Section 2.05(a).
-------
(c) If a notice of disagreement shall be duly delivered pursuant to
Section 2.05(b), Buyer and the Principal Stockholder shall, during the 15 days
-------
following such delivery, use their best efforts to reach agreement on the
disputed items or amounts in order to determine, as may be required, the amount
of Closing Capitalization Amount, which amount shall not be more than the amount
thereof shown in the Principal Stockholder's calculations delivered pursuant to
Section 2.05(a) nor less than the amount thereof shown in Buyer's calculation
-------
delivered pursuant to Section 2.05(b). If, during such period, Buyer and the
-------
Principal Stockholder are unable to reach such agreement, either party may
thereafter cause independent accountants (the "ACCOUNTING REFEREE") of
nationally recognized standing reasonably satisfactory to Buyer and the
Principal Stockholder (who shall not have any material relationship with Buyer,
TISM, the Company, any Subsidiary or the Principal Stockholder), promptly to
review this Agreement and the disputed items or amounts for the purpose of
calculating Closing Capitalization Amount. In making such calculation, the
Accounting Referee shall consider only those items or amounts in the Closing
Balance Sheet or the Principal Stockholder's calculation of Closing
Capitalization Amount as to which Buyer has disagreed. The Accounting Referee
shall deliver to Buyer and the Principal Stockholder, as promptly as
practicable, a report setting forth such calculation. Such report shall be final
and binding upon Buyer and the Stockholders. The cost of such review and report
shall be (i) paid from funds deposited in the Escrow Account if the difference
between Final Capitalization Amount and the Principal Stockholder's calculation
of Closing Capitalization Amount delivered pursuant to Section 2.05(a) is
-------
greater than the difference between Final Capitalization Amount and Buyer's
calculation of Closing Capitalization Amount delivered pursuant to Section
2.05(B), (ii) borne by Buyer if the first such difference is less than the
- -------
second such difference and (iii) otherwise paid equally by Buyer and from funds
deposited in the Escrow Account.
(d) Buyer and the Principal Stockholder agree that they will, and agree to
cause their respective independent accountants and TISM, the Company and each
Subsidiary to, cooperate and assist in the preparation of the Closing Balance
Sheet and the calculation of Closing Capitalization Amount, including without
10
limitation, the making available to the extent necessary of books, records, work
papers and personnel, it being understood that Harry Silverman and Steven
Benrubi shall participate in the preparation of such calculations.
Section 2.06. Adjustment of Purchase Price. (a) If Base Capitalization
Amount exceeds Final Capitalization Amount by at least $500,000, the amount of
such excess shall be paid to the Surviving Corporation from the funds deposited
in the Escrow Account, in the manner and with interest as provided in Section
2.06(B) and 2.06(c). If Final Capitalization Amount exceeds Base Capitalization
- -------
Amount by at least $500,000, Buyer shall pay to the Principal Stockholder for
distribution to the Stockholders, in the manner and with interest as provided in
Section 2.06(b) and 2.06(c), the amount of such excess. "BASE CAPITALIZATION
-------
AMOUNT" means $82,039,102, as calculated on Schedule 2.06(a).
-------
"FINAL CAPITALIZATION AMOUNT" means the Closing Capitalization Amount (i)
as shown in the Principal Stockholder's calculation delivered pursuant to
Section 2.05(a), if no notice of disagreement with respect thereto is duly
-------
delivered pursuant to Section 2.05(B); or (ii) if such a notice of disagreement
-------
is delivered, (A) as agreed by Buyer and the Principal Stockholder pursuant to
Section 2.05(c) or (B) in the absence of such agreement, as shown in the
-------
Accounting Referee's calculation delivered pursuant to Section 2.05(c); provided
-------
that in no event shall Final Capitalization Amount be more than the Principal
Stockholder's calculation of Closing Capitalization Amount delivered pursuant
to Section 2.05(a) or less than Buyer's calculation of Closing Capitalization
-------
Amount delivered pursuant to Section 2.05(b).
-------
(b) Any payment pursuant to Section 2.06(a) shall be made at a mutually
-------
convenient time and place within 10 days after the Final Capitalization Amount
has been determined by delivery by the Surviving Corporation or the Escrow
Agent, as the case may be, of a certified or official bank check payable in
immediately available funds to the Surviving Corporation or the Principal
Stockholder, as the case may be, or by causing such payments to be credited to
the account of the Surviving Corporation as designated by the Surviving
Corporation or to the account of the Principal Stockholder as designated by the
Principal Stockholder, as the case may be. The amount of any payment to be made
pursuant to this Section 2.06(b) shall bear interest from and including the
-------
Closing Date to but excluding the date of payment at a rate per annum equal to
the rate of interest earned on the funds in the Escrow Account during the
relevant period.
(c) (i) Any payment required to be made to the Surviving Corporation
pursuant to Section 2.06(a) shall be subject to Section 14.11.
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11
(ii) Any payment required to be paid by the Surviving Corporation pursuant
to Section 2.06(a) shall be paid to the Principal Stockholder for distribution
-------
to the Stockholders as part of the Merger Consideration.
Section 2.07. Dissenting Shares. Notwithstanding Section 2.02, Shares
----
which are issued and outstanding immediately prior to the Effective Time and
which are held by a holder who has not voted such shares in favor of the Merger,
who shall have delivered a written dissenters' notice with respect to such
Shares in the manner provided by the Michigan Law and who, as of the Effective
Time, shall not have effectively withdrawn or waived such right of dissent and
appraisal ("DISSENTING SHARES") shall not be converted into a right to receive
the Merger Consideration. The holders thereof shall be entitled only to such
rights as are granted by Sections 761 to 774 of the Michigan Law. Each holder
of Dissenting Shares who becomes entitled to payment for such Shares pursuant to
Section 769 or 773 of the Michigan Law shall receive payment therefor from the
Surviving Corporation in accordance with the Michigan Law; provided, however,
that (i) if any such holder of Dissenting Shares shall have failed to establish
his entitlement to appraisal rights as provided in Section 767 of the Michigan
Law or (ii) if any such holder of Dissenting Shares shall have effectively
withdrawn his demand for appraisal of such Shares or lost his right to appraisal
and payment for his Shares under Section 765 or 767 of the Michigan Law, such
holder shall forfeit the right to appraisal of such Shares and each such Share
shall be treated as if it had not been a Dissenting Share and had been
converted, as of the Effective Time, into a right to receive the Merger
Consideration, without interest thereon, from the Surviving Corporation as
provided in Section 2.02 hereof. TISM shall give Buyer prompt notice of any
----
demands received by TISM for appraisal of Shares, and Buyer shall have the right
to participate in all negotiations and proceedings with respect to such demands.
TISM shall not, except with the prior written consent of Buyer, make any payment
with respect to, or settle or offer to settle, any such demands.
ARTICLE 3
The Surviving Corporation
Section 3.01. Articles of Incorporation. The articles of incorporation of
Buyer in effect at the Effective Time shall be the articles of incorporation of
the Surviving Corporation (except that the corporate name of the Surviving
Corporation shall be "TISM, Inc.") until amended in accordance with applicable
law.
12
Section 3.02. Bylaws. The bylaws of Buyer in effect at the Effective Time
shall be the bylaws of the Surviving Corporation until amended in accordance
with applicable law.
Section 3.03. Directors and Officers. From and after the Effective Time,
until successors are duly elected or appointed and qualified in accordance with
applicable law, (a) the directors of Buyer at the Effective Time shall be the
directors of the Surviving Corporation, and (b) the officers of Buyer at the
Effective Time shall be the officers of the Surviving Corporation.
ARTICLE 4
Representations and Warranties of TISM
TISM represents and warrants to Buyer as of the date hereof and as of the
Closing Date that:
Section 4.01. Corporate Existence and Power. Each of TISM and the Company
is a corporation duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation. Each of TISM and the Company
also has all corporate powers and all governmental licenses, authorizations,
permits, consents and approvals required to carry on its business as now
conducted, except for such matters as, individually or in the aggregate, have
not had and would not reasonably be expected to have a Material Adverse Effect.
Each of TISM and the Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for such matters as, individually or in the
aggregate, have not had and would not reasonably be expected to have a Material
Adverse Effect.
Section 4.02. Corporate Authorization. The execution, delivery and
performance of this Agreement by TISM and the consummation of the transactions
contemplated hereby are within TISM's corporate powers and have been duly
authorized by all necessary corporate and stockholder action, except for the
required approval by TISM's stockholders by majority vote in connection with the
consummation of the Merger. This Agreement constitutes a valid and binding
agreement of TISM and of the Principal Stockholder.
Section 4.03. Governmental Authorization. The execution, delivery and
performance by TISM of this Agreement and the consummation of the transactions
contemplated hereby require no action by or in respect of, or filing with, any
governmental body, agency or official other than (i) compliance with any
applicable requirements of the Hart-Scott-Rodino Antitrust Improvements
13
Act of 1976, as amended (the "HSR ACT"); (ii) required post-closing amendments
to and filing with the Federal Trade Commission and state franchise authorities
of the Company's Uniform Franchise Offering Circular as described on Schedule
4.03; (iii) the filing with the State of Michigan of the certificate of merger
- ----
pursuant to Michigan Law; and (iv) such other matters which, individually or in
the aggregate, have not had and would not reasonably be expected to have a
Material Adverse Effect.
Section 4.04. Noncontravention. Except as disclosed in Schedule 4.04, the
----
execution, delivery and performance by TISM and the Principal Stockholder of
this Agreement and the consummation of the transactions contemplated hereby do
not and will not (i) violate the articles of incorporation or bylaws of TISM or
the Company or any Subsidiary, (ii) assuming compliance with the matters
referred to in Section 4.03, violate any applicable law, rule, regulation,
----
judgment, injunction, order or decree, (iii) require any consent or other action
by any Person under, constitute a default under, or give rise to any right of
termination, cancellation or acceleration of any right or obligation of TISM,
the Company or any Subsidiary or to a loss of any benefit to which TISM or the
Company or any Subsidiary is entitled under any provision of any agreement or
other instrument binding upon TISM, the Company, any Subsidiary or the Principal
Stockholder, except for such matters as, individually or in the aggregate, have
not had and would not reasonably be expected to have a Material Adverse Effect
or a material adverse effect on Buyer, or (iv) result in the creation or
imposition of any Lien on any asset of TISM, the Company or any Subsidiary,
except for Permitted Liens.
Section 4.05. TISM. (a) The authorized capital stock of TISM consists of
5,000,000 shares of Common Stock. There are outstanding 1,400,000 shares of
Common Stock. TISM currently holds an option (the "OPTION") to purchase 439,000
shares of Common Stock held by the Principal Stockholder. The terms of the
Option prohibit transfer of those shares of Common Stock so long as they are
subject to the Option.
(b) All outstanding shares of capital stock of TISM have been duly
authorized and validly issued and are fully paid and non-assessable and are held
beneficially and of record as indicated on Schedule 4.05 free and clear of all
----
Liens. Except as set forth in this Section or on Schedule 4.05, there are no
----
outstanding (i) shares of capital stock or voting securities of TISM, (ii)
securities of TISM convertible into or exchangeable for shares of capital stock
or voting securities of TISM or (iii) options or other rights to acquire from
TISM, or other obligation of TISM to issue, any capital stock, voting securities
or securities convertible into or exchangeable for capital stock or voting
securities of TISM. There are no outstanding obligations of TISM, the Company or
any Subsidiary to
14
repurchase, redeem or otherwise acquire any securities referred to in clauses
(i), (ii) or (iii) above.
(c) Except for the securities of the Company as set forth in Section 4.06,
----
TISM has and since 1995 has had no material assets or liabilities, and is and
since 1995 has engaged in no business or activity.
Section 4.06. Ownership of Capital Stock of the Company. TISM is the
record and beneficial owner of all of the outstanding capital stock of the
Company, free and clear of any Lien. Except as set forth in this Section, there
are no outstanding (i) shares of capital stock or voting securities of the
Company, (ii) securities of TISM or the Company convertible into or
exchangeable for shares of capital stock or voting securities of the Company or
(iii) options or other rights to acquire from TISM or the Company, or other
obligation of the Company to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of the Company. There are no outstanding obligations of the Company
or any Subsidiary to repurchase, redeem or otherwise acquire any securities
referred to in clauses (i), (ii) or (iii) above.
Section 4.07. Subsidiaries. (a) Each Subsidiary is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each Subsidiary has all corporate powers and all
governmental licenses, authorizations, permits, consents and approvals required
to carry on its business as now conducted, except for such matters as,
individually or in the aggregate, have not had and would not have a Material
Adverse Effect. All Subsidiaries and their respective jurisdictions of
incorporation are identified on Schedule 4.07.
----
(b) All of the outstanding capital stock or other voting securities of
each Subsidiary is owned by the Company, directly or indirectly, free and clear
of any Lien. There are no outstanding (i) securities of TISM, the Company or
any Subsidiary convertible into or exchangeable for shares of capital stock or
voting securities of any Subsidiary or (ii) options or other rights to acquire
from the Company or any Subsidiary, or other obligation of the Company or any
Subsidiary to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of any
Subsidiary. There are no outstanding obligations of the Company or any
Subsidiary to repurchase, redeem or otherwise acquire any securities referred to
in clauses (i) or (ii) above.
Section 4.08. Financial Statements. Except as disclosed in Schedule 4.08,
----
the audited consolidated balance sheet as of December 28, 1997 (the "DECEMBER
BALANCE SHEET") and the related audited consolidated statements of
15
income and cash flows for the year ended December 28, 1997 and the unaudited
interim consolidated balance sheet as of August 9, 1998 and the related
unaudited interim consolidated statements of income and cash flows for the
period from December 29, 1997 to August 9, 1998 of the Company and the
Subsidiaries (collectively, together with the notes thereto, the "FINANCIAL
STATEMENTS") fairly present, in conformity with generally accepted accounting
principles applied on a consistent basis (except as may be indicated in the
notes thereto or as set forth on Schedule 4.08), the consolidated financial
----
position of the Company and the Subsidiaries as of the dates thereof and their
consolidated results of operations and cash flows for the periods then ended
(subject to normal year-end adjustments in the case of any unaudited interim
financial statements). TISM has also provided to Buyer the unaudited
consolidated balance sheet as of December 28, 1997 and the related unaudited
consolidated statement of income for the year ended December 28, 1997 (the
"UNAUDITED TISM YEAR-END FINANCIALS") and the unaudited interim consolidated
balance sheet as of August 9, 1998 and the related unaudited interim
consolidated statement of income for the period from December 29, 1997 to August
9, 1998 of TISM, the Company and the Subsidiaries which fairly present, in
conformity with generally accepted accounting principles applied on a consistent
basis (except as may be indicated in the notes thereto or as set forth on
Schedule 4.08), the consolidated financial position of TISM, the Company and the
----
Subsidiaries as of the date thereof and their consolidated results of operations
and cash flows for the periods then ended (subject to normal year-end
adjustments in the case of any unaudited interim financial statements).
Section 4.09. Absence of Certain Changes. Since the Balance Sheet Date, no
Material Adverse Effect has occurred and no event has occurred or condition come
to exist which, individually or in the aggregate, has had or would reasonably be
expected to have a Material Adverse Effect. Without limiting the generality of
the foregoing, except as disclosed in Schedule 4.09 or as disclosed in the
----
Financial Statements, since the Balance Sheet Date, the business of TISM, the
Company and the Subsidiaries has been conducted in the ordinary course
consistent with past practices and to the Knowledge of TISM there has not been:
(a) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of TISM,
other than cash dividends to the Stockholders in an amount estimated to
equal the Tax liability of the Stockholders for the period from the Balance
Sheet Date to the Closing Date, or any repurchase, redemption or other
acquisition by TISM, the Company or any Subsidiary of any outstanding
shares of capital stock or other securities of TISM, other than pursuant to
Section 6.05 with respect to the Option;
----
16
(b) any amendment of any material term of any outstanding security
of TISM, the Company or any Subsidiary;
(c) any incurrence, assumption or guarantee by TISM, the Company
or any Subsidiary of any indebtedness for borrowed money, in each case
material to the Company and the Subsidiaries taken as a whole, other than
in the ordinary course of business consistent with past practices;
(d) any making of any loan, advance or capital contributions to or
investment in any Person other than loans, advances, capital contributions
or investments that are not material to the Company and the Subsidiaries,
taken as a whole, made in the ordinary course of business consistent with
past practices;
(e) except as expressly contemplated by this Agreement, any
transaction, or any agreement entered into, by TISM, the Company or any
Subsidiary relating to its assets or business, in either case, in excess of
$200,000, other than transactions and commitments in the ordinary course of
business consistent with past practices;
(f) any material change in any method of accounting or accounting
practice by the Company or any Subsidiary except for any such change
required by reason of a concurrent change in generally accepted accounting
principles; or
(g) except as set forth on Schedule 10.02, any (i) employment,
-----
deferred compensation, severance, retirement or other similar agreement
entered into with any director, officer or employee of TISM, the Company or
any Subsidiary (or any amendment to any such existing agreement), (ii)
grant of any severance or termination pay to any director, officer or
employee of TISM, the Company or any Subsidiary, or (iii) change in
compensation or other benefits payable to any director, officer or employee
of TISM, the Company or any Subsidiary pursuant to any severance or
retirement plans or policies thereof or otherwise, in each case other than
in the ordinary course of business consistent with past practices.
Section 4.10. No Undisclosed Material Liabilities. There are no
liabilities of the Company or any Subsidiary of any kind, other than:
(a) liabilities to the extent disclosed or provided for in the
Financial Statements;
(b) liabilities disclosed on Schedule 4.10(b);
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17
(c) liabilities disclosed in or arising under any agreements or
instruments disclosed in this Agreement or any Schedule hereto;
(d) liabilities incurred in the ordinary course of business,
consistent with past practice, since the Balance Sheet Date; or
(e) other undisclosed liabilities which, individually or in the
aggregate, are not material to the Company and the Subsidiaries, taken as a
whole.
Section 4.11. Intercompany Accounts. Schedule 4.11 contains a complete
----
list of all intercompany balances or other obligations as of the Balance Sheet
Date between any member of the Affiliate Group on the one hand, and TISM, the
Company and the Subsidiaries, on the other hand. Since December 28, 1997,
except for (i) transactions with the franchises owned by the members of the
Affiliate Group listed on Schedule 4.12(b) on arms' length terms in the ordinary
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course of business consistent with past practice, (ii) payments of cash
dividends, (iii) compensation of officers and employees in the ordinary course
of business consistent with past practice at rates reflected in the Financial
Statements and (iv) transactions set forth on Schedule 4.11, there have been no
----
transactions with any member of the Affiliate Group.
Section 4.12. Material Contracts. (a) Except as disclosed on Schedule
4.12(a) or referred to in the Financial Statements and other than Franchise
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Agreements, TISM is not a party to or bound by any agreement, and neither the
Company nor any Subsidiary is a party to or bound by:
(i) any lease (whether of real or personal property) providing for
annual rentals of $100,000 or more that cannot be terminated on not more
than 60 days' notice without payment by the Company or any Subsidiary of
any material penalty;
(ii) any agreement for the purchase of materials, supplies, goods,
services, equipment or other assets providing for either (A) annual
payments by the Company and the Subsidiaries of $500,000 or more or (B)
aggregate payments by the Company and the Subsidiaries of $1,000,000 or
more, in each case that cannot be terminated on not more than 60 days'
notice without payment by the Company or any Subsidiary of any material
penalty;
(iii) any sales, distribution or other similar agreement providing
for the sale by the Company or any Subsidiary of materials, supplies,
18
goods, services, equipment or other assets that provides for either (A)
annual payments to the Company and the Subsidiaries of $500,000 or more or
(B) aggregate payments to the Company and the Subsidiaries of $1,000,000 or
more;
(iv) any agreement providing for any quantity discount, volume
purchase rebate or bill back sales arrangement that will continue after
the Closing Date and is material to the conduct of the business of the
Company and the Subsidiaries, taken as a whole;
(v) any partnership, material joint venture or other similar
agreement or arrangement;
(vi) any agreement relating to the acquisition or disposition of
any material business (whether by merger, sale of stock, sale of assets or
otherwise);
(vii) any agreement relating to indebtedness for borrowed money or
the deferred purchase price of property (in either case, whether incurred,
assumed, guaranteed or secured by any asset), except any such agreement
(A) with an aggregate outstanding principal amount not exceeding $250,000
or (B) entered into subsequent to the date of this Agreement as permitted
by Section 4.09(c);
-------
(viii) any material agreement that limits the freedom of the
Company or any Subsidiary to compete in any line of business or with any
Person or in any area;
(ix) any agreement with any member of the Affiliate Group (other
than the Option and agreements relating to the franchises owned by members
of the Affiliate Group whose terms and conditions are standard for such
agreements with Persons who are not members of the Affiliate Group);
(x) any lease referred to in Section 4.15 and any licenses
----
referred to in Section 4.17(b); or
-------
(xi) any other agreement, commitment, arrangement or plan not made
in the ordinary course of business consistent with past practice that is
material to the Company and the Subsidiaries, taken as a whole.
(b) Schedule 4.12(b) contains a complete list as of the date hereof of
-------
(A) all of the current franchisees (each, a "FRANCHISEE") of the Company or of
any
19
Subsidiary to whom the Company or any Subsidiary has granted any franchise or
similar rights with respect to the business of the Company or any Subsidiary and
(B) all area development, area franchise, area subfranchisor, master license or
similar agreements that cover the development or franchising of Company or
Subsidiary franchises within any area or country or the delegation of duties by
the Company or any Subsidiary with respect to its obligations as a franchisor or
otherwise (collectively, the "FRANCHISE AGREEMENTS"). Separately listed on
Schedule 4.12(b) is each member of the Affiliate Group who is a Franchisee or
-------
party to any of the foregoing agreements and a list of each such franchise or
other such agreement. Neither the Company nor any Subsidiary has waived any
rights under or with respect to any of the Franchise Agreements except for such
matters as, individually or in the aggregate, have not had and would not
reasonably be expected to have a Material Adverse Effect.
(c) Each agreement, contract, plan, lease, arrangement or commitment
required to be disclosed pursuant to Section 4.12(a) or 4.12(b) is a valid and
------- -------
binding agreement of the Company or a Subsidiary, as the case may be, and, to
the Knowledge of TISM, the other parties thereto, and is in full force and
effect, and none of the Company or a Subsidiary or, to the Knowledge of TISM,
any other party thereto is in default or breach in any respect under the terms
of any such agreement, contract, plan, lease, arrangement or commitment, except
for such matters as, individually or in the aggregate, have not had and would
not reasonably be expected to have a Material Adverse Effect.
Section 4.13. Litigation. Except as disclosed in Schedule 4.13, there is
----
no action, suit, investigation or proceeding pending against, or to the
Knowledge of TISM, threatened against or affecting, TISM or the Company or any
Subsidiary or any of their respective properties before any court or arbitrator
or any governmental body, agency or official which has had or is reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect.
Section 4.14. Compliance with Laws and Court Orders. Except as disclosed
on Schedule 4.14 or referred to in the Financial Statements, TISM, the Company
----
and the Subsidiaries have not been, and are not, in violation of any federal,
state, local or foreign law, statute, ordinance, rule, regulation, judgment,
order, injunction, decree, arbitration award, agency requirement, license or
permit of any Governmental Entity (collectively, "LAWS") except for such matters
as, individually or in the aggregate, have not had and would not reasonably be
expected to have a Material Adverse Effect. Except as disclosed in Schedule
4.14, no investigation or review by any Governmental Entity with respect to
- ----
TISM, the Company or any Subsidiary is pending or, to the Knowledge of TISM,
threatened, nor has any Governmental Entity indicated an intention to conduct
the same except for such matters as, individually or in the aggregate, have not
had and
20
would not reasonably be expected to have a Material Adverse Effect. To the
Knowledge of TISM, no material change is required in the processes or procedures
of the Company or any of the Subsidiaries in connection with any such Laws.
Section 4.15. Properties. Schedule 4.15 sets forth a complete list of
----
all material real property owned by or leased to the Company or any of the
Subsidiaries, and, with respect to such leased properties, a description of the
term of such lease and the monthly rental thereunder. The Company and the
Subsidiaries have good title to, or in the case of leased property have valid
leasehold interests in, all property owned, used or held for use except where
the failure to have such good title or valid leasehold interests would not,
individually or in the aggregate, have a Material Adverse Effect. None of such
property is subject to any Lien, except:
(a) Liens disclosed on Schedule 4.15;
----
(b) Liens disclosed on the Balance Sheet or notes thereto or
securing liabilities reflected on the Balance Sheet or notes thereto;
(c) Liens incurred in the ordinary course of business consistent with
past practice since the Balance Sheet Date;
(d) Liens for Taxes, assessments and similar charges that are not yet
due or are being contested in good faith;
(e) mechanic's, materialman's, carrier's, repairer's and other
similar Liens arising or incurred in the ordinary course of business or
that are not yet due or are being contested in good faith; or
(f) other Liens which, individually or in the aggregate, have not had
and would not have a Material Adverse Effect (clauses (a)-(f) are,
collectively, the "PERMITTED LIENS").
Section 4.16. Facilities. The warehouses, stores, plants, production
facilities, processing facilities, fixtures and improvements owned by the
Company and the Subsidiaries or otherwise used by the Company and the
Subsidiaries in connection with the operation of their businesses (the
"FACILITIES") are (as to physical plant and structure) structurally sound, in
good operating condition and repair, ordinary wear and tear excepted, and are
adequate for the uses to which they are being put, in each case with such
exceptions as, individually or in the aggregate, have not had and are not
reasonably likely to have a Material Adverse Effect.
21
Section 4.17. Intellectual Property. (a) Schedule 4.17 contains a list of
----
all material Intellectual Property Rights owned, licensed, used or held for use
by the Company or any Subsidiary ("COMPANY INTELLECTUAL PROPERTY RIGHTS"),
specifying as to each, as applicable: (i) the nature of such Intellectual
Property Right, (ii) the owner of such Intellectual Property Right, (iii) the
jurisdictions by or in which such Intellectual Property Right (A) is recognized
(without regard to registration) or (B) has been issued or registered or in
which an application for such issuance or registration has been filed and (iv)
the registration or application numbers.
The Company or a Subsidiary owns, free and clear of any Liens, or has
enforceable rights to use, all Company Intellectual Property Rights used in the
conduct of its business as currently conducted, except as has not had and would
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
"INTELLECTUAL PROPERTY RIGHT" means any patent, trademark, service mark,
trade name, copyright (including any registrations or applications for
registration of any of the foregoing), trade secret, computer software, know-
how, recipes, processes or any other similar type of proprietary intellectual
property right.
(b) Schedule 4.17 sets forth a list of all material licenses, sublicenses
----
and other agreements, other than Franchise Agreements, as to which the Company
or any Subsidiary is a party (i) pursuant to which any Person is authorized to
use any Company Intellectual Property Right, or (ii) pursuant to which the
Company or a Subsidiary holds or uses or is authorized to use any Intellectual
Property Right.
(c) No Company Intellectual Property Right is subject to any outstanding
judgment, injunction, order, decree or agreement restricting the use thereof by
the Company or any Subsidiary or restricting the licensing thereof by the
Company or any Subsidiary to any Person, except for such matters as,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Material Adverse Effect.
(d) To the Knowledge of TISM, (i) no Person has interfered with, infringed
with, infringed upon, misappropriated, or otherwise come into conflict with any
Company Intellectual Property Rights, and (ii) no Person other than the Company
or a Subsidiary uses or has any right to the use of the name "Domino's" (or any
similar name) in connection with food products or services in any jurisdiction,
except pursuant to the Franchise Agreements or by a license from the Company or
a Subsidiary listed in Schedule 4.17.
----
22
Section 4.18. Insurance Coverage. TISM has made available to Buyer true
and complete copies of, and Schedule 4.18 sets forth a list of, all insurance
----
policies and fidelity bonds for the current policy year relating to the assets,
business, operations, employees, officers or directors of TISM, the Company and
the Subsidiaries. There are no material claims by TISM, the Company or any
Subsidiary pending under any of such policies or bonds as to which coverage has
been questioned, denied or disputed by the underwriters of such policies or
bonds or in respect of which such underwriters have reserved their rights.
Section 4.19. Finders' Fees. Except for J.P. Morgan Securities, Inc.,
whose fees will be paid by the Stockholders, there is no investment banker,
broker, finder or other intermediary which has been retained by or is authorized
to act on behalf of TISM or the Company who might be entitled to any fee or
commission in connection with the transactions contemplated by this Agreement.
Section 4.20. Employees. Schedule 4.20 sets forth a true and complete
----
list of (a) the names and titles of all officers of TISM, the Company or any
Subsidiary and the names, titles and annual salaries of all other employees of
the Company or any Subsidiary whose annual base salary exceeds $100,000 and (b)
the average wage rates for all employees of the Company (by job grade
classification).
Section 4.21. Labor Matters. Except for such matters disclosed in
Schedule 4.21 or as have not had and would not reasonably be expected to have,
----
individually or in the aggregate, a Material Adverse Effect:
(a) the Company and the Subsidiaries are in compliance with all currently
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and are not engaged in any unfair labor
practice,
(b) neither the Company nor any Subsidiary is a party, or is otherwise
subject, to any collective bargaining agreement or other labor union contract
applicable to its employees,
(c) to the Knowledge of TISM, there are no activities or proceedings by a
labor union or representative thereof to organize any employees of the Company
or any Subsidiary,
(d) there are not pending, and the Company and the Subsidiaries have not
experienced since January 1, 1997, any labor disputes, slowdowns, work
stoppages, or threats thereof,
23
(e) there are no claims or actions pending, or to the Knowledge of TISM
threatened, between the Company and the Subsidiaries and any of their employees
and
(f) the Company and the Subsidiaries have complied with the Worker
Adjustment and Retraining Notification Act of 1988 and any similar state or
local laws regulating layoffs or employment terminations.
Section 4.22. Environmental Matters. Except as set forth on Schedule
4.22 and except for matters that have not had and would not reasonably be
- ----
expected to have, individually or in the aggregate, a Material Adverse Effect,
to the Knowledge of TISM:
(a) no written notice, request for information, order, complaint or
penalty has been received relating to the Company or any Subsidiary and
arising out of any Environmental Law (as defined below), and there are no
judicial, administrative or other actions, suits or proceedings pending or
threatened which allege a violation of or liability under any Environmental
Law relating to the Company or any Subsidiary;
(b) the Company and the Subsidiaries have all environmental permits
necessary for their operations to comply with all applicable Environmental
Laws and are in compliance with the terms of such permits and with all
other applicable Environmental Laws;
(c) there has been no written environmental audit conducted within
the past five years by or on behalf of TISM or any of its Affiliates, the
Company or any of the Subsidiaries of any property currently owned or
leased by the Company or the Subsidiaries which has not been made available
to Buyer prior to the date hereof; and
(d) neither TISM, the Company nor any Subsidiary has, to the
Knowledge of TISM, any liabilities arising from (i) any noncompliance with
any Environmental Laws or (ii) (a) the on-site or off-site disposal of any
Hazardous Materials by or on behalf of TISM, the Company or any Subsidiary
or any predecessor entities thereof on or prior to the Closing Date or (b)
the presence of, or the release or threat of release into the environment
of, any Hazardous Material on or prior to the Closing Date, which Hazardous
Material was generated, handled or possessed by TISM, the Company or any
Subsidiary or any predecessor entities thereof or located at or emanating
from or to a site now or heretofore owed, leased or otherwise used by TISM,
the Company or any Subsidiary or predecessor
24
entity. The term "HAZARDOUS MATERIALS" shall mean all substances
(including, without limitation, petroleum and any derivative thereof),
wastes or materials classified as hazardous or toxic under, or otherwise
regulated under, any applicable Environmental Laws.
"ENVIRONMENTAL LAW" means any statute, law, regulation or rule, in each
case as in effect on or prior to the Closing Date, that has as its principal
purpose the protection of the environment or natural resources.
Section 4.23. Suppliers. No entity which is now supplying, or during 1997
supplied, to the Company or the Subsidiaries products and services has reduced
or otherwise discontinued, or threatened to reduce or discontinue, supplying
such items to the Company or the Subsidiaries on reasonable terms, except for
such matters as have not had and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
Section 4.24. No Material Misstatements. To the Knowledge of TISM,
neither this Agreement (including without limitation the Disclosure Schedules
hereto), nor the Financial Statements, nor any document furnished or to be
furnished in connection herewith, contains or will contain any untrue statement
of a material fact. To the Knowledge of TISM, this Agreement (including without
limitation the Disclosure Schedules hereto) and the Financial Statements do not,
considered as a whole, omit to state a material fact necessary in order to make
the statements contained herein and therein not misleading.
Section 4.25. Purchase for Investment. Each of the Stockholders (i)
either alone or together with its advisors, has sufficient knowledge and
experience in financial and business matters so as to be capable of evaluating
the merits and risks of his or her investment hereunder in the Stock
Consideration and is capable of bearing the economic risks of such investment
and (ii) is acquiring the Stock Consideration for investment for his or her own
account and not with a view to, or for sale in connection with, any distribution
of the shares of the Surviving Corporation.
ARTICLE 5
Representations and Warranties of Buyer
Buyer represents and warrants to TISM as of the date hereof and as of the
Closing Date that:
25
Section 5.01. Corporate Existence and Power. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of Michigan.
Buyer has all corporate powers and all material governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted.
Section 5.02. Corporate Authorization. The execution, delivery and
performance by Buyer of this Agreement and the consummation of the transactions
contemplated hereby are within the corporate powers of Buyer and have been duly
authorized by all necessary corporate action on the part of Buyer. This
Agreement constitutes a valid and binding agreement of Buyer.
Section 5.03. Governmental Authorization. The execution, delivery and
performance by Buyer of this Agreement and the consummation of the transactions
contemplated hereby require no material action by or in respect of, or filing
with, any governmental body, agency or official other than (i) compliance with
any applicable requirements of the HSR Act and (ii) the filing with the
Secretary of State of Michigan of the certificate of merger pursuant to Michigan
Law.
Section 5.04. Noncontravention. The execution, delivery and performance by
Buyer of this Agreement and the consummation of the transactions contemplated
hereby do not and will not (i) violate the certificate of incorporation or
bylaws of Buyer, (ii) assuming compliance with the matters referred to in
Section 5.03, violate any applicable law, rule, regulation, judgment,
----
injunction, order or decree, (iii) require any consent or other action by any
Person under, constitute a default under, or give rise to any right of
termination, cancellation or acceleration of any right or obligation of Buyer or
to a loss of any benefit to which Buyer is entitled under any provision of any
agreement or other instrument binding upon Buyer or (iv) result in the creation
or imposition of any material Lien on any asset of Buyer.
Section 5.05. Financing. TISM has received copies of (i) an equity
commitment letter dated as of the date hereof from Bain Capital Fund VI, L.P.
and Bain Capital VI Coinvestment Fund, L.P. pursuant to which each of the
foregoing has committed, subject to the terms and conditions set forth or
referred to therein, to purchase equity securities of Buyer for an aggregate
amount equal to $232,500,000, (ii) a commitment letter dated as of the date
hereof from J.P. Morgan Securities Inc. ("JPMSI") pursuant to which JPMSI has
committed, subject to the terms and conditions set forth or referred to therein,
to purchase subordinated debt securities in the amount of $380,000,000 and (iii)
a commitment letter dated as of the date hereof from JPMSI and Morgan Guaranty
Trust ("MORGAN") pursuant to which Morgan has committed, subject to the terms
26
and conditions set forth or referred to therein, to enter into one or more
credit agreements providing for loans of up to $545,000,000, and JPMSI has
agreed to use its best efforts to syndicate the financing under such credit
agreements. As used in this Agreement, the aforementioned entities shall
hereinafter be referred to as the "FINANCING ENTITIES." The aforementioned
credit agreements and commitments to purchase debt and equity securities shall
be referred to as the "FINANCING AGREEMENTS" and the financing to be provided
thereunder shall be referred to as the "FINANCING." Assuming the accuracy in
all material respects of TISM's representations and warranties hereunder, and
the reasonableness of the projections provided by the Company in the Descriptive
Memorandum prepared by J.P. Morgan of July 1998, the aggregate anticipated
proceeds of the Financing are in an amount sufficient to pay the Merger
Consideration, to repay TISM's, the Company's and the Subsidiaries' indebtedness
together with any interest, premium or penalties payable in connection
therewith, to provide a reasonable amount of working capital financing and to
pay related fees and expenses (collectively, the "REQUIRED AMOUNTS"). As of the
date hereof, none of the commitment letters relating to the Financing Agreements
referred to above has been withdrawn and Buyer knows of no facts or
circumstances not known to TISM or its advisors that may reasonably be expected
to result in any of the conditions set forth in the commitment letters relating
to the Financing Agreements not being satisfied. Assuming the accuracy in all
material respects of TISM's representations and warranties hereunder and the
reasonableness of the projections provided by the Company in the Descriptive
Memorandum prepared by J.P. Morgan of July 1998, Buyer believes that the
Financing will not create any liability to the directors and stockholders of
TISM under any federal or state fraudulent conveyance or transfer law. Assuming
the accuracy in all material respects of TISM's representations and warranties
hereunder and the reasonableness of the projections provided by the Company in
the Descriptive Memorandum prepared by J.P. Morgan of July 1998, Buyer further
believes that the transactions contemplated hereby, including, without
limitation, the Financing, will not cause (a) the Surviving Corporation (i) to
become insolvent, (ii) to be left with unreasonably small capital or (iii) to
incur debts beyond its ability to pay such debts as they mature, or (b) the
capital of TISM to become impaired, in each case under any federal or state
fraudulent conveyance or transfer law.
Section 5.06. Purchase for Investment. Buyer is consummating the Merger
for investment for its own account and not with a view to, or for sale in
connection with, any distribution of the shares of the Surviving Corporation,
except as contemplated by the Financing Agreements or any replacement financing.
Buyer (either alone or together with its advisors) has sufficient knowledge and
experience in financial and business matters so as to be capable of
27
evaluating the merits and risks of its investment hereunder and is capable of
bearing the economic risks of such investment.
Section 5.07. Litigation. As of the date hereof, there is no action, suit,
investigation or proceeding pending against, or to the knowledge of Buyer
threatened against or affecting, Buyer before any court or arbitrator or any
governmental body, agency or official which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay the transactions contemplated by this
Agreement.
Section 5.08. Finders' Fees. There is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of Buyer who might be entitled to any fee or commission from any of
TISM's stockholders or any of their Affiliates upon consummation of the
transactions contemplated by this Agreement.
Section 5.09. Inspections; No Other Representations. Buyer has undertaken
such investigation and has been provided with and has evaluated such documents
and information as it has deemed necessary to enable it to make an informed and
intelligent decision with respect to the execution, delivery and performance of
this Agreement. Buyer acknowledges that TISM has given Buyer access to the key
employees, documents and facilities of TISM, the Company and the Subsidiaries.
Buyer agrees to accept TISM, the Company and the Subsidiaries in the condition
they are in on the Closing Date based upon its own inspection, examination and
determination with respect thereto as to all matters, and without reliance upon
any express or implied representations or warranties of any nature made by or on
behalf of or imputed to TISM or any other Person, except as expressly set forth
in this Agreement. Buyer acknowledges that TISM and its stockholders make no
representation or warranty with respect to (i) any projections, estimates or
budgets delivered to or made available to Buyer of revenues, results of
operations (or any component thereof), cash flows or financial condition of the
Company and the Subsidiaries (or any component thereof) or the business and
operations of the Company and the Subsidiaries or (ii) any other information or
documents made available to Buyer or its counsel, accountants or advisors with
respect to TISM, the Company, the Subsidiaries or their respective businesses or
operations, except as expressly set forth in this Agreement. Nothing in this
Section 5.09 shall modify or limit, or be construed to modify or limit, any
----
right provided to Buyer or its Affiliates under this Agreement to enforce (or to
obtain any remedy by reason of any inaccuracy in or violation of) any
representation, warranty, covenant or agreement expressly set forth in this
Agreement or in any certificate provided hereunder.
28
Section 5.10. Retained Interest. As of the Effective Time, the shares of
Surviving Corporation Common Stock issued in respect of Shares pursuant to
clause (iii) of Section 2.02 as part of the Merger Consideration (the "RETAINED
----
SHARES") will constitute (i) seven percent (7%) of all shares of each class of
Surviving Corporation Common Stock outstanding after giving effect to the Merger
(other than shares, if any, issued in connection with the debt Financing or any
replacement debt financing) and (ii) more than 5% of all shares of each class of
Surviving Corporation Common Stock outstanding, after giving effect to the
Merger (including without limitation shares, if any, issued in connection with
the debt Financing or any replacement debt financing). All such shares of
Surviving Corporation Common Stock will be duly authorized, validly issued,
fully paid and non-assessable.
ARTICLE 6
Covenants of TISM and the Principal Stockholder
Each of TISM and the Principal Stockholder agrees that:
Section 6.01. Conduct of the Company. Except as specifically contemplated
by this Agreement, from the date hereof until the Effective Time, TISM shall,
and shall cause each of the Company and the Subsidiaries to, conduct its
businesses in the ordinary course consistent with past practice and use its
reasonable best efforts to preserve intact its business organizations and
relationships with third parties and to keep available the services of its
present officers and employees. Without limiting the generality of the
foregoing, from the date hereof until the Effective Time, except as disclosed on
Schedule 6.01 and except for transactions expressly contemplated by this
Agreement, TISM will not, and will not permit the Company or any Subsidiary to:
(a) adopt or propose any change in its certificate of incorporation
or bylaws;
(b) (i) merge or consolidate with any other Person, (ii) acquire
assets (other than inventory in the ordinary course of business) from any
other Person or group of related Persons in an aggregate amount exceeding
$1,000,000, or (iii) make any investment in an aggregate amount exceeding
$1,000,000 in any other Person or group of related Persons;
(c) sell, lease, license or otherwise dispose of any assets or
property in excess of $200,000 except (i) pursuant to existing contracts or
29
commitments or (ii) otherwise in the ordinary course consistent with past
practice, including pursuant to standard franchise agreements; or
(d) agree or commit to do any of the foregoing.
TISM will not take, and will not permit the Company or any Subsidiary to take,
any action that would make any representation or warranty of TISM hereunder
inaccurate in any material respect at the Effective Time.
Section 6.02. Access to Information; Confidentiality. From the date hereof
until the Effective Time, TISM will (i) give, and will cause the Company and
each Subsidiary to give, Buyer, its financiers and their respective counsel,
financial advisors, auditors and other authorized representatives reasonable
access to the offices, properties, books and records of or relating to TISM, the
Company and each Subsidiary, (ii) furnish, and will cause the Company and each
Subsidiary to furnish, to Buyer, its financiers and their respective counsel,
financial advisors, auditors and other authorized representatives such financial
and operating data and other information relating to TISM, the Company or any
Subsidiary as such Persons may reasonably request and (iii) instruct the
employees, counsel and financial advisors of TISM or the Company or any
Subsidiary to cooperate with Buyer in its investigation of TISM, the Company or
any Subsidiary. Any investigation pursuant to this Section shall be conducted in
such manner as not to interfere unreasonably with the conduct of the business of
TISM or the Company and the Subsidiaries. Notwithstanding the foregoing, Buyer
shall not have access to personnel records of the Company and the Subsidiaries
relating to individual performance or evaluation records, medical histories or
any information the disclosure of which is prohibited by law.
Section 6.03. Notices of Certain Events. TISM shall promptly notify Buyer
of:
(a) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement; and
(c) any actions, suits, claims, investigations or proceedings
commenced relating to TISM or the Company or any Subsidiary that, if
pending on the date of this Agreement, would have been required to have
been disclosed pursuant to Section 4.13.
----
30
Section 6.04. Noncompetition. (a) The Principal Stockholder agrees that
for a period of 5 years from the Closing Date, he shall not:
(i) engage, either directly or indirectly, as an employee, officer,
director or consultant, or as a principal for his own account or jointly
with others, or as a stockholder in any corporation or joint stock
association, in, or have any investment or other interest in, directly or
indirectly, any business other than the Company that is engaged in the
marketing, production or sale of pizza (the "BUSINESS") within the United
States, or any other country from which the Company or any Subsidiary
derives revenues, directly or indirectly, on or prior to the Closing Date;
provided, that nothing contained in this Section 6.04 shall prevent the
----
Principal Stockholder from owning, directly or indirectly, (i) not more
than five percent of the outstanding shares of, or not more than five
percent of any other equity interest in, any Person engaged in the Business
and listed or traded on a national securities exchange or in an over-the-
counter securities market or (ii) any financial interest in one or more
Franchisees (A) the aggregate cost of which shall not exceed $10,000,000
without the prior consent of the Surviving Corporation, or (B) at any
amount with the consent of the Surviving Corporation, which consent shall
not be unreasonably withheld; and provided further, that this Section shall
not be deemed to prohibit incidental sales of pizza on the premises of
charitable, non-profit or educational institutions established by the
Principal Stockholder or his Affiliates; or
(ii) himself, or permit any Affiliate to, directly or indirectly,
employ or solicit, or receive or accept the performance of services by any
current employee with managerial responsibility or other current key
employee of the Company or any Subsidiary, except as set forth on Schedule
6.04 provided, that nothing in this Section 6.04 shall prevent solicitation
---- ----
through general, non-targeted recruitment efforts such as advertisements
and job listings.
If any provision contained in this Section shall for any reason be held
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Section, but this
Section shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein. It is the intention of the parties
that if any of the restrictions or covenants contained herein is held to cover a
geographic area or to be for a length of time which is not permitted by
applicable law, or in any way construed to be too broad or to any extent
invalid, such provision shall not be construed to be null, void and of no
effect, but to the extent such provision would
31
be valid or enforceable under applicable law, a court of competent jurisdiction
shall construe and interpret or reform this Section to provide for a covenant
having the maximum enforceable geographic area, time period and other provisions
(not greater than those contained herein) as shall be valid and enforceable
under such applicable law. The Principal Stockholder acknowledges that Buyer
would be irreparably harmed by any breach of this Section and that there would
be no adequate remedy at law or in damages to compensate Buyer for any such
breach. The Principal Stockholder agrees that Buyer shall be entitled to
injunctive relief requiring specific performance by him of this Section and
consents to the entry thereof.
In consideration of the Principal Stockholder agreeing to the provisions of
this Section, at the Closing, Buyer agrees to pay to him the sum of $50,000,000
(the "NONCOMPETE CONSIDERATION") in immediately available funds by wire transfer
to an account with a bank in New York City designated by notice from him to
Buyer.
Section 6.05. The Option. Prior to the Closing Date, the Principal
Stockholder shall repurchase the Option from TISM and on or prior to the Closing
Date TISM will make a pro rata redemption from each of the Stockholders of
shares of the then-outstanding Common Stock in the amount of the payment for
such repurchase.
Section 6.06. Stockholder Consent. Within 10 business days of the date
hereof, the Principal Stockholder shall cause this Agreement and the Merger to
be approved in accordance with Michigan law.
Section 6.07. Escrow Agreement. Concurrently with the Merger, the
Principal Stockholder, on behalf of the Stockholders, will enter into the Escrow
Agreement with Buyer and the Escrow Agent.
Section 6.08. Lease Agreement. Concurrently with the Merger, the
Principal Stockholder will cause Domino's Farms to enter into the Lease
Agreement with the Company.
Section 6.09. Consulting Agreement. Concurrently with the Merger, the
Principal Stockholder will enter into a consulting agreement with the Company
substantially in the form of Exhibit E hereto (the "CONSULTING AGREEMENT").
Section 6.10. TISM Financial Information. (a) TISM shall furnish or shall
cause TISM's independent accountants (i) to furnish to Buyer by October 22, 1998
audited consolidated financial statements for TISM and its subsidiaries for each
of the three years ended December 28, 1997 in a form
32
meeting the requirements of Regulation S-X under the Securities Act of 1933, as
amended, (ii) to furnish to Buyer upon receipt of a final draft of any
registration statement (or offering memorandum) of the Surviving Corporation or
any of its subsidiaries, the consent of Arthur Andersen & Co. or another
nationally recognized accounting firm to the inclusion of their reports on such
financial statements in the Surviving Corporation's registration statement (or
offering memorandum) and any amendments thereto and (iii) to cooperate regarding
comfort letters that may be requested by underwriters or placement agents in
connection with such matters.
(b) For purposes of assisting the Surviving Corporation with its planned
registration statement and subsequent reporting requirements, TISM will deliver
to Buyer (i) unaudited income statements, statements of cash flows, balance
sheets, and related schedules of capital expenditures and depreciation for each
1997 and 1998 fiscal quarter, (ii) unaudited income statements, and related
schedules of capital expenditures and depreciation for each 1996 fiscal quarter
corresponding to each 1997 fiscal quarter and (iii) an unaudited income
statement, statements of cash flows, balance sheet and related schedules of
capital expenditures and depreciation for the period from December 29, 1997
through the Closing Date. The financial statements and schedules described in
(i) and (ii) above shall be delivered to Buyer by October 22, 1998. The
financial statements and schedules described in clause (iii) above shall be
delivered to Buyer by the Principal Stockholder within 60 days after the Closing
Date. Further, TISM will provide unaudited financial information for fiscal
years 1994 and 1993 meeting the requirements of Item 301 of Regulation S-K
(Selected Financial Data) by October 22, 1998.
Section 6.11. Confidentiality. The Principal Stockholder agrees, from and
after the Effective Time, that he shall not disclose or use for his own benefit
or purposes or the benefit or purposes of any other person, firm, partnership,
joint venture, association, corporation or other business organization, entity
or enterprise other than the Surviving Corporation and any of its subsidiaries
or affiliates, any trade secrets, information, data, or other confidential
information relating to customers, development programs, costs, marketing,
trading, investment, sales activities, promotion, credit and financial data,
manufacturing processes, financing methods, plans, or the business and affairs
of the Surviving Corporation generally, or of any subsidiary or affiliate of the
Surviving Corporation; provided that the foregoing shall not apply to
information which is not unique to the Surviving Corporation or which is
generally known to the industry or the public other than as a result of the
Principal Stockholder's breach of this covenant.
33
Section 6.12. Closing Debt Amount; Company Transaction Expenses. (a) Not
later than three days prior to the Closing Date, the Principal Stockholder shall
deliver to Buyer a certificate, dated as of such date and signed by the
Principal Stockholder, as to the Closing Debt Amount. TISM will provide Buyer
reasonable access to information (including access to work papers and a
reasonable opportunity to ask questions) relating to the calculation of the
Closing Debt Amount.
(b) At the Effective Time, the Principal Stockholder, on behalf of the
Stockholders, shall authorize and direct Buyer to pay or cause to be paid the
Company Transaction Expenses, less any required withholding Taxes, out of the
aggregate Merger Consideration. After the Effective Time, the Surviving
Corporation may, at its option, elect to have any Company Transaction Expenses
that are not paid out of the aggregate Merger Consideration at the Effective
Time be paid by the Principal Stockholder or paid out of the Escrow Account;
provided that all Tax withholding and reporting requirements shall be satisfied.
ARTICLE 7
Covenants of Buyer
Buyer agrees that:
Section 7.01. Confidentiality. Subject to Section 6.02, all information
----
provided to Buyer or any of its Affiliates or representatives pursuant to this
Agreement will be treated in accordance with the Confidentiality Agreement dated
September 25, 1998, between Bain Capital, Inc. and J.P. Morgan Securities, Inc.,
as agent for TISM and the Company, as the same may be amended from time to time
(the "CONFIDENTIALITY AGREEMENT") and Buyer agrees to be bound by the terms of
the Confidentiality Agreement as if Buyer were a party thereto.
Section 7.02. Access. After the Effective Time, Buyer will cause the
Surviving Corporation, the Company and each Subsidiary to afford to the
Principal Stockholder and members of his immediate family reasonable access (so
long as there is no pending or threatened litigation between the Principal
Stockholder or any other Stockholder and Buyer or their respective Affiliates in
which case consent of Buyer to such access shall not to be unreasonably
withheld) during normal business hours to historical documents concerning TISM
and the Company (including, without limitation, press clippings and videotapes)
and to permit the Principal Stockholder and members of his immediate family to
make copies of such historical materials at the expense of the Principal
Stockholder or such family member; provided that any such access by the
Principal Stockholder
34
or a family member shall not unreasonably interfere with the conduct of the
business of the Surviving Corporation, the Company or any Subsidiary.
Section 7.03. Financing. Buyer shall use reasonable commercial efforts to
obtain the Financing. In the event that any portion of such Financing becomes
unavailable, regardless of the reason therefor, Buyer will use reasonable
commercial efforts to obtain alternative financing on identical or more
favorable terms and conditions from other sources. Nothing in this Agreement
shall obligate the Buyer, or any of its Affiliates, to waive or modify any of
the terms and conditions of this Agreement or any of the documents contemplated
hereby (including without limitation any of the terms and conditions of the
Financing Agreements (including, without limitation, the terms and conditions of
the Financing Agreements relating to the amount of equity)).
Section 7.04. Escrow Agreement. Concurrently with the Merger, Buyer will
enter into the Escrow Agreement with the Principal Stockholder (on behalf of the
Stockholders) and the Escrow Agent.
Section 7.05. Lease Agreement. Concurrently with the Merger, Buyer will
cause the Company to enter into the Lease Agreement with Domino Farms.
Section 7.06. Consulting Agreement. Concurrently with the Merger, Buyer
will cause the Company to enter into the Consulting Agreement with the Principal
Stockholder.
Section 7.07. Confirmation of Stock Consideration Value Adjustment Amount.
Not later than two (2) business days prior to the Closing Date, Buyer will
confirm to TISM and the Principal Stockholder as to the Stock Consideration
Value Adjustment Amount.
ARTICLE 8
Covenants of Buyer and TISM
Buyer and TISM agree that:
Section 8.01. Best Efforts; Further Assurances. Subject to the terms and
conditions of this Agreement, Buyer and TISM will use reasonable commercial
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary or desirable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement; provided, that
nothing in this Section 8.01 shall obligate TISM, the Company, any Subsidiary or
----
35
the Buyer, or any of their respective Affiliates, to waive or modify any of the
terms and conditions of this Agreement or any of the documents contemplated
hereby (including without limitation any of the terms and conditions of the
Financing Agreements (including without limitation the terms and conditions of
the Financing Agreements relating to the amount of equity)). TISM and Buyer
agree, and TISM, prior to the Effective Time, and Buyer, after the Effective
Time, agree to cause the Company and each Subsidiary, to use reasonable
commercial efforts to (i) execute and deliver such other documents,
certificates, agreements and other writings and (ii) to take such other actions
as may be necessary or desirable in order to consummate or implement
expeditiously the transactions contemplated by this Agreement; provided, that
nothing in this Section 8.01 shall obligate TISM, the Company, any Subsidiary or
----
the Buyer, or any of their respective Affiliates, to waive or modify any of the
terms and conditions of this Agreement or any of the documents contemplated
hereby (including without limitation any of the terms and conditions of the
Financing Agreements (including without limitation the terms and conditions of
the Financing Agreements relating to the amount of equity)).
Section 8.02. Certain Filings. TISM and Buyer shall cooperate with one
another (i) in determining whether any action by or in respect of, or filing
with, any governmental body, agency, official or authority is required, or any
actions, consents, approvals or waivers are required to be obtained from parties
to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement and (ii) in taking such actions or
making any such filings, furnishing information required in connection therewith
and seeking timely to obtain any such actions, consents, approvals or waivers.
Section 8.03. Public Announcements. The parties agree to consult with
each other before issuing any press release or making any public statement with
respect to this Agreement or the transactions contemplated hereby and, except as
may be required by applicable law or any listing agreement with any national
securities exchange, will not issue any such press release or make any such
public statement prior to such consultation. Notwithstanding the foregoing, no
provision of this Agreement shall relieve Buyer from any of its obligations
under, or terminate any of the restrictions imposed upon Buyer by, the
Confidentiality Agreement.
Section 8.04. Intercompany Accounts. All unpaid obligations of any member
of the Affiliate Group, on the one hand, and TISM, the Company and the
Subsidiaries, on the other hand, as of the Effective Time shall be settled
(irrespective of the terms of payment of such obligation) in the manner provided
in this Section or, in the case of transactions regarding the Option, Section
6.05; provided that such unpaid obligations as to employees and officers other
- ----
than the
36
Stockholders shall exclude employment compensation and business expense
reimbursement. At least two business days prior to the Effective Time, TISM
shall prepare and deliver to Buyer a statement setting out in reasonable detail
the calculation of the amount of each such obligation based upon the latest
available financial information as of such date and, to the extent requested by
Buyer, provide Buyer with supporting documentation to verify the underlying
charges and transactions. The Principal Stockholder and TISM will cause all such
obligations to be paid in full in cash prior to the Closing Date (including,
without limitation, refund of any prepaid rent or other expenses or costs and
payment of all receivables).
Section 8.05. Trademarks; Tradenames. Following the Closing Date, none
of the stockholders of TISM or their Affiliates shall use any of the Company
Intellectual Property Rights; provided, that the phrase "Domino's Farms" may
continue to be used by the Principal Stockholder and his Affiliates with respect
to (i) the operations and property of Domino's Farms and (ii) the petting farm
and other recreational facilities and operations owned and operated by the
Principal Stockholder on the property adjacent to the property of Domino's Farms
and currently owned by any Affiliate of the Principal Stockholder.
Section 8.06. Transfer of Certain Assets. Prior to the Closing Date, TISM
(i) shall cooperate with Buyer and shall take such steps as may be reasonably
requested by Buyer to cause one of the Subsidiaries to become an intermediate
holding company between TISM and the Company and to cause the Company or its
Subsidiaries (other than any Subsidiary that is not a QSSS) to sell to an
existing Subsidiary of the Company (that is a Subchapter C corporation at the
time of such sale) certain Franchise Agreements entered into by the Company or
such Subsidiary on or after December 30, 1996 and certain other assets acquired
by the Company or its Subsidiaries on or after December 30, 1996 as specified by
Buyer (collectively, the "TRANSFERRED ASSETS") in exchange for a note from such
Subchapter C corporation Subsidiary in a transaction in which the Tax gain
realized does not exceed $150,000,000; and (ii in connection therewith shall
incur such incidental third-party out-of-pocket costs as may reasonably be
requested by Buyer in an amount not to exceed $100,000. The value of each of
the Transferred Assets will be determined by Buyer. TISM, the Company, its
Subsidiaries, and the Principal Stockholder hereby agree to provide, by October
22, 1998, a written list of the Franchise Agreements entered into by the Company
or its Subsidiaries on or after December 30, 1996, and a written list of the
material assets acquired by the Company or its Subsidiaries on or after December
30, 1996, and such other information as is reasonably required to value the
Transferred Assets.
37
ARTICLE 9
Tax Matters
Section 9.01. Tax Definitions. The following terms, as used herein, have
the following meanings:
"POST-CLOSING TAX PERIOD" means (i) any Tax period beginning after the
Closing Date and (ii) with respect to a Tax period that commences on or before
but ends after the Closing Date, the portion of such period beginning after the
Closing Date.
"PRE-CLOSING TAX PERIOD" means (i) any Tax period ending before the Closing
Date and (ii) with respect to a Tax period that commences on or before but ends
after the Closing Date, the portion of such period up to, and including the
Closing Date.
"TAX" means (i) any tax, governmental fee or other like assessment or
charge of any kind (including, but not limited to, withholding on amounts paid
to or by any Person) including any alternative or add-on minimum tax and the
Michigan Single Business Tax together with any interest, penalty, addition to
tax or additional amount due from, or in respect of, TISM, the Company or any of
the Subsidiaries imposed by any governmental authority (domestic or foreign)
responsible for the imposition of any such tax (a "TAXING AUTHORITY") and (ii)
any liability for the payment of any amount of the type described in the
immediately preceding clause (i) as a result of TISM, the Company or any of the
Subsidiaries (A) having been a member of an affiliated, consolidated or combined
group with any other corporation at any time on or prior to the Closing Date or
(B) being a transferee of, or a successor by contract (or otherwise) to, such
liability.
Section 9.02. Tax Representations. (a) Except as disclosed on Schedule
9.02(a), TISM made a valid election under Subchapter S of the Code to which all
- -------
Persons who were shareholders on the date of such election gave their (and if
necessary each shareholder's spouse gave his or her) consent and such election
became effective on December 30, 1996. TISM is, and has been since December 30,
1996, an S Corporation (for federal Tax law purposes as defined in Section 1361
of the Code, and for state Tax law purposes, other than states which do not
recognize S Corporation status, as defined under applicable state Tax law).
(b) TISM made a valid election to treat the Company and each of the
Subsidiaries as a qualified Subchapter S subsidiary within the meaning of
Section 1361(b)(3)(B) of the Code (a "QSSS") and such elections became effective
on
38
December 30, 1996. The Company and each Subsidiary is, and has been since
December 30, 1996, a QSSS.
(c) Except as disclosed in Schedule 9.02(c), TISM represents and warrants
-------
to Buyer as of the date hereof and as of the Closing Date that, except as set
forth in the Financial Statements (including the notes thereto) or on the
Disclosure Schedule, (i) all Tax returns, statements, reports and forms
(collectively, the "RETURNS") required to be filed with any Taxing Authority on
or before the Closing Date with respect to any Pre-Closing Tax Period by, or
with respect to, TISM, the Company or any of the Subsidiaries have been timely
filed or will be timely filed on or before the Closing Date in accordance with
all applicable laws and all such Returns are and will be true, accurate, and
complete; (ii) TISM, the Company and the Subsidiaries have timely paid all Taxes
shown as due and payable on the Returns that have been filed; (iii) TISM, the
Company and the Subsidiaries have made and will on or before the Closing Date
make provision for all Taxes payable by TISM, the Company and the Subsidiaries
for any Pre-Closing Tax Period for which no Return has yet been filed; (iv) the
charges, accruals and reserves for unpaid Taxes with respect to the Company and
the Subsidiaries as set forth in the Financial Statements are adequate to cover
all unpaid Tax liabilities with respect to all periods through the date of such
Financial Statements and will not exceed such amounts as adjusted for the
passage of time in accordance with the respective company's consistent past
practice as of the Closing Date; (v) there is no action, suit, proceeding,
investigation, audit or claim pending against or with respect to TISM, the
Company or any of the Subsidiaries in respect of any Tax; (vi) all Returns filed
with respect to Tax years of TISM, the Company and the Subsidiaries through the
Tax year ended January 3, 1993 have been examined and are closed or are Returns
with respect to which the applicable period for assessment under applicable law,
after giving effect to extensions or waivers, has expired; (vii) all U.S.
federal Returns filed with respect to Tax years of TISM, the Company and the
Subsidiaries for the Tax years ended January 2, 1994, January 1, 1995 and
December 31, 1995 have been examined and such examinations have been concluded
and settled and all Taxes resulting from such settlements have been paid,
provided, however, that there is an unpaid deficiency with respect to the U.S.
federal Tax year of TISM, the Company and the Subsidiaries ended January 2,
1994, in the amount of $84,303 which is expected to be largely offset by a
credit with respect to the U.S. federal Tax year of TISM, the Company and the
Subsidiaries ended December 30, 1990 in the amount of $69,780 and provided,
further, that taking into account extensions and waivers granted with respect to
U.S. federal Tax years of TISM, the Company and the Subsidiaries for the Tax
years ended January 2, 1994, January 1, 1995 and December 31, 1995, the
applicable period for assessment under applicable law has not expired, (viii)
set forth in Schedule 9.02(c)(viii) is a true and accurate list of the date on
which each extension and waiver of any statute of limitations with
39
respect to Taxes is set to expire and (ix) amended state income Tax returns have
been filed to reflect changes related to all U.S. federal income Tax settlements
and adjustments for all Tax years ending on or before December 31, 1995, and all
Taxes with respect to such Returns have been paid, provided, however, that with
respect to certain states, interest with respect to such income Taxes has not
yet been paid.
Section 9.03. Tax Covenants. (a) Buyer covenants that it will not cause
or permit TISM, the Surviving Corporation, the Company, any Subsidiary or any
Affiliate of Buyer (i) to take any action on the Closing Date other than as
specifically contemplated by this Agreement or in the ordinary course of
business that would increase any Tax liability of Stockholder, TISM, the Company
or the Subsidiaries in respect of any Pre-Closing Tax Period or (ii) to amend
any Tax return other than (A) with the written consent of the Principal
Stockholder or (B) as required by any Taxing Authority that results in any
increased Tax liability of any Stockholder in respect of any Pre-Closing Tax
Period. Buyer agrees that no Stockholder is to have any liability for any Tax
resulting from any action of Buyer, referred to in the preceding sentence, with
respect to TISM, the Surviving Corporation, the Company, Buyer or any Affiliate
of Buyer on or after the Closing Date, and agrees to indemnify and hold harmless
each Stockholder against any such Tax and against any Damages incurred or
suffered by the Stockholders arising out of any breach of any covenant or
agreement provided in Section 9.04. The Principal Stockholder agrees to give
----
prompt notice to Buyer of the assertion of any claim, or the commencement of any
action or proceeding, in respect of which indemnity may be sought under this
Section 9.03(a). Buyer may participate in and, upon acknowledgment of its
-------
liability under this Section 9.03(a), assume the defense of any such suit,
-------
action or proceeding at its own expense. If Buyer assumes such defense, the
Principal Stockholder on behalf of the Stockholders shall have the right (but
not the duty) to participate in the defense thereof and to employ counsel, at
his own expense, separate from the counsel employed by Buyer. Whether or not the
Principal Stockholder chooses to defend or prosecute any claim, the parties
hereto shall cooperate in the defense or prosecution thereof. The Principal
Stockholder shall not settle any liability for Tax for a Pre-Closing Tax Period
for which Buyer has agreed to indemnify the Principal Stockholder without the
consent of the Surviving Corporation, which consent shall not be unreasonably
withheld. The failure of the Principal Stockholder to notify Buyer under this
Section 9.03(a) shall not relieve Buyer of its indemnification obligations
-------
hereunder except to the extent such failure shall have adversely prejudiced
Buyer.
(b) All transfer, documentary, sales, use, stamp, registration and other
such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement shall be borne equally by Buyer and the Principal
40
Stockholder, on behalf of the Stockholders. The party that is required by
applicable law to make the filings, reports, or returns with respect to any such
Taxes and fees shall do so, and the other party shall cooperate with respect
thereto as necessary.
(c) All Returns required to be filed after the Closing Date with respect
to TISM, the Surviving Corporation, the Company or the Subsidiaries with respect
to any Pre-Closing Tax Period, including those required to be filed with respect
to the S short year (as defined in Section 1362(e) of the Code) of TISM, will be
filed by the Surviving Corporation when due (taking into account any extension
of a required filing date) and will be prepared in a manner consistent with past
practices of TISM, the Company and the Subsidiaries and based on substantial
authority, to the extent not inconsistent with the Code and the applicable
regulations thereunder or any similar provision under local law; provided that
the Principal Stockholder on behalf of the Stockholders shall have the right to
review and approve all such Returns, which approval shall not be unreasonably
withheld.
(d) Buyer shall promptly pay or cause to be paid to the Principal
Stockholder for distribution to the former stockholders of TISM as part of the
Merger Consideration all refunds of Taxes (except to the extent such refund is
(i) generated by carrybacks of Tax benefit items attributable to a Post-Closing
Tax Period or (ii) included in the calculation of Final Capitalization Amount),
received by Buyer any Affiliate of Buyer, TISM, the Surviving Corporation, the
Company, or any Subsidiary attributable to Taxes paid by the Stockholders, TISM,
the Company or any Subsidiary with respect to any Pre-Closing Tax Period,
provided, however, that to the extent such refund is later disallowed, the
Principal Stockholder shall, on behalf of the Stockholders, pay to Buyer an
amount equal to the amount of such disallowance.
(e) Buyer shall promptly pay, upon actual realization, to the Principal
Stockholder for distribution to the former stockholders of TISM as part of the
Merger Consideration amounts equal to the amounts by which the total Tax
liability of TISM, the Surviving Corporation, the Company or any Subsidiary is
reduced as a result of Tax deductions or other Tax benefits resulting from
payments made on the Closing Date with respect to Company Transaction Expenses.
If any such Tax deduction or Tax benefit is subsequently adjusted or disallowed
by any Taxing Authority, the Principal Stockholder shall, on behalf of the
Stockholders, pay to Buyer the amount of such adjustment or disallowance.
(f) Buyer agrees that it will not cause or permit TISM, the Surviving
Corporation, the Company, any Subsidiary or any Affiliate of the foregoing to
claim a deduction in any Post-Closing Tax Period with respect to rents or deemed
prepaid rents with respect to office space in a building referred to as Phase 5
in a
41
certain 1998 Internal Revenue Service Closing Agreement in Final Determination
Covering Specific Matters with TISM, Inc. and Subsidiaries, a copy of which has
been provided to Buyer.
Section 9.04. Cooperation on Tax Matters. (a) Buyer and the Principal
Stockholder agree to furnish or cause to be furnished to each other, upon
request, as promptly as practicable, such information (including access to books
and records) and assistance relating to TISM, the Surviving Corporation, the
Company and the Subsidiaries as is reasonably necessary for the filing of any
return, for the preparation for any Tax audit, and for the prosecution or
defense of any claim, suit or proceeding relating to any proposed Tax
adjustment. Buyer and the Principal Stockholder agree, except in the ordinary
course of business consistent with past practices, to retain or cause to be
retained all books and records pertinent to TISM, the Surviving Corporation, the
Company and the Subsidiaries until the applicable period for assessment under
applicable law (giving effect to any and all extensions or waivers) has expired,
and to abide by or cause the abidance with all record retention agreements
entered into with any Taxing Authority. Buyer agrees to cause TISM, the
Surviving Corporation, the Company and the Subsidiaries to give the Principal
Stockholder reasonable notice prior to transferring, discarding or destroying
any such books and records relating to Tax matters, except in the ordinary
course of business consistent with past practices, and, if the Principal
Stockholder so requests, Buyer agrees to cause TISM, the Surviving Corporation,
the Company and the Subsidiaries to allow the Principal Stockholder to take
possession of such books and records. Buyer and the Principal Stockholder shall
cooperate with each other in the conduct of any audit or other proceedings
involving TISM, the Surviving Corporation, the Company and the Subsidiaries for
any Tax purposes and each shall execute and deliver such powers of attorney and
other documents as are necessary to carry out the intent of this subsection.
(b) Buyer and the Principal Stockholder further agree, upon request, to
provide the other party with all information that either party may be required
to report pursuant to Section 6043 of the Code and all Treasury Department
Regulations promulgated thereunder or any similar provision under local law.
Section 9.05. Indemnification. (a) Except to the extent a reserve
therefor is included in the calculation of the Final Capitalization Amount,
Buyer, TISM, the Surviving Corporation, the Company or any Subsidiary shall be
indemnified against and held harmless from any (i) Tax of TISM, the Surviving
Corporation, the Company or the Subsidiaries with respect to any Pre-Closing Tax
Period, (ii) liabilities, costs, expenses (including, without limitation,
reasonable expenses of investigation and attorneys' fees and expenses), arising
out of or incident to the imposition, assessment or assertion of any Tax
described
42
in clause (i), including those incurred in the contest in good faith in
appropriate proceedings relating to the imposition, assessment or assertion of
any such Tax, in each case incurred or suffered by Buyer, any of its Affiliates,
TISM, the Surviving Corporation, the Company or any of the Subsidiaries and
(iii) Damages incurred or suffered by Buyer, and, after the Effective Time the
Surviving Corporations, and any of their respective Affiliates arising out of
any breach of any covenant or agreement provided in Section 9.04 (the amounts
----
referred to in clauses (i), (ii) and (iii) are collectively referred to as a
"LOSS"); provided that Loss shall not include any Tax of TISM, the Surviving
Corporation, the Company or the Subsidiaries arising as a result of the
assumption of liabilities in excess of basis by the Company or any Subsidiary.
(b) If the indemnification obligation under this Section 9.05 arises in
----
respect of an adjustment which makes allowable to Buyer, any of its Affiliates
or, following the Effective Time, the Surviving Corporation, the Company or any
Subsidiary, any deduction, amortization, exclusion from income or other
allowance which produces an actually realized reduction in such Person's Tax
liability (such reduction, a "TAX BENEFIT") which would not, but for such
adjustment, be allowable, then Buyer shall pay to the Principal Stockholder the
amount of such Tax Benefit when it is actually realized by such Person.
(c) Any payment pursuant to this Section 9.05 shall be made not later than
----
30 days after receipt by the Principal Stockholder and the Escrow Agent of
written notice from Buyer stating that any Loss has been paid by Buyer, any of
its Affiliates or, following the Effective Time, the Surviving Corporation, the
Company or any Subsidiary and the amount thereof and of the indemnity payment
requested and the resolution of any dispute relating thereto; provided, that,
following the termination of the Escrow Account, such notice need be made only
to the Principal Stockholder; and provided, further, that if and to the extent
any indemnification payments are made from the Escrow Account in respect of
indemnification obligations pursuant to this Section 9.05, (i) the maximum
aggregate limitation amount specified in clause (ii) of the first proviso of
Section 12.02(a) shall automatically be deemed to be increased by the aggregate
amount of such indemnification payments and (ii) the Principal Stockholder will
directly indemnify Buyer and its Affiliates with respect to any other claims for
indemnification under Section 12.02(a) without regard to the limitation
contained in clause (ii) of said first proviso of Section 12.02(a) to the extent
of such indemnification payments from the Escrow Account pursuant to this
Section 9.05. The immediately preceding proviso is not intended and shall not be
construed to affect the limitations or recovery contained in clause (i) of the
first proviso of Section 12.02(a).
43
(d) If any claim or demand in respect of which indemnity may be sought
pursuant to this Section 9.05 is asserted in writing against Buyer, any of its
----
Affiliates or, following the Effective Time, the Surviving Corporation, the
Company or any Subsidiaries, Buyer shall give prompt notice to the Principal
Stockholder of such claim or demand, and shall give the Principal Stockholder
such information with respect thereto as the Principal Stockholder may
reasonably request. The Principal Stockholder may discharge, at any time, the
indemnification obligation under this Section 9.05 by causing the Escrow Agent
----
pursuant to the Escrow Agreement to pay or, following the termination of the
Escrow Account, by paying directly, to Buyer the amount of the applicable Loss,
calculated on the date of such payment. The Principal Stockholder may, at his
expense, participate in and, upon notice to Buyer and upon his acknowledgment,
on behalf of the Stockholders, of liability for such Loss, assume the defense of
any such claim, suit, action, litigation or proceeding (including any Tax
audit). If the Principal Stockholder assumes such defense, Buyer shall have the
right (but not the duty) to participate in the defense thereof and to employ
counsel, at its own expense, separate from the counsel employed by the Principal
Stockholder. Whether or not the Principal Stockholder chooses to defend or
prosecute any claim, all of the parties hereto shall cooperate in the defense or
prosecution thereof. Moreover, the parties hereto agree to cooperate generally
with respect to matters relating to Taxes of TISM, the Surviving Corporation,
the Company or the Subsidiaries with respect to any Pre-Closing Tax Period;
specifically, Buyer and the Principal Stockholder will notify each other of any
Taxing Authority communications with respect to such Taxes. Buyer shall not
settle any liability for Tax for a Pre-Closing Tax Period for which the
Principal Stockholder has agreed to indemnify Buyer, TISM, the Surviving
Corporation, the Company, or any Subsidiary without the consent of the Principal
Stockholder, which consent shall not be unreasonably withheld. The failure of
Buyer to notify the Principal Stockholder under this Section 9.05(d) shall not
-------
relieve the Principal Stockholder of its indemnification obligations hereunder
except to the extent such failure shall have adversely prejudiced the Principal
Stockholder.
Section 9.06. Payments Under Article 9. Any payment required to be paid by
Buyer pursuant to this Article 9 shall be paid to the Principal Stockholder for
distribution to the Stockholders as part of the Merger Consideration.
44
ARTICLE 10
Employee Benefits
Section 10.01. Employee Benefits Definitions. The following terms, as used
herein, have the following meanings:
"BENEFIT ARRANGEMENT" means each employment, severance or similar contract
or arrangement (whether written or oral) or any plan, policy, fund, program or
arrangement (whether written or oral) providing for bonus, profit-sharing, stock
option, or other stock related rights or other forms of incentive or deferred
compensation, vacation benefits, insurance coverage (including any self-insured
arrangements), health or medical benefits, disability benefits, workers'
compensation, supplemental unemployment benefits, severance benefits and post-
employment or retirement benefits (including compensation, pension, health,
medical or life insurance or other benefits) that (i) is not an Employee Plan,
(ii) is entered into, maintained, administered or contributed to, as the case
may be, by TISM, any of its Affiliates or the Company or any Subsidiary and
(iii) covers any one or more current or former employees (or dependent or
beneficiary thereof) of the Company or any Subsidiary.
"DEFERRED COMPENSATION PLANS" means, collectively, the Domino's Pizza, Inc.
Second Amended and Restated Executive Deferred Compensation Plan and the
Domino's Pizza, Inc. Second Amended and Restated Managerial Deferred
Compensation Plan.
"EMPLOYEE PLAN" means each "employee benefit plan", as defined in Section
3(3) of ERISA, that (i) is subject to any provision of ERISA, (ii) is
maintained, administered or contributed to by TISM, any of its Affiliates or the
Company or any Subsidiary and (iii) covers any one or more current or former
employees (or dependent or beneficiary thereof) of TISM, the Company or any
Subsidiary.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and the rules and regulations promulgated thereunder.
"ERISA AFFILIATE" of any entity means any other entity which, together with
such entity, would be treated as a single employer under Section 414 of the
Code.
Section 10.02. ERISA Representations. Except as set forth in Schedule
10.02, TISM represents and warrants to Buyer as of the date hereof and as of the
- -----
Closing Date that:
45
(a) Schedule 10.02(a) identifies each material Employee Plan. TISM has
--------
made available to Buyer copies of each such Employee Plan (and, if applicable,
related trust agreements) and all amendments thereto and written interpretations
thereof together with the most recent annual report (Form 5500 including, if
applicable, Schedule B thereto). No Employee Plan is subject to Title IV of
ERISA, nor has the Company, nor any past or present ERISA Affiliate, maintained
or been required to contribute to any employee benefit plan subject to Title IV
of ERISA.
(b) Each Employee Plan that is intended to be qualified under Section
401(a) of the Code has been determined by the Internal Revenue Service to be so
qualified and, to the Knowledge of TISM, there has been no event since the date
of such determination which would adversely affect such qualification; each
trust created under any such plan has been determined by the Internal Revenue
Service to be exempt from Tax under Section 501(a) of the Code and, to the
Knowledge of TISM, there has been no event since the date of such determination
which would adversely affect such exemption. TISM has provided Buyer with the
most recent determination letter of the Internal Revenue Service relating to
each such Employee Plan. Each Employee Plan has been maintained in compliance
with its terms and with the requirements prescribed by any and all applicable
statutes, orders, rules and regulations, including but not limited to ERISA and
the Code, except for such matters as, individually or in the aggregate, have not
had and would not reasonably be expected to have a Material Adverse Effect.
(c) Schedule 10.02(c) identifies each material Benefit Arrangement. TISM
--------
has furnished to Buyer copies or descriptions of each such Benefit Arrangement
(and, if applicable, related trust agreements) and all amendments thereto and
written interpretations thereof. Except for such matters as, individually or in
the aggregate, have not had and would not be reasonably expected to have a
Material Adverse Effect, each Benefit Arrangement has been maintained in
compliance with its terms and with the requirements prescribed by any and all
applicable statutes, orders, rules and regulations.
(d) Except as set forth in Schedule 10.02(d), the Company, TISM and each
--------
Subsidiary has no current or projected liability in respect of post-employment
or post-retirement health or medical or life insurance benefits for retired,
former or current employees of TISM, the Company or any Subsidiary, except as
required to avoid excise Tax under Section 4980B of the Code.
(e) Except as set forth in Schedule 10.02(e), no employee or former
--------
employee of TISM, the Company or any of its ERISA Affiliates will become
46
entitled to any bonus, retirement, severance, job security or similar benefit or
enhanced such benefit solely as a result of the transactions contemplated
hereby.
Section 10.03. Maintenance of Employee Benefits. (a) For a period of two
years from the Closing Date, Buyer agrees that the Surviving Corporation will,
or will cause the Company and each Subsidiary to, continue to maintain employee
and retiree compensation and benefit plans, programs, arrangements and policies
for the benefit of employees of TISM, the Company and each Subsidiary which
provide compensation and benefits that are substantially comparable, in the
aggregate, to those provided by TISM, the Company or any Subsidiary, if
applicable, for the benefit of such employees immediately prior to the Closing
Date. Buyer agrees that the Surviving Corporation will, or will cause the
Company and each Subsidiary to, give employees of the Company and each
Subsidiary full credit for purposes of eligibility, vesting and benefit accrual
under any such plans or arrangements maintained by TISM, the Company or any
Subsidiary, if applicable, pursuant to this Section 10.03 for such employees'
-----
service recognized for such purposes under the Employee Plans and Benefit
Arrangements.
(b) Without limiting the generality of the foregoing, for a period of two
years from the Closing Date, Buyer agrees that the Surviving Corporation will,
or will cause the Company and each Subsidiary to, provide deferred compensation
benefits to employees of TISM, the Company and each Subsidiary no less favorable
than those provided to such employees pursuant to the Deferred Compensation
Plans for the most recently completed fiscal year of the Company immediately
preceding the date hereof.
Section 10.04. Employee Agreements and Change of Control. From and after
the Effective Time, Buyer agrees that the Surviving Corporation will, or will
cause to the Company and each Subsidiary to, honor and perform all obligations
of the Company and each Subsidiary pursuant to each of the benefit plans,
arrangements and employment agreements set forth on Schedules 10.02(a), 10.02(c)
-------- --------
and 10.02(e), and Buyer acknowledges and agrees that the consummation of the
--------
transactions contemplated by this Agreement will constitute a "change of
control" of the Company for purposes of all such plans, arrangements and
agreements.
47
ARTICLE 11
Conditions to the Merger
Section 11.01. Conditions to Obligations of Buyer and TISM. The
obligations of Buyer and TISM to consummate the Merger are subject to the
satisfaction of the following conditions:
(a) Any applicable waiting period under the HSR Act relating to the
transactions contemplated hereby shall have expired or been terminated.
(b) No provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Merger .
(c) The Surviving Corporation and the Principal Stockholder shall
have entered into a stockholders' agreement substantially in accordance
with the terms set forth in Exhibit D hereto.
Section 11.02. Conditions to Obligations of Buyer. The obligations of
Buyer to consummate the Merger are subject to the satisfaction of the following
further conditions:
(a) (i) TISM and the Principal Stockholder shall have performed in
all material respects all of their respective obligations hereunder
required to be performed by them on or prior to the Closing Date, (ii) the
representations and warranties of TISM contained in this Agreement and in
any certificate or other writing delivered by TISM pursuant hereto shall be
true in all material respects at and as of the Closing Date, as if made at
and as of such date and (iii) Buyer shall have received a certificate
signed by the chief financial officer of TISM to the foregoing effect.
(b) TISM shall have delivered a certification to the effect that (i)
TISM is not nor has it been within 5 years of the date hereof a "United
States real property holding corporation" as defined in Section 897 of the
Code and (ii) it shall comply with Internal Revenue Service filing
requirements with respect thereto.
(c) Each Stockholder shall have delivered a correct taxpayer
identification number on a substitute Form W-9 indicating thereon that he
or she is not subject to backup withholding on income earned on any amount
received hereunder.
48
(d) Buyer shall have received an opinion of Davis Polk & Wardwell,
special counsel to TISM, in form and substance reasonably satisfactory to
Buyer.
(e) Buyer shall have received an opinion of Pear Sperling Eggan &
Muskovitz, PC, Michigan counsel to TISM, in form and substance reasonably
satisfactory to Buyer.
(f) The funds in an amount at least equal to the Required Amounts
shall have been provided to Buyer and its subsidiaries and/or Borrower
Subsidiary (i) as contemplated by the Financing Agreements on the terms and
conditions of the Financing Agreements and on such additional terms and
conditions as may be reasonably satisfactory to Buyer or (ii) from other
sources on terms and conditions identical to or more favorable than the
terms and conditions of the Financing Agreements and on such additional
terms and conditions as may be reasonably satisfactory to Buyer.
(g) (i) TISM shall have delivered to Buyer on or prior to October
22, 1998 the audited consolidated balance sheet of TISM and its
subsidiaries as of December 28, 1997 and the related audited consolidated
statements of income and cash flows of TISM and its subsidiaries for the
year ended December 28, 1997, together with the notes thereto and
unqualified (except as set forth in Schedule 11.02(g)) report thereon of
--------
Arthur Andersen & Co. (the "Year End Audited TISM Financials"), together
with a certificate, signed by the chief financial officer of TISM to the
effect that such Year End Audited TISM Financials fairly present, in
conformity with generally accepted accounting principles applied on a
consistent basis (except as set forth in Schedule 4.08), the consolidated
----
financial position of TISM and its subsidiaries as of the date thereof and
their consolidated results of operations and cash flows for the periods
then ended; and (ii) the Year End Audited TISM Financials shall not differ
in any material respect from the Year End Unaudited TISM Financials.
Section 11.03. Conditions to Obligations of TISM and the Principal
Stockholder. The obligations of TISM and the Principal Stockholder to
consummate the Merger are subject to the satisfaction of the following further
conditions:
(a) (i) Buyer shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
Closing Date, (ii) the representations and warranties of Buyer contained in
this Agreement and in any certificate or other writing delivered by Buyer
49
pursuant hereto shall be true in all material respects at and as of the
Closing Date, as if made at and as of such date and (iii) TISM shall have
received a certificate signed by a vice president of Buyer to the foregoing
effect.
(b) TISM shall have received a copy of the solvency opinion addressed
to JPMSI and Morgan pursuant to the Financing Agreements or any replacement
financing, together with a letter authorizing TISM's reliance thereon as if
such opinion were addressed to TISM, which opinion and letter shall be
reasonably satisfactory to TISM.
(c) TISM shall have received an opinion of Ropes & Gray, counsel to
Buyer, in form and substance reasonably satisfactory to TISM.
(d) TISM shall have received an opinion of Honigman Miller Schwartz
and Cohn, special Michigan counsel to Buyer, in form and substance
reasonably satisfactory to TISM.
ARTICLE 12
Survival; Indemnification
Section 12.01. Survival. The covenants, agreements, representations and
warranties of the parties hereto contained in this Agreement or in any
certificate delivered pursuant hereto or in connection herewith shall survive
the Merger until one year after the Closing Date; provided that (i) the
representations and warranties contained in the first sentence of Section 4.01,
----
the first sentence of Section 4.07 and the first sentence of Section 5.01,
---- ----
Sections 4.02, 4.05, 4.06, 4.07(b), 5.02, 5.08, 5.09 and 5.10, and in any
---- ---- ---- ------- ---- ---- ---- ----
certificate delivered pursuant hereto with respect to such Sections shall
survive indefinitely, (ii) the representations and warranties contained in
Section 10.02 shall survive the Merger until three years after the Closing Date,
-----
(iii) the covenants, agreements, representations and warranties contained in
Article 9 shall survive until the 30th day following the expiration of the
-
statute of limitations applicable to the matters covered thereby (giving effect
to any waiver, mitigation, or extension thereof), (iv) the covenants contained
herein (other than Sections 6.01, 6.02, 6.03, 6.05, 6.06, 6.07, 6.08, 6.09,
6.10, 7.03, 7.04, 7.05, 7.06 and 7.07) shall survive indefinitely, (v) the
covenant contained in Section 6.04 shall survive for the period of time set
forth therein and (vi) each misrepresentation constituting fraud by TISM or the
Principal Stockholder shall survive indefinitely. Notwithstanding the preceding
sentence, any covenant, agreement, representation or warranty in respect of
which indemnity may be sought under this Agreement shall survive the time at
which it
50
would otherwise terminate pursuant to the preceding sentence, if notice
of the inaccuracy or breach thereof giving rise to such right of indemnity shall
have been given to the party against whom such indemnity may be sought prior to
such time.
Section 12.02. Indemnification. (a) The Principal Stockholder hereby
indemnifies Buyer and after the Effective Time, the Surviving Corporation, and
their Affiliates against and agrees to hold each of them harmless from any and
all damage, loss, liability and expense (including, without limitation,
reasonable expenses of investigation and reasonable attorneys' fees and expenses
in connection with any action, suit or proceeding) ("DAMAGES") incurred or
suffered by Buyer or any of its Affiliates arising out of any inaccuracy in or
breach of any representation or warranty or any breach of covenant or agreement
made or to be performed by the Principal Stockholder or, at or prior to the
Effective Time, by TISM contained in this Agreement or in any certificate or
other writing delivered pursuant hereto (other than those contained in Article
9); provided that with respect to Damages arising out of any misrepresentation
under this Agreement (i) there shall be no indemnification under this Section
12.02(a) unless the aggregate amount of Damages with respect to all such
- --------
misrepresentations (determined without regard to any materiality qualification
contained in any misrepresentation giving rise to the claim for indemnity
hereunder) exceeds $2,000,000 and then only to the extent of such excess and
(ii) subject to Section 9.05(c), the maximum aggregate indemnification under
this Section 12.02(a) shall not exceed the funds in the Escrow Account and
--------
provided further, that the immediately preceding proviso shall not apply to any
Damages with respect to (i) a misrepresentation under the first sentence of
Section 4.01, the first sentence of Section 4.07, Sections 4.02, 4.05, 4.06,
---- ---- ---- ---- ----
4.07(b), 4.11 or 4.19 or Article 10, (ii) a breach of covenant hereunder or
- ------- ---- ---- --
(iii) a misrepresentation constituting fraud by TISM or the Principal
Stockholder.
(b) Buyer hereby indemnifies TISM, the Stockholders and their respective
Affiliates against and agrees to hold each of them harmless from any and all
Damages incurred or suffered by TISM, any Stockholder or any of their respective
Affiliates arising out of any inaccuracy in or breach of any representation or
warranty or any breach of covenant or agreement made or to be performed by Buyer
contained in this Agreement or in any certificate delivered pursuant hereto
(other than those contained in Article 9); provided that with respect to Damages
-
arising out of any misrepresentation under this Agreement (i) Buyer shall not be
liable under this Section 12.02(b) unless the aggregate amount of Damages with
--------
respect to all such misrepresentations (determined without regard to any
materiality qualification contained in any misrepresentation giving rise to the
claim for indemnity hereunder) exceeds $2,000,000 and then only to the extent of
such excess and (ii) Buyer's maximum liability under this Section 12.02(b) shall
--------
not exceed the funds in the Escrow Account, and provided further,
51
that the immediately preceding proviso shall not apply to any Damages with
respect to (i) a misrepresentation under the first sentence of Section 5.01,
----
Sections 5.02, 5.08 or 5.10 or (ii) a misrepresentation constituting fraud by
---- ----
Buyer or an Affiliate of Buyer.
Section 12.03. Procedures. (a) The party seeking indemnification under
Section 12.02 (the "INDEMNIFIED PARTY") agrees to give prompt notice to the
-----
party against whom indemnity is sought, or, in the case of an indemnity sought
by Buyer, to the Principal Stockholder (the "INDEMNIFYING PARTY"), of the
assertion of any claim, or the commencement of any suit, action or proceeding,
by a third party ("THIRD PARTY CLAIM") in respect of which indemnity may be
sought under such Section and will provide the Indemnifying Party such
information with respect thereto that the Indemnifying Party may reasonably
request. The failure to so notify the Indemnifying Party shall not relieve the
Indemnifying Party of its obligations hereunder, except to the extent such
failure shall have adversely prejudiced the Indemnifying Party.
(b) The Indemnifying Party shall be entitled to participate in the
defense of any Third Party Claim at its own expense. If, within 30 days of its
receipt of the notice called for in 12.03(a) above, the Indemnifying Party
--------
delivers a written notice to the Indemnified Party acknowledging its liability
to indemnify the Indemnified Party against any and all Damages that the
Indemnified Party might incur in respect of such Third Party Claim (subject only
to the $2,000,000 deductible provided in Section 12.02(a) or (b), as
--------
applicable), then, subject to the limitations set forth in this Section, the
Indemnifying Party shall be entitled to control and appoint lead counsel for
such defense, in each case at the expense of the Indemnifying Party. Prior to
the receipt of the written notice from the Indemnifying Party called for in the
preceding sentence, the Indemnified Party may take, but shall not be obligated
to take, any action it considers reasonably necessary or desirable in conducting
such defense.
(c) If the Indemnifying Party shall assume the control of the defense
of any Third Party Claim in accordance with the provisions of this Section
12.03, (i) the Indemnifying Party shall obtain the prior written consent of the
- -----
Indemnified Party (which shall not be unreasonably withheld) before entering
into any settlement of such Third Party Claim, if the settlement does not
release the Indemnified Party from all liabilities and obligations with respect
to such Third Party Claim or the settlement imposes injunctive or other
equitable relief against the Indemnified Party and (ii) the Indemnified Party
shall be entitled to participate in the defense of such Third Party Claim and to
employ separate counsel of its choice for such purpose. The fees and expenses
of such separate counsel shall be paid by the Indemnified Party.
52
(d) Each party shall cooperate, and cause their respective Affiliates to
cooperate, in the defense or prosecution of any Third Party Claim and shall
furnish or cause to be furnished such records, information and testimony, and
attend such conferences, discovery proceedings, hearings, trials or appeals, as
may be reasonably requested in connection therewith.
Section 12.04. Calculation of Damages. (a) The amount of any Damages
payable under Section 12.02 shall be net of any (i) amounts recovered and
-----
premium adjustments or detriments incurred by the Indemnified Party under
applicable insurance policies, and (ii) Tax Benefit realized by the Indemnified
Party arising from the incurrence or payment of any such Damages calculated in
accordance with the principles of Section 9.05(b).
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(b) The Indemnifying Party shall not be liable under Section 12.02 for
-----
any (i) Damages relating to any matter to the extent that there is included in
the calculation of the Final Capitalization Amount a specific liability or
reserve relating to such matter or (ii) exemplary or punitive Damages (other
than exemplary or punitive Damages owed to a third party).
Section 12.05. Assignment of Claims. If the Indemnified Party receives any
payment from an Indemnifying Party in respect of any Damages pursuant to Section
12.02 and the Indemnified Party could have recovered all or a part of such
- -----
Damages from a third party (a "POTENTIAL CONTRIBUTOR") based on the underlying
Claim asserted against the Indemnifying Party, the Indemnified Party shall
assign such of its rights to proceed against the Potential Contributor as are
necessary to permit the Indemnifying Party to recover from the Potential
Contributor the amount of such payment.
Section 12.06. Other Indemnification. (a) The Principal Stockholder, on
behalf of the Stockholders, hereby indemnifies Buyer and, after the Effective
Time, the Surviving Corporation, and their Affiliates against and agrees to hold
each of them harmless from any and all damage, loss, liability and expense
(excluding all attorneys' fees (other than costs of collection) and expenses and
exemplary or punitive damages (other than exemplary or punitive Damages owed to
a third party), but including, without limitation, all loss of earnings that
would otherwise have been achieved and all mitigation expenses incurred to avoid
such loss of earnings determined by any court of competent jurisdiction) ("PHASE
CHANGE DAMAGES") incurred or suffered by Buyer or any of its Affiliates arising
out of or relating to any matter that has been alleged or may be alleged in the
patent infringement claim filed by R.G. Barry Corporation and Vesture
Corporation against the Company and Phase Change Laboratories, Inc. in the U.S.
District Court for the Middle District of North Carolina (including without
limitation any relief that may be granted in respect of any such matter in such
53
litigation or any other litigation relating to any such matter). Buyer may, at
its option, elect to have all or a portion of any payment required to be made to
Buyer or its Affiliates under this Section made out of the funds in the Escrow
Account.
(b) The Principal Stockholder shall be entitled to participate in the
defense of the above-referenced matters at his own expense. Prior to the
Effective Time, TISM shall control such defense; provided that TISM shall obtain
the prior written consent of Buyer (which shall not be unreasonably withheld)
before entering into any settlement of such matters. Following the Effective
Time the Surviving Corporation shall control such defense; provided, that the
Surviving Corporation shall obtain the prior written consent of the Principal
Stockholder (which shall not be unreasonably withheld) before entering into any
settlement of such matters. Each party shall cooperate, and cause their
respective Affiliates to cooperate, in the defense or prosecution of such
matters and shall furnish or cause to be furnished such records, information and
testimony, and attend such conferences, discovery proceedings, hearings, trials
or appeals, as may be reasonably requested in connection therewith.
(c) The amount of any Phase Change Damages payable under this Section
shall be net of (i) any amounts (other than in respect of attorneys fees)
recovered by the Buyer, its Affiliates or the Surviving Corporation pursuant to
the indemnity from Phase Change Laboratories, Inc., (ii) any amounts recovered
and premium adjustments or other detriments incurred by Buyer, its Affiliates or
the Surviving Corporation under applicable insurance policies and (iii) any Tax
Benefit realized by Buyer, its Affiliates or the Surviving Corporation arising
from the incurrence or payment of any such Phase Change Damages calculated in
accordance with the principles of Section 9.05(b).
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(d) For the avoidance of doubt, it is agreed that the indemnity provided
by this Section 12.06 (i) is not pursuant to Section 12.02(a), (ii) is not
subject to any deductible or cap and (iii) is not subject to the procedures set
forth in Section 12.03.
Section 12.07. Exclusivity. Except for rights and claims arising under the
express terms of this Agreement, each party hereto on behalf of itself and its
Affiliates waives and agrees not to assert any rights or claims that such party
or any of its Affiliates may now or hereafter have against any other party or
any of such other party's Affiliates, whether in law or equity, relating to
TISM, the Company, any of the Subsidiaries, or any of the transactions
contemplated hereby. The rights and claims waived and covenanted not to be
asserted by means of the preceding sentence include, without limitation, all the
following claims except to the extent they arise under an express
representation, warranty, covenant, or agreement contained within this Agreement
or any certificate delivered pursuant
54
to this Agreement: (i) claims for contribution or other rights of recovery
arising out of or relating to any Environmental Law; (ii) claims under
applicable securities and blue sky laws; (iii) claims for breach of contract,
breach of representation or warranty, negligent misrepresentation, or fraud; and
(iv) all other claims for breach of duty. After the Effective Time, Sections
9.05 and 12.02 will provide the exclusive remedy for any inaccuracy in or
- ---- -----
violation of any express representation, warranty, covenant or agreement (other
than those contained in Sections 2.06, 6.04, 6.12, 7.03 and 12.06) contained in
---- ---- ---- ----
this Agreement or in any certificate delivered pursuant to this Agreement. The
Principal Stockholder waives and agrees not to assert any right or claim of any
kind (including, without limitation, any director's or officer's indemnification
or similar claim) that the Principal Stockholder now or hereafter may have
against TISM, the Company, any of the Subsidiaries, or any of their respective
officers, directors, or Affiliates by reason of any actual or claimed inaccuracy
in or violation of any representation, warranty, covenant or agreement of TISM
expressly set forth in this Agreement or in any certificate delivered pursuant
to this Agreement.
Section 12.08. Escrow Account. (a) Any payment required to be made to
Buyer or any of its Affiliates under this Article 12 shall be subject to Section
14.11.
- -----
(b) Any payment required to be made by Buyer pursuant to this Article 12
--
shall be paid to the Principal Stockholder for distribution to the Stockholders
as part of the Merger Consideration.
ARTICLE 13
Termination
Section 13.01. Grounds for Termination. This Agreement may be terminated
at any time prior to the Effective Time:
(a) by mutual written agreement of TISM and Buyer;
(b) by either TISM or Buyer if the Merger shall not have been
consummated on or before January 15, 1999; provided that the party seeking
to exercise such right is not then in material breach of any
representation, warranty, covenant or agreement under this Agreement;
(c) by either TISM or Buyer if the other party is in material
breach of any representation, warranty, covenant or agreement of such party
under this Agreement; or
55
(d) by either TISM or Buyer if consummation of the transactions
contemplated hereby would violate any nonappealable final order, decree or
judgment of any court or governmental body having competent jurisdiction.
The party desiring to terminate this Agreement pursuant to clauses 13.01(b),
--------
13.01(c) or 13.01(d) shall give notice of such termination to the other party.
- -------- -------
Section 13.02. Effect of Termination. If this Agreement is terminated as
permitted by Section 13.01, such termination shall be without liability of
-----
either party (or any stockholder, director, officer, employee, agent, consultant
or representative of such party) to the other party to this Agreement; provided
that in the case of a (i) failure of either party to fulfill a condition to the
performance of the obligations of the other party, (ii) failure of either party
to perform a covenant of this Agreement or (iii) breach as of the date hereof by
either party hereto of any representation or warranty contained herein, such
party shall be fully liable for any and all Damages incurred or suffered by the
other party as a result of such failure or breach. Subject to the foregoing, the
provisions of Sections 7.01, 14.03, 14.05, 14.06 and 14.07 and the
---- ----- ----- ----- -----
Confidentiality Agreement shall survive any termination hereof pursuant to
Section 13.01.
-----
ARTICLE 14
Miscellaneous
Section 14.01. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile transmission) and
shall be given,
if to Buyer, to:
TM Transitory Merger Corporation
Two Copley Square
Boston, Massachusetts 02116
Attention: Andrew Balson
Fax: 617-572-3274
56
with a copy to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Newcomb Stillwell
Fax: 617-951-7050
if to TISM or to the Principal Stockholder, to:
TISM, Inc.
30 Frank Lloyd Wright Drive
P.O. Box 997
Ann Arbor, Michigan 48106-0997
Attention: Thomas S. Monaghan
Fax: 734-663-7922
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Dennis S. Hersch
Fax: (212) 450-4800
All such notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 5 p.m. on a
business day in the place of receipt. Otherwise, any such notice, request or
communication shall be deemed not to have been received until the next
succeeding business day in the place of receipt.
Section 14.02. Amendments and Waivers. (a) Any provision of this Agreement
may be amended or waived if, but only if, such amendment or waiver is in writing
and is signed, in the case of an amendment, by each party to this Agreement, or
in the case of a waiver, by the party against whom the waiver is to be
effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
57
Section 14.03. Expenses. Except as expressly provided otherwise in this
Agreement, all costs and expenses incurred in connection with this Agreement
shall be paid by the party incurring such cost or expense.
Section 14.04. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto; provided, however, that no
consent shall be required for any assignment or other transfer by the Buyer or
the Surviving Corporation in connection with granting a security interest to any
lender or in connection with the sale or other disposition of all or
substantially all of the business of TISM and its Subsidiaries, whether through
a sale of assets, sale of stock, merger, consolidation or other transaction.
Section 14.05. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York, without regard to
the conflicts of law rules of such state.
Section 14.06. Jurisdiction. Except as otherwise expressly provided in
this Agreement, the parties hereto agree that any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby may only
be brought in the United States District Court for the Southern District of New
York or any other New York State court sitting in New York City, and each of the
parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Each party agrees that service of process on such party as
provided in Section 14.01 shall be deemed effective service of process on such
-----
party.
Section 14.07. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 14.08. Counterparts; Third Party Beneficiaries. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon
58
the same instrument. This Agreement shall become effective when each party
hereto shall have received a counterpart hereof signed by the other party
hereto. Subject to Section 14.04 and except for the rights of Buyer's Affiliates
-----
and the Principal Stockholder's Affiliates under Articles 9 and 12, no provision
-
of this Agreement is intended to confer upon any Person other than the parties
hereto any rights or remedies hereunder.
Section 14.09. Entire Agreement. This Agreement, together with the
Disclosure Schedule, the Escrow Agreement, the Lease Agreement and the
Confidentiality Agreement, constitute the entire agreement between the parties
or their Affiliates with respect to the subject matter of this Agreement and
supersede all prior agreements and understandings, both oral and written,
between the parties or their Affiliates with respect to the subject matter of
this Agreement.
Section 14.10. Captions, Etc. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof. As used in this Agreement, the term "including" shall
mean "including, without limitation."
Section 14.11. Limitation on Remedies. (a) Notwithstanding anything else
contained herein, after the Closing Date, except as provided in Sections 6.12,
9.05 or 12.06, all claims of Buyer and its Affiliates and, after the Closing
Date, TISM, the Company and the Subsidiaries, for any payment or indemnification
under Section 9.05 or under Section 12.02(a) with respect to (i) a
---- --------
misrepresentation under the first sentence of Section 4.01, the first sentence
of Section 4.07(a) or Sections 4.02, 4.05, 4.06, 4.07(b), 4.11 or 4.19 or
---- ---- ---- ----
Article 10, (ii) a breach of a covenant hereunder or (iii) a misrepresentation
--
constituting fraud by TISM or the Principal Stockholder, shall be satisfied
first out of amounts in the Escrow Account, and thereafter by the Principal
Stockholder.
(b) Notwithstanding anything else contained herein but subject to Section
14.11(a), after the Closing Date all other claims of Buyer and its Affiliates
and, after the Closing Date, TISM, the Company and the Subsidiaries for any
payment or indemnification under this Agreement (pursuant to Sections 2.06,
----
12.02(a) or otherwise) shall be satisfied solely out of amounts in the Escrow
- --------
Account and the sole remedy in respect thereof shall be against the funds in
such account.
Section 14.12. Disclosure Schedules. The parties acknowledge and agree
that (i) the Disclosure Schedules to this Agreement may include certain items
and information solely for informational purposes for the convenience of Buyer
and (ii) the disclosure by TISM of any matter in the Disclosure Schedules shall
not be deemed to constitute an acknowledgment by TISM that the matter is
59
required to be disclosed by the terms of this Agreement or that the matter is
material.
Section 14.13. Cooperation on Certain Matters. The parties hereto agree
to cooperate to take such steps as may be reasonably necessary or advisable,
including the amendment of this Agreement, to implement the transactions
contemplated by Section 8.06; provided, that the parties shall not be obligated
----
to take any action that would result in any change in the aggregate amount of
the Merger Consideration payable hereunder or any of the other material terms or
conditions hereof.
Section 14.14. Timeliness of Performance. The parties hereto acknowledge
and agree that time is of the essence in the performance of the provisions of
this Agreement.
60
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
TM TRANSITORY MERGER CORPORATION
By: /s/ Mitt Romney
----------------------------
Name: Mitt Romney
Title: President
TISM, INC.
By: /s/ Thomas S. Monaghan
----------------------------
Name: Thomas S. Monaghan
Title: Chairman and CEO
/s/ Thomas S. Monaghan
--------------------------------
THOMAS S. MONAGHAN,
Individually and as Trustee
61
Exhibit 2.2
AMENDMENT NO. 1
TO AGREEMENT AND PLAN OF MERGER
Dated as of November 24, 1998
TM Transitory Merger Corporation, a Michigan corporation ("BUYER"), TISM,
Inc., a Michigan corporation ("TISM") and Mr. Thomas S. Monaghan (the "PRINCIPAL
STOCKHOLDER"), individually and as trustee of The Thomas S. Monaghan Living
Trust, hereby agree as follows:
1. Reference to the Merger Agreement; Definitions. Reference is made to the
----------------------------------------------
Agreement and Plan of Merger dated as of September 25, 1998 (as amended,
the "Merger Agreement"), among Buyer, TISM and the Principal Stockholder.
Terms defined in the Merger Agreement and not otherwise defined herein are
used herein as so defined.
2. Amendments to Merger Agreement. The Merger Agreement is hereby amended as
------------------------------
follows:
(a) Amendments to Section 5.05.
--------------------------
(i) Clause (ii) of the first sentence of Section 5.05 is hereby
amended and restated so as to read in its entirety as follows:
"(ii) (a) a commitment letter dated as of the date hereof from
J.P. Morgan Securities Inc. ("JPMSI") pursuant to which JPMSI has
committed, subject to the terms and conditions set forth or
referred to therein, to purchase subordinated debt securities in
the amount of $380,000,000 and (b) a preliminary offering
memorandum dated on or about November 24, 1998 relating to an
offering by Domino's, Inc. of $275,000,000 of Senior Subordinated
Notes due 2008 (which contemplates the concurrent sale of
$105,000,000 of Preferred Stock);" and
(ii) The second sentence of Section 5.05 is hereby amended and
restated so as to read in its entirety as follows: "The
aforementioned credit agreements and commitments to purchase debt
and equity securities shall be referred to as the "FINANCING
AGREEMENTS" and the financing described in clauses (i), (ii)(a)
or (b), and (iii) shall be referred to as the "FINANCING.""
3. Waiver under Merger Agreement. Reference is made to the Amended and
-----------------------------
Restated Retention Agreements with Patrick Doyle and Bob Fulmer (the
"Amended and Restated Retention Agreements"), a copy of which has been
furnished to Buyer. The Buyer hereby waives the provisions of the Merger
Agreement solely to the extent necessary to permit the execution and
delivery of the Amended and Restated Retention Agreements.
4. Miscellaneous. Except to the extent specifically amended or waived hereby
-------------
the provisions of the Merger Agreement have not been otherwise amended or
waived, and the Merger Agreement as amended and waived hereby is hereby
confirmed as being in full force and effect. This Amendment may be executed
in any number of counterparts which together shall constitute one
instrument, shall be governed by and construed in accordance with the law
of the State of New York, without regard to the conflict of law rules of
such state. This Agreement shall become effective when each party hereto
shall have received a counterpart hereof signed by each other party hereto.
In WITNESS WHEREOF, the parties have executed and delivered this Amendment
or caused this Amendment to be executed and delivered by their duly authorized
officers as of the date first above written.
TM TRANSITORY MERGER CORPORATION
By: /s/ Andrew Balson
--------------------------
Name: Andrew Balson
Title: Vice President
TISM, INC.
By: /s/ Thomas S. Monaghan
--------------------------
Name: Thomas S. Monaghan
Title: Chairman and CEO
/s/ Thomas S. Monaghan
------------------------------
THOMAS S. MONAGHAN
Individually and as Trustee
-2-
Exhibit 2.3
AMENDMENT NO. 2
TO AGREEMENT AND PLAN OF MERGER
Dated as of November 24, 1998
TM Transitory Merger Corporation, a Michigan corporation ("BUYER"), TISM,
Inc., a Michigan corporation ("TISM") and Mr. Thomas S. Monaghan (the "PRINCIPAL
STOCKHOLDER"), individually and as trustee of The Thomas S. Monaghan Living
Trust, hereby agree as follows:
1. Reference to the Merger Agreement: Definitions. Reference is made to the
----------------------------------------------
Agreement and Plan of Merger dated as of September 25, 1998 (as amended by
Amendment No. 1 thereto dated November 24, 1998, the "MERGER AGREEMENT"),
among Buyer, TISM and the Principal Stockholder. Terms defined in the
Merger Agreement and not otherwise defined herein are used herein as so
defined.
2. Amendments to Merger Agreement. The Merger Agreement is hereby amended as
------------------------------
follows:
(a) Section 1.01(a) is hereby amended to include the following after the
definition of "CONTINGENT NOTE": "'DEFERRED AMOUNTS' shall mean the
aggregate Deferred Amounts as defined in the Amendments to Bonus
Agreements dated as November 23, 1998 between the Company and each of
Pat Kelly, Stuart Mathis, Gary McCausland, Harry Silverman and Michael
Soignet."
(b) Section 1.01(a) is hereby amended by replacing the definition of "NET
PURCHASE PRICE" with the following: "'NET PURCHASE PRICE' means (i)
the Purchase Price minus (ii) (A) the total Indebtedness of TISM, the
Company and the Subsidiaries immediately prior to the Effective Time
and (B) the Deferred Amounts."
(c) Section 2.05 is hereby amended to add the following sentence following
the last sentence of Section 2.05(a). "Notwithstanding anything herein
to the contrary, the Closing Capitalization Amount shall not reflect
any liabilities in connection with the Company Transaction Expenses or
Deferred Amounts."
(d) Section 9.03(e) is amended by replacing the first sentence of such
Section 9.03(e) with the following sentence:
"Buyer shall promptly pay, upon actual realization, to the Principal
Stockholder for distribution to the former stockholders of TISM as
part of the Merger Consideration amounts equal to the amounts by
1
which the total Tax liability of TISM, the Surviving Corporation, the
Company or any Subsidiary is reduced as a result of Tax deductions or
other Tax benefits resulting from (i) payments made on the Closing
Date of Company Transaction Expenses and (ii) payments, whenever made,
of the Deferred Amounts."
3. Waiver under Merger Agreement. Reference is made to the attached form of
-----------------------------
Agreements among Domino's Pizza, Inc. and each of Pat Kelly, Stuart Mathis,
Gary McCausland, Harry Silverman and Michael Soignet (the "AMENDED SALE
BONUS AGREEMENTS"). Buyer hereby waives the provisions of the Merger
Agreement solely to the extent necessary to permit the execution and
delivery of the Amended Sale Bonus Agreements.
4. Miscellaneous. Except to the extent specifically amended or waived hereby,
-------------
the provisions of the Merger Agreement have not been otherwise amended or
waived, and the Merger Agreement as amended and waived hereby is hereby
confirmed as being in full force and effect. This Amendment may be
executed in number of counterparts which together shall constitute one
instrument, and shall be governed by and construed in accordance with the
law of the State of New York, without regard to the conflict of law rules
of such state. This Agreement shall become effective when each party
hereby shall have received a counterpart hereof signed by each other party
hereto.
-2-
In WITNESS WHEREOF, the parties have executed and delivered this Amendment
No. 2 to the Merger Agreement or caused this Amendment No. 2 to the Merger
Agreement to be executed and delivered by their duly authorized officers as of
the date first above written.
TM TRANSITORY MERGER CORPORATION
By: /s/ Andrew Balson
---------------------------------
Name: Andrew Balson
Title: President, Secretary and
Treasurer
TISM, INC.
By: /s/ Thomas S. Monaghan
---------------------------------
Name: Thomas S. Monaghan
Title: Chairman and CEO
/s/ Thomas S. Monaghan
--------------------------------------
THOMAS S. MONAGHAN,
Individually and as Trustee
-3-
Exhibit 2.4
AMENDMENT NO. 3
to
AGREEMENT AND PLAN OF MERGER
among
TM TRANSITORY MERGER CORPORATION,
TISM, INC.
and
THOMAS S. MONAGHAN,
Individually and as Trustee of The Thomas S. Monaghan Living Trust
AMENDMENT NO. 3 TO AGREEMENT AND PLAN OF MERGER (this "AMENDMENT"), dated
December 18, 1998, by and among TM Transitory Merger Corporation, a Michigan
corporation ("BUYER"), TISM, Inc., a Michigan corporation ("TISM"), and Thomas
S. Monaghan, individually and as trustee of The Thomas S. Monaghan Living Trust
(the "PRINCIPAL STOCKHOLDER").
WITNESSETH:
WHEREAS, Buyer, TISM and the Principal Stockholder are parties to an
Agreement and Plan of Merger dated as of September 25, 1998, as amended by
Amendments No.1 and No. 2 thereto dated as of November 24, 1998 and November 24,
1998, respectively (the "AGREEMENT");
NOW, THEREFORE, in consideration of the premises and mutual agreements set
forth herein and in the Agreement, the parties hereto agree as follows:
1. Section 1.01(a) of the Agreement is hereby amended by inserting
immediately after the words "all obligations" in the definition of
"Indebtedness" included therein, the words "(other than obligations solely
between or among TISM and its subsidiaries)".
2. Section 2.01(c) of the Agreement is hereby deleted in its entirety,
and Section 2.01(d) is renumbered Section 2.01(c).
3. Section 5.03 of the Agreement is hereby amended to read in its
entirety as follows:
"The execution, delivery and performance by Buyer of this Agreement
and the consummation of the transactions contemplated hereby require
no material action by or in respect of, or filing with, any
governmental body, agency or official, including compliance with any
applicable requirements of the HSR Act, other than the
1
filing with the Department of Consumer and Industry Services,
Corporations, Securities and Land Development Bureau of the State of
Michigan of the certificate of merger pursuant to Michigan Law."
4. Schedule 6.01 of the Agreement is hereby amended to add the following
sentence after the last sentence thereof:
"Prior to the Closing Date, the name of Storefinder, Inc. a subsidiary
of the Company, will be changed to Domino's Pizza International
Payroll Services, Inc., and the name of Domino's Pizza International
Payroll Services, Inc., an indirect subsidiary of the Company, will be
changed to Domino's, Inc., and each such Company's certificate of
incorporation will be amended to reflect this change."
5. Section 6.05 is hereby amended to read in its entirety as follows:
"Prior to the Closing Date, TISM shall exercise the Option in exchange
for a promissory note. The Principal Stockholder shall purchase from
TISM the same number of TISM shares acquired pursuant to the option in
exchange for one or more promissory notes in an amount that is, in the
aggregate, larger than the principal amount of the note issued by TISM
to exercise the Option. The Principal Stockholder and TISM shall net
their respective notes referred to in the previous sentence, resulting
in a net obligation of the Principal Stockholder to TISM. On or prior
to the Closing Date, TISM will make a pro rata redemption from each of
the Stockholders of shares of the then-outstanding Common Stock in an
amount of such notes equal to the amount of such obligation of the
Principal Stockholder to TISM."
6. (a) Section 1.01(a) of the Agreement is hereby amended by inserting
the following additional definition immediately following the definition of
"Disclosure Schedules" therein:
"ACCOUNTING EFFECTIVE DATE' means Sunday, December 20, 1998."
(b) Section 1.01(a) of the Agreement is hereby amended by inserting the
following proviso at the end of the definition of "Stock Consideration" therein:
-2-
"provided, however, that in the case of Stock Consideration
consisting of shares of Class A Common Stock of the Surviving
Corporation, all of such Class A Common Stock shall be payable in
the form of shares of Class A-1 Common Stock."
(c) Section 2.01(a) of the Agreement is hereby amended by appending the
following proviso to the end of such paragraph:
"; provided, that (i) for accounting purposes only, the Merger will be
deemed to be effective as of the Accounting Effective Date, (ii) subject to the
other terms and conditions of this Agreement, all of the revenues, income, costs
and expenses of TISM and its Subsidiaries for the period from the close of
business on the Accounting Effective Date (the "CLOSE OF BUSINESS") through the
Closing Date shall be for the benefit or detriment of the Surviving Corporation
and not the Stockholders of TISM and (iii) during such period TISM shall not
declare or pay any dividend on, or make any other distribution in respect of its
capital stock or otherwise make any payments of any kind to its Stockholders or
any of its Affiliates other than as expressly provided herein."
(d) Section 2.05(a) of the Agreement is hereby amended by replacing clause
(x) thereof in its entirety with the following:
"(x) fairly present the consolidated financial position of the
Company and the Subsidiaries as at the Close of Business in accordance with
generally accepted accounting principles applied on a basis consistent with
those used in the preparation of the December Balance Sheet,"
(e) Section 9.05(a) of the Agreement is hereby amended by inserting
therein, immediately after the words "provided, that Loss shall not include any
Tax of TISM, the Surviving Corporation, the Company or the Subsidiaries arising
as a result of the assumption of liabilities in excess of basis by the Company
or any Subsidiary", the words:
"; and provided, further, that there shall be no indemnification
under this Section 9.05 unless the aggregate amount of Losses
exceeds $150,000 and then only to the extent of such excess."
(f) All references in the Agreement to the "Closing Balance Sheet" are
hereby replaced with the words "Accounting Effective Date Balance Sheet", and
all references in the Agreement to "Closing Capitalization Amount" are hereby
replaced with the words "Accounting Effective Date Capitalization Amount".
-3-
7. (a) Section 6.04 of the Agreement is hereby amended by inserting in
the place thereof the following:
Section 6.04. Noncompetition. (a) The Principal Stockholder
agrees that during the Non-Competition Period he shall not:
(i) engage, either directly or indirectly, as an employee,
officer, director or consultant, or as a principal for his own account
or jointly with others, or as a stockholder in any corporation or
joint stock association, in, or have any investment or other interest
in, directly or indirectly, any business other than the Company that
is engaged in the marketing, production or sale of pizza (the
"BUSINESS") within the United States, or any other country from which
the Company or any Subsidiary derives revenues, directly or
indirectly, on or prior to the Closing Date; provided, that nothing
contained in this Section 6.04 shall prevent the Principal Stockholder
from owning, directly or indirectly, (i) not more than five percent of
the outstanding shares of, or not more than five percent of any other
equity interest in, any Person engaged in the Business and listed or
traded on a national securities exchange or in an over-the-counter
securities market or (ii) any financial interest in one or more
Franchisees (A) the aggregate cost of which shall not exceed
$10,000,000 without the prior consent of the Surviving Corporation, or
(B) at any amount with the consent of the Surviving Corporation, which
consent shall not be unreasonably withheld; and provided further, that
this Section shall not be deemed to prohibit incidental sales of pizza
on the premises of charitable, non-profit or educational institutions
established by the Principal Stockholder or his Affiliates; or
(ii) himself, or permit any Affiliate to, directly or indirectly,
employ or solicit, or receive or accept the performance of services by
any current employee with managerial responsibility or other current
key employee of the Company or any Subsidiary, except as set forth on
Schedule 6.04 provided, that nothing in this Section 6.04 shall
prevent solicitation through general, non-targeted recruitment efforts
such as advertisements and job listings.
As used herein, the term "Non-Competition Period" shall mean the
period beginning on the Closing Date and ending on the later of (x) three
years after the Closing Date and (y) the date to which the Non-Competition
Period shall have been from time to time extended pursuant
-4-
to the immediately following sentence. The Buyer shall be entitled to elect
to make up to two (2) extensions of the Non-Competition Period, with each
extension to be of one year's duration, such elections to be exercisable by
notice to the Principal Stockholder (x) prior to three (3) years from the
Closing Date in the case of the first such extension and (y) prior to four
(4) years from the Closing Date in the case of the second such extension,
such notice to be accompanied or preceded in each case by payment of $1.0
million by bank check or wire transfer of immediately available funds.
(b) The Principal Stockholder agrees, from and after the Effective
Time, that he shall not disclose or use for his own benefit or purposes or
the benefit or purposes of any other person, firm, partnership, joint
venture, association, corporation or other business organization, entity or
enterprise other than the Surviving Corporation and any of its subsidiaries
or affiliates, any trade secrets, information, data, or other confidential
information relating to customers, development programs, costs, marketing,
trading, investment, sales activities, promotion, credit and financial
data, manufacturing processes, financing methods, plans, or the business
and affairs of the Surviving Corporation generally, or of any subsidiary or
affiliate of the Surviving Corporation; provided that the foregoing shall
not apply to information which is not unique to the Surviving Corporation
or which is generally known to the industry or the public other than as a
result of the Principal Stockholder's breach of this covenant.
(c) If any provision contained in this Section shall for any reason
be held invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions of
this Section, but this Section shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein. It is
the intention of the parties that if any of the restrictions or covenants
contained herein is held to cover a geographic area or to be for a length
of time which is not permitted by applicable law, or in any way construed
to be too broad or to any extent invalid, such provision shall not be
construed to be null, void and of no effect, but to the extent such
provision would be valid or enforceable under applicable law, a court of
competent jurisdiction shall construe and interpret or reform this Section
to provide for a covenant having the maximum enforceable geographic area,
time period and other provisions (not greater than those contained herein)
as shall be valid and enforceable under such applicable law. The Principal
Stockholder acknowledges that Buyer would be irreparably harmed by any
-5-
breach of this Section and that there would be no adequate remedy at law or
in damages to compensate Buyer for any such breach. The Principal
Stockholder agrees that Buyer shall be entitled to injunctive relief
requiring specific performance by him of this Section and consents to the
entry thereof.
(d) In consideration of the Principal Stockholder agreeing to the
provisions of clause (a) of this Section, at the Closing, Buyer agrees to
pay to him the sum of $50,000,000 (the "NONCOMPETE CONSIDERATION") in
immediately available funds by wire transfer to an account with a bank in
New York City designated by notice from him to Buyer.
(b) Section 6.11 is hereby amended by replacing the text and heading
thereof with the words "[intentionally omitted]".
9. (a) The Buyer hereby waives the provisions of the Agreement solely to
the extent necessary to permit the Company to terminate the Deferred
Compensation Plans and make the required payments to the employees of the
Company pursuant to the Deferred Compensation Plans prior to the Closing Date.
(b) The Buyer hereby waives the provisions of the Agreement (other
than Sections 2.05 and 2.06) to permit TISM to make on or prior to December 18,
1998 a distribution to its stockholders of a note receivable from the Principal
Stockholder in the amount of $2,568,031.01 in payment for certain assets listed
on the attached schedule. In addition, the Buyer hereby waives the provisions of
the Agreement solely to the extent necessary (i) to permit certain other
Stockholders of TISM to sell their Shares to the Principal Stockholder prior to
the Closing, such that the ownership of the capital stock of TISM immediately
prior to the Effective Time shall be as set forth on Exhibit A hereto rather
than as set forth in Schedule 4.05 and (ii) to permit TISM to contribute 100% of
the common stock of the Company to Domino's, Inc., a subsidiary of TISM.
(c) This Amendment may be executed and delivered in any number of
counterparts which together shall constitute one instrument, and shall be
governed by and construed in accordance with the law of the State of New York,
without regard to the conflict of law rules of such state. This Agreement shall
become effective when signed and delivered by each party hereto.
10. Except as specifically amended by this Amendment, the Agreement shall
remain in full force and effect. Terms defined in the Merger Agreement and not
otherwise defined herein are used herein as so defined.
-6-
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 3
to the Agreement as of this 18 day of December, 1998.
TM TRANSITORY MERGER CORPORATION
By: /s/ Andrew Balson
-------------------------------------
Name: Andrew Balson
Title: President, Secretary and
Treasurer
TISM, INC.
By: /s/ Harry J. Silverman
-------------------------------------
Name: Harry J. Silverman
Title: Vice President
/s/ Kathleen Ferrell, As Attorney-in-Fact
-----------------------------------------
THOMAS S. MONAGHAN,
Individually and as Trustee
-7-
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
DOMINO'S PIZZA INTERNATIONAL PAYROLL SERVICES, INC.
______________________________________________________________________________
DOMINO'S PIZZA INTERNATIONAL PAYROLL SERVICES, INC., (the "Corporation"),
a corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That the date of incorporation of the Corporation is December 17,
1991.
SECOND: That the Board of Directors of said Corporation, at a meeting duly
convened and held, adopted the following resolution:
"RESOLVED, that the Board of Directors hereby declares it advisable
and in the best interest of the Corporation that the Certificate of
Incorporation be amended and restated to read as follows:
1. The name of the Corporation is DOMINO'S, INC.
2. The original date of incorporation of the Corporation was December 17,
1991.
3. The registered office of this corporation in the State of Delaware is
located at 1209 Orange Street, Wilmington, Delaware, 19801, county of New
Castle. The name of its registered agent at such address is The
Corporation Trust Company.
4. The purpose of this corporation is to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
5. The total number of shares of stock that this corporation shall have
authority to issue is 3,000 shares of Common Stock, par value $.01 per
share. The holders of the Common Stock shall have and possess all powers
and voting and other rights pertaining to the stock of this corporation and
each share of Common Stock shall be entitled to one vote.
6. The name and mailing address of each incorporator is as follows:
NAME MAILING ADDRESS
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L. J. Vitalo Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
K. A. Widdoes Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
M. A. Brzoska Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
7. Except as otherwise provided in the provisions establishing a class of
stock, the number of authorized shares of any class or series of stock may
be increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the
voting power of the corporation entitled to vote irrespective of the
provisions of Section 242(b)(2) of the General Corporation Law of the State
of Delaware.
8. The election of directors need not be by written ballot unless the By-
Laws shall so require.
9. In furtherance and not in limitation of the power conferred upon the
board of directors by law, the board of directors shall have power to make,
adopt, alter, amend and repeal from time to time by-laws of this
corporation, subject to the right of the stockholders entitled to vote with
respect thereto to alter and repeal by-laws made by the board of directors.
10. A director of this corporation shall not be liable to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent that exculpation from liability is not
permitted under the General Corporation Law of the State of Delaware as in
effect at the time such liability is determined. No amendment or repeal of
this Section 10 shall apply to or have any effect on the liability or
alleged liability of any director of the corporation for or with respect to
any acts or omissions of such director occurring prior to such amendment or
repeal.
11. This corporation shall, to the maximum extent permitted from time to
time under the law of the State of Delaware, indemnify and upon request
advance expenses to any person who is or was a party or is threatened to be
made a party to any threatened, pending or completed action, suit,
proceeding or claim, whether civil, criminal, administrative or
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investigative, by reason of the fact that such person is or was or has
agreed to be a director or officer of this corporation or while a director
or officer is or was serving at the request of this corporation as a
director, officer, partner, trustee, employee or agent of any corporation,
partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, against expenses (including
attorney's fees and expenses), judgments, fines, penalties and amounts paid
in settlement incurred (and not otherwise recovered) in connection with the
investigation, preparation to defend or defense of such action, suit,
proceeding or claim; provided, however, that the foregoing shall not
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require this corporation to indemnify or advance expenses to any person in
connection with any action, suit, proceeding, claim or counterclaim
initiated by or on behalf of such person. Such indemnification shall not be
exclusive of other indemnification rights arising under any by-law,
agreement, vote of directors or stockholders or otherwise and shall inure
to the benefit of the heirs and legal representatives of such person. Any
person seeking indemnification under this Section 11 shall be deemed to
have met the standard of conduct required for such indemnification unless
the contrary shall be established. Any repeal or modification of the
foregoing provisions of this Section 11 shall not adversely affect any
right or protection of a director or officer of this corporation with
respect to any acts or omissions of such director or officer occurring
prior to such repeal or modification.
12. The books of this corporation may (subject to any statutory
requirements) be kept outside the State of Delaware as may be designated by
the board of directors or in the by-laws of this corporation.
13. If at any time this corporation shall have a class of stock registered
pursuant to the provisions of the Securities Exchange Act of 1934, for so
long as such class is so registered, any action by the stockholders of such
class must be taken at an annual or special meeting of stockholders and may
not be taken by written consent."
THIRD: That this Certificate has been consented to and authorized by the
holder of all the issued and outstanding stock entitled to vote by written
consent given in accordance with the provisions of Section 228 of the General
Corporation Law of the State of Delaware.
FOURTH: That the aforesaid amendment is duly adopted in accordance with
the applicable provisions of Sections 245 and 228 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, said Corporation has caused this Certificate to be
signed by Harry J. Silverman, its Vice President, this 17th day of December,
1998.
/s/ Harry J. Silverman
________________________________
Harry J. Silverman
Vice President
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EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS
OF
DOMINO'S, INC.
Section 1. LAW, CERTIFICATE OF INCORPORATION AND BY-LAWS
1.1 These by-laws are subject to the certificate of incorporation of the
corporation. In these by-laws, references to law, the certificate of
incorporation and by-laws mean the law, the provisions of the certificate of
incorporation and the by-laws as from time to time in effect.
Section 2. STOCKHOLDERS
2.1 Annual Meeting. The annual meeting of stockholders shall be held at
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10:00 a.m. on the third Wednesday in March in each year, unless that day be a
legal holiday at the place where the meeting is to be held, in which case the
meeting shall be held at the same hour on the next succeeding day not a legal
holiday, or at such other date and time as shall be designated from time to time
by the board of directors and stated in the notice of the meeting, at which they
shall elect a board of directors and transact such other business as may be
required by law or these by-laws or as may properly come before the meeting.
2.2 Special Meetings. A special meeting of the stockholders may be called
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at any time by the chairman of the board, if any, the president or the board of
directors. A special meeting of the stockholders shall be called by the
secretary, or in the case of the death, absence, incapacity or refusal of the
secretary, by an assistant secretary or some other officer, upon application of
a majority of the directors. Any such application shall state the purpose or
purposes of the proposed meeting. Any such call shall state the place, date,
hour, and purposes of the meeting.
2.3 Place of Meeting. All meetings of the stockholders for the election
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of directors or for any other purpose shall be held at such place within or
without the State of Delaware as may be determined from time to time by the
chairman of the board, if any, the president or the board of directors. Any
adjourned session of any meeting of the stockholders shall be held at the place
designated in the vote of adjournment.
2.4 Notice of Meetings. Except as otherwise provided by law, a written
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notice of each meeting of stockholders stating the place, day and hour thereof
and, in the case of a special meeting, the purposes for which the meeting is
called, shall be given not less then ten nor more than sixty days before the
meeting, to each stockholder entitled to vote thereat, and to each stockholder
who, by law, by the certificate of incorporation or by these by-laws, is
entitled to
notice, by leaving such notice with him or at his residence or usual place of
business, or by depositing it in the United States mail, postage prepaid, and
addressed to such stockholder at his address as it appears in the records of the
corporation. Such notice shall be given by the secretary, or by an officer or
person designated by the board of directors, or in the case of a special meeting
by the officer calling the meeting. As to any adjourned session of any meeting
of stockholders, notice of the adjourned meeting need not be given if the time
and place thereof are announced at the meeting at which the adjournment was
taken except that if the adjournment is for more than thirty days or if after
the adjournment a new record date is set for the adjourned session, notice of
any such adjourned session of the meeting shall be given in the manner
heretofore described. No notice of any meeting of stockholders or any adjourned
session thereof need be given to a stockholder if a written waiver of notice,
executed before or after the meeting or such adjourned session by such
stockholder, is filed with the records of the meeting or if the stockholder
attends such meeting without objecting at the beginning of the meeting to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
meeting of the stockholders or any adjourned session thereof need be specified
in any written waiver of notice.
2.5 Quorum of Stockholders. At any meeting of the stockholders a quorum
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as to any matter shall consist of a majority of the votes entitled to be cast on
the matter, except where a larger quorum is required by law, by the certificate
of incorporation or by these by-laws. Any meeting may be adjourned from time to
time by a majority of the votes properly cast upon the question, whether or not
a quorum is present. If a quorum is present at an original meeting, a quorum
need not be present at an adjourned session of that meeting. Shares of its own
stock belonging to the corporation or to another corporation, if a majority of
the shares entitled to vote in the election of directors of such other
corporation is held, directly or indirectly, by the corporation, shall neither
be entitled to vote nor be counted for quorum purposes; provided, however, that
the foregoing shall not limit the right of any corporation to vote stock,
including but not limited to its own stock, held by it in a fiduciary capacity.
2.6 Action by Vote. When a quorum is present at any meeting, a plurality
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of the votes properly cast for election to any office shall elect to such office
and a majority of the votes properly cast upon any question other than an
election to an office shall decide the question, except when a larger vote is
required by law, by the certificate of incorporation or by these by-laws. No
ballot shall be required for any election unless requested by a stockholder
present or represented at the meeting and entitled to vote in the election.
2.7 Action without Meetings. Unless otherwise provided in the certificate
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of incorporation, any action required or permitted to be taken by stockholders
for or in connection with any corporate action may be taken without a meeting,
without prior notice and without a vote, if a consent or consents in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted and shall be delivered to the corporation by
delivery to its registered office in
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Delaware by hand or certified or registered mail, return receipt requested, to
its principal place of business or to an officer or agent of the corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Each such written consent shall bear the date of signature of each
stockholder who signs the consent. No written consent shall be effective to take
the corporate action referred to therein unless written consents signed by a
number of stockholders sufficient to take such action are delivered to the
corporation in the manner specified in this paragraph within sixty days of the
earliest dated consent so delivered.
If action is taken by consent of stockholders and in accordance with the
foregoing, there shall be filed with the records of the meetings of stockholders
the writing or writings comprising such consent.
If action is taken by less than unanimous consent of stockholders, prompt
notice of the taking of such action without a meeting shall be given to those
who have not consented in writing and a certificate signed and attested to by
the secretary that such notice was given shall be filed with the records of the
meetings of stockholders.
In the event that the action which is consented to is such as would have
required the filing of a certificate under any provision of the General
Corporation Law of the State of Delaware, if such action had been voted upon by
the stockholders at a meeting thereof, the certificate filed under such
provision shall state, in lieu of any statement required by such provision
concerning a vote of stockholders, that written consent has been given under
Section 228 of said General Corporation Law and that written notice has been
given as provided in such Section 228.
2.8 Proxy Representation. Every stockholder may authorize another person
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or persons to act for him by proxy in all matters in which a stockholder is
entitled to participate, whether by waiving notice of any meeting, objecting to
or voting or participating at a meeting, or expressing consent or dissent
without a meeting. Every proxy must be signed by the stockholder or by his
attorney-in-fact. No proxy shall be voted or acted upon after three years from
its date unless such proxy provides for a longer period. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and, if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally. The authorization of a proxy may but need
not be limited to specified action, provided, however, that if a proxy limits
its authorization to a meeting or meetings of stockholders, unless otherwise
specifically provided such proxy shall entitle the holder thereof to vote at any
adjourned session but shall not be valid after the final adjournment thereof.
2.9 Inspectors. The directors or the person presiding at the meeting may,
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and shall if required by applicable law, appoint one or more inspectors of
election and any substitute inspectors to act at the meeting or any adjournment
thereof. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors,
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if any, shall determine the number of shares of stock outstanding and the voting
power of each, the shares of stock represented at the meeting, the existence of
a quorum, the validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all stockholders. On request of the person
presiding at the meeting, the inspectors shall make a report in writing of any
challenge, question or matter determined by them and execute a certificate of
any fact found by them.
2.10 List of Stockholders. The secretary shall prepare and make, at least
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ten days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at such meeting, arranged in alphabetical order
and showing the address of each stockholder and the number of shares registered
in his name. The stock ledger shall be the only evidence as to who are
stockholders entitled to examine such list or to vote in person or by proxy at
such meeting.
Section 3. BOARD OF DIRECTORS
3.1 Number. The corporation shall have four directors, the number of
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directors to be determined from time to time by vote of the stockholders (as so
determined, the "Number of Directors"). Except in connection with the election
of directors at the annual meeting of stockholders, the number of directors may
be decreased only to eliminate vacancies by reason of death, resignation or
removal of one or more directors. No director need be a stockholder.
3.2 Tenure. Except as otherwise provided by law, by the certificate of
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incorporation or by these by-laws, each director shall hold office until the
next annual meeting and until his successor is elected and qualified, or until
he sooner dies, resigns, is removed or becomes disqualified.
3.3 Powers. The business and affairs of the corporation shall be managed
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by or under the direction of the board of directors who shall have and may
exercise all the powers of the corporation and do all such lawful acts and
things as are not by law, the certificate of incorporation or these by-laws
directed or required to be exercised or done by the stockholders.
3.4 Vacancies. Vacancies and any newly created directorships resulting
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from any increase in the number of directors may be filled by vote of the
holders of the particular class or series of stock entitled to elect such
director at a meeting called for the purpose or by the directors. The directors
shall have and may exercise all their powers notwithstanding the existence of
one or more vacancies in their number, subject to any requirements of law or of
the certificate of incorporation or of these by-laws as to the number of
directors required for a quorum or for any vote or other actions.
3.5 Committees. The board of directors may, by vote of a majority of the
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whole board, (a) designate, change the membership of or terminate the existence
of any committee or
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committees, each committee to consist of one or more of the directors; (b)
designate one or more directors as alternate members of any such committee who
may replace any absent or disqualified member at any meeting of the committee;
and (c) determine the extent to which each such committee shall have and may
exercise the powers of the board of directors in the management of the business
and affairs of the corporation, including the power to authorize the seal of the
corporation to be affixed to all papers which require it and the power and
authority to declare dividends or to authorize the issuance of stock; excepting,
however, such powers which by law, by the certificate of incorporation or by
these by-laws they are prohibited from so delegating. In the absence or
disqualification of any member of such committee and his alternate, if any, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not constituting a quorum, may unanimously appoint another
member of the board of directors to act at the meeting in the place of any such
absent or disqualified member. Except as the board of directors may otherwise
determine, any committee may make rules for the conduct of its business, but
unless otherwise provided by the board or such rules, its business shall be
conducted as nearly as may be in the same manner as is provided by these by-laws
for the conduct of business by the board of directors. Each committee shall keep
regular minutes of its meetings and report the same to the board of directors
upon request.
3.6 Regular Meetings. Regular meetings of the board of directors may be
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held without call or notice at such places within or without the State of
Delaware and at such times as the board may from time to time determine,
provided that notice of the first regular meeting following any such
determination shall be given to absent directors. A regular meeting of the
directors may be held without call or notice immediately after and at the same
place as the annual meeting of stockholders.
3.7 Special Meetings. Special meetings of the board of directors may be
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held at any time and at any place within or without the State of Delaware
designated in the notice of the meeting, when called by the chairman of the
board, if any, the president, or by any two directors, reasonable notice thereof
being given to each director by the secretary or by the chairman of the board,
if any, the president or any one of the directors calling the meeting.
3.8 Notice. It shall be reasonable and sufficient notice to a director to
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send notice by mail at least forty-eight hours or by telegram at least twenty-
four hours before the meeting addressed to him at his usual or last known
business or residence address or to give notice to him in person or by telephone
at least twenty-four hours before the meeting. Notice of a meeting need not be
given to any director if a written waiver of notice, executed by him before or
after the meeting, is filed with the records of the meeting, or to any director
who attends the meeting without protesting prior thereto or at its commencement
the lack of notice to him. Neither notice of a meeting nor a waiver of a notice
need specify the purposes of the meeting.
3.9 Quorum. Except as a greater number may be required by law, by the
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certificate of incorporation or by these by-laws, at any meeting of the
directors a majority of the Number of Directors shall constitute a quorum. Any
meeting may be adjourned from time to time by a
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majority of the votes cast upon the question, whether or not a quorum is
present, and the meeting may be held as adjourned without further notice.
3.10 Action by Vote. Except as a greater number may be required by law, by
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the certificate of incorporation or by these by-laws, the vote at a meeting at
which a quorum is present of a majority of the Number of Directors shall be the
act of the board of directors.
3.11 Action Without a Meeting. Any action required or permitted to be
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taken at any meeting of the board of directors or a committee thereof may be
taken without a meeting if all the members of the board (but not less than a
majority of the Number of Directors) or of such committee, as the case may be,
consent thereto in writing, and such writing or writings are filed with the
records of the meetings of the board or of such committee. Such consent shall
be treated for all purposes as the act of the board or of such committee, as the
case may be.
3.12 Participation in Meetings by Conference Telephone. Members of the
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board of directors, or any committee designated by such board, may participate
in a meeting of such board or committee by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other or by any other means permitted by law. Such
participation shall constitute presence in person at such meeting.
3.13 Compensation. In the discretion of the board of directors, each
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director may be paid such fees for his services as director and be reimbursed
for his reasonable expenses incurred in the performance of his duties as
director as the board of directors from time to time may determine. Nothing
contained in this section shall be construed to preclude any director from
serving the corporation in any other capacity and receiving reasonable
compensation therefor.
3.14 Interested Directors and Officers.
---------------------------------
(a) No contract or transaction between the corporation and one or more of
its directors or officers, or between the corporation and any other corporation,
partnership, association, or other organization in which one or more of the
corporation's directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the board or committee thereof which authorizes the contract or transaction, or
solely because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the board of directors
or the committee, and the board or committee in good faith authorizes the
contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or
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(2) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation as of
the time it is authorized, approved or ratified, by the board of directors, a
committee thereof, or the stockholders.
(b) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the board of directors or of a committee
which authorizes the contract or transaction.
Section 4. OFFICERS AND AGENTS
4.1 Enumeration; Qualification. The officers of the corporation shall be
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a president, a treasurer, a secretary and such other officers, if any, as the
board of directors from time to time may in its discretion elect or appoint
including without limitation a chairman of the board, one or more vice
presidents and a controller. The corporation may also have such agents, if any,
as the board of directors from time to time may in its discretion choose. Any
officer may be but none need be a director or stockholder. Any two or more
offices may be held by the same person. Any officer may be required by the board
of directors to secure the faithful performance of his duties to the corporation
by giving bond in such amount and with sureties or otherwise as the board of
directors may determine.
4.2 Powers. Subject to law, to the certificate of incorporation and to
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the other provisions of these by-laws, each officer shall have, in addition to
the duties and powers herein set forth, such duties and powers as are commonly
incident to his office and such additional duties and powers as the board of
directors may from time to time designate.
4.3 Election. The officers may be elected by the board of directors at
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their first meeting following the annual meeting of the stockholders or at any
other time. At any time or from time to time the directors may delegate to any
officer their power to elect or appoint any other officer or any agents.
4.4 Tenure. Each officer shall hold office until the first meeting of the
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board of directors following the next annual meeting of the stockholders and
until his respective successor is chosen and qualified unless a shorter period
shall have been specified by the terms of his election or appointment, or in
each case until he sooner dies, resigns, is removed or becomes disqualified.
Each agent shall retain his authority at the pleasure of the directors, or the
officer by whom he was appointed or by the officer who then holds agent
appointive power.
4.5 Chairman of the Board of Directors, President and Vice President. The
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chairman of the board, if any, shall have such duties and powers as shall be
designated from time to time
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by the board of directors. Unless the board of directors otherwise specifies,
the chairman of the board, or if there is none the chief executive officer,
shall preside, or designate the person who shall preside, at all meetings of the
stockholders and of the board of directors.
Unless the board of directors otherwise specifies, the president shall be
the chief executive officer and shall have direct charge of all business
operations of the corporation and, subject to the control of the directors,
shall have general charge and supervision of the business of the corporation.
Any vice presidents shall have such duties and powers as shall be set forth
in these by-laws or as shall be designated from time to time by the board of
directors or by the president.
4.6 Treasurer and Assistant Treasurers. Unless the board of directors
----------------------------------
otherwise specifies, the treasurer shall be the chief financial officer of the
corporation and shall be in charge of its funds and valuable papers, and shall
have such other duties and powers as may be designated from time to time by the
board of directors or by the president. If no controller is elected, the
treasurer shall, unless the board of directors otherwise specifies, also have
the duties and powers of the controller.
Any assistant treasurers shall have such duties and powers as shall be
designated from time to time by the board of directors, the president or the
treasurer.
4.7 Controller and Assistant Controllers. If a controller is elected, he
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shall, unless the board of directors otherwise specifies, be the chief
accounting officer of the corporation and be in charge of its books of account
and accounting records, and of its accounting procedures. He shall have such
other duties and powers as may be designated from time to time by the board of
directors, the president or the treasurer.
Any assistant controller shall have such duties and powers as shall be
designated from time to time by the board of directors, the president, the
treasurer or the controller.
4.8 Secretary and Assistant Secretaries. The secretary shall record all
-----------------------------------
proceedings of the stockholders, of the board of directors and of committees of
the board of directors in a book or series of books to be kept therefor and
shall file therein all actions by written consent of stockholders or directors.
In the absence of the secretary from any meeting, an assistant secretary, or if
there be none or he is absent, a temporary secretary chosen at the meeting,
shall record the proceedings thereof. Unless a transfer agent has been appointed
the secretary shall keep or cause to be kept the stock and transfer records of
the corporation, which shall contain the names and record addresses of all
stockholders and the number of shares registered in the name of each
stockholder. He shall have such other duties and powers as may from time to time
be designated by the board of directors or the president.
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Any assistant secretaries shall have such duties and powers as shall be
designated from time to time by the board of directors, the president or the
secretary.
Section 5. RESIGNATIONS AND REMOVALS
5.1 Any director or officer may resign at any time by delivering his
resignation in writing to the chairman of the board, if any, the president, or
the secretary or to a meeting of the board of directors. Such resignation shall
be effective upon receipt unless specified to be effective at some other time,
and without in either case the necessity of its being accepted unless the
resignation shall so state. Except as may be otherwise provided by law, by the
certificate of incorporation or by these by-laws, a director (including persons
elected by stockholders or directors to fill vacancies in the board) may be
removed from office with or without cause by the vote of the holders of a
majority of the issued and outstanding shares of the particular class or series
entitled to vote in the election of such directors. The board of directors may
at any time remove any officer either with or without cause. The board of
directors may at any time terminate or modify the authority of any agent.
Section 6. VACANCIES
6.1 If the office of the president or the treasurer or the secretary
becomes vacant, the directors may elect a successor by vote of a majority of the
directors then in office. If the office of any other officer becomes vacant, any
person or body empowered to elect or appoint that officer may choose a
successor. Each such successor shall hold office for the unexpired term, and in
the case of the president, the treasurer and the secretary until his successor
is chosen and qualified or in each case until he sooner dies, resigns, is
removed or becomes disqualified. Any vacancy of a directorship shall be filled
as specified in Section 3.4 of these by-laws.
Section 7. CAPITAL STOCK
7.1 Stock Certificates. Each stockholder shall be entitled to a
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certificate stating the number and the class and the designation of the series,
if any, of the shares held by him, in such form as shall, in conformity to law,
the certificate of incorporation and the by-laws, be prescribed from time to
time by the board of directors. Such certificate shall be signed by the chairman
or vice chairman of the board, if any, or the president or a vice president and
by the treasurer or an assistant treasurer or by the secretary or an assistant
secretary. Any of or all the signatures on the certificate may be a facsimile.
In case an officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed on such certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if he were such
officer, transfer agent, or registrar at the time of its issue.
7.2 Loss of Certificates. In the case of the alleged theft, loss,
--------------------
destruction or mutilation of a certificate of stock, a duplicate certificate may
be issued in place thereof, upon such terms,
-9-
including receipt of a bond sufficient to indemnify the corporation against any
claim on account thereof, as the board of directors may prescribe.
Section 8. TRANSFER OF SHARES OF STOCK
8.1 Transfer on Books. Subject to the restrictions, if any, stated or
-----------------
noted on the stock certificate, shares of stock may be transferred on the books
of the corporation by the surrender to the corporation or its transfer agent of
the certificate therefor properly endorsed or accompanied by a written
assignment and power of attorney properly executed, with necessary transfer
stamps affixed, and with such proof of the authenticity of signature as the
board of directors or the transfer agent of the corporation may reasonably
require. Except as may be otherwise required by law, by the certificate of
incorporation or by these by-laws, the corporation shall be entitled to treat
the record holder of stock as shown on its books as the owner of such stock for
all purposes, including the payment of dividends and the right to receive notice
and to vote or to give any consent with respect thereto and to be held liable
for such calls and assessments, if any, as may lawfully be made thereon,
regardless of any transfer, pledge or other disposition of such stock until the
shares have been properly transferred on the books of the corporation.
It shall be the duty of each stockholder to notify the corporation of his
post office address.
8.2 Record Date. In order that the corporation may determine the
-----------
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the board of directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the board of directors, and which record date shall
not be more than sixty nor less than ten days before the date of such meeting.
If no such record date is fixed by the board of directors, the record date for
determining the stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the board of directors may fix a new record date for the adjourned meeting.
In order that the corporation may determine the stockholders entitled to
consent to corporate action in writing without a meeting, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the board of directors, and
which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the board of directors. If no
such record date has been fixed by the board of directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the board of directors is required by
the General Corporation Law of the State of Delaware, shall be the first date on
which a signed written consent setting forth the action taken or proposed to be
taken is delivered to the corporation by delivery to its registered office in
Delaware by hand or certified
-10-
or registered mail, return receipt requested, to its principal place of business
or to an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. If no record date has been
fixed by the board of directors and prior action by the board of directors is
required by the General Corporation Law of the State of Delaware, the record
date for determining stockholders entitled to consent to corporate action in
writing without a meeting shall be at the close of business on the day on which
the board of directors adopts the resolution taking such prior action.
In order that the corporation may determine the stockholders entitled to
receive payment of any dividend or other distribution or allotment of any rights
or to exercise any rights in respect of any change, conversion or exchange of
stock, or for the purpose of any other lawful action, the board of directors may
fix a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted, and which record date shall be not
more than sixty days prior to such payment, exercise or other action. If no such
record date is fixed, the record date for determining stockholders for any such
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
Section 9. CORPORATE SEAL
9.1 Subject to alteration by the directors, the seal of the corporation
shall consist of a flat-faced circular die with the word "Delaware" and the name
of the corporation cut or engraved thereon, together with such other words,
dates or images as may be approved from time to time by the directors.
Section 10. EXECUTION OF PAPERS
10.1 Except as the board of directors may generally or in particular cases
authorize the execution thereof in some other manner, all deeds, leases,
transfers, contracts, bonds, notes, checks, drafts or other obligations made,
accepted or endorsed by the corporation shall be signed by the chairman of the
board, if any, the president, a vice president or the treasurer.
Section 11. FISCAL YEAR
11. The fiscal year of the corporation shall end on December 31.
Section 12. AMENDMENTS
12. These by-laws may be adopted, amended or repealed by vote of a
majority of the Number of Directors or by vote of a majority of the voting power
of the stock outstanding and entitled to vote. Any by-law, whether adopted,
amended or repealed by the stockholders or directors, may be amended or
reinstated by the stockholders or the directors.
-11-
EXHIBIT 3.3
- --------------------------------------------------------------------------------
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
- --------------------------------------------------------------------------------
(FOR BUREAU USE ONLY) Date Received
December 22, 1992
---------------------
---------------------
---------------------
- --------------------------------------------------------------------------------
RESTATED ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC PROFIT CORPORATIONS
(Please read information and instructions on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972, the undersigned
corporation executes the following Articles:
1. The present name of the corporation is:
Domino's Pizza, Inc.
2. The corporation identification number (CID) assigned by the Bureau is: 020-
735
3. All former names of the corporation are:
Dominick's Pizza King, Inc.
Domino's, Inc.
4. The date of filing the original Articles of Incorporation was: October 24,
-------------
1963
----
The following Restated Articles of Incorporation superseded the Articles of
Incorporation as amended and shall be the Articles of Incorporation for the
corporation:
ARTICLE I
The name of the corporation is:
Domino's Pizza, Inc.
ARTICLE II
The purpose or purposes for which the corporation is formed are: To engage in
any activity within the purposes for which corporations may be formed under the
Business Corporation Act of Michigan.
ARTICLE III
The total authorized capital stock is:
1. Common Shares 5,000,000
-------------------------------------------------------------
Preferred Shares _________________________________________________________
2. A statement of all or any of the relative rights, preferences and
limitations of the shares of each class is as follows:
All shares are equal in all respects.
ARTICLE IV
1. The address of the registered office is:
615 Griswold Street, (Suite 1414,) Detroit, Michigan 48226
- ----------------------------------------------------------- ----------
(Street Address) (City) (Zip Code)
2. The mailing address of the registered current office if different than
above:
___________________________________________________________, Michigan _________
(P.O. Box) (City) (Zip Code)
3. The name of the current registered agent is: The Corporation Company
- --------------------------------------------------------------------------------
ARTICLE V (OPTIONAL, DELETE IF NOT APPLICABLE.)
When a compromise or arrangement or a plan of reorganization of this corporation
is proposed between this corporation and its creditors or any class of them or
between this corporation and its shareholders or any class of them, a court of
equity jurisdiction within the state, on application of this corporation or of a
creditor or shareholder thereof, or on application of a receiver appointed for
the corporation, may order a meeting of the creditors or class of creditors or
of the shareholders or class of shareholders to be affected by the proposed
compromise or arrangement or reorganization, to be summoned in such manner as
the court directs. If a majority in number representing 3/4 in value of the
creditors or class of creditors, or of the shareholders or class of shareholders
to be affected by the proposed compromise or arrangement or a reorganization,
agree to a compromise or arrangement or a reorganization of this corporation as
a consequence of the compromise or arrangement, the compromise or arrangement
and the reorganization, if sanctioned by the court to which the application has
been made, shall be binding on all the creditors or class of creditors, or on
all the shareholders or class of shareholders and also on this corporation.
-2-
ARTICLE VI (OPTIONAL, DELETE IF NOT APPLICABLE.)
Any action required or permitted by the Act to be taken at an annual or special
meeting of shareholders may be taken without a meeting, without prior notice and
without a vote, if consent in writing, setting forth the action so taken, are
signed by the holders of outstanding shares having not less than the minimum
number of votes that would be necessary to authorize or take the action at a
meeting at which all shares entitled to vote on the action were present and
voted. The written consents shall bear the date of signature of each shareholder
who signs the consent. No written consents shall be effective to take the
corporate action referred to unless, within 60 days after the record date for
determining shareholders entitled to express consent to or to dissent from a
proposal without a meeting, written consents signed by a sufficient number of
shareholders to take the action are delivered to the corporation. Delivery shall
be to the corporation's registered office, its principal place of business, or
an officer or agent of the corporation having custody of the minutes of the
proceedings of its shareholders. Delivery made to a corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to shareholders who have not
consented in writing.
-3-
DOCUMENT WILL BE RETURNED TO NAME Name of person or organization
AND MAILING ADDRESS INDICATED IN remitting fees:
THE BOX BELOW. Include name,
street and number (or P.O. box),
city, state and ZIP code.
Wise & Marsac
Attention: Stephen M. Fleming
11th Floor Buhl Building
Detroit, Michigan 48226
(313) 962-0643
Wise & Marsac
------------------------------
------------------------------
Preparer's name and business
telephone number:
Stephen M. Fleming
------------------------------
(313) 962-0643
------------------------------
INFORMATION AND INSTRUCTIONS
1. The articles of incorporation cannot be restated until this form, or a
comparable document, is submitted.
2. Submit one original copy of this document. Upon filing, a microfilm copy
will be prepared for the records of the Corporation and Securities Bureau.
The original copy will be returned to the address appearing in the box
above as evidence of filing. Since this document must be microfilmed, it is
important that the filing be legible. Documents will poor black ad white
contrast, or otherwise illegible, will be rejected.
3. This document is to be used pursuant to the sections 641 through 643 of Act
for the purpose of restating the articles of incorporation of a domestic
profit corporation. Restated articles of incorporation are an integration
into ;a single instrument of the current provisions of the corporation's
articles of incorporation, along with any desired amendments to those
articles.
4. Restated articles of incorporation which do not amend the articles of
incorporation may be adopted by the board of directors without a vote of
the shareholders. Restated articles of incorporation which amend the
articles of incorporation require adoption by the shareholders. Restated
articles of incorporation submitted before the first meeting of the board
of directors require adoption by all of the incorporators.
5. Item 2 - Enter the identification number previously assigned by the Bureau.
If this number is unknown, leave it blank.
6. The duration of the corporation should be stated in the restated articles
of incorporation only if it is not perpetual.
7. This document is effective on the date approved and filed by the Bureau. A
later effective date, no more than 90 days after the date of delivery, may
be stated.
8. If the restated articles are adopted before the first meeting of the board
of directors, this document must be signed in ink by all of the
incorporators. Other restated articles must be signed by the president,
vice-president, chairperson or vice-chairperson.
9. FEES: NONREFUNDABLE FEES (Make remittance payable to the State of Michigan.
Include corporation name and CID Number on check or money order..... $10.00
Franchise fee: payable only if authorized shares is increased:
each additional 20,000 authorized shares or portion thereof.... $50.00
10. Mail form and fee to:
Michigan Department of Commerce
Corporation and Securities Bureau
Corporation Division
P.O. Box 30054
6546 Mercantile Way
Lansing, Michigan 48909
Telephone: (517) 334-6302
-4-
EXHIBIT 3.4
BYLAWS OF
DOMINO'S PIZZA, INC.
ARTICLE I
OFFICES
-------
1.1 Registered Office. The registered office of the Corporation shall be
-----------------
located at such place in Michigan as the Board of Directors from time to time
determines.
1.2 Other Offices. The Corporation may also have offices or branches at
-------------
such other places as the Board of Directors from time to time determines or the
business of the Corporation requires.
ARTICLE II
MEETINGS OF SHAREHOLDERS
------------------------
2.1 Time and Place. All meetings of the shareholders shall be held at
--------------
such place and time as the Board of Directors determines.
2.2 Annual Meetings. An annual meeting of shareholders shall be held on
---------------
the first Tuesday of the third month of each fiscal year of the corporation if
not a legal holiday in the state in which the meeting shall be held, and if a
legal holiday, then on the next secular day following, at such time as
determined by the Board of Directors, or at such other date and time as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting. At the annual meeting, the shareholders shall elect directors
and transact such other business as is properly brought before the meeting and
described in the notice of meeting. If the annual meeting is not held on its
designated date, the Board of Directors shall cause it to be held as soon
thereafter as convenient.
2.3 Special Meetings. Special meetings of the shareholders, for any
----------------
purpose (a) may be called by the Corporation's chief executive officer or the
Board of Directors, and (b) shall be called by the President or Secretary upon
written request (stating the purpose for which the meeting is to be called) of
the holders of a majority of all the shares entitled to vote at the meeting.
2.4 Notice of Meetings. Written notice of each shareholders' meeting,
------------------
stating the place, date and time of the meeting and the purposes for which the
meeting is called, shall be given (in the manner described in Section 5.1 below)
not less than 10 or nor more than 60 days before the date of the meeting to each
shareholder of record entitled to vote at the meeting. Notice of adjourned
meetings is governed by Section 2.6 below.
2.5 List of Shareholders. The officer or agent who has charge of the
--------------------
stock transfer books for shares of the Corporation shall make and certify a
complete list of the shareholders entitled to vote at a shareholders' meeting or
any adjournment of the meeting. The list shall be arranged alphabetically
within each class and series and shall show the address of, and the number of
shares held by, each shareholder. The list shall be produced at the time and
place of the meeting and may be inspected by any shareholder at any time during
the meeting.
2.6 Quorum; Adjournment. At all shareholders' meetings, the shareholders
-------------------
present in person or represented by proxy who, as of the record date for the
meeting, were holders of shares entitled to cast a majority of the votes at the
meeting, shall constitute a quorum. Once a quorum is present at a meeting, all
shareholders present in person or represented by proxy at the meeting may
continue to do business until adjournment, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum. Regardless of whether a quorum
is present, a shareholders' meeting may be adjourned to another time and place
by a vote of the shares present in person or by proxy without notice other than
announcement at the meeting; provided, that (a) only such business may be
transacted at the adjourned meeting as might have been transacted at the
original meeting and (b) if the adjournment is for more than 60 days or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting must be given to each shareholder of record entitled to
vote at the meeting.
2.7 Voting. Each shareholder shall at every meeting of the shareholders
------
be entitled to one vote in person or by proxy for each share having voting power
held by such shareholder and on each matter submitted to a vote. A vote may be
cast either orally or in writing. When an action, other than the election of
directors, is to be taken by vote of the shareholders, it shall be authorized by
a majority of the votes cast by the holders of shares entitled to vote on such
action. Directors shall be elected by a plurality of the votes cast at any
election.
2.8 Proxies. A shareholder entitled to vote at a meeting of shareholders
-------
or to express consent or dissent without a meeting may authorize other persons
to act for him or her by proxy. Each proxy shall be in writing and signed by the
shareholder or the shareholder's authorized agent or representative. A proxy is
not valid after the expiration of three years after its date unless otherwise
provided in the proxy.
2.9 Questions Concerning Elections. The Board of Directors may, in
------------------------------
advance of the meeting, or the presiding officer may, at the meeting, appoint
one or more inspectors to act at a shareholders' meeting. If appointed, the
inspectors shall determine the number of shares outstanding and the voting power
of each, the shares represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes, ballots or consents,
hear and determine challenges and questions arising in connection with the right
to vote, count and tabulate votes, ballots or consents, determine the result,
and do such acts as are proper to conduct the election or vote with fairness to
all shareholders.
-2-
2.10 Telephonic Attendance. Shareholders may participate in any
---------------------
shareholders' meeting by means of conference telephone or similar communications
equipment through which all persons participating in the meeting may communicate
with the other participants and all participants are advised of the
communications equipment and the names of the participants in the conference.
Participation in a meeting pursuant to this Section 2.10 constitutes presence in
person at such meeting.
2.11 Action by Written Consent. To the extent permitted by the Articles of
-------------------------
Incorporation or applicable law, any action required or permitted to be taken at
any shareholders' meeting may be taken without a meeting, prior notice and a
vote, by written consent of shareholders.
ARTICLE III
DIRECTORS
---------
3.1 Number and Residence. The business and affairs of the Corporation
--------------------
shall be managed by or under the direction of a Board of Directors consisting of
not less than one nor more than fifteen members. The Number of Directors shall
be determined from time to time by the voting shareholders (as so determined
from time to time, the "Number of Directors"). Directors need not be Michigan
residents or shareholders of the Corporation.
3.2 Election and Term. Except as provided in Section 3.5 below, Directors
-----------------
shall be elected at the annual shareholders' meeting. Each Director elected
shall hold office for the term for which he or she is elected and until his or
her successor is elected and qualified or until his or her resignation or
removal.
3.3 Resignation. A Director may resign by written notice to the
-----------
Corporation. A Director's resignation is effective upon its receipt by the
Corporation or at a later time set forth in the notice of resignation.
3.4 Removal. One or more Directors may be removed, with or without cause,
-------
by vote of the holders of a majority of the shares entitled to vote at an
election of Directors.
3.5 Vacancies. Vacancies, including vacancies resulting from an increase
---------
in the Number of Directors, may be filled by the Board of Directors, by the
affirmative vote of a majority of all the Directors remaining in office, if the
Directors remaining in office constitute less than a quorum, or by the
shareholders. Each Director so chosen shall hold office until the next annual
election of Directors by the shareholders and until his or her successor is
elected and qualified, or until his or her resignation or removal.
-3-
3.6 Place of Meetings. The Board of Directors may hold meetings at any
-----------------
location. The location of annual and regular Board of Directors' meetings shall
be determined by the Board and the location of special meetings shall be
determined by the person calling the meeting.
3.7 Annual Meetings. Each newly elected Board of Directors may meet
---------------
promptly after the annual shareholders' meeting for the purposes of electing
officers and transacting such other business as may properly come before the
meeting. No notice of the annual Directors' meeting shall be necessary to the
newly elected Directors in order to legally constitute the meeting, provided a
quorum is present.
3.8 Regular Meetings. Regular meetings of the Board of Directors or Board
----------------
committees may be held without notice at such places and times as the Board or
committee determines at least 30 days before the date of the meeting.
3.9 Special Meetings. Special meetings of the Board of Directors may be
----------------
called by the chief executive officer or by any two Directors on two days notice
to each Director or committee member by mail or 24 hours notice by any other
means provided in Section 5.1. The notice must specify the place, date and time
of the special meeting, but need not specify the business to be transacted at,
nor the purpose of, the meeting. Special meetings of Board committees may be
called by the Chairperson of the committee or a majority of committee members
pursuant to this Section 3.9.
3.10 Quorum. At all meetings of the Board or a Board committee, a majority
------
of the Number of Directors, or of members of such committee, constitutes a
quorum for transaction of business, unless a higher number is otherwise
required. If a quorum is not present at any Board or Board committee meeting, a
majority of the Directors present at the meeting may adjourn the meeting to
another time and place without notice other than announcement at the meeting.
Any business may be transacted at the adjourned meeting which might have been
transacted at the original meeting, provided a quorum is present.
3.11 Voting. The vote of a majority of the Number of Directors at any
------
Board meeting at which a quorum is present constitutes the action of the Board
of Directors, unless a higher vote is otherwise required, and the vote of a
majority of the members present at any Board committee meeting at which a quorum
is present constitutes the action of the Board committee.
3.12 Telephonic Participation. Members of the Board of Directors or any
------------------------
Board committee may participate in a Board or Board committee meeting by means
of conference telephone or similar communications equipment through which all
persons participating in the meeting can communicate with each other.
Participation in a meeting pursuant to this Section 3.12 constitutes presence in
person at such meeting.
3.13 Action by Written Consent. Any action required or permitted to be
-------------------------
taken under authorization voted at a Board or Board committee meeting may be
taken without a meeting if,
-4-
before or after the action, all members of the Board then in office ( but not
less than a majority of the Number of Directors) or of the Board committee
consent to the action in writing. Such consents shall be filed with the minutes
of the proceedings of the Board or committee and shall have the same effect as a
vote of the Board or committee for all purposes.
3.14 Committees. The Board of Directors may, by resolution passed by a
----------
majority of the Number of Directors, designate one or more committees, each
consisting of one or more Directors. The Board may designate one or more
Directors as alternate members of a committee, who may replace an absent or
disqualified member at a committee meeting. In the absence or disqualification
of a member of a committee, the committee members present and not disqualified
from voting, regardless of whether they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in place
of such absent or disqualified member. Any committee, to the extent provided in
the resolution of the Board, may exercise all powers and authority of the Board
of Directors in management of the business and affairs of the Corporation,
except a committee does not have power or authority to:
(a) Amend the Articles of Incorporation.
(b) Adopt an agreement of merger or share exchange.
(c) Recommend to shareholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets.
(d) Recommend to shareholders a dissolution of the Corporation or a
revocation of a dissolution.
(e) Amend the Bylaws of the Corporation.
(f) Fill vacancies in the Board.
(g) Unless the resolution designating the committee or a later Board of
Director's resolution expressly so provides, declare a distribution or
dividend or authorize the issuance of shares.
Each committee and its members shall serve at the pleasure of the Board, which
may at any time change the members and powers of, or discharge, the committee.
Each committee shall keep regular minutes of its meetings and report them to the
Board of Directors when required.
3.15 Compensation. The Board, by affirmative vote of a majority of
------------
Directors in office and irrespective of any personal interest of any of them,
may establish reasonable compensation of Directors for services to the
Corporation as directors, officers or members of a Board committee. No such
payment shall preclude any Director from serving the Corporation in any other
capacity and receiving compensation for such service.
-5-
ARTICLE IV
OFFICERS
--------
4.1 Officers and Agents. The Board of Directors, at its first meeting
-------------------
after each annual meeting of shareholders, shall elect a President, a Secretary
and a Treasurer, and may also elect and designate as officers a Chairperson of
the Board, a Vice Chairperson of the Board and one or more Executive Vice
Presidents, Vice Presidents, Assistant Vice Presidents, Assistant Secretaries
and Assistant Treasurers. The Board of Directors may also from time to time
appoint, or delegate authority to the Corporation's chief executive officer to
appoint, such other officers and agents as it deems advisable. Any number of
offices may be held by the same person, but an officer shall not execute,
acknowledge or verify an instrument in more than one capacity if the instrument
is required by law to be executed, acknowledged or verified by two or more
officers. An officer has such authority and shall perform such duties in the
management of the Corporation as provided in these Bylaws, or as may be
determined by resolution of the Board of Directors not inconsistent with these
Bylaws, and as generally pertain to their offices, subject to the control of the
Board of Directors.
4.2 Compensation. The compensation of all officers of the Corporation
------------
shall be fixed by the Board of Directors.
4.3 Term. Each officer of the Corporation shall hold office for the term
----
for which he or she is elected or appointed and until his or her successor is
elected or appointed and qualified, or until his or her resignation or removal.
The election or appointment of an officer does not, by itself, create contract
rights.
4.4 Removal. An officer elected or appointed by the Board of Directors
-------
may be removed by the Board of Directors with or without cause. An officer
elected by the shareholders may be removed, with or without cause, only by vote
of the shareholders, but his or her authority to act as an officer may be
suspended by the Board of Directors for cause. The removal of an officer shall
be without prejudice to his or her contract rights, if any.
4.5 Resignation. An officer may resign by written notice to the
-----------
Corporation. The resignation is effective upon its receipt by the Corporation
or at a subsequent time specified in the notice of resignation.
4.6 Vacancies. Any vacancy occurring in any office of the Corporation
---------
shall be filled by the Board of Directors.
4.7 Chairperson of the Board. The Chairperson of the Board, if such
------------------------
office is filled, shall be a Director and shall preside at all shareholders' and
Board of Directors' meetings.
-6-
4.8 Chief Executive Officer. The Chairperson of the Board, if any, or the
-----------------------
President, as designated by the Board, shall be the chief executive officer of
the Corporation and shall have the general powers of supervision and management
of the business and affairs of the Corporation usually vested in the chief
executive officer of a corporation and shall see that all orders and resolutions
of the Board of Directors are carried into effect. If no designation of chief
executive officer is made, or if there is no Chairperson of the Board, the
President shall be the chief executive officer. The chief executive officer may
delegate to the other officers such of his or her authority and duties at such
time and in such manner as he or she deems advisable.
4.9 President. In the office of Chairperson of the Board is not filled,
---------
the President shall perform the duties and execute the authority of the
Chairperson of the Board. If the Chairperson of the Board is designated by the
Board as the Corporation's chief executive officer, the President shall be the
chief operating officer of the Corporation, shall assist the Chairperson of the
Board in the supervision and management of the business and affairs of the
Corporation and, in the absence of the Chairperson of the Board, shall preside
at all shareholders' and Board of Directors' meetings. The President may
delegate to the officers other than the Chairperson of the Board, if any, such
of his or her authority and duties at such time and in such manner as he or she
deems appropriate.
4.10 Executive Vice Presidents and Vice Presidents. The Executive Vice
---------------------------------------------
Presidents and Vice Presidents shall assist and act under the direction of the
Chairman of the Board and President. The Board of Directors may designate one
or more Executive Vice Presidents and may grant other Vice Presidents titles
which describe their functions or specify their order of seniority. In the
absence or disability of the President, the authority of the President shall
descend to the Executive Vice Presidents or, if there are none, to the Vice
Presidents in the order of seniority indicated by their titles or otherwise
specified by the Board. If not specified by their titles or the Board, the
authority of the President shall descend to the Executive Vice Presidents or, if
there are none, to the Vice Presidents, in the order of their seniority in such
office.
4.11 Secretary. The Secretary shall act under the direction of the
---------
Corporation's Chief executive officer and President. The Secretary shall attend
all shareholders' and Board of Directors' meetings, record minutes of the
proceedings and maintain the minutes and all documents evidencing corporate
action taken by written consent of the shareholders and Board of Directors in
the Corporation's minute book. The Secretary shall perform these duties for
Board committees when required. The Secretary shall see to it that all notices
of shareholders' meetings and special Board of Directors' meetings are duly
given in accordance with applicable law, the Articles of Incorporation and these
Bylaws. The Secretary shall have custody of the Corporation's seal and, when
authorized by the Corporation's chief executive officer, President or the Board
of Directors, shall affix the seal to any instrument requiring it and attest
such instrument.
4.12 Treasurer. The Treasurer shall act under the direction of the
---------
Corporation's chief executive officer and President. The Treasurer shall have
custody of the corporate funds and
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securities and shall keep full and accurate accounts of the Corporation's
assets, liabilities, receipts and disbursements in books belonging to the
Corporation. The Treasurer shall deposit all moneys and other valuables in the
name and to the credit of the Corporation in such depositories as may be
designated by the Board of Directors. The Treasurer shall disburse the funds of
the Corporation as may be ordered by the Corporation's chief executive officer,
the President or the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Corporation's chief executive officer,
the President and the Board of Directors (at its regular meetings or whenever
they request it) an account of all his or her transactions as Treasurer and of
the financial condition of the Corporation. If required by the Board of
Directors, the Treasurer shall give the Corporation a bond for the faithful
discharge of his or her duties in such amount and with such surety as the Board
prescribes.
4.13 Assistant Vice Presidents, Secretaries and Treasurers. The Assistant
-----------------------------------------------------
Vice Presidents, Assistant Secretaries and Assistant Treasurers, if any, shall
act under the direction of the Corporation's chief executive officer, the
President and the officer they assist. In the order of their seniority, the
Assistant Secretaries shall, in the absence or disability of the Secretary,
perform the duties and exercise the authority of the Secretary. The Assistant
Treasurers, in the order of their seniority, shall in the absence or disability
of the Treasurer, perform the duties and exercise the authority of the
Treasurer.
4.14 Execution of Contracts and Instruments. The Board of Directors may
--------------------------------------
designate an officer or agent with authority to execute any contract or other
instrument on the Corporation's behalf; the Board may also ratify or confirm any
such execution. If the Board authorizes, ratifies or confirms the execution of
a contract or instrument without specifying the authorized executing officer or
agent, the Corporation's chief executive officer, the President or any Executive
Vice President or Vice President may execute the contract or instrument in the
name and on behalf of the Corporation and may affix the corporate seal to such
document or instrument.
4.15 Voting of Shares and Securities of Other Corporations and Entities.
------------------------------------------------------------------
Unless the Board of Directors otherwise directs, the Corporation's chief
executive officer shall be entitled to vote or designate a proxy to vote all
shares and other securities which the Corporation owns in any other corporation
or entity.
ARTICLE V
NOTICES AND WAIVERS OF NOTICE
-----------------------------
5.1 Delivery of Notices. All written notices to shareholders, Directors
-------------------
and Board committee members shall be given personally or by mail (registered,
certified or other first class mail, with postage pre-paid), addressed to such
person at the address designated by him or her for that purpose or, if none is
designated, at his or her last know address. Written notices to Directors or
Board committee members may also be delivered at his or her office on the
Corporation's premises, if any, or by overnight carrier, telegram, telex,
telecopy, radiogram,
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cablegram, facsimile, computer transmission or similar form of communication,
addressed to the address referred to in the preceding sentence. Notices given
pursuant to this Section 5.1 shall be deemed to be given when dispatched, or, if
mailed, when deposited in a post office or official depository under the
exclusive care and custody of the United States postal service. Notices given by
overnight carrier shall be deemed "dispatched" at 9:00 a.m. on the day the
overnight carrier is reasonably requested to deliver the notice. The Corporation
shall have not duty to change the written address of any Director, Board
committee member or shareholder unless the Secretary receives written notice of
such address change.
5.2 Waiver of Notice. Action may be taken without a required notice and
----------------
without lapse of a prescribed period of time, if at any time before or after the
action is completed the person entitled to notice or to participate in the
action to be taken or, in the case of a shareholder, his or her attorney-in-
fact, submits a signed waiver of the requirements, or if such requirements are
waived in such other manner permitted by applicable law. Neither the business
to be transacted at, nor the purpose of, the meeting need be specified in the
written waiver of notice. Attendance at any shareholders' meeting (in person or
by proxy) will result in both of the following:
(a) Waiver of objection to lack of notice or defective notice of the
meeting, unless the shareholder at the beginning of the meeting
objects to holding the meeting or transacting business at the meeting.
(b) Waiver of objection to consideration of a particular matter at the
meeting that is not within the purpose or purposes described in the
meeting notice, unless the shareholder objects to considering the
matter when it is presented.
A director's attendance at or participation in any Board or Board committee
meeting waives any required notice to him or her of the meeting unless he or
she, at the beginning of the meeting or upon his or her arrival, objects to the
meeting or the transacting of business at the meeting and does not thereafter
vote for or asset to any action taken at the meeting.
ARTICLE VI
SHARE CERTIFICATES AND SHAREHOLDERS OF RECORD
---------------------------------------------
6.1 Certificates for Shares. The shares of the Corporation shall be
-----------------------
represented by certificates signed by the Chairperson of the Board, Vice-
chairperson of the Board, President or a Vice-president and which also may be
signed by another officer of the Corporation. The officers' signatures may be
facsimiles if the certificate is countersigned by a transfer agent or registered
by a registrar other than the Corporation or its employee. If an officer who
has signed or whose facsimile signature has been placed upon a certificate
ceases to be such officer before the certificate is issued, it may be issued by
the Corporation with the same effect as if the person were such officer at the
date of issue.
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6.2 Lost or Destroyed Certificates. The Board of Directors may direct or
------------------------------
authorize an officer to direct that a new certificate for shares be issued in
place of any certificate alleged to have been lost or destroyed. When
authorizing such issue of a new certificate, the Board of Directors or officer
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner (or the owner's legal representative) of such lost or
destroyed certificate to give the Corporation an affidavit claiming that the
certificate is lost or destroyed or a bond in such sum as it may direct as
indemnity against any claim that may be made against the Corporation with
respect to such old or new certificate.
6.3 Transfer of Shares. Shares of the Corporation are transferable only
------------------
on the Corporation's stock transfer books upon surrender to the Corporation or
its transfer agent of a certificate for the shares, duly endorsed for transfer,
and the presentation of such evidence of ownership and validity of the transfer
as the Corporation requires.
6.4 Record Date. The Board of Directors may fix, in advance, a date as
-----------
the record date for determining shareholders for any purpose, including
determining shareholders entitled to (a) notice of, and to vote at, any
shareholders' meeting or any adjournment of such meeting; (b) express consent
to, or dissent from, a proposal without a meeting; or (c) receive payment of a
share dividend or distribution or allotment of a right. The record date shall
not be more than 60 nor less than 10 days before the date of the meeting, nor
more than 10 days after the Board resolution fixing a record date for
determining shareholders entitled to express consent to, or dissent from a
proposal without a meeting, nor more than 60 days before any other action.
If a record date is not fixed:
(a) the record date for determining the shareholders entitled to notice
of, or to vote at, a shareholders' meeting shall be the close of
business on the day next preceding the date on which notice of the
meeting is given, or, if no notice is given, the close of business on
the day next preceding the day on which the meeting is held; and
(b) if prior action by the Board of Directors is not required with respect
to the corporate action to be taken without a meeting , the record
date for determining shareholders entitled to express consent to, or
dissent from, a proposal without a meeting, shall be the first date on
which a signed written consent is properly delivered to the
Corporation; and
(c) the record date for determining shareholders for any other purpose
shall be close of business on the day on which the resolution of the
Board of Directors relating to the action is adopted.
A determination of shareholders of record entitled to notice of, or to vote at,
a shareholders' meeting shall apply to any adjournment of the meeting, unless
the Board of Directors fixes a new record date for the adjourned meeting.
-10-
Only shareholders of record on the record date shall be entitled to notice
of, or to participate in, the action relating to the record date,
notwithstanding any transfer of shares on the Corporation's books after the
record date. This Section 6.4 shall not affect the rights of a shareholder and
the shareholder's transferor or transferee as between themselves.
6.5 Registered Shareholders. The Corporation shall be entitled to
-----------------------
recognize the exclusive right of a person registered on its books as the owner
of a share for all purposes, including notices, voting, consent, dividends and
distributions, and shall not be bound to recognize any other person's equitable
or other claim to interest in such share, regardless of whether it has actual or
constructive notice of such claim or interest.
ARTICLE VII
INDEMNIFICATION
---------------
The Corporation shall, to the fullest extent authorized or permitted by the
Michigan Business Corporation Act, (a) indemnify any person, and his or her
heirs, personal representatives, executors, administrators and legal
representatives, who was, is, or is threatened to be made, a party to any
threatened, pending or completed action, suit or proceeding (whether civil,
criminal, administrative or investigative) by reason of the fact that such
person is or was a director or officer of the corporation or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
(collectively, "Covered Matters"); and (b) pay or reimburse the reasonable
expenses incurred by such person and his or her heirs, executors, administrators
and legal representatives in connection with any Covered Matters in advance of
final disposition of such Covered Matters. The Corporation may provide such
other indemnification to directors, officers, employees and agent by insurance,
contract or otherwise as is permitted by law and authorized by the Board of
Directors.
ARTICLE VII
GENERAL PROVISIONS
------------------
8.1 Checks and Funds. All checks, drafts or demands for money and notes
----------------
of the Corporation must be signed by such officer or officers or such other
person or persons as the Board of Directors from time to time designates. All
funds of the Corporation not otherwise employed shall be deposited or used as
the Board of Directors from time to time designates.
8.2 Fiscal Year. The fiscal year of the Corporation shall end on December
-----------
31st of each year or on such date as the Board of Directors from time to time
determines.
8.3 Corporate Seal. The Board of Directors may adopt a corporate seal for
--------------
the Corporation. The corporate seal, if adopted, shall be circular and contain
the name of the
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Corporation and the words "Corporate Seal Michigan". The seal may be used by
causing it or a facsimile of it to be impressed, affixed, reproduced or
otherwise.
8.4 Books and Records. The Corporation shall keep within or outside of
-----------------
Michigan books and records of account and minutes of the proceedings of its
shareholders. Board of Directors and Board committees, if any. The Corporation
shall keep at its registered office or at the office of its transfer agent
within or outside of Michigan records containing the names and addresses of all
shareholders, the number, class and series of shares held by each and the dates
when they respectively became recordholders of shares. Any of such books,
records or minutes may be in written form or in any other form capable of being
converted into written form within a reasonable time.
8.5 Financial Statements. The Corporation shall cause to be made and
--------------------
distributed to its shareholders, within four months after the end of each fiscal
year, a financial report (including a statement of income, year-end balance
sheet, and, if prepared by the Corporation, its statement of sources and
application of funds) covering the preceding fiscal year of the Corporation.
ARTICLE IX
AMENDMENTS
----------
These Bylaws may be amended or repealed, or new Bylaws may be adopted, by
action of either the shareholders or a majority of the Number of Directors. The
shareholders or the Board may from time to time specify particular provisions of
the Bylaws which may not be altered or repealed by the Board of Directors.
ARTICLE X
SCOPE OF BYLAWS
---------------
These Bylaws govern the regulation and management of the affairs of the
Corporation to the extent that they are consistent with applicable law and the
Articles of Incorporation; to the extent they are not consistent, applicable law
and the Articles of Incorporation shall govern. Greater voting, notice or other
requirements than those set forth in these Bylaws may be established by
contract.
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EXHIBIT 3.5
RESTATED ARTICLES OF INCORPORATION
OF
METRO DETROIT PIZZA, INC.
Pursuant to the provisions of Act 284, Public Acts of 1972, the undersigned
corporation executes the following Articles:
1. The present name of the corporation is: METRO DETROIT PIZZA, INC.
2. The identification number assigned by the Bureau is: 410-984
3. All former names of the corporation are: n/a
4. The date of filing the original Articles of Incorporation was: September
16, 1992
The following Restated Articles of Incorporation supersede the Articles of
Incorporation as amended and shall be the Articles of Incorporation for the
corporation:
ARTICLE I
The name of the corporation is: METRO DETROIT PIZZA, INC.
ARTICLE II
The purpose or purposes for which the corporation is formed are: To engage in
any activity within the purposes for which corporations may be formed under the
Business Corporation Act of Michigan.
ARTICLE III
The total authorized shares:
Common shares - 50,000
Preferred shares - 10,000
All shares of stock of the corporation shall have identical rights, preferences
and limitations except as follows:
The holders of preferred stock shall be entitled to receive dividends
thereon at the rate of eight (8) percent per annum and no more payable out
of surplus or net profits of the corporation, quarterly, half-yearly or
yearly, as and when declared by the Board of Directors, before any dividend
shall be declared, set apart for, or paid upon the common stock of the
corporation. The dividends on the preferred stock shall be cumulative, so
that if the corporation fails in any fiscal year to pay such dividends on
all of the issued and outstanding preferred stock, such deficiency in the
dividends shall be fully paid, but without interest, before any
dividends shall be paid on or set apart for the common shares. Subject to
the foregoing provisions, the preferred stock shall not be entitled to
participate in any other or additional surplus or net profits of the
corporation.
In the event of dissolution or liquidation of the corporation, or a sale of
all of its assets, whether voluntary or involuntary, or in the event of its
insolvency or upon any distribution of its assets, there shall be paid to
the holders of the preferred stock its par value of One Hundred Dollars
($100) per share plus the amount of all unpaid accrued dividends thereon,
without interest before any sum shall be paid to or any assets distributed
among the holders of common stock. After such payment to the holders of
the preferred stock, the remaining assets and funds of the corporation
shall be divided among and paid to the holders of the common stock in
proportion to their respective holdings of such shares. The consolidation
or merger of the corporation at any time, or from time to time, with any
other corporation or corporations, or a sale of all or substantially all of
the assets of the corporation as part of such consolidation or merger,
shall not be construed as a dissolution, liquidation, or winding up of the
corporation within the meaning hereof.
The Board of Directors, in its discretion, may declare and pay dividends on
the common stock concurrently with dividends on the preferred stock for any
dividend period of any fiscal year when such dividends are applicable to
the common stock; provided that all accumulated dividends on the preferred
stock for all previous fiscal years and all dividends on the preferred
stock for the previous dividend periods for the current fiscal year have
been paid in full.
ARTICLE IV
1. The address of the registered office is: 615 Griswold, Suite 1020, Detroit,
Michigan 48226
2. The name of the resident agent is: The Corporation Company
ARTICLE V
When a compromise or arrangement or a plan of reorganization of this corporation
is proposed between this corporation and its creditors or any class of them or
between this corporation and its shareholders or any class of them, a court of
equity jurisdiction within the state, on application of this corporation or of a
creditor or shareholder thereof, or on application of a receiver appointed for
the corporation, may order a meeting of the creditors or class of creditors or
of the shareholders or class of shareholders to be affected by the proposed
compromise or arrangement or reorganization, to be summoned in such manner as
the court directs. If a majority in number representing 3/4 in value of the
creditors or class of creditors, or of the shareholders or class of shareholders
to be affected by the proposed compromise or arrangement or a reorganization,
agree to a compromise or arrangement or a reorganization of this
corporation as a consequence of the compromise or arrangement, the compromise or
arrangement and the reorganization, if sanctioned by the court to which the
application has been made, shall be binding on all the creditors or class of
creditors, or on all the shareholders or class of shareholders and also on this
corporation.
ARTICLE VI
Any action required or permitted by the Act to be taken at an annual or special
meeting of shareholders may be taken without a meeting, without prior notice,
and without a vote, if consents in writing, setting forth the action so taken,
are signed by the holders of outstanding shares having not less than the minimum
number of votes that would be necessary to authorize or take the action at a
meeting at which all shares entitled to vote on the action were present and
voted. The written consents shall bear the date of signature of each shareholder
who signs the consent. No written consents shall be effective to take the
corporate action referred to unless, within 60 days after the record date for
determining shareholders entitled to express consent to or to dissent from a
proposal without a meeting, written consents dated not more than 10 days before
the record date and signed by a sufficient number of shareholders to take the
action are delivered to the corporation. Delivery shall be to the corporation's
registered office, its principal place of business, or an officer or agent of
the corporation having custody of the minutes of the proceedings of its
shareholders. Delivery made to a corporation's registered office shall be by
hand or by certified or registered mail, return receipt requested.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to shareholders who would have
been entitled to notice of the shareholder meeting if the action had been taken
at a meeting and who have not consented in writing.
ARTICLE VII
SECTION 7.1 Limitation of Liability. A Director of the Corporation shall not
-----------------------
be personally liable to the Corporation or its Shareholders for monetary damages
resulting from a breach of fiduciary duties imposed on the Director, except for
liability:
(a) resulting from breach of the Director's duty of loyalty to the
Corporation or its Shareholders;
(b) resulting from any acts or omissions not in good faith or which
involve intentional misconduct or knowing violations of law;
(c) resulting from a violation of Section 551(1) of the Michigan Business
Corporation Act (the "Act"); or
(d) resulting from any transaction from which the Director derived an
improper personal benefit.
In the event that the Michigan Business Corporation Act is hereafter amended to
authorize corporation action further eliminating or limiting personal liability
of directors, then the liability of the Directors of this Corporation shall be
eliminated or limited to the fullest extent permitted by the Michigan
Corporation Act so amended. Any repeal, modification or amendment of any
provision in these Articles of Incorporation inconsistent with this Article
shall not adversely affect any right or protection of a Director of the
Corporation existing at the time of such repeal, modification or amendment for
or with respect to any act or omission occurring prior to the time of such
repeal, modification or amendment.
ARTICLE VIII
SECTION 8.1 Action by Third Party. Except to the extent limited by the Act,
---------------------
the Corporation has the power to indemnify a person who was or is a party or is
threatened to be made a party to a threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative and
whether formal or informal, other than an action by or in the right of the
Corporation, by reason of the fact that he or she is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, whether profit or not, against expenses, including attorneys'
fees, judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with the action, suit or
proceeding, if the person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Corporation or its stockholders, and with respect to a criminal action or
proceeding, if the person had no reasonable cause to believe his or her conduct
was unlawful. The termination of an action, suit, or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, does not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation or its stockholders, and, with
respect to a criminal action or proceeding, had reasonable cause to believe that
his or her conduct was unlawful.
SECTION 8.2 Action by or in Right of Corporation. Except to the extent limited
------------------------------------
by the Act, the Corporation has the power to indemnify a person who was or is a
party to or is threatened to be made a party to a threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, partner, trustee, employee,
or agent of another foreign or domestic corporation, partnership, joint venture,
trust, or other enterprise, whether for profit or not, against expenses,
including actual and reasonable attorneys' fees, and amount paid in settlement
incurred by the person in connection with the action or suit, if the person
acted in good faith and in a manner the person reasonably believed to be in or
not opposed to the best interests of the Corporation or its stockholders.
However, indemnification shall not be made for a
claim, issue, or matter in which the person has been found liable to the
Corporation unless and only to the extent that the court in which the action or
suit was brought has determined upon application that, despite the adjudication
of liability, but in view of all circumstances of the case, the person is fairly
and reasonably entitled to indemnification for the expenses which the court
considers proper.
SECTION 8.3 Expense. Indemnification against expenses:
-------
(a) To the extent that a director, officer, employee, or agent of the
Corporation has been successful on the merits or otherwise in defense
of an action, suit, or proceeding referred to above in Sections 8.1 or
8.2, or in defense of a claim, issue, or matter in the action, suit or
proceeding, he or she shall be indemnified against expenses, including
actual and reasonable attorneys' fees, incurred by him or her in
connection with the action, suit, or proceeding and an action, suit or
proceeding brought to enforce the mandatory indemnification provided
in this Subsection.
(b) An indemnification under Sections 8.1 and 8.2 above, unless ordered by
a court, shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances
because he or she has met the applicable standard of conduct set forth
in Subsections 8.1 and 8.2 above. This determination shall be made in
any of the following ways:
(i) By a majority vote of a quorum of the Board consisting of
directors who were not parties to the action, suit or
proceeding.
(ii) If the quorum described in subdivision (i) is not
obtainable, then by a majority vote of a committee of
directors who are not parties to the action. The committee
shall consist of not less than two (2) disinterested
directors.
(iii) By independent legal counsel in a written opinion.
(iv) By the stockholders.
(c) If a person is entitled to indemnification under Section 8.1 or 8.2
for a portion of expenses including attorneys' fees, judgments,
penalties, fines, and amounts paid in settlement, but not for the
total amount thereof, the Corporation may indemnify the person for the
portion of the expenses, judgments, penalties, fines, or amounts paid
in settlement for which the person is entitled to be indemnified.
SECTION 8.4 Payment in Advance. Expenses incurred in defending a civil or
------------------
criminal action, suit, or proceeding described in Sections 8.1 or 8.2 above may
be paid
by the Corporation in advance of the final disposition of the action, suit, or
proceeding upon receipt of an undertaking by or on behalf of the director,
officer, employee, or agent to repay the expenses if it is ultimately determined
that the person is not entitled to be indemnified by the Corporation. The
undertaking shall be by unlimited general obligation of the person on whose
behalf advances are made but need not be secured.
SECTION 8.5 Nonexclusivity.
--------------
(a) The indemnification or advancement of expenses provided under Sections
8.1 to 8.4 is not exclusive of other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the
Articles of Incorporation, Bylaws or a contractual agreement. However,
the total amount of expenses advanced or indemnified from all sources
combined shall not exceed the amount of actual expenses incurred by
the person seeking indemnification or advancement of expenses.
(b) The indemnification provided for in Sections 8.1 to 8.4 continues as
to a person who ceases to be a director, officer, employee, or agent
and shall inure to the benefit of the heirs, executors, and
administrators of the person.
SECTION 8.6 Insurance. The Corporation shall have the power to purchase and
----------
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under Sections 8.1 to 8.5.
SECTION 8.7 Constituent Corporations. For purposes of Sections 8.1 to 8.6
------------------------
above, "corporation" includes all constituent corporations absorbed in a
consolidation or merger and the resulting or surviving corporation, so that a
person who is or was a director, officer, employee, or agent of the constituent
corporation or is or was serving at the request of the constituent corporation
as a director, officer, partner, trustee, employee, or agent of another foreign
or domestic corporation, partnership, joint venture, trust, or other enterprise
whether for profit or not shall stand in the same position under the provisions
of this Subsection with respect to the resulting or surviving corporation as the
person would if he or she had served the resulting or surviving corporation in
the same capacity.
SECTION 8.8 Definitions. For the purposes of Sections 8.1 to 8.6 above, "other
-----------
enterprises" shall include employee benefit plans; "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
"serving at the request of the Corporation" shall include any service as a
director, officer, employee, or agent of the Corporation which imposes duties
on, or involves services by, the director, officer, employee, or agent with
respect to an employee benefit plan, its participants or beneficiaries; and a
person who acted in good faith and in a manner he or she
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be considered to have acted in a manner "not
opposed to the best interests of the Corporation or its stockholders" as
referred to in Sections 8.1 and 8.2 above.
These Restated Articles of Incorporation were duly adopted on the ____ day of
March, 1999, in accordance with the provisions of Section 642 of the Act and
were duly adopted by the shareholders. The necessary number of shares as
required by statute were voted in favor of these Restated Articles.
Signed this ___ day of March, 1999
By /s/ Harry J. Silverman
----------------------------------------
Harry Silverman
EXHIBIT 3.6
BY-LAWS
OF
METRO DETROIT PIZZA, INC.
ARTICLE I
OFFICE
------
SECTION 1.1 Principal Office. The Corporation shall maintain its
----------------
principal office in the Township of Ann Arbor, State of Michigan.
SECTION 1.2 Registered Office. The Corporation shall maintain a
-----------------
registered office in the State of Michigan as required by the Michigan Business
Corporation Act (the "Act").
SECTION 1.3 Other Offices. The Corporation may have such offices within
-------------
and without the State of Michigan as the business of the Corporation may require
from time to time. The authority to establish or close such other offices may
be delegated by the Board of Directors to one or more of the Corporation's
officers.
SECTION 1.4 Place of Meetings. All meetings of the Corporation's
-----------------
stockholders or Board of Directors shall be held at the Corporation's principal
office or at such place as shall be designated in the notice of such meetings.
ARTICLE II
STOCKHOLDERS
------------
SECTION 2.1 Annual Meeting of Stockholders. An annual meeting of the
------------------------------
stockholders shall be held in each year, on the 3rd Wednesday of March, or if
such date is a holiday, the meeting shall be on the next succeeding business
day. One of the purposes of the annual meeting of the stockholders shall be to
elect a Board of Directors. If the annual meeting is not held on the date
designated therefor, the Board of Directors shall cause the meeting to be held
thereafter as convenient but within ninety (90) days after said designated date.
SECTION 2.2 Special Meetings. A special meeting of the stockholders may
----------------
be called at any time by the President, or by a majority of the Board of
Directors, or the holders of not less than twenty-five percent (25%) of all the
shares entitled to vote at such special meeting. The method by which such
meeting may be called is as follows: Upon receipt of a specification in writing
setting forth the date and purposes of such proposed special meeting, signed by
the President, or by a majority of the Board of
Directors, or by stockholders as above provided, the Secretary of this
Corporation shall prepare, sign and mail the notices requisite to such meeting.
SECTION 2.3 Notice of Stockholders' Meeting. Not less than ten (10)
-------------------------------
days, nor more than sixty (60) days, prior to the date of an annual or special
meeting of stockholders, written notice of the time, place and purposes of such
meeting shall be mailed, as hereinafter provided, to each stockholder entitled
to vote at such meeting. Every notice shall be deemed duly served when the same
has been deposited in the United States mail, or with a private courier service
(such as Federal Express), with postage prepaid, addressed to the stockholder at
the stockholder's address as it appears on the Corporation's records, or if a
stockholder shall have filed with the Secretary of the Corporation a written
request that the notice be sent to some other address, then at such other
address.
SECTION 2.4 Waiver of Notice. Notice of the time, place and purpose of
----------------
any meeting of the stockholders may be waived by telegram, telecopy, confirmed
facsimile or other writing, either before or after such meeting has been held.
The attendance of any stockholder at any stockholders' meeting shall constitute
a waiver of any notice to which such stockholder may be entitled pursuant to
these By-Laws, except when the stockholder attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully convened.
SECTION 2.5 Quorum of Stockholders. A majority of the outstanding shares
----------------------
of this Corporation entitled to vote, represented by the record holders thereof
in person or by proxy, shall constitute a quorum at any meeting of the
stockholders. The stockholders present in person or by proxy at such meeting
may continue to do business until adjournment, notwithstanding the withdrawal of
stockholders which results in less than a quorum remaining. Whether or not a
quorum is present, the meeting may be adjourned by a vote of the shares present.
SECTION 2.6 Record Date for Determination of Stockholders. The Board of
---------------------------------------------
Directors shall fix a record date for determining stockholders entitled to
receive payment of a share dividend or distribution, or allotment of a right,
which date shall not precede the date on which the resolution fixing the record
date is adopted by the Board of Directors. The date shall not be more than 60
days before the payment of the share dividend or distribution or allotment of a
right or other action.
SECTION 2.7 Transaction of Business. Business transacted at an annual
-----------------------
meeting of stockholders may include all such business as may properly come
before the meeting. Business transacted at a special meeting of the
stockholders shall be limited to the purposes set forth in the notice of the
meeting.
SECTION 2.8 Voting. Except as otherwise required by the Act or the
------
Corporation's Articles of Incorporation, each stockholder of the Corporation
shall, at every meeting of the stockholders, be entitled to one vote in person
or by proxy for each
share of capital stock of this Corporation held by such stockholder, subject,
however, to the full effect of the limitations imposed by the fixed record date
for determination of stockholders set forth in Section 2.6 of this Article.
SECTION 2.9 Proxies. No proxy shall be deemed operative unless and until
-------
signed by the stockholder and filed with the Secretary of the Corporation. All
proxies shall be executed by the appointing stockholder or such stockholder's
authorized attorney; provided that no proxy shall be valid for more than three
(3) months after execution of such proxy unless the proxy specifically provides
for a longer period.
SECTION 2.10 Vote by Stockholder Corporation. Any other corporation
-------------------------------
owning shares of this Corporation entitled to vote may vote upon the same by the
president of such stockholder corporation, or by proxy appointed by him, unless
some other person shall be appointed to vote upon such shares by resolution of
the Board of Directors of such stockholder corporation.
SECTION 2.11 Inspectors of Election. Whenever any person entitled to vote
----------------------
at a meeting of the stockholders shall request the appointment of inspectors,
the chairman of the meeting shall appoint not more than three inspectors, who
need not be stockholders. If the right of any person to vote at such meeting
shall be challenged, the inspectors shall determine such right. The inspectors
shall receive and count the votes either upon an election or for the decision of
any question, and shall determine the result. Their certificate of any vote
shall be prima facie evidence thereof.
SECTION 2.12 Action by Written Consent. Any action required or
-------------------------
permitted by the Michigan Business Corporation Act to be taken at an annual or
special meeting of stockholders may be taken without a meeting, without prior
notice and without a vote, if consents in writing, setting forth the action so
taken, are signed by the holders of all of the outstanding shares of the
Corporation entitled to vote.
SECTION 2.13 Order of Business. The order of business at the annual
-----------------
meeting of the stockholders, and so far as practicable at all other meetings of
the stockholders, shall be as follows:
1. Proof of Notice of the Meeting
2. Determination of a Quorum
3. Election of Directors
4. Unfinished Business
5. New Business
6. Adjournment
Except with respect to a specific rule to the contrary in these By-Laws or
the Act, Robert's Rules of Order shall be used to resolve all to resolve all
procedural disputes that may arise at a stockholder's meeting.
ARTICLE III
BOARD OF DIRECTORS
------------------
SECTION 3.1 Authority. The Board of Directors shall have ultimate
---------
authority over the conduct and management of the business and affairs of the
Corporation.
SECTION 3.2 Number and Term. Except as otherwise provided by the
---------------
Corporation's Articles of Incorporation, the number of directors of the
Corporation shall be fixed from time to time by the vote of a majority of the
entire Board; provided, that the number of directors shall not be reduced to
shorten the term of any director at that time in office.
SECTION 3.3 Term. Each Director shall hold office from the date of
----
election and qualification until his or her successor shall have been duly
elected, or until his or her earlier removal, resignation, death or incapacity.
SECTION 3.4 Removal. Any Director may be removed from office, with or
-------
without cause, by a vote of a majority of the shares of the Corporation's shares
entitled to vote.
SECTION 3.5 Vacancies. Vacancies in the Board of Directors (including
---------
vacancies resulting from an increase in the number of directors) shall be filled
by appointment made by a majority of the remaining directors. Each person so
appointed shall hold office until the next election of Directors or until his or
her successor shall be elected and qualified.
SECTION 3.6 Organizational Meeting of Board. At the place of holding the
-------------------------------
annual meeting of stockholders, and immediately following the same, the Board of
Directors as constituted upon final adjournment of such annual meeting, shall
convene for the purposes of electing officers, setting the selling price for the
Corporation's shares as provided in Section 3.18 and transacting any other
business properly brought before it, provided that the organizational meeting in
any year may be held at a different time and place than that herein provided by
consent of a majority of the Directors of such new Board.
SECTION 3.7 Regular Meetings of the Board. Regular meetings of the Board
-----------------------------
of Directors may be held at times and places agreed upon by a majority of the
directors at any meeting of the Board of Directors and such regular meetings may
be held at such times and places without any further notice of the time, place
or purposes of such regular meetings.
SECTION 3.8 Special Meetings of the Board. Special meetings of the Board
-----------------------------
of Directors may be called at the request of any member of the Board at any time
by means of written notice of the time, place and purpose thereof mailed to each
director not less than one (1) day, nor more than sixty (60) days, prior to the
date fixed for the holding of any special meeting of Directors, but action taken
at any such meeting shall not be invalidated for want of notice if such notice
shall be waived as hereinafter provided.
SECTION 3.9 Notices. Every notice of a meeting of the Board of Directors
-------
shall be deemed duly served when the same has been deposited in the United
States mail, or with a private courier service (such as Federal Express), with
postage prepaid, addressed to the director at his or her last known address, or
if a director shall have filed with the Secretary of the Corporation a written
request that the notice be sent to some other address, then at such other
address.
SECTION 3.10 Waiver of Notice. Notice of the time, place and purpose of
----------------
any meeting of the Board of Directors may be waived by telegram, telecopy,
confirmed facsimile or other writing, either before or after such meeting has
been held. The attendance of any director at any directors' meeting shall
constitute a waiver of any notice to which such director may be entitled
pursuant to these By-Laws, except when the director attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully convened.
SECTION 3.11 Participation by Telecommunications. Any Director may
-----------------------------------
participate in, and be regarded as present at, any meeting of the Board of
Directors by means of conference telephone or any other means of communication
by which all persons participating in the meeting can hear each other at the
same time.
SECTION 3.12 Quorum of Directors. A majority of the directors then in
-------------------
office shall constitute a quorum for transaction of business.
SECTION 3.13 Action. The Board of Directors shall take action pursuant to
------
resolutions adopted by the affirmative vote of a majority of the Directors
participating in a meeting at which a quorum is present, or affirmative vote of
a greater number of Directors where required by the Corporation's Articles of
Incorporation or by law.
SECTION 3.14 Action by Unanimous Written Consent. Any action required or
-----------------------------------
permitted to be taken by the Board of Directors of the Corporation may be taken
without a meeting, without prior notice, and without a vote if consents in
writing, setting forth the action so taken, are signed by all of the directors
of the Corporation.
SECTION 3.15 Selection of Officers. The Board of Directors shall select a
---------------------
president, treasurer, and a secretary, and may select a chairman of the Board,
one or more vice presidents, one or more assistant treasurers, and one or more
assistant secretaries, and any other officers that the Board of Directors deems
to be in the best interests of the Corporation, which officers may be appointed
and their duties prescribed by resolution of the Board.
SECTION 3.16 Power to Appoint Other Officers and Agents. The Board of
------------------------------------------
Directors shall have power to appoint such other officers and agents as the
Board may deem necessary for transaction of the business of the Corporation.
SECTION 3.17 Removal of Officers and Agents. Any officer or agent may be
------------------------------
removed by the Board of Directors whenever, in the judgment of the Board, the
business interests of the Corporation will be served thereby.
SECTION 3.18 Share Sale Price. At each organizational meeting of the
----------------
Board of Directors, the Board shall set the share selling price for purposes of
various Stock Purchase Agreements entered into from time to time between the
Corporation and its stockholders.
SECTION 3.19 Delegation of Powers. For any reason deemed sufficient by
--------------------
the Board of Directors, whether occasioned by absence or otherwise, the Board
may delegate all or any of the powers and duties of any officer to any other
officer or director, but no officer or director shall execute, verify or
acknowledge any instrument in more than one capacity unless specifically
authorized by the Board of Directors.
SECTION 3.20 Power to Appoint Committees of the Board. The Board of
----------------------------------------
Directors shall have power to designate, by resolution, committees composed of
one or more directors who, to the extent provided in such resolution, may
exercise the business and affairs of the Corporation except as restricted by
statute. In the absence or disqualification of a member of the committee, the
members thereof present at a meeting and not disqualified from voting, whether
or not they constitute a quorum, may unanimously appoint another director of the
Board to act at the meeting in place of such an absent or disqualified member.
A majority of the members of any committee of the Board will constitute a quorum
for all committee action.
SECTION 3.21 Compensation. The Board of Directors may by resolution
------------
authorize the payment to all Directors of a uniform sum for attendance at each
meeting or a uniform stated fee as a Director. No such payment shall preclude
any Director from serving the Corporation in any other capacity and receiving
compensation therefor. The Board of Directors may also by resolution authorize
the payment of reimbursement of all expenses of each Director related to the
Director's attendance at meetings.
SECTION 3.22 Order of Business. The order of business at all meetings of
-----------------
the Board of Directors shall be:
1. Determination of a quorum
2. Reading and disposal of all unapproved minutes
3. Reports of officers and committees
4. Unfinished business
5. New business
6. Adjournment
Except with respect to a specific rule to the contrary in these By-Laws or
the Act, Robert's Rules of Order shall be used to resolve all procedural
disputes that may arise at a Director's meeting.
ARTICLE IV
OFFICERS
--------
SECTION 4.1 In General. The officers of the Corporation shall consist of
----------
a chairman, a president, a vice president, a secretary, a treasurer and such
additional vice presidents, assistant secretaries, assistant treasurers, and
other officers and agents as the Board of Directors from time to time deems
advisable. All officers shall be appointed by the Board to serve at its
pleasure. Except as otherwise provided by law or in the Articles of
Incorporation, any officer may be removed by the Board of Directors at any time,
with or without cause. Any vacancy, however occurring, in any office may be
filled by the Board of Directors for the unexpired term. One person may hold two
or more offices. Each officer shall exercise authority and perform the duties
set forth in these By-Laws and any additional authority and duties as the Board
of Directors shall determine from time to time.
SECTION 4.2 Chairman of the Board. The Chairman of the Board shall be
---------------------
selected by and from the membership of the Board of Directors. He shall conduct
all meetings of the Board and shall perform all duties incident thereto.
SECTION 4.3 President. The President shall have general and active
---------
management of the business of the Corporation and shall see that all orders and
resolutions of the Board are carried into effect. He shall be ex-officio, a
member of all standing committees, and shall have the general powers and duties
of supervision and management usually vested in the office of president of a
corporation.
SECTION 4.4 Vice Presidents. Each Vice President shall serve under the
---------------
direction of the President and shall perform such other duties as the Board of
Directors shall from time to time direct.
SECTION 4.5 Secretary. Except as otherwise provided by these By-Laws or
---------
otherwise determined by the Board of Directors, the Secretary of the
Corporation shall serve under the direction of the President and shall perform
such other duties as the Board shall from time to time direct. The Secretary
shall attend all meetings of the stockholders and the Board of Directors, and
shall preserve in the books of the Company true minutes of the proceedings of
all such meetings. The Secretary shall safely keep in his or her custody the
seal of the Corporation, and shall have authority to affix the same to all
instruments where its use is required. The Secretary shall give all notices
required by statute, by-law or resolution.
SECTION 4.6 Treasurer. The Treasurer shall serve under the President and
---------
shall perform such other duties as the Board shall from time to time direct. The
Treasurer shall have custody of all corporate funds and securities, and shall
keep in books belonging to the Corporation full and accurate accounts of all
receipts and disbursements. The Treasurer shall deposit all monies, securities
and other valuable effects in the name of the Corporation in such depositories
as may be designated for that purpose by the Board of Directors and shall
disburse the funds of the Corporation as may be ordered by the Board. The
Treasurer shall upon request report to the Board of Directors on the financial
condition of the Corporation.
SECTION 4.7 Assistant Secretary and Assistant Treasurer. The Assistant
-------------------------------------------
Secretary, in the absence or disability of the Secretary, shall perform the
duties and exercise the powers of the Secretary. The Assistant Treasurer, in the
absence or disability of the Treasurer, shall perform the duties and exercise
the powers of the Treasurer.
ARTICLE V
STOCK AND TRANSFERS
-------------------
SECTION 5.1 Certificates for Shares. Every stockholder shall be entitled
-----------------------
to a certificate of the shares to which he has subscribed, said certificate to
be signed by the Chairman of the Board, President or a Vice President, and may
be sealed with the seal of the Corporation or a facsimile thereof certifying the
number and class of shares; provided, that where such certificate is signed by a
transfer agent or an assistant transfer agent, or by a transfer clerk acting on
behalf of such entity, and by a registrar, the signature of any such officers
may be a facsimile.
If the shares of the Corporation shall become listed on a national
securities exchange, the Corporation may eliminate certificates representing
such shares and provide such shares and provide for such other methods of
recording, noticing ownership and disclosure as may be provided by the rules of
that national securities exchange.
SECTION 5.2 Transferable Only on Books of the Corporation. Shares shall
---------------------------------------------
be transferable only on the books of the Corporation by the holder thereof in
person or by an attorney lawfully constituted in writing, and upon surrender of
the certificate therefor. A record shall be made of every such transfer and
issue. Whenever any transfer is made for collateral security and not absolutely,
the fact shall be so expressed in the entry of such transfer.
SECTION 5.3 Stock Ledger. The Corporation shall maintain a stock ledger
------------
which contains the name and address of each stockholder and the number of shares
of stock of each class which the stockholder holds. The stock ledger may be in
written form or in any other form which can be converted within a reasonable
time into written form for visual inspection. The original or a duplicate of
the stock ledger shall be kept at the office of a transfer agent for the
particular class of stock, within or without
the State of Michigan, or, if none, at the principal office of the Corporation
in the State of Michigan.
SECTION 5.4 Registered Stockholders. The Corporation shall have the
-----------------------
right to treat the registered holder of any share as the absolute owner thereof,
and shall not be bound to recognize any equitable or other claim to or interest
in such share on the part of any other person, whether or not the Corporation
shall have express or other notice thereof, save as may be otherwise provided by
the laws of Michigan.
SECTION 5.5 Cancellation; Missing Certificates. All certificates
----------------------------------
surrendered to the Corporation for transfer shall be cancelled and no new
certificates representing the same number of shares shall be issued until the
former certificate or certificates for the same number of shares shall have been
so surrendered and cancelled. In the event that a certificate of stock is lost
or destroyed another may be issued and unless waived by the President, the party
alleging loss or destruction of the certificate shall post a bond or agree to
indemnify the Corporation, at the election of the President, in an amount not
exceeding two (2) times the value of the stock.
ARTICLE VI
INSTRUMENTS
-----------
SECTION 6.1 Checks, Etc. All checks, drafts and orders for payment of
------------
money shall be signed in the name of the Corporation or any assumed name under
which the Corporation has duly filed a certificate therefor and shall be
countersigned by such officers or agents as the Board of Directors shall from
time to time designate for that purpose.
SECTION 6.2 Contracts, Conveyances, Etc. When the execution of any
----------------------------
contract, conveyance or other instrument has been authorized without
specification of the executing officers, the president or any vice president, or
the treasurer or assistant treasurer, or the secretary or assistant secretary,
may execute the same in the name and on behalf of this Corporation, and may
affix the corporate seal thereto. The Board of Directors shall have power to
designate the officers and agents who shall have authority to execute any
instrument on behalf of this Corporation.
SECTION 6.3 Voting Shares of Other Corporations. Stock of other
------------------------------------
corporations or associations, registered in the name of the Corporation, may be
voted by the President, a Vice President or a proxy appointed by either of them.
The Board of Directors may by resolution appoint some other person to vote the
shares.
ARTICLE VII
AMENDMENT OF BY-LAWS
--------------------
SECTION 7.1 Amendment. These By-Laws may be amended, altered, changed,
---------
added to or repealed by the affirmative vote of a majority of the shares
entitled to vote at any regular or special meeting of the stockholders if notice
of the proposed amendment, alteration, change, addition or repeal be contained
on the notice of the meeting, or by the affirmative vote of the majority of the
Board of Directors if notice of the proposed amendment, alteration, change,
addition or repeal be contained in the notice of the meeting or is given at the
meeting preceding the meeting at which the change is adopted, provided, however,
that no change of the date for the annual meeting of the stockholders shall be
made within thirty (30) days next before the day on which such meeting is to be
held unless consented to in writing, or by a resolution adopted at a meeting, by
a majority of all stockholders entitled to vote at the annual meeting.
EXHIBIT 3.7
ARTICLES OF INCORPORATION
OF
DOMINO'S FRANCHISE HOLDING CO.
Pursuant to the provisions of Act 284, Public Acts of 1972, the undersigned
corporation executes the following Articles:
1. The present name of the corporation is: DOMINO'S FRANCHISE HOLDING CO.
2. The identification number assigned by the Bureau is: 520-768
3. All former names of the corporation are: Bluefence Co.
Whitefence Co.
4. The date of filing the original Articles of Incorporation was: February
20, 1998
The following Restated Articles of Incorporation supersede the Articles of
Incorporation as amended and shall be the Articles of Incorporation for the
corporation:
ARTICLE I
The name of the corporation is: DOMINO'S FRANCHISE HOLDING CO.
ARTICLE II
The purpose or purposes for which the corporation is formed are: To engage in
any activity within the purposes for which corporations may be formed under the
Business Corporation Act of Michigan.
ARTICLE III
The total authorized shares:
Common shares - 60,000
ARTICLE IV
1. The address of the registered office is: 30600 Telegraph Road, Bingham
Farms, Michigan 48025
2. The name of the resident agent is: The Corporation Company
ARTICLE V
When a compromise or arrangement or a plan of reorganization of this corporation
is proposed between this corporation and its creditors or any class of them or
between this
corporation and its shareholders or any class of them, a court of equity
jurisdiction within the state, on application of this corporation or of a
creditor or shareholder thereof, or on application of a receiver appointed for
the corporation, may order a meeting of the creditors or class of creditors or
of the shareholders or class of shareholders to be affected by the proposed
compromise or arrangement or reorganization, to be summoned in such manner as
the court directs. If a majority in number representing 3/4 in value of the
creditors or class of creditors, or of the shareholders or class of shareholders
to be affected by the proposed compromise or arrangement or a reorganization,
agree to a compromise or arrangement or a reorganization of this corporation as
a consequence of the compromise or arrangement, the compromise or arrangement
and the reorganization, if sanctioned by the court to which the application has
been made, shall be binding on all the creditors or class of creditors, or on
all the shareholders or class of shareholders and also on this corporation.
ARTICLE VI
Any action required or permitted by the Act to be taken at an annual or special
meeting of shareholders may be taken without a meeting, without prior notice,
and without a vote, if consents in writing, setting forth the action so taken,
are signed by the holders of outstanding shares having not less than the minimum
number of votes that would be necessary to authorize or take the action at a
meeting at which all shares entitled to vote on the action were present and
voted. The written consents shall bear the date of signature of each
shareholder who signs the consent. No written consents shall be effective to
take the corporate action referred to unless, within 60 days after the record
date for determining shareholders entitled to express consent to or to dissent
from a proposal without a meeting, written consents dated not more than 10 days
before the record date and signed by a sufficient number of shareholders to take
the action are delivered to the corporation. Delivery shall be to the
corporation's registered office, its principal place of business, or an officer
or agent of the corporation having custody of the minutes of the proceedings of
its shareholders. Delivery made to a corporation's registered office shall be
by hand or by certified or registered mail, return receipt requested.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to shareholders who would have
been entitled to notice of the shareholder meeting if the action had been taken
at a meeting and who have not consented in writing.
ARTICLE VII
SECTION 7.1 Limitation of Liability. A Director of the Corporation shall not
-----------------------
be personally liable to the Corporation or its Shareholders for monetary damages
resulting from a breach of fiduciary duties imposed on the Director, except for
liability:
(a) resulting from breach of the Director's duty of loyalty to the
Corporation or its Shareholders;
(b) resulting from any acts or omissions not in good faith or which
involve intentional misconduct or knowing violations of law;
(c) resulting from a violation of Section 551(1) of the Michigan Business
Corporation Act (the "Act"); or
(d) resulting from any transaction from which the Director derived an
improper personal benefit.
In the event that the Michigan Business Corporation Act is hereafter amended to
authorize corporation action further eliminating or limiting personal liability
of directors, then the liability of the Directors of this Corporation shall be
eliminated or limited to the fullest extent permitted by the Michigan
Corporation Act so amended. Any repeal, modification or amendment of any
provision in these Articles of Incorporation inconsistent with this Article
shall not adversely affect any right or protection of a Director of the
Corporation existing at the time of such repeal, modification or amendment for
or with respect to any act or omission occurring prior to the time of such
repeal, modification or amendment.
ARTICLE VIII
Section 8.1 Action by Third Party. Except to the extent limited by the Act,
---------------------
the Corporation has the power to indemnify a person who was or is a party or is
threatened to be made a party to a threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative and
whether formal or informal, other than an action by or in the right of the
Corporation, by reason of the fact that he or she is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, whether profit or not, against expenses, including attorneys'
fees, judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with the action, suit or
proceeding, if the person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Corporation or its stockholders, and with respect to a criminal action or
proceeding, if the person had no reasonable cause to believe his or her conduct
was unlawful. The termination of an action, suit, or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, does not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation or its stockholders, and, with
respect to a criminal action or proceeding, had reasonable cause to believe that
his or her conduct was unlawful.
SECTION 8.2 Action by or in Right of Corporation. Except to the extent limited
------------------------------------
by the Act, the Corporation has the power to indemnify a person who was or is a
party to or is threatened to be made a party to a threatened, pending or
completed action or suit by
or in the right of the Corporation to procure a judgment in its favor by reason
of the fact that he or she is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust, or other enterprise,
whether for profit or not, against expenses, including actual and reasonable
attorneys' fees, and amount paid in settlement incurred by the person in
connection with the action or suit, if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the Corporation or its stockholders. However, indemnification shall
not be made for a claim, issue, or matter in which the person has been found
liable to the Corporation unless and only to the extent that the court in which
the action or suit was brought has determined upon application that, despite the
adjudication of liability, but in view of all circumstances of the case, the
person is fairly and reasonably entitled to indemnification for the expenses
which the court considers proper.
SECTION 8.3 Expense. Indemnification against expenses:
-------
(a) To the extent that a director, officer, employee, or agent of the
Corporation has been successful on the merits or otherwise in defense
of an action, suit, or proceeding referred to above in Sections 8.1 or
8.2, or in defense of a claim, issue, or matter in the action, suit or
proceeding, he or she shall be indemnified against expenses, including
actual and reasonable attorneys' fees, incurred by him or her in
connection with the action, suit, or proceeding and an action, suit or
proceeding brought to enforce the mandatory indemnification provided
in this Subsection.
(b) An indemnification under Sections 8.1 and 8.2 above, unless ordered by
a court, shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances
because he or she has met the applicable standard of conduct set forth
in Subsections 8.1 and 8.2 above. This determination shall be made in
any of the following ways:
(i) By a majority vote of a quorum of the Board consisting of
directors who were not parties to the action, suit or
proceeding.
(ii) If the quorum described in subdivision (i) is not
obtainable, then by a majority vote of a committee of
directors who are not parties to the action. The committee
shall consist of not less than two (2) disinterested
directors.
(iii) By independent legal counsel in a written opinion.
(iv) By the stockholders.
(c) If a person is entitled to indemnification under Section 8.1 or
8.2 for a portion of expenses including attorneys' fees,
judgments, penalties, fines, and amounts paid in settlement, but
not for the total amount thereof, the Corporation may indemnify
the person for the portion of the expenses, judgments, penalties,
fines, or amounts paid in settlement for which the person is
entitled to be indemnified.
SECTION 8.4 Payment in Advance. Expenses incurred in defending a civil or
------------------
criminal action, suit, or proceeding described in Sections 8.1 or 8.2 above may
be paid by the Corporation in advance of the final disposition of the action,
suit, or proceeding upon receipt of an undertaking by or on behalf of the
director, officer, employee, or agent to repay the expenses if it is ultimately
determined that the person is not entitled to be indemnified by the Corporation.
The undertaking shall be by unlimited general obligation of the person on whose
behalf advances are made but need not be secured.
SECTION 8.5 Nonexclusivity.
--------------
(a) The indemnification or advancement of expenses provided under Sections
8.1 to 8.4 is not exclusive of other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the
Articles of Incorporation, Bylaws or a contractual agreement. However,
the total amount of expenses advanced or indemnified from all sources
combined shall not exceed the amount of actual expenses incurred by
the person seeking indemnification or advancement of expenses.
(b) The indemnification provided for in Sections 8.1 to 8.4 continues as
to a person who ceases to be a director, officer, employee, or agent
and shall inure to the benefit of the heirs, executors, and
administrators of the person.
SECTION 8.6 Insurance. The Corporation shall have the power to purchase and
----------
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under Sections 8.1 to 8.5.
SECTION 8.7 Constituent Corporations. For purposes of Sections 8.1 to 8.6
------------------------
above, "corporation" includes all constituent corporations absorbed in a
consolidation or merger and the resulting or surviving corporation, so that a
person who is or was a director, officer, employee, or agent of the constituent
corporation or is or was serving at the request of the constituent corporation
as a director, officer, partner, trustee, employee, or agent of another foreign
or domestic corporation, partnership, joint venture, trust, or other enterprise
whether for profit or not shall stand in the same position under the provisions
of this Subsection with respect to the resulting or surviving corporation as the
person would if he or she had served the resulting or surviving corporation in
the same capacity.
SECTION 8.8 Definitions. For the purposes of Sections 8.1 to 8.6 above, "other
-----------
enterprises" shall include employee benefit plans; "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
"serving at the request of the Corporation" shall include any service as a
director, officer, employee, or agent of the Corporation which imposes duties
on, or involves services by, the director, officer, employee, or agent with
respect to an employee benefit plan, its participants or beneficiaries; and a
person who acted in good faith and in a manner he or she reasonably believed to
be in the interest of the participants and beneficiaries of an employee benefit
plan shall be considered to have acted in a manner "not opposed to the best
interests of the Corporation or its stockholders" as referred to in Sections 8.1
and 8.2 above.
These Restated Articles of Incorporation were duly adopted on the ____ day of
March, 1999, in accordance with the provisions of Section 642 of the Act and
were duly adopted by the shareholders. The necessary number of shares as
required by statute were voted in favor of these Restated Articles.
Signed this ___ day of March, 1999
By /s/ Harry J. Silverman
-----------------------------------------
Harry Silverman
EXHIBIT 3.8
BY-LAWS
OF
DOMINO'S FRANCHISE HOLDING CO.
ARTICLE I
OFFICE
------
SECTION 1.1 Principal Office. The Corporation shall maintain its
----------------
principal office in the Township of Ann Arbor, State of Michigan.
SECTION 1.2 Registered Office. The Corporation shall maintain a
-----------------
registered office in the State of Michigan as required by the Michigan Business
Corporation Act (the "Act").
SECTION 1.3 Other Offices. The Corporation may have such offices within
-------------
and without the State of Michigan as the business of the Corporation may require
from time to time. The authority to establish or close such other offices may
be delegated by the Board of Directors to one or more of the Corporation's
officers.
SECTION 1.4 Place of Meetings. All meetings of the Corporation's
-----------------
stockholders or Board of Directors shall be held at the Corporation's principal
office or at such place as shall be designated in the notice of such meetings.
ARTICLE II
STOCKHOLDERS
------------
SECTION 2.1 Annual Meeting of Stockholders. An annual meeting of the
------------------------------
stockholders shall be held in each year, on the 3/rd/ Wednesday of March, or if
such date is a holiday, the meeting shall be on the next succeeding business
day. One of the purposes of the annual meeting of the stockholders shall be to
elect a Board of Directors. If the annual meeting is not held on the date
designated therefor, the Board of Directors shall cause the meeting to be held
thereafter as convenient but within ninety (90) days after said designated date.
SECTION 2.2 Special Meetings. A special meeting of the stockholders may
----------------
be called at any time by the President, or by a majority of the Board of
Directors, or the holders of not less than twenty-five percent (25%) of all the
shares entitled to vote at such special meeting. The method by which such
meeting may be called is as follows: Upon receipt of a specification in writing
setting forth the date and purposes of such proposed special meeting, signed by
the President, or by a majority of the Board of
Directors, or by stockholders as above provided, the Secretary of this
Corporation shall prepare, sign and mail the notices requisite to such meeting.
SECTION 2.3 Notice of Stockholders' Meeting. Not less than ten (10) days,
-------------------------------
nor more than sixty (60) days, prior to the date of an annual or special meeting
of stockholders, written notice of the time, place and purposes of such meeting
shall be mailed, as hereinafter provided, to each stockholder entitled to vote
at such meeting. Every notice shall be deemed duly served when the same has
been deposited in the United States mail, or with a private courier service
(such as Federal Express), with postage prepaid, addressed to the stockholder at
the stockholder's address as it appears on the Corporation's records, or if a
stockholder shall have filed with the Secretary of the Corporation a written
request that the notice be sent to some other address, then at such other
address.
SECTION 2.4 Waiver of Notice. Notice of the time, place and purpose of
----------------
any meeting of the stockholders may be waived by telegram, telecopy, confirmed
facsimile or other writing, either before or after such meeting has been held.
The attendance of any stockholder at any stockholders' meeting shall constitute
a waiver of any notice to which such stockholder may be entitled pursuant to
these By-Laws, except when the stockholder attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully convened.
SECTION 2.5 Quorum of Stockholders. A majority of the outstanding shares
----------------------
of this Corporation entitled to vote, represented by the record holders thereof
in person or by proxy, shall constitute a quorum at any meeting of the
stockholders. The stockholders present in person or by proxy at such meeting may
continue to do business until adjournment, notwithstanding the withdrawal of
stockholders which results in less than a quorum remaining. Whether or not a
quorum is present, the meeting may be adjourned by a vote of the shares present.
SECTION 2.6 Record Date for Determination of Stockholders. The Board of
---------------------------------------------
Directors shall fix a record date for determining stockholders entitled to
receive payment of a share dividend or distribution, or allotment of a right,
which date shall not precede the date on which the resolution fixing the record
date is adopted by the Board of Directors. The date shall not be more than 60
days before the payment of the share dividend or distribution or allotment of a
right or other action.
SECTION 2.7 Transaction of Business. Business transacted at an annual
-----------------------
meeting of stockholders may include all such business as may properly come
before the meeting. Business transacted at a special meeting of the
stockholders shall be limited to the purposes set forth in the notice of the
meeting.
SECTION 2.8 Voting. Except as otherwise required by the Act or the
------
Corporation's Articles of Incorporation, each stockholder of the Corporation
shall, at every meeting of the stockholders, be entitled to one vote in person
or by proxy for each
share of capital stock of this Corporation held by such stockholder, subject,
however, to the full effect of the limitations imposed by the fixed record date
for determination of stockholders set forth in Section 2.6 of this Article.
SECTION 2.9 Proxies. No proxy shall be deemed operative unless and until
-------
signed by the stockholder and filed with the Secretary of the Corporation. All
proxies shall be executed by the appointing stockholder or such stockholder's
authorized attorney; provided that no proxy shall be valid for more than three
(3) months after execution of such proxy unless the proxy specifically provides
for a longer period.
SECTION 2.10 Vote by Stockholder Corporation. Any other corporation
-------------------------------
owning shares of this Corporation entitled to vote may vote upon the same by the
president of such stockholder corporation, or by proxy appointed by him, unless
some other person shall be appointed to vote upon such shares by resolution of
the Board of Directors of such stockholder corporation.
SECTION 2.11 Inspectors of Election. Whenever any person entitled to vote
----------------------
at a meeting of the stockholders shall request the appointment of inspectors,
the chairman of the meeting shall appoint not more than three inspectors, who
need not be stockholders. If the right of any person to vote at such meeting
shall be challenged, the inspectors shall determine such right. The inspectors
shall receive and count the votes either upon an election or for the decision of
any question, and shall determine the result. Their certificate of any vote
shall be prima facie evidence thereof.
SECTION 2.12 Action by Written Consent. Any action required or
-------------------------
permitted by the Michigan Business Corporation Act to be taken at an annual or
special meeting of stockholders may be taken without a meeting, without prior
notice and without a vote, if consents in writing, setting forth the action so
taken, are signed by the holders of all of the outstanding shares of the
Corporation entitled to vote.
SECTION 2.13 Order of Business. The order of business at the annual
-----------------
meeting of the stockholders, and so far as practicable at all other meetings of
the stockholders, shall be as follows:
1. Proof of Notice of the Meeting
2. Determination of a Quorum
3. Election of Directors
4. Unfinished Business
5. New Business
6. Adjournment
Except with respect to a specific rule to the contrary in these By-Laws or
the Act, Robert's Rules of Order shall be used to resolve all to resolve all
procedural disputes that may arise at a stockholder's meeting.
ARTICLE III
BOARD OF DIRECTORS
------------------
SECTION 3.1 Authority. The Board of Directors shall have ultimate
---------
authority over the conduct and management of the business and affairs of the
Corporation.
SECTION 3.2 Number and Term. Except as otherwise provided by the
---------------
Corporation's Articles of Incorporation, the number of directors of the
Corporation shall be fixed from time to time by the vote of a majority of the
entire Board; provided, that the number of directors shall not be reduced to
shorten the term of any director at that time in office.
SECTION 3.3 Term. Each Director shall hold office from the date of
----
election and qualification until his or her successor shall have been duly
elected, or until his or her earlier removal, resignation, death or incapacity.
SECTION 3.4 Removal. Any Director may be removed from office, with
-------
or without cause, by a vote of a majority of the shares of the Corporation's
shares entitled to vote.
SECTION 3.5 Vacancies. Vacancies in the Board of Directors
---------
(including vacancies resulting from an increase in the number of directors)
shall be filled by appointment made by a majority of the remaining directors.
Each person so appointed shall hold office until the next election of Directors
or until his or her successor shall be elected and qualified.
SECTION 3.6 Organizational Meeting of Board. At the place of holding
-------------------------------
the annual meeting of stockholders, and immediately following the same, the
Board of Directors as constituted upon final adjournment of such annual meeting,
shall convene for the purposes of electing officers, setting the selling price
for the Corporation's shares as provided in Section 3.18 and transacting any
other business properly brought before it, provided that the organizational
meeting in any year may be held at a different time and place than that herein
provided by consent of a majority of the Directors of such new Board.
SECTION 3.7 Regular Meetings of the Board. Regular meetings of the
-----------------------------
Board of Directors may be held at times and places agreed upon by a majority of
the directors at any meeting of the Board of Directors and such regular meetings
may be held at such times and places without any further notice of the time,
place or purposes of such regular meetings.
SECTION 3.8 Special Meetings of the Board. Special meetings of the
-----------------------------
Board of Directors may be called at the request of any member of the Board at
any time by means of written notice of the time, place and purpose thereof
mailed to each
director not less than one (1) day, nor more than sixty (60) days, prior to the
date fixed for the holding of any special meeting of Directors, but action taken
at any such meeting shall not be invalidated for want of notice if such notice
shall be waived as hereinafter provided.
SECTION 3.9 Notices. Every notice of a meeting of the Board of
-------
Directors shall be deemed duly served when the same has been deposited in the
United States mail, or with a private courier service (such as Federal Express),
with postage prepaid, addressed to the director at his or her last known
address, or if a director shall have filed with the Secretary of the Corporation
a written request that the notice be sent to some other address, then at such
other address.
SECTION 3.10 Waiver of Notice. Notice of the time, place and purpose
----------------
of any meeting of the Board of Directors may be waived by telegram, telecopy,
confirmed facsimile or other writing, either before or after such meeting has
been held. The attendance of any director at any directors' meeting shall
constitute a waiver of any notice to which such director may be entitled
pursuant to these By-Laws, except when the director attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully convened.
SECTION 3.11 Participation by Telecommunications. Any Director may
-----------------------------------
participate in, and be regarded as present at, any meeting of the Board of
Directors by means of conference telephone or any other means of communication
by which all persons participating in the meeting can hear each other at the
same time.
SECTION 3.12 Quorum of Directors. A majority of the directors then
-------------------
in office shall constitute a quorum for transaction of business.
SECTION 3.13 Action. The Board of Directors shall take action
------
pursuant to resolutions adopted by the affirmative vote of a majority of the
Directors participating in a meeting at which a quorum is present, or
affirmative vote of a greater number of Directors where required by the
Corporation's Articles of Incorporation or by law.
SECTION 3.14 Action by Unanimous Written Consent. Any action
-----------------------------------
required or permitted to be taken by the Board of Directors of the Corporation
may be taken without a meeting, without prior notice, and without a vote if
consents in writing, setting forth the action so taken, are signed by all of the
directors of the Corporation.
SECTION 3.15 Selection of Officers. The Board of Directors shall
---------------------
select a president, treasurer, and a secretary, and may select a chairman of the
Board, one or more vice presidents, one or more assistant treasurers, and one or
more assistant secretaries, and any other officers that the Board of Directors
deems to be in the best interests of the Corporation, which officers may be
appointed and their duties prescribed by resolution of the Board.
SECTION 3.16 Power to Appoint Other Officers and Agents. The Board
------------------------------------------
of Directors shall have power to appoint such other officers and agents as the
Board may deem necessary for transaction of the business of the Corporation.
SECTION 3.17 Removal of Officers and Agents. Any officer or agent
------------------------------
may be removed by the Board of Directors whenever, in the judgment of the Board,
the business interests of the Corporation will be served thereby.
SECTION 3.18 Share Sale Price. At each organizational meeting of the
----------------
Board of Directors, the Board shall set the share selling price for purposes of
various Stock Purchase Agreements entered into from time to time between the
Corporation and its stockholders.
SECTION 3.19 Delegation of Powers. For any reason deemed sufficient
--------------------
by the Board of Directors, whether occasioned by absence or otherwise, the Board
may delegate all or any of the powers and duties of any officer to any other
officer or director, but no officer or director shall execute, verify or
acknowledge any instrument in more than one capacity unless specifically
authorized by the Board of Directors.
SECTION 3.20 Power to Appoint Committees of the Board. The Board of
----------------------------------------
Directors shall have power to designate, by resolution, committees composed of
one or more directors who, to the extent provided in such resolution, may
exercise the business and affairs of the Corporation except as restricted by
statute. In the absence or disqualification of a member of the committee, the
members thereof present at a meeting and not disqualified from voting, whether
or not they constitute a quorum, may unanimously appoint another director of the
Board to act at the meeting in place of such an absent or disqualified member.
A majority of the members of any committee of the Board will constitute a quorum
for all committee action.
SECTION 3.21 Compensation. The Board of Directors may by resolution
------------
authorize the payment to all Directors of a uniform sum for attendance at each
meeting or a uniform stated fee as a Director. No such payment shall preclude
any Director from serving the Corporation in any other capacity and receiving
compensation therefor. The Board of Directors may also by resolution authorize
the payment of reimbursement of all expenses of each Director related to the
Director's attendance at meetings.
SECTION 3.22 Order of Business. The order of business at all
-----------------
meetings of the Board of Directors shall be:
1. Determination of a quorum
2. Reading and disposal of all unapproved minutes
3. Reports of officers and committees
4. Unfinished business
5. New business
6. Adjournment
Except with respect to a specific rule to the contrary in these By-Laws or
the Act, Robert's Rules of Order shall be used to resolve all procedural
disputes that may arise at a Director's meeting.
ARTICLE IV
OFFICERS
--------
SECTION 4.1 In General. The officers of the Corporation shall
----------
consist of a chairman, a president, a vice president, a secretary, a treasurer
and such additional vice presidents, assistant secretaries, assistant
treasurers, and other officers and agents as the Board of Directors from time to
time deems advisable. All officers shall be appointed by the Board to serve at
its pleasure. Except as otherwise provided by law or in the Articles of
Incorporation, any officer may be removed by the Board of Directors at any time,
with or without cause. Any vacancy, however occurring, in any office may be
filled by the Board of Directors for the unexpired term. One person may hold two
or more offices. Each officer shall exercise authority and perform the duties
set forth in these By-Laws and any additional authority and duties as the Board
of Directors shall determine from time to time.
SECTION 4.2 Chairman of the Board. The Chairman of the Board shall
---------------------
be selected by and from the membership of the Board of Directors. He shall
conduct all meetings of the Board and shall perform all duties incident thereto.
SECTION 4.3 President. The President shall have general and active
---------
management of the business of the Corporation and shall see that all orders and
resolutions of the Board are carried into effect. He shall be ex-officio, a
member of all standing committees, and shall have the general powers and duties
of supervision and management usually vested in the office of president of a
corporation.
SECTION 4.4 Vice Presidents. Each Vice President shall serve under
---------------
the direction of the President and shall perform such other duties as the Board
of Directors shall from time to time direct.
SECTION 4.5 Secretary. Except as otherwise provided by these By-Laws
---------
or otherwise determined by the Board of Directors, the Secretary of the
Corporation shall serve under the direction of the President and shall perform
such other duties as the Board shall from time to time direct. The Secretary
shall attend all meetings of the stockholders and the Board of Directors, and
shall preserve in the books of the Company true minutes of the proceedings of
all such meetings. The Secretary shall safely keep in his or her custody the
seal of the Corporation, and shall have authority to affix the same to all
instruments where its use is required. The Secretary shall give all notices
required by statute, by-law or resolution.
SECTION 4.6 Treasurer. The Treasurer shall serve under the President
---------
and shall perform such other duties as the Board shall from time to time direct.
The
Treasurer shall have custody of all corporate funds and securities, and shall
keep in books belonging to the Corporation full and accurate accounts of all
receipts and disbursements. The Treasurer shall deposit all monies, securities
and other valuable effects in the name of the Corporation in such depositories
as may be designated for that purpose by the Board of Directors and shall
disburse the funds of the Corporation as may be ordered by the Board. The
Treasurer shall upon request report to the Board of Directors on the financial
condition of the Corporation.
SECTION 4.7 Assistant Secretary and Assistant Treasurer. The
-------------------------------------------
Assistant Secretary, in the absence or disability of the Secretary, shall
perform the duties and exercise the powers of the Secretary. The Assistant
Treasurer, in the absence or disability of the Treasurer, shall perform the
duties and exercise the powers of the Treasurer.
ARTICLE V
STOCK AND TRANSFERS
-------------------
SECTION 5.1 Certificates for Shares. Every stockholder shall be
-----------------------
entitled to a certificate of the shares to which he has subscribed, said
certificate to be signed by the Chairman of the Board, President or a Vice
President, and may be sealed with the seal of the Corporation or a facsimile
thereof certifying the number and class of shares; provided, that where such
certificate is signed by a transfer agent or an assistant transfer agent, or by
a transfer clerk acting on behalf of such entity, and by a registrar, the
signature of any such officers may be a facsimile.
If the shares of the Corporation shall become listed on a national
securities exchange, the Corporation may eliminate certificates representing
such shares and provide such shares and provide for such other methods of
recording, noticing ownership and disclosure as may be provided by the rules of
that national securities exchange.
SECTION 5.2 Transferable Only on Books of the Corporation. Shares
---------------------------------------------
shall be transferable only on the books of the Corporation by the holder thereof
in person or by an attorney lawfully constituted in writing, and upon surrender
of the certificate therefor. A record shall be made of every such transfer and
issue. Whenever any transfer is made for collateral security and not absolutely,
the fact shall be so expressed in the entry of such transfer.
SECTION 5.3 Stock Ledger. The Corporation shall maintain a stock
------------
ledger which contains the name and address of each stockholder and the number of
shares of stock of each class which the stockholder holds. The stock ledger may
be in written form or in any other form which can be converted within a
reasonable time into written form for visual inspection. The original or a
duplicate of the stock ledger shall be kept at the office of a transfer agent
for the particular class of stock, within or without
the State of Michigan, or, if none, at the principal office of the Corporation
in the State of Michigan.
SECTION 5.4 Registered Stockholders. The Corporation shall have the
-----------------------
right to treat the registered holder of any share as the absolute owner thereof,
and shall not be bound to recognize any equitable or other claim to or interest
in such share on the part of any other person, whether or not the Corporation
shall have express or other notice thereof, save as may be otherwise provided by
the laws of Michigan.
SECTION 5.5 Cancellation; Missing Certificates. All certificates
----------------------------------
surrendered to the Corporation for transfer shall be cancelled and no new
certificates representing the same number of shares shall be issued until the
former certificate or certificates for the same number of shares shall have been
so surrendered and cancelled. In the event that a certificate of stock is lost
or destroyed another may be issued and unless waived by the President, the party
alleging loss or destruction of the certificate shall post a bond or agree to
indemnify the Corporation, at the election of the President, in an amount not
exceeding two (2) times the value of the stock.
ARTICLE VI
INSTRUMENTS
-----------
SECTION 6.1 Checks, Etc. All checks, drafts and orders for payment of
------------
money shall be signed in the name of the Corporation or any assumed name under
which the Corporation has duly filed a certificate therefor and shall be
countersigned by such officers or agents as the Board of Directors shall from
time to time designate for that purpose.
SECTION 6.2 Contracts, Conveyances, Etc. When the execution of any
----------------------------
contract, conveyance or other instrument has been authorized without
specification of the executing officers, the president or any vice president, or
the treasurer or assistant treasurer, or the secretary or assistant secretary,
may execute the same in the name and on behalf of this Corporation, and may
affix the corporate seal thereto. The Board of Directors shall have power to
designate the officers and agents who shall have authority to execute any
instrument on behalf of this Corporation.
SECTION 6.3 Voting Shares of Other Corporations. Stock of other
-----------------------------------
corporations or associations, registered in the name of the Corporation, may be
voted by the President, a Vice President or a proxy appointed by either of them.
The Board of Directors may by resolution appoint some other person to vote the
shares.
ARTICLE VII
AMENDMENT OF BY-LAWS
--------------------
SECTION 7.1 Amendment. These By-Laws may be amended, altered,
---------
changed, added to or repealed by the affirmative vote of a majority of the
shares entitled to vote at any regular or special meeting of the stockholders if
notice of the proposed amendment, alteration, change, addition or repeal be
contained on the notice of the meeting, or by the affirmative vote of the
majority of the Board of Directors if notice of the proposed amendment,
alteration, change, addition or repeal be contained in the notice of the meeting
or is given at the meeting preceding the meeting at which the change is adopted,
provided, however, that no change of the date for the annual meeting of the
stockholders shall be made within thirty (30) days next before the day on which
such meeting is to be held unless consented to in writing, or by a resolution
adopted at a meeting, by a majority of all stockholders entitled to vote at the
annual meeting.
EXHIBIT 3.9
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
of
DOMINO'S PIZZA INTERNATIONAL, INC.
Domino's Pizza International, Inc. (the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, DOES HEREBY CERTIFY:
FIRST: That the date of incorporation of the Corporation is September 2,
1982.
SECOND: That the Board of Directors of said Corporation, at a meeting duly
convened and held, adopted the following resolution:
"RESOLVED, that the Board of Directors hereby declares it advisable
and in the best interest of the Corporation that the Certificate of
Incorporation be amended and restated to read as follows:
1. The name of this corporation is Domino's Pizza International, Inc.
2. The original date of incorporation of the Corporation was September 2,
1982.
3. The registered office of this corporation in the State of Delaware is
located at 1013 Centre Road, in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is Corporation Service Company.
4. The purpose of this corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
5. The total number of shares of stock that this corporation shall have
authority to issue is 100,000 shares of Common Stock, par value $1.00 per share.
The holders of the Common Stock shall have and possess all powers and voting and
other rights pertaining to the stock of this corporation and each share of
Common Stock shall be entitled to one vote.
6. The name and mailing address of each incorporator is as follows:
NAME MAILING ADDRESS
---- ---------------
L. J. Vitalo Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
K. A. Widdoes Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
M. A. Brzoska Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
7. Except as otherwise provided in the provisions establishing a class of
stock, the number of authorized shares of any class or series of stock may be
increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the voting
power of the corporation entitled to vote irrespective of the provisions of
Section 242(b)(2) of the General Corporation Law of the State of Delaware.
8. The election of directors need not be by written ballot unless the by-
laws shall so require.
9. In furtherance and not in limitation of the power conferred upon the
board of directors by law, the board of directors shall have power to make,
adopt, alter, amend and repeal from time to time by-laws of this corporation,
subject to the right of the stockholders entitled to vote with respect thereto
to alter and repeal by-laws made by the board of directors.
10. A director of this corporation shall not be liable to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent that exculpation from liability is not permitted
under the General Corporation Law of the State of Delaware as in effect at the
time such liability is determined. No amendment or repeal of this paragraph 9
shall apply to or have any effect on the liability or alleged liability of any
director of the corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment or repeal.
11. This corporation shall, to the maximum extent permitted from time to
time under the law of the State of Delaware, indemnify and upon request advance
expenses to any person who is or was a party or is threatened to be made a party
to any threatened, pending or completed action, suit, proceeding or claim,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is or was or has agreed to be a director or officer of this
corporation or while a director or officer is or was serving at the request of
this
-2-
corporation as a director, officer, partner, trustee, employee or agent of
any corporation, partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, against expenses
(including attorney's fees and expenses), judgments, fines, penalties and
amounts paid in settlement incurred (and not otherwise recovered) in connection
with the investigation, preparation to defend or defense of such action, suit,
proceeding or claim; provided, however, that the foregoing shall not require
-------- -------
this corporation to indemnify or advance expenses to any person in connection
with any action, suit, proceeding, claim or counterclaim initiated by or on
behalf of such person. Such indemnification shall not be exclusive of other
indemnification rights arising under any by-law, agreement, vote of directors or
stockholders or otherwise and shall inure to the benefit of the heirs and legal
representatives of such person. Any person seeking indemnification under this
paragraph 10 shall be deemed to have met the standard of conduct required for
such indemnification unless the contrary shall be established. Any repeal or
modification of the foregoing provisions of this paragraph 10 shall not
adversely affect any right or protection of a director or officer of this
corporation with respect to any acts or omissions of such director or officer
occurring prior to such repeal or modification.
12. The books of this corporation may (subject to any statutory
requirements) be kept outside the State of Delaware as may be designated by the
board of directors or in the by-laws of this corporation.
13. If at any time this corporation shall have a class of stock registered
pursuant to the provisions of the Securities Exchange Act of 1934, for so long
as such class is so registered, any action by the stockholders of such class
must be taken at an annual or special meeting of stockholders and may not be
taken by written consent.
THIRD: That this Certificate has been consented to and authorized by the
holder of all the issued and outstanding stock entitled to vote by written
consent given in accordance with the provisions of Section 228 of the General
Corporation Law of the State of Delaware.
FOURTH: That the aforesaid amendment is duly adopted in accordance with
the applicable provisions of Sections 245 and 228 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, said Corporation has caused this Certificate to be
signed by Harry J. Silverman, its President, this __th day of March, 1999.
/s/ Harry J. Silverman
---------------------------------
Harry J. Silverman
President
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EXHIBIT 3.10
AMENDED AND RESTATED
BY-LAWS
OF
DOMINO'S PIZZA INTERNATIONAL, INC.
Section 1. LAW, CERTIFICATE OF INCORPORATION AND BY-LAWS
1.1 These by-laws are subject to the certificate of incorporation of the
corporation. In these by-laws, references to law, the certificate of
incorporation and by-laws mean the law, the provisions of the certificate of
incorporation and the by-laws as from time to time in effect.
Section 2. STOCKHOLDERS
2.1 Annual Meeting. The annual meeting of stockholders shall be held at
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10:00 a.m. on the first Monday in May in each year, unless that day be a legal
holiday at the place where the meeting is to be held, in which case the meeting
shall be held at the same hour on the next succeeding day not a legal holiday,
or at such other date and time as shall be designated from time to time by the
board of directors and stated in the notice of the meeting, at which they shall
elect a board of directors and transact such other business as may be required
by law or these by-laws or as may properly come before the meeting.
2.2 Special Meetings. A special meeting of the stockholders may be called
----------------
at any time by the chairman of the board, if any, the president or the board of
directors. A special meeting of the stockholders shall be called by the
secretary, or in the case of the death, absence, incapacity or refusal of the
secretary, by an assistant secretary or some other officer, upon application of
a majority of the directors. Any such application shall state the purpose or
purposes of the proposed meeting. Any such call shall state the place, date,
hour, and purposes of the meeting.
2.3 Place of Meeting. All meetings of the stockholders for the election
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of directors or for any other purpose shall be held at such place within or
without the State of Delaware as may be determined from time to time by the
chairman of the board, if any, the president or the board of directors. Any
adjourned session of any meeting of the stockholders shall be held at the place
designated in the vote of adjournment.
2.4 Notice of Meetings. Except as otherwise provided by law, a written
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notice of each meeting of stockholders stating the place, day and hour thereof
and, in the case of a special meeting, the purposes for which the meeting is
called, shall be given not less then ten nor more than sixty days before the
meeting, to each stockholder entitled to vote thereat, and to each stockholder
who, by law, by the certificate of incorporation or by these by-laws, is
entitled to
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notice, by leaving such notice with him or at his residence or usual place of
business, or by depositing it in the United States mail, postage prepaid, and
addressed to such stockholder at his address as it appears in the records of the
corporation. Such notice shall be given by the secretary, or by an officer or
person designated by the board of directors, or in the case of a special meeting
by the officer calling the meeting. As to any adjourned session of any meeting
of stockholders, notice of the adjourned meeting need not be given if the time
and place thereof are announced at the meeting at which the adjournment was
taken except that if the adjournment is for more than thirty days or if after
the adjournment a new record date is set for the adjourned session, notice of
any such adjourned session of the meeting shall be given in the manner
heretofore described. No notice of any meeting of stockholders or any adjourned
session thereof need be given to a stockholder if a written waiver of notice,
executed before or after the meeting or such adjourned session by such
stockholder, is filed with the records of the meeting or if the stockholder
attends such meeting without objecting at the beginning of the meeting to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
meeting of the stockholders or any adjourned session thereof need be specified
in any written waiver of notice.
2.5 Quorum of Stockholders. At any meeting of the stockholders a quorum
----------------------
as to any matter shall consist of a majority of the votes entitled to be cast on
the matter, except where a larger quorum is required by law, by the certificate
of incorporation or by these by-laws. Any meeting may be adjourned from time to
time by a majority of the votes properly cast upon the question, whether or not
a quorum is present. If a quorum is present at an original meeting, a quorum
need not be present at an adjourned session of that meeting. Shares of its own
stock belonging to the corporation or to another corporation, if a majority of
the shares entitled to vote in the election of directors of such other
corporation is held, directly or indirectly, by the corporation, shall neither
be entitled to vote nor be counted for quorum purposes; provided, however, that
the foregoing shall not limit the right of any corporation to vote stock,
including but not limited to its own stock, held by it in a fiduciary capacity.
2.6 Action by Vote. When a quorum is present at any meeting, a plurality
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of the votes properly cast for election to any office shall elect to such office
and a majority of the votes properly cast upon any question other than an
election to an office shall decide the question, except when a larger vote is
required by law, by the certificate of incorporation or by these by-laws. No
ballot shall be required for any election unless requested by a stockholder
present or represented at the meeting and entitled to vote in the election.
2.7 Action without Meetings. Unless otherwise provided in the certificate
-----------------------
of incorporation, any action required or permitted to be taken by stockholders
for or in connection with any corporate action may be taken without a meeting,
without prior notice and without a vote, if a consent or consents in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted and shall be delivered to the corporation by
delivery to its registered office in
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Delaware by hand or certified or registered mail, return receipt requested, to
its principal place of business or to an officer or agent of the corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Each such written consent shall bear the date of signature of each
stockholder who signs the consent. No written consent shall be effective to take
the corporate action referred to therein unless written consents signed by a
number of stockholders sufficient to take such action are delivered to the
corporation in the manner specified in this paragraph within sixty days of the
earliest dated consent so delivered.
If action is taken by consent of stockholders and in accordance with the
foregoing, there shall be filed with the records of the meetings of stockholders
the writing or writings comprising such consent.
If action is taken by less than unanimous consent of stockholders, prompt
notice of the taking of such action without a meeting shall be given to those
who have not consented in writing and a certificate signed and attested to by
the secretary that such notice was given shall be filed with the records of the
meetings of stockholders.
In the event that the action which is consented to is such as would have
required the filing of a certificate under any provision of the General
Corporation Law of the State of Delaware, if such action had been voted upon by
the stockholders at a meeting thereof, the certificate filed under such
provision shall state, in lieu of any statement required by such provision
concerning a vote of stockholders, that written consent has been given under
Section 228 of said General Corporation Law and that written notice has been
given as provided in such Section 228.
2.8 Proxy Representation. Every stockholder may authorize another person
--------------------
or persons to act for him by proxy in all matters in which a stockholder is
entitled to participate, whether by waiving notice of any meeting, objecting to
or voting or participating at a meeting, or expressing consent or dissent
without a meeting. Every proxy must be signed by the stockholder or by his
attorney-in-fact. No proxy shall be voted or acted upon after three years from
its date unless such proxy provides for a longer period. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and, if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally. The authorization of a proxy may but
need not be limited to specified action, provided, however, that if a proxy
limits its authorization to a meeting or meetings of stockholders, unless
otherwise specifically provided such proxy shall entitle the holder thereof to
vote at any adjourned session but shall not be valid after the final adjournment
thereof.
2.9 Inspectors. The directors or the person presiding at the meeting may,
----------
and shall if required by applicable law, appoint one or more inspectors of
election and any substitute inspectors to act at the meeting or any adjournment
thereof. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors,
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if any, shall determine the number of shares of stock outstanding and the voting
power of each, the shares of stock represented at the meeting, the existence of
a quorum, the validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all stockholders. On request of the person
presiding at the meeting, the inspectors shall make a report in writing of any
challenge, question or matter determined by them and execute a certificate of
any fact found by them.
2.1 List of Stockholders. The secretary shall prepare and make, at least
--------------------
ten days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at such meeting, arranged in alphabetical order
and showing the address of each stockholder and the number of shares registered
in his name. The stock ledger shall be the only evidence as to who are
stockholders entitled to examine such list or to vote in person or by proxy at
such meeting.
Section 3. BOARD OF DIRECTORS
3.1 Number. The corporation shall have one or more directors, the number
------
of directors to be determined from time to time by vote of a majority of the
directors then in office. Except in connection with the election of directors
at the annual meeting of stockholders, the number of directors may be decreased
only to eliminate vacancies by reason of death, resignation or removal of one or
more directors. No director need be a stockholder.
3.2 Tenure. Except as otherwise provided by law, by the certificate of
------
incorporation or by these by-laws, each director shall hold office until the
next annual meeting and until his successor is elected and qualified, or until
he sooner dies, resigns, is removed or becomes disqualified.
3.3 Powers. The business and affairs of the corporation shall be managed
------
by or under the direction of the board of directors who shall have and may
exercise all the powers of the corporation and do all such lawful acts and
things as are not by law, the certificate of incorporation or these by-laws
directed or required to be exercised or done by the stockholders.
3.4 Vacancies. Vacancies and any newly created directorships resulting
---------
from any increase in the number of directors may be filled by vote of the
holders of the particular class or series of stock entitled to elect such
director at a meeting called for the purpose or by the directors. The directors
shall have and may exercise all their powers notwithstanding the existence of
one or more vacancies in their number, subject to any requirements of law or of
the certificate of incorporation or of these by-laws as to the number of
directors required for a quorum or for any vote or other actions.
3.5 Committees. The board of directors may, by vote of a majority of the
----------
whole board, (a) designate, change the membership of or terminate the existence
of any committee or
-4-
committees, each committee to consist of one or more of the directors; (b)
designate one or more directors as alternate members of any such committee who
may replace any absent or disqualified member at any meeting of the committee;
and (c) determine the extent to which each such committee shall have and may
exercise the powers of the board of directors in the management of the business
and affairs of the corporation, including the power to authorize the seal of the
corporation to be affixed to all papers which require it and the power and
authority to declare dividends or to authorize the issuance of stock; excepting,
however, such powers which by law, by the certificate of incorporation or by
these by-laws they are prohibited from so delegating. In the absence or
disqualification of any member of such committee and his alternate, if any, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not constituting a quorum, may unanimously appoint another
member of the board of directors to act at the meeting in the place of any such
absent or disqualified member. Except as the board of directors may otherwise
determine, any committee may make rules for the conduct of its business, but
unless otherwise provided by the board or such rules, its business shall be
conducted as nearly as may be in the same manner as is provided by these by-laws
for the conduct of business by the board of directors. Each committee shall keep
regular minutes of its meetings and report the same to the board of directors
upon request.
3.6 Regular Meetings. Regular meetings of the board of directors may be
----------------
held without call or notice at such places within or without the State of
Delaware and at such times as the board may from time to time determine,
provided that notice of the first regular meeting following any such
determination shall be given to absent directors. A regular meeting of the
directors may be held without call or notice immediately after and at the same
place as the annual meeting of stockholders.
3.7 Special Meetings. Special meetings of the board of directors may be
----------------
held at any time and at any place within or without the State of Delaware
designated in the notice of the meeting, when called by the chairman of the
board, if any, the president, or by one-third or more in number of the
directors, reasonable notice thereof being given to each director by the
secretary or by the chairman of the board, if any, the president or any one of
the directors calling the meeting.
3.8 Notice. It shall be reasonable and sufficient notice to a director to
------
send notice by mail at least forty-eight hours or by telegram at least twenty-
four hours before the meeting addressed to him at his usual or last known
business or residence address or to give notice to him in person or by telephone
at least twenty-four hours before the meeting. Notice of a meeting need not be
given to any director if a written waiver of notice, executed by him before or
after the meeting, is filed with the records of the meeting, or to any director
who attends the meeting without protesting prior thereto or at its commencement
the lack of notice to him. Neither notice of a meeting nor a waiver of a notice
need specify the purposes of the meeting.
3.9 Quorum. Except as may otherwise be provided by law, by the
------
certificate of incorporation or by these by-laws, at any meeting of the
directors a majority of the directors then
-5-
in office shall constitute a quorum; a quorum shall not in any case be less than
one-third of the total number of directors constituting the whole board. Any
meeting may be adjourned from time to time by a majority of the votes cast upon
the question, whether or not a quorum is present, and the meeting may be held as
adjourned without further notice.
3.1 Action by Vote. Except as may be otherwise provided by law, by the
--------------
certificate of incorporation or by these by-laws, when a quorum is present at
any meeting the vote of a majority of the directors present shall be the act of
the board of directors.
3.1 Action Without a Meeting. Any action required or permitted to be
------------------------
taken at any meeting of the board of directors or a committee thereof may be
taken without a meeting if all the members of the board or of such committee, as
the case may be, consent thereto in writing, and such writing or writings are
filed with the records of the meetings of the board or of such committee. Such
consent shall be treated for all purposes as the act of the board or of such
committee, as the case may be.
3.1 Participation in Meetings by Conference Telephone. Members of the
-------------------------------------------------
board of directors, or any committee designated by such board, may participate
in a meeting of such board or committee by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other or by any other means permitted by law. Such
participation shall constitute presence in person at such meeting.
3.1 Compensation. In the discretion of the board of directors, each
------------
director may be paid such fees for his services as director and be reimbursed
for his reasonable expenses incurred in the performance of his duties as
director as the board of directors from time to time may determine. Nothing
contained in this section shall be construed to preclude any director from
serving the corporation in any other capacity and receiving reasonable
compensation therefor.
3.1 Interested Directors and Officers.
---------------------------------
(a) No contract or transaction between the corporation and one or more of
its directors or officers, or between the corporation and any other corporation,
partnership, association, or other organization in which one or more of the
corporation's directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the board or committee thereof which authorizes the contract or transaction, or
solely because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the board of directors
or the committee, and the board or committee in good faith authorizes the
contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or
-6-
(2) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation as of
the time it is authorized, approved or ratified, by the board of directors, a
committee thereof, or the stockholders.
(b) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the board of directors or of a committee
which authorizes the contract or transaction.
Section 4. OFFICERS AND AGENTS
4.1 Enumeration; Qualification. The officers of the corporation shall be
--------------------------
a president, a treasurer, a secretary and such other officers, if any, as the
board of directors from time to time may in its discretion elect or appoint
including without limitation a chairman of the board, one or more vice
presidents and a controller. The corporation may also have such agents, if any,
as the board of directors from time to time may in its discretion choose. Any
officer may be but none need be a director or stockholder. Any two or more
offices may be held by the same person. Any officer may be required by the
board of directors to secure the faithful performance of his duties to the
corporation by giving bond in such amount and with sureties or otherwise as the
board of directors may determine.
4.2 Powers. Subject to law, to the certificate of incorporation and to
------
the other provisions of these by-laws, each officer shall have, in addition to
the duties and powers herein set forth, such duties and powers as are commonly
incident to his office and such additional duties and powers as the board of
directors may from time to time designate.
4.3 Election. The officers may be elected by the board of directors at
--------
their first meeting following the annual meeting of the stockholders or at any
other time. At any time or from time to time the directors may delegate to any
officer their power to elect or appoint any other officer or any agents.
4.4 Tenure. Each officer shall hold office until the first meeting of the
------
board of directors following the next annual meeting of the stockholders and
until his respective successor is chosen and qualified unless a shorter period
shall have been specified by the terms of his election or appointment, or in
each case until he sooner dies, resigns, is removed or becomes disqualified.
Each agent shall retain his authority at the pleasure of the directors, or the
officer by whom he was appointed or by the officer who then holds agent
appointive power.
-7-
4.5 Chairman of the Board of Directors, President and Vice President. The
----------------------------------------------------------------
chairman of the board, if any, shall have such duties and powers as shall be
designated from time to time by the board of directors. Unless the board of
directors otherwise specifies, the chairman of the board, or if there is none
the chief executive officer, shall preside, or designate the person who shall
preside, at all meetings of the stockholders and of the board of directors.
Unless the board of directors otherwise specifies, the president shall be
the chief executive officer and shall have direct charge of all business
operations of the corporation and, subject to the control of the directors,
shall have general charge and supervision of the business of the corporation.
Any vice presidents shall have such duties and powers as shall be set forth
in these by-laws or as shall be designated from time to time by the board of
directors or by the president.
4.6 Treasurer and Assistant Treasurers. Unless the board of directors
----------------------------------
otherwise specifies, the treasurer shall be the chief financial officer of the
corporation and shall be in charge of its funds and valuable papers, and shall
have such other duties and powers as may be designated from time to time by the
board of directors or by the president. If no controller is elected, the
treasurer shall, unless the board of directors otherwise specifies, also have
the duties and powers of the controller.
Any assistant treasurers shall have such duties and powers as shall be
designated from time to time by the board of directors, the president or the
treasurer.
4.7 Controller and Assistant Controllers. If a controller is elected, he
------------------------------------
shall, unless the board of directors otherwise specifies, be the chief
accounting officer of the corporation and be in charge of its books of account
and accounting records, and of its accounting procedures. He shall have such
other duties and powers as may be designated from time to time by the board of
directors, the president or the treasurer.
Any assistant controller shall have such duties and powers as shall be
designated from time to time by the board of directors, the president, the
treasurer or the controller.
4.8 Secretary and Assistant Secretaries. The secretary shall record all
-----------------------------------
proceedings of the stockholders, of the board of directors and of committees of
the board of directors in a book or series of books to be kept therefor and
shall file therein all actions by written consent of stockholders or directors.
In the absence of the secretary from any meeting, an assistant secretary, or if
there be none or he is absent, a temporary secretary chosen at the meeting,
shall record the proceedings thereof. Unless a transfer agent has been
appointed the secretary shall keep or cause to be kept the stock and transfer
records of the corporation, which shall contain the names and record addresses
of all stockholders and the number of shares registered in the name of each
stockholder. He shall have such other duties and powers as may from time to
time be designated by the board of directors or the president.
-8-
Any assistant secretaries shall have such duties and powers as shall be
designated from time to time by the board of directors, the president or the
secretary.
Section 5. RESIGNATIONS AND REMOVALS
5.1 Any director or officer may resign at any time by delivering his
resignation in writing to the chairman of the board, if any, the president, or
the secretary or to a meeting of the board of directors. Such resignation shall
be effective upon receipt unless specified to be effective at some other time,
and without in either case the necessity of its being accepted unless the
resignation shall so state. Except as may be otherwise provided by law, by the
certificate of incorporation or by these by-laws, a director (including persons
elected by stockholders or directors to fill vacancies in the board) may be
removed from office with or without cause by the vote of the holders of a
majority of the issued and outstanding shares of the particular class or series
entitled to vote in the election of such directors. The board of directors may
at any time remove any officer either with or without cause. The board of
directors may at any time terminate or modify the authority of any agent.
Section 6. VACANCIES
6.1 If the office of the president or the treasurer or the secretary
becomes vacant, the directors may elect a successor by vote of a majority of
the directors then in office. If the office of any other officer becomes
vacant, any person or body empowered to elect or appoint that officer may choose
a successor. Each such successor shall hold office for the unexpired term, and
in the case of the president, the treasurer and the secretary until his
successor is chosen and qualified or in each case until he sooner dies, resigns,
is removed or becomes disqualified. Any vacancy of a directorship shall be
filled as specified in Section 3.4 of these by-laws.
Section 7. CAPITAL STOCK
7.1 Stock Certificates. Each stockholder shall be entitled to a
------------------
certificate stating the number and the class and the designation of the series,
if any, of the shares held by him, in such form as shall, in conformity to law,
the certificate of incorporation and the by-laws, be prescribed from time to
time by the board of directors. Such certificate shall be signed by the
chairman or vice chairman of the board, if any, or the president or a vice
president and by the treasurer or an assistant treasurer or by the secretary or
an assistant secretary. Any of or all the signatures on the certificate may be
a facsimile. In case an officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed on such certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent, or registrar at the time of its issue.
7.2 Loss of Certificates. In the case of the alleged theft, loss,
--------------------
destruction or mutilation of a certificate of stock, a duplicate certificate may
be issued in place thereof, upon such terms,
-9-
including receipt of a bond sufficient to indemnify the corporation against any
claim on account thereof, as the board of directors may prescribe.
Section 8. TRANSFER OF SHARES OF STOCK
8.1 Transfer on Books. Subject to the restrictions, if any, stated or
-----------------
noted on the stock certificate, shares of stock may be transferred on the books
of the corporation by the surrender to the corporation or its transfer agent of
the certificate therefor properly endorsed or accompanied by a written
assignment and power of attorney properly executed, with necessary transfer
stamps affixed, and with such proof of the authenticity of signature as the
board of directors or the transfer agent of the corporation may reasonably
require. Except as may be otherwise required by law, by the certificate of
incorporation or by these by-laws, the corporation shall be entitled to treat
the record holder of stock as shown on its books as the owner of such stock for
all purposes, including the payment of dividends and the right to receive notice
and to vote or to give any consent with respect thereto and to be held liable
for such calls and assessments, if any, as may lawfully be made thereon,
regardless of any transfer, pledge or other disposition of such stock until the
shares have been properly transferred on the books of the corporation.
It shall be the duty of each stockholder to notify the corporation of his
post office address.
8.2 Record Date. In order that the corporation may determine the
-----------
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the board of directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the board of directors, and which record date shall
not be more than sixty nor less than ten days before the date of such meeting.
If no such record date is fixed by the board of directors, the record date for
determining the stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the board of directors may fix a new record date for the adjourned meeting.
In order that the corporation may determine the stockholders entitled to
consent to corporate action in writing without a meeting, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the board of directors, and
which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the board of directors. If no
such record date has been fixed by the board of directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the board of directors is required by
the General Corporation Law of the State of Delaware, shall be the first date on
which a signed written consent setting forth the action taken or proposed to be
taken is delivered to the corporation by delivery to its registered office in
Delaware by hand or certified
-10-
or registered mail, return receipt requested, to its principal place of business
or to an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. If no record date has been
fixed by the board of directors and prior action by the board of directors is
required by the General Corporation Law of the State of Delaware, the record
date for determining stockholders entitled to consent to corporate action in
writing without a meeting shall be at the close of business on the day on which
the board of directors adopts the resolution taking such prior action.
In order that the corporation may determine the stockholders entitled to
receive payment of any dividend or other distribution or allotment of any rights
or to exercise any rights in respect of any change, conversion or exchange of
stock, or for the purpose of any other lawful action, the board of directors may
fix a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted, and which record date shall be not
more than sixty days prior to such payment, exercise or other action. If no
such record date is fixed, the record date for determining stockholders for any
such purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
Section 9. CORPORATE SEAL
9.1 Subject to alteration by the directors, the seal of the corporation
shall consist of a flat-faced circular die with the word "Delaware" and the name
of the corporation cut or engraved thereon, together with such other words,
dates or images as may be approved from time to time by the directors.
Section 10. EXECUTION OF PAPERS
10. Except as the board of directors may generally or in particular cases
authorize the execution thereof in some other manner, all deeds, leases,
transfers, contracts, bonds, notes, checks, drafts or other obligations made,
accepted or endorsed by the corporation shall be signed by the chairman of the
board, if any, the president, a vice president or the treasurer.
Section 11. FISCAL YEAR
11. The fiscal year of the corporation shall end on the Sunday closest to
December 31 of each year.
Section 12. AMENDMENTS
12. These by-laws may be adopted, amended or repealed by vote of a
majority of the directors then in office or by vote of a majority of the voting
power of the stock outstanding and entitled to vote. Any by-law, whether
adopted, amended or repealed by the stockholders or directors, may be amended or
reinstated by the stockholders or the directors.
-11-
EXHIBIT 3.11
ARTICLES OF INCORPORATION
OF
STOREFINDER, INC.
The undersigned Incorporator hereby files these Articles of Incorporation
in order to form a corporation (the "Corporation") under the laws of the State
of Florida.
ARTICLE I.
Name
----
The name of the Corporation shall be Storefinder, Inc.
ARTICLE II.
Nature of Business
------------------
The Corporation may engage in any activity or business permitted under the
laws of the United States and the State of Florida.
ARTICLE III.
Stock
-----
The authorized capital stock of the Corporation shall consist of 100 shares
of Common Stock with a par value of $1.00 (one dollar) per share. The stock of
the Corporation shall be issued for such consideration as may be determined by
the Board of Directors but not less than par value. Shareholders may enter into
agreements with the Corporation or with each other to control or restrict the
transfer of stock and such agreements may take the form of options, rights of
first refusal, buy and sell agreements or any other lawful form of agreements.
ARTICLE IV.
Right of Purchase
-----------------
Every shareholder, upon the sale of any new stock of this Corporation of
the same kind, class or series as that which he already holds, shall have the
right to purchase his pro rata share at the price at which it is offered to
others.
ARTICLE V.
Incorporator
------------
The name and street address of the Incorporator of this Corporation is as
follows:
Floyd R. Self
Suite 701, 215 S. Monroe Street
First Florida Bank Building
Tallahassee, Florida 32301
ARTICLE VI.
Term of Corporate Existence
---------------------------
The Corporation shall exist perpetually unless dissolved according to law.
ARTICLE VII.
Address of Registered Office, Registered Agent,
-----------------------------------------------
Principal Office, and Mailing Address
-------------------------------------
The address of the initial registered and principal office of the
Corporation in the State of Florida shall be Suite 701, First Florida Bank
Building, 215 S. Monroe Street, Tallahassee. Florida 32301, which also is the
mailing address of the corporation. The name of the initial registered agent of
the Corporation at the above address shall be Floyd R. Self. The Board of
Directors may from time to time change the registered office
-2-
to any other address in the State of Florida or change the registered agent.
ARTICLE VIII.
Number of Directors
The business of the Corporation shall be managed by a Board of Directors
consisting of at least one person, the exact number to be determined from time
to time in accordance with the By-Laws.
ARTICLE IX.
Initial Board of Directors
--------------------------
The initial Board of Directors shall consist of three (3) member(s). The
name(s) and street address(es) of the member(s) of the initial Board of
Directors of the Corporation, who shall hold office until the first annual
meeting of the shareholders, and thereafter until (his/her/their) successor(s)
(has/have) been elected and qualified (is/are) as follows:
P. David Black
Douglas J. Dawson
Timothy S. Carr
30 Frank Lloyd Wright Drive
Ann Arbor, Michigan 48106-0997
ARTICLE X.
Officers
--------
The Corporation shall have a President, a Secretary and a Treasurer and may
have additional and assistant officers, including, without limitation thereto,
one or more Vice Presidents, Assistant Secretaries and Assistant Treasurers.
Any two or more offices may be held by the same person.
-3-
ARTICLE XI.
Transactions in Which Directors
-------------------------------
Or Officers Are Interested
--------------------------
(a) No contract or other transaction between the Corporation and one or
more of its Directors or officers, or between the Corporation and any other
corporation, firm, or entity in which one or more of the Corporation's Directors
or officers are directors or officers, or have a financial interest, shall be
void or voidable solely because of such relationship or interest, or solely
because such Director(s) or officer(s) are present at or participate in the
meeting of the Board of Directors or a committee thereof which authorizes,
approves or ratifies such contract or transaction, or solely because his or
their votes are counted for such purpose, if:
(1) The fact of such relationship or interest is disclosed or known to
the Board of Directors or the committee which authorizes, approves or ratifies
the contract or transaction by a vote or consent sufficient for the purpose,
without counting the votes or consents of such interested Director or Directors;
or
(2) The fact of such relationship or interest is disclosed or known to
the shareholders entitled to vote thereon, and they authorize, approve or ratify
such contract or transaction by vote or written consent; or
(3) The contract or transaction is fair and reasonable as to the
Corporation at the time it is authorized.
(b) Common or interested Directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
thereof which authorizes, approves, or ratifies such contract or transaction.
-4-
ARTICLE XII.
Indemnification of Directors and Officers
-----------------------------------------
(a) The Corporation hereby indemnifies and agrees to hold harmless from
claim, liability, loss or judgment any Director or officer made a party or
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, or investigative
(other than an action, suit or proceeding by or on behalf of the Corporation to
procure a judgment in its favor), brought to impose a liability or penalty on
such person for an act alleged to have been committed by such person in his
capacity as Director, officer, employee or agent of the Corporation or any other
corporation, partnership, joint venture, trust or other enterprise in which he
served at the request of the Corporation, against judgments, fines, amounts paid
in settlement and reasonable expenses, including attorneys' fees actually and
reasonably incurred as a result of such action, suit or proceeding or any appeal
thereof, if, such person acted in good faith in the reasonable belief that such
action was in, or not opposed to, the best interests of the Corporation, and in
criminal actions or proceedings, without reasonable ground for belief that such
action was unlawful. The termination of any such action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or its
equivalent shall not create a presumption that any such Director or officer did
not act in good faith in the reasonable belief that such action was in, or not
opposed to, the best interests; of the Corporation. Such person shall not be
entitled to indemnification in relation to matters as to which such person has
been adjudged to have been guilty of gross negligence or willful misconduct in
the performance of his duties to the Corporation.
-5-
(b) Any indemnification under paragraph (a) shall be made by the
Corporation only as authorized in the specific case upon a determination that
amounts for which a Director or officer seeks indemnification were properly
incurred and that such Director or officer acted in good faith and in a manner
he reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and that, with respect to any criminal action or proceeding, he had
no reasonable ground for belief that such action was unlawful. Such
determination shall be made either (1) by the Board of Directors by a majority
vote of a quorum consisting of Directors who were not parties to such action,
suit or proceeding, or (2) by a majority vote of a quorum consisting of
shareholders who were not parties to such action, suit or proceeding.
(c) The Corporation shall be entitled to assume the defense of any person
seeking indemnification pursuant to the provisions of paragraph (a) above upon a
preliminary determination by the Board of Directors that such person has met the
applicable standards of conduct set forth in paragraph (a) above, and upon
receipt of an undertaking by such person to repay all amounts, expended by the
Corporation in such defense, unless it shall ultimately be determined that such
person is entitled to be indemnified by the Corporation as authorized in this
article. If the Corporation elects to assume the defense, such defense shall be
conducted by counsel chosen by it and not objected to in writing for valid
reasons by such person. In the event that the Corporation elects to assume the
defense of any such person and retains such counsel, such person shall bear the
fees and expenses of any additional counsel retained by him, unless there are
conflicting interests between or among such person and other parties represented
in the same action, suit or proceeding by the counsel retained by the
Corporation, that are, for valid reasons, objected to in writing by such person,
in which case the reasonable
-6-
expenses of such additional representation shall be within the scope of the
indemnification intended if such person is ultimately determined to be entitled
thereto as authorized in this article.
(d) The foregoing rights of indemnification shall not be deemed to limit in
any way the power of the Corporation to indemnify under any applicable law.
ARTICLE XIII.
Financial Information
---------------------
The Corporation shall not be required to prepare and provide a balance
sheet or a profit and loss statement to its shareholders, nor shall the
Corporation be required to file a balance sheet or profit and loss statement in
its registered office. This provision shall be deemed to have been ratified by
the shareholders each year hereafter unless a resolution to the contrary has
been adopted by the shareholders.
ARTICLE XIV.
Amendment
---------
These Articles of Incorporation may be amended in any manner now or
hereafter provided for by law and all rights conferred upon shareholders
hereunder are granted subject to this reservation.
IN WITNESS WHEREOF, the undersigned, being the original subscribing
-7-
Incorporator to the foregoing Articles of Incorporation has hereunto set his
hand and seal this 9th day of October, 1990.
/s/ Floyd R. Self
---------------------
FLOYD R. SELF
STATE OF FLORIDA
COUNTY OF LEON
I HEREBY CERTIFY that on this day personally appeared before me, the
undersigned authority, Floyd R. Self, to me well known and known to me to be the
person who executed the foregoing instrument and acknowledged before me that he
executed the same freely and voluntarily for the uses and purposes therein set
forth and expressed.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal on this
9th day of October, 1990.
/s/ S. C. Taylor
--------------------
NOTARY PUBLIC
My commission expires: Sept. 3, 1991
-8-
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
STOREFINDER, INC.
Pursuant to the provisions of section 607.1006, Florida Statutes, this Florida
profit corporation adopts the following articles of amendment to its articles of
incorporation:
FIRST: Amendment(s) adopted: Article FIRST of the Articles of Incorporation of
Storefinder, Inc. are hereby amended to read as follows:
FIRST: The name of the corporation is Domino's Pizza
International Payroll Services, Inc.
SECOND: The date of the amendments adoption is December 18, 1998.
THIRD: Adoption of Amendments(s) (CHECK ONE)
[ ] The amendment(s) was/were approved by the shareholders. The number of
votes cast for the amendment(s) was/were sufficient for approval.
[ ] The amendment(s) was/were approved by the shareholders through voting
groups. The following statement must be separately provided for each
voting group entitled to vote separately on the amendment(s):
The number of votes cast for the amendment(s) was/were
sufficient for approval by __________________________
voting group
[ ] The amendment(s) was/were adopted by the board of directors without
shareholder action and shareholder action was not required.
[ ] The amendment(s) was/were adopted by the incorporators without
shareholder action and shareholder action was not required.
-9-
Signed this 18th day of December, 1998.
By: /s/ Harry J. Silverman
--------------------------------
Name: Harry J. Silverman
Title: Vice President
-10-
EXHIBIT 3.12
BY-LAWS
-------
OF
--
STOREFINDER, INC.
-----------------
ARTICLE I - OFFICES
-------------------
The principal office of the Corporation in the State of Florida shall be located
in the City of Tallahassee. The Corporation may have such other offices, either
within or without the State of Florida, as the Board of Directors may designate
or as the business of the Corporation may require from time to time.
The registered office of the Corporation, may be maintained in the State of
Florida, but need not be, identical with the principal office in the State of
Florida, and the address of the registered office may be changed from time to
time by the Board of Directors.
ARTICLE II - MEETING OF SHAREHOLDERS
Section 1 - Annual Meeting:
- --------------------------
The annual meeting of the shareholders of the Corporation shall be held on the
2nd Monday of the month of December, in each year, at the hour of 10:00 a.m., or
such other time or day within such month as shall be fixed by the Board of
Directors, for the purpose of electing directors, and for transacting such other
business as may properly come before the meeting.
Failure to hold an annual meeting at the time stated in or fixed in accordance
with these bylaws does not affect the validity of such corporate action.
Section 2- Special Meetings:
- ---------------------------
Special meetings of the shareholders may be called for any purpose or purposes,
unless otherwise prescribed by statute, at any time by the Board of Directors or
by the President, and shall be called by the President or the Secretary at the
written request of the holders of not less than ten percent (10%) of all shares
of the Corporation then outstanding entitled to vote hereat, so long as such
written request is signed by all shareholders mentioned herein, describes the
purpose or proposes for which it is to be held and is delivered to the
Corporation.
Section 3 - Place of Meetings:
- -----------------------------
The Board of Directors may designate any place, either within or without the
State of Florida, is the place of meeting for any annual or for any special
meeting called by the Board Of Directors. If no designation is made, or if a
special meeting be otherwise called, the place of meeting shall be the principal
office of the Corporation in the State of Florida.
By-Laws 1
Section 4 - Notice of Meetings:
- ------------------------------
(a) Written notice of each meeting of shareholders, whether annual or special,
stating the time, date, hour of the meeting and place where it is to be held,
and in the case of a special meeting, the purpose or purposes for which the
meeting is called, (only business within the purpose or purposes described in
the notice of such special meeting may be conducted at any such shareholder
meeting) shall, unless otherwise prescribed by law, be served either personally
or by mail by or at the direction of the President or Secretary, or the officer
or other person or persons calling the meeting, not less than ten or more than
sixty days before the meeting, upon each shareholder of record entitled to vote
at such meeting, and to any other shareholder to whom the giving of notice may
be required by law. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, addressed to the shareholder at his/her
address as it appears on the stock transfer books of the Corporation, with
postage thereon prepaid. If, at any meeting, action is proposed to be taken
that would, if taken, entitle shareholders to receive payment for their shares
pursuant to the Business Corporation Act, the notice of such meeting shall
include a statement of that purpose and to that effect. If mailed, such notice
shall be directed to each such shareholder at his address, as it appears on the
records of the shareholders of the Corporation, unless he shall have previously
filed with the Secretary of the Corporation a written request that notices
intended for him be mailed to some other address, in which case, it shall be
mailed to the address designated in such request.
(b) Notice of any meeting need not be given to any person who may become a
shareholder of record after mailing of such notice, to any shareholder who
submits a signed waiver of notice either before or after such meeting, or to any
shareholder who attends such meeting, in person or by proxy, and fails to object
to lack of notice or defective notice of the meeting at the beginning of such
meeting.
(c) If an annual or special shareholders' meeting is adjourned to a different
date, time, or place, notice need not be given of the new date, time, or place
if the new date, time, or place is announced at the meeting before adjournment.
If a new record date for the adjoined meeting is or must be fixed by law,
however, notice of the adjourned meeting must be given under this section of
these Bylaws to persons who are shareholders as of the new record date.
Section 5 - Quorum:
- ------------------
(a) Except as otherwise provided herein, or by law, or in the Articles of
Incorporation (such Articles and any amendments thereof being hereinafter
collectively referred to as the "Articles of Incorporation", at all
shareholders' meetings, a majority of the shares of the Corporation entitled to
vote thereat and represented at such meeting either in person or by proxy shall
constitute a quorum. If less than a majority of the outstanding shares entitled
to vote are represented at a shareholders' meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice.
At such adjourned meeting at which a
By-Laws 2
quorum shall be present or presented, any business may be transacted which was
outlined in the original notice for the meeting. The shareholders present at a
duly organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
Section 6- Voting:
- -----------------
(a) Except as otherwise provided by statute or by the Articles of
Incorporation, any corporate action, other than the election of directors to be
taken by vote of the shareholders, shall be authorized by a majority of votes
cast at a meeting of shareholders by the holders of shares entitled to vote
thereon.
(b) Except as otherwise provided by statute or by the Articles of
Incorporation, at each meeting of shareholders, each outstanding share of the
Corporation entitled to vote thereat, shall be entitled to one vote for each
share registered in his name on the books of the Corporation on each matter
voted on at such shareholders' meeting.
(c) Each shareholder entitled to vote or to express consent or dissent without
a meeting, may do so in person or by proxy; provided, however, that the
instrument authorizing such proxy to act shall have been executed in writing by
the shareholder himself, or by his duly authorized attorney-in-fact which is
sent to the Secretary or other officer or agent of the Corporation authorized to
tabulate votes. No proxy shall be valid after the expiration of eleven months
from the date of its execution, unless the persons executing it shall have
specified therein the length of time it is to continue in force. Such
instrument shall not be valid until received by the Secretary, or other officer
or agent authorized to tabulate votes at the meeting and shall be filed with the
records of the Corporation. The death or incapacity of the shareholder
appointing a proxy does not affect the right of the Corporation to accept the
proxy's authority unless notice of the death or incapacity is received by the
secretary or other officer or agent of the Corporation authorized to tabulate
votes before the proxy exercises his or her authority under the appointment.
(d) Any action required or permitted to be taken at a meeting of the
shareholders may be taken without a meeting if a consent in writing, setting
forth the action so taken shall be signed by all of the shareholders entitled to
vote with respect to the subject matter thereof.
ARTICLE III - BOARD OF DIRECTORS
--------------------------------
Section 1 - Number, Election and Term of Office:
- -----------------------------------------------
(a) The number of the directors of the Corporation shall be not less than one
nor more than five, unless and until otherwise determined by vote of a majority
of the entire Board of Directors.
By-Laws 3
(b) Except as may otherwise be provided herein or in the Articles of
Incorporation, the
members of the Board of Directors of the Corporation, who need not be
shareholders or residents of the State of Florida, shall be elected by a
majority of the votes cast at a meeting of shareholders, by the holders of
shares entitled to vote in the election.
(c) Each director shall hold office until the next annual meeting of the
shareholders, and until his successor is elected and qualified, or until his
prior death, resignation or removal.
Section 2 - Duties and Powers:
- -----------------------------
The business and affairs of the Corporation shall be managed by the Board of
Directors.
Section 3 - Annual and Regular Meetings; Notice:
- ------------------------------------------------
(a) A regular annual meeting of the Board of Directors shall be held without
any other notice than this Bylaw, immediately following and at the same place as
the annual meeting of the shareholders at the place of such annual meeting of
shareholders.
(b) The Board of Directors, from time to time, may provide by resolution for
the time and place, either within or without the State of Florida, for the
holding of additional regular meetings without other notice than such
resolution.
(c) The Board of Directors may participate in any meeting of the Board or
conduct such meeting through the use of any means of communication in which all
Directors participating may simultaneously hear each other during the meeting.
Any or all Directors participating by this means are deemed to be present and in
person at such meeting.
Section 4 - Special Meetings; Notice:
- ------------------------------------
(a) Special meetings of the Board of Directors may be called by or at the
request of the President or by one of the directors, or by any other officer or
individual so specified by the Board, at such time and place as may be specified
in the respective notices or waivers of notice thereof.
(b) The person or person authorized to call such special meeting may fix any
places, either within or without the State of Florida, as the place for holding
any such special meeting called by them.
(c) Notice of special meetings shall be mailed directly to each director,
addressed to him at his residence or usual place of business, at least two (2)
days before the day on which the meeting is to be held, or shall be sent to him
at such place by telegram, radio or cable, or shall be delivered to him
personally or given to him orally, not later than the day before the day on
which the meeting is to be held. If mailed, such notice shall be deemed to be
delivered when
By-Laws 4
deposited in the United States mail, so addressed, with postage
thereon prepaid. If notice be given by telegram, such notice shall be deemed to
be delivered when the telegram is delivered by the telegraph company. A notice,
or waiver of notice, except as required by Section 8 of this Article III, need
not specify the purpose of the meeting.
(d) Any Director may waive notice of any meeting. The attendance of a director
at a meeting shall constitute a waiver of notice of such meeting except where a
Director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened.
Section 5 - Chairperson:
- -----------------------
At all meetings of the Board of Directors the Chairperson of the Board, if any
and if present, shall preside. If there shall be no Chairperson, or he shall be
absent, then the President shall preside, and in his absence, a Chairperson
chosen by the Directors shall preside.
Section 6 - Quorum and Adjournments:
- -----------------------------------
(a) A majority of the number of Directors shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors, but if less
than such majority is present at the meeting, a majority of the Directors
present may adjourn the meeting from time to time without further notice.
Section 7 - Manner of Acting:
- ----------------------------
(a) At all meetings of the Board of Directors, each director present shall have
one vote irrespective of the number of shares of stock, if any, which he may
hold.
(b) If a quorum is present when a vote is taken, the affirmative vote of a
majority of Directors present is the act of the Board of Directors unless the
Articles of Incorporation or these Bylaws require the vote of a greater number
of Directors.
(c) A Director who is present at a meeting of the Board of Directors or a
committee of the Board of Directors when corporate action is taken is deemed to
have assented to the action taken unless: (i) he objects at the beginning of the
meeting, or promptly upon his arrival, to holding it or transacting business at
the meeting; (ii) his dissent or abstention from the action taken is entered in
the minutes of the meeting; or (iii) he delivers written notice of his dissent
or abstention to the presiding officer of the meeting before it is adjourned or
to the Corporation immediately after adjournment of the meeting. The right of
dissent or abstention is not available to a Director who votes in favor of the
action taken.
(d) Any action required or permitted to be taken by the Board of Directors at a
meeting may be taken without a meeting if a consent in writing, setting forth
the action so taken, shall be
By-Laws 5
signed by all of the Directors and included in the minutes or filed with the
corporate records reflecting the action taken. Any such action taken without a
meeting shall be deemed effective when the last director signs the consent,
unless the consent specifies a different effective date and such signed consent
has the effect of a meeting vote and may be described as such in any document.
(e) A director of the Corporation who is present at a meeting of the Board of
Directors when a corporate action is taken is deemed to have assented to the
action taken unless:
(f) he or she objects at the beginning of the meeting, or promptly upon his
arrival, to holding it or transacting business at the meeting;
(ii) his or her dissent or abstention from the action taken is entered in
the minutes of the meeting; or;
(iii) he or she delivers written notice of his dissent or abstention to the
presiding officer of the meeting before its adjournment or immediately after
adjournment of the meeting. The right of dissent or abstention is not available
to a Director who votes in favor of the action taken.
Section 8 - Vacancies:
- ---------------------
(a) Unless the Articles of Incorporation of the Corporation or these Bylaws
provide otherwise, of a vacancy occurs on the Board of Directors, including a
vacancy resulting from any increase in the number of Directors:
(i) the shareholders may fill the vacancy;
(ii) the Board of Directors may fill the vacancy; or
(iii) if the Directors remaining in office constitute fewer than a quorum
of the Board, they may fill the vacancy by the affirmative vote of a
majority of all the Directors remaining in office.
(b) If the vacant office was held by a Director elected by a voting group of
shareholders, only the shareholders of that voting group are entitled to vote to
fill the vacancy if it is filled by the shareholders.
(c) A vacancy that will occur at a specific later date may be filled before the
vacancy occurs, but the new Director may not take office until the vacancy
occurs.
By-Laws 6
Section- 9 - Resignation:
- ------------------------
Any director may resign at any time by delivering written notice to the
Corporation. A resignation is effective when the notice is delivered unless the
notice specifies a later effective date.
Section 10 - Removal of Directors by Shareholders and Directors:
- ---------------------------------------------------------------
(a) Any director may be removed with or without cause at any time by the
shareholders of the Corporation at a special meeting called for the purpose of
removing him and the meeting notice must state that the purpose, or one of the
purposes, of the meeting is removal of the director.
(b) Any director elected by a voting group of shareholders may be removed only
by the shareholders of that voting group.
(c) Any director may be removed for cause by action of the Board.
Section 11 - Salary:
- -------------------
By resolution of the Board of Directors, each Director may be paid his/her
expenses, if any, of attendance at each meeting of the Board of Directors, and
may be paid a fixed sum for attendance at each meeting of the Board of
Directors. No such payment shall preclude any Director from serving the
Corporation in any other capacity and receiving compensation herefor.
Section 12 - Contracts:
- ----------------------
(a) No contract or other transaction between this Corporation and any other
Corporation shall be voidable by the Corporation solely because of a director or
directors' interest in a transaction if:
(i) the material facts of the transaction and the director or directors'
interest was disclosed or known to the Board of Directors or a
committee of the Board of Directors and the Board or Directors or
committee authorized or approved, or ratified the transaction;
(ii) the material facts of the transaction and the director or directors'
interest were disclosed or known to the shareholders entitled to vote
and they authorized, approved, or ratified the transaction; or
(iii) the transaction was fair to the Corporation.
By-Laws 7
Such interested Director or Directors may be counted in determining the presence
of a quorum at such meeting. However, such interested director or directors may
not be counted in determining a vote by the Board of Directors to ratify such
contract or transaction in which such director or directors is/are interested.
Section 13 - Committees:
- -----------------------
The Board of Directors may, by resolution, authorize one or more committees and
appoint members of the Board of Directors to serve on such committees with such
powers and authority, to the extent permitted by law, as may be provided in such
resolution. Sections 2, 3, 4, 6, and 7 of these Bylaws, governing authority of
the Board of Directors, meetings, action without meetings, notice and quorum and
voting requirements shall apply to committees and their members as well.
Section 14 - Contracts:
- ----------------------
The Board of Directors may authorize any Officer or Officers, agent or agents,
to enter into any contract or execute and deliver any instrument in the name of
and an behalf of the Corporation, and such authority may be general or confined
to specific instances.
Exhibit 3.13
ARTICLES OF INCORPORATION
OF
DOMINO'S PIZZA - GOVERNMENT SERVICES DIVISION, INC.
* * * * *
We, the undersigned natural persons of the age of eighteen years or more,
acting as incorporators of a corporation under the Texas Business Corporation
Act, do hereby adopt the following Articles of Incorporation for such
corporation:
ARTICLE ONE
The name of the corporation is
DOMINO'S PIZZA - GOVERNMENT SERVICES DIVISION, INC.
ARTICLE TWO
The period of its duration is perpetual.
ARTICLE THREE
The purpose or purposes for which the corporation is organized are:
To engage in the transaction of any or all lawful business for which
corporations may be incorporated under the Texas Business Corporation Act.
ARTICLE FOUR
The aggregate number of shares which the corporation shall have authority
to issue is fifty thousand (50,000) of the par value One Dollar ($1.00) each.
ARTICLE FIVE
The corporation will not commence business until it has received for the
issuance of its shares consideration of the value of One Thousand Dollars
($1,000), consisting of money,
labor done or property actually received, which sum is not less than One
Thousand Dollars ($1,000).
ARTICLE SIX
The street address of its initial registered office is 350 N. St. Paul
Street, c/o C T Corporation System, Dallas, Texas 75201, and the name of its
initial registered agent at such address is C T CORPORATION SYSTEM.
ARTICLE SEVEN
The number of directors of the corporation may be fixed by the by-laws.
The number of directors constituting the initial board of directors is four
(4), and the name and address of each person who is to serve as director until
the first annual meeting of the shareholders or until a successor is elected and
qualified are:
NAME ADDRESS
---- -------
Stuart Mathis 30 Frank Lloyd Wright Drive
Ann Arbor, Michigan 48105
Hoyt Jones 1960 Grand Ave., Ste. 850
El Segundo, California 90245
David Pear 13355 Noel Road, Ste. 400
Dallas, Texas 75240
Wally Powers 30 Frank Lloyd Wright Drive
Ann Arbor, Michigan 48105
ARTICLE EIGHT
The names and address of the incorporators are:
NAMES ADDRESSES
----- ---------
Claudia L. Saari 615 Griswold, Ste. 1020
-2-
Detroit, Michigan 48226
Michael R. Dalida 615 Griswold, Ste. 1020
Detroit, Michigan 48226
Laura D. Mosset 615 Griswold, Ste. 1020
Detroit, Michigan 48226
IN WITNESS WHEREOF, we have hereunto set our hands, this 15th day of
October, 1990.
/s/ Claudia L. Saari
---------------------------------
Claudia L. Saari
/s/ Michael R. Dalida
---------------------------------
Michael R. Dalida
/s/ Laura D. Mosset
----------------------------------
Laura D. Mosset
STATE OF MICHIGAN )
) ss:
COUNTY OF WAYNE )
I, Gertrude A. Hall, a notary public, do hereby certify that on this 15th
day of October, 1990, personally appeared before me, Claudia L. Saari, Michael
R. Dalida and Laura D. Mosset, who each being by me first duly sworn, severally
declared that they are the persons who signed the foregoing document as
incorporators, and that the statements therein contained are true.
/s/ Gertrude A. Hall
----------------------------------
Notary Public
My commission expires 6/15/93
(NOTARIAL SEAL)
-3-
Exhibit 3.14
Annex II
DOMINO'S PIZZA - GOBERNMENT SERVICES DIVISION, INC.
*****
B Y L A W S
*****
ARTICLE I
OFFICES
Section 1. The registered office shall be located in Dallas, Texas.
Section 2. The corporation may also have offices at such other places
both within and without the State of Texas as the board of directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
ANNUAL MEETINGS OF SHAREHOLDERS
Section 1. All meetings of shareholders for the election of directors
shall be held in Ann Arbor, State of Michigan, at such place as may be fixed
from time to time by the board of directors. Said meetings may also be held at
such other place either within or without the State of Texas as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting.
Section 2. Annual meetings of shareholders, commencing with the year
1991, shall be held on the second Monday of October if not a legal holiday, and
if a legal holiday, then on the next secular day following, at 10:00 A. M., at
which they shall elect by a plurality vote a board of directors, and transact
such other business as may properly be brought before the meeting.
Section 3. Written or printed notice of the annual meeting stating the
place, day and hour of the meeting shall be delivered not less than ten nor more
than fifty days before the date of the meeting, either personally or by mail, by
or at the direction of the president, the secretary, or the officer or persons
calling the meeting, to each shareholder of record entitled to vote at such
meeting.
ARTICLE III
SPECIAL MEETINGS OF SHAREHOLDERS
Section 1. Special meetings of shareholders for any purpose other than
the election of directors may be held at such time and place within or without
the State of Texas as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
Section 2. Special meetings of the shareholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the articles of
incorporation, may be called by the president, the board of directors, or the
holders of not less than one-tenth of all the shares entitled to vote at the
meeting.
Section 3. Written or printed notice of a special meeting stating the
place, day and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be delivered not less than ten nor more than fifty days
before the date of the meeting, either personally or by mail, by or at the
direction of the president, the secretary, or the officer or persons calling the
meeting, to each shareholder of record entitled to vote at such meeting.
Section 4. The business transacted at any special meeting of shareholders
shall be limited to the purposes stated in the notice.
ARTICLE IV
QUORUM AND VOTING OF STOCK
Section 1. The holders of a majority of the shares of stock issued and
outstanding and entitled to vote, represented in person or by proxy, shall
constitute a quorum at all meetings of the shareholders for the transaction of
business except as otherwise provided by statute or by the articles of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the shareholders, the shareholders present in person or
represented by proxy shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented any business may be transacted which might have been
transacted at the meeting as originally notified.
Section 2. If a quorum is present, the affirmative vote of a majority of
the shares of stock represented at the meeting shall be the act of the
shareholders unless the vote of a greater number of shares of stock is required
by law or the articles of incorporation.
Section 3. Each outstanding share of stock, having voting power, shall be
entitled to one vote on each matter submitted to a vote at a meeting of
shareholders. A shareholder may
-2-
vote either in person or by proxy executed in writing by the shareholder or by
his duly authorized attorney-in-fact.
In all elections for directors every shareholder, entitled to vote, shall
have the right to vote, in person or by proxy, the number of shares of stock
owned by him, for as many persons as there are directors to be elected, or to
cumulate the vote of said shares, and give one candidate as many votes as the
number of directors multiplied by the number of his shares of stock shall equal,
or to distribute the votes on the same principle among as many candidates as he
may see fit.
Section 4. Any action required to be taken at a meeting of the
shareholders may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the shareholders entitled
to vote with respect to the subject matter thereof.
ARTICLE V
DIRECTORS
Section 1. The number of directors shall be four (4). Directors need not
be residents of the State of Texas nor shareholders of the corporation. The
directors, other than the first board of directors, shall be elected at the
annual meeting of the shareholders, and each director elected shall serve until
the next succeeding annual meeting and until his successor shall have been
elected and qualified. The first board of directors shall hold office until the
first annual meeting of shareholders.
Section 2. Any vacancy occurring in the board of directors may be filled
by the shareholders at an annual or a special meeting or by the affirmative vote
of a majority of the remaining directors though less than a quorum of the board
of directors. A director elected to fill a vacancy shall be elected for the
unexpired portion of the term of his predecessor in office.
Any directorship to be filled by reason of an increase in the number of
directors may be filled by election at an annual meeting or at a special meeting
of shareholders called for that purpose. A director elected to fill a newly
created directorship shall serve until the next succeeding annual meeting of
shareholders and until his successor shall have been elected and qualified. Any
directorship to be filled by reason of an increase in the number of directors
may also be filled by the board of directors for a term of office until the next
election of directors by shareholders; provided no more than two directorships
may be so filled during a period between any two successive annual meetings of
shareholders.
Whenever the holders of any class or series of shares are entitled to elect
one or more directors by the provisions of the articles of incorporation, any
vacancies in such directorships and any newly created directorships of such
class or series to be filled by reason of an increase in the number of such
directors may be filled by the affirmative vote of a majority of the
-3-
directors elected by such class or series then in office or by a sole remaining
director so elected, or by the vote of the holders of the outstanding shares of
such class or series, and such directorships shall not in any case be filled by
the vote of the remaining directors or the holders of the outstanding shares as
a whole unless otherwise provided in the articles of incorporation.
Section 3. The business affairs of the corporation shall be managed by
its board of directors which may exercise all such powers of the corporation and
do all such lawful acts and things as are not by statute or by the articles of
incorporation or by these by-laws directed or required to be exercised or done
by the shareholders.
Section 4. The directors may keep the books of the corporation, except
such as are required by law to be kept within the state, outside of the State of
Texas, at such place or places as they may from time to time determine.
Section 5. The board of directors, by the affirmative vote of a majority
of the directors then in office, and irrespective of any personal interest of
any of its members, shall have authority to establish reasonable compensation of
all directors for services to the corporation as directors, officers or
otherwise.
ARTICLE VI
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. Meetings of the board of directors, regular or special, may be
held either within or without the State of Texas.
Section 2. The first meeting of each newly elected board of directors
shall be held at such time and place as shall be fixed by the vote of the
shareholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present, or it may convene at such place and
time as shall be fixed by the consent in writing of all the directors.
Section 3. Regular meetings of the board of directors may be held upon
such notice, or without notice, and at such time and at such place as shall from
time to time be determined by the board.
Section 4. Special meetings of the board of directors may be called by
the president on ___________ days' notice to each director, either personally or
by mail or by telegram; special meetings shall be called by the president or
secretary in like manner and on like notice on the written request of two
directors.
-4-
Section 5. Attendance of a director at any meeting shall constitute a
waiver of notice of such meeting, except where a director attends for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the board
of directors need be specified in the notice or waiver of notice of such
meeting.
Section 6. A majority of the directors shall constitute a quorum for the
transaction of business unless a greater number is required by law or by the
articles of incorporation. The act of a majority of the directors present at any
meeting at which a quorum is present shall be the act of the board of directors,
unless the act of a greater number is required by statute or by the articles of
incorporation. If a quorum shall not be present at any meeting of directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 7. Unless otherwise restricted by the articles of incorporation
or these by-laws, any action required or permitted to be taken at any meeting of
the board of directors or of any committee thereof may be taken without a
meeting, if all members of the board or committee, as the case may be, consent
thereto in writing which shall set forth the action taken and be signed by all
members of the board of directors or of the committee as the case may be.
ARTICLE VII
COMMITTEES OF DIRECTORS
Section 1. The board of directors, by resolution adopted by a majority of
the full board of directors, may designate from among its members an executive
committee and one or more other committees, each of which shall be comprised of
one or more members and, to the extent provided in the resolution, shall have
and may exercise all of the authority of the board of directors, except that no
such committee shall have the authority of the board of directors in reference
to amending the articles of incorporation, approving a plan of merger or
consolidation, recommending to the shareholders the sale, lease, or exchange of
all or substantially all of the property and assets of the corporation otherwise
than in the usual and regular course of its business, recommending to the
shareholders a voluntary dissolution of the corporation or a revocation thereof,
amending, altering, or repealing the bylaws of the corporation or adopting new
bylaws for the corporation, filling vacancies in the board of directors or any
committee, filling any directorship to be filled by reason of an increase in the
number of directors, electing or removing officers or members of any committee,
fixing the compensation of any member of a committee, or altering or repealing
any resolution of the board of directors which by its terms provides that it
shall not be so amendable or repealable; and, unless the resolution expressly so
provides, no committee shall have the power or authority to declare a dividend
or to authorize the issuance of shares of the corporation.
-5-
ARTICLE VIII
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
articles of incorporation or of these by-laws, notice is required to be given to
any director or shareholder, it shall not be construed to mean personal notice,
but such notice may be given in writing, by mail, addressed to such director or
shareholder, at his address as it appears on the records of the corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
directors may also be given by telegram.
Section 2. Whenever any notice whatever is required to be given under the
provisions of the statutes or under the provisions of the articles of
incorporation or these by-laws, a waiver thereof in writing signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
ARTICLE IX
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board
of directors and shall be a president and a secretary. The board of directors
may also elect or appoint such other officers, including assistant officers and
agents as may be deemed necessary.
Section 2. The board of directors at its first meeting after each annual
meeting of shareholders shall choose a president and a secretary neither of whom
need be a member of the board.
Section 3. The board of directors may also appoint such other officers
and agents as it shall deem necessary who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board of directors.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the
board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.
-6-
THE PRESIDENT
Section 6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the shareholders and the board of
directors, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the board of
directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation.
THE VICE-PRESIDENTS
Section 8. The vice-president, if there is one, or if there shall be more
than one, the vice-presidents in the order determined by the board of directors,
shall, in the absence or disability of the president, perform the duties and
exercise the powers of the president and shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the shareholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the shareholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The board of directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
signature.
Section 10. The assistant secretary, if there is one, or if there be more
than one, the assistant secretaries in the order determined by the board of
directors, shall, in the absence or disability of the secretary, perform the
duties and exercise the powers of the secretary and shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe.
-7-
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer, if there is one, shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the board of
directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the board of directors, he shall give the
corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the board of directors for the faithful performance of the
duties of his office and for the restoration to the corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
Section 14. The assistant treasurer, if there is one, or, if there shall
be more than one, the assistant treasurers in the order determined by the board
of directors, shall, in the absence or disability of the treasurer, perform the
duties and exercise the powers of the treasurer and shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe.
ARTICLE X
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented by
certificates signed by the president and secretary or such other officers as may
be elected or appointed, and may be sealed with the seal of the corporation or a
facsimile thereof.
When the corporation is authorized to issue shares of more than one class
there shall be set forth upon the face or back of the certificate, or the
certificate shall have a statement that the corporation will furnish to any
shareholder upon request and without charge, a full statement of the
designations, preferences, limitations and relative rights of the shares of each
class authorized to be issued and, if the corporation is authorized to issue any
preferred or special class in series, the variations in the relative rights and
preferences between the shares of each such series so far as the same have been
fixed and determined and the authority of the
-8-
board of directors to fix and determine the relative rights and preferences of
subsequent series. When the corporation is authorized to issue shares of more
than one class, every certificate shall also set forth upon the face or the back
of such certificate a statement that there is set forth in the articles of
incorporation on file in the office of the Secretary of State a full statement
of all the designations, preferences, limitations and relative rights, including
voting rights, of the shares of each class authorized to be issued and the
corporation will furnish a copy of such statement to the record holder of the
certificate without charge on written request to the corporation at its
principal place of business or registered office. Every certificate shall have
noted thereon any information required to be set forth by the Texas Business
Corporation Act and such information shall be set forth in the manner provided
in said Act.
Section 2. The signatures of the officers of the corporation upon a
certificate may be facsimiles if the certificate is countersigned by a transfer
agent, or registered by a registrar, other than the corporation itself or an
employee of the corporation. In case any officer who has signed or whose
facsimile signature has been placed upon such certificate shall have ceased to
be such officer before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at the date of its
issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate to be
issued in place of any certificate theretofore issued by the corporation alleged
to have been lost or destroyed. When authorizing such issue of a new
certificate, the board of directors, in its discretion and as a condition
precedent to the issuance thereof, may prescribe such terms and conditions as it
deems expedient, and may require such indemnities as it deems adequate, to
protect the corporation from any claim that may be made against it with respect
to any such certificate alleged to have been lost or destroyed.
TRANSFERS OF SHARES
Section 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate representing shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, a new
certificate shall be issued to the person entitled thereto, and the old
certificate canceled and the transaction recorded upon the books of the
corporation.
CLOSING OF TRANSFER BOOKS
Section 5. For the purpose of determining shareholders entitled to notice
of or to vote at any meeting of shareholders, or any adjournment thereof or
entitled to receive payment of any dividend, or in order to make a determination
of shareholders for any other proper purpose, the board of directors may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, fifty days. If the stock transfer books shall be
-9-
closed for the purpose of determining shareholders entitled to notice of or to
vote at a meeting of shareholders, such books shall be closed for at least ten
days immediately preceding such meeting. In lieu of closing the stock transfer
books, the board of directors may fix in advance a date as the record date for
any such determination of shareholders, such date in any case to be not more
than fifty days and, in case of a meeting of shareholders, not less than ten
days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. If the stock transfer books are
not closed and no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the board of directors
declaring such dividend is adopted, as the case may be, shall be the record date
for such determination of shareholders. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided in
this section, such determination shall apply to any adjournment thereof.
REGISTERED SHAREHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Texas.
LIST OF SHAREHOLDERS
Section 7. The officer or agent having charge of the transfer books for
shares shall make, at least ten days before each meeting of shareholders, a
complete list of the shareholders entitled to vote at such meeting, arranged in
alphabetical order, with the address of each and the number of shares held by
each, which list for a period of ten days prior to such meeting, shall be kept
on file at the registered office of the corporation and shall be subject to
inspection by any shareholder at any time during usual business hours. Such list
shall also be produced and kept open at the time and place of the meeting and
shall be subject to the inspection of any shareholder during the whole time of
the meeting. The original share ledger or transfer book, or a duplicate
thereof, shall be prima facie evidence as to who are the shareholders entitled
to examine such list or share ledger or transfer book or to vote at any meeting
of the shareholders.
-10-
ARTICLE XI
GENERAL PROVISIONS
DIVIDENDS
Section 1. Subject to the provisions of the articles of incorporation
relating thereto, if any, dividends may be declared by the board of directors at
any regular or special meeting, pursuant to law. Dividends may be paid in cash,
in property or in shares of the capital stock, subject to any provisions of the
articles of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
SEAL
Section 5. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words "Corporate Seal,
Texas". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any manner reproduced.
ARTICLE XII
AMENDMENTS
Section 1. These by-laws may be altered, amended, or repealed or new by-
laws may be adopted by the affirmative vote of a majority of the board of
directors at any regular or special meeting of the board subject to repeal or
change at any regular or special meeting of shareholders at which a quorum is
present or represented, by the affirmative vote of a majority
-11-
of the stock entitled to vote, provided notice of the proposed repeal or change
be contained in the notice of such meeting.
-12-
Exhibit 4.1
EXECUTION COPY
________________________________________________________________________________
Domino's, Inc.
and the
Guarantors
Signatories Hereto
SERIES A AND SERIES B
10 3/8% SENIOR SUBORDINATED NOTES DUE 2009
INDENTURE
_______________________
Dated as of December 21, 1998
_______________________
IBJ SCHRODER BANK & TRUST COMPANY
Trustee
______________
________________________________________________________________________________
CROSS-REFERENCE TABLE*
Act Section Indenture Section
310 (a)(1)................................................... 7.10
(a)(2)....................................................... 7.10
(a)(3)....................................................... N.A.
(a)(4)....................................................... N.A.
(a)(5)....................................................... 7.10
(i)(b)....................................................... 7.10
(ii)(c)...................................................... N.A.
311(a)....................................................... 7.11
(b).......................................................... 7.11
(iii(c)...................................................... N.A.
312 (a)...................................................... 2.05
(b).......................................................... 11.03
(iv)(c)...................................................... 11.03
313(a)....................................................... 7.06
(b)(2)....................................................... 7.07
(v)(c)....................................................... 7.06;
11.02
(vi)(d)...................................................... 7.06
314(a)....................................................... 4.03;
11.02
(c)(1)....................................................... 11.04
(c)(2)....................................................... 11.04
(c)(3)....................................................... N.A.
(vii)(e)..................................................... 11.05
(f).......................................................... N.A.
315 (a)...................................................... 7.01
(b).......................................................... 7.05,
11.02
(A)(c)....................................................... 7.01
(d).......................................................... 7.01
(e).......................................................... 6.11
316 (a)(last sentence)....................................... 2.09
(a)(1)(A).................................................... 6.05
(a)(1)(B).................................................... 6.04
(a)(2)....................................................... N.A.
(b).......................................................... 6.07
(B)(c)....................................................... 2.12
317 (a)(1)................................................... 6.08
(a)(2)....................................................... 6.09
(b).......................................................... 2.04
318 (a)...................................................... 11.01
(b).......................................................... N.A.
(c).......................................................... 11.01
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
TABLE OF CONTENTS
PAGE
----
ARTICLE 1. DEFINITIONS AND INCORPORATION BY
REFERENCE............................................................... 1
Section 1.01. Definitions................................................ 1
Section 1.02. Other Definitions.......................................... 22
Section 1.03. Trust Indenture Act Definitions............................ 23
Section 1.04. Rules of Construction...................................... 23
ARTICLE 2. THE NOTES..................................................... 24
Section 2.01. Form and Dating............................................ 24
Section 2.02. Execution and Authentication............................... 25
Section 2.03. Registrar and Paying Agent................................. 26
Section 2.04. Paying Agent to Hold Money in Trust........................ 26
Section 2.05. Holder Lists............................................... 26
Section 2.06. Transfer and Exchange...................................... 26
Section 2.07. Replacement Notes.......................................... 38
Section 2.08. Outstanding Notes.......................................... 38
Section 2.09. Treasury Notes............................................. 38
Section 2.10. Temporary Notes............................................ 39
Section 2.11. Cancellation............................................... 39
Section 2.12. Defaulted Interest......................................... 39
Section 2.13. CUSIP Numbers.............................................. 39
ARTICLE 3. REDEMPTION AND PREPAYMENT..................................... 40
Section 3.01. Notices to Trustee......................................... 40
Section 3.02. Selection of Notes to Be Redeemed.......................... 40
Section 3.03. Notice of Redemption....................................... 40
Section 3.04. Effect of Notice of Redemption............................. 41
Section 3.05. Deposit of Redemption Price................................ 41
Section 3.06. Notes Redeemed in Part..................................... 41
Section 3.07. Optional Redemption........................................ 42
Section 3.08. Mandatory Redemption....................................... 42
Section 3.09. Offer to Purchase by Application of
Excess Proceeds........................................... 43
ARTICLE 4. COVENANTS..................................................... 44
Section 4.01. Payment of Notes........................................... 44
Section 4.02. Maintenance of Office or Agency............................ 45
Section 4.03. Reports.................................................... 45
Section 4.04. Compliance Certificate..................................... 46
Section 4.05. Taxes...................................................... 46
Section 4.06. Stay, Extension and Usury Laws............................. 46
Section 4.07. Restricted Payments........................................ 47
Section 4.08. Dividend and Other Payment Restrictions
Affecting Subsidiaries.................................... 50
Section 4.09. Incurrence of Indebtedness and
Issuance of Preferred Stock.............................. 52
Section 4.10. Asset Sales................................................ 54
Section 4.11. Transactions with Affiliates............................... 56
Section 4.12. Liens...................................................... 57
Section 4.13. Business Activities........................................ 57
Section 4.14. Corporate Existence........................................ 58
Section 4.15. Offer to Repurchase Upon Change of
Control................................................... 58
i
Section 4.16. No Senior Subordinated Debt................................ 59
Section 4.17. Limitation on Issuances of Guarantees
of Indebtedness........................................... 59
Section 4.18. Designation of Restricted and
Unrestricted Subsidiaries................................. 60
ARTICLE 5. SUCCESSORS.................................................... 60
Section 5.01. Merger, Consolidation, or Sale of
Assets.................................................... 60
Section 5.02. Successor Corporation Substituted.......................... 61
ARTICLE 6. DEFAULTS AND REMEDIES......................................... 61
Section 6.01. Events of Default.......................................... 61
Section 6.02. Acceleration............................................... 62
Section 6.03. Other Remedies............................................. 63
Section 6.04. Waiver of Past Defaults.................................... 63
Section 6.05. Control by Majority........................................ 64
Section 6.06. Limitation on Suits........................................ 64
Section 6.07. Rights of Holders of Notes to Receive
Payment................................................... 64
Section 6.08. Collection Suit by Trustee................................. 65
Section 6.09. Trustee May File Proofs of Claim........................... 65
Section 6.10. Priorities................................................. 65
Section 6.11. Undertaking for Costs...................................... 66
ARTICLE 7. TRUSTEE....................................................... 66
Section 7.01. Duties of Trustee.......................................... 66
Section 7.02. Rights of Trustee.......................................... 67
Section 7.03. Individual Rights of Trustee............................... 67
Section 7.04. Trustee's Disclaimer....................................... 67
Section 7.05. Notice of Defaults......................................... 68
Section 7.06. Reports by Trustee to Holders of the
Notes..................................................... 68
Section 7.07. Compensation and Indemnity................................. 68
Section 7.08. Replacement of Trustee..................................... 69
Section 7.09. Successor Trustee by Merger, etc........................... 70
Section 7.10. Eligibility; Disqualification.............................. 70
Section 7.11. Preferential Collection of Claims
Against Company........................................... 70
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE...................... 71
Section 8.01. Option to Effect Legal Defeasance or
Covenant Defeasance....................................... 71
Section 8.02. Legal Defeasance and Discharge............................. 71
Section 8.03. Covenant Defeasance........................................ 71
Section 8.04. Conditions to Legal or Covenant
Defeasance................................................ 72
Section 8.05. Deposited Money and Government Securities
to be Held in Trust; Other Miscellaneous
Provisions................................................ 73
Section 8.06. Repayment to Company....................................... 73
Section 8.07. Reinstatement.............................................. 74
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER.............................. 74
Section 9.01. Without Consent of Holders of Notes........................ 74
Section 9.02. With Consent of Holders of Notes........................... 75
Section 9.03. Compliance with Trust Indenture Act........................ 76
Section 9.04. Revocation and Effect of Consents.......................... 76
Section 9.05. Notation on or Exchange of Notes........................... 76
Section 9.06. Trustee to Sign Amendments, etc............................ 77
ARTICLE 10. SUBORDINATION................................................ 77
Section 10.01. Agreement to Subordinate.................................. 77
ii
Section 10.02. Liquidation; Dissolution; Bankruptcy..................... 77
Section 10.03. Default on Designated Senior Debt........................ 78
Section 10.04. Acceleration of Notes.................................... 79
Section 10.05. When Distribution Must Be Paid Over...................... 79
Section 10.06. Notice by Company........................................ 79
Section 10.07. Subrogation.............................................. 79
Section 10.08. Relative Rights.......................................... 80
Section 10.09. Subordination May Not Be Impaired by
Company................................................. 80
Section 10.10. Distribution or Notice to
Representative.......................................... 81
Section 10.11. Rights of Trustee and Paying Agent....................... 81
Section 10.12. Authorization to Effect
Subordination........................................... 81
Section 10.13. Amendments............................................... 81
ARTICLE 11. SUBSIDIARY GUARANTEES...................................... 82
Section 11.01. Guarantee................................................ 82
Section 11.02. Subordination of Subsidiary
Guarantee............................................... 83
Section 11.03. Limitation on Guarantor Liability........................ 83
Section 11.04. Execution and Delivery of Subsidiary
Guarantee............................................... 83
Section 11.05. Guarantors May Consolidate, etc., on
Certain Terms........................................... 84
Section 11.06. Releases Following Sale of Assets........................ 85
ARTICLE 12. MISCELLANEOUS.............................................. 85
Section 12.01. Trust Indenture Act Controls............................. 85
Section 12.02. Notices.................................................. 85
Section 12.03. Communication by Holders of Notes
with Other Holders of Notes............................. 87
Section 12.04. Certificate and Opinion as to
Conditions Precedent.................................... 87
Section 12.05. Statements Required in Certificate
or Opinion.............................................. 87
Section 12.06. Rules by Trustee and Agents.............................. 87
Section 12.07. No Personal Liability of Directors,
Officers, Employees and Stockholders.................... 87
Section 12.08. Governing Law............................................ 88
Section 12.09. No Adverse Interpretation of Other
Agreements.............................................. 88
Section 12.10. Successors............................................... 88
Section 12.11. Severability............................................. 88
Section 12.12. Counterpart Originals.................................... 88
Section 12.13. Table of Contents, Headings, etc......................... 88
EXHIBITS
Exhibit A-1 FORM OF NOTE
Exhibit A-2 FORM OF REGULATION S TEMPORARY GLOBAL NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Exhibit E FORM OF NOTATION OF SUBSIDIARY GUARANTEE
Exhibit F FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT
GUARANTORS
iii
INDENTURE dated as of December 21, 1998 between Domino's, Inc., a
Delaware corporation (the "Company"), the Guarantors signatories hereto and IBJ
Schroder Bank & Trust Company, as trustee (the "Trustee").
The Company, the Guarantors and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the 10 3/8% Series A Senior Subordinated Notes due 2009 (the "Series A Notes")
and the 10 3/8% Series B Senior Subordinated Notes due 2009 (the "Series B
Notes" and, together with the Series A Notes, the "Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.
"144A Global Note" means a global note in the form of Exhibit A-1
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, whether or
not such Indebtedness is incurred in connection with, or in contemplation of,
such other Person merging with or into, or becoming a Subsidiary of, such
specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.
"Additional Notes" means up to $125.0 million in aggregate principal
amount of Notes (other than the Initial Notes) issued under this Indenture in
accordance with Sections 2.02 and 4.09 hereof.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise. For purposes of this definition, the terms
"controlling," "controlled by" and "under common control with" shall have
correlative meanings.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Premium" means, with respect to any Note on any Redemption
Date, the greater of (i) 1.0% of the principal amount of such Note or (ii) the
excess of (A) the present value at such Redemption Date of (1) the redemption
price of such Note at January 15, 2004 (such redemption price being set forth in
Section 3.07 hereof) plus (2) all required interest payments due on such Note
through January 15, 2004 (excluding accrued but unpaid interest), computed using
a discount rate equal to the
1
Treasury Rate at such Redemption Date plus 50 basis points over (B) the
principal amount of such Note, if greater.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer or
exchange.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person if, as a result of such
Investment, such Person shall become a Restricted Subsidiary of the Company, or
shall be merged with or into the Company or any Restricted Subsidiary of the
Company, or (b) the acquisition by the Company or any Restricted Subsidiary of
the Company of all or substantially all of the assets of any other Person or any
division or line of business of any other Person.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights (including, without limitation, by way of a sale and leaseback), other
than sales or leases in the ordinary course of business; provided that the sale,
conveyance or other disposition of all or substantially all of the assets of the
Company and its Restricted Subsidiaries taken as a whole will be governed by the
provisions of this Indenture described in Section 4.15 hereof and/or the
provisions described in Section 5.01 hereof and not by the provisions of Section
4.10 hereof; and
(2) the issuance of Equity Interests by any of the Company's
Restricted Subsidiaries or the sale of Equity Interests in any of its
Subsidiaries.
Notwithstanding the preceding, the following items shall not be deemed
to be Asset Sales:
(1) any single transaction or series of related transactions that: (a)
involves assets having a fair market value of less than $1.0 million; or (b)
results in net proceeds to the Company and its Subsidiaries of less than $1.0
million;
(2) disposals or replacements of obsolete equipment in the ordinary
course of business;
(3) the sale, lease conveyance, disposition or other transfer by the
Company or any Restricted Subsidiary of assets or property or Equity Interests
of any Restricted Subsidiary to one or more Restricted Subsidiaries in
connection with Investments permitted by the Section 4.07 hereof;
(4) a transfer of assets between or among the Company and its Wholly
Owned Restricted Subsidiaries;
(5) an issuance of Equity Interests by a Wholly Owned Restricted
Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary; and
(6) a Restricted Payment that is permitted by Section 4.07 hereof.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
2
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3
and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as such term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire, whether such
right is currently exercisable or is exercisable only upon the occurrence of a
subsequent condition.
"Board of Directors" means the Board of Directors of the Company, or
any authorized committee of the Board of Directors.
"Broker-Dealer" has the meaning set forth in the Registration Rights
Agreement.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality thereof (provided
that the full faith and credit of the United States is pledged in support
thereof) having maturities of not more than twelve months from the date of
acquisition;
(3) certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding twelve months and overnight bank
deposits, in each case, with any lender party to the Senior Credit Facilities
or, with any commercial bank having capital and surplus in excess of $500
million and a Thompson Bank Watch Rating of "B" or better;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the qualifications specified
in clause (3) above;
3
(5) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Corporation and in each case
maturing within twelve months after the date of acquisition; and
(6) money market funds substantially all of the assets of which
constitute Cash Equivalents of the kinds described in clauses (1) through (5) of
this definition.
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the following:
(1) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and its
Restricted Subsidiaries taken as a whole to any "person" (as such term is used
in Section 13(d)(3) of the Exchange Act) other than a Principal;
(2) the adoption of a plan relating to the liquidation or dissolution
of the Company;
(3) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principals or any Permitted Group,
becomes the Beneficial Owner, directly or indirectly, of more than 50% of the
Voting Stock of the Company, measured by voting power rather than number of
shares;
(4) the first day on which a majority of the members of the Board of
Directors of the Company are not Continuing Directors; or
(5) the Company consolidates with, or merges with or into, any Person,
or any Person consolidates with, or merges with or into, the Company, in any
such event pursuant to a transaction in which any of the outstanding Voting
Stock of the Company is converted into or exchanged for cash, securities or
other property, other than any such transaction where the Voting Stock of the
Company outstanding immediately prior to such transaction is converted into or
exchanged for Voting Stock (other than Disqualified Stock) of the surviving or
transferee Person constituting a majority of the outstanding shares of such
Voting Stock of such surviving or transferee Person (immediately after giving
effect to such issuance).
"Company" means Domino's, Inc., and any and all successors thereto.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus:
(1) provision for taxes based on income or profits of such Person and
its Restricted Subsidiaries for such period, to the extent that such provision
for taxes was deducted in computing such Consolidated Net Income; plus
(2) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance costs,
original issue discount, non-cash interest payments, the interest component of
any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other fees
and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments, if any, pursuant to Hedging
4
Obligations), to the extent that any such expense was deducted in computing such
Consolidated Net Income; plus
(3) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses that were
paid in a prior period) and other non-cash expenses (excluding any such non-cash
expense to the extent that it represents an accrual of or reserve for cash
expenses in any future period or amortization of a prepaid cash expense that was
paid in a prior period) of such Person and its Restricted Subsidiaries for such
period to the extent that such depreciation, amortization and other non-cash
expenses were deducted in computing such Consolidated Net Income; plus
(4) the costs and expenses of the Company and its Subsidiaries
incurred in connection with the Transactions to the extent that such costs and
expenses were deducted in computing Consolidated Net Income, in each case, on a
consolidated basis and determined in accordance with GAAP; minus
(5) non-cash items increasing such Consolidated Net Income for such
period, other than (i) items that were accrued in the ordinary course of
business and (ii) the reversal of reserves in the ordinary course of business,
in each case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the preceding, the provision for taxes based on the
income or profits of, and the depreciation and amortization and other non-cash
charges of, a Restricted Subsidiary of the Company shall be added to
Consolidated Net Income to compute Consolidated Cash Flow of the Company only to
the extent that a corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Restricted Subsidiary
without prior approval (that has not been obtained), pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Restricted
Subsidiary or its stockholders.
"Consolidated Net Income" of the Company means, for any period, the
aggregate net income (or loss) of the Company and its Restricted Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP,
provided that there shall be excluded therefrom:
(1) gains and losses from Asset Sales (without regard to the $1.0
million limitation set forth in the definition thereof) and the related tax
effects according to GAAP;
(2) gains and losses due solely to fluctuations in currency values and
the related tax effects according to GAAP;
(3) items classified as extraordinary, unusual or nonrecurring gains
and losses (including, without limitation, severance, relocation and other
restructuring costs), and the related tax effects according to GAAP;
(4) the net income (or loss) of any Person acquired in a pooling of
interests transaction accrued prior to the date it becomes a Restricted
Subsidiary of the Company or is merged or consolidated with the Company or any
Restricted Subsidiary of the Company;
5
(5) the net income of any Restricted Subsidiary of the Company to the
extent that the declaration of dividends or similar distributions by that
Restricted Subsidiary of the Company of that income is restricted by contract,
operation, operation of law or otherwise;
(6) the net loss of any Person, other than a Restricted Subsidiary of
the Company;
(7) the net income of any Person, that is not a Restricted Subsidiary
of the Company, except to the extent of cash dividends or distributions paid to
the Company or a Restricted Subsidiary of the Company by such Person; and
(8) one time non-cash compensation charges, including any arising from
existing stock options resulting from any merger or recapitalization
transaction.
"Consulting Agreement" means that certain consulting agreement by and
between Domino's Pizza, Inc. and Thomas S. Monaghan, dated as of the date
hereof, as in effect on the date hereof.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who:
(1) was a member of such Board of Directors on the date of this
Indenture; or
(2) was nominated for election or elected to such Board of Directors
with the approval of a majority of the Continuing Directors who were members of
such Board at the time of such nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 12.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Cumulative Preferred Stock" means the Company's 11.5% Cumulative
Preferred Stock due 2009.
"Custodian" means the Trustee, as custodian with respect to the Notes
in global form, or any successor entity thereto.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Definitive Note" means a certificated Note registered in the name of
the Holder thereof and issued in accordance with Section 2.06 hereof, in the
form of Exhibit A-1 hereto except that such Note shall not bear the Global Note
Legend and shall not have the "Schedule of Exchanges of Interests in the Global
Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Designated Noncash Consideration" means any non-cash consideration
received by the Company or one of its Restricted Subsidiaries in connection with
an Asset Sale that is designated as
6
Designated Noncash Consideration pursuant to an Officers' Certificate executed
by the principal executive officer and the principal financial officer of the
Company or such Restricted Subsidiary. Such Officers' Certificate shall state
the basis of such valuation, which shall be a report of a nationally recognized
investment banking firm with respect to the receipt in one or a series of
related transactions of Designated Noncash Consideration with a fair market
value in excess of $10.0 million. A particular item of Designated Noncash
Consideration shall no longer be considered to be outstanding when it has been
sold for cash or redeemed or paid in full in the case of non-cash consideration
in the form of promissory notes or equity.
"Designated Preferred Stock" means preferred stock that is designated
as Designated Preferred Stock, pursuant to an Officers' Certificate executed by
the principal executive officer and the principal financial officer of the
Company, on the issuance date thereof, the cash proceeds of which are excluded
from the calculation set forth in clause (iii)(B) of Section 4.07 hereof.
"Designated Senior Debt" means:
(1) any Indebtedness under or in respect of the Senior Credit
Facilities; and
(2) any other Senior Debt permitted under this Indenture the
principal amount of which is $25 million or more and that has been designated
by the Company in the instrument or agreement relating to the same as
"Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature. Notwithstanding the preceding sentence, any
Capital Stock that would constitute Disqualified Stock solely because the
holders thereof have the right to require the Company to repurchase such Capital
Stock upon the occurrence of a change of control or an asset sale shall not
constitute Disqualified Stock if the terms of such Capital Stock provide that
the Company may not repurchase or redeem any such Capital Stock pursuant to such
provisions unless such repurchase or redemption complies with Section 4.07
hereof.
"Domestic Subsidiary" means, with respect to the Company, any
Restricted Subsidiary of the Company that was formed under the laws of the
United States of America or that guarantees or otherwise provides direct credit
support for any Indebtedness of the Company.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means any offering of Qualified Capital Stock of any
direct or indirect parent corporation of the Company or the Company; provided
that, in the event of any Equity Offering by any direct or indirect parent
corporation of the Company, such direct or indirect parent corporation of the
Company contributes to the common equity capital of the Company (other than as
Disqualified Stock) the portion of the net cash proceeds of such Equity Offering
necessary to pay the aggregate redemption price (plus accrued interest to the
redemption date) of the Notes to be redeemed pursuant to clause (a) of Section
3.07 hereof.
7
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Notes issued in the Exchange Offer pursuant
to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Senior Credit Facilities) in
existence on the date hereof, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the
sum, without duplication, of:
(1) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued, including,
without limitation, original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations other than any such
interest component in respect of obligations under the Consulting Agreement, the
interest component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments, if any, pursuant
to Hedging Obligations, but excluding amortization or write-off of debt issuance
costs; plus
(2) the consolidated interest expense of such Person and its
Restricted Subsidiaries that was capitalized during such period; plus
(3) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a
Lien on assets of such Person or one of its Restricted Subsidiaries, whether or
not such Guarantee or Lien is called upon; plus
(4) the product of (a) all dividend payments, whether or not in cash,
on any series of preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests to the extent
paid in Equity Interests of the Company (other than Disqualified Stock) or to
the Company or a Restricted Subsidiary of the Company, times (b) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current combined federal, state and local statutory tax rate of such Person,
expressed as a decimal, in each case, on a consolidated basis and in accordance
with GAAP.
"Fixed Charge Coverage Ratio" means, with respect to any Person as of
any date, the ratio of the Consolidated Cash Flow of such Person during the most
recent four full fiscal quarters for which internal financial statements are
available (the "Four-Quarter Period") ending on or prior to such date (the
"Transaction Date") to the Fixed Charges of such Person for the Four-Quarter
Period.
8
In addition to and without limitation of the preceding paragraph, for
purposes of this definition, Consolidated Cash Flow and Fixed Charges shall be
calculated after giving effect on a pro forma basis for the period of such
calculation to:
(1) the incurrence of any Indebtedness or the issuance of any
preferred stock of such Person or any of its Restricted Subsidiaries (and the
application of the proceeds thereof) and any repayment of other Indebtedness or
redemption of other preferred stock occurring during the Four-Quarter Period or
at any time subsequent to the last day of the Four-Quarter Period and on or
prior to the Transaction Date, as if such incurrence, repayment, issuance or
redemption, as the case may be (and the application of the proceeds thereof),
occurred on the first day of the Four-Quarter Period; and
(2) any Asset Sales or Asset Acquisitions (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Restricted Subsidiaries
(including any Person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition) incurring, assuming or otherwise being liable for Acquired
Debt and also including any Consolidated Cash Flow (including any Pro Forma Cost
Savings) occurring during the Four-Quarter Period or at any time subsequent to
the last day of the Four-Quarter Period and on or prior to the Transaction Date,
as if such Asset Sale or Asset Acquisition (including the incurrence, assumption
or liability for any such Indebtedness or Acquired Debt) occurred on the first
day of the Four-Quarter Period.
If such Person or any of its Restricted Subsidiaries directly or
indirectly Guarantees Indebtedness of a third Person, the preceding sentence
shall give effect to the incurrence of such guaranteed Indebtedness as if such
Person or any Restricted Subsidiary of such Person had directly incurred or
otherwise assumed such guaranteed Indebtedness. Furthermore, in calculating
Fixed Charges for purposes of determining the denominator (but not the
numerator) of this Fixed Charge Coverage Ratio:
(1) interest on outstanding Indebtedness determined on a fluctuating
basis as of the Transaction Date and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal to
the rate of interest on such Indebtedness in effect on the Transaction Date;
(2) if interest on any Indebtedness actually incurred on the
Transaction Date may optionally be determined at an interest rate based upon a
factor of a prime or similar rate, a eurocurrency interbank offered rate, or
other rates, then the interest rate in effect on the Transaction Date will be
deemed to have been in effect during the Four-Quarter Period; and
(3) notwithstanding clause (1) above, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is covered by
agreements relating to Hedging Obligations, shall be deemed to accrue at the
rate per annum resulting after giving effect to the operation of such
agreements.
"Foreign Subsidiary" means any Subsidiary of the Company that is not a
Domestic Subsidiary.
"Four-Quarter Period" has the meaning specified in the definition of
Fixed Charge Coverage Ratio.
9
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date hereof.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"Guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
"Guarantors" means each of:
(1) each domestic Subsidiary of the Company on the date hereof; and
(2) any other Restricted Subsidiary that executes a Subsidiary
Guarantee in accordance with the provisions of this Indenture;
and their respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the net
obligations of such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates or the value of foreign currencies.
"Holder" means a Person in whose name a Note is registered.
"IAI Global Note" means the global Note in the form of Exhibit A-1
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold to Institutional Accredited Investors.
"Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent, in respect of:
(1) borrowed money;
10
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof);
(3) banker's acceptances;
(4) representing Capital Lease Obligations;
(5) the balance deferred and unpaid of the purchase price of any
property, except any such balance that constitutes an accrued expense or trade
payable; or
(6) the net amount owing under Hedging Obligations,
if and to the extent any of the preceding items (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of the specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included, the Guarantee
by such Person of any Indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued
with original issue discount; and
(2) the principal amount thereof, in the case of any other
Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Indirect Participant" means a Person who holds a beneficial interest
in a Global Note through a Participant.
"Initial Notes" means $275.0 million in aggregate principal amount of
Notes issued under this Indenture on the date hereof.
"Initial Public Offering" means the first underwritten public offering
of Qualified Capital Stock by any direct or indirect parent corporation of the
Company or by the Company pursuant to a registration statement filed with the
Commission in accordance with the Securities Act for aggregate net cash proceeds
of at least $65.0 million; provided that in the event the Initial Public
Offering is consummated by any direct or indirect parent corporation of the
Company, such direct or indirect parent corporation of the Company contributes
to the common equity capital of the Company at least $65.0 million of the net
cash proceeds of the Initial Public Offering.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items
11
that are or would be classified as investments on a balance sheet prepared in
accordance with GAAP. If the Company or any Subsidiary of the Company sells or
otherwise disposes of any Equity Interests of any direct or indirect Subsidiary
of the Company such that, after giving effect to any such sale or disposition,
such Person is no longer a Subsidiary of the Company, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Equity Interests of such Subsidiary not
sold or disposed of in an amount determined as provided in the final paragraph
of Section 4.07 hereof.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be prepared
by the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"Liquidated Damages" means all liquidated damages then owing pursuant
to Section 5 of the Registration Rights Agreement.
"Marketable Securities" means publicly traded debt or equity
securities that are listed for trading on a national securities exchange and
that were issued by a corporation whose debt securities are rated in one of the
three highest rating categories by either S&P or Moody's.
"Moody's" means Moody's Investors Service, Inc.
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale, including, without limitation,
legal, accounting and investment banking fees, and sales commissions, and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof, in each case after taking into account any available tax credits
or deductions and any tax sharing arrangements and amounts required to be
applied to the repayment of Indebtedness, other than debt under the Senior
Credit Facilities, secured by a Lien on the asset or assets that were the
subject of such Asset Sale.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither the Company nor any of its Restricted
Subsidiaries (a) provides credit support of any kind (including any undertaking,
agreement or instrument that would constitute Indebtedness), (b) is directly or
indirectly liable as a guarantor or otherwise, or (c) constitutes the lender;
12
(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice, lapse of time or both any holder of any
other Indebtedness (other than the Notes) of the Company or any of its
Restricted Subsidiaries to declare a default on such other Indebtedness or cause
the payment thereof to be accelerated or payable prior to its stated maturity;
and
(3) as to which the lenders have been notified in writing that they
will not have any recourse to the stock or assets of the Company or any of its
Restricted Subsidiaries.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Notes" has the meaning assigned to it in the preamble to this
Indenture. The Initial Notes and the Additional Notes shall be treated as a
single class for all purposes under this Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, expenses, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Offering" means the offering of the Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 12.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
12.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"Permitted Business" means the business conducted by the Company and
its Restricted Subsidiaries on the date hereof and businesses which derive a
majority of their revenues from products and activities reasonably related
thereto.
"Permitted Group" means any group of investors if deemed to be a
"person" (as such term is used in Section 13(d)(3) of the Exchange Act) by
virtue of the Stockholders Agreement, as the same may be amended, modified or
supplemented from time to time, provided that (i) the Principals are party to
such Stockholders Agreement, (ii) the persons party to the Stockholders
Agreement as so amended, supplemented or modified from time to time that were
not parties, and are not Affiliates of persons who were parties, to the
Stockholders Agreement on the date hereof, together with their respective
Affiliates (collectively the "New Investors") are not the direct or indirect
Beneficial Owners (determined without reference to the Stockholders Agreement)
of more than 50% of the Voting Stock owned by all parties to the Stockholders
Agreement as so amended, supplemented of modified and (iii)
13
the New Investors, individually or in the aggregate, do not, directly or
indirectly, have the right, pursuant to the Stockholders Agreement (as so
amended, supplemented or modified) or otherwise to designate more than one-half
of the directors of the Board of Directors of the Company or any direct or
indirect parent entity of the Company.
"Permitted Investments" means:
(1) any Investment in the Company or in a Restricted Subsidiary of the
Company that is a Guarantor or a Foreign Subsidiary;
(2) any Investment in Cash Equivalents;
(3) any Investment by the Company or any Restricted Subsidiary of the
Company in a Person, if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of the
Company that is a Guarantor or a Foreign Subsidiary; or
(b) such Person is merged, consolidated or amalgamated with
or into, or transfers or conveys substantially all of its assets to,
or is liquidated into, the Company or a Restricted Subsidiary of the
Company that is a Guarantor or a Foreign Subsidiary;
(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in compliance
with Section 4.10 hereof;
(5) investments existing on the date of this Indenture;
(6) loans and advances to employees and officers of the Company and
its Restricted Subsidiaries in the ordinary course of business;
(7) any acquisition of assets to the extent acquired in exchange for
the issuance of Equity Interests (other than Disqualified Stock) of the Company;
(8) Investments in securities of trade creditors or customers received
in compromise of obligations of such persons incurred in the ordinary course of
business, including pursuant to any plan of reorganization or similar
arrangement upon the bankruptcy or insolvency of such trade creditors or
customers;
(9) Investments in a Permitted Business in an aggregate amount at any
time outstanding not to exceed $10.0 million; and
(10) other Investments in any Person having an aggregate fair market
value (measured on the date each such Investment was made and without giving
effect to subsequent changes in value), when taken together with all other
Investments made pursuant to this clause (10) that are at the time outstanding,
not to exceed the greater of (a) $35.0 million or (b) 10% of Total Assets.
"Permitted Junior Securities" means debt or equity securities of the
Company or any successor corporation issued pursuant to a plan of reorganization
or readjustment of the Company that are subordinated to the payment of all then
outstanding Senior Debt of the Company at least to the same
14
extent that the Notes are subordinated to the payment of all Senior Debt of the
Company on the date of this Indenture, so long as:
(1) the effect of the use of this defined term in the subordination
provisions contained in Article 10 of this Indenture is not to cause the Notes
to be treated as part of:
(a) the same class of claims as the Senior Debt of the
Company; or
(b) any class or claims pari passu with, or senior to, the
Senior Debt of the Company for any payment or distribution in any case
or proceeding or similar event relating to the liquidation,
insolvency, bankruptcy, dissolution, winding up or reorganization of
the Company; and
(2) to the extent that any Senior Debt of the Company outstanding on
the date of consummation of any such plan of reorganization or readjustment is
not paid in full in cash on such date, either:
(a) the holders of any such Senior Debt not so paid in full
in cash have consented to the terms of such plan of reorganization or
readjustment; or
(b) such holders receive securities which constitute Senior
Debt of the Company (which are guaranteed pursuant to guarantees
constituting Senior Debt of each Guarantor) and which have been
determined by the relevant court to constitute satisfaction in full in
money or money's worth of any Senior Debt of the Company (and any
related Senior Debt of the Guarantors) not paid in full in cash.
"Permitted Liens" means:
(1) Liens on assets of the Company and any Guarantor securing
Indebtedness and other Obligations under the Senior Credit Facilities that were
permitted by the terms of this Indenture to be incurred;
(2) Liens in favor of the Company or the Guarantors;
(3) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any Subsidiary of the
Company; provided that such Liens were in existence prior to the contemplation
of such merger or consolidation and do not extend to any assets other than those
of the Person merged into or consolidated with the Company or the Subsidiary;
(4) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other types
of social security, including any Lien securing letters of credit issued in the
ordinary course of business consistent with past practice in connection
therewith, or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money);
(5) judgment Liens not giving rise to an Event of Default;
15
(6) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company or any
of its Restricted Subsidiaries;
(7) any interest or title of a lessor under any Capitalized Lease
Obligation;
(8) Liens upon specific items of inventory or other goods and proceeds
of any Person securing such Person's obligations in respect of bankers'
acceptance issued or created for the account of such Person to facilitate the
purchase, shipment, or storage of such inventory or other goods;
(9) Lien securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to such
letters of credit and products and proceeds thereof;
(10) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the Company
or any of its Restricted Subsidiaries, including rights of offset and set-off;
(11) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of the Company and its Restricted
Subsidiaries;
(12) Liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(13) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customer duties in connection with the
importation of goods;
(14) Liens on property existing at the time of acquisition thereof by
the Company or any Subsidiary of the Company, provided that such Liens were in
existence prior to the contemplation of such acquisition;
(15) Liens to secure the performance of statutory obligations and
Liens imposed by law, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business;
(16) Liens securing Hedging Obligations which Hedging Obligations
relate to Indebtedness that is otherwise permitted under this Indenture;
(17) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (4) of the second paragraph of Section 4.09
hereof covering only the assets acquired with such Indebtedness;
(18) Liens existing on the date of this Indenture, together with any
Liens securing Indebtedness incurred in reliance on clause (5) of the second
paragraph of Section 4.09 hereof in order to refinance the Indebtedness secured
by Liens existing on the date of this Indenture; provided that the Liens
securing the refinancing Indebtedness shall not extend to property other than
that pledged under the Liens securing the Indebtedness being refinanced;
16
(19) Liens on assets of the Company and its Restricted Subsidiaries to
secure Senior Debt of the Company or such Restricted Subsidiary, as the case may
be, that was permitted by this Indenture to be incurred;
(20) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded, provided
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor;
(21) Liens incurred in the ordinary course of business of the Company
or any Restricted Subsidiary of the Company with respect to obligations that do
not exceed $10.0 million at any one time outstanding; and
(22) Liens securing Indebtedness of foreign Restricted Subsidiaries of
the Company incurred in accordance with this Indenture.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount of (or
accreted value, if applicable), plus accrued interest on, the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded (plus the amount
of reasonable costs and expenses incurred in connection therewith);
(2) such Permitted Refinancing Indebtedness has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the Notes, such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and
(4) such Indebtedness is incurred either by the Company or by the
Restricted Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof (including any subdivision
or ongoing business of any such entity or substantially all of the assets of any
such entity, subdivision or business).
"Principals" means Bain Capital, Inc. and any of its Affiliates.
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
17
"Pro Forma Cost Savings" means, with respect to any period, the
reduction in costs and related adjustments that occurred during the Four-Quarter
Period or after the end of the Four-Quarter Period and on or prior to the
Transaction Date that were (i) directly attributable to an Asset Acquisition or
Asset Sale and calculated on a basis that is consistent with Regulation S-X
under the Securities Act as in effect and applied as of the date hereof or (ii)
implemented by the business that was the subject of any such Asset Acquisition
or Asset Sale within six months of the date of the Asset Acquisition or Asset
Sale and that are supportable and quantifiable by the underlying accounting
records of such business, as if, in the case of each of clause (i) and (ii), all
such reductions in costs and related adjustments had been effected as of the
beginning of such period.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Stock.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of December 21, 1998, by and among the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time and, with respect to any Additional
Notes, one or more registration rights agreements between the Company and the
other parties thereto, as such agreement(s) may be amended, modified or
supplemented from time to time, relating to rights given by the Company to the
purchasers of Additional Notes to register such Additional Notes under the
Securities Act.
"Regulation S" means Regulation S promulgated under the Securities
Act.
"Regulation S Global Note" means a Regulation S Temporary Global Note
or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global Note in
the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of and registered in the name
of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global Note in
the form of Exhibit A-2 hereto bearing the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee, issued in a denomination equal to the outstanding principal amount
of the Notes initially sold in reliance on Rule 903 of Regulation S.
"Representative" means the indenture trustee or other trustee, agent
or representative in respect of any Designated Senior Debt; provided that if,
and for so long as, any Designated Senior Debt lacks such a representative, then
the Representative for such Designated Senior Debt shall at all times constitute
the holders of a majority in outstanding principal amount of such Designated
Senior Debt in respect of any Designated Senior Debt.
"Responsible Officer," when used with respect to the Trustee, means
any officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
18
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Period" means the 40-day distribution compliance period as
defined in Regulation S.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"S&P" means Standard & Poor's.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Credit Facilities" means one or more credit agreements from
time to time in effect, including that certain Credit Agreement, dated as of
December 21, 1998, by and among the Company and certain of its affiliates and
Morgan Guaranty Trust Company of New York, as administrative agent, and the
other lenders party thereto, together with the related documents thereto
(including, without limitation, any guarantee agreements and security
documents), in each case as such agreements may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from time
to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including increasing the amount of
available borrowings thereunder (provided that such increase in borrowings is
permitted by Section 4.09 hereof) or adding Restricted Subsidiaries of the
Company as additional borrowers or guarantors thereunder) all or any portion of
the Indebtedness under such agreement or any successor or replacement agreement
and whether by the same or any other agent, lender or group of lenders.
"Senior Debt" means:
(1) all Indebtedness outstanding under Senior Credit Facilities and
all Hedging Obligations (including guarantees thereof) with respect thereto of
the Company and the Guarantors, whether outstanding on the date of this
Indenture or thereafter incurred;
(2) any other Indebtedness incurred by the Company and the Guarantors,
unless the instrument under which such Indebtedness is incurred expressly
provides that it is on a parity with or subordinated in right of payment to the
Notes or the Subsidiary Guarantees, as the case may be; and
19
(3) all Obligations with respect to the items listed in the preceding
clauses (1) and (2) (including any interest accruing subsequent to the filing of
a petition of bankruptcy at the rate provided for in the documentation with
respect thereto, whether or not such interest is an allowed claim under
applicable law).
Notwithstanding anything to the contrary in the preceding, Senior Debt
will not include:
(1) any liability for federal, state, local or other taxes owed or
owing by the Company or the Guarantors;
(2) any Indebtedness of the Company or any Guarantor to any of its
Subsidiaries or other Affiliates;
(3) any trade payables;
(4) any Indebtedness that is incurred in violation of this Indenture
(but only to the extent so incurred);
(5) any Capitalized Lease Obligations; or
(6) notes payable to franchisee captive insurers.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"Significant Restricted Subsidiary" means any Restricted Subsidiary
that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of
Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation
is in effect on the date of this Indenture.
"Stated Maturity" means, with respect to any installment of interest
or principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Stockholders Agreement" means that certain stockholders agreement
that may be entered into by and among the Principals, TISM, Inc. and the other
stockholders of TISM, Inc. referred to therein, as in effect from time to time.
"Subsidiary" means, with respect to any Person:
(1) any corporation, association or other business entity of which
more than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other Subsidiaries
of that Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
20
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (SS) 77aaa-
77bbbb) as in effect on the date on which this Indenture is qualified under the
TIA.
"Total Assets" means the total consolidated assets of the Company and
its Restricted Subsidiaries, as set forth on the Company's most recent
consolidated balance sheet.
"Transactions" means concurrent with the consummation of the Offering,
the Company's consummation of (i) the merger whereby, among other things, funds
managed by Bain Capital, Inc. (the "Bain Funds"), together with other equity
investors, including members of management (the "Management Investors" and
collectively with the other investors, the "Investors"), acquired an approximate
93% equity stake in TISM, Inc. (the "Merger") and (ii) a refinancing (the
"Refinancing") whereby the Company entered into and borrowed under the Senior
Credit Facilities and refinanced indebtedness of TISM, Inc. The Merger will be
accounted for as a recapitalization. The Offering, the Merger and the
Refinancing are collectively referred to herein as the "Transactions."
"Treasury Rate" means, as of any Redemption Date, the yield to
maturity as of such Redemption Date of United States Treasury securities with a
constant maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least two
Business Days prior to such Redemption Date (or, if such Statistical Release is
no longer published, any publicly available source of similar market data)) most
nearly equal to the period from such Redemption Date to January 15, 2004;
provided, however, that if the period from such Redemption Date to January 15,
2004 is less than one year, the weekly average yield on actually traded United
States Treasury securities adjusted to a constant maturity of one year shall be
used.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Definitive Note" means one or more Definitive Notes that
do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Global Note" means a permanent global Note in the form
of Exhibit A-1 attached hereto that bears the Global Note Legend and that has
the "Schedule of Exchanges of Interests in the Global Note" attached thereto,
and that is deposited with or on behalf of and registered in the name of the
Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Subsidiary" means any Subsidiary of the Company that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution, but only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or understanding
are no less favorable to the Company or such Restricted Subsidiary than those
that might be obtained at the time from Persons who are not Affiliates of the
Company;
(3) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect obligation (a) to
subscribe for additional Equity Interests or (b) to
21
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results; and
(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of the Company or any of its Restricted
Subsidiaries.
Any designation of a Subsidiary of the Company as an Unrestricted
Subsidiary shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
preceding conditions and was permitted by Section 4.07 hereof. If, at any time,
any Unrestricted Subsidiary would fail to meet the preceding requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of this Indenture and any Indebtedness of such
Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date and, if such Indebtedness is not permitted to be
incurred as of such date under Section 4.09 hereof, the Company shall be in
default of such covenant. The Board of Directors of the Company may at any time
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided
that such designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of the Company of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if (1) such
Indebtedness is permitted under Section 4.09 hereof, calculated on a pro forma
basis as if such designation had occurred at the beginning of the four-quarter
reference period; and (2) no Default or Event of Default would be in existence
following such designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other required
payments of principal, including payment at final maturity, in respect thereof,
by (b) the number of years (calculated to the nearest one-twelfth) that will
elapse between such date and the making of such payment; by
(2) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person and/or by one or more Wholly Owned Restricted
Subsidiaries of such Person.
Section 1.02. Other Definitions.
Defined in
Term Section
"Acceleration Notice".............................. 6.02
"Affiliate Transaction"............................ 4.11
"Asset Sale Offer"................................. 3.09
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"Authentication Order".............................. 2.02
"Change of Control Offer"........................... 4.15
"Change of Control Payment"......................... 4.15
"Change of Control Payment Date".................... 4.15
"Covenant Defeasance"............................... 8.03
"Event of Default".................................. 6.01
"Excess Proceeds"................................... 4.10
"incur"............................................. 4.09
"Legal Defeasance".................................. 8.02
"Offer Amount"...................................... 3.09
"Offer Period"...................................... 3.09
"Paying Agent"...................................... 2.03
"Payment Blockage Notice"........................... 10.03
"Payment Default"................................... 6.01
"Permitted Debt".................................... 4.09
"Purchase Date"..................................... 3.09
"Redemption Date"................................... 3.07
"Registrar"......................................... 2.03
"Restricted Payments"............................... 4.07
Section 1.03. Trust Indenture Act Definitions
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes and the Subsidiary Guarantees means the Company
and the Guarantors, respectively, and any successor obligor upon the Notes and
the Subsidiary Guarantees, respectively.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
23
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act
shall be deemed to include substitute, replacement of successor sections or
rules adopted by the SEC from time to time.
ARTICLE 2.
THE NOTES
Section 2.01. Form and Dating.
(a) General.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto. The Notes may have notations,
legends or endorsements required by law, stock exchange rule or usage. Each
Note shall be dated the date of its authentication. The Notes shall be in
denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and the Company, the
Guarantors and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Note conflicts with the express provisions of
this Indenture, the provisions of this Indenture shall govern and be
controlling.
(b) Global Notes.
Notes issued in global form shall be substantially in the form of
Exhibits A-1 or A-2 attached hereto (including the Global Note Legend thereon
and the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A-1 attached hereto (but without the Global Note Legend thereon and
without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
(c) Temporary Global Notes.
24
Notes offered and sold in reliance on Regulation S shall be issued
initially in the form of the Regulation S Temporary Global Note, which shall be
deposited on behalf of the purchasers of the Notes represented thereby with the
Trustee, at its New York office, as custodian for the Depositary, and registered
in the name of the Depositary or the nominee of the Depositary for the accounts
of designated agents holding on behalf of Euroclear or Cedel Bank, duly executed
by the Company and authenticated by the Trustee as hereinafter provided. The
Restricted Period shall be terminated upon the receipt by the Trustee of (i) a
written certificate from the Depositary, together with copies of certificates
from Euroclear and Cedel Bank certifying that they have received certification
of non-United States beneficial ownership of 100% of the aggregate principal
amount of the Regulation S Temporary Global Note (except to the extent of any
beneficial owners thereof who acquired an interest therein during the Restricted
Period pursuant to another exemption from registration under the Securities Act
and who will take delivery of a beneficial ownership interest in a 144A Global
Note or an IAI Global Note bearing a Private Placement Legend, all as
contemplated by Section 2.06(a)(ii) hereof), and (ii) an Officers' Certificate
from the Company. Following the termination of the Restricted Period,
beneficial interests in the Regulation S Temporary Global Note shall be
exchanged for beneficial interests in Regulation S Permanent Global Notes
pursuant to the Applicable Procedures. Simultaneously with the authentication
of Regulation S Permanent Global Notes, the Trustee shall cancel the Regulation
S Temporary Global Note. The aggregate principal amount of the Regulation S
Temporary Global Note and the Regulation S Permanent Global Notes may from time
to time be increased or decreased by adjustments made on the records of the
Trustee and the Depositary or its nominee, as the case may be, in connection
with transfers of interest as hereinafter provided.
(d) Euroclear and Cedel Procedures Applicable.
The provisions of the "Operating Procedures of the Euroclear System"
and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and
Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall be
applicable to transfers of beneficial interests in the Regulation S Temporary
Global Note and the Regulation S Permanent Global Notes that are held by
Participants through Euroclear or Cedel Bank.
Section 2.02. Execution and Authentication.
Two Officers shall sign the Notes for the Company by manual or
facsimile signature.
If an Officer whose signature is on a Note no longer holds that office
at the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Note has
been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers (an "Authentication Order"), authenticate Notes for original issue up
to the aggregate principal amount stated in paragraph 4 of the Notes. The
aggregate principal amount of Notes outstanding at any time may not exceed such
amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent.
25
An authenticating agent has the same rights as an Agent to deal with Holders or
an Affiliate of the Company.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall
notify the Trustee in writing of the name and address of any Agent not a party
to this Indenture. If the Company fails to appoint or maintain another entity
as Registrar or Paying Agent, the Trustee shall act as such. The Company or any
of its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Custodian with respect to the Global Notes.
Section 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes, and
will notify the Trustee of any default by the Company in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders all money held by it as Paying Agent. Upon
any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent for the Notes.
Section 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA (S) 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes.
26
A Global Note may not be transferred as a whole except by the
Depositary to a nominee of the Depositary, by a nominee of the Depositary to the
Depositary or to another nominee of the Depositary, the Depositary or any such
nominee to a successor Depositary or a nominee of such successor Depositary.
All Global Notes will be exchanged by the Company for Definitive Notes if (i)
the Company delivers to the Trustee notice from the Depositary that it is
unwilling or unable to continue to act as Depositary or that it is no longer a
clearing agency registered under the Exchange Act and, in either case, a
successor Depositary is not appointed by the Company within 120 days after the
date of such notice from the Depositary or (ii) the Company in its sole
discretion determines that the Global Notes (in whole but not in part) should be
exchanged for Definitive Notes and delivers a written notice to such effect to
the Trustee; provided that in no event shall the Regulation S Temporary Global
Note be exchanged by the Company for Definitive Notes prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar of any
certificates required pursuant to Rule 903(c)(3)(ii)(B) under the Securities
Act. Upon the occurrence of either of the preceding events in (i) or (ii)
above, Definitive Notes shall be issued in such names as the Depositary shall
instruct the Trustee. Global Notes also may be exchanged or replaced, in whole
or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note
authenticated and delivered in exchange for, or in lieu of, a Global Note or any
portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof,
shall be authenticated and delivered in the form of, and shall be, a Global
Note. A Global Note may not be exchanged for another Note other than as
provided in this Section 2.06(a), however, beneficial interests in a Global Note
may be transferred and exchanged as provided in Section 2.06(b),(c) or (f)
hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes
shall be effected through the Depositary, in accordance with the provisions of
this Indenture and the Applicable Procedures. Beneficial interests in the
Restricted Global Notes shall be subject to restrictions on transfer comparable
to those set forth herein to the extent required by the Securities Act.
Transfers of beneficial interests in the Global Notes also shall require
compliance with either subparagraph (i) or (ii) below, as applicable, as well as
one or more of the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note. Beneficial
interests in any Restricted Global Note may be transferred to Persons who take
delivery thereof in the form of a beneficial interest in the same Restricted
Global Note in accordance with the transfer restrictions set forth in the
Private Placement Legend; provided, however, that prior to the expiration of
the Restricted Period, transfers of beneficial interests in the Temporary
Regulation S Global Note may not be made to a U.S. Person or for the account
or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial
interests in any Unrestricted Global Note may be transferred to Persons who
take delivery thereof in the form of a beneficial interest in an Unrestricted
Global Note. No written orders or instructions shall be required to be
delivered to the Registrar to effect the transfers described in this Section
2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in Global
Notes. In connection with all transfers and exchanges of beneficial interests
that are not subject to Section 2.06(b)(i) above, the transferor of such
beneficial interest must deliver to the Registrar either (A) (1) a written
order from a Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to credit
or cause to be credited a beneficial interest in another Global Note in an
amount equal to the beneficial interest to be transferred or exchanged and (2)
instructions given in accordance with the Applicable Procedures containing
information regarding the Participant account to be credited with such
increase or (B) (1) a written
27
order from a Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to cause to
be issued a Definitive Note in an amount equal to the beneficial interest to
be transferred or exchanged and (2) instructions given by the Depositary to
the Registrar containing information regarding the Person in whose name such
Definitive Note shall be registered to effect the transfer or exchange
referred to in (1) above provided that in no event shall Definitive Notes be
issued upon the transfer or exchange of beneficial interests in the Regulation
S Temporary Global Note prior to (x) the expiration of the Restricted Period
and (y) the receipt by the Registrar of any certificates required pursuant to
Rule 903 under the Securities Act. Upon consummation of an Exchange Offer by
the Company in accordance with Section 2.06(f) hereof, the requirements of
this Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt
by the Registrar of the instructions contained in the Letter of Transmittal
delivered by the Holder of such beneficial interests in the Restricted Global
Notes. Upon satisfaction of all of the requirements for transfer or exchange
of beneficial interests in Global Notes contained in this Indenture and the
Notes or otherwise applicable under the Securities Act, the Trustee shall
adjust the principal amount of the relevant Global Note(s) pursuant to Section
2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global Note.
A beneficial interest in any Restricted Global Note may be transferred to a
Person who takes delivery thereof in the form of a beneficial interest in
another Restricted Global Note if the transfer complies with the requirements
of Section 2.06(b)(ii) above and the Registrar receives the following:
(A) if the transferee will take delivery in the form of a beneficial
interest in the 144A Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the certifications
in item (1) thereof;
(B) if the transferee will take delivery in the form of a beneficial
interest in the Regulation S Temporary Global Note or the Regulation S
Global Note, then the transferor must deliver a certificate in the form
of Exhibit B hereto, including the certifications in item (2) thereof;
and
(C) if the transferee will take delivery in the form of a beneficial
interest in the IAI Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the certifications
and certificates and Opinion of Counsel required by item (3) thereof, if
applicable.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted Global
Note for Beneficial Interests in the Unrestricted Global Note. A beneficial
interest in any Restricted Global Note may be exchanged by any holder thereof
for a beneficial interest in an Unrestricted Global Note or transferred to a
Person who takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note if the exchange or transfer complies with the
requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the holder
of the beneficial interest to be transferred, in the case of an exchange,
or the transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a Person
who is an affiliate (as defined in Rule 144) of the Company;
28
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a beneficial
interest in an Unrestricted Global Note, a certificate from such holder in
the form of Exhibit C hereto, including the certifications in item (1)(a)
thereof; or
(2) if the holder of such beneficial interest in a Restricted
Global Note proposes to transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note, a certificate from such holder in the form of
Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if
the Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to the
effect that such exchange or transfer is in compliance with the Securities
Act and that the restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued, the
Company shall issue and, upon receipt of an Authentication Order in accordance
with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Restricted
Definitive Note or to transfer such beneficial interest to a Person who takes
delivery thereof in the form of a Restricted Definitive Note, then, upon
receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a Restricted
Definitive Note, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (2)(a) thereof;
29
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in
item (1) thereof;
(C) if such beneficial interest is being transferred to a Non-U.S.
Person in an offshore transaction in accordance with Rule 903 or Rule 904
under the Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred pursuant to an
exemption from the registration requirements of the Securities Act in
accordance with Rule 144 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in
item (3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed
in subparagraphs (B) through (D) above, a certificate to the effect set
forth in Exhibit B hereto, including the certifications, certificates and
Opinion of Counsel required by item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred to the Company or
any of its Subsidiaries, a certificate to the effect set forth in Exhibit
B hereto, including the certifications in item (3)(b) thereof; or
(G) if such beneficial interest is being transferred pursuant to an
effective registration statement under the Securities Act, a certificate
to the effect set forth in Exhibit B hereto, including the certifications
in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Company shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions a
Definitive Note in the appropriate principal amount. Any Definitive Note
issued in exchange for a beneficial interest in a Restricted Global Note
pursuant to this Section 2.06(c) shall be registered in such name or names
and in such authorized denomination or denominations as the holder of such
beneficial interest shall instruct the Registrar through instructions from
the Depositary and the Participant or Indirect Participant. The Trustee
shall deliver such Definitive Notes to the Persons in whose names such
Notes are so registered. Any Definitive Note issued in exchange for a
beneficial interest in a Restricted Global Note pursuant to this Section
2.06(c)(i) shall bear the Private Placement Legend and shall be subject to
all restrictions on transfer contained therein.
(ii) Beneficial Interests in Regulation S Temporary Global Note to
Definitive Notes. Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a
beneficial interest in the Regulation S Temporary Global Note may not be
exchanged for a Definitive Note or transferred to a Person who takes delivery
thereof in the form of a Definitive Note prior to (x) the expiration of the
Restricted Period and (y) the receipt by the Registrar of any certificates
required pursuant to Rule 903(c)(3)(ii)(B) under the Securities Act, except in
the case of a transfer pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 903 or Rule 904.
30
(iii) Beneficial Interests in Restricted Global Notes to Unrestricted
Definitive Notes. A holder of a beneficial interest in a Restricted Global
Note may exchange such beneficial interest for an Unrestricted Definitive Note
or may transfer such beneficial interest to a Person who takes delivery
thereof in the form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the
holder of such beneficial interest, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a Person
who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Definitive
Note that does not bear the Private Placement Legend, a certificate from
such holder in the form of Exhibit C hereto, including the certifications
in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a Restricted
Global Note proposes to transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a Definitive Note that does not
bear the Private Placement Legend, a certificate from such holder in the
form of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if
the Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to the
effect that such exchange or transfer is in compliance with the Securities
Act and that the restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
(iv) Beneficial Interests in Unrestricted Global Notes to Unrestricted
Definitive Notes. If any holder of a beneficial interest in an Unrestricted
Global Note proposes to exchange such beneficial interest for a Definitive
Note or to transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Definitive Note, then, upon satisfaction of the
conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause
the aggregate principal amount of the applicable Global Note to be reduced
accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute
and the Trustee shall authenticate and deliver to the Person designated in the
instructions a Definitive Note in the appropriate principal amount. Any
Definitive Note issued in exchange for a beneficial interest pursuant to this
Section 2.06(c)(iv) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the Depositary
and the Participant or Indirect
31
Participant. The Trustee shall deliver such Definitive Notes to the Persons in
whose names such Notes are so registered. Any Definitive Note issued in exchange
for a beneficial interest pursuant to this Section 2.06(c)(iv) shall not bear
the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
(i) Restricted Definitive Notes to Beneficial Interests in Restricted Global
Notes. If any Holder of a Restricted Definitive Note proposes to exchange such
Note for a beneficial interest in a Restricted Global Note or to transfer such
Restricted Definitive Notes to a Person who takes delivery thereof in the form
of a beneficial interest in a Restricted Global Note, then, upon receipt by the
Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note proposes to exchange
such Note for a beneficial interest in a Restricted Global Note, a
certificate from such Holder in the form of Exhibit C hereto, including the
certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in item
(1) thereof;
(C) if such Restricted Definitive Note is being transferred to a Non-U.S.
Person in an offshore transaction in accordance with Rule 903 or Rule 904
under the Securities Act, a certificate to the effect set forth in Exhibit
B hereto, including the certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being transferred pursuant to
an exemption from the registration requirements of the Securities Act in
accordance with Rule 144 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in item
(3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed in
subparagraphs (B) through (D) above, a certificate to the effect set forth
in Exhibit B hereto, including the certifications, certificates and Opinion
of Counsel required by item (3) thereof, if applicable;
(F) if such Restricted Definitive Note is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in item (3)(b) thereof;
or
(G) if such Restricted Definitive Note is being transferred pursuant to
an effective registration statement under the Securities Act, a certificate
to the effect set forth in Exhibit B hereto, including the certifications
in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or
cause to be increased the aggregate principal amount of, in the case of clause
(A) above, the appropriate Restricted Global Note, in the case of clause (B)
above, the 144A Global Note, in the case of clause (c) above, the Regulation S
Global Note, and in all other cases, the IAI Global Note.
32
(ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted
Global Notes. A Holder of a Restricted Definitive Note may exchange such Note
for a beneficial interest in an Unrestricted Global Note or transfer such
Restricted Definitive Note to a Person who takes delivery thereof in the form
of a beneficial interest in an Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the
Holder, in the case of an exchange, or the transferee, in the case of a
transfer, certifies in the applicable Letter of Transmittal that it is
not (1) a broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as defined
in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to exchange
such Notes for a beneficial interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit C hereto, including the
certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes to transfer
such Notes to a Person who shall take delivery thereof in the form of a
beneficial interest in the Unrestricted Global Note, a certificate from
such Holder in the form of Exhibit B hereto, including the certifications
in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if
the Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to the
effect that such exchange or transfer is in compliance with the Securities
Act and that the restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
Upon satisfaction of the conditions of any of the
subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel the
Definitive Notes and increase or cause to be increased the aggregate
principal amount of the Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note or
transfer such Definitive Notes to a Person who takes delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note at any time.
Upon receipt of a request for such an exchange or transfer, the Trustee shall
cancel the applicable Unrestricted Definitive Note and increase or cause to be
increased the aggregate principal amount of one of the Unrestricted Global
Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global
33
Note has not yet been issued, the Company shall issue and, upon receipt of an
Authentication Order in accordance with Section 2.02 hereof, the Trustee shall
authenticate one or more Unrestricted Global Notes in an aggregate principal
amount equal to the principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's compliance
with the provisions of this Section 2.06(e), the Registrar shall register the
transfer or exchange of Definitive Notes. Prior to such registration of
transfer or exchange, the requesting Holder shall present or surrender to the
Registrar the Definitive Notes duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Registrar duly executed by
such Holder or by his attorney, duly authorized in writing. In addition, the
requesting Holder shall provide any additional certifications, documents and
information, as applicable, required pursuant to the following provisions of
this Section 2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes. Any
Restricted Definitive Note may be transferred to and registered in the name of
Persons who take delivery thereof in the form of a Restricted Definitive Note
if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A under the
Securities Act, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications in item (1)
thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule 904,
then the transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (2) thereof; and
(C) if the transfer will be made pursuant to any other exemption from
the registration requirements of the Securities Act, then the transferor
must deliver a certificate in the form of Exhibit B hereto, including
the certifications, certificates and Opinion of Counsel required by item
(3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any
Restricted Definitive Note may be exchanged by the Holder thereof for an
Unrestricted Definitive Note or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the
Holder, in the case of an exchange, or the transferee, in the case of a
transfer, certifies in the applicable Letter of Transmittal that it is
not (1) a broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) any such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
34
(1) if the Holder of such Restricted Definitive Notes proposes to
exchange such Notes for an Unrestricted Definitive Note, a certificate from
such Holder in the form of Exhibit C hereto, including the certifications
in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof in the form
of an Unrestricted Definitive Note, a certificate from such Holder in the
form of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if
the Registrar so requests, an Opinion of Counsel in form reasonably
acceptable to the Company to the effect that such exchange or transfer is
in compliance with the Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no longer required
in order to maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A
Holder of Unrestricted Definitive Notes may transfer such Notes to a Person
who takes delivery thereof in the form of an Unrestricted Definitive Note.
Upon receipt of a request to register such a transfer, the Registrar shall
register the Unrestricted Definitive Notes pursuant to the instructions from
the Holder thereof.
(f) Exchange Offer.
Upon the occurrence of the Exchange Offer in accordance with the
Registration Rights Agreement, the Company shall issue and, upon receipt of an
Authentication Order in accordance with Section 2.02, the Trustee shall
authenticate (i) one or more Unrestricted Global Notes in an aggregate principal
amount equal to the principal amount of the beneficial interests in the
Restricted Global Notes tendered for acceptance by Persons that certify in the
applicable Letters of Transmittal that (x) they are not broker-dealers, (y) they
are not participating in a distribution of the Exchange Notes and (z) they are
not affiliates (as defined in Rule 144) of the Company, and accepted for
exchange in the Exchange Offer and (ii) Definitive Notes in an aggregate
principal amount equal to the principal amount of the Restricted Definitive
Notes accepted for exchange in the Exchange Offer. Concurrently with the
issuance of such Notes, the Trustee shall cause the aggregate principal amount
of the applicable Restricted Global Notes to be reduced accordingly, and the
Company shall execute and the Trustee shall authenticate and deliver to the
Persons designated by the Holders of Definitive Notes so accepted Definitive
Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global Note
and each Definitive Note (and all Notes issued in exchange therefor or
substitution thereof) shall bear the legend in substantially the
following form:
"This Note has not been registered under the Securities Act of 1933,
as amended (the "Securities Act"), and this Note may not be offered, sold,
pledged or otherwise transferred except pursuant to an effective registration
statement or in accordance with an applicable exemption from the
35
registration requirements of the Securities Act (subject to the delivery of such
evidence, if any, required under the indenture pursuant to which this Note is
issued) and in accordance with any applicable securities laws of any state of
the United States or any other jurisdiction. Each purchaser of the security
evidenced hereby is hereby notified that the seller may be relying on the
exemption from the provisions of Section 5 of the Securities Act provided by
Rule 144A thereunder or another exemption under the Securities Act. The holder
of the security evidenced hereby agrees for the benefit of the Company that (a)
such security may be resold, pledged or otherwise transferred only (1)(a) to a
person who the seller reasonably believes is a qualified institutional buyer (as
defined in Rule 144A under the Securities Act) in a transaction meeting the
requirements of Rule 144A, (b) in a transaction meeting the requirements of Rule
144 under the Securities Act, (c) outside the United States to a foreign person
in a transaction meeting the requirements of Rule 904 under the Securities Act
or (d) in accordance with another exemption from the registration requirements
of the Securities Act (and based upon an opinion of counsel if the Company so
requests), as long as the registrar receives a certification of the transferor
and an opinion of counsel that such transfer is in compliance with the
Securities Act, (2) to the Company or (3) pursuant to an effective registration
statement and, in each case, in accordance with any applicable securities laws
of any State of the United States or any other applicable jurisdiction and (b)
the holder will and each subsequent holder is required to notify any purchaser
from it of the security evidenced hereby of the resale restriction set forth in
(a) above."
(B) Notwithstanding the foregoing, any Global Note or Definitive Note
issued pursuant to subparagraphs (b)(iv), (c)(iii), (c)(iv), (d)(ii),
(d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and all Notes
issued in exchange therefor or substitution thereof) shall not bear the
Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"This Global Note is held by the Depositary (as defined in the
Indenture governing this Note) or its nominee in custody for the benefit of
the beneficial owners hereof, and is not transferable to any person under
any circumstances except that (i) the Trustee may make such notations
hereon as may be required pursuant to section 2.07 of the Indenture, (ii)
this Global Note may be exchanged in whole but not in part pursuant to
section 2.06(a) of the Indenture, (iii) this Global Note may be delivered
to the Trustee for cancellation pursuant to section 2.11 of the Indenture,
and (iv) this Global Note may be transferred to a successor depositary with
the prior written consent of the Company."
(iii) Regulation S Temporary Global Note Legend. The Regulation S
Temporary Global Note shall bear a legend in substantially the following form:
"The rights attaching to this Regulation S Temporary Global Note,
and the conditions and procedures governing its exchange for Certificated
Notes, are as specified in the Indenture (as defined herein). Neither the
Holder nor the Beneficial Owners of this Regulation S Temporary Global Note
shall be entitled to receive payment of interest hereon."
(h) Cancellation and/or Adjustment of Global Notes.
At such time as all beneficial interests in a particular Global Note
have been exchanged for Definitive Notes or a particular Global Note has been
redeemed, repurchased or canceled in whole and not in part, each such Global
Note shall be returned to or retained and canceled by the Trustee in
36
accordance with Section 2.11 hereof. At any time prior to such cancellation, if
any beneficial interest in a Global Note is exchanged for or transferred to a
Person who will take delivery thereof in the form of a beneficial interest in
another Global Note or for Definitive Notes, the principal amount of Notes
represented by such Global Note shall be reduced accordingly and an endorsement
shall be made on such Global Note by the Trustee or by the Depositary at the
direction of the Trustee to reflect such reduction; and if the beneficial
interest is being exchanged for or transferred to a Person who will take
delivery thereof in the form of a beneficial interest in another Global Note,
such other Global Note shall be increased accordingly and an endorsement shall
be made on such Global Note by the Trustee or by the Depositary at the direction
of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company shall
execute and the Trustee shall authenticate Global Notes and Definitive Notes
upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial interest
in a Global Note or to a Holder of a Definitive Note for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient
to cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar governmental charge
payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10,
4.15 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer of or
exchange any Note selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any registration of
transfer or exchange of Global Notes or Definitive Notes shall be the valid
obligations of the Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Global Notes or Definitive Notes
surrendered upon such registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to register the
transfer of or to exchange any Notes during a period beginning at the opening
of business 15 days before the day of any selection of Notes for redemption
under Section 3.02 hereof and ending at the close of business on the day of
selection, (B) to register the transfer of or to exchange any Note so selected
for redemption in whole or in part, except the unredeemed portion of any Note
being redeemed in part or (c) to register the transfer of or to exchange a
Note between a record date and the next succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of any
Note, the Trustee, any Agent and the Company may deem and treat the Person in
whose name any Note is registered as the absolute owner of such Note for the
purpose of receiving payment of principal of and interest on such Notes and
for all other purposes, and none of the Trustee, any Agent or the Company
shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive Notes in
accordance with the provisions of Section 2.02 hereof.
37
(viii) All certifications, certificates and Opinions of Counsel required
to be submitted to the Registrar pursuant to this Section 2.06 to effect a
registration of transfer or exchange may be submitted by facsimile.
Section 2.07. Replacement Notes
If any mutilated Note is surrendered to the Trustee or the
Company and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note, the Company shall issue and the Trustee,
upon receipt of an Authentication Order, shall authenticate a replacement Note
if the Trustee's requirements are met. If required by the Trustee or the
Company, an indemnity bond must be supplied by the Holder that is sufficient in
the judgment of the Trustee and the Company to protect the Company, the Trustee,
any Agent and any authenticating agent from any loss that any of them may suffer
if a Note is replaced. The Company may charge for its expenses in replacing a
Note.
Every replacement Note is an additional obligation of the Company
and shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated
by the Trustee except for those canceled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note; however, Notes held by the Company or a Subsidiary of
the Company shall not be deemed to be outstanding for purposes of Section
3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases
to be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by the Company, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company, shall
be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that the Trustee shall have received
written notice that such Notes are so owned shall be so disregarded.
38
Section 2.10. Temporary Notes
Until certificates representing Notes are ready for delivery, the
Company may prepare and the Trustee, upon receipt of an Authentication Order,
shall authenticate temporary Notes. Temporary Notes shall be substantially in
the form of certificated Notes but may have variations that the Company
considers appropriate for temporary Notes and as shall be reasonably acceptable
to the Trustee. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the
benefits of this Indenture.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee and no one else shall cancel all Notes surrendered for registration
of transfer, exchange, payment, replacement or cancellation and shall destroy
canceled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all canceled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it
has paid or that have been delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee
in writing of the amount of defaulted interest proposed to be paid on each Note
and the date of the proposed payment. The Company shall fix or cause to be
fixed each such special record date and payment date, provided that no such
special record date shall be less than 10 days prior to the related payment date
for such defaulted interest. At least 15 days before the special record date,
the Company (or, upon the written request of the Company, the Trustee in the
name and at the expense of the Company) shall mail or cause to be mailed to
Holders a notice that states the special record date, the related payment date
and the amount of such interest to be paid.
Section 2.13. CUSIP Numbers.
The Company in issuing the Notes may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use CUSIP numbers in notices of
redemption as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness of such numbers either as
printed on the Notes or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Notes, and any such redemption shall not be affected by any defect in or the
omission of such numbers. The Company will promptly notify the Trustee of any
change in the CUSIP numbers.
39
ARTICLE 3.
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 35 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture or the
Notes pursuant to which the redemption shall occur, (ii) the redemption date,
(iii) the principal amount of Notes to be redeemed, (iv) the redemption price
and (v) a statement to the effect that such redemption will comply with the
conditions contained herein.
Section 3.02. Selection of Notes to Be Redeemed
If less than all of the Notes are to be redeemed at any time, the
Trustee shall select Notes for redemption as follows:
(a) if the Notes are listed, in compliance with the requirements of
the principal national securities exchange on which the Notes are listed; or
(b) if the Notes are not so listed, on a pro rata basis, by lot or by
such method as the Trustee shall deem fair and appropriate.
In the event of partial redemption by lot, the particular Notes
to be redeemed shall be selected, unless otherwise provided herein, not less
than 30 nor more than 60 days prior to the redemption date by the Trustee from
the outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the
Notes selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.03. Notice of Redemption
Subject to the provisions of Section 3.09 hereof, at least 30
days but not more than 60 days before a redemption date, the Company shall mail
or cause to be mailed, by first class mail, a notice of redemption to each
Holder whose Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption date
upon surrender of such Note, a new Note or Notes in principal amount equal to
the unredeemed portion shall be issued upon cancellation of the original Note;
40
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture pursuant to
which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy of the
CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
Section 3.04. Effect of Notice of Redemption
Once notice of redemption is mailed in accordance with Section
3.03 hereof, Notes called for redemption become irrevocably due and payable on
the redemption date at the redemption price. A notice of redemption may not be
conditional.
Section 3.05. Deposit of Redemption Price
Prior to 10:00 a.m. on the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess of
the amounts necessary to pay the redemption price of, and accrued interest on,
all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 4.01 hereof.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company
shall issue and, upon the Company's written request, the Trustee shall
authenticate for the Holder at the expense of the Company a new Note equal in
principal amount to the unredeemed portion of the Note surrendered.
41
Section 3.07. Optional Redemption.
(a) Before January 15, 2002, the Company may on any one or more occasions
redeem up to 35% of the aggregate principal amount of Notes originally issued
under this Indenture at a redemption price of 110.375% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the redemption date, with the net cash proceeds of one or more Equity
Offerings; provided that:
(i) at least 65% of the aggregate principal amount of Notes issued under
this Indenture remains outstanding immediately after the occurrence of such
redemption (excluding Notes held by the Company and its Subsidiaries); and
(ii) the redemption must occur within 120 days of the date of the closing
of the Equity Offering.
(b) Before January 15, 2004, the Company may also redeem the Notes, as a
whole but not in part, upon the occurrence of a Change of Control, upon not less
than 30 nor more than 60 days' prior notice (but in no event may any such
redemption occur more than 90 days after the occurrence of such Change of
Control), at a redemption price equal to 100% of the principal amount thereof
plus the Applicable Premium as of, and accrued and unpaid interest and
Liquidated Damages thereon, if any, to, the date of redemption (the "Redemption
Date").
(c) Except pursuant to the preceding paragraphs, the Notes will not be
redeemable at the Company's option prior to January 15, 2004.
On or after January 15, 2004, the Company may redeem all or a part of the
Notes upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the
applicable redemption date, if redeemed during the twelve-month period beginning
on January 15 of the years indicated below:
YEAR PERCENTAGE
---- ----------
2004.................................... 105.1875%
2005.................................... 103.4583%
2006.................................... 101.7292%
2007 and thereafter..................... 100.0000%
(d) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
Section 3.08. Mandatory Redemption.
The Company shall not be required to make mandatory redemption
or sinking fund payments with respect to the Notes.
42
Section 3.09. Offer to Purchase by Application of Excess Proceeds.
In the event that, pursuant to Section 4.10 hereof, the Company
shall be required to commence an offer to all Holders to purchase Notes (an
"Asset Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20
Business Days following its commencement and no longer, except to the extent
that a longer period is required by applicable law (the "Offer Period"). No
later than five Business Days after the termination of the Offer Period (the
"Purchase Date"), the Company shall purchase the principal amount of Notes
required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount")
or, if less than the Offer Amount has been tendered, all Notes tendered in
response to the Asset Sale Offer. Payment for any Notes so purchased shall be
made in the same manner as interest payments are made.
If the Purchase Date is on or after an interest record date and
on or before the related interest payment date, any accrued and unpaid interest
shall be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall
send, by first class mail, a notice to the Trustee and each of the Holders, with
a copy to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section 3.09
and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain
open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue to
accrue interest;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrue
interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an Asset
Sale Offer may only elect to have all of such Note purchased and may not elect
to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to any Asset
Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased;
43
(h) that, if the aggregate principal amount of Notes surrendered by Holders
exceeds the Offer Amount, the Company shall select the Notes to be purchased on
a pro rata basis (with such adjustments as may be deemed appropriate by the
Company so that only Notes in denominations of $1,000, or integral multiples
thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered (or transferred by book-entry transfer).
On or before 10:00 a.m. on the Purchase Date, the Company shall, to
the extent lawful, accept for payment, on a pro rata basis to the extent
necessary, the Offer Amount of Notes or portions thereof tendered pursuant to
the Asset Sale Offer, or if less than the Offer Amount has been tendered, all
Notes tendered, and shall deliver to the Trustee an Officers' Certificate
stating that such Notes or portions thereof were accepted for payment by the
Company in accordance with the terms of this Section 3.09. The Company, the
Depositary or the Paying Agent, as the case may be, shall promptly (but in any
case not later than five days after the Purchase Date) mail or deliver to each
tendering Holder an amount equal to the purchase price of the Notes tendered by
such Holder and accepted by the Company for purchase, and the Company shall
promptly issue a new Note, and the Trustee, upon written request from the
Company shall authenticate and mail or deliver such new Note to such Holder, in
a principal amount equal to any unpurchased portion of the Note surrendered.
Any Note not so accepted shall be promptly mailed or delivered by the Company to
the Holder thereof. The Company shall publicly announce the results of the
Asset Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
Section 4.01. Payment of Notes.
The Company or a Guarantor shall pay or cause to be paid the
principal of, premium, if any, and interest and Liquidated Damages, if any, on
the Notes on the dates and in the manner provided in the Notes. Principal,
premium, if any, and interest and Liquidated Damages, if any, shall be
considered paid on the date due if the Paying Agent, if other than the Company
or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date
money deposited by the Company in immediately available funds and designated for
and sufficient to pay all principal, premium, if any, and interest and
Liquidated Damages, if any, then due. The Company shall pay all Liquidated
Damages, if any, in the same manner on the dates and in the amounts set forth in
the Registration Rights Agreement.
The Company or a Guarantor shall pay interest (including post-
petition interest in any proceeding under any Bankruptcy Law) on overdue
principal at the rate equal to 1% per annum in excess of the then applicable
interest rate on the Notes to the extent lawful; it shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest and Liquidated Damages (without regard to any
applicable grace period) at the same rate to the extent lawful.
44
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City
of New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.03.
Section 4.03. Reports.
Whether or not required by the SEC, so long as any Notes are
outstanding, the Company shall furnish to the Holders of Notes, within the time
periods specified in the SEC's rules and regulations:
(i) all quarterly and annual financial information that would be
required to be contained in a filing with the SEC on Forms 10-Q and 10-K if
the Company were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report on the annual financial
statements by the Company's certified independent accountants; and
(ii) all current reports that would be required to be filed with the
SEC on Form 8-K if the Company were required to file such reports.
If the Company has designated any of its Subsidiaries as
Unrestricted Subsidiaries, then the quarterly and annual financial information
required by the preceding paragraph shall include a reasonably detailed
presentation, either on the face of the financial statements or in the footnotes
thereto, and in Management's Discussion and Analysis of Financial Condition and
Results of Operations, of the financial condition and results of operations of
the Company and its Restricted Subsidiaries separate from the financial
condition and results of operations of the Unrestricted Subsidiaries of the
Company.
In addition, whether or not required by the SEC, the Company
shall file a copy of all of the information and reports referred to in clauses
(i) and (ii) above with the SEC for public availability within the time periods
specified in the SEC's rules and regulations (unless the SEC will not accept
such a filing) and make such information available to securities analysts and
prospective investors upon request. Moreover, the Company has agreed, and any
Guarantor shall agree, that, for so long as any
45
Notes remain outstanding, it shall furnish to the Holders and to securities
analysts and prospective investors, upon their request, the information required
to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Section 4.04. Compliance Certificate.
(a) The Company and each Guarantor (to the extent that such Guarantor
is so required under the TIA) shall deliver to the Trustee, within 90 days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company and its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto. For
purposes this paragraph, such compliance shall be determined without regard to
any period of grace or requirement of notice under this Indenture.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(i) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto .
Section 4.05. Taxes.
The Company shall pay, and shall cause each of its Subsidiaries
to pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate proceedings
or where the failure to effect such payment is not adverse in any material
respect to the Holders of the Notes.
Section 4.06. Stay, Extension and Usury Laws.
The Company and each of the Guarantors covenants (to the extent
that it may lawfully do so) that it shall not at any time insist upon, plead, or
in any manner whatsoever claim or take the
46
benefit or advantage of, any stay, extension or usury law wherever enacted, now
or at any time hereafter in force, that may affect the covenants or the
performance of this Indenture; and the Company and each of the Guarantors (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not, by resort to any
such law, hinder, delay or impede the execution of any power herein granted to
the Trustee, but shall suffer and permit the execution of every such power as
though no such law has been enacted.
Section 4.07. Restricted Payments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any other payment or
distribution on account of the Company's Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation
involving the Company or any of its Restricted Subsidiaries) or to the direct
or indirect holders of the Company's Equity Interests in their capacity as
such (other than dividends or distributions payable in Equity Interests (other
than Disqualified Stock) of the Company);
(ii) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company or any direct or
indirect parent of the Company (other than any such Equity Interests owned by
the Company or any Restricted Subsidiary of the Company);
(iii) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Notes or the Subsidiary Guarantees, except a payment of
interest or principal at the Stated Maturity thereof; or
(iv) make any Restricted Investment (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively
referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted
Payment:
(i) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(ii) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of Section
4.09 hereof; and
(iii) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of this Indenture (excluding Restricted Payments
permitted by clauses (ii), (iii), (v), (vi), (vii) and (viii) of the next
succeeding paragraph), is less than the sum, without duplication, of
(A) 50% of the Consolidated Net Income of the Company for
the period (taken as one accounting period) from the beginning of the
first fiscal quarter commencing after the date of this Indenture to
the end of the Company's most recently ended fiscal quarter for which
internal financial statements are available at
47
the time of such Restricted Payment (or, if such Consolidated Net Income
for such period is a deficit, less 100% of such deficit), plus
(B) 100% of the aggregate net cash proceeds received by the
Company (other than from a Restricted Subsidiary) since the date of this
Indenture as a contribution to its common equity capital or from the issue
or sale of Equity Interests of the Company (other than Disqualified Stock)
or from the issue or sale of convertible or exchangeable Disqualified Stock
or convertible or exchangeable debt securities of the Company that have
been converted into or exchanged for such Equity Interests (other than
Equity Interests (or Disqualified Stock or debt securities) sold to a
Subsidiary of the Company), plus
(C) to the extent that any Restricted Investment that was made
after the date of this Indenture is sold for cash or otherwise liquidated
or repaid for cash, the lesser of (i) the cash return of capital with
respect to such Restricted Investment (less the cost of disposition, if
any) and (ii) the initial amount of such Restricted Investment.
The preceding provisions will not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of this Indenture;
(ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness of the Company or any Guarantor
or of any Equity Interests of the Company or any Restricted Subsidiary in
exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Subsidiary of the Company) of, Equity Interests of the
Company (other than Disqualified Stock); provided that the amount of any such
net cash proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from clause
(iii) (B) of the preceding paragraph;
(iii) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness of the Company or any Guarantor with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness;
(iv) payments to any direct or indirect parent corporation of the Company
for the purpose of permitting, and in an amount equal to the amount required
to permit, such direct or indirect parent corporation of the Company to redeem
or repurchase such direct or indirect parent corporation of the Company's
common equity or options in respect thereof, in each case in connection with
the repurchase provisions of employee stock option or stock purchase
agreements or other agreements to compensate management employees; provided
that all such redemptions or repurchases pursuant to this clause (iv) shall
not exceed $17.5 million in the aggregate since the date of this Indenture
(which amount shall be increased (A) by the amount of any net cash proceeds
received from the sale since the date of this Indenture of Equity Interests
(other than Disqualified Stock) to members of the Company's management team
that have not otherwise been applied to the payment of Restricted Payments
pursuant to the terms of clause (iii)(B) of the preceding paragraph and (B) by
the cash proceeds of any "key-man" life insurance policies that are used to
make such redemptions or repurchases); and provided, further, that the
cancellation of Indebtedness owing to the Company from members of management
of the Company or any of its Restricted Subsidiaries in connection
48
with such a repurchase of Capital Stock of any direct or indirect parent
corporation of the Company will not be deemed to constitute a Restricted
Payment under this Indenture;
(v) the making of distributions, loans or advances to any direct or
indirect parent corporation of the Company in an amount not to exceed $1.5
million per annum in order to permit such direct or indirect parent
corporation of the Company to pay the ordinary operating expenses of such
direct or indirect parent corporation of the Company (including, without
limitation, directors' fees, indemnification obligations, professional fees
and expenses);
(vi) payments to any direct or indirect parent corporation of the Company
in respect of (A) federal income taxes for the tax periods for which a federal
consolidated return is filed by such direct or indirect parent corporation of
the Company for a consolidated group of which such direct or indirect parent
corporation of the Company is the parent and the Company and its Subsidiaries
are members, in an amount not to exceed the hypothetical federal income taxes
that the Company would have paid if the Company and its Restricted
Subsidiaries filed a separate consolidated return with the Company as the
parent, taking into account carryovers and carrybacks of tax attributes
(including net operating losses) that would have been allowed if such separate
consolidated return had been filed, (B) state income tax for the tax periods
for which a state combined, consolidated or unitary return is filed by such
direct or indirect parent corporation of the Company for a combined,
consolidated or unitary group of which such direct or indirect parent
corporation of the Company is the parent and the Company and its Subsidiaries
are members, in an amount not to exceed the hypothetical state income taxes
that the Company would have paid if the Company and its Restricted
Subsidiaries had filed a separate combined, consolidated or unitary return
taking into account carryovers and carrybacks of tax attributes (including net
operating losses) that would have been allowed if such separate combined
return had been filed and (C) capital stock, net worth, or other similar taxes
(but for the avoidance of doubt, excluding any taxes based on net or gross
income) payable by such direct or indirect parent corporation of the Company
based on or attributable to its investment in or ownership of the Company and
its Restricted Subsidiaries; provided, however, that in no event shall any
such tax payment pursuant to this clause (vi) exceed the amount of federal (or
state, as the case may be) income tax that is, at the time the Company makes
such tax payments, actually due and payable by such direct or indirect parent
corporation of the Company to the relevant taxing authorities or to become due
and payable within 30 days of such payment by the Company; provided, further,
that for purposes of this clause (vi), payments made by an Unrestricted
Subsidiary to a Restricted Subsidiary or the Company which are in turn
distributed by such Restricted Subsidiary or the Company to any direct or
indirect parent corporation of the Company shall be disregarded.
(vii) if no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof, the declaration and
payment of dividends to holders of any class or series of Designated Preferred
Stock (other than Disqualified Stock) of the Company or any Restricted
Subsidiary issued after the date of this Indenture; provided that, at the time
of such issuance, the Company, after giving effect to such issuance on a pro
forma basis, would have had a Fixed Charge Coverage Ratio of at least 2.0 to
1.0 for the most recent Four-Quarter Period;
(viii) distributions made by the Company on the date hereof that are
utilized solely to consummate the Recapitalization and distributions made
subsequent to the date hereof in order to make payments pursuant to the Merger
Agreement, as in effect on the date hereof and as amended or modified from
time to time so long as any such amendment or modification is, in the good
faith judgment of the Board of Directors of the Company, not more
disadvantageous to the Holders of Notes in any material respects than the
Merger Agreement as in effect on the date hereof;
49
(ix) the repurchase, redemption or other acquisition or retirement for
value of subordinated Indebtedness or the Cumulative Preferred Stock with
Excess Proceeds to the extent such Excess Proceeds are permitted to be used
for general corporate purposes under Section 4.10 hereof; and
(x) if no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof and the Company would be
permitted to incur at least $1.00 of additional Indebtedness (other than
Permitted Debt) in compliance with Section 4.09 hereof, other Restricted
Payments in an aggregate amount not to exceed $15.0 million since the date of
this Indenture.
The amount of all Restricted Payments (other than cash) shall be
the fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any assets or securities that are required to be valued
by this Section 4.07 shall be determined by the Board of Directors whose
resolution with respect thereto shall be delivered to the Trustee. The Board of
Directors' determination must be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if the
fair market value exceeds $10.0 million. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this Section 4.07 were
computed, together with a copy of any fairness opinion or appraisal required by
this Indenture.
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to exist or become
effective any encumbrance or restriction on the ability of any Restricted
Subsidiary to:
(i) pay dividends or make any other distributions on its Capital
Stock to the Company or any of the Company's Restricted Subsidiaries, or with
respect to any other interest or participation in, or measured by, its
profits, or pay any indebtedness owed to the Company or any of the Company's
Restricted Subsidiaries;
(ii) make loans or advances to the Company or any of the Company's
Restricted Subsidiaries; or
(iii) transfer any of its properties or assets to the Company or any of
the Company's Restricted Subsidiaries.
However, the preceding restrictions will not apply to
encumbrances or restrictions existing under or by reason of:
(i) Existing Indebtedness as in effect on the date of this Indenture;
(ii) this Indenture and the Notes;
(iii) the Senior Credit Facilities;
(iv) applicable law;
50
(v) any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Company or any of its Restricted Subsidiaries as in effect at
the time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties
or assets of any Person, other than the Person, or the property or assets of
the Person, so acquired, provided that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of this Indenture to be incurred;
(vi) non-assignment provisions in leases, licenses or similar agreements
entered into in the ordinary course of business and consistent with past
practices;
(vii) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so acquired of the
nature described in clause (iii) of the preceding paragraph;
(viii) any agreement for the sale or other disposition of a Restricted
Subsidiary that restricts distributions by such Restricted Subsidiary pending
its sale or other disposition;
(ix) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing Indebtedness
are not materially more restrictive, in the good faith judgment of the Board
of Directors of the Company, taken as a whole, than those contained in the
agreements governing the Indebtedness being refinanced;
(x) restrictions on the transfer of assets subject to any Lien permitted
under this Indenture imposed by the holder of such Lien;
(xi) Liens securing Indebtedness otherwise permitted to be incurred
pursuant to the provisions of Section 4.12 hereof that limit the right of the
Company or any of its Restricted Subsidiaries to dispose of the assets subject
to such Lien;
(xii) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements and other similar agreements
entered into in the ordinary course of business;
(xiii) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business;
(xiv) any agreement or instrument governing Indebtedness or preferred
stock (whether or not outstanding) of Foreign Subsidiaries of the Company that
was permitted by this Indenture to be incurred;
(xv) Indebtedness incurred after the date hereof in accordance with the
terms of this Indenture; provided that the restrictions contained in the
agreements governing such new Indebtedness are, in the good faith judgment of
the Board of Directors of the Company, not materially less favorable, taken as
a whole, to the Holders of the Notes than those contained in the agreements
governing Indebtedness on the date hereof; and
(xvi) any encumbrances or restrictions imposed by any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings of the contracts, instruments or obligations
referred to in clauses (i) through (xv) above; provided that such amendments,
modifications restatements, renewals, increases, supplements, refundings,
replacements
51
or refinancings are, in the good faith judgment of the Board of Directors of
the Company, not materially more restrictive with respect to such dividend and
other payment restrictions than those contained in the dividends or other
payment restrictions prior to such amendment, modification, restatement,
renewal, increase, supplement, refunding, replacement or refinancing.
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt), and the Company shall not issue any Disqualified Stock and shall not
permit any of its Restricted Subsidiaries to issue any shares of preferred
stock; provided, however, that the Company and any Guarantor may incur
Indebtedness (including Acquired Debt) or issue Disqualified Stock, and any
Guarantor may issue preferred stock, if in each case the Fixed Charge Coverage
Ratio for the Company's most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date on
which such additional Indebtedness is incurred or such Disqualified Stock or
preferred stock is issued would have been at least 2.0 to 1.0, determined on a
pro forma basis (including a pro forma application of the net proceeds therefrom
and as otherwise provided in accordance with the provisions contained in the
definition of "Fixed Charge Coverage Ratio"), as if the additional Indebtedness
had been incurred, or the Disqualified Stock or preferred stock had been issued,
as the case may be, at the beginning of such four-quarter period.
The first paragraph of this Section 4.09 shall not prohibit the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company and any Guarantor of Indebtedness
pursuant to the Senior Credit Facilities in an aggregate principal amount at
any time outstanding (with letters of credit being deemed to have a principal
amount equal to the maximum potential liability of the Company and its
Subsidiaries thereunder) not to exceed $545.0 million less the aggregate
amount of all Net Proceeds of Asset Sales applied by the Company or any of its
Restricted Subsidiaries to permanently repay Indebtedness under the Senior
Credit Facilities pursuant to Section 4.10 hereof; provided that the amount of
Indebtedness permitted to be incurred pursuant to the Senior Credit Facilities
in accordance with this clause (i) shall be in addition to any Indebtedness
permitted to be incurred pursuant to the Senior Credit Facilities in reliance
on, and in accordance with, clauses (iv) and (xiv) below;
(ii) the incurrence by the Company and its Restricted Subsidiaries of the
Existing Indebtedness;
(iii) the incurrence by the Company and the Guarantors of Indebtedness
represented by the Notes issued on the date of this Indenture, the Subsidiary
Guarantees of such Notes, the Exchange Notes issued in exchange for such Notes
and the Subsidiary Guarantees thereof;
(iv) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness (including Capitalized Lease Obligations) to finance the
purchase, lease or improvement of property (real or personal) or equipment
(whether through the direct purchase of assets or the Capital Stock of any
Person owning such assets) within 180 days after such purchase, lease or
improvement in an aggregate principal amount outstanding (which amount may,
but need not, be incurred in whole or in part under the Senior Credit
Facilities) not to exceed the greater of (a) $30.0 million or (b) 7.5% of
52
Total Assets at the time of any incurrence thereof, including any Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (iv);
(v) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace, Indebtedness (other than
intercompany Indebtedness) that was permitted by this Indenture to be incurred
under the first paragraph of this Section 4.09 or clauses (ii), (iii), (iv) or
(xiv) of this paragraph;
(vi) the incurrence by the Company or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among the Company and any of its
Restricted Subsidiaries; provided, however, that:
(A) if the Company or any Guarantor is the obligor on such
Indebtedness and the obligee is not the Company or any Guarantor, such
Indebtedness must be expressly subordinated to the prior payment in full
in cash of all Obligations with respect to the Notes, in the case of the
Company, or the Subsidiary Guarantee of such Guarantor, in the case of a
Guarantor; and
(B) (1) any subsequent issuance or transfer of Equity Interests
that results in any such Indebtedness being held by a Person other than
the Company or a Restricted Subsidiary thereof and (2) any sale or other
transfer of any such Indebtedness to a Person that is not either the
Company or a Restricted Subsidiary thereof; shall be deemed, in each
case, to constitute an incurrence of such Indebtedness by the Company or
such Restricted Subsidiary, as the case may be, that was not permitted by
this clause (vi);
(vii) the incurrence by the Company or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred for the purpose of fixing or hedging
(1) interest rate risk with respect to any floating or fixed rate Indebtedness
that is permitted by the terms of this Indenture to be outstanding or (2) the
value of foreign currencies purchased or received by the Company in the
ordinary course of business;
(viii) the guarantee by the Company or any of the Guarantors of
Indebtedness of the Company or a Guarantor that was permitted to be incurred
by another provision of this Section 4.09;
(ix) the incurrence of Indebtedness and/or the issuance of preferred
stock by Foreign Subsidiaries of the Company, which together with the
aggregate principal amount of Indebtedness incurred pursuant to this clause
(ix) and the aggregate liquidation value of all preferred stock issued
pursuant to this clause (ix), does not exceed $20.0 million at any one time
outstanding; provided that such amount shall increase to $40.0 million upon
the consummation of an Initial Public Offering;
(x) the accrual of interest, accretion or amortization of original issue
discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of dividends on
Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock; provided, in each such case, that the amount thereof is
included in Fixed Charges of the Company as accrued;
53
(xi) Indebtedness incurred by the Company or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to letters of
credit issued in the ordinary course of business including, without
limitation, in respect of workers' compensation claims or self insurance, or
other Indebtedness with respect to reimbursement type obligations regarding
workers' compensation claims;
(xii) Indebtedness arising from agreements of the Company or a Restricted
Subsidiary of the Company providing for indemnification, adjustment of
purchase price, earn out or other similar obligations, in each case, incurred
or assumed in connection with the disposition of any business, assets or a
Restricted Subsidiary of the Company, other than guarantees of Indebtedness
incurred by any Person acquiring all or any portion of such business, assets
or Restricted Subsidiary for the purpose of financing such acquisition;
provided that the maximum assumable liability in respect of all such
Indebtedness shall at no time exceed the gross proceeds actually received by
the Company and its Restricted Subsidiaries in connection with such
disposition;
(xiii) obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary of
the Company in the ordinary course of business; and
(xiv) the incurrence by the Company or any of its Restricted Subsidiaries
of additional Indebtedness, and/or the issuance by any Guarantor of preferred
stock, in an aggregate principal amount (or accreted value, as applicable) or
aggregate liquidation value, as applicable, at any time outstanding (which
amount may, but need not, be incurred in whole or in part under the Senior
Credit Facilities), including all Permitted Refinancing Indebtedness incurred
to refund, refinance or replace any Indebtedness incurred or preferred stock
issued pursuant to this clause (xiv), not to exceed $40.0 million at any one
time outstanding; provided that such amount shall increase to $60.0 million
upon the consummation of an Initial Public Offering.
For purposes of determining compliance with this Section 4.09, in
the event that an item of proposed Indebtedness meets the criteria of more than
one of the categories of Permitted Debt described in clauses (i) through (xiv)
above, or is entitled to be incurred pursuant to the first paragraph of this
Section 4.09, the Company will be permitted to classify such item of
Indebtedness on the date of its incurrence in any manner that complies with this
Section 4.09. All borrowings outstanding on the date of this Indenture under the
Senior Credit Facilities will be deemed to have been borrowed pursuant to clause
(1) of the definition of Permitted Debt.
Section 4.10. Asset Sales
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(i) the Company (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the
fair market value of the assets or Equity Interests issued or sold or
otherwise disposed of;
(ii) such fair market value is determined by the Company's Board of
Directors and evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to the Trustee; and
54
(iii) at least 75% of the consideration therefor received by the Company
or such Restricted Subsidiary is in the form of cash or Cash Equivalents. For
purposes of this provision, each of the following shall be deemed to be cash:
(A) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet), of the Company or any
Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any
Subsidiary Guarantee) that are assumed by the transferee of any such
assets pursuant to a customary novation agreement that releases the
Company or such Restricted Subsidiary from further liability;
(B) any securities, notes or other obligations received by the
Company or any such Restricted Subsidiary from such transferee that
are contemporaneously (subject to ordinary settlement periods)
converted by the Company or such Restricted Subsidiary into cash (to
the extent of the cash received in that conversion); and
(C) any Designated Noncash Consideration received by the Company or
any of its Restricted Subsidiaries in such Asset Sale having an
aggregate fair market value, taken together with all other Designated
Noncash Consideration received since the date of this Indenture
pursuant to this clause (C) that is at that time outstanding, not to
exceed 10% of Total Assets at the time of the receipt of such
Designated Noncash Consideration (with the fair market value of each
item of Designated Noncash Consideration being measured at the time
received and without giving effect to subsequent changes in value).
Within 365 days after the receipt of any Net Proceeds from an Asset
Sale, the Company may apply such Net Proceeds at its option:
(i) to repay Senior Debt (and to correspondingly reduce commitments if
the Senior Debt repaid is revolving credit borrowings);
(ii) to acquire all or substantially all of the assets of, or a majority
of the Voting Stock of, another Permitted Business;
(iii) to make a capital expenditure; and/or
(iv) to acquire assets that are used or useable in a Permitted Business.
Pending the final application of any such Net Proceeds, the Company
may temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by this Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested
as provided in the preceding paragraph will constitute "Excess Proceeds." When
the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company will
make an Asset Sale Offer to all Holders of Notes and all holders of other
Indebtedness that is pari passu with the Notes containing provisions similar to
those set forth in this Indenture with respect to offers to purchase or redeem
with the proceeds of sales of assets to purchase the maximum principal amount of
Notes and such other pari passu Indebtedness that may be purchased out of the
Excess Proceeds. The offer price in any Asset Sale Offer will be equal to 100%
of
55
the principal amount plus accrued and unpaid interest and Liquidated Damages, if
any, to the date of purchase, and will be payable in cash. If any Excess
Proceeds remain after consummation of an Asset Sale Offer, the Company may use
such Excess Proceeds for any purpose not otherwise prohibited by this Indenture.
If the aggregate principal amount of Notes and such other pari passu
Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes and such other pari passu
Indebtedness to be purchased on a pro rata basis. Upon completion of each Asset
Sale Offer, the amount of Excess Proceeds shall be reset at zero.
Section 4.11. Transactions with Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each, an "Affiliate Transaction"), unless:
(i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person; and
(ii) the Company delivers to the Trustee:
(A) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$5.0 million, a resolution of the Board of Directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction
complies with this covenant and that such Affiliate Transaction has
been approved by a majority of the disinterested members of the Board
of Directors; and
(B) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$10.0 million, an opinion as to the fairness to the Holders of such
Affiliate Transaction from a financial point of view issued by an
accounting, appraisal or investment banking firm of national standing.
The following items shall not be deemed to be Affiliate Transactions
and, therefore, will not be subject to the provisions of the prior paragraph:
(i) reasonable fees and compensation paid to and indemnity provided on
behalf of, officers, directors, employee or consultants of the Company or any
Subsidiary as determined in good faith by the Board of Directors of the
Company or senior management;
(ii) transactions between or among the Company and/or its Restricted
Subsidiaries;
(iii) any agreement or instrument as in effect as of the date of this
Indenture or any amendment or replacement thereto or any transaction
contemplated thereby (including pursuant to any amendment or replacement
thereto) so long as any such amendment or replacement agreement or instrument
is, in the good faith judgment of the Board of Directors of the Company, not
more disadvantageous to the Holders of Notes in any material respect than the
original agreement or instrument as in effect on the date of this Indenture;
56
(iv) the payment of customary management, consulting and advisory fees
and related expenses to the Principals and their Affiliates made pursuant to
any financial advisory, financing, underwriting or placement agreement or in
respect of other investment banking activities, including, without limitation,
in connection with acquisitions or divestitures which are approved by the
Board of Directors of the Company or such Restricted Subsidiary in good faith;
(v) payments or loans to employees or consultants that are approved by
the Board of Directors of the Company in good faith;
(vi) the existence of, or the performance by the Company or any of its
Restricted Subsidiaries of its obligations under the terms of, any
stockholders agreement (including any registration rights agreement or
purchase agreement related thereto) to which it is a party as of the date of
this Indenture and any similar agreements which it may enter into thereafter;
provided, however, that the existence of, or the performance by the Company
or any of its Restricted Subsidiaries of obligations under, any future
amendment to any such existing agreement or under any similar agreement
entered into after the date of this Indenture shall only be permitted by this
clause (vi) to the extent that the terms of any such amendment or new
agreement are not disadvantageous to the Holders of Notes in any material
respect;
(vii) transactions with customers, clients, suppliers, joint venture
partners or purchasers or sellers of goods or services, in each case in the
ordinary course of business (including, without limitation, pursuant to joint
venture agreements) and otherwise in compliance with the terms of this
Indenture which are fair to the Company or its Restricted Subsidiaries, in the
reasonable determination of the Board of Directors of the Company or the
senior management thereof, or are on terms at least as favorable as might
reasonably have been obtained at such time from an unaffiliated party; and
(viii) Restricted Payments that are permitted by the provisions of this
Indenture described in Section 4.07 hereof.
Section 4.12. Liens.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien of any kind securing Indebtedness, or trade payables on any asset
now owned or hereafter acquired, except Permitted Liens, unless all payments due
under this Indenture and the Notes are secured on an equal and ratable basis
with the Indebtedness so secured until such time as such is no longer secured by
a Lien; provided that if such Indebtedness is by its terms expressly
subordinated to the Notes or any Subsidiary Guarantee, the Lien securing such
Indebtedness shall be subordinate and junior to the Lien securing the Notes and
the Subsidiary Guarantees with the same relative priority as such subordinate or
junior Indebtedness shall have with respect to the Notes and the Subsidiary
Guarantees.
Section 4.13. Business Activities.
The Company shall not, and shall not permit any Subsidiary to,
engage in any business other than Permitted Businesses.
57
Section 4.14. Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Subsidiaries, in accordance with the respective organizational documents
(as the same may be amended from time to time) of the Company or any such
Subsidiary and (ii) the rights (charter and statutory), licenses and franchises
of the Company and its Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders of the Notes.
Section 4.15. Offer to Repurchase Upon Change of Control.
If a Change of Control occurs, each Holder of Notes will have the
right to require the Company to repurchase all or any part (equal to $1,000 or
an integral multiple thereof) of that Holder's Notes pursuant to the Change of
Control Offer. In the Change of Control Offer, the Company shall offer a Change
of Control Payment in cash equal to 101% of the aggregate principal amount of
Notes repurchased plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase (the "Change of Control Payment").
Within 30 days following any Change of Control, the Company shall mail a notice
to the Trustee and each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Notes on the
purchase date specified in such notice (which must be no earlier than 30 days
nor later than 45 days from the date such notice is mailed, other than as
required by law (the "Change of Control Payment Date")), pursuant to the
procedures required by this Indenture and described in such notice. The Company
shall comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control. The Company shall publicly announce the results
of the Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date.
Prior to the mailing of the notice referred to above, but in any event
within 30 days following any Change of Control, the Company shall:
(i) repay in full and terminate all commitments under Indebtedness under
the Senior Credit Facilities and all other Senior Debt the terms of which
require repayment upon a Change of Control or offer to repay in full and
terminate all commitments under all Indebtedness under the Senior Credit
Facilities and all other such Senior Debt and to repay the Indebtedness owed
to each lender which has accepted such offer; or
(ii) obtain the requisite consents under the Senior Credit Facilities and
all other such Senior Debt to permit the repurchase of the Notes as provided
below.
The Company shall first comply with the covenant in the immediately
preceding sentence before it shall be required to repurchase Notes pursuant to
the provisions described below. The Company's failure to comply with the
covenant described in the immediately preceding sentence may (with notice and
lapse of time) constitute an Event of Default described in clause (iii) but
shall not constitute an Event of Default described in clause (ii), under Section
6.01 hereof.
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On the Change of Control Payment Date, the Company shall, to the
extent lawful:
(i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer;
(ii) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all Notes or portions thereof so tendered; and
(iii) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating the aggregate
principal amount of Notes or portions thereof being purchased by the Company.
The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note shall be in a
principal amount of $1,000 or an integral multiple thereof.
The Company shall not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements set
forth in this Section 4.15 and Section 3.09 hereof and purchases all Notes
validly tendered and not withdrawn under such Change of Control Offer.
Section 4.16. No Senior Subordinated Debt.
The Company shall not incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to any Indebtedness of the Company and senior in any respect in
right of payment to the Notes. No Guarantor shall incur, create, issue, assume,
guarantee or otherwise become liable for any Indebtedness that is subordinate or
junior in right of payment to any Indebtedness of such Guarantor and senior in
any respect in right of payment to such Guarantor's Subsidiary Guarantee.
Section 4.17. Limitation on Issuances of Guarantees of Indebtedness
The Company shall not permit any Restricted Subsidiary that is not a
Guarantor, directly or indirectly, to Guarantee or pledge any assets to secure
the payment of any other Indebtedness of the Company or any Guarantor (other
than such Restricted Subsidiary) unless such Restricted Subsidiary
simultaneously executes and delivers a supplemental indenture in the form
attached as Exhibit F hereto providing for the Guarantee of the payment of the
Notes by such Subsidiary, which Guarantee shall be senior to or pari passu with
such Restricted Subsidiary's Guarantee of or pledge to secure such other
Indebtedness, unless such other Indebtedness is Senior Debt, in which case the
Guarantee of the Notes shall be subordinated to the Guarantee of such Senior
Debt to the same extent as the Notes are subordinated to such Senior Debt.
Notwithstanding the preceding paragraph, any Subsidiary Guarantee of
the Notes shall provide by its terms that it shall be automatically and
unconditionally released and discharged under the circumstances described in
Section 11 hereof. The form of the Subsidiary Guarantee is attached as Exhibit
E hereto.
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Section 4.18. Designation of Restricted and Unrestricted Subsidiaries.
The Board of Directors may designate any Restricted Subsidiary to be
an Unrestricted Subsidiary if that designation would not cause a Default. If a
Restricted Subsidiary is designated as an Unrestricted Subsidiary, all
outstanding Investments owned by the Company and its Restricted Subsidiaries in
the Subsidiary so designated shall be deemed to be an Investment made as of the
time of such designation and shall reduce the amount available for Restricted
Payments under clause (iii)(B) of the first paragraph of Section 4.07 hereof or
Permitted Investments, as applicable. All such outstanding Investments shall be
valued at their fair market value at the time of such designation. That
designation shall only be permitted if such Restricted Payment would be
permitted at the time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary. The Board of Directors may
redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if the
redesignation would not cause a Default.
ARTICLE 5.
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.
The Company shall not, directly or indirectly: (1) consolidate or
merge with or into another Person (whether or not the Company is the surviving
corporation); or (2) sell, assign, transfer, convey or otherwise dispose of all
or substantially all of its properties or assets, in one or more related
transactions, to another Person; unless:
(i) either: (a) the Company is the surviving corporation; or (b) the
Person formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, conveyance or other
disposition shall have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) the Person formed by or surviving any such consolidation or merger
(if other than the Company) or the Person to which such sale, assignment,
transfer, conveyance or other disposition shall have been made assumes all the
obligations of the Company under the Notes, this Indenture and the
Registration Rights Agreement pursuant to agreements reasonably satisfactory
to the Trustee;
(iii) immediately after such transaction no Default or Event of Default
exists; and
(iv) the Company or the Person formed by or surviving any such
consolidation or merger (if other than the Company) shall, on the date of such
transaction after giving pro forma effect thereto and any related financing
transactions as if the same had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of Section 4.09 hereof.
In addition, the Company shall not, directly or indirectly, lease
all or substantially all of its properties or assets, in one or more related
transactions, to any other Person. The provisions of this Section 5.01 shall not
apply to a sale, assignment, transfer, conveyance or other disposition of assets
between or among the Company and any of its Wholly Owned Restricted
Subsidiaries.
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Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the assets of the Company in accordance with Section 5.01 hereof, the successor
corporation formed by such consolidation or into or with which the Company is
merged or to which such sale, assignment, transfer, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so that from and
after the date of such consolidation, merger, sale, lease, conveyance or other
disposition, the provisions of this Indenture referring to the "Company" shall
refer instead to the successor corporation and not to the Company), and may
exercise every right and power of the Company under this Indenture with the same
effect as if such successor Person had been named as the Company herein;
provided, however, that the predecessor Company shall not be relieved from the
obligation to pay the principal of and interest on the Notes except in the case
of a sale of all of the Company's assets that meets the requirements of Section
5.01 hereof.
ARTICLE 6.
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
Each of the following is an Event of Default:
(i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes, whether or not prohibited by
Article 10 hereof;
(ii) default in payment when due of the principal of or premium, if
any, on the Notes, whether or not prohibited by Article 10 hereof;
(iii) failure by the Company or any of its Restricted Subsidiaries for
30 days after specified notice from the Trustee or the Holders of at least 25%
of the outstanding principal amount of the Notes to comply with any of the
other agreements in this Indenture or the Notes;
(iv) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of
its Restricted Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the date hereof, if that default:
(A) is caused by a failure to pay principal at the final stated
maturity of such Indebtedness (a "Payment Default"); or
(B) results in the acceleration of such Indebtedness prior to
its express maturity,
and, in each case, the principal amount of any such Indebtedness, together
with the principal amount of any other such Indebtedness under which there has
been a Payment Default or the maturity of which has been so accelerated,
aggregates $15.0 million or more;
(v) failure by the Company or any of its Restricted Subsidiaries to
pay final judgments aggregating in excess of $15.0 million, which judgments
are not paid, discharged or stayed for a period of 60 consecutive days after
such judgments become final and non-appealable; and
61
(vi) the Company or any of its Significant Restricted Subsidiaries or
any group of Subsidiaries that, taken as a whole, would constitute a
Significant Restricted Subsidiary pursuant to or within the meaning of
Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in
an involuntary case;
(C) consents to the appointment of a custodian of it or for all
or substantially all of its property
(D) makes a general assignment for the benefit of its
creditors; or
(E) generally is not paying its debts as they become due; or
(vii) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any of its Significant
Restricted Subsidiaries or any group of Subsidiaries that, taken as
a whole, would constitute a Significant Restricted Subsidiary in an
involuntary case;
(B) appoints a custodian of the Company or any of its
Significant Restricted Subsidiaries or any group of Subsidiaries
that, taken as a whole, would constitute a Significant Restricted
Subsidiary or for all or substantially all of the property of the
Company or any of its Significant Restricted Subsidiaries or any
group of Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary; or
(C) orders the liquidation of the Company or any of its
Significant Restricted Subsidiaries or any group of Subsidiaries
that, taken as a whole, would constitute a Significant Restricted
Subsidiary;
and the order or decree remains unstayed and in effect for 60
consecutive days; or
(viii) except as permitted by this Indenture, any Subsidiary Guarantee
is held in any judicial proceeding to be unenforceable or invalid or shall
cease for any reason to be in full force and effect or any Guarantor, or any
Person acting on behalf of any Guarantor, shall deny or disaffirm its
obligations under such Guarantor's Subsidiary Guarantee.
Section 6.02. Acceleration.
If any Event of Default (other than an Event of Default
specified in clause (vi) or (vii) of Section 6.01 hereof with respect to the
Company, any Significant Restricted Subsidiary or any group of Significant
Restricted Subsidiaries that, taken as a whole, would constitute a Significant
Restricted Subsidiary) occurs and is continuing, the Trustee or the Holders of
at least 25% in principal amount of the then outstanding Notes may declare the
principal of and accrued interest on all the Notes to be due and payable by
notice in writing to the Company and the Trustee specifying the respective Event
of Default and that such notice is a "notice of acceleration" (the "Acceleration
Notice"), and the same (1) shall become immediately due and payable or (2) if
there are any amounts outstanding under the Senior
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Credit Facilities, shall become immediately due and payable upon the first to
occur of an acceleration under the Senior Credit Facilities or five Business
Days after receipt by the Company and the Representative under the Senior Credit
Facilities of such Acceleration Notice but only if such Event of Default is then
continuing. Upon any such declaration, but subject to the immediately preceding
sentence, the Notes shall become due and payable immediately. Notwithstanding
the foregoing, if an Event of Default specified in clause (vi) or (vii) of
Section 6.01 hereof occurs with respect to the Company, all outstanding Notes
shall be due and payable immediately without further action or notice. The
Holders of a majority in aggregate principal amount of the then outstanding
Notes by written notice to the Trustee may on behalf of all of the Holders
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default
(except nonpayment of principal, interest or premium that has become due solely
because of the acceleration) have been cured or waived.
If an Event of Default occurs on or after January 15, 2004 by
reason of any willful action (or inaction) taken (or not taken) by or on behalf
of the Company with the intention of avoiding payment of the premium that the
Company would have had to pay if the Company then had elected to redeem the
Notes pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an
equivalent premium shall also become and be immediately due and payable, to the
extent permitted by law, anything in this Indenture or in the Notes to the
contrary notwithstanding. If an Event of Default occurs prior to January 15,
2004 by reason of any willful action (or inaction) taken (or not taken) by or on
behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to such date, then, upon acceleration of the
Notes, an additional premium shall also become and be immediately due and
payable in an amount, for each of the years beginning on January 15 of the years
set forth below, as set forth below (expressed as a percentage of the principal
amount of the Notes on the date of payment that would otherwise be due but for
the provisions of this sentence):
YEAR PERCENTAGE
---- ----------
1999..........................113.8335%
2000..........................112.1043%
2001..........................110.3751%
2002..........................108.6459%
2003..........................106.9167%
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, and interest and Liquidated Damages, if any, on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder of a Note in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal
amount of the then outstanding Notes by notice to the Trustee may on behalf of
the Holders of all of the Notes waive an existing Default or Event of Default
and its consequences hereunder, except a continuing Default or Event of Default
in
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the payment of the principal of, premium and Liquidated Damages, if any, or
interest on, the Notes (including in connection with an offer to purchase)
(provided, however, that the Holders of a majority in aggregate principal amount
of the then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration).
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
Section 6.05. Control by Majority.
Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture that the Trustee determines may be unduly
prejudicial to the rights of other Holders of Notes or that may involve the
Trustee in personal liability.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this
Indenture or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice
of a continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the
then outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60
days after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) during such 60-day period the Holders of a majority in
principal amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the
rights of another Holder of a Note or to obtain a preference or priority over
another Holder of a Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right
of any Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
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Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(i) or (ii)
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company for the whole
amount of principal of, premium and Liquidated Damages, if any, and interest
remaining unpaid on the Notes and interest on overdue principal and, to the
extent lawful, interest and such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it
shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due
under Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium and Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Notes for principal, premium and Liquidated Damages, if
any and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
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The Trustee may fix a record date and payment date for any
payment to Holders of Notes pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
ARTICLE 7.
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only those
duties that are specifically set forth in this Indenture and no others, and no
implied covenants or obligations shall be read into this Indenture against the
Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture. However, the
Trustee shall examine the certificates and opinions to determine whether or
not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction received
by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section.
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(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders, unless the Trustee shall have received security and
indemnity satisfactory to it in its sole discretion against any loss, liability
or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document believed by
it to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel of its selection and the advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection from liability
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless the Trustee shall have received reasonable security or
indemnity satisfactory to it in its sole discretion against the costs, expenses
and liabilities that might be incurred by it in compliance with such request or
direction.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the Notes, it
shall not be accountable for the Company's use of the proceeds from the Notes or
any money paid to the Company or upon the Company's direction under any
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provision of this Indenture, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement or recital herein or any
statement in the Notes or any other document in connection with the sale of the
Notes or pursuant to this Indenture other than its certificate of
authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and the
Trustee receives actual notice of such event, the Trustee shall mail to Holders
of Notes a notice of the Default or Event of Default within 90 days after the
Trustee receives such notice. Except in the case of a Default or Event of
Default in payment of principal of, premium, if any, or interest on any Note,
the Trustee may withhold the notice if and so long as a committee of its
Responsible Officers in good faith determines that withholding the notice is in
the interests of the Holders of the Notes.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, and for so long as Notes remain
outstanding, the Trustee shall mail to the Holders of the Notes a brief report
dated as of such reporting date that complies with TIA (S) 313(a) (but if no
event described in TIA (S) 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA (S) 313(b)(2). The Trustee shall also transmit by mail all
reports as required by TIA (S) 313(c).
A copy of each report at the time of its mailing to the Holders
of Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA (S) 313(d). The
Company shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
Section 7.07. Compensation and Indemnity.
The Company and the Guarantors shall pay to the Trustee from time
to time such compensation for its acceptance of this Indenture and services
hereunder as the parties shall agree from time to time. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company and the Guarantors shall reimburse the Trustee
promptly upon request for all reasonable disbursements, advances and expenses
incurred or made by it in addition to the compensation for its services. Such
expenses shall include the reasonable compensation, disbursements and expenses
of the Trustee's agents and counsel and any taxes or other expenses incurred by
a trust created pursuant to Article 8 hereof.
The Company and the Guarantors shall, jointly and severally,
indemnify the Trustee against any and all losses, liabilities or expenses
incurred by it arising out of or in connection with the acceptance or
administration of its duties under this Indenture, including the costs and
expenses of enforcing this Indenture against the Company and the Guarantors
(including this Section 7.07) and defending itself against any claim (whether
asserted by the Company or any Holder or any other person) or liability in
connection with the exercise or performance of any of its powers or duties
hereunder, except to the extent any such loss, liability or expense may be
attributable to its negligence or bad faith. The Trustee shall notify the
Company and the Guarantors promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Company shall not relieve the
Company of its obligations hereunder. The Company shall defend the claim and the
Trustee shall cooperate in the
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defense. The Trustee may have separate counsel and the Company shall pay the
reasonable fees and expenses of such counsel. The Company and the Guarantors
need not pay for any settlement made without its consent, which consent shall
not be unreasonably withheld.
The obligations of the Company and the Guarantors under this
Section 7.07 shall survive the satisfaction and discharge of this Indenture.
To secure the Company's and the Guarantors' payment obligations
in this Section, the Trustee shall have a Lien prior to the Notes on all money
or property held or collected by the Trustee, except that held in trust to pay
principal and interest on particular Notes. Such Lien shall survive the
satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(vi) or (vii) hereof occurs, the
expenses and the compensation for the services (including the fees and expenses
of its agents and counsel) are intended to constitute expenses of administration
under any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA (S) 313(b)(2)
to the extent applicable.
The Company's and the Guarantors' obligations under this Section
7.07 and any claim arising hereunder shall survive the resignation or removal of
any Trustee, the discharge of the Company's obligations pursuant to Article 8
hereof and any rejection or termination under any Bankruptcy Law.
Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged
from the trust hereby created by so notifying the Company. The Holders of Notes
of a majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
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If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee, the Company,
or the Holders of Notes of at least 10% in principal amount of the then
outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note who
has been a Holder of a Note for at least six months, fails to comply with
Section 7.10, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, provided all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant
to this Section 7.08, the Company's obligations under Section 7.07 hereof shall
continue for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $100.0 million as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA (S) 310(a)(1), (2) and (5). The Trustee is subject to TIA
(S) 310(b).
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
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ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors
evidenced by a resolution set forth in an Officers' Certificate, at any time,
elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding
Notes upon compliance with the conditions set forth below in this Article Eight.
Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.02, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to
have been discharged from its obligations with respect to all outstanding Notes
on the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive solely from the trust fund described in Section
8.04 hereof, and as more fully set forth in such Section, payments in respect of
the principal of, premium, if any, and interest and Liquidated Damages, if any,
on such Notes when such payments are due, (b) the Company's obligations with
respect to such Notes under Article 2 and Section 4.02 hereof, (c) the rights,
powers, trusts, duties and immunities of the Trustee hereunder and the Company's
obligations in connection therewith and (d) this Article Eight. Subject to
compliance with this Article Eight, the Company may exercise its option under
this Section 8.02 notwithstanding the prior exercise of its option under Section
8.03 hereof.
Section 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.03, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be released
from its obligations under the covenants contained in Sections 4.07, 4.08, 4.09,
4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17 and 4.18 hereof and clauses (iii) and
(iv) of Section 5.01 hereof with respect to the outstanding Notes on and after
the date the conditions set forth in Section 8.04 are satisfied (hereinafter,
"Covenant Defeasance"), and the Notes shall thereafter be deemed not
"outstanding" for the purposes of any direction, waiver, consent or declaration
or act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder (it being understood that such Notes shall not be deemed outstanding
for accounting purposes). For this purpose, Covenant Defeasance means that, with
respect to the outstanding Notes, the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event of Default under
Section 6.01 hereof, but, except as specified above, the remainder of this
Indenture and such Notes shall be unaffected thereby. In addition, upon the
Company's exercise under Section 8.01 hereof of the option applicable to this
Section 8.03 hereof, subject to the satisfaction of the
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conditions set forth in Section 8.04 hereof, Sections 5.01(iii) and 5.01(iv) and
Sections 6.01(iv) through 6.01(vi) hereof shall not constitute Events of
Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of
either Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, cash in United States dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest and
Liquidated Damages, if any on the outstanding Notes on the stated maturity or on
the applicable redemption date, as the case may be and the Company must specify
whether the Notes are being defeased to maturity or to a particular redemption
date;
(b) in the case of an election under Section 8.02 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the incurrence of Indebtedness all or a portion of the proceeds
of which will be used to defease the Notes pursuant to this Article Eight
concurrently with such incurrence) or insofar as Sections 6.01(vi) or 6.01(vii)
hereof is concerned, at any time in the period ending on the 91/st/ day after
the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under the Senior Credit
Facilities or any other material agreement or instrument (other than this
Indenture) to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel (which may be subject to customary exceptions) to the effect that on the
91/st/ day following the deposit, the trust funds
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will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable
Government Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section
8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the
outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the payment,
either directly or through any Paying Agent (including the Company acting as
Paying Agent) as the Trustee may determine, to the Holders of such Notes of all
sums due and to become due thereon in respect of principal, premium, if any, and
interest, but such money need not be segregated from other funds except to the
extent required by law.
The Company shall pay and indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article Eight to the contrary notwithstanding,
the Trustee shall deliver or pay to the Company from time to time upon the
request of the Company any money or non-callable Government Securities held by
it as provided in Section 8.04 hereof which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 8.04(a) hereof), are in excess of the amount thereof
that would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.
Section 8.06. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of, premium, if
any, or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as a
secured creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Company cause to be
published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified
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therein, which shall not be less than 30 days from the date of such notification
or publication, any unclaimed balance of such money then remaining will be
repaid to the Company.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United
States dollars or non-callable Government Securities in accordance with Section
8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee
or Paying Agent is permitted to apply all such money in accordance with Section
8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company
makes any payment of principal of, premium, if any, or interest on any Note
following the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Notes to receive such payment from the
money held by the Trustee or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture, the
Subsidiary Guarantees or the Notes without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes or to alter the provisions of Article 2 hereof (including the
related definitions) in a manner that does not materially adversely affect any
Holder;
(c) to provide for the assumption of the Company's or any Guarantor's
obligations to the Holders of the Notes by a successor to the Company or a
Guarantor pursuant to Article 5 or Article 11 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights hereunder of any Holder of the Note;
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
(f) to provide for the issuance of Additional Notes in accordance
with the limitations set forth in this Indenture as of the date hereof; or
(g) to allow any Guarantor to execute a supplemental indenture and/or
a Subsidiary Guarantee with respect to the Notes.
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 7.02 hereof, the Trustee shall join with the Company and
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the Guarantors in the execution of any amended or supplemental Indenture
authorized or permitted by the terms of this Indenture and to make any further
appropriate agreements and stipulations that may be therein contained, but the
Trustee shall not be obligated to enter into such amended or supplemental
Indenture that affects its own rights, duties or immunities under this Indenture
or otherwise.
Section 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Company and
the Trustee may amend or supplement this Indenture (including Section 3.09, 4.10
and 4.15 hereof), the Subsidiary Guarantees and the Notes with the consent of
the Holders of at least a majority in principal amount of the Notes (including
Additional Notes, if any) then outstanding voting as a single class (including
consents obtained in connection with a tender offer or exchange offer for, or
purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any
existing Default or Event of Default (other than a Default or Event of Default
in the payment of the principal of, premium, if any, or interest on the Notes,
except a payment default resulting from an acceleration that has been rescinded)
or compliance with any provision of this Indenture, the Subsidiary Guarantees or
the Notes may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Notes (including Additional Notes, if
any) voting as a single class (including consents obtained in connection with a
tender offer or exchange offer for, or purchase of, the Notes). Without the
consent of at least 75% in principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for, or purchase of, such Notes), no waiver or amendment to this Indenture may
make any change in the provisions of Article 10 hereof that adversely affects
the rights of any Holder of Notes. Section 2.08 hereof shall determine which
Notes are considered to be "outstanding" for purposes of this Section 9.02.
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid,
and upon receipt by the Trustee of the documents described in Section 7.02
hereof, the Trustee shall join with the Company in the execution of such amended
or supplemental Indenture unless such amended or supplemental Indenture directly
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section
becomes effective, the Company shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the
Holders of a majority in aggregate principal amount of the Notes (including
Additional Notes, if any) then outstanding voting as a single class may waive
compliance in a particular instance by the Company with any provision of this
Indenture or the Notes. However, without the consent of each Holder affected, an
amendment or waiver under this Section 9.02 may not (with respect to any Notes
held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver;
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(b) reduce the principal of or change the fixed maturity of any Note
or alter or waive any of the provisions with respect to the redemption of the
Notes, other than provisions relating to Sections 3.09 or 4.15 hereof;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the then outstanding Notes (including Additional Notes, if
any) and a waiver of the payment default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of or premium, if any, or interest on the Notes;
(g) waive a redemption payment with respect to any Note, other than a
payment required by Sections 3.09 or 4.15 hereof; or
(h) make any change in Section 6.04 or 6.07 hereof or in the
preceding amendment and waiver provisions.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes
shall be set forth in a amended or supplemental Indenture that complies with the
TIA as then in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. However, any such Holder of a Note or subsequent Holder
of a Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
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Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article Nine if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental Indenture until the Board
of Directors approves it. In executing any amended or supplemental indenture,
the Trustee shall be entitled to receive and (subject to Section 7.01 hereof)
shall be fully protected in relying upon, in addition to the documents required
by Section 11.04 hereof, an Officer's Certificate and an Opinion of Counsel
stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
ARTICLE 10.
SUBORDINATION
Section 10.01. Agreement to Subordinate.
The Company agrees, and each Holder by accepting a Note agrees,
that the payment of principal, premium, interest, Liquidation Damages, if any,
and any other Obligations on, or relating to the Notes, is subordinated and
junior in right of payment, to the extent and in the manner provided in this
Article 10, to the prior payment in full in cash or Cash Equivalents (other than
Cash Equivalents of the type referred in clauses (3) and (4) of the definition
thereof) of all Senior Debt of the Company (whether outstanding on the date
hereof or hereafter created, incurred, assumed or guaranteed), and that the
subordination is for the benefit of, and shall be enforceable directly by, the
holders of Senior Debt of the Company, and that each holder of Senior Debt of
the Company whether now outstanding or hereafter created, incurred, assumed or
guaranteed shall be deemed to have acquired such Senior Debt in reliance upon
the covenants and provisions contained in this Indenture and the Notes.
Section 10.02. Liquidation; Dissolution; Bankruptcy.
Upon any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to creditors of the
Company in a liquidation or dissolution of the Company or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or its property, in an assignment for the benefit of creditors or any
marshalling of the Company's assets and liabilities:
(i) holders of Senior Debt of the Company shall be entitled to
receive payment in full in cash or Cash Equivalents (other than Cash
Equivalents of the type referred to in clauses (3) and (4) of the definition
thereof) of all Obligations due in respect of such Senior Debt (including
interest after the commencement of any such proceeding at the rate specified
in the applicable Senior Debt, whether or not such interest is an allowable
claim) before Holders of the Notes shall be entitled to receive any payment or
distribution of any kind or character with respect to any Obligations on, or
relating to, the Notes (except that Holders may receive (i) Permitted Junior
Securities and (ii) payments and other distributions made from any defeasance
trust created pursuant to Section 8.01 hereof so long as the deposit of
amounts therein satisfied the relevant conditions specified in this Indenture
at the time of such deposit); and
(ii) until all Obligations with respect to Senior Debt of the Company
(as provided in subsection (i) above) are paid in full in cash or Cash
Equivalents (other than Cash Equivalents of the type referred in clauses (3)
and (4) of the definition thereof), any payment or distribution of assets of
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the Company of any kind or character, whether in cash, properties or
securities to which Holders would be entitled but for this Article 10 shall be
made to holders of such Senior Debt (except that Holders of Notes may receive
(i) Permitted Junior Securities and (ii) payments and other distributions made
from any defeasance trust created pursuant to Section 8.01 hereof so long as
the deposit of amounts therein satisfied the relevant conditions specified in
this Indenture at the time of such deposit), as their interests may appear.
Section 10.03. Default on Designated Senior Debt.
(a) The Company may not make any payment or distribution of any kind
or character to the Trustee or any Holder with respect to any Obligations on, or
with respect to, the Notes and may not acquire from the Trustee or any Holder
any Notes for cash or property or otherwise (other than (i) Permitted Junior
Securities and (ii) payments and other distributions made from any defeasance
trust created pursuant to Section 8.01 hereof so long as the deposit of amounts
therein satisfied the relevant conditions specified in the Indenture at the time
of such deposit) until all principal and other Obligations with respect to the
Senior Debt of the Company have been paid in full in cash or Cash Equivalents
(other than Cash Equivalents of the type referred to in clauses (3) and (4) of
the definition thereof) if:
(i) a default in the payment when due, whether at maturity, upon
redemption, by declaration or otherwise, of any principal of, interest on,
unpaid drawings for letters of credit issued in respect of, or any other
Obligations with respect to, any Designated Senior Debt of the Company
occurs and is continuing; or
(ii) a default, other than a default referred to in Section 10.03(i)
hereof, on Designated Senior Debt of the Company occurs and is continuing
that then permits holders of such Designated Senior Debt to accelerate its
maturity and the Trustee receives a notice of such default (a "Payment
Blockage Notice") from the Holders or the Representative of such Designated
Senior Debt. If the Trustee receives any such Payment Blockage Notice, no
subsequent Payment Blockage Notice shall be effective for purposes of this
Section unless and until at least 360 days shall have elapsed since the
effectiveness of the immediately prior Payment Blockage Notice. No
nonpayment default that existed or was continuing on the date of delivery
of any Payment Blockage Notice to the Trustee shall be, or be made, the
basis for a subsequent Payment Blockage Notice unless such default shall
have been cured or waived for a period of not less than 90 consecutive
days.
(b) The Company may and shall resume payments on and distributions
in respect of the Notes upon:
(i) in the case of a default referred to in Section 10.03(i) hereof,
the date upon which the default is cured or waived, or
(ii) in the case of a default referred to in Section 10.03(ii)
hereof, the earlier of (x) the date on which all nonpayment defaults are
cured or waived, (y) 179 days after the date of delivery of the applicable
Payment Blockage Notice or (z) the Trustee receives notice from the
Representative for such Designated Senior Debt rescinding the Payment
Blockage Notice, unless the maturity of any such Designated Senior Debt has
been accelerated.
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Section 10.04. Acceleration of Notes.
If payment of the Notes is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Debt of the Company
of the acceleration.
Section 10.05. When Distribution Must Be Paid Over.
In the event that the Trustee or any Holder receives any payment
or distribution of assets of any kind or character, whether in cash, properties
or securities, in respect of any Obligations with respect to the Notes at a time
when such payment is prohibited by Section 10.02 or 10.03 hereof, such payment
or distribution shall be held by the Trustee or such Holder, in trust for the
benefit of, and shall be paid forthwith over and delivered, upon written
request, to, the holders of Senior Debt of the Company (pro rata to such holders
on the basis of their respective amount of such Senior Debt held by such
holders) or their Representatives under the indenture or other agreement (if
any) pursuant to which such Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of all
Obligations with respect to Senior Debt remaining unpaid to the extent necessary
to pay such Obligations in full in cash or Cash Equivalents (other than Cash
Equivalents of the type referred to in clauses (3) and (4) of the definition
thereof) in accordance with their terms, after giving effect to any concurrent
payment or distribution to or for the holders of such Senior Debt.
With respect to the holders of Senior Debt of the Company, the
Trustee undertakes to perform only such obligations on the part of the Trustee
as are specifically set forth in this Article 10, and no implied covenants or
obligations with respect to the holders of Senior Debt of the Company shall be
read into this Indenture against the Trustee. The Trustee shall not be deemed to
owe any fiduciary duty to the holders of Senior Debt of the Company, and shall
not be liable to any such holders if the Trustee shall pay over or distribute to
or on behalf of Holders or the Company or any other Person money or assets to
which any holders of Senior Debt shall be entitled by virtue of this Article 10,
except if such payment is made as a result of the willful misconduct or gross
negligence of the Trustee.
To the extent any payment of Senior Debt of the Company (whether
by or on behalf of the Company, as proceeds of security or enforcement of any
right of setoff or otherwise) is declared to be fraudulent or preferential, set
aside or required to be paid to any receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar Person under any bankruptcy, insolvency,
receivership, fraudulent conveyance or similar law, then, if such payment is
recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar Person, the Senior Debt of the Company or part
thereof originally intended to be satisfied shall be deemed to be reinstated and
outstanding as if such payment had not occurred.
Section 10.06. Notice by Company.
The Company shall promptly notify the Trustee and the Paying
Agent of any facts known to the Company that would cause a payment of any
Obligations with respect to the Notes to violate this Article 10, but failure to
give such notice shall not affect the subordination of the Notes to the Senior
Debt of the Company as provided in this Article 10.
Section 10.07. Subrogation.
Subject to the payment in full in cash or Cash Equivalents
(other than Cash Equivalents of the type referred to in clauses (3) and (4) of
the definition thereof) of all Senior Debt of the Company,
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Holders of Notes shall be subrogated (equally and ratably with all other
Indebtedness pari passu with the Notes) to the rights of holders of Senior Debt
of the Company to receive payments or distributions of cash, properties or
securities of the Company applicable to the Senior Debt of the Company until the
Notes have been paid in full. A distribution made under this Article 10 to
holders of Senior Debt of the Company that otherwise would have been made to
Holders of Notes is not, as between the Company and Holders, a payment by the
Company to or on account of Senior Debt of the Company.
Section 10.08. Relative Rights.
This Article 10 defines the relative rights of Holders of Notes
and holders of Senior Debt of the Company. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders of Notes, the
obligation of the Company, which is absolute and unconditional, to pay principal
of and interest on the Notes in accordance with their terms;
(2) affect the relative rights of Holders of Notes and
creditors of the Company other than their rights in relation to holders of
Senior Debt of the Company; or
(3) prevent the Trustee or any Holder of Notes from exercising
its available remedies upon a Default or Event of Default, subject to the rights
of holders and owners of Senior Debt of the Company to receive distributions and
payments otherwise payable to Holders of Notes.
The failure to make a payment on account of principal of, or
interest on, the Notes by reason of any provision of this Article 10 will not be
construed as preventing the occurrence of a Default or Event of Default.
Section 10.09. Subordination May Not Be Impaired by Company.
No right of any holder of Senior Debt of the Company to enforce
the subordination of the Indebtedness evidenced by the Notes as provided herein
shall at any time in any way be prejudiced or impaired by any act or failure to
act by the Company or any Holder or by the failure of the Company or any Holder
to comply with this Indenture, regardless of any knowledge thereof which any
such Holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Debt of the Company may, at any time and from
time to time, without the consent of or notice to the Trustee, without incurring
responsibility to the Trustee or the Holders of the Notes and without impairing
or releasing the subordination provided in this Article 10 or the obligations
hereunder of the Holders of the Notes to the holders of the Senior Debt of the
Company, do any one or more of the following: (i) change the manner, place or
terms of payment or extend the time of payment of, or renew or alter, Senior
Debt of the Company, or otherwise amend or supplement in any manner Senior Debt
of the Company, or any instrument evidencing the same or any agreement under
which Senior Debt of the Company is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing Senior
Debt of the Company; (iii) release any Person liable in any manner for the
payment or collection of Senior Debt of the Company; and (iv) exercise or
refrain from exercising any rights against the Company and any other Person.
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Section 10.10. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company referred to
in this Article 10, the Trustee and the Holders of Notes shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction or
upon any certificate of such Representative or of the liquidating trustee or
agent or other Person making any distribution to the Trustee or to the Holders
of Notes for the purpose of ascertaining the Persons entitled to participate in
such distribution, the holders of the Senior Debt of the Company and other
Indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article 10.
Section 10.11. Rights of Trustee and Paying Agent.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least two Business Days prior to the date upon which
such payment would otherwise become due and payable written notice of facts that
would cause the payment of any Obligations with respect to the Notes to violate
this Article 10. Only the Company or a Representative therefor may give any
such notice. Nothing in this Article 10 shall impair the claims of, or payments
to, the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior
Debt of the Company with the same rights it would have if it were not Trustee.
Any Agent may do the same with like rights.
Section 10.12. Authorization to Effect Subordination.
Each Holder of Notes, by the Holder's acceptance thereof, authorizes
and directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as such Holder's attorney-in-fact
for any and all such purposes. If the Trustee does not file a proper proof of
claim or proof of debt in the form required in any proceeding referred to in
Section 6.09 hereof at least 30 days before the expiration of the time to file
such claim the holders of the Senior Debt of the Company or their
Representatives are hereby authorized to file an appropriate claim for and on
behalf of the Holders of the Notes.
Section 10.13. Amendments.
The provisions of this Article 10 shall not be amended or modified
without the written consent of the parties holding a majority of the outstanding
Indebtedness under each credit agreement included in the Senior Credit
Facilities.
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ARTICLE 11.
SUBSIDIARY GUARANTEES
Section 11.01. Guarantee.
Subject to this Article 11, each of the Guarantors hereby, jointly and
severally, unconditionally guarantees to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of this Indenture, the Notes or
the obligations of the Company hereunder or thereunder, that: (a) the principal
of and interest on the Notes will be promptly paid in full when due, whether at
maturity, by acceleration, redemption or otherwise, and interest on the overdue
principal of and interest on the Notes, if any, if lawful, and all other
obligations of the Company to the Holders or the Trustee hereunder or thereunder
will be promptly paid in full or performed, all in accordance with the terms
hereof and thereof; and (b) in case of any extension of time of payment or
renewal of any Notes or any of such other obligations, that same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
Failing payment when due of any amount so guaranteed or any performance so
guaranteed for whatever reason, the Guarantors shall be jointly and severally
obligated to pay the same immediately. Each Guarantor agrees that this is a
guarantee of payment and not a guarantee of collection.
The Guarantors hereby agree that their obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Each Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenant that this Subsidiary Guarantee shall not be discharged except by
complete performance of the obligations contained in the Notes and this
Indenture.
If any Holder or the Trustee is required by any court or otherwise to
return to the Company, the Guarantors or any custodian, trustee, liquidator or
other similar official acting in relation to either the Company or the
Guarantors, any amount paid by either to the Trustee or such Holder, this
Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated
in full force and effect.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby. Each
Guarantor further agrees that, as between the Guarantors, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6 hereof
for the purposes of this Subsidiary Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such obligations as provided in Article 6 hereof, such
obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantors for the purpose of this Subsidiary Guarantee. The
Guarantors shall have the right to seek contribution from any non-paying
Guarantor so long as the exercise of such right does not impair the rights of
the Holders under the Guarantee.
82
Section 11.02. Subordination of Subsidiary Guarantee.
Each Guarantor agrees, and each Holder by accepting a Note agrees,
that the Obligations of each Guarantor under its Subsidiary Guarantee, are
subordinated and junior in right of payment to the prior payment of all Senior
Debt of each Guarantor on the same basis as the Obligations on, or relating to
the Notes, are subordinated and junior in right of payment to the prior payment
of all Senior Debt of the Company pursuant to Article 10. In furtherance of the
foregoing, each Guarantor agrees, and the Trustee and each Holder by accepting a
Note agrees, that the subordination and related provisions applicable to the
Obligations of each Guarantor under its Subsidiary Guarantee by virtue of the
preceding sentence shall be as set forth in Article 10 as if each reference to
"Company" therein were instead a reference to "a Guarantor", each reference to
"Senior Debt of the Company" therein were instead a reference to "Senior Debt of
each Guarantor" and each reference to "Notes" therein were instead a reference
to "this Subsidiary Guarantee", with such appropriate modifications as the
context may require. For the purposes of the foregoing sentence, the Trustee
and the Holders shall have the right to receive and/or retain payments by any of
the Guarantors only at such times as they may receive and/or retain payments in
respect of the Notes pursuant to this Indenture, including Article 10 hereof.
The provisions of this Section 11.02 may not be amended or modified without the
written consent of the parties holding a majority of the outstanding
Indebtedness under each credit agreement included in the Senior Credit
Facilities.
Section 11.03. Limitation on Guarantor Liability.
Each Guarantor, and by its acceptance of Notes, each Holder, hereby
confirms that it is the intention of all such parties that the Subsidiary
Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance
for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar federal or state law to the
extent applicable to any Subsidiary Guarantee. To effectuate the foregoing
intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree
that the obligations of such Guarantor under its Subsidiary Guarantee and this
Article 11 shall be limited to the maximum amount as will, after giving effect
to such maximum amount and all other contingent and fixed liabilities of such
Guarantor that are relevant under such laws, and after giving effect to any
collections from, rights to receive contribution from or payments made by or on
behalf of any other Guarantor in respect of the obligations of such other
Guarantor under this Article 11, result in the obligations of such Guarantor
under its Subsidiary Guarantee not constituting a fraudulent transfer or
conveyance.
Section 11.04. Execution and Delivery of Subsidiary Guarantee.
To evidence its Subsidiary Guarantee set forth in Section 11.01, each
Guarantor hereby agrees that a notation of such Subsidiary Guarantee
substantially in the form included in Exhibit E shall be endorsed by an Officer
of such Guarantor on each Note authenticated and delivered by the Trustee and
that this Indenture shall be executed on behalf of such Guarantor by its
President or one of its Vice Presidents.
Each Guarantor hereby agrees that its Subsidiary Guarantee set forth
in Section 11.01 shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Subsidiary Guarantee.
83
If an Officer whose signature is on this Indenture or on the
Subsidiary Guarantee no longer holds that office at the time the Trustee
authenticates the Note on which a Subsidiary Guarantee is endorsed, the
Subsidiary Guarantee shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee set
forth in this Indenture on behalf of the Guarantors.
In the event that the Company creates or acquires any new Subsidiaries
subsequent to the date of this Indenture, if required by Section 4.17 hereof,
the Company shall cause such Subsidiaries to execute supplemental indentures to
this Indenture and Subsidiary Guarantees in accordance with Section 4.17 hereof
and this Article 11, to the extent applicable.
Section 11.05. Guarantors May Consolidate, etc., on Certain Terms.
A Guarantor may not sell or otherwise dispose of all or substantially
all of its assets, or consolidate with or merge with or into (whether or not
such Guarantor is the surviving Person) another Person unless:
(a) immediately after giving effect to such transaction, no Default or
Event of Default exists; and
(b) either:
(i) the Person acquiring the property in any such sale or disposition or
the Person formed by or surviving any such consolidation or merger assumes all
the obligations of such Guarantor, pursuant to a supplemental indenture
satisfactory to the Trustee; or
(ii) the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of this Indenture.
In case of any such consolidation, merger, sale or conveyance and upon
the assumption by the successor Person, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the
Subsidiary Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Guarantor, such successor Person shall succeed to and be
substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor. Such successor Person thereupon may cause to be signed
any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in
all respects have the same legal rank and benefit under this Indenture as the
Subsidiary Guarantees theretofore and thereafter issued in accordance with the
terms of this Indenture as though all of such Subsidiary Guarantees had been
issued at the date of the execution hereof.
Except as set forth in Articles 4 and 5 hereof, and notwithstanding
clauses (a) and (b) above, nothing contained in this Indenture or in any of the
Notes shall prevent any consolidation or merger of a Guarantor with or into the
Company or another Guarantor, or shall prevent any sale or conveyance of the
property of a Guarantor as an entirety or substantially as an entirety to the
Company or another Guarantor.
84
Section 11.06. Releases Following Sale of Assets.
The Subsidiary Guarantee of a Guarantor will be released:
(a) in connection with any sale or other disposition of all or
substantially all of the assets of that Guarantor (including by way of merger or
consolidation), if the disposition is to the Company or another Guarantor or if
the Company applies the Net Proceeds of that sale or other disposition in
accordance with the applicable provisions of this Indenture, including without
limitation Section 4.10 hereof; or
(b) in connection with any sale of all of the capital stock of a
Guarantor, if the Company applies the Net Proceeds of that sale in accordance
with the applicable provisions of this Indenture, including without limitation
Section 4.10 hereof; or
(c) if the Company designates any Restricted Subsidiary that is a
Guarantor as an Unrestricted Subsidiary; or
(d) upon the release or discharge of all guarantees of such Guarantor, and
all pledges of property or assets of such Guarantor securing, all other
Indebtedness of the Company and the other Guarantors.
Upon delivery by the Company to the Trustee of an Officers'
Certificate and an Opinion of Counsel to the effect that such sale or other
disposition was made by the Company in accordance with the applicable provisions
of this Indenture, including without limitation Section 4.10 hereof, the Trustee
shall execute any documents reasonably required in order to evidence the release
of any Guarantor from its obligations under its Subsidiary Guarantee.
Any Guarantor not released from its obligations under its Subsidiary
Guarantee shall remain liable for the full amount of principal of and interest
on the Notes and for the other obligations of any Guarantor under this Indenture
as provided in this Article 11.
ARTICLE 12.
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA (S) 318(c), the imposed duties shall control.
Section 12.02. Notices.
Any notice or communication by the Company, any Guarantor or the
Trustee to the others is duly given if in writing and delivered in Person or
mailed by first class mail (registered or certified, return receipt requested),
telex, telecopier or overnight air courier guaranteeing next day delivery, to
the others' address
If to the Company and/or any Guarantor:
Domino's, Inc.
30 Frank Lloyd Wright Drive
P.O. Box 997
85
Ann Arbor, Michigan 48106-0997
Telecopier No.: (734) 913-0377
Attention: Chief Financial Officer
With a copy to:
Ropes & Gray
1 International Place
Boston, MA 02110
Telecopier No.: (617) 951-7050
Attention: R. Newcomb Stillwell
If to the Trustee:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Telecopier No.: (212) 858-2952
Attention: Corporate Trust Administration
With a copy to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
701 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Telecopier No.: (202) 434-7400
Attention: Leocadia I. Zak
The Company, any Guarantor or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA (S) 313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
86
Section 12.03. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company,
the Trustee, the Registrar and anyone else shall have the protection of TIA (S)
312(c).
Section 12.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 12.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 12.05 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
Section 12.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA (S) 314(a)(4)) shall comply with the provisions of TIA
(S) 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has been
satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
Section 12.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 12.07. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No past, present or future director, officer, employee, incorporator
or stockholder of the Company or any Guarantor, as such, shall have any
liability for any obligations of the Company or such Guarantor under the Notes,
the Subsidiary Guarantees, this Indenture or for any claim based on, in
87
respect of, or by reason of, such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes.
Section 12.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES WITHOUT GIVING
EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
Section 12.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Company or its Subsidiaries or of any other Person.
Any such indenture, loan or debt agreement may not be used to interpret this
Indenture.
Section 12.10. Successors.
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors. All agreements of each Guarantor in this Indenture shall bind
its successors, except as otherwise provided in Section 11.
Section 12.11. Severability.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 12.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
Section 12.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[Indenture signature pages follow]
88
[Indenture signature pages]
Dated as of December 21, 1998
Domino's, Inc.
By: /s/ Harry J. Silverman
---------------------------
Name: Harry J. Silverman
Title: Vice President
Domino's Pizza, Inc.
By: /s/ Harry J. Silverman
---------------------------
Name: Harry J. Silverman
Title: Vice President
Metro Detroit Pizza, Inc.
By: /s/ Harry J. Silverman
---------------------------
Name: Harry J. Silverman
Title: Vice President
Bluefence, Inc.
By: /s/ Harry J. Silverman
---------------------------
Name: Harry J. Silverman
Title: President
Domino's Pizza International Payroll
Services, Inc.
By: /s/ Harry J. Silverman
---------------------------
Name: Harry J. Silverman
Title: Vice President
Domino's Pizza International, Inc.
By: /s/ Harry J. Silverman
---------------------------
Name: Harry J. Silverman
Title: Vice President
89
Domino's Pizza-Government Services Division,
Inc.
By: /s/ Harry J. Silverman
---------------------------
Name: Harry J. Silverman
Title: Vice President
IBJ Schroder Bank & Trust Company
By: /s/ Terence Rawlins
---------------------------
Name: Terence Rawlins
Title: Vice President
90
EXHIBIT A-1
(Face of Note)
================================================================================
CUSIP ________
ISIN __________
103/8% Senior Subordinated Notes due 2009
No. ___ $____________
DOMINO'S, INC.
promises to pay to CEDE & CO., or registered assigns, the principal sum of
______________ MILLION Dollars ($__________) on January 15, 2009.
Interest Payment Dates: January 15 and July 15, commencing July 15, 1999.
Record Dates: January 1 and July 1.
Dated: December 21, 1998
DOMINO'S, INC.
By: _______________________________
Name:
Title:
By: _______________________________
Name:
Title:
This is one of the
Notes referred to in the
within-mentioned Indenture:
IBJ SCHRODER BANK AND TRUST COMPANY,
as Trustee
By: _______________________________
Authorized Signatory
Dated: December 21, 1998
================================================================================
A-1-1
(Back of Note)
103/8% [Series A] [Series B] Senior Subordinated Notes due 2009
[Insert the Global Note Legend, if applicable pursuant to the provisions of the
Indenture]
[Insert the Private Placement Legend, if applicable pursuant to the provisions
of the Indenture]
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Domino's, Inc., a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Note at 10 3/8% per
annum from December 21, 1998 until maturity and shall pay the Liquidated Damages
payable pursuant to Section 5 of the Registration Rights Agreement referred to
below. The Company shall pay interest and Liquidated Damages semi-annually on
January 15 and July 15 of each year, or if any such day is not a Business Day,
on the next succeeding Business Day (each an "Interest Payment Date"). Interest
on the Notes will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from the date of issuance; provided that
if there is no existing Default in the payment of interest, and if this Note is
authenticated between a record date referred to on the face hereof and the next
succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; provided, further, that the first Interest
Payment Date shall be July 15, 1999. The Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
principal and premium, if any, from time to time on demand at a rate that is 1%
per annum in excess of the rate then in effect; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest and Liquidated Damages (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
2. METHOD OF PAYMENT. The Company, in accordance with Section 4.01
of the Indenture, will pay interest on the Notes (except defaulted interest) and
Liquidated Damages to the Persons who are registered Holders of Notes at the
close of business on the January 1 or July 1 next preceding the Interest Payment
Date, even if such Notes are canceled after such record date and on or before
such Interest Payment Date, except as provided in Section 2.12 of the Indenture
with respect to defaulted interest. The Notes will be payable as to principal,
premium and Liquidated Damages, if any, and interest at the office or agency of
the Company maintained for such purpose within or without the City and State of
New York, or, at the option of the Company, payment of interest and Liquidated
Damages may be made by check mailed to the Holders at their addresses set forth
in the register of Holders, and provided that payment by wire transfer of
immediately available funds will be required with respect to principal of and
interest, premium and Liquidated Damages on, all Global Notes and all other
Notes the Holders of which shall have provided wire transfer instructions to the
Company or the Paying Agent. Such payment shall be in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, IBJ Schroder Bank & Trust
Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
A-1-2
4. INDENTURE. The Company issued the Notes under an Indenture, dated
as of December 21, 1998 (the "Indenture"), among the Company, the Guarantors and
the Trustee. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to
all such terms, and Holders are referred to the Indenture and such Act for a
statement of such terms. To the extent any provision of this Note conflicts with
the express provisions of the Indenture, the provisions of the indenture shall
govern and be controlling. The Notes are obligations of the Company limited to
$400.0 million in aggregate principal amount.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraphs (b) and (c) of this
Paragraph 5, the Notes will not be redeemable at the Company's option prior to
January 15, 2004. Thereafter, the Notes will be subject to redemption at any
time at the option of the Company, in whole or in part, upon not less than 30
nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on January 15 of the years
indicated below:
Year Percentage
---- ----------
2004........................................ 105.1875%
2005........................................ 103.4583%
2006........................................ 101.7292%
2007 and thereafter......................... 100.0000%
(b) Notwithstanding the provisions of subparagraph (a) of this
Paragraph 5, before January 15, 2002, the Company may on any one or more
occasions redeem up to 35% of the aggregate principal amount of Notes originally
issued under the Indenture at a redemption price of 110.375% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the redemption date, with the net cash proceeds of any Equity
Offerings; provided that at least 65% of the aggregate principal amount of Notes
issued under the Indenture remains outstanding immediately after the occurrence
of such redemption (excluding Notes held by the Company and its Subsidiaries);
and provided further that such redemption shall occur within 120 days of the
date of the closing of any such Equity Offering.
(c) Before January 15, 2004, the Notes may also be redeemed, as a
whole but not in part, at the option of the Company upon the occurrence of a
Change of Control, upon not less than 30 nor more than 60 days prior notice (but
in no event may any such redemption occur more than 90 days after the occurrence
of such Change of Control) mailed by first-class mail to each Holder's
registered address, at a redemption price equal to 100% of the principal amount
thereof plus the Applicable Premium as of, and accrued and unpaid interest and
Liquidated Damages thereon, if any, to, the date of redemption (the "Redemption
Date").
6. MANDATORY REDEMPTION. Except as set forth in paragraph 7 below,
the Company shall not be required to make mandatory redemption or sinking fund
payments with respect to the Notes.
A-1-3
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of purchase
(the "Change of Control Payment"). Within 30 days following any Change of
Control, the Company shall mail a notice to each Holder setting forth the
procedures governing the Change of Control Offer as required by the Indenture.
(b) When the aggregate amount of Excess Proceeds exceeds $10.0
million, the Company will make an Asset Sale Offer to all Holders of Notes and
all holders of other Indebtedness that is pari passu with the Notes containing
provisions similar to those set forth in this Indenture with respect to offers
to purchase or redeem with the proceeds of sales of assets to purchase the
maximum principal amount of Notes and such other pari passu Indebtedness that
may be purchased out of the Excess Proceeds. The offer price in any Asset Sale
Offer will be equal to 100% of the principal amount plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of purchase, and will be
payable in cash. If any Excess Proceeds remain after consummation of an Asset
Sale Offer, the Company may use such Excess Proceeds for any purpose not
otherwise prohibited by this Indenture. If the aggregate principal amount of
Notes and such other pari passu Indebtedness tendered into such Asset Sale Offer
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and
such other pari passu Indebtedness to be purchased on a pro rata basis. Holders
of Notes that are the subject of an offer to purchase will receive an Asset Sale
Offer from the Company prior to any related purchase date and may elect to have
such Notes purchased by completing the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture, the Subsidiary Guarantees or the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the then outstanding Notes and Additional
A-1-4
Notes, if any, voting as a single class, and any existing default or compliance
with any provision of the Indenture, the Subsidiary Guarantees or the Notes may
be waived with the consent of the Holders of a majority in principal amount of
the then outstanding Notes and Additional Notes, if any, voting as a single
class. Without the consent of any Holder of a Note, the Indenture, the
Subsidiary Guarantees or the Notes may be amended or supplemented to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to provide for the assumption of
the Company's or Guarantor's obligations to Holders of the Notes in case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not adversely affect
the legal rights under the Indenture of any such Holder, to comply with the
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act, to provide for the Issuance of
Additional Notes in accordance with the limitations set forth in the Indenture,
or to allow any Guarantor to execute a supplemental indenture to the Indenture
and/or a Subsidiary Guarantee with respect to the Notes.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for
30 days in the payment when due of interest, on, or Liquidated Damages with
respect to, the Notes whether or not prohibited by Article 10 of the Indenture;
(ii) the default in payment when due of the principal of or premium, if any, on
the Notes, whether or not prohibited by Article 10 of the Indenture; (iii)
failure by the Company or any of its Restricted Subsidiaries for 30 days after
specified notice from the Trustee or the Holders of at least 25% of the
outstanding principal amount of the Notes to comply with any of the other
agreements in the Indenture or the Notes; (iv) default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any
of its Restricted Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Restricted Subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the date of the Indenture, if that
default: (A) is caused by a failure to pay principal at the final stated
maturity of such Indebtedness (a "Payment Default"); or (B) results in the
acceleration of such Indebtedness prior to its express maturity, and, in each
case, the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $15.0
million or more; (v) failure by the Company or any of its Restricted
Subsidiaries to pay final judgments aggregating in excess of $15.0 million,
which judgments are not paid, discharged or stayed for a period of 60
consecutive days after such judgments become final and non-appealable; and (vi)
certain events of bankruptcy or insolvency with respect to the Company or any of
its Significant Restricted Subsidiaries. If any Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding Notes will become
due and payable without further action or notice. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes. The Company is required
to deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Company is required upon becoming aware of any Default or
Event of Default, to deliver to the Trustee a statement specifying such Default
or Event of Default.
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13. SUBORDINATION. Each Holder by accepting a Note agrees that the
Indebtedness evidenced by the Note is subordinated in right of payment, to the
extent and in the manner provided in Article 10 of the Indenture, prior to the
payment in full in cash or Cash Equivalents of all Senior Debt (whether
outstanding on the date of the Indenture or thereafter created, incurred assumed
or guaranteed), and that the subordination is for the benefit of the holders of
Senior Debt.
14. SUBSIDIARY GUARANTEES. The payment of principal of, premium, and
interest and Liquidated Damages, if any, on the Notes are unconditionally
guaranteed, jointly and severally, on a senior subordinated basis by the
Guarantors.
15. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
16. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
17. AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
18. ABBREVIATIONS. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
19. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the A/B Exchange
Registration Rights Agreement, dated as of December 21, 1998, between the
Company and the parties named on the signature pages thereof or, in the case of
Additional Notes, Holders of Restricted Global Notes and Restricted Definitive
Notes shall have the rights set forth in one or more registration rights
agreements, if any, between the Company and the other parties thereto, relating
to rights given by the Company to the purchasers of any Additional Notes
(collectively, the "Registration Rights Agreement").
20. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
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The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Domino's, Inc.
30 Frank Lloyd Wright Drive
P.O. Box 997
Ann Arbor, Michigan 48106-0997
Telecopier No.: (734) 913-0377
Attention: Chief Financial Officer
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ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
- --------------------------------------------------------------------------------
Date: ____________
Your Signature:__________________________
(Sign exactly as your name appears on the
face of this Note)
Tax Identification No:___________________
SIGNATURE GUARANTEE:
---------------------------------
Signatures must be guaranteed by an
"eligible guarantor institution" meeting
the requirements of the Registrar, which
requirements include membership or
participation in the Security Transfer
Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as
may be determined by the Registrar in
addition to, or in substitution for,
STAMP, all in accordance with the
Securities Exchange Act of 1934, as
amended.
A-1-8
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
[_] Section 4.10 [_] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $________
Date: ____________
Your Signature:__________________________
(Sign exactly as your name appears on the
face of this Note)
Tax Identification No:
SIGNATURE GUARANTEE:
---------------------------------
Signatures must be guaranteed by an
"eligible guarantor institution" meeting
the requirements of the Registrar, which
requirements include membership or
participation in the Security Transfer
Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as
may be determined by the Registrar in
addition to, or in substitution for,
STAMP, all in accordance with the
Securities Exchange Act of 1934, as
amended.
A-1-9
[SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE]/1/
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note, have
been made:
Principal Amount
Amount of Amount of increase of this Global Note Signature of
decrease in in Principal following such authorized officer
Principal Amount Amount of this decrease (or of Trustee or Note
Date of Exchange of this Global Note Global Note increase) Custodian
- ---------------- ------------------- ------------------ ------------------- -------------------
_________________________
/1/ This should be included only if the Note is issued in global form.
A-1-10
EXHIBIT A-2
(Face of Regulation S Temporary Global Note)
================================================================================
CUSIP U25760 AA4
ISIN USU25760 AA40
103/8% Senior Subordinated Notes due 2009
No. ___ $____________
DOMINO'S, INC.
promises to pay to CEDE & CO., or registered assigns, the principal sum of
______________ MILLION Dollars ($__________) on January 15, 2009.
Interest Payment Dates: January 15 and July 15, commencing July 15, 1999.
Record Dates: January 1 and July 1.
Dated: December 21, 1998
DOMINO'S, INC.
By: ______________________
Name:
Title:
By: ______________________
Name:
Title:
This is one of the
Notes referred to in the
within-mentioned Indenture:
IBJ SCHRODER BANK AND TRUST COMPANY,
as Trustee
By: _______________________________
Authorized Signatory
Dated: December 21, 1998
================================================================================
A-2-1
(Back of Regulation S Temporary Global Note)
103/8% Series A Senior Subordinated Notes due 2009
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR
IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT (SUBJECT TO THE DELIVERY OF SUCH EVIDENCE, IF ANY, REQUIRED
UNDER THE INDENTURE PURSUANT TO WHICH THIS NOTE IS ISSUED) AND IN ACCORDANCE
WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER JURISDICTION. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER OR ANOTHER
EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY
AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY (1)(A) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (B) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (C) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (D)
IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), AS LONG AS THE REGISTRAR RECEIVES A CERTIFICATION OF THE TRANSFEROR
AND AN OPINION OF COUNSEL THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL AND EACH SUBSEQUENT HOLDER IS REQUIRED TO NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTION SET FORTH IN
(A) ABOVE.
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(A) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE, AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED
TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.
A-2-2
Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
1. Interest. Domino's Inc., a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Note at 10 3/8% per
annum from December 21, 1998 until maturity and shall pay the Liquidated Damages
payable pursuant to Section 5 of the Registration Rights Agreement referred to
below. The Company shall pay interest and Liquidated Damages semi-annually on
January 15 and July 15 of each year, or if any such day is not a Business Day,
on the next succeeding Business Day (each an "Interest Payment Date"). Interest
on the Notes will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from the date of issuance; provided that
if there is no existing Default in the payment of interest, and if this Note is
authenticated between a record date referred to on the face hereof and the next
succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; provided, further, that the first Interest
Payment Date shall be July 15, 1999. The Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
principal and premium, if any, from time to time on demand at a rate that is 1%
per annum in excess of the rate then in effect; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest and Liquidated Damages (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
Until this Regulation S Temporary Global Note is exchanged for one or
more Regulation S Permanent Global Notes, the Holder hereof shall not be
entitled to receive payments of interest hereon; until so exchanged in full,
this Regulation S Temporary Global Note shall in all other respects be entitled
to the same benefits as other Notes under the Indenture.
2. Method of Payment. The Company, in accordance with Section 4.01
of the Indenture, will pay interest on the Notes (except defaulted interest) and
Liquidated Damages to the Persons who are registered Holders of Notes at the
close of business on the January 1 or July 1 next preceding the Interest Payment
Date, even if such Notes are canceled after such record date and on or before
such Interest Payment Date, except as provided in Section 2.12 of the Indenture
(as herein defined) with respect to defaulted interest. The Notes will be
payable as to principal, premium and Liquidated Damages, if any, and interest at
the office or agency of the Company maintained for such purpose within or
without the City and State of New York, or, at the option of the Company,
payment of interest and Liquidated Damages may be made by check mailed to the
Holders at their addresses set forth in the register of Holders, and provided
that payment by wire transfer of immediately available funds will be required
with respect to principal of and interest, premium and Liquidated Damages on,
all Global Notes and all other Notes the Holders of which shall have provided
wire transfer instructions to the Company or the Paying Agent. Such payment
shall be in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts.
3. Paying Agent and Registrar. Initially, IBJ Schroder Bank &
Trust Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. Indenture. The Company issued the Notes under an Indenture, dated
as of December 21, 1998 (the "Indenture"), among the Company, the Guarantors and
the Trustee. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to
A-2-3
the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb).
The Notes are subject to all such terms, and Holders are referred to the
Indenture and such Act for a statement of such terms. The Notes are obligations
of the Company limited to $400.0 million in aggregate principal amount.
5. Optional Redemption.
(a) Except as set forth in subparagraphs (b) and (c) of this
Paragraph 5, the Notes will not be redeemable at the Company's option prior to
January 15, 2004. Thereafter, the Notes will be subject to redemption at any
time at the option of the Company, in whole or in part, upon not less than 30
nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on January 15 of the years
indicated below:
YEAR PERCENTAGE
---- ----------
2004....................................105.1875%
2005....................................103.4583%
2006....................................101.7292%
2007 and thereafter.....................100.0000%
(b) Notwithstanding the provisions of subparagraph (a) of this
Paragraph 5, before January 15, 2002, the Company may on any one or more
occasions redeem up to 35% of the aggregate principal amount of Notes originally
issued under the Senior Subordinated Note Indenture at a redemption price of
110.375% of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the redemption date, with the net cash
proceeds of any Equity Offerings; provided that at least 65% of the aggregate
principal amount of Notes issued under the Indenture remains outstanding
immediately after the occurrence of such redemption (excluding Notes held by the
Company and its Subsidiaries); and provided further that such redemption shall
occur within 120 days of the date of the closing of any such Equity Offering.
(c) Before January 15, 2004, the Notes may also be redeemed, as a
whole but not in part, at the option of the Company upon the occurrence of a
Change of Control, upon not less than 30 nor more than 60 days prior notice (but
in no event may any such redemption occur more than 90 days after the occurrence
of such Change of Control) mailed by first-class mail to each Holder's
registered address, at a redemption price equal to 100% of the principal amount
thereof plus the Applicable Premium as of, and accrued and unpaid interest and
Liquidated Damages thereon, if any, to, the date of redemption (the "Redemption
Date").
6. Mandatory Redemption. Except as set forth in paragraph 7 below,
the Company shall not be required to make mandatory redemption or sinking fund
payments with respect to the Notes.
7. Repurchase at Option of Holder.
(a) If there is a Change of Control, the Company shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of purchase
A-2-4
(the "Change of Control Payment"). Within 10 days following any Change of
Control, the Company shall mail a notice to each Holder setting forth the
procedures governing the Change of Control Offer as required by the Indenture.
(b) When the aggregate amount of Excess Proceeds exceeds $10.0
million, the Company will make an Asset Sale Offer to all Holders of Notes and
all holders of other Indebtedness that is pari passu with the Notes containing
provisions similar to those set forth in this Indenture with respect to offers
to purchase or redeem with the proceeds of sales of assets to purchase the
maximum principal amount of Notes and such other pari passu Indebtedness that
may be purchased out of the Excess Proceeds. The offer price in any Asset Sale
Offer will be equal to 100% of the principal amount plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of purchase, and will be
payable in cash. If any Excess Proceeds remain after consummation of an Asset
Sale Offer, the Company may use such Excess Proceeds for any purpose not
otherwise prohibited by this Indenture. If the aggregate principal amount of
Notes and such other pari passu Indebtedness tendered into such Asset Sale Offer
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and
such other pari passu Indebtedness to be purchased on a pro rata basis. Holders
of Notes that are the subject of an offer to purchase will receive an Asset Sale
Offer from the Company prior to any related purchase date and may elect to have
such Notes purchased by completing the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Notes.
8. Notice of Redemption. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
9. Denominations, Transfer, Exchange. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, it need not
exchange or register the transfer of any Notes for a period of 15 days before a
selection of Notes to be redeemed or during the period between a record date and
the corresponding Interest Payment Date.
This Regulation S Temporary Global Note is exchangeable in whole or in
part for one or more Global Notes only (i) on or after the termination of the
40-day restricted period (as defined in Regulation S) and (ii) upon presentation
of certificates (accompanied by an Opinion of Counsel, if applicable) required
by Article 2 of the Indenture. Upon exchange of this Regulation S Temporary
Global Note for one or more Global Notes, the Trustee shall cancel this
Regulation S Temporary Global Note.
10. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes.
11. Amendment, Supplement and Waiver. Subject to certain exceptions,
the Indenture or the Subsidiary may be amended or supplemented with the consent
of the Holders of at least a majority in principal amount of the then
outstanding Notes, and any existing default or compliance
A-2-5
with any provision of the Indenture or the Notes may be waived with the consent
of the Holders of a majority in principal amount of the then outstanding Notes.
Without the consent of any Holder of a Note, the Indenture or the Notes may be
amended or supplemented to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's obligations to Holders of
the Notes in case of a merger or consolidation, to make any change that would
provide any additional rights or benefits to the Holders of the Notes or that
does not adversely affect the legal rights under the Indenture of any such
Holder, or to comply with the requirements of the Commission in order to effect
or maintain the qualification of the Indenture under the Trust Indenture Act.
12. Defaults and Remedies. Events of Default include: (i) default for
30 days in the payment when due of interest, on or Liquidated Damages with
respect to, the Notes whether or not prohibited by Article 10 of the Indenture;
(ii) the default in payment when due of the principal of or premium, if any, on
the Notes, whether or nor prohibited by Article 10 of the Indenture; (iii)
failure by the Company or any of its Restricted Subsidiaries for 30 days after
specified notice from the Trustee or the Holders of at least 25% of the
outstanding principal amount of the Notes to comply with any of the other
agreements in the Indenture or the Notes; (iv) default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any
of its Restricted Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Restricted Subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the date of the Indenture, if that
default: (A) is caused by a failure to pay principal at the final stated
maturity of such Indebtedness (a "Payment Default"); or (B) results in the
acceleration of such Indebtedness prior to its express maturity, and, in each
case, the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $15.0
million or more; (v) failure by the Company or any of its Restricted
Subsidiaries to pay final judgments aggregating in excess of $15.0 million,
which judgments are not paid, discharged or stayed for a period of 60
consecutive days after such judgments become final and non-appealable; and (vi)
certain events of bankruptcy or insolvency with respect to the Company or any of
its Significant Restricted Subsidiaries. If any Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding Notes will become
due and payable without further action or notice. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes. The Company is required
to deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Company is required upon becoming aware of any Default or
Event of Default, to deliver to the Trustee a statement specifying such Default
or Event of Default.
13. Subordination. Each Holder by accepting a Note agrees that the
Indebtedness evidenced by the Note is subordinated in right of payment, to the
extent and in the manner provided in Article 10 of the Indenture, prior to the
payment in full in cash or Cash Equivalents of all Senior Debt
A-2-6
(whether outstanding on the date of the Indenture or thereafter created,
incurred assumed or guaranteed), and that the subordination is for the benefit
of the holders of Senior Debt.
14. Subsidiary Guarantees. The payment of principal of, premium, and
interest and Liquidated Damages, if any, on the Notes are unconditionally
guaranteed, jointly and severally, on a senior subordinated basis by the
Guarantors.
15. Trustee Dealings with Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
16. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder, of the Company or any of the Guarantors, as such,
shall not have any liability for any obligations of the Company or such
Guarantor under the Notes, the Subsidiary Guarantees or the Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
17. Authentication. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
18. Abbreviations. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
19. Additional Rights of Holders of Restricted Global Notes and
Restricted Definitive Notes. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the A/B Exchange
Registration Rights Agreement, dated as of December 21, 1998, between the
Company and the parties named on the signature pages thereof or, in the case of
Additional Notes, Holders of Restricted Global Notes and Restricted Definitive
Notes shall have the rights set forth in one or more registration rights
agreements, if any, between the Company and the other parties thereto, relating
to rights given by the Company to the purchasers of any Additional Notes
(collectively, the "Registration Rights Agreement").
20. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
A-2-7
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
Domino's, Inc.
30 Frank Lloyd Wright Drive
P.O. Box 997
Ann Arbor, Michigan 48106-0997
Telecopier No.: (734) 913-0377
Attention: Chief Financial Officer
A-2-8
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
________________________________________________________________________________
Date: _________
Your Signature:___________________________
(Sign exactly as your name appears on the
face of this Note)
Tax Identification No:____________________
SIGNATURE GUARANTEE:
____________________________
Signatures must be guaranteed by an
"eligible guarantor institution" meeting
the requirements of the Registrar, which
requirements include membership or
participation in the Security Transfer
Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may
be determined by the Registrar in addition
to, or in substitution for, STAMP, all in
accordance with the Securities Exchange
Act of 1934, as amended.
A-2-9
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate box
below:
[_] Section 4.10 [_] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $___________
________________________________________________________________________________
Date: ___________
Your Signature:___________________________
(Sign exactly as your name appears on the
face of this Note)
Tax Identification No:____________________
SIGNATURE GUARANTEE:
__________________________
Signatures must be guaranteed by an
"eligible guarantor institution" meeting
the requirements of the Registrar, which
requirements include membership or
participation in the Security Transfer
Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may
be determined by the Registrar in addition
to, or in substitution for, STAMP, all in
accordance with the Securities Exchange
Act of 1934, as amended.
A-2-10
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S Temporary
Global Note for an interest in another Global Note, or of other Restricted
Global Notes for an interest in this Regulation S Temporary Global Note, have
been made:
Principal Amount
Amount of Amount of increase of this Global Note Signature of
decrease in in Principal following such authorized officer
Principal Amount Amount of this decrease (or of Trustee or Note
Date of Exchange of this Global Note Global Note increase) Custodian
- ---------------- ------------------- ------------------ ------------------- ------------------
A-2-11
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Domino's, Inc.
30 Frank Lloyd Wright Drive
P.O. Box 997
Ann Arbor, Michigan 48106-0997
Telecopier No.: (734) 913-0377
Attention: Chief Financial Officer
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention: Corporate Trust Administration
Re: 10 3/8% Senior Subordinated Notes due 2009
------------------------------------------
Reference is hereby made to the Indenture, dated as of
December 21, 1998 (the "Indenture"), among Domino's, Inc., as issuer (the
"Company"), the guarantors party thereto and IBJ Schroder Bank & Trust Company,
as trustee. Capitalized terms used but not defined herein shall have the
meanings given to them in the Indenture.
______________, (the "Transferor") owns and proposes to
transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in
the principal amount of $___________ in such Note[s] or interests (the
"Transfer"), to __________ (the "Transferee"), as further specified in Annex A
hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [_] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
----------------------------------------------------------------------
144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is
- -----------------------------------------------------------
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. [_] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
----------------------------------------------------------------------
TEMPORARY REGULATION S GLOBAL NOTE, THE REGULATION S GLOBAL NOTE OR A DEFINITIVE
- --------------------------------------------------------------------------------
NOTE PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in
- -----------------------------
accordance with Rule 903 or Rule 904
B-1
under the Securities Act and, accordingly, the Transferor hereby further
certifies that (i) the Transfer is not being made to a person in the United
States and (x) at the time the buy order was originated, the Transferee was
outside the United States or such Transferor and any Person acting on its behalf
reasonably believed and believes that the Transferee was outside the United
States or (y) the transaction was executed in, on or through the facilities of a
designated offshore securities market and neither such Transferor nor any Person
acting on its behalf knows that the transaction was prearranged with a buyer in
the United States, (ii) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S
under the Securities Act, (iii) the transaction is not part of a plan or scheme
to evade the registration requirements of the Securities Act and (iv) if the
proposed transfer is being made prior to the expiration of the Restricted
Period, the transfer is not being made to a U.S. Person or for the account or
benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of
the proposed transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be subject to the
restrictions on Transfer enumerated in the Private Placement Legend printed on
the Regulation S Global Note, the Temporary Regulation S Global Note and/or the
Definitive Note and in the Indenture and the Securities Act.
3. [_] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
-------------------------------------------------------------------
INTEREST IN THE IAI GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION
- ------------------------------------------------------------------------------
OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is
- ----------------------------------------------------------
being effected in compliance with the transfer restrictions applicable to
beneficial interests in Restricted Global Notes and Restricted Definitive Notes
and pursuant to and in accordance with the Securities Act and any applicable
blue sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) [_] such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
(b) [_] such Transfer is being effected to the Company or a
subsidiary thereof;
or
(c) [_] such Transfer is being effected pursuant to an
effective registration statement under the Securities Act and in compliance with
the prospectus delivery requirements of the Securities Act;
or
(d) [_] such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904,
and the Transferor hereby further certifies that it has not engaged in any
general solicitation within the meaning of Regulation D under the Securities Act
and the Transfer complies with the transfer restrictions applicable to
beneficial interests in a Restricted Global Note or Restricted Definitive Notes
and the requirements of the exemption claimed, which certification is supported
by (1) a certificate executed by the Transferee in the form of Exhibit D to the
Indenture and (2) if such Transfer is in respect of a principal amount of Notes
at the time of transfer of less than $250,000, an Opinion of Counsel provided by
the Transferor or the Transferee (a copy of which the Transferor has attached to
this certification), to the effect that such Transfer is in compliance with the
Securities Act. Upon
B-2
consummation of the proposed transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the IAI Global Note and/or the Definitive Notes and in the
Indenture and the Securities Act.
4. [_] Check if Transferee will take delivery of a beneficial interest in an
Unrestricted Global Note or of an Unrestricted Definitive Note.
(a) [_] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The
Transfer is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(b) [_] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of any
state of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(c) [_] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i)
The Transfer is being effected pursuant to and in compliance with an exemption
from the registration requirements of the Securities Act other than Rule 144,
Rule 903 or Rule 904 and in compliance with the transfer restrictions contained
in the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company.
__________________________________
[Insert Name of Transferor]
By:_______________________________
Name:
Title:
Dated:______,______
B-3
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [_] a beneficial interest in the:
(i) [_] 144A Global Note (CUSIP ______), or
(ii) [_] Regulation S Global Note (CUSIP ______), or
(iii) [_] IAI Global Note (CUSIP ______); or
(b) [_] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [_] a beneficial interest in the:
(i) [_] 144A Global Note (CUSIP ______), or
(ii) [_] Regulation S Global Note (CUSIP ______), or
(iii) [_] IAI Global Note (CUSIP ______); or
(iv) [_] Unrestricted Global Note (CUSIP ______); or
(b) [_] a Restricted Definitive Note; or
(c) [_] an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-4
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Domino's, Inc.
30 Frank Lloyd Wright Drive
P.O. Box 997
Ann Arbor, Michigan 48106-0997
Telecopier No.: (734) 913-0377
Attention: Chief Financial Officer
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention: Corporate Trust Department
Re: 10 3/8% Senior Subordinated Notes due 2009
------------------------------------------
(CUSIP ______________)
Reference is hereby made to the Indenture, dated as of December
21, 1998 (the "Indenture"), among Domino's, Inc., as issuer (the "Company"), the
guarantors party thereto and IBJ Schroder Bank & Trust Company, as trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
____________, (the "Owner") owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN AN UNRESTRICTED GLOBAL NOTE
(a) [_] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
--------------------------------------------------
RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In
- ----------------------------------------------------------------------------
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Note for a beneficial interest in an Unrestricted Global Note in an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to the
Global Notes and pursuant to and in accordance with the United States Securities
Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
beneficial interest in an Unrestricted Global Note is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
(b) [_] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
--------------------------------------------------
RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the
- ------------------------------------------------------
Exchange of the Owner's beneficial interest in a Restricted Global Note for an
Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes
C-1
and pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the Securities Act
and (iv) the Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
(c) [_] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
-------------------------------------------------------
BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
- --------------------------------------------------
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) [_] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
-------------------------------------------------------
UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
- ----------------------------
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN RESTRICTED GLOBAL NOTES
(a) [_] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
--------------------------------------------------
RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the
- ----------------------------------------------------
Exchange of the Owner's beneficial interest in a Restricted Global Note for a
Restricted Definitive Note with an equal principal amount, the Owner hereby
certifies that the Restricted Definitive Note is being acquired for the Owner's
own account without transfer. Upon consummation of the proposed Exchange in
accordance with the terms of the Indenture, the Restricted Definitive Note
issued will continue to be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the Restricted Definitive Note and in
the Indenture and the Securities Act.
(b) [_] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
-------------------------------------------------------
BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange
- -----------------------------------------------
of the Owner's Restricted Definitive Note for a beneficial interest in the
[CHECK ONE] [_] 144A Global Note, [_] Regulation S Global Note, [_] IAI Global
Note with an equal principal amount, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer and (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Notes and pursuant to
and in accordance with the Securities Act, and in compliance with any applicable
blue sky securities laws of any state of the United States. Upon consummation of
the proposed Exchange in accordance with the terms of the Indenture, the
beneficial interest issued will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the relevant Restricted
Global Note and in the Indenture and the Securities Act.
C-2
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company.
______________________________
[Insert Name of Owner]
By:___________________________
Name:
Title:
Dated: __________, ____
C-3
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Domino's, Inc.
30 Frank Lloyd Wright Drive
P.O. Box 997
Ann Arbor, Michigan 48106-0997
Telecopier No.: (734) 913-0377
Attention: Chief Financial Officer
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention: Corporate Trust Administration
Re: 10 3/8% Senior Subordinated Notes due 2009
------------------------------------------
Reference is hereby made to the Indenture, dated as of December
21, 1998 (the "Indenture"), among Domino's, Inc., as issuer (the "Company"), the
guarantors party thereto and IBJ Schroder Bank & Trust Company, as trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
In connection with our proposed purchase of $____________
aggregate principal amount of:
(a) [_] a beneficial interest in a Global Note, or
(b) [_] a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or
any interest therein is subject to certain restrictions and conditions set forth
in the Indenture and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not
been registered under the Securities Act, and that the Notes and any interest
therein may not be offered or sold except as permitted in the following
sentence. We agree, on our own behalf and on behalf of any accounts for which we
are acting as hereinafter stated, that if we should sell the Notes or any
interest therein, we will do so only (A) to the Company or any subsidiary
thereof, (B) in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined therein), (c) to an institutional
"accredited investor" (as defined below) that, prior to such transfer, furnishes
(or has furnished on its behalf by a U.S. broker-dealer) to you and to the
Company a signed letter substantially in the form of this letter and,
D-1
if such transfer is in respect of a principal amount of Notes, at the time of
transfer of less than $250,000, an Opinion of Counsel in form reasonably
acceptable to the Company to the effect that such transfer is in compliance with
the Securities Act, (D) outside the United States in accordance with Rule 904 of
Regulation S under the Securities Act, (E) pursuant to the provisions of Rule
144(k) under the Securities Act or (F) pursuant to an effective registration
statement under the Securities Act, and we further agree to provide to any
person purchasing the Definitive Note or beneficial interest in a Global Note
from us in a transaction meeting the requirements of clauses (A) through (E) of
this paragraph a notice advising such purchaser that resales thereof are
restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or
beneficial interest therein, we will be required to furnish to you and the
Company such certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Notes purchased by us
will bear a legend to the foregoing effect. We further understand that any
subsequent transfer by us of the Notes or beneficial interest therein acquired
by us must be effected through one of the Placement Agents.
4. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Notes, and
we and any accounts for which we are acting are each able to bear the economic
risk of our or its investment.
5. We are acquiring the Notes or beneficial interest therein
purchased by us for our own account or for one or more accounts (each of which
is an institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
______________________________________
[Insert Name of Accredited Investor]
By: _______________________________
Name:
Title:
Dated: __________________, ____
D-2
EXHIBIT E
FORM OF NOTATION OF SUBSIDIARY GUARANTEE
For value received, each Guarantor (which term includes any
successor Person under the Indenture) has, jointly and severally,
unconditionally guaranteed, to the extent set forth in the Indenture and subject
to the provisions in the Indenture, dated as of December 21, 1998 (the
"Indenture"), among Domino's, Inc., the Guarantors party thereto and IBJ
Schroder Bank & Trust Company, as trustee (the "Trustee"), (a) the due and
punctual payment of the principal of, premium, if any, and interest on the Notes
(as defined in the Indenture), whether at maturity, by acceleration, redemption
or otherwise, the due and punctual payment of interest on overdue principal and
premium, and, to the extent permitted by law, interest, and the due and punctual
performance of all other obligations of the Company to the Holders or the
Trustee all in accordance with the terms of the Indenture and (b) in case of any
extension of time of payment or renewal of any Notes or any of such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. The obligations of the Guarantors to the
Holders of Notes and to the Trustee pursuant to the Subsidiary Guarantee and the
Indenture are expressly set forth in Article 11 of the Indenture and reference
is hereby made to the Indenture for the precise terms of the Subsidiary
Guarantee. The obligations of the Guarantors will be released only in accordance
with the provisions of Article 11 of the Indenture. Each Holder of a Note, by
accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee, on behalf of such Holder, to take such
action as may be necessary or appropriate to effectuate the subordination as
provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such
Holder for such purpose; provided, however, that the Indebtedness evidenced by
this Subsidiary Guarantee shall cease to be so subordinated and subject in right
of payment upon any defeasance of this Note in accordance with the provisions of
the Indenture.
[Name of Guarantor(s)]
By: ________________________________
Name:
Title:
E-1
EXHIBIT F
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
Supplemental Indenture (this "Supplemental Indenture"), dated
as of ________________, among __________________ (the "Guaranteeing
Subsidiary"), a subsidiary of Domino's, Inc. (or its permitted successor), a
Delaware corporation (the "Company"), the Company, the other Guarantors (as
defined in the Indenture referred to herein) and IBJ Schroder Bank & Trust
Company, as trustee under the indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to
the Trustee an indenture (the "Indenture"), dated as of December 21, 1998,
providing for the issuance of an aggregate principal amount of up to $400.0
million of 10 3/8% Senior Subordinated Notes due 2009 (the "Notes");
WHEREAS, the Indenture provides that under certain
circumstances the Guaranteeing Subsidiary shall execute and deliver to the
Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary
shall unconditionally guarantee all of the Company's Obligations under the Notes
and the Indenture on the terms and conditions set forth herein (the "Subsidiary
Guarantee"); and
WHEREAS, pursuant to Section 9.06 of the Indenture, the
Trustee is authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. The Guaranteeing Subsidiary
hereby agrees as follows:
(a) Along with all Guarantors named in the Indenture, to
jointly and severally Guarantee to each Holder of a Note
authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, irrespective of
the validity and enforceability of the Indenture, the
Notes or the obligations of the Company hereunder or
thereunder, that:
(i) the principal of and interest on the Notes will be
promptly paid in full when due, whether at
maturity, by acceleration, redemption or otherwise,
and interest on the overdue principal of and
interest on the Notes, if any, if lawful, and all
other obligations of the Company to the Holders or
the Trustee hereunder or thereunder will be
promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and
F-1
(ii) in case of any extension of time of payment or
renewal of any Notes or any of such other
obligations, that same will be promptly paid in
full when due or performed in accordance with the
terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise.
Failing payment when due of any amount so
guaranteed or any performance so guaranteed for
whatever reason, the Guarantors shall be jointly
and severally obligated to pay the same
immediately.
(b) The obligations hereunder shall be unconditional,
irrespective of the validity, regularity or
enforceability of the Notes or the Indenture, the absence
of any action to enforce the same, any waiver or consent
by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against
the Company, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or
equitable discharge or defense of a guarantor.
(c) The following is hereby waived: diligence presentment,
demand of payment, filing of claims with a court in the
event of insolvency or bankruptcy of the Company, any
right to require a proceeding first against the Company,
protest, notice and all demands whatsoever.
(d) This Subsidiary Guarantee shall not be discharged except
by complete performance of the obligations contained in
the Notes and the Indenture.
(e) If any Holder or the Trustee is required by any court or
otherwise to return to the Company, the Guarantors, or
any Custodian, trustee, liquidator or other similar
official acting in relation to either the Company or the
Guarantors, any amount paid by either to the Trustee or
such Holder, this Subsidiary Guarantee, to the extent
theretofore discharged, shall be reinstated in full force
and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to any
right of subrogation in relation to the Holders in
respect of any obligations guaranteed hereby until
payment in full of all obligations guaranteed hereby.
(g) As between the Guarantors, on the one hand, and the
Holders and the Trustee, on the other hand, (x) the
maturity of the obligations guaranteed hereby may be
accelerated as provided in Article 6 of the Indenture for
the purposes of this Subsidiary Guarantee,
notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the
obligations guaranteed hereby, and (y) in the event of
any declaration of acceleration of such obligations as
provided in Article 6 of the Indenture, such obligations
(whether or not due and payable) shall forthwith become
due and payable by the Guarantors for the purpose of this
Subsidiary Guarantee.
(h) The Guarantors shall have the right to seek contribution
from any non-paying Guarantor so long as the exercise of
such right does not impair the rights of the Holders
under the Guarantee.
F-2
(i) Pursuant to Section 11.03 of the Indenture, after giving
effect to any maximum amount and any other contingent and
fixed liabilities that are relevant under any applicable
Bankruptcy or fraudulent conveyance laws, and after
giving effect to any collections from, rights to receive
contribution from or payments made by or on behalf of any
other Guarantor in respect of the obligations of such
other Guarantor under Article 11 of the Indenture shall
result in the obligations of such Guarantor under its
Subsidiary Guarantee not constituting a fraudulent
transfer or conveyance.
3 Execution And Delivery. Each Guaranteeing Subsidiary
agrees that the Subsidiary Guarantees shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Subsidiary Guarantee.
4. Guaranteeing Subsidiary May Consolidate, Etc. on Certain
Terms.
(a) A Guaranteeing Subsidiary may not sell or otherwise dispose of
all or substantially all of its assets, or consolidate with or
merge with or into (whether or not such Guaranteeing
Subsidiary is the surviving Person) another Person unless:
(i) immediately after giving effect to such transaction, no
Default or Event of Default exists; and
(ii) either:
(A) the Person acquiring the property in any such sale
or disposition or the Person formed by or surviving
any such consolidation or merger assumes all the
obligations of such Guaranteeing Subsidiary,
pursuant to a supplemental indenture satisfactory
to the Trustee; or
(B) the Net Proceeds of such sale or other disposition
are applied in accordance with the applicable
provisions of the Indenture.
(b) In case of any such consolidation, merger, sale or conveyance
and upon the assumption by the successor Person, by
supplemental indenture, executed and delivered to the Trustee
and satisfactory in form to the Trustee, of the Subsidiary
Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of the
Indenture to be performed by the Guarantor, such successor
corporation shall succeed to and be substituted for the
Guarantor with the same effect as if it had been named herein
as a Guarantor. Such successor corporation thereupon may cause
to be signed any or all of the Subsidiary Guarantees to be
endorsed upon all of the Notes issuable hereunder which
theretofore shall not have been signed by the Company and
delivered to the Trustee. All the Subsidiary Guarantees so
issued shall in all respects have the same legal rank and
benefit under the Indenture as the Subsidiary Guarantees
theretofore and thereafter issued in accordance with the terms
of the Indenture as though all of such Subsidiary Guarantees
had been issued at the date of the execution hereof.
(c) Except as set forth in Articles 4 and 5 of the Indenture, and
notwithstanding clauses (a) and (b) above, nothing contained
in the Indenture or in any of the Notes shall prevent any
consolidation or merger of a Guarantor with or into the
Company or another
F-3
Guarantor, or shall prevent any sale or conveyance of the
property of a Guarantor as an entirety or substantially as an
entirety to the Company or another Guarantor.
5. Releases.
(a) The Subsidiary Guarantee of a Guarantor will be released (i)
in connection with any sale or other disposition of all or
substantially all of the assets of that Guarantor (including
by way of merger or consolidation), if the disposition is to
the Company or another Guarantor or if the Company applies the
Net Proceeds of that sale or other disposition in accordance
with the applicable provisions of the Indenture, including
without limitation Section 4.10 thereof; (ii) in connection
with any sale of all of the capital stock of a Guarantor, if
the Company applies the Net Proceeds of that sale in
accordance with the applicable provisions of the Indenture,
including without limitation Section 4.10 thereof; (iii) if
the Company designates any Restricted Subsidiary that is a
Guarantor as an Unrestricted Subsidiary; or (iv) upon the
release or discharge of all guarantees of such Guarantor, and
all pledges of property or assets of such Guarantor securing,
all other Indebtedness of the Company and the other
Guarantors. Upon delivery by the Company to the Trustee of an
Officers' Certificate and an Opinion of Counsel to the effect
that such sale or other disposition was made by the Company in
accordance with the provisions of the Indenture, including
without limitation Section 4.10 of the Indenture, the Trustee
shall execute any documents reasonably required in order to
evidence the release of any Guarantor from its obligations
under its Subsidiary Guarantee.
(b) Any Guarantor not released from its obligations under its
Subsidiary Guarantee shall remain liable for the full amount
of principal of and interest on the Notes and for the other
obligations of any Guarantor under the Indenture as provided
in Article 11 of the Indenture.
6. No Recourse Against Others. No past, present or future
director, officer, employee, incorporator, stockholder or agent of the
Guaranteeing Subsidiary, as such, shall have any liability for any obligations
of the Company or any Guaranteeing Subsidiary under the Notes, any Subsidiary
Guarantees, the Indenture or this Supplemental Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder of the Notes by accepting a Note waives and releases all such liability.
The waiver and release are part of the consideration for issuance of the Notes.
Such waiver may not be effective to waive liabilities under the federal
securities laws and it is the view of the Commission that such a waiver is
against public policy.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF
NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT
THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.
8. Counterparts. The parties may sign any number of copies of
this Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
9. Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.
F-4
10 The Trustee. The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or for or in respect of the recitals contained herein,
all of which recitals are made solely by the Guaranteeing Subsidiary and the
Company.
F-5
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed and attested, all as of the date
first above written.
Dated: _______________, ____
[GUARANTEEING SUBSIDIARY]
By:____________________________
Name:
Title:
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By:____________________________
Name:
Title:
F-1
Exhibit 4.2
EXECUTION COPY
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of December 21, 1998
by and among
DOMINO'S, INC.,
The Guarantors Signatories Hereto
and
J.P. MORGAN SECURITIES, INC.
and
GOLDMAN, SACHS & CO.
================================================================================
This Registration Rights Agreement (this "Agreement") is made and entered
into as of December 21, 1998, by and among Domino's, Inc., a Delaware
corporation (the "Company"), the subsidiaries of the Company listed on the
signature pages hereof (the "Guarantors") and J.P. Morgan Securities Inc. and
Goldman, Sachs & Co. (each an "Initial Purchaser" and, collectively, the
"Initial Purchasers"), each of whom has agreed to purchase the Company's 10 3/8%
Senior Subordinated Notes due 2009 (the "Series A Notes") pursuant to the
Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated December
10, 1998, as amended and restated December 21, 1998 (the "Purchase Agreement"),
by and among the Company, the Guarantors and the Initial Purchasers. In order
to induce the Initial Purchasers to purchase the Series A Notes, the Company and
the Guarantors have agreed to provide the registration rights set forth in this
Agreement. The execution and delivery of this Agreement is a condition to the
obligations of the Initial Purchasers set forth in Section 6 of the Purchase
Agreement. Capitalized terms used herein and not otherwise defined shall have
the meaning assigned to them in the Indenture, dated December 21, 1998, by and
among the Company, the Guarantors and IBJ Schroder Bank & Trust Company, as
Trustee (the "Trustee"), relating to the Series A Notes and the Series B Notes
(the "Indenture").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
Affiliate: As defined in Rule 144 of the Act.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Business Day: Any day except a Saturday, Sunday or other day in the City of
New York on which banks are authorized or ordered to close.
Closing Date: The date hereof.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for purposes of
this Agreement upon the occurrence of (a) the filing and effectiveness under the
Act of the Exchange Offer Registration Statement relating to the Series B Notes
to be issued in the Exchange Offer, (b) the maintenance of such Exchange Offer
Registration Statement continuously effective and the keeping of the Exchange
Offer open for a period not less than the minimum period required pursuant to
Section 3(b) hereof and (c) the delivery by the Company to the Registrar under
the Indenture of Series B Notes in the same aggregate principal amount as the
aggregate principal amount of Series A Notes tendered by Holders thereof
pursuant to the Exchange Offer.
Effectiveness Deadline: As defined in Section 3(a) and 4(a) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The exchange and issuance by the Company of a principal
amount of Series B Notes (which shall be registered pursuant to the Exchange
Offer Registration Statement) equal to the
outstanding principal amount of Series A Notes that are tendered by such Holders
in connection with such exchange and issuance.
Exchange Offer Registration Statement: The Registration Statement relating
to the Exchange Offer, including the related Prospectus.
Filing Deadline: As defined in Sections 3(a) and 4(a) hereof.
Guarantors: The Guarantors defined in the preamble hereto and any Person
which becomes a guarantor of Notes after the date hereof pursuant to the terms
of the Indenture.
Holders: As defined in Section 2 hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indemnified Party: As defined in Section 8(c) hereof.
Indemnifying Party: As defined in Section 8(c) hereof.
Liquidated Damages: As defined in Section 5 hereof.
Notes: Series A Notes and Series B Notes (including guarantees thereof by
the Guarantors).
Person: An individual, partnership, limited liability company, corporation,
trust, unincorporated organization, or a government or agency or political
subdivision thereof.
Prospectus: The prospectus included in a Registration Statement at the time
such Registration Statement is declared effective, as amended or supplemented by
any prospectus supplement and by all other amendments thereto, including post-
effective amendments, and all material incorporated by reference into such
Prospectus.
Recommencement Date: As defined in Section 6(d) hereof.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company and the
Guarantors relating to (a) an offering of any Series B Notes (including
guarantees thereof by the Guarantors) pursuant to an Exchange Offer or (b) the
registration for resale of Transfer Restricted Securities pursuant to the Shelf
Registration Statement, in each case, (i) that is filed pursuant to the
provisions of this Agreement and (ii) including the Prospectus included therein,
all amendments and supplements thereto (including post-effective amendments) and
all exhibits and material incorporated by reference therein.
Regulation S: Regulation S promulgated under the Act.
Rule 144: Rule 144 promulgated under the Act.
Series B Notes: The Company's 10 3/8% Series B Senior Notes due 2009 to be
issued pursuant to the Indenture: (i) in the Exchange Offer or (ii) as
contemplated by Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
2
Suspension Notice: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in
effect on the date of the Indenture.
Transfer Restricted Securities: Each Note, until the earliest to occur of
(a) the date on which such Note is exchanged in an Exchange Offer and entitled
to be resold to the public by the Holder thereof without complying with the
prospectus delivery requirements of the Act, (b) the date on which such Note has
been disposed of in accordance with a Shelf Registration Statement, and (c) the
date on which such Note is disposed of by a Broker-Dealer pursuant to the "Plan
of Distribution" contemplated by an Exchange Offer Registration Statement
(including the delivery of the Prospectus contained therein) or (d) the date
which such Note is distributed to the public pursuant to Rule 144 under the
Securities Act.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities (each, a
"Holder") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable federal
law or policy of the Commission (after the procedures set forth in Section
6(a)(i) below have been complied with), the Company and the Guarantors shall (i)
cause the Exchange Offer Registration Statement to be filed with the Commission
as soon as practicable after the Closing Date, but in no event later than 90
days after the Closing Date (such 90th day being the "Filing Deadline"), (ii)
use their respective best efforts to cause such Exchange Offer Registration
Statement to become effective at the earliest possible time, but in no event
later than 150 days after the Closing Date (such 150th day being the
"Effectiveness Deadline"), (iii) in connection with the foregoing, (A) file all
pre-effective amendments to such Exchange Offer Registration Statement as may be
necessary in order to cause it to become effective, (B) file, if applicable, a
post-effective amendment to such Exchange Offer Registration Statement pursuant
to Rule 430A under the Act and (C) cause all necessary filings, if any, in
connection with the registration and qualification of the Series B Notes to be
made under the Blue Sky laws of such jurisdictions as are necessary to permit
Consummation of the Exchange Offer, and (iv) upon the effectiveness of such
Exchange Offer Registration Statement, use their respective best efforts to
commence and Consummate the Exchange Offer. The Exchange Offer shall be on the
appropriate form permitting registration of the Series B Notes to be offered in
exchange for the Series A Notes that are Transfer Restricted Securities and to
permit resales of Series B Notes by Broker-Dealers that tendered into the
Exchange Offer for Series A Notes that such Broker-Dealer acquired for its own
account as a result of market making activities or other trading activities
(other than Series A Notes acquired directly from the Company or any of its
Affiliates) as contemplated by Section 3(c) below.
(b) The Company and the Guarantors shall use their respective best efforts
to cause the Exchange Offer Registration Statement to be effective continuously,
and shall keep the Exchange Offer open for a period of not less than the minimum
period required under applicable federal and state securities laws to Consummate
the Exchange Offer; provided, however, that in no event shall such period be
less than 20 Business Days. The Company and the Guarantors shall cause the
Exchange Offer to comply with all applicable federal and state securities laws.
No securities other than the Series B Notes and the guarantees thereof shall be
included in the Exchange Offer Registration Statement. The Company and the
Guarantors shall use their respective best efforts to cause the Exchange Offer
to be Consummated on the earliest
3
practicable date after the Exchange Offer Registration Statement has become
effective, but in no event later than 30 Business Days thereafter.
(c) The Company and the Guarantors shall include a "Plan of Distribution"
section in the Prospectus contained in the Exchange Offer Registration Statement
and indicate therein that any Broker-Dealer who holds Transfer Restricted
Securities that were acquired for the account of such Broker-Dealer as a result
of market-making activities or other trading activities (other than Transfer
Restricted Securities acquired directly from the Company or any Affiliate of the
Company), may exchange such Transfer Restricted Securities pursuant to the
Exchange Offer; however, such Broker-Dealer may be deemed to be an "underwriter"
within the meaning of the Act and must, therefore, deliver a prospectus meeting
the requirements of the Act in connection with its initial sale of any Exchange
Notes received by such Broker-Dealer in the Exchange Offer and that the
Prospectus contained in the Exchange Offer Registration Statement may be used to
satisfy such prospectus delivery requirement. Such "Plan of Distribution"
section shall also contain all other information with respect to such sales by
such Broker-Dealers that the Commission may require in order to permit such
sales pursuant thereto, but such "Plan of Distribution" shall not name any such
Broker-Dealer or disclose the amount of Transfer Restricted Securities held by
any such Broker-Dealer, except to the extent required by the Commission as a
result of a change in policy, rules or regulations after the date of this
Agreement.
To the extent necessary to ensure that the Exchange Offer Registration
Statement is available for sales of Series B Notes by Broker-Dealers, the
Company and the Guarantors agree to use their respective best efforts to keep
the Exchange Offer Registration Statement continuously effective, supplemented
and amended as required by the provisions of Section 6(c) hereof and in
conformity with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of 180 days from the date on which the Exchange Offer is Consummated, or
such shorter period as will terminate when all Transfer Restricted Securities
covered by such Registration Statement have been sold pursuant thereto. The
Company and the Guarantors shall promptly provide sufficient copies of the
latest version of such Prospectus to such Broker-Dealers promptly upon request,
and in no event later than one day after such request, at any time during such
period.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not permitted by
------------------
applicable law or policy of the Commission (after the Company and the Guarantors
have complied with the procedures set forth in Section 6(a)(i) below) or (ii)
any Holder of Transfer Restricted Securities shall notify the Company in writing
within 20 Business Days following the Consummation of the Exchange Offer that
(A) upon advice of counsel such Holder was prohibited by law or Commission
policy from participating in the Exchange Offer or (B) such Holder may not
resell the Series B Notes acquired by it in the Exchange Offer to the public
without delivering a prospectus and the Prospectus contained in the Exchange
Offer Registration Statement is not appropriate or available for such resales by
such Holder or (C) such Holder is a Broker-Dealer and holds Series A Notes
acquired directly from the Company or any of its Affiliates, then the Company
and the Guarantors shall:
(x) cause to be filed, on or prior to 90 days after the earlier of (i) the
date on which the Company determines that the Exchange Offer Registration
Statement cannot be filed as a result of clause (a)(i) above and (ii) the date
on which the Company receives the notice specified in clause (a)(ii) above,
(such earlier date, the "Filing Deadline"), a shelf registration statement
pursuant to Rule 415 under the Act (which may be an amendment to the Exchange
Offer Registration Statement (the "Shelf Registration Statement")), relating to
all Transfer Restricted Securities of Holders which shall have provided the
information required pursuant to Section 4(b) hereof, and
4
(y) shall use their respective best efforts to cause such Shelf Registration
Statement to become effective on or prior to 150 days after the Filing Deadline
(such 150th day the "Effectiveness Deadline").
If, after the Company and the Guarantors have filed an Exchange Offer
Registration Statement that satisfies the requirements of Section 3(a) above,
the Company is required to file and make effective a Shelf Registration
Statement solely because the Exchange Offer is not permitted under applicable
federal law or policy of the Commission (i.e., clause (a)(i) above), then the
filing of the Exchange Offer Registration Statement shall be deemed to satisfy
the requirements of clause (x) above; provided that, in such event, the Company
and the Guarantors shall remain obligated to meet the Effectiveness Deadline set
forth in clause (y).
The Company and the Guarantors shall use their respective best efforts to
keep any Shelf Registration Statement required by this Section 4(a) continuously
effective, supplemented and amended as required by and subject to the provisions
of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is
available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a) and to ensure that it conforms with
the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of at
least two years (as extended pursuant to Section 6(d)) following the Closing
Date, or such shorter period as will terminate when all Transfer Restricted
Securities covered by such Shelf Registration Statement have been sold pursuant
thereto.
(b) Provision by Holders of Certain Information in Connection with the Shelf
------------------------------------------------------------------------
Registration Statement. No Holder of Transfer Restricted Securities may include
- ----------------------
any of its Transfer Restricted Securities in any Shelf Registration Statement
pursuant to this Agreement unless and until such Holder furnishes to the Company
in writing, within 20 days after receipt of a request therefor, the information
specified in Item 507 or 508 of Regulation S-K, as applicable, of the Act for
use in connection with any Shelf Registration Statement or Prospectus or
preliminary Prospectus included therein. No Holder of Transfer Restricted
Securities shall be entitled to Liquidated Damages pursuant to Section 5 hereof
unless and until such Holder shall have provided all such information (it being
understood that Liquidated Damages shall not accrue for the benefit of any
Holder until such Holder provides such information). Each selling Holder agrees
to promptly furnish to the Company additional information required to be
disclosed in order to make the information previously furnished to the Company
by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not filed
with the Commission on or prior to the applicable Filing Deadline, (ii) any such
Registration Statement has not been declared effective by the Commission on or
prior to the applicable Effectiveness Deadline, (iii) the Exchange Offer has not
been Consummated within 30 Business Days after the Exchange Offer Registration
Statement is first declared effective by the Commission or (iv) subject to
Section 6(c)(i) any Registration Statement required by this Agreement is filed
and declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded immediately by a post-
effective amendment to such Registration Statement that cures such failure and
that is itself declared effective immediately (each such event referred to in
clauses (i) through (iv), a "Registration Default"), then, subject to Section
4(b), the Company and the Guarantors hereby jointly and severally agree to pay
to each Holder of Transfer Restricted Securities affected thereby liquidated
damages ("Liquidated Damages") in an amount equal to $.05 per week per $1,000 in
principal amount of Transfer Restricted Securities held by such Holder for each
week or portion thereof that the Registration Default continues for the first
90-day period immediately following the occurrence of such Registration Default.
The amount of the Liquidated Damages shall
5
increase by an additional $.05 per week per $1,000 in principal amount of
Transfer Restricted Securities with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of
liquidated damages of $.50 per week per $1,000 in principal amount of Transfer
Restricted Securities; provided that the Company and the Guarantors shall in no
event be required to pay liquidated damages for more than one Registration
Default at any given time. Notwithstanding anything to the contrary set forth
herein, (1) upon filing of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (i) above, (2)
upon the effectiveness of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (ii) above, (3)
upon Consummation of the Exchange Offer, in the case of (iii) above, or (4) upon
the filing of a post-effective amendment to the Registration Statement or an
additional Registration Statement that causes the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement) to again be
declared effective or made usable in the case of (iv) above, the Liquidated
Damages payable with respect to the Transfer Restricted Securities as a result
of such clause (i), (ii), (iii) or (iv), as applicable, shall cease.
All accrued Liquidated Damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date, as more fully set forth in the Indenture and the
Notes. All obligations of the Company and the Guarantors set forth in the
preceding paragraph that are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
security shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the Exchange
-------------------------------------
Offer, the Company and the Guarantors shall (x) comply with all applicable
provisions of Section 6(c) below, (y) use their respective best efforts to
effect such exchange and to permit the resale of Series B Notes by Broker-
Dealers that tendered in the Exchange Offer Series A Notes that such Broker-
Dealer acquired for its own account as a result of its market making activities
or other trading activities (other than Series A Notes acquired directly from
the Company or any of its Affiliates) being sold in accordance with the intended
method or methods of distribution thereof, and (z) comply with all of the
following provisions:
(i) If, following the date hereof there has been announced a change in
Commission policy with respect to exchange offers such as the Exchange
Offer, that in the reasonable opinion of counsel to the Company raises a
substantial question as to whether the Exchange Offer is permitted by
applicable federal law, the Company and the Guarantors hereby agree to seek
a no-action letter or other favorable decision from the Commission allowing
the Company and the Guarantors to Consummate an Exchange Offer for such
Transfer Restricted Securities. The Company and the Guarantors hereby
agree to pursue the issuance of such a decision to the Commission staff
level. In connection with the foregoing, the Company and the Guarantors
hereby agree to take all such other actions as may be requested by the
Commission or otherwise required in connection with the issuance of such
decision, including without limitation (A) participating in telephonic
conferences with the Commission, (B) delivering to the Commission staff an
analysis prepared by counsel to the Company setting forth the legal bases,
if any, upon which such counsel has concluded that such an Exchange Offer
should be permitted and (C) diligently pursuing a resolution (which need
not be favorable) by the Commission staff.
(ii) As a condition to its participation in the Exchange Offer, each
Holder of Transfer Restricted Securities (including, without limitation,
any Holder who is a Broker Dealer) shall furnish, upon the request of the
Company, prior to the Consummation of the Exchange Offer, a
6
written representation to the Company and the Guarantors (which may be
contained in the letter of transmittal contemplated by the Exchange Offer
Registration Statement) to the effect that (A) it is not an Affiliate of
the Company, (B) it is not engaged in, and does not intend to engage in,
and has no arrangement or understanding with any person to participate in,
a distribution of the Series B Notes to be issued in the Exchange Offer and
(C) it is acquiring the Series B Notes in its ordinary course of business.
Each Holder using the Exchange Offer to participate in a distribution of
the Series B Notes hereby acknowledges and agrees that, if the resales are
of Series B Notes obtained by such Holder in exchange for Series A Notes
acquired directly from the Company or an Affiliate thereof, it (1) could
not, under Commission policy as in effect on the date of this Agreement,
rely on the position of the Commission enunciated in Morgan Stanley and
------------------
Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation
--------- ----------------------------------
(available May 13, 1988), as interpreted in the Commission's letter to
Shearman & Sterling dated July 2, 1993, and similar no-action letters
-------------------
(including, if applicable, any no-action letter obtained pursuant to clause
(i) above), and (2) must comply with the registration and prospectus
delivery requirements of the Act in connection with a secondary resale
transaction and that such a secondary resale transaction must be covered by
an effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and the Guarantors shall provide a supplemental
letter to the Commission (A) stating that the Company and the Guarantors
are registering the Exchange Offer in reliance on the position of the
Commission enunciated in Exxon Capital Holdings Corporation (available May
----------------------------------
13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) as
----------------------------
interpreted in the Commission's letter to Shearman & Sterling dated July 2,
-------------------
1993, and, if applicable, any no-action letter obtained pursuant to clause
(i) above, (B) including a representation that neither the Company nor any
Guarantor has entered into any arrangement or understanding with any Person
to distribute the Series B Notes to be received in the Exchange Offer and
that, to the best of the Company's and each Guarantor's information and
belief, each Holder participating in the Exchange Offer is acquiring the
Series B Notes in its ordinary course of business and has no arrangement or
understanding with any Person to participate in the distribution of the
Series B Notes received in the Exchange Offer and (C) any other undertaking
or representation required by the Commission as set forth in any no-action
letter obtained pursuant to clause (i) above, if applicable.
(b) Shelf Registration Statement.
----------------------------
In connection with the Shelf Registration Statement, the Company and
the Guarantors shall comply with all the provisions of Section 6(c) below and
shall use their respective best efforts to effect such registration to permit
the sale of the Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution thereof (as indicated in the
information furnished to the Company pursuant to Section 4(b) hereof), and
pursuant thereto the Company and the Guarantors will prepare and file with the
Commission a Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof within the time periods and otherwise in
accordance with the provisions hereof.
(c) General Provisions. In connection with any Registration Statement and
------------------
any related Prospectus required by this Agreement, the Company and the
Guarantors shall:
(i) use their respective best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements for the period specified in Section 3 or 4 of this Agreement, as
applicable. Upon the occurrence of any event that would cause any such
Registration Statement or the Prospectus contained therein (A) to contain a
material misstatement
7
or omission or (B) not to be effective and usable for resale of Transfer
Restricted Securities during the period required by this Agreement, the
Company and the Guarantors shall file promptly an appropriate amendment to
such Registration Statement curing such defect, and, if Commission review
is required, use their respective best efforts to cause such amendment to
be declared effective as soon as practicable. Notwithstanding the
foregoing, if the Board of Directors of the Company determines in good
faith that it is in the best interests of the Company and the Guarantors
not to disclose the existence of or facts surrounding any proposed or
pending material corporate transaction or other material development
involving the Company or the Guarantors, the Company and the Guarantors may
allow the Shelf Registration Statement to fail to be effective or the
Prospectus contained therein to be unusable as a result of such
nondisclosure for up to ninety (90) days in any year during the two-year
period of effectiveness required by Section 4 hereof;
(ii) prepare and file with the Commission such amendments and post-
effective amendments to the applicable Registration Statement as may be
necessary to keep such Registration Statement effective for the applicable
period set forth in Section 3 or 4 hereof, as the case may be; cause the
Prospectus to be supplemented by any required Prospectus supplement, and as
so supplemented to be filed pursuant to Rule 424 under the Act, and to
comply fully with Rules 424, 430A and 462, as applicable, under the Act in
a timely manner; and comply with the provisions of the Act with respect to
the disposition of all securities covered by such Registration Statement
during the applicable period in accordance with the intended method or
methods of distribution by the sellers thereof set forth in such
Registration Statement or supplement to the Prospectus;
(iii) with respect to a Shelf Registration Statement, advise the
selling Holders promptly and, if requested by such Person, confirm such
advice in writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to any
applicable Registration Statement or any post-effective amendment thereto,
when the same has become effective, (B) of any request by the Commission
for amendments to the Registration Statement or amendments or supplements
to the Prospectus or for additional information relating thereto, (C) of
the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the Act or of the
suspension by any state securities commission of the qualification of the
Transfer Restricted Securities for offering or sale in any jurisdiction, or
the initiation of any proceeding for any of the preceding purposes, (D) of
the existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto or any document
incorporated by reference therein untrue, or that requires the making of
any additions to or changes in the Registration Statement in order to make
the statements therein not misleading, or that requires the making of any
additions to or changes in the Prospectus in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws, the
Company and the Guarantors shall use their respective best efforts to
obtain the withdrawal or lifting of such order at the earliest possible
time;
(iv) subject to Section 6(c)(i), if any fact or event contemplated by
Section 6(c)(iii)(D) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the Registration Statement or
related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus will not
contain an untrue statement of a material fact or omit
8
to state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(v) with respect to a Shelf Registration Statement, furnish to the
Initial Purchasers and each selling Holder named in any Registration
Statement or Prospectus in connection with such sale, if any, before filing
with the Commission, copies of any Registration Statement or any Prospectus
included therein or any amendments or supplements to any such Registration
Statement or Prospectus (including all documents incorporated by reference
after the initial filing of such Registration Statement), which documents
will be subject to the review and comment of such Holders in connection
with such sale, if any, for a period of at least five Business Days, and
the Company will not file any such Registration Statement or Prospectus or
any amendment or supplement to any such Registration Statement or
Prospectus (including all such documents incorporated by reference) to
which the selling Holders of the Transfer Restricted Securities covered by
such Registration Statement in connection with such sale, if any, shall
reasonably object within five Business Days after the receipt thereof. A
selling Holder shall be deemed to have reasonably objected to such filing
if such Registration Statement, amendment, Prospectus or supplement, as
applicable, as proposed to be filed, contains a material misstatement or
omission or fails to comply with the applicable requirements of the Act;
(vi) furnish to the Initial Purchasers before filing with the
Commission, copies of any Registration Statement or any Prospectus included
therein or any amendments or supplements to any such Registration Statement
or Prospectus (including all documents incorporated by reference after the
initial filing of such Registration Statement after the filing of such
documents);
(vii) with respect to a Shelf Registration Statement, promptly prior
to the filing of any document that is to be incorporated by reference into
a Registration Statement or Prospectus, provide copies of such document to
the selling Holders in connection with such sale, if any, make the
Company's and the Guarantors' representatives available for discussion of
such document and other customary due diligence matters, and include such
information in such document prior to the filing thereof as such selling
Holders may reasonably request;
(viii) with respect to a Shelf Registration Statement, make available
at reasonable times for inspection by the selling Holders participating in
any disposition pursuant to such Registration Statement and any attorney or
accountant retained by such selling Holders, all financial and other
records, pertinent corporate documents of the Company and the Guarantors
and cause the Company's and the Guarantors' officers, directors and
employees to supply all information reasonably requested by any such
selling Holder, attorney or accountant in connection with such Registration
Statement or any post-effective amendment thereto subsequent to the filing
thereof and prior to its effectiveness;
(ix) with respect to a Shelf Registration Statement, if requested by
any selling Holders in connection with such sale, if any, promptly include
in any Registration Statement or Prospectus, pursuant to a supplement or
post-effective amendment if necessary, such information as such selling
Holders may reasonably request to have included therein, including, without
limitation, information relating to the "Plan of Distribution" of the
Transfer Restricted Securities; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as practicable
after the Company is notified of the matters to be included in such
Prospectus supplement or post-effective amendment;
9
(x) with respect to a Shelf Registration Statement, furnish to each
selling Holder in connection with such sale, if any, without charge, at
least one copy of the Registration Statement, as first filed with the
Commission, and of each amendment thereto, including all documents
incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference);
(xi) with respect to a Shelf Registration Statement, deliver to each
selling Holder, without charge, as many copies of the Prospectus (including
each preliminary prospectus) and any amendment or supplement thereto as
such Persons reasonably may request; the Company and the Guarantors hereby
consent to the use (in accordance with law) of the Prospectus and any
amendment or supplement thereto by each of the selling Holders in
connection with the offering and the sale of the Transfer Restricted
Securities covered by the Prospectus or any amendment or supplement
thereto;
(xii) with respect to a Shelf Registration Statement, upon the request
of any selling Holder, enter into such agreements (including underwriting
agreements containing customary terms) and make such representations and
warranties and take all such other actions in connection therewith in order
to expedite or facilitate the disposition of the Transfer Restricted
Securities pursuant to any applicable Registration Statement contemplated
by this Agreement as may be reasonably requested by any Holder of Transfer
Restricted Securities in connection with any sale or resale pursuant to any
applicable Registration Statement. In such connection, the Company and the
Guarantors shall:
(A) upon request of any selling Holder, furnish (or in the case of
paragraphs (2) and (3), use its best efforts to cause to be furnished) to
each selling Holder, upon the effectiveness of the Shelf Registration
Statement:
(1) a certificate, dated such date, signed on behalf of
the Company and each Guarantor by (x) the President or any
Vice President and (y) a principal financial or accounting
officer of the Company and such Guarantor, confirming, as of
the date thereof, the matters, to the extent applicable, set
forth in Section 4 of the Purchase Agreement (as to the
Registration Statement rather than the Offering Memorandum
(as defined in the Purchase Agreement) and excepting
Sections 4(f), (i), (j), (k), (l), (m), (r), (t), (u) and
(v)) such other similar matters as the selling Holders may
reasonably request;
(2) an opinion, dated the date of effectiveness of the
Shelf Registration Statement, as the case may be, of counsel
for the Company and the Guarantors covering matters similar
to those set forth in Section 6(c) of the Purchase Agreement
(as to the Registration Statement rather than the Offering
Memorandum and excepting the clauses (iv), (vi), (ix), (xii)
and (xiii) of Exhibit B to the Purchase Agreement and
clauses (iii) and (viii) of Exhibit C to the Purchase
Agreement) and such other matters as the selling Holders may
reasonably request, and in any event including a statement
to the effect that such counsel has participated in
conferences with officers and other representatives of the
Company and the Guarantors, representatives of the
independent public accountants for the Company and the
Guarantors and have considered the matters required to be
stated therein and the statements contained therein,
although such counsel has not independently verified the
accuracy, completeness or fairness of such statements; and
that such counsel advises that, on the basis of the
foregoing (relying as to
10
materiality to the extent such counsel deems appropriate
upon the statements of officers and other representatives of
the Company and the Guarantors), no facts came to such
counsel's attention that caused such counsel to believe that
the applicable Registration Statement, at the time such
Registration Statement or any post-effective amendment
thereto became effective, contained an untrue statement of a
material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading, or that the Prospectus contained in
such Registration Statement as of its date, contained an
untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading. Without limiting the foregoing,
such counsel may state further that such counsel assumes no
responsibility for, and has not independently verified, the
accuracy, completeness or fairness of the financial
statements, notes and schedules and other financial data
included in any Registration Statement contemplated by this
Agreement or the related Prospectus; and
(3) a customary comfort letter, dated the date of
effectiveness of the Shelf Registration Statement from the
Company's independent accountants, in the customary form and
covering matters of the type customarily covered in comfort
letters to underwriters in connection with underwritten
offerings, and affirming the matters set forth in the
comfort letters delivered pursuant to Section 6(d) of the
Purchase Agreement;
(B) set forth in full or incorporated by reference in the underwriting
agreement, if any, the indemnification provisions and procedures of
Section 8 hereof with respect to all parties to be indemnified pursuant
to said Section; and
(C) deliver such other documents and certificates as may be reasonably
requested by the selling Holders to evidence compliance with clause (A)
above and with any customary conditions contained in the any agreement
entered into by the Company and the Guarantors pursuant to this clause
(xi);
If at any time the representations and warranties of the Company and
each of the Guarantors set forth in the certificate contemplated in clause
(A)(1) above cease to be true and correct, the Company shall so advise the
Initial Purchasers and the underwriters, if any, and each selling Holder
promptly and, if requested by such Persons, shall confirm such advice in
writing;
(xiii) prior to any public offering of Transfer Restricted Securities,
cooperate with the selling Holders and their counsel in connection with the
registration and qualification of the Transfer Restricted Securities under
the securities or Blue Sky laws of such jurisdictions as the selling
Holders may request and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Transfer
Restricted Securities covered by the applicable Registration Statement;
provided, however, that neither the Company nor any Guarantor shall be
required to register or qualify as a foreign corporation where it is not
now so qualified or to take any action that would subject it to the service
of process in suits or to taxation, other than as to matters and
transactions relating to the Registration Statement, in any jurisdiction
where it is not now so subject;
11
(xiv) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the Holders to facilitate the timely preparation
and delivery of certificates representing Transfer Restricted Securities to
be sold and not bearing any restrictive legends; and to register such
Transfer Restricted Securities in such denominations and such names as the
selling Holders may request at least two Business Days prior to such sale
of Transfer Restricted Securities;
(xv) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of a Registration Statement covering such
Transfer Restricted Securities and provide the Trustee under the Indenture
with printed certificates for the Transfer Restricted Securities which are
in a form eligible for deposit with The Depository Trust Company;
(xvi) otherwise use their respective best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders with regard to any applicable
Registration Statement, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be audited)
covering a twelve-month period beginning after the effective date of the
Registration Statement (as such term is defined in paragraph (c) of Rule
158 under the Act);
(xvii) cause the Indenture to be qualified under the TIA not later than
the effective date of the first Registration Statement required by this
Agreement and, in connection therewith, cooperate with the Trustee and the
Holders to effect such changes to the Indenture as may be required for such
Indenture to be so qualified in accordance with the terms of the TIA; and
execute and use their respective best efforts to cause the Trustee to
execute, all documents that may be required to effect such changes and all
other forms and documents required to be filed with the Commission to
enable such Indenture to be so qualified in a timely manner; and
(xviii) provide promptly to each Holder, upon request, each document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
-----------------------
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(iii)(C) or any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(i) or Section 6(c)(iii)(D) hereof (in each
case, a "Suspension Notice"), such Holder will forthwith discontinue disposition
of Transfer Restricted Securities pursuant to the applicable Registration
Statement until (i) such Holder has received copies of the supplemented or
amended Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder
is advised in writing by the Company that the use of the Prospectus may be
resumed, and has received copies of any additional or supplemental filings that
are incorporated by reference in the Prospectus (in each case, the
"Recommencement Date"). Each Holder receiving a Suspension Notice hereby agrees
that it will either (i) destroy any Prospectuses, other than permanent file
copies, then in such Holder's possession which have been replaced by the Company
with more recently dated Prospectuses or (ii) deliver to the Company (at the
Company's expense) all copies, other than permanent file copies, then in such
Holder's possession of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of the Suspension Notice.
The time period regarding the effectiveness of such Registration Statement set
forth in Section 3 or 4 hereof, as applicable, shall be extended by a number of
days equal to the number of days in the period from and including the date of
delivery of the Suspension Notice to the date of the Recommencement Date.
12
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Guarantors' performance
of or compliance with this Agreement will be borne by the Company and the
Guarantors, regardless of whether a Registration Statement becomes effective,
including without limitation: (i) all registration and filing fees and expenses;
(ii) all fees and expenses of compliance with federal securities and state Blue
Sky or securities laws; (iii) all expenses of printing (including printing
certificates for the Series B Notes to be issued in the Exchange Offer and
printing of Prospectuses), messenger and delivery services and telephone; (iv)
all fees and disbursements of counsel for the Company and the Guarantors; (v)
all application and filing fees in connection with listing the Series B Notes on
a national securities exchange or automated quotation system pursuant to the
requirements hereof; and (vi) all fees and disbursements of independent
certified public accountants of the Company and the Guarantors (including the
expenses of any special audit and comfort letters required by or incident to
such performance).
The Company will, in any event, bear its and the Guarantors' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Guarantors.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the Guarantors
will reimburse the Initial Purchasers and the Holders of Transfer Restricted
Securities being tendered in the Exchange Offer and/or resold pursuant to the
"Plan of Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel (not to exceed
$25,000), who shall be Latham & Watkins, unless another firm shall be chosen by
the Holders of a majority in principal amount of the Transfer Restricted
Securities for whose benefit such Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Company and the Guarantors, jointly and severally, agree to
indemnify and hold harmless (i) each Holder and (ii) each Person, if any, who
controls (within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) any Holder (any of the persons referred to in this clause (ii)
being hereinafter referred to as a "controlling person") and (iii) the
respective officers, directors, partners, employees, representatives and agents
of any Holder or any controlling person (any person referred to in clause (i),
(ii) or (iii) may hereinafter be referred to as an "Indemnified Holder"), from
and against any and all losses, claims, damages, liabilities, judgments,
(including without limitation, any legal or other expenses reasonably incurred
in connection with investigating or defending any matter, including any action
that could give rise to any such losses, claims, damages, liabilities or
judgments) caused by any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement, preliminary prospectus or
Prospectus (or any amendment or supplement thereto) provided by the Company to
any Holder or any prospective purchaser of Series B Notes or registered Series A
Notes, or caused by any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as such losses, claims, damages, liabilities or
judgments are caused by an untrue statement or omission or alleged untrue
statement or omission that is based upon information relating to any of the
Holders furnished in writing to the Company by any of the Holders.
13
(b) Each Holder of Transfer Restricted Securities agrees, severally and not
jointly, to indemnify and hold harmless the Company and the Guarantors, and
their respective directors and officers, and each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company or the Guarantors to the same extent as the foregoing indemnity from
the Company and the Guarantors to each of the Indemnified Holders, but only with
reference to information relating to such Indemnified Holder furnished in
writing to the Company by such Indemnified Holder expressly for use in any
Registration Statement. In no event shall any Indemnified Holder be liable or
responsible for any amount in excess of the amount by which the total amount
received by such Indemnified Holder with respect to its sale of Transfer
Restricted Securities pursuant to a Registration Statement exceeds the amount
paid by such Indemnified Holder for such Transfer Restricted Securities.
(c) In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 8(a) or 8(b) hereof (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying person") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), an Indemnified Holder shall not be required to
assume the defense of such action pursuant to this Section 8(c), but may employ
separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
the Indemnified Holder). Any indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of the indemnified
party unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party).
In any such case, the indemnifying party shall not, in connection with any one
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all indemnified parties and all such fees and
expenses shall be reimbursed as they are incurred. Such firm shall be designated
in writing by a majority of the Indemnified Holders, in the case of the parties
indemnified pursuant to Section 8(a), and by the Company, in the case of parties
indemnified pursuant to Section 8(b). The indemnifying party shall indemnify and
hold harmless the indemnified party from and against any and all losses, claims,
damages, liabilities and judgments by reason of any settlement of any action
effected with its written consent. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement or
compromise of, or consent to the entry of judgment with respect to, any pending
or threatened action in respect of which the indemnified party is or could have
been a party and indemnity or contribution may be or could have been sought
hereunder by the indemnified party, unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability on claims that are or could have been the subject matter of such
action and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this Section 8
is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or
14
judgments (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Guarantors, on the one hand, and the
Holders, on the other hand, from their sale of Transfer Restricted Securities or
(ii) if the allocation provided by clause 8(d)(i) is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause 8(d)(i) above but also the relative fault of the
Company and the Guarantors, on the one hand, and of the Indemnified Holder, on
the other hand, in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations. The relative fault of the Company and the
Guarantors, on the one hand, and of the Indemnified Holder, on the other hand,
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or such
Guarantor, on the one hand, or by the Indemnified Holder, on the other hand, and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The amount paid or payable by
a party as a result of the losses, claims, damages, liabilities and judgments
referred to above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or defending
any action or claim.
The Company, the Guarantors and each Holder agree that it would not be just
and equitable if contribution pursuant to this Section 8(d) were determined by
pro rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any matter, including any
action that could have given rise to such losses, claims, damages, liabilities
or judgments. Notwithstanding the provisions of this Section 8, no Holder or
its related Indemnified Holders shall be required to contribute, in the
aggregate, any amount in excess of the amount by which the total received by
such Holder with respect to the sale of Transfer Restricted Securities pursuant
to a Registration Statement exceeds the sum of (A) the amount paid by such
Holder for such Transfer Restricted Securities plus (B) the amount of any
damages which such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Holders' obligations to contribute
pursuant to this Section 8(c) are several in proportion to the respective
principal amount of Transfer Restricted Securities held by each Holder hereunder
and not joint.
SECTION 9. RULE 144A AND RULE 144
The Company and each Guarantor hereby agrees with each Holder, for so long
as any Transfer Restricted Securities remain outstanding and during any period
in which the Company or such Guarantor is not subject to Section 13 or 15(d) of
the Exchange Act, to make available, upon request of any Holder of Transfer
Restricted Securities, to any Holder or beneficial owner of Transfer Restricted
Securities in connection with any sale thereof and any prospective purchaser of
such Transfer Restricted Securities designated by such Holder or beneficial
owner, the information required by Rule 144A(d)(4) under the Act in order to
permit resales of such Transfer Restricted Securities pursuant to Rule 144A.
15
SECTION 10. MISCELLANEOUS
(a) Remedies. The Company and the Guarantors acknowledge and agree that any
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failure by the Company and/or the Guarantors to comply with their respective
obligations under Sections 3 and 4 hereof may result in material irreparable
injury to the Initial Purchasers or the Holders for which there is no adequate
remedy at law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of any such failure, the Initial Purchasers or
any Holder may obtain such relief as may be required to specifically enforce the
Company's and the Guarantors' obligations under Sections 3 and 4 hereof. The
Company and the Guarantors further agree to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any Guarantor will,
--------------------------
on or after the date of this Agreement, enter into any agreement with respect to
its securities that is inconsistent with the rights granted to the Holders in
this Agreement or otherwise conflicts with the provisions hereof. Neither the
Company nor any Guarantor has previously entered into any agreement granting any
registration rights with respect to its securities to any Person. The rights
granted to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's and the
Guarantors' securities under any agreement in effect on the date hereof.
(c) Adjustments Affecting the Notes. Neither the Company nor any of the
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Guarantors shall take any action, or permit any change to occur, with respect to
the Notes that would materially and adversely affect the ability of the Holders
to Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not be
----------------------
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(d)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose securities are being tendered pursuant to the Exchange Offer,
and that does not affect directly or indirectly the rights of other Holders
whose securities are not being tendered pursuant to such Exchange Offer, may be
given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities subject to such Exchange Offer.
(e) Third Party Beneficiary. The Holders shall be third party beneficiaries
-----------------------
to the agreements made hereunder between the Company and the Guarantors, on the
one hand, and the Initial Purchasers, on the other hand, and shall have the
right to enforce such agreements directly to the extent they may deem such
enforcement necessary or advisable to protect its rights or the rights of
Holders hereunder.
(f) Notices. All notices and other communications provided for or permitted
-------
hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
16
(ii) if to the Company or the Guarantors:
Domino's, Inc.
30 Frank Lloyd Wright Drive
P.O. Box 997
Ann Arbor, MI 48106-0997
Telecopier No.: (734) 913-0377
Attention: Chief Financial Officer
With a copy to:
Ropes & Gray
1 International Plaza
Boston, MA 02110
Telecopier No.: (617) 951-7050
Attention: R. Newcomb Stillwell
All such notices and communications shall be deemed to have been duly given:
at the time delivered by hand, if personally delivered; five Business Days after
being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
Upon the date of filing of the Exchange Offer or a Shelf Registration
Statement, as the case may be, notice shall be delivered to the Initial
Purchasers in the form attached hereto as Exhibit A.
(g) Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities; provided, that nothing herein shall
be deemed to permit any assignment, transfer or other disposition of Transfer
Restricted Securities in violation of the terms hereof or of the Purchase
Agreement or the Indenture. If any transferee of any Holder shall acquire
Transfer Restricted Securities in any manner, whether by operation of law or
otherwise, such Transfer Restricted Securities shall be held subject to all of
the terms of this Agreement, and by taking and holding such Transfer Restricted
Securities such Person shall be conclusively deemed to have agreed to be bound
by and to perform all of the terms and provisions of this Agreement, including
the restrictions on resale set forth in this Agreement and, if applicable, the
Purchase Agreement, and such Person shall be entitled to receive the benefits
hereof.
(h) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(i) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(j) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
17
(k) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(l) Entire Agreement. This Agreement is intended by the parties as a final
----------------
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
18
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
DOMINO'S INC.
By: /s/ Harry J. Silverman
-----------------------------
Name: Harry J. Silverman
Title: Vice President
DOMINO'S PIZZA, INC.
By: /s/ Harry J. Silverman
-----------------------------
Name: Harry J. Silverman
Title: Vice President
METRO DETROIT PIZZA, INC.
By: /s/ Harry J. Silverman
-----------------------------
Name: Harry J. Silverman
Title: Vice President
BLUEFENCE, INC.
By: /s/ Harry J. Silverman
-----------------------------
Name: Harry J. Silverman
Title: President
DOMINO'S PIZZA INTERNATIONAL PAYROLL SERVICES,
INC.
By: /s/ Harry J. Silverman
-----------------------------
Name: Harry J. Silverman
Title: Vice President
19
DOMINO'S PIZZA INTERNATIONAL, INC.
By: /s/ Harry J. Silverman
-----------------------------
Name: Harry J. Silverman
Title: Vice President
DOMINO'S PIZZA-GOVERNMENT SERVICES DIVISION, INC.
By: /s/ Harry J. Silverman
-----------------------------
Name: Harry J. Silverman
Title: Vice President
20
J.P. MORGAN SECURITIES, INC.
GOLDMAN, SACHS & CO.
By: J.P. MORGAN SECURITIES INC.
By: /s/ Timothy R. Murphy
-------------------------------
Name: Timothy R. Murphy
Title: Vice President
21
EXHIBIT A
NOTICE OF FILING OF
EXCHANGE OFFER REGISTRATION STATEMENT
To: J.P. Morgan Securities Inc.
60 Wall Street
New York, NY 10260
Attn: Syndicate Department
Fax: (212) 648-5560
From: Domino's, Inc.
30 Frank Lloyd Wright Drive
P.O. Box 997
Ann Arbor, MI 48106
Attn: Chief Financial Officer
Fax: (734) 913-0377
Re: 10 3/8% Senior Subordinated Notes Due 2009
Date:________________, 199__
For your information only (NO ACTION REQUIRED):
Today, ________________, 199__, we filed [an Exchange Registration
Statement] [a Shelf Registration Statement] with the Securities and Exchange
Commission. We currently expect this registration statement to be declared
effective within __ business days of the date hereof.
22
Exhibit 5.1
March 19, 1999
Domino's, Inc.
Domino's Pizza International, Inc.
30 Frank Lloyd Wright Drive
Ann Arbor, Michigan 48106
Re: Registration Statement on Form S-4
----------------------------------
Ladies and Gentlemen:
We have acted as counsel to Domino's, Inc., a Delaware corporation (the
"Company"), and Domino's Pizza International, Inc., a Delaware corporation (the
"Subsidiary Guarantor"), in connection with (i) the proposed issuance by the
Company of up to $275,000,000 aggregate principal amount of its 10 3/8% Series B
Senior Subordinated Notes due 2009 (the "Exchange Notes") registered under the
Securities Act of 1933, as amended (the "Securities Act"), in exchange for a
like principal amount of the Company's outstanding 10 3/8% Senior Subordinated
Notes due 2009 (the "Original Notes"), which have not been so registered (the
"Exchange Offer") and (ii) the guarantee of the Exchange Notes by each of the
Guarantors (as defined below) (the "Guarantees").
The Exchange Notes will be issued under an Indenture dated as of December
21, 1998 (the "Indenture") among the Company and Domino's Pizza, Inc., Metro
Detroit Pizza, Inc., Domino's Franchise Holding Co., Domino's Pizza
International Payroll Services, Inc., Domino's Pizza - Government Services
Division, Inc. and the Subsidiary Guarantor (collectively, the "Guarantors") and
IBJ Whitehall Bank & Trust Company (formerly IBJ Schroder Bank & Trust Company),
as indenture trustee. The terms of the Guarantees are contained in the
Indenture, and the Guarantees will be issued pursuant to the Indenture.
We have examined and relied upon the information set forth in the
Registration Statement on Form S-4 (the "Registration Statement") filed by the
Company and the Guarantors with the Securities and Exchange Commission relating
to the Exchange Offer and the Guarantees and such other documents and records as
we have deemed necessary and have made such investigation of fact and such
examination of law as we have deemed appropriate in order to enable us to render
the opinions set forth herein. As to questions of fact not independently
verified by us, we have relied upon certificates of officers of the Company and
the Subsidiary Guarantor, public officials and other appropriate persons.
Domino's, Inc. -2-
Domino's Pizza International, Inc. March 19, 1999
We express no opinion as to the laws of any jurisdiction other than those
of The Commonwealth of Massachusetts, the corporate laws of the State of
Delaware and the federal laws of the United States of America. We call your
attention to the fact that each of the Indenture, the Exchange Notes and the
Guarantees provides that it is to be governed by and construed in accordance
with the internal laws of the State of New York. We are of the opinion that a
Massachusetts court or a federal court sitting in Massachusetts would, under
conflict of law principles observed by the courts of Massachusetts, give effect
to such provisions. For purposes of the opinion expressed herein, we have
assumed that each of the Indenture, the Exchange Notes and the Guarantees
provides that it is to be governed by would be governed by and construed in
accordance with the internal laws of The Commonwealth of Massachusetts.
We express no opinion as to whether the Subsidiary Guarantor may guarantee
or otherwise become liable for indebtedness incurred by the Company, including,
without limitation, indebtedness evidenced by the Exchange Notes, except to the
extent the Subsidiary Guarantor may be determined to have benefitted from the
incurrence of such indebtedness by the Company, or as to whether such benefit
may be measured other than by the extent to which the proceeds of the
indebtedness incurred by the Company are directly or indirectly made available
to the Subsidiary Guarantor for its corporate purposes.
Based upon the foregoing, we are of the opinion that the Exchange Notes
have been duly authorized by all requisite corporate action of the Company and,
when executed and authenticated in the manner provided for in the Indenture and
delivered against surrender and cancellation of a like aggregate principal
amount of Original Notes in accordance with the terms of the Exchange Offer, the
Exchange Notes will constitute valid and binding obligations of the Company
entitled to the benefits of the Indenture and enforceable against the Company in
accordance with their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws of
general application affecting the rights and remedies of creditors or by general
principles of equity, regardless of whether applied in proceedings in equity or
at law. We are of the further opinion that the Guarantee by the Subsidiary
Guarantor has been duly authorized by all requisite corporate action of the
Subsidiary Guarantor and, upon the due issuance of the Exchange Notes in
accordance with the terms of the Indenture and the Exchange Offer, such Exchange
Notes shall be entitled to the benefits of the Guarantee by the Subsidiary
Guarantor which will constitute a valid and binding obligation of the Subsidiary
Guarantor, enforceable against the Subsidiary Guarantor in accordance with its
terms, except as enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
affecting the rights and remedies of creditors or by general principles of
equity, regardless of whether applied in proceedings in equity or at law.
Domino's, Inc. -3-
Domino's Pizza International, Inc. March 19, 1999
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Prospectus included therein.
It is understood that this opinion is to be used only in connection with
the Exchange Offer and the Guarantees while the Registration Statement is in
effect.
Very truly yours,
/s/ Ropes & Gray
Ropes & Gray
Exhibit 5.2
March 19, 1999
Domino's Pizza, Inc.
Metro Detroit Pizza, Inc.
Domino's Franchise Holding Co.
30 Frank Lloyd Wright Drive
Ann Arbor, Michigan 48106
Re: Registration Statement on Form S-4
----------------------------------
Ladies and Gentlemen:
We have acted as special Michigan counsel to Domino's Pizza, Inc., Metro
Detroit Pizza, Inc. and Domino's Franchise Holding Co., each a Michigan
corporation (collectively, the "Subsidiary Guarantors"), in connection with (i)
the proposed issuance by Domino's, Inc., a Delaware corporation (the "Company")
of up to $275,000,000 aggregate principal amount of its new 10 3/8% Series B
Senior Subordinated Notes due 2009 (the "Exchange Notes") registered under the
Securities Act of 1933, as amended (the "Securities Act"), in exchange for a
like principal amount of the Company's outstanding 10 3/8% Senior Subordinated
Notes due 2009 (the "Original Notes"), which have not been so registered (the
"Exchange Offer") and (ii) the guarantee of the Exchange Notes by each of the
Guarantors (as defined below) (the "Guarantees").
The terms of the Guarantees are contained in the Indenture, dated as of
December 21, 1998 (the "Indenture") among the Company and Domino's Pizza
International, Inc., Domino's Pizza International Payroll Services, Inc.,
Domino's Pizza - Government Services Division, Inc. and the Subsidiary
Guarantors (collectively, the "Guarantors") and IBJ Whitehall Bank & Trust
Company (formerly IBJ Schroder Bank & Trust Company), as indenture trustee. The
Guarantees will be issued pursuant to the Indenture.
We have examined and relied upon the information set forth in the
Registration Statement on Form S-4 (the "Registration Statement") filed by the
Company and the Guarantors with the Securities and Exchange Commission relating
to the Exchange Offer and the Guarantees and such other documents and records as
we have deemed necessary. In
Domino's Pizza, Inc. -2- March 19, 1999
Metro Detroit Pizza, Inc.
Domino's Franchise Holding Co.
addition, as to questions of fact material to our opinions, we have relied upon
certificates of officers of the Subsidiary Guarantors and public officials.
In the course of our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. In making our
examination of documents executed by parties other than the Subsidiary
Guarantors, we have assumed that such parties had the corporate power to enter
into and perform all obligations thereunder and have also assumed the due
authorization by all requisite corporate action and the execution and delivery
by such parties of such documents and the validity and binding effect thereof on
such parties.
We express no opinion as to the laws of any jurisdiction other than those
of the State of Michigan and the federal laws of the United States of America.
We call your attention to the fact that each of the Indenture and the Guarantees
provides that it is to be governed by the internal laws of the State of New
York. For purposes of the opinion provided herein, we have assumed with your
permission that each of the Indenture and the Guarantees would be governed by
and construed in accordance with the domestic substantive laws of the State of
Michigan.
We express no opinion as to whether the Subsidiary Guarantors may guarantee
or otherwise become liable for indebtedness incurred by the Company, including,
without limitation, indebtedness evidenced by the Exchange Notes, except to the
extent the Subsidiary Guarantors may be determined to have received benefit from
the incurrence of such indebtedness by the Company, or as to whether such
benefit may be measured other than by the extent to which the proceeds of the
indebtedness incurred by the Company are directly or indirectly made available
to the Subsidiary Guarantors for their corporate purposes.
Based upon the foregoing, we are of the opinion that the Guarantees by the
Subsidiary Guarantors have been duly authorized by all requisite corporate
action of the Subsidiary Guarantors and, upon the due issuance of the Exchange
Notes in accordance with the terms of the Indenture and the Exchange Offer as
set forth in the Registration Statement, such Exchange Notes shall be entitled
to the benefits of the Guarantees by the Subsidiary Guarantors which will
constitute a valid and binding obligation of the Subsidiary Guarantors,
enforceable against the Subsidiary Guarantors in accordance with their terms,
except as enforcement thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws relating
to or affecting creditors' rights generally or by general equitable principles
regardless of whether considered in a proceeding in equity or at law.
Domino's Pizza, Inc. -3- March 19, 1999
Metro Detroit Pizza, Inc.
Domino's Franchise Holding Co.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" contained in the Prospectus included therein.
It is understood that this opinion is to be used only in connection with
the Guarantees while the Registration Statement is in effect.
Very truly yours,
/s/ Honigman Miller Schwartz and Cohn
Honigman Miller Schwartz and Cohn
Exhibit 10.1
EXECUTION COPY
$275,000,000
DOMINO'S PIZZA INTERNATIONAL, INC.
AND THE
GUARANTORS
SIGNATORIES HERETO
10 3/8% SENIOR SUBORDINATED NOTES DUE 2009
AMENDED AND RESTATED PURCHASE AGREEMENT
December 21, 1998
J.P. Morgan Securities Inc.
Goldman, Sachs & Co.
c/o J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260-0060
Ladies and Gentlemen:
Domino's Pizza International Payroll Services, Inc., a Delaware corporation
(the "Company"), proposes to issue and sell to the several Initial Purchasers
listed in Schedule I hereto (the "Initial Purchasers") $275,000,000 aggregate
principal amount of its 10 3/8% Senior Subordinated Notes due 2009 (the
"Notes"). The Notes will be issued pursuant to the provisions of an indenture to
be dated as of December 21, 1998 (the "Indenture") among the Company, the
guarantors listed on the signature pages hereof (the "Guarantors") and IBJ
Schroder Bank & Trust Company, as trustee (the "Trustee"). The Notes will be
fully and unconditionally guaranteed (the "Guarantees" and, with the Notes,
collectively the "Securities"), jointly and severally, on a senior subordinated
basis by each of the Guarantors. The Company and the Guarantors are collectively
referred to herein as the "Issuers." On the date hereof, the Company is an
indirect wholly-owned subsidiary of TISM, Inc., a Michigan corporation ("TISM").
The offering of the Securities is being made in connection with the
recapitalization of TISM (the "Recapitalization") pursuant to which, among other
things, (i) all of the capital stock of the Company will be distributed to TISM;
(ii) the Company will own, directly or indirectly through one or more wholly-
owned subsidiaries, all of the capital stock of all other subsidiaries of TISM;
and (iii) Domino's Pizza International Payroll Services, Inc. will change its
name to Domino's Inc. References in this Agreement to the "Company,"
"Subsidiaries" of the Company or to "Issuers" or "Guarantors" shall be
deemed to be references to such entities both before and immediately after
giving effect to the Recapitalization (it being understood that prior to the
Recapitalization the Company has no Subsidiaries).
The sale of the Securities to the Initial Purchasers will be made without
registration of the Securities under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon exemptions therefrom.
In connection with the sale of the Securities, the Company has prepared a
preliminary offering memorandum, dated November 24, 1998 (the "Preliminary
Memorandum"), and has prepared a final offering memorandum dated the date hereof
(the "Final Memorandum" and, with the Preliminary Memorandum, collectively, the
"Offering Memorandum"), for the information of the Initial Purchasers and for
delivery to prospective purchasers of the Securities.
The purchasers of the Securities and their direct and indirect transferees
will be entitled to the benefits of a Registration Rights Agreement, to be dated
as of the Closing Date and to be substantially in the form attached hereto as
Exhibit A (the "Registration Rights Agreement"), pursuant to which the Company
will file one or more registration statements with the Securities and Exchange
Commission (the "Commission") registering with the Commission the Securities or
the Exchange Securities referred to (and as defined) in such Registration Rights
Agreement.
The Issuers hereby agree with the Initial Purchasers as follows:
1. The Company agrees to issue and sell the Notes to the several Initial
Purchasers as hereinafter provided, and each Initial Purchaser, upon the basis
of the representations and warranties herein contained, but subject to the
conditions hereinafter stated, agrees to purchase, severally and not jointly,
from the Company the respective principal amount of Notes set forth opposite
such Initial Purchaser's name in Schedule I hereto at a price (the "Purchase
Price") equal to 97.00% of their principal amount plus accrued interest, if any,
from December 21, 1998 to the date of payment and delivery.
2. The Issuers understand that the Initial Purchasers intend (i) to offer
privately and pursuant to Regulation S under the Securities Act ("Regulation S")
their respective portions of the Securities as soon after this Agreement has
become effective as in the judgment of the Initial Purchasers is advisable and
(ii) initially to offer the Securities upon the terms set forth in this
Agreement and the Offering Memorandum.
The Issuers confirm that they have authorized the Initial Purchasers,
subject to the restrictions set forth below, to distribute copies of the
Offering Memorandum in connection with the offering of the Securities. Each
Initial Purchaser hereby makes to the Issuers the following representations and
agreements:
(i) it is a "qualified institutional buyer" within the meaning of
Rule 144A under the Securities Act; and
(ii) (A) neither it nor to its knowledge any person acting on its
behalf has solicited or will solicit offers for, or offer to sell, the
Securities by any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Securities Act ("Regulation D")) and
(B) it will solicit offers for the Securities only from, and will offer the
Securities only to, (x) in the case of offers inside the United States, persons
whom it reasonably believes to be "qualified institutional buyers" within the
meaning of Rule 144A under the Securities Act; and (y) in the case of offers
outside the
2
United States, persons other than U.S. persons ("foreign purchasers," which term
shall include dealers or other professional fiduciaries in the United States
acting on a discretionary basis for foreign beneficial owners (other than an
estate or trust)) that, in each case, in purchasing the Securities are deemed to
have represented and agreed as provided in the Offering Memorandum;
With respect to offers and sales outside the United States, as described in
clause (ii)(B)(y) above, each Initial Purchaser hereby represents and agrees
with the Issuers that:
(i) it understands that no action has been or will be taken by the
Issuers that would permit a public offering of the Securities, or possession or
distribution of the Offering Memorandum or any other offering or publicity
material relating to the Notes, in any country or jurisdiction where action for
that purpose is required;
(ii) it will comply with all applicable laws and regulations in each
jurisdiction in which it acquires, offers, sells or delivers Securities or has
in its possession or distributes the Offering Memorandum or any such other
material, in all cases at its own expense;
(iii) it understands that the Securities have not been and will not
be registered under the Securities Act and may not be offered or sold within the
United States or to, or for the account or benefit of, U.S. persons except in
accordance with Regulation S under the Securities Act or pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act;
(iv) it has offered the Securities and will offer and sell the Notes
(x) as part of its distribution at any time and (y) otherwise until 40 days
after the later of the commencement of the Offering and the Closing Date, only
in accordance with Rule 903 of Regulation S. Accordingly, neither such Initial
Purchaser, nor any of its Affiliates, nor any persons acting on its behalf has
engaged or will engage in any directed selling efforts (within the meaning of
Regulation S) with respect to the Notes, and such Initial Purchaser, its
Affiliates and any such persons have complied and will comply with the offering
restrictions requirement of Regulation S; and
(v) it agrees that, at or prior to confirmation of sales of the
Securities, it will have sent to each distributor, dealer or person receiving a
selling concession, fee or other remuneration that purchases Notes from it
during the restricted period a confirmation or notice to substantially the
following effect:
"The Securities covered hereby have not been registered
under the U.S. Securities Act of 1933 (the "Securities Act")
and may not be offered and sold within the United States or
to, or for the account or benefit of, U.S. persons (i) as
part of their distribution at any time or (ii) otherwise
prior to 40 days after the closing of the offering, except
in either case in accordance with Regulation S (or Rule
144A, if available) under the Securities Act. Terms used
above have the meaning given to them by Regulation S."
Terms used in this Section 2 and not otherwise defined in this Agreement
have the meanings given to them by Regulation S.
3. Payment for the Notes shall be made by wire transfer in immediately
available funds to the account specified by the Company to the Initial
Purchasers no later than noon on December 21, 1998,
3
or at such other time on the same or such other date, not later than the fifth
Business Day thereafter, as the Initial Purchasers and the Company may agree
upon in writing. The time and date of such payment are referred to herein as the
"Closing Date." As used herein, the term "Business Day" means any day other than
a day on which banks are permitted or required to be closed in New York City.
Payment for the Notes shall be made against delivery to the nominee of The
Depository Trust Company for the respective accounts of the several Initial
Purchasers of the Notes of one or more global notes (collectively, the "Global
Note") representing the Notes, with any transfer taxes payable in connection
with the transfer to the Initial Purchasers of the Notes duly paid by the
Company. The Global Note will be made available for inspection by the Initial
Purchasers at the office of J.P. Morgan Securities Inc. at the address set forth
above not later than 1:00 P.M., New York City time, on the Business Day prior to
the Closing Date.
4. The Issuers, jointly and severally, represent and warrant to each
Initial Purchaser that:
(a) The Preliminary Memorandum did not, as of its date, and the Final
Memorandum will not, in the form used by the Initial Purchasers to confirm sales
of the Securities and as of the Closing Date, contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances existing at such dates, not
misleading; provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in conformity
with information relating to any Initial Purchaser furnished to the Company in
writing by such Initial Purchaser expressly for use therein;
(b) Neither the Company nor any of the Subsidiaries has sustained
since the date of the latest audited financial statements included in the Final
Memorandum any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Final Memorandum; and, since the
respective dates as of which information is given in the Final Memorandum, there
has not been any change in the capital stock or long-term debt of the Company or
any of the Subsidiaries or any material adverse change, or any development which
could reasonably be expected to involve a material adverse change, in or
affecting the general affairs, management, financial position, stockholders'
equity or results of operations of the Company and the Subsidiaries, taken as a
whole, otherwise than as set forth or contemplated in the Final Memorandum;
(c) The Company and the Subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all personal
property owned by them, in each case free and clear of all liens, encumbrances
and defects except such as are described in the Final Memorandum or such as do
not materially affect the value of such property and do not interfere with the
use made and proposed to be made of such property by the Company and the
Subsidiaries; and any real property and buildings held under lease by the
Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and the Subsidiaries;
(d) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of Delaware, with power and
authority to own its properties and conduct its business as described in the
Final Memorandum. Prior to the Recapitalization, the Company has been duly
qualified as a foreign corporation for the transaction of business and is in
good standing under the
4
laws of each other jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification, except where the
failure to be so qualified would not have a material adverse effect upon the
business, properties, financial condition, earnings, or prospects of the Company
or any of the Subsidiaries (a "Material Adverse Effect"); and each Subsidiary of
the Company has been duly incorporated and is validly existing as a corporation
in good standing under the laws of its jurisdiction of incorporation;
(e) Upon the closing of the Recapitalization, the Company will have
an authorized capitalization as set forth in the Final Memorandum, and all of
the outstanding shares of capital stock of the Company will have been duly and
validly authorized and issued and fully paid and non-assessable; and all of the
outstanding shares of capital stock of each Subsidiary of the Company have been
duly and validly authorized and issued, are fully paid and non-assessable and
(except as otherwise set forth in the Final Memorandum) are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances, equities
or claims;
(f) This Agreement has been duly authorized, executed and delivered
by the Company and the Guarantors;
(g) The Notes have been duly authorized and, when issued and
delivered, and payment therefore received, as contemplated by this Agreement,
will have been duly executed, authenticated, issued and delivered and will
constitute valid and legally binding obligations of the Company, entitled to the
benefits provided by the Indenture; the Indenture has been duly authorized and,
when executed and delivered by the Company, the Guarantors and the Trustee, the
Indenture will constitute a valid and legally binding instrument, enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability relating to
or affecting creditors' rights and to general equity principles; and the Notes
and the Indenture will conform in all material respects to the descriptions
thereof in the Final Memorandum and will be in substantially the form previously
delivered to you;
(h) The Guarantees have been duly authorized by the Guarantors, and
when executed, authenticated, issued and delivered as contemplated by this
Agreement and the Indenture, will constitute valid and legally binding
obligations of the Guarantors entitled to the benefits provided by the
Indenture, enforceable in accordance with their terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles. The Guarantees will conform in all material respects to the
descriptions thereof in the Final Memorandum;
(i) The Registration Rights Agreement has been duly authorized by the
Company and the Guarantors, and when executed, authenticated, issued and
delivered by the Company and the Guarantors, will constitute the valid and
legally binding obligation of the Company and the Guarantors, enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability relating to
or affecting creditors' rights and to general equity principles; provided,
however, that no representation is made as to the enforceability of the
indemnification and contribution provisions of such Registration Rights
Agreement. Pursuant to the Registration Rights Agreement, the Company will agree
to file with the Commission, under the circumstances set forth therein, (i) a
registration statement under the Securities Act relating to another series of
debt securities of the Company with terms substantially identical to the Notes
(the "Exchange Notes") to be offered in exchange for the Notes (the "Exchange
Offer") and (ii) to the extent required by the Registration Rights Agreement, a
shelf registration statement pursuant to Rule 415 of the Securities
5
Act relating to the resale by certain holders of the Notes, and in each case, to
use its best efforts to cause such registration statements to be declared
effective. The Exchange Notes have been duly authorized for issuance by the
Company, and when issued and authenticated in accordance with the terms of the
Indenture, will be the valid and legally binding obligations of the Company,
entitled to the benefits provided by the Indenture, enforceable in accordance
with their terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles;
(j) The guarantees of the Company's obligations under the Notes to be
issued with terms substantially identical to the Guarantees (the "Exchange
Guarantees") to be offered in exchange for the Guarantees in the Exchange Offer
have been duly authorized by the Guarantors, and when executed, authenticated,
issued and delivered as contemplated by this Agreement and the Indenture, will
constitute valid and legally binding obligations of the Guarantors entitled to
the benefits provided by the Indenture, enforceable in accordance with their
terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting creditors' rights
and to general equity principles. The Exchange Guarantees will conform to the
descriptions thereof in the Final Memorandum;
(k) The Senior Credit Facilities (as defined in the Final Memorandum)
have been duly authorized by the Company and the Guarantors, and when executed
and delivered by the Company, the Guarantors and the other parties thereto, will
constitute the valid and legally binding obligation of the Company and the
Guarantors, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles;
(l) None of the transactions contemplated by this Agreement
(including, without limitation, the use of the proceeds from the sale of the
Notes) will violate or result in a violation of Section 7 of the Exchange Act,
or any regulation promulgated thereunder, including, without limitation,
Regulations T, U, and X of the Board of Governors of the Federal Reserve System;
(m) Prior to the date hereof, neither the Company nor any of its
affiliates has taken any action which is designed to or which has constituted or
which might have been expected to cause or result in stabilization or
manipulation of the price of any security of the Company in connection with the
offering of the Notes;
(n) The issue and sale of the Notes and the compliance by the Company
with all of the provisions of the Notes, the Indenture, the Registration Rights
Agreement and this Agreement and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a breach or violation
of any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument material to the Company and the Subsidiaries, taken as a whole, to
which the Company or any of the Subsidiaries is a party or by which the Company
or any of the Subsidiaries is bound or to which any of the property or assets of
the Company or any of the Subsidiaries is subject, nor will such action result
in any violation of the provisions of the Articles of Incorporation or By-laws
of the Company or (assuming the accuracy of the representations, warranties and
agreements of the Initial Purchasers contained herein) any statute or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of the Subsidiaries or any of their
properties (except, in the case of any such indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument, for such breaches, conflicts,
violations or defaults as would not have a Material Adverse Effect); and no
consent, approval,
6
authorization, order, registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale of the Notes or
the consummation by the Company of the transactions contemplated by this
Agreement or the Indenture, except for the filing of a registration statement by
the Company with the Commission pursuant to the Securities Act and such
consents, approvals, authorizations, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection with the purchase
and distribution of the Securities by the Initial Purchasers;
(o) Neither the Company nor any of the Subsidiaries is in violation of
its Charter or By-laws or in default in the performance or observance of any
material obligation, covenant or condition contained in any material indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or instrument
to which it is a party or by which it or any of its properties may be bound
(except, in the case of any such indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument, for such violations or
defaults as would not have a Material Adverse Effect);
(p) The statements set forth in the Final Memorandum under the caption
"Description of Notes," insofar as they purport to constitute a summary of the
terms of the Notes, and under the caption "Certain Federal Tax Considerations,"
insofar as they purport to describe the provisions of the laws and documents
referred to therein, are accurate, complete and fair in all material respects;
(q) Other than as set forth in the Final Memorandum, there are no
legal or governmental proceedings pending to which the Company or any of the
Subsidiaries is a party or of which any property of the Company or any of the
Subsidiaries is the subject which could reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the current or
future financial position, stockholders' equity or results of operations of the
Company and the Subsidiaries, taken as a whole; and, to the Company's knowledge,
no such proceedings are threatened or contemplated by governmental authorities
or threatened by others;
(r) When the Notes and Guarantees are issued and delivered pursuant to
this Agreement, the Notes and Guarantees will not be of the same class (within
the meaning of Rule 144A under the Securities Act) as securities or guarantees
which are 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;
(s) No Issuer is, or after giving effect to the offering and sale of
the Notes will be, an "investment company," or an entity "controlled" by an
"investment company," as such terms are defined in the United States Investment
Company Act of 1940, as amended (the "Investment Company Act");
(t) Neither the Company, any of the Subsidiaries, nor any person
acting on its or their behalf has offered or sold the Securities by means of any
general solicitation or general advertising within the meaning of Rule 502(c)
under the Securities Act or, with respect to Securities sold outside the United
States to non-U.S. persons (as defined in Rule 902 under the Securities Act), by
means of any directed selling efforts within the meaning of Rule 902 under the
Securities Act and the Company, any affiliate of the Company and any person
acting on its or their behalf has complied with and will implement the "offering
restriction" within the meaning of such Rule 902;
(u) Within the preceding six months, neither the Company nor any other
person acting on behalf of the Company has offered or sold to any person any
Securities, or any securities of the
7
same or a similar class as the Securities, other than Securities offered or sold
to the Initial Purchasers hereunder. The Company will take reasonable
precautions designed to insure that any offer or sale, direct or indirect, in
the United States or to any U.S. person (as defined in Rule 902 under the
Securities Act) of any Securities or any substantially similar security issued
by the Company, within six months subsequent to the date on which the
distribution of the Securities has been completed (as notified to the Company by
J.P. Morgan Securities Inc.), is made under restrictions and other circumstances
reasonably designed not to affect the status of the offer and sale of the
Securities in the United States and to U.S. persons contemplated by this
Agreement as transactions exempt from the registration provisions of the
Securities Act;
(v) Neither the Company nor any of its respective affiliates does
business with the government of Cuba or with any person or affiliate located in
Cuba within the meaning of Section 517.075, Florida Statutes;
(w) Arthur Andersen LLP, who have certified certain financial
statements of the Company and the Subsidiaries, are independent public
accountants as required by the Securities Act and the rules and regulations of
the Commission thereunder;
(x) The Company and each of the Subsidiaries has complied in all
respects with all laws, regulations and orders applicable to it or its
businesses, except for such violations as would not have a Material Adverse
Effect; and
(y) The Company and each of the Subsidiaries owns or possesses or has
the right to use the patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures), trademarks,
service marks and trade names (collectively, the "Intellectual Property")
presently employed by it in connection with, and material to, collectively or in
the aggregate, the operation of the businesses now operated by the Company and
the Subsidiaries as a whole, and, except as disclosed in the Final Memorandum,
none of the Company or the Subsidiaries has received any notice of infringement
of or conflict with asserted rights of others with respect to the foregoing
which, individually or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in a Material Adverse Effect.
5. The Issuers, jointly and severally, covenant and agree with each of
the several Initial Purchasers as follows:
(a) To prepare the Final Memorandum in a form approved by you; to make
no amendment or any supplement to the Final Memorandum without your approval
promptly after reasonable notice thereof, which approval shall not be
unreasonably withheld; and to furnish you with copies thereof;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Securities for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with such
laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution of
the Securities, provided that in connection therewith the Company shall not be
required to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction;
8
(c) To furnish the Initial Purchasers with copies of the Final
Memorandum and each amendment or supplement thereto signed by an authorized
officer of the Company with the independent accountants' report(s) in the Final
Memorandum, and any amendment or supplement containing amendments to the
financial statements covered by such report(s), signed by the accountants, and
additional copies thereof in such quantities as you may from time to time
reasonably request, and if, at any time prior to the expiration of nine months
after the date of the Final Memorandum, any event shall have occurred as a
result of which the Final Memorandum as then amended or supplemented would
include an untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made when such Final Memorandum is
delivered, not misleading, or, if for any other reason it shall be necessary or
desirable during such same period to amend or supplement the Final Memorandum,
to notify you and upon your request to prepare and furnish without charge to
each Initial Purchaser and to any dealer in securities as many copies as you may
from time to time reasonably request of an amended Final Memorandum or a
supplement to the Final Memorandum which will correct such statement or omission
or effect such compliance;
(d) During the period beginning from the date hereof and continuing
until the date six months after the Closing Date, not to offer, sell contract to
sell or otherwise dispose of, except as provided hereunder, any securities of
the Company that are substantially similar to the Securities;
(e) Not to be or become, at any time prior to the expiration of three
years after the Closing Date, an open-end investment company, unit investment
trust, closed-end investment company or face-amount certificate company that is
or is required to be registered under Section 8 of the Investment Company Act;
(f) While the Securities remain outstanding and are "restricted
securities" within the meaning of Rule 144(a)(3) under the Securities Act, to,
during any period in which the Company is not subject to Section 13 or 15(d)
under the Exchange Act, make available to the Initial Purchasers and any holder
of Securities in connection with any sale thereof and any prospective purchaser
of Securities, in each case upon request, the information specified in, and
meeting the requirements of, Rule 144A(d)(4) ("Rule 144A(d)(4) Information")
under the Securities Act (or any successor thereto);
(g) If requested by you, to use its best efforts to cause such
Securities to be eligible for the PORTAL trading system of the National
Association of Securities Dealers, Inc.;
(h) Until such time as the Company has Consummated (as defined in the
Registration Rights Agreement) an Exchange Offer (as defined in the Registration
Rights Agreement), to furnish to the holders of the Securities as soon as
practicable after the end of each fiscal year an annual report (including a
balance sheet and consolidated statements of income, stockholders' equity and
cash flows of the Company and the Subsidiaries certified by independent public
accountants) and, as soon as practicable after the end of each of the first
three quarters of each fiscal year (beginning with the fiscal quarter ending
after the date of the Final Memorandum), consolidated summary financial
information of the Company and the Subsidiaries for such quarter in reasonable
detail; provided, however, that in the event that (i) the consolidated
statements of income, stockholders' equity and cash flows of TISM are identical
to those of the Company and the Subsidiaries and (ii) the Company would
otherwise be permitted to file such financial statements with the Commission
pursuant to and in full satisfaction of the requirements of the Exchange Act (if
the Company were subject to Section 13 or 15(d) of such Exchange Act), the
Issuers shall be permitted to furnish to you such financial statements of TISM
in satisfaction of its obligations hereunder;
9
(i) Until such time as the Company has Consummated an Exchange Offer,
during a period of five years from the date of the Final Memorandum, to furnish
to you copies of all reports or other communications (financial or other)
furnished to shareholders of the Company in their capacity as such, and to
deliver to you (i) as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission or any securities
exchange on which the Securities or any class of securities of the Company is
listed; and (ii) such additional information concerning the business and
financial condition of the Company as you may from time to time reasonably
request (such financial statements to be on a consolidated basis to the extent
the accounts of the Company and the Subsidiaries are consolidated in reports
furnished to the stockholders generally or to the Commission);
(j) Until such time as the Company has Consummated an Exchange Offer,
during the period of two years after the Closing Date, the Company will not, and
will not permit any of its "affiliates" (as defined in Rule 144 under the
Securities Act) to, resell any of the Securities which constitute "restricted
securities" under Rule 144 that have been reacquired by any of them;
(k) To use the net proceeds received by it from the sale of the
Securities pursuant to this Agreement substantially in the manner specified in
the Final Memorandum under the caption "Use of Proceeds;"
(l) Not to take any action prohibited by Regulation M under the
Exchange Act, in connection with the distribution of the Securities contemplated
hereby;
(m) To pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the issue of the Securities and all other expenses in connection
with the preparation, printing and filing of the Preliminary Memorandum and the
Final Memorandum and any amendments and supplements thereto and the mailing and
delivering of copies thereof to the Initial Purchasers and dealers; (ii) the
cost of copying or producing any Agreement among Initial Purchasers, this
Agreement, the Indenture, the Blue Sky Memoranda, closing documents (including
any compilations thereof) and any other documents in connection with the
offering, purchase, sale and delivery of the Securities; (iii) all expenses in
connection with the qualification of the Securities for offering and sale under
state securities laws as provided in Section 5(b) hereof, including the
reasonable fees and disbursements of counsel for the Initial Purchasers in
connection with such qualification and in connection with the Blue Sky and legal
investment surveys; (iv) any fees charged by securities rating services for
rating the Securities; (v) the cost of preparing the Securities; (vi) the fees
and expenses of the Trustee and any agent of the Trustee and the fees and
disbursements of counsel for the Trustee in connection with the Indenture and
the Securities and (vii) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section. It is understood, however, that, except as
provided in this Section, and Sections 7 and 10 hereof, the Initial Purchasers
will pay all of their own costs and expenses, including the fees of their
counsel, transfer taxes on resale of any of the Securities by them, and any
advertising expenses connected with any offers they may make; and
(n) As soon as practicable, to take all necessary action to cause the
Company to be duly qualified as a foreign corporation for the transaction of
business and in good standing under the laws of each other jurisdiction in which
it owns or leases properties or conducts any business so as to require such
qualification, or be subject to no material liability or disability by reason of
the failure to be so qualified in any such jurisdiction.
10
6. The several obligations of the Initial Purchasers hereunder to
purchase the Securities on the Closing Date are subject to the performance by
each of the Issuers of its obligations hereunder and to the following additional
conditions:
(a) The representations and warranties of the Company and each of the
Guarantors contained herein are true and correct on and as of the Closing Date
as if made on and as of the Closing Date and the Company and each of the
Guarantors shall have complied with all agreements and all conditions on its
part to be performed or satisfied hereunder at or prior to the Closing Date;
(b) Latham & Watkins, counsel for the Initial Purchasers, shall have
furnished to you such opinion or opinions, dated the Closing Date, with respect
to such matters as you may reasonably request, and such counsel shall have
received such papers and information as they may reasonably request to enable
them to pass upon such matters;
(c) (i) Ropes & Gray, counsel for the Company, shall have furnished
to you their written opinion, dated the Closing Date, substantially in the form
of Exhibit B hereto. For purposes of their opinion, Ropes & Gray may assume that
New York law is identical to Massachusetts law.
(ii) You shall have received the written opinions of counsel to
the Issuers reasonably satisfactory to you, dated the Closing Date, in the form
of Exhibit C hereto with respect to the Issuers organized under the laws of
Michigan;
(d) On the date of the Final Memorandum prior to the execution of this
Agreement and also at the Closing Date, Arthur Anderson LLP shall have furnished
to you a letter or letters, dated the respective dates of delivery thereof, in
form and substance satisfactory to you;
(e) (i) Neither the Company nor any of the Subsidiaries shall have
sustained since the date of the latest audited financial statements included in
the Final Memorandum any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Final Memorandum, and (ii) since the
respective dates as of which information is given in the Final Memorandum there
shall not have been any change in the capital stock or long-term debt of the
Company or any of the Subsidiaries or any change, or any development involving a
prospective change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company and the
Subsidiaries, taken as a whole, otherwise than as set forth or contemplated in
the Final Memorandum, the effect of which, in any such case described in clause
(i) or (ii), is in the judgment of the Initial Purchasers so material and
adverse as to make it impracticable or inadvisable to proceed with the offering
or the delivery of the Securities on the terms and in the manner contemplated in
this Agreement and in the Final Memorandum;
(f) On or after the date hereof (i) no downgrading shall have occurred
in the rating accorded the Company's debt securities by any "nationally
recognized statistical rating organization," as that term is defined by the
Commission for purposes of Rule 436(g)(2) under the Securities Act, and (ii) no
such organization shall have publicly announced that it has under surveillance
or review, with possible negative implications, its rating of any of the
Company's debt securities;
(g) The Securities shall have been designated for trading on PORTAL;
11
(h) The Company and the Guarantors shall have furnished or caused to
be furnished to you at the Closing Date certificates of officers of the Company
and the Guarantors satisfactory to you as to the accuracy of the representations
and warranties of the Company and the Guarantors herein at and as of such
Closing Date, as to the performance by the Company and the Guarantors of all of
their obligations hereunder to be performed at or prior to such Closing Date, as
to the matters set forth in subsections (a) and (f) of this Section and as to
such other matters as you may reasonably request;
(i) No later than the Closing Date, the equity investment (as
described in the Final Memorandum) shall have been made, in accordance in all
material respects with the description of such equity investment in the Final
Memorandum;
(j) No later than the Closing Date, the Issuers shall have entered
into the Senior Credit Facilities (the form and substance of which shall be
reasonably acceptable to the Initial Purchasers) and the Initial Purchasers
shall have received counterparts, conformed as executed, thereof and of all
other material documents and agreements entered into in connection therewith.
There shall exist at the Closing Date no conditions that would constitute a
default (or an event that with notice or the lapse of time, or both, would
constitute a default) under the Senior Credit Facilities. On the Closing Date,
the Senior Credit Facilities shall be in full force and effect and shall not
have been modified;
(k) The Transactions (as described in the Final Memorandum) shall have
been consummated and evidence as to such, satisfactory to the Initial Purchasers
and their counsel, shall have been delivered to you;
(l) The Company and the Guarantors shall have entered into the
Registration Rights Agreement and you shall have received executed counterparts
thereof; and
(m) You shall have been permitted to rely upon an opinion, addressed
to the lenders under the Senior Credit Facilities, as to the solvency of the
Company after giving effect to the Transactions.
7. The Issuers, jointly and severally, agree to indemnify and hold
harmless each Initial Purchaser, each affiliate of any Initial Purchaser which
assists such Initial Purchaser in the distribution of the Securities, and each
person, if any, who controls any Initial Purchaser within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages and liabilities (including without
limitation the legal fees and other expenses incurred in connection with any
suit, action or proceeding or any claim asserted) caused by any untrue statement
or alleged untrue statement of a material fact contained in the Offering
Memorandum (and any amendment or supplement thereto if the Company shall have
furnished any amendments or supplements thereto) or any preliminary offering
memorandum, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with information
relating to any Initial Purchaser furnished to the Company in writing by such
Initial Purchaser through J.P. Morgan Securities Inc. expressly for use therein;
provided that the indemnification contained in this paragraph (a) shall not
inure to the benefit of the Initial Purchasers (or to the benefit of any person
controlling the Initial Purchasers) on account of any such loss, claim, damage,
liability or expense arising from the sale of the Securities by the Initial
Purchasers to any person if a copy of the Final Memorandum (as then amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) shall not have been delivered or sent to such person
12
and each untrue statement of a material fact contained in, and each omission or
alleged omission of a material fact from, such Offering Memorandum was corrected
in the Final Memorandum (as so amended or supplemented) and it shall have been
determined that any Initial Purchaser and each person, if any, who controls such
Initial Purchasers would not have incurred such losses, claims, damages,
liabilities and expenses had the Final Memorandum been delivered or sent.
Each Initial Purchaser agrees, severally and not jointly, to indemnify and
hold harmless the Issuers, their directors, their officers and each person who
controls the Company within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act, to the same extent as the foregoing indemnity
from the Issuers to each Initial Purchaser, but only with reference to
information relating to such Initial Purchaser furnished to the Issuers in
writing by such Initial Purchaser through J.P. Morgan Securities Inc. expressly
for use in the Offering Memorandum or any amendment or supplement thereto.
If any suit, action, proceeding (including any governmental or regulatory
investigation), claim or demand shall be brought or asserted against any person
in respect of which indemnity may be sought pursuant to either of the two
preceding paragraphs, such person (the "Indemnified Person") shall promptly
notify the person against whom such indemnity may be sought (the "Indemnifying
Person") in writing, and the Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may designate in such proceeding and shall pay the fees and
expenses of such counsel related to such proceeding. In any such proceeding,
any Indemnified Person shall have the right to retain its own counsel, but the
fees and expenses of such counsel shall be at the expense of such Indemnified
Person unless (i) the Indemnifying Person and the Indemnified Person shall have
mutually agreed to the contrary, (ii) the Indemnifying Person has failed within
a reasonable time to retain counsel reasonably satisfactory to the Indemnified
Person or (iii) the named parties in any such proceeding (including any
impleaded parties) include both the Indemnifying Person and the Indemnified
Person and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It
is understood that the Indemnifying Person shall not, in connection with any
proceeding or related proceeding in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel) for all Indemnified Persons, and that all such reasonable fees and
expenses shall be reimbursed as they are incurred. Any such separate firm for
the Initial Purchasers, each affiliate of any Initial Purchaser which assists
such Initial Purchaser in the distribution of the Securities and such control
persons of the Initial Purchasers shall be designated in writing by J.P. Morgan
Securities Inc. and any such separate firm for the Issuers, their directors,
their officers and such control persons of the Issuers shall be designated in
writing by the Issuers. The Indemnifying Person shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff, the
Indemnifying Person agrees to indemnify any Indemnified Person from and against
any loss or liability by reason of such settlement or judgment. No Indemnifying
Person shall, without the prior written consent of the Indemnified Person,
effect any settlement of any pending or threatened proceeding in respect of
which any Indemnified Person is or could have been a party and indemnity could
have been sought hereunder by such Indemnified Person, unless such settlement
includes an unconditional release of such Indemnified Person from all liability
on claims that are the subject matter of such proceeding.
If the indemnification provided for in the first and second paragraphs of
this Section 7 is unavailable to an Indemnified Person or insufficient in
respect of any losses, claims, damages or liabilities referred to therein, then
each Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or
liabilities (i) in such proportion as
13
is appropriate to reflect the relative benefits received by the Issuers on the
one hand and the Initial Purchasers on the other hand from the offering of the
Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Issuers on the one hand and the Initial Purchasers on the other in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Issuers on the one hand
and the Initial Purchasers on the other shall be deemed to be in the same
respective proportions as the net proceeds from the offering (before deducting
expenses) received by the Issuers and the total discounts and commissions
received by the Initial Purchasers, in each case as set forth in the table on
the cover of the Offering Memorandum, bear to the aggregate offering price of
the Securities. The relative fault of the Issuers on the one hand and the
Initial Purchasers on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Issuers or by the Initial Purchasers and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Issuers and the Initial Purchasers agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Initial Purchasers were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall an Initial
Purchaser be required to contribute any amount in excess of the amount by which
the total price at which the Securities purchased by it were offered exceeds the
amount of any damages that such Initial Purchaser has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The Initial
Purchasers' obligations to contribute pursuant to this Section 7 are several in
proportion to the respective principal amount of the Securities set forth
opposite their names in Schedule I hereto, and not joint.
The remedies provided for in this Section 7 are not exclusive and shall not
limit any rights or remedies which may otherwise be available to any indemnified
party at law or in equity.
The indemnity and contribution agreements contained in this Section 7 and
the representations and warranties of the Issuers and the Initial Purchasers set
forth in this Agreement shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any investigation made
by or on behalf of any Initial Purchaser or any person controlling any Initial
Purchaser or by or on behalf of the Issuers, its officers or directors or any
other person controlling the Issuers and (iii) acceptance of and payment for any
of the Securities.
8. Notwithstanding anything herein contained, this Agreement may be
terminated in the absolute discretion of the Initial Purchasers, by notice given
to the Issuers, if after the execution and delivery of this Agreement and prior
to the Closing Date (i) trading generally shall have been suspended or
materially limited on or by, as the case may be, any of the New York Stock
Exchange, the American Stock Exchange, the National Association of Securities
Dealers, Inc., the Chicago Board Options Exchange, the Chicago Mercantile
Exchange or the Chicago Board of Trade, (ii) trading of any securities
14
of or guaranteed by the Company shall have been suspended on any exchange or in
any over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities, or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in the judgment of the Initial Purchasers, is material and adverse and
which, in the judgment of the Initial Purchasers, makes it impracticable to
market the Securities on the terms and in the manner contemplated in the
Offering Memorandum.
9. This Agreement shall become effective upon the execution and delivery
hereof by the parties hereto.
If, on the Closing Date any one of the Initial Purchasers shall fail or
refuse to purchase Notes which it or they have agreed to purchase hereunder on
such date, and the aggregate principal amount of Notes which such defaulting
Initial Purchaser or Initial Purchasers agreed but failed or refused to purchase
is not more than one-tenth of the aggregate principal amount of the Notes to be
purchased on such date, the other Initial Purchasers shall be obligated
severally in the proportions that the principal amount of Notes set forth
opposite their respective names in Schedule I bears to the aggregate principal
amount of Notes set forth opposite the names of all such non-defaulting Initial
Purchasers, or in such other proportions as the Initial Purchasers may specify,
to purchase the Securities which such defaulting Initial Purchaser or Initial
Purchasers agreed but failed or refused to purchase on such date; provided that
in no event shall the principal amount of Notes that any Initial Purchaser has
agreed to purchase pursuant to Section 1 be increased pursuant to this Section 9
by an amount in excess of one-tenth of such principal amount of Notes without
the written consent of such Initial Purchaser. If, on the Closing Date any
Initial Purchaser or Initial Purchasers shall fail or refuse to purchase Notes
which it or they have agreed to purchase hereunder on such date, and the
aggregate principal amount of Securities with respect to which such default
occurs is more than one-tenth of the aggregate principal amount of Notes to be
purchased on such date, and arrangements satisfactory to the Initial Purchasers
and the Company for the purchase of such Notes are not made within 36 hours
after such default, this Agreement shall terminate without liability on the part
of any non-defaulting Initial Purchaser or the Company. In any such case either
the Initial Purchasers or the Company shall have the right to postpone the
Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Offering Memorandum or in any other documents
or arrangements may be effected. Any action taken under this paragraph shall
not relieve any defaulting Initial Purchaser from liability in respect of any
default of such Initial Purchaser under this Agreement.
10. If this Agreement shall be terminated by the Initial Purchasers, or
any of them, because of any failure or refusal on the part of any of the Issuers
to comply with the terms or to fulfill any of the conditions of this Agreement,
or if for any reason the Issuers shall be unable to perform its obligations
under this Agreement or any condition of the Initial Purchasers' obligations
cannot be fulfilled, the Issuers agree to reimburse the Initial Purchasers or
such Initial Purchasers as have so terminated this Agreement with respect to
themselves, severally, for all out-of-pocket expenses (including the fees and
expenses of their counsel) reasonably incurred by such Initial Purchasers in
connection with this Agreement or the offering contemplated hereunder.
11. This Agreement shall inure to the benefit of and be binding upon the
Issuers, the Initial Purchasers, each affiliate of any Initial Purchaser which
assists such Initial Purchaser in the distribution of the Securities, any
controlling persons referred to herein and their respective successors and
assigns. Nothing expressed or mentioned in this Agreement is intended or shall
be construed to give any other person, firm or corporation any legal or
equitable right, remedy or claim under or in respect of this
15
Agreement or any provision herein contained. No purchaser of Notes from any
Initial Purchaser shall be deemed to be a successor by reason merely of such
purchase.
12. Any action by the Initial Purchasers hereunder may be taken by J.P.
Morgan Securities Inc. alone on behalf of the Initial Purchasers, and any such
action taken by J.P. Morgan Securities Inc. alone shall be binding upon the
Initial Purchasers. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if mailed or transmitted by
any standard form of telecommunication. Notices to the Initial Purchasers shall
be given to the Initial Purchasers c/o J.P. Morgan Securities Inc., 60 Wall
Street, New York, New York 10260 (telefax: (212) 648-5560); Attention: Syndicate
Department. Notices to the Issuers shall be given to it at 30 Frank Lloyd
Wright Drive, Ann Arbor, Michigan 48106 (telefax (734) 913-0377); Attention:
Chief Financial Officer.
13. This Agreement may be signed in counterparts, each of which shall be
an original and all of which together shall constitute one and the same
instrument.
14. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without giving effect to the conflicts of
laws provisions thereof.
16
If the foregoing is in accordance with your understanding, please sign and
return four counterparts hereof. It is understood that your acceptance of this
letter on behalf of each of the Initial Purchasers is pursuant to authority set
forth in a form of Agreement among Initial Purchasers, the form of which shall
be submitted to the Company for examination upon request.
Very truly yours,
DOMINO'S, INC.
By: /s/ Harry J. Silverman
-----------------------------
Name: Harry J. Silverman
Title: Vice President
DOMINO'S PIZZA, INC.
By: /s/ Harry J. Silverman
-----------------------------
Name: Harry J. Silverman
Title: Vice President
METRO DETROIT PIZZA, INC.
By: /s/ Harry J. Silverman
-----------------------------
Name: Harry J. Silverman
Title: Vice President
BLUEFENCE, INC.
By: /s/ Harry J. Silverman
-----------------------------
Name: Harry J. Silverman
Title: President
DOMINO'S PIZZA INTERNATIONAL
PAYROLL SERVICES, INC.
By: /s/ Harry J. Silverman
-----------------------------
Name: Harry J. Silverman
Title: Vice President
17
DOMINO'S PIZZA INTERNATIONAL, INC.
By: /s/ Harry J. Silverman
-----------------------------
Name: Harry J. Silverman
Title: Vice President
DOMINO'S PIZZA-GOVERNMENT SERVICES DIVISION, INC.
By: /s/ Harry J. Silverman
-----------------------------
Name: Harry J. Silverman
Title: Vice President
18
Accepted: December 21, 1998
J.P. MORGAN SECURITIES INC.
GOLDMAN, SACHS & CO.
By: J.P. MORGAN SECURITIES INC.
By: /s/ Timothy R. Murphy
------------------------------
Name: Timothy R. Murphy
Title: Vice President
19
SCHEDULE I
Principal Amount
Initial Purchaser of Securities
- -----------------
To Be Purchased
---------------
J.P. Morgan Securities Inc....................... $220,000,000
Goldman, Sachs & Co.............................. $ 55,000,000
------------
Total:............. $275,000,000
20
EXHIBIT A
Form of Registration Rights Agreement
EXHIBIT B
Form of Ropes & Gray Opinion
(i) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of Delaware, with corporate
power and authority to own its properties and conduct its business as described
in the Final Memorandum;
(ii) TISM has the authorized capital stock set forth in the Final
Memorandum; and all of the issued shares of capital stock of the Company have
been duly and validly authorized and issued and are fully paid and non-
assessable, and (except as otherwise set forth in the Final Memorandum) all of
the outstanding shares of capital stock of the Company are owned of record
directly by TISM;
(iii) Each Guarantor incorporated under the laws of the State of
Delaware (the "Delaware Guarantors") has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware; and all of the issued shares of capital stock of each such Delaware
Guarantor have been duly and validly authorized and issued, are fully paid and
non-assessable, and (except as otherwise set forth in the Final Memorandum) are
owned of record directly or indirectly by the Company;
(iv) The Amended and Restated Purchase Agreement has been duly
authorized, executed and delivered by the Company and the Delaware Guarantors;
(v) The Notes have been duly authorized, executed, issued and
delivered by the Company and assuming the due authentication and delivery of the
Notes by the Trustee in accordance with the terms of the Indenture and the
payment therefor in accordance with the terms of the Amended and Restated
Purchase Agreement, will be duly and validly issued and outstanding and will
(subject to the qualifications in the final paragraph of such opinion set forth
below) constitute valid and legally binding obligations of the Company,
enforceable against the Company in accordance with their terms;
(vi) The Exchange Notes have been duly authorized by the Company and
assuming the due execution, delivery and issuance thereof by the Company in
accordance with the terms of the Registration Rights Agreement and the
Indenture, and assuming the due authentication and delivery of the Exchange
Notes thereof by the Trustee, will (subject to the qualifications in the final
paragraph of such opinion set forth below) constitute valid and legally binding
obligations of the Company entitled to the benefits provided by the Indenture,
enforceable in accordance with their terms;
(vii) The Indenture has been duly authorized, executed and delivered
by the Company and the Delaware Guarantors and assuming the due authorization,
execution and delivery thereof by the Guarantors (other than the Delaware
Guarantors), will (subject to the qualifications in the final paragraph of such
opinion set forth below) constitute a valid and legally binding instrument of
the Issuers, enforceable in accordance with its terms;
(viii) The Guarantees have been duly authorized, executed and
delivered by the Delaware Guarantors and assuming the due authorization,
execution and delivery thereof by the Guarantors (other than the Delaware
Guarantors), the corporate power of the Guarantors (other than the Delaware
Guarantors) therefor and for the performance thereof and the due authorization,
execution and delivery of the Indenture by the Guarantors (other than the
Delaware Guarantors), will (subject to the qualifications in the final paragraph
of such opinion set forth below) constitute valid and legally binding
obligations of the Guarantors entitled to the benefits provided by the
Indenture, enforceable in accordance with their terms;
(ix) The Exchange Guarantees have been duly authorized by the
Delaware Guarantors and assuming the due authorization by all necessary
corporate action of the Guarantors (other than the Delaware Guarantors), the
corporate power of the Guarantors (other than the Delaware Guarantors) therefor
and for the performance thereof and assuming the due execution, delivery and
issuance thereof by the Guarantors and assuming no change in applicable law, in
accordance with the terms of the Registration Rights Agreement and the
Indenture, will (subject to the qualifications in the final paragraph of such
opinion set forth below) constitute valid and legally binding obligations of the
Guarantors entitled to the benefits provided by the Indenture, enforceable in
accordance with their terms;
(x) The issue and sale of the Notes and the compliance by the
Company with all of the provisions of the Notes, the Indenture and the Amended
and Restated Purchase Agreement and the consummation of the transactions herein
and therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
any of the agreements listed on Schedule I hereto, which have been identified to
us by the Chief Financial Officer of the Company as being all of the agreements
to which the Company or any of the Subsidiaries is party, or to which any of
their respective businesses or assets is subject, that are material to the
financial condition or results of operations of the Company and the
Subsidiaries, taken as a whole (the "Material Agreements"), nor will such
actions result in any violation of the provisions of the Certificate of
Incorporation or By-laws of the Company or any statute, rule or regulation under
federal or Massachusetts law applicable to the Company or any of the
Subsidiaries or any judgment, order or decree to which the Company or any of the
Subsidiaries is a party and is known to such counsel, of any federal or
Massachusetts court or governmental agency or body having jurisdiction over the
Company or any of the Subsidiaries or any of their properties; except, in the
case of any Material Agreement, for such breaches, violations or defaults as
would not, individually or in the aggregate, have a material adverse effect on
the consolidated financial condition and results of operations of the Company;
such counsel need not express any opinion in such paragraph as to compliance
with federal or state securities or blue sky laws or antitrust laws, including,
but not limited to, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended;
(xi) To the knowledge of such counsel, no consent, approval,
authorization, order, registration or qualification of or with any federal or
Massachusetts court or governmental agency or body is required for the issue and
sale of the Securities or the consummation by the Issuers of the transactions
contemplated by this Agreement or the Indenture, except that such counsel need
not express any opinion in such paragraph as to compliance with federal or state
securities or blue sky laws or antitrust laws, including, but not limited to,
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended;
(xii) The statements set forth in the Final Memorandum under the
caption "Description of Notes," insofar as they purport to constitute a summary
of the terms of the Notes and under the caption "Certain Federal Tax
Considerations," insofar as they purport to describe the provisions of the laws
referred to therein, fairly summarize such terms and provisions in all material
respects;
(xiii) Assuming (a) the accuracy of the representations and warranties
of the Company, the Subsidiaries and the Initial Purchasers set forth in the
Amended and Restated Purchase Agreement and (b) the due performance of and
compliance with the covenants and agreements set forth
2
in the Amended and Restated Purchase Agreement by the Company, the Subsidiaries
and the Initial Purchasers, the offer and sale of the Securities to the Initial
Purchasers, and the initial resales of the Securities by the Initial Purchasers,
in the manner contemplated by the Amended and Restated Purchase Agreement and
the Final Memorandum, do not require registration under the Securities Act or
qualification of the Indenture under the Trust Indenture Act (it being
understood that such counsel need not express any opinion in such paragraph as
to any reoffer or resale of any Securities initially sold by the Initial
Purchasers).
(xiv) None of the Company or the Subsidiaries is an "investment
company" or an entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act; and
(xv) Neither the issuance or sale of the Securities nor the
application by the Company of the net proceeds thereof as set forth in the Final
Memorandum will violate Regulation T, U or X of the Board of Governors of the
Federal Reserve System.
We have not independently verified the accuracy, completeness or fairness
of the statements made or the information contained in the Final Memorandum,
and, except with respect to the descriptions referred to in paragraph (xii)
above, we are not passing upon and do not assume any responsibility therefor. In
the course of the preparation by the Company of the Final Memorandum, we have
participated in discussions with your representatives and those of the Company
and its independent accountants, in which the business and affairs of the
Company and the contents of the Final Memorandum were discussed. Based on such
information and participation, nothing has come to our attention that has caused
us to believe that as of its date and the date hereof, the Final Memorandum
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading. We express no opinion, however, as to financial
statements or any other financial or statistical information set forth or
referred to in the Final Memorandum.
The opinion of Ropes & Gray may include the following language:
Our opinion stated herein that each of the Indenture, the Notes, the
Guarantors, the Exchange Notes and the Exchange Guarantees (the "Operative
Documents") constitutes a valid and binding obligation, enforceable against the
Company or the Guarantors, where applicable, in accordance with its terms, is
subject to (a) bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting the rights and remedies of creditors and
secured parties and (b) general principles of equity, regardless of whether
enforcement is sought in proceedings in equity or at law. We express no opinion
as to the enforceability of powers of attorney, submission to jurisdiction,
waiver of defenses, waiver of right of subrogation, waiver of service of process
and venue and waiver of the right to trial by jury and jury trial waivers
contained in the Operative Documents. We express no opinion with respect to the
applicability of Section 548 of the Bankruptcy Code or any other fraudulent
conveyance provision. In addition, certain provisions of the Operative Documents
may be unenforceable in whole or in part but, in our opinion, the inclusion of
such provisions does not affect the validity of the Operative Documents as a
whole, and the Operative Documents contain remedies, which, if properly invoked,
are adequate for the practical realization of the principal legal benefits
afforded thereby under Massachusetts law. The opinions expressed herein are
subject to the qualification that the enforceability of the provisions of the
Operative Documents providing for indemnification may be affected by public
policy considerations, federal or state securities laws or court decisions that
may limit the right of the indemnified party to obtain indemnification.
3
4
EXHIBIT C
FORM OF LOCAL COUNSEL OPINION
(i) Each Guarantor incorporated under the laws of the State of
Michigan (the "Michigan Guarantors") has been duly incorporated with corporate
power to execute, deliver and perform its obligations under the Amended and
Restated Purchase Agreement, the Indenture, its Guarantee and its Exchange
Guarantee and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation; and all of the issued shares of
capital stock of each such Guarantor have been duly and validly authorized and
issued, are fully paid and non-assessable, and (except as otherwise set forth in
the Final Memorandum) are owned of record directly or indirectly by the Company;
(ii) To such counsel's knowledge and other than the litigation
referred to in the Final Memorandum, after having made inquiry of the officers
of the Company, but without having investigated any governmental court dockets
or making any other independent investigation, there are no legal or
governmental proceedings pending to which the Company or any of the Subsidiaries
is a party or of which any property of the Company or any of the Subsidiaries is
the subject which would reasonably be expected, individually or in the
aggregate, to have a material adverse effect on the current or future
consolidated financial position, shareholders' equity or results of operations
of the Company and the Subsidiaries; and, to such counsel's knowledge, no such
proceedings are threatened by governmental authorities or threatened by others;
(iii) The Amended and Restated Purchase Agreement has been duly
authorized, executed and delivered by the Michigan Guarantors;
(iv) The Indenture has been duly authorized, executed and delivered
by the Michigan Guarantors;
(vii) The Guarantees have been duly authorized, executed, issued and
delivered by the Michigan Guarantors; and
(viii) The Exchange Guarantees have been duly authorized by the
Michigan Guarantors.
Exhibit 10.2
CONSULTING AGREEMENT
CONSULTING AGREEMENT dated as of _________ __, 1998 (the "AGREEMENT") by
and between Domino's Pizza, Inc., a Michigan corporation (the "COMPANY") and
Thomas S. Monaghan ("CONSULTANT").
W I T N E S S E T H:
WHEREAS it is desirable that the Company be able to call upon the
experience and knowledge of Consultant for consultation services and advice
following a Change of Control (as defined below); and
WHEREAS Consultant is willing to render such services to the Company on the
terms and conditions hereinafter set forth in this Agreement;
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Term of Agreement. (a) Consultant shall be retained by the Company
for a period of ten years commencing on the date of a Change of Control (as
defined below) which period may be extended or renewed by mutual agreement in
writing of the parties hereto. The initial period and any extensions or
renewals thereof shall constitute the "CONSULTING TERM". A "CHANGE OF CONTROL"
means the first of the following events to occur following the date hereof:
(i) Any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended) (a
"PERSON") shall become the beneficial owner (within the meaning of Rule
13d-3 promulgated under the Securities Exchange Act of 1934, as amended) of
more than 51% of the then outstanding shares of common stock of the Company
or TISM, Inc.; or
(ii) Consummation of any reorganization, merger or consolidation with
respect to the Company or TISM, Inc. (each a "REORGANIZATION"), unless
following such Reorganization more than 51% of the outstanding equity of
the entity resulting from such Reorganization continues to be beneficially
owned, directly or indirectly, by Consultant; or
(iii) The sale or other disposition (or the last in a series of such
transactions) of all or substantially all of the assets of the Company or
TISM, Inc., other than to an entity with respect to which following such
sale or other disposition more than 51% of the outstanding equity is
beneficially owned, directly or indirectly, by Consultant.
(b) Notwithstanding the foregoing, this Agreement shall not become
effective and shall cease to have any significance if a Change of Control does
not occur prior to January 31, 2000 or upon the earlier Abandonment of Sale.
"ABANDONMENT OF SALE" means a termination by the Chief Executive Officer of the
Company of the sale process initiated pursuant to the letter dated May 1, 1998
addressed to TISM, Inc. from J.P. Morgan Securities Inc., as evidenced by an
affirmative action by said Chief Executive Officer such as written notice of
termination of the process to J.P. Morgan Securities Inc.
2. Position and Responsibilities. Consultant agrees to serve as a
consultant to the Company and, subject to such other commitments he may have,
agrees to make himself reasonably available to render such advice and services
to the Company as may be reasonably required by the Company and as are
consistent with the type of duties and services he rendered to the Company prior
to a Change of Control; provided that in no event shall Consultant be required
to be available to the Company for more than twelve (12) days in any one-year
period during the Consulting Term. During the Consulting Term, Consultant shall
report directly to the Board of Directors of the Company.
3. Compensation. The Company shall pay Consultant a retainer (the
"RETAINER") at the rate of (i) $1,000,000 per year during the first twelve
months of the Consulting Term and (ii) $500,000 per year thereafter through the
end of the Consulting Term, payable in equal monthly installments during the
Consulting Term. Consultant shall be entitled to the full Retainer regardless
of the amount and frequency of consulting services actually rendered by him.
4. Expenses. Consultant shall be reimbursed for all reasonable business
expenses, including travel, incurred in the performance of his duties to the
Company at its request during the Consulting Term, consistent with the Company's
expense reimbursement policy applicable to senior executives of the Company
generally immediately prior to the Consulting Term.
5. Access to Office. During the Consulting Term, from time to time,
Consultant shall have nonexclusive limited use of the office space currently
assigned for his use on the second floor of the office building commonly known
as Domino's Farms Prairie House located at 24 Frank Lloyd Wright Drive, Ann
Arbor, Michigan 48105, provided that the Company has the right to consent to
2
any such use of the office from time to time, which consent shall not be
unreasonably withheld.
6. Termination. This Agreement and Consultant's retention hereunder may
be terminated at any time by either the Company or Consultant upon thirty (30)
days prior written notice to the other. In the event of such a termination by
the Company for any reason, Consultant shall be entitled to receive the full
amount of Retainer payable for the remainder of the Consulting Term as of such
date in a lump sum payment within thirty (30) days following the date of
termination of employment.
7. Status; Taxes. (a) Consultant shall not be an employee of the
Company and shall not be entitled to participate in any employee benefit plans
or other benefits or conditions of employment available to the employees of the
Company. Consultant shall have no authority to act as an agent of the Company,
except on authority specifically so delegated, and he shall not represent to the
contrary to any person. Consultant shall only consult, render advice and
perform such tasks as Consultant determines are necessary to achieve the results
specified by the Company. He shall not direct the work of any employee of the
Company, or make any management decisions, or undertake to commit the Company to
any course of action in relation to third persons. Although the Company may
specify the results to be achieved by the Consultant and may control and direct
him in that regard, the Company shall not control or direct the Consultant as to
the details or means by which such results are accomplished.
(b) It is intended that the fees paid hereunder shall constitute revenues
to Consultant. To the extent consistent with applicable law, the Company will
not withhold any amounts therefrom as federal income tax withholding from wages
or as employee contributions under the Federal Insurance Contributions Act or
any other state or federal laws. Consultant shall be solely responsible for and
will indemnify and hold harmless the Company from and against the withholding
and/or payment of any federal, state or local income or payroll taxes.
8. Confidentiality. During and after the Consulting Term, Consultant
shall not disclose or use for Consultant's own benefit or purposes or the
benefit or purposes of any other person, firm, partnership, joint venture,
association, corporation or other business organization, entity or enterprise
other than the Company and any of its subsidiaries or affiliates, any trade
secrets, information, data, or other confidential information relating to
customers, development programs, costs, marketing, trading, investment, sales
activities, promotion, credit and financial data, manufacturing processes,
financing methods, plans, or the business and affairs of the Company generally,
or of any subsidiary or affiliate of the Company; provided that the foregoing
shall not apply to information which is
3
not unique to the Company or which is generally known to the industry or the
public other than as a result of Consultant's breach of this covenant.
9. Specific Performance. Consultant acknowledges and agrees that the
Company's remedies at law for a breach of Section 8 hereof would be inadequate
and, in recognition of this fact, Consultant agrees that, in the event of such a
breach, in addition to any remedies at law, the Company, without posting any
bond, shall be entitled to obtain equitable relief in a court of competent
jurisdiction in the form of specific performance, temporary restraining order,
temporary or permanent injunction or any other equitable remedy which may then
be available.
10. Fees and Expenses. The Company agrees to pay any and all legal fees
and related expenses incurred by Consultant in connection with the entering into
of this Agreement. The Company also agrees, in the event of a dispute between
Consultant and the Company with respect to any of Consultant's rights under this
Agreement, to reimburse Consultant for any and all legal fees and related
expenses incurred by Consultant in connection with enforcing such rights.
11. Miscellaneous. (a) Governing Law; No Liability of Consultant. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Michigan. Consultant shall not be subject to liability for breach of
this Agreement by reason of his termination of his retention hereunder.
(b) Entire Agreement; Amendments. This Agreement contains the entire
understanding of the parties with respect to the subject matter hereof. There
are no restrictions, agreements, promises, warranties, covenants or undertakings
between the parties with respect to the subject matter herein other than those
expressly set forth herein. This Agreement may not be altered, modified, or
amended except by written instrument signed by the parties hereto.
(c) No Waiver. The failure of a party to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a waiver of
such party's rights or deprive such party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.
(d) Severability. In the event that any one or more of the provisions of
this Agreement shall be or become invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
of this Agreement shall not be affected thereby.
(e) Assignment. This Agreement shall not be assignable by Consultant and
shall be assignable by the Company only with the consent of Consultant or as
4
set forth in Section 11(g) hereof; provided that no such assignment by the
Company shall relieve the Company of any liability hereunder.
(f) Arbitration. With respect to any dispute between the parties to this
Agreement arising from or relating to the terms of this Agreement or the
retention of Consultant by the Company, except as provided in Section 8 hereof,
the parties agree to submit such dispute to arbitration in Ann Arbor, Michigan
under the auspices of and the employment rules of the American Arbitration
Association. The determination of the arbitrator(s) shall be conclusive and
binding on the Company and Consultant and judgment upon the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction thereof.
(g) Successors; Binding Agreement. (i) The Company shall require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or the assets of the
Company to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place, and the Consultant hereby consents to the
Company's assignment of its rights hereunder to any such successor. Failure of
the Company to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle Consultant to
receive the full amount of the Retainer payable for the remainder of the
Consulting Term as of the date of such failure in a lump sum payment on the date
of such succession.
(ii) This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, representatives, successors and
assigns.
(h) Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the execution page of this Agreement.
(i) Counterparts; Effectiveness. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective when each party hereto shall have received a counterpart
hereof signed by the other party hereto.
5
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
/s/ Thomas S. Monaghan
------------------------------
Thomas S. Monaghan
Address:
DOMINOS PIZZA, INC.
By: /s/ Harry J. Silverman
------------------------------
Title: Vice President
30 Frank Lloyd Wright Drive
P.O. Box 997
Ann Arbor, Michigan 48106-0997
6
Exhibit 10.3
[LOGO OF DOMINO'S PIZZA APPEARS HERE]
LEASE AGREEMENT
BETWEEN
DOMINO'S FARMS OFFICE PARK LIMITED PARTNERSHIP
AND
DOMINO'S PIZZA, INC.
TABLE OF CONTENTS
Standard Lease Summary
1. Definitions/Lease
2. Amenities and Common Area
3. The Term
4. The Base Rent
5. Late Charges and Interest
6. Taxes and Assessments
7. Utilities and Utility Expenses
8. Insurance
9. Payment for Services Rendered by Landlord
10. Use of Premises
11. Damage
12. Maintenance and Repairs
13. Leasehold Improvements
14. Alterations
15. Liens
16. Eminent Domain
17. Assignment or Subletting
18. Inspection and Alteration of Public Portions
19. Fixtures and Equipment
20. Notices or Demands
21. Breach; Insolvency; Re-Entry
22. Surrender of Premises on Termination
23. Performance by Landlord of the Covenants of Tenant
24. Subordination; Estoppel Certificates
25. Substitute Space
26. Quiet Enjoyment
27. Holding Over
28. Remedies Not Exclusive; Waiver
29. Waiver of Claims
30. Indemnification
31. Assignment by Landlord
32. Security Deposit
33. Hazardous Materials
34. Movement of Tenant's Property
35. Non-Terminability Compliance With Laws, Costs, Severability
36. Entire Agreement; Merger Agreement
37. Recording
38. General
Rider A Office Location
Rider B Rules and Regulations
Rider C Additional Provisions
-2-
STANDARD LEASE SUMMARY
THIS LEASE is made as of this 21 day of December, 1998, between the following
parties:
LANDLORD: TENANT:
Domino's Farms Office Park Limited Partnership Domino's Pizza, Inc.
24 Frank Lloyd Wright Drive 30 Frank Lloyd Wright Drive
Ann Arbor, Michigan 48105 P.O. Box 997
Ann Arbor, Michigan 48106-0997
The following is intended to summarize certain basic terms of this Lease, and is
not intended to be exhaustive. In the event anything set forth in this Lease
Summary ("Lease Summary ") conflicts with the other specific provisions of this
Lease contained in the Standard Lease Terms, the latter shall be deemed to
control.
A. BUILDING:
The office building commonly known as Domino's Farms Prairie House located at 30
Frank Lloyd Wright Drive, Ann Arbor, Michigan 48105.
B. PREMISES:
Office Space, Lab Space
and Conference Center
Square Footage: Approximately 162,000 rentable square feet
based upon 140,875 usable square feet, plus
a 15% common area factor.
Commissary Square Footage: Approximately 23,450 rentable square feet
based upon 20,371 usable square feet, plus a
15% common area factor.
Storage Space Square Footage: 19,994 usable square feet.
Location: All of the green highlighted space as shown
in that certain "Domino's Farms Tenant
Directory" dated October 27, 1998 attached
hereto as Rider A.
C. TERM:
Commencement Date: The Closing Date (as defined in that certain
Agreement and Plan of Merger dated September
25, 1998 among TM Merger Corporation, TISM,
Inc. and Thomas S. Monaghan ("Merger
Agreement").
Expiration Date: Five (5) years from and after
Commencement Date .
Option to Renew: See Rider C.
D. RENT:
Year Base Annual
Rental
---- -----------
Year 1 $4,078,500
Year 2 $4,185,825
Year 3 $4,296,012
Year 4 $4,410,492
Year 5 $4,527,834
-3-
E. PERMITTED USES: Office, together with uses ancillary and
accessory thereto
F. SECURITY DEPOSIT: None
G. LANDLORD'S AGENT: Domino's Farms Corporation
H. MAILING ADDRESS: 24 Frank Lloyd Wright Drive
P.O. Box 445
Ann Arbor, Michigan 48105-0445
RIDERS ATTACHED:
Rider A Office Location
Rider B Rules and Regulations
Rider C Additional Provisions
-4-
STANDARD LEASE TERMS
SECTION 1
DEFINITIONS/LEASE
1.01 DEFINITIONS: In addition to words and phrases defined in these Standard
------------
Lease Terms, the words and phrases in the Summary of Lease Terms shall
have the meanings set forth therein.
1.02 LEASE OF PREMISES: In consideration of the rents to be paid and the
------------------
covenants and agreements to be performed hereunder, Landlord hereby
leases to Tenant and Tenant hereby leases from Landlord the Premises.
SECTION 2
AMENITIES AND COMMON AREA
2.01 AMENITIES: Tenant's lease of the Premises shall include the nonexclusive
----------
right to the use of such building amenities as are generally made
available to tenants of the Building. The use and the availability of
all such amenities shall be subject to the reasonable rules and
regulations established by Landlord or the respective proprietor or
operator of such amenities. In addition to the payment of Base Annual
Rent, Tenant shall during the initial five (5) year Term pay to
Landlord an annual amount of $175,000.00 for use of the fitness
center, which amount shall increase by three percent (3%) per annum,
and shall be payable in equal monthly installments on each Rent Day.
In addition, Tenant shall be entitled to exclusive use of the parking
spaces described in Paragraph 1 of Rider C and, otherwise, unreserved
parking spaces in the parking area provided for the Building on a
basis comparable to other tenants in the Building, together with the
nonexclusive right to use the walkways and other means of ingress and
egress over the land surrounding the Building, and all other rights of
ingress and egress provided for use in common by all owners and
tenants of the Building.
2.02 COMMON AREA: The term "Common Area" means that part of the Building
------------
intended by Landlord for the common use of all tenants, including, but
not limited to, lobbies, public entrances, restrooms, stairways,
elevators, corridors, parking areas and walkways. Tenant, and its
employees and licensees, shall have the nonexclusive right to use the
Common Area with other tenants and other persons permitted by Landlord
to use the same. Tenant shall not take any action which would
interfere with the rights of other persons to use the Common Area.
SECTION 3
THE TERM
3.01 TERM: The initial five (5) year Term of this Lease and the payment of rent
-----
hereunder, shall commence on the Commencement Date and shall end on
the Expiration Date as set forth on the Standard Lease Summary, unless
extended as hereinafter provided. The word "Term" as used herein shall
include the First Extended Term and Second Extended Term, if and when
exercised.
3.02 INTENTIONALLY OMITTED.
----------------------
-5-
SECTION 4
THE BASE RENT
4.01 BASE ANNUAL RENTAL: Tenant agrees to pay to Landlord the Base Annual Rental
-------------------
for the original Term of this Lease without right of set-off or
abatement (except as expressly permitted under this Lease).
4.02 BASE MONTHLY RENTAL: The Base Annual Rental shall be payable in equal
--------------------
monthly installments ("Base Monthly Rental"), in advance, without any
set-offs or deductions (except as expressly permitted under this
Lease), on the first day of each month (the "Rent Day") during the
Term of this Lease at the mailing address shown in Paragraph I of the
Summary, or at such other place as Landlord from time to time may
designate in writing. In the event the Commencement Date is other than
the first day of the calendar month, the rental for the first and last
partial months shall be prorated based on the actual number of days of
such months included within the Lease Term and based upon the amount
of the Base Monthly Rental.
SECTION 5
LATE CHARGES AND INTEREST
5.01 LATE CHARGES: Any rent or other sums payable by Tenant to Landlord under
-------------
this Lease which are not paid by Tenant and received and accepted by
Landlord within seven (7) days after they are due will be subject to a
one-time late charge of five percent (5%) of the amount due. Such late
charges will be due and payable as additional rent on or before the
next Rent Day.
5.02 INTEREST: Any rent, late charges or other sums, if any, payable by Tenant
---------
to Landlord under this Lease not paid within thirty (30) days after
the same are due will bear interest at a per annum rate of eleven
percent (11%); provided however, if such rate exceeds the maximum rate
of interest permitted by law under such circumstances, then such rate
shall be reduced to the maximum permissible rate. Such interest will
be due and payable as additional rent on or before the next Rent Day,
and will accrue from the date that such rent, late charges or other
sums are first payable under the provisions of this Lease until
actually paid by Tenant.
5.03 DEFAULT: Any default in the payment of rent, late charges or other sums
--------
will not be considered cured unless and until the late charges and
interest due hereunder are paid by Tenant to Landlord. If Tenant
defaults in paying such late charges and/or interest, Landlord will
have the same remedies as on default in the payment of rent. The
obligation hereunder to pay late charges and interest exists in
addition to, and not in the place of, the other default provisions of
this Lease.
SECTION 6
TAXES AND ASSESSMENTS
6.01 PERSONAL PROPERTY TAXES: Tenant shall be responsible for and pay all
------------------------
personal property taxes assessed against Tenant's fixtures, equipment
and other property of Tenant located on the Premises to the extent
such taxes are payable during, and allocable to, the Term.
SECTION 7
UTILITIES AND UTILITY EXPENSES
7.01 TELECOMMUNICATIONS: Tenant shall arrange and pay for its own telephone or
-------------------
other telecommunications services, subject to Landlord's prior written
approval of the means of installation of such service(s).
-6-
7.02 UTILITIES TO BE FURNISHED: Landlord shall furnish the following utilities
--------------------------
("Utilities"):
A. Electricity for usual office requirements;
B. Air conditioning and heat during the appropriate season, as provided
in the Rules and Regulations attached as Rider B; and
C. Hot and cold water for lavatory purposes.
7.07 INTERRUPTION OF UTILITIES: Interruption or curtailment of any Utility for
--------------------------
any reason or interruption or curtailment of any service maintained in
the Building, if caused by strikes, mechanical difficulties, or any
causes or acts beyond Landlord's control, whether similar or
dissimilar to those enumerated, shall not entitle Tenant to any claim
against Landlord or to any abatement in rent, nor shall the same
constitute constructive or partial eviction, unless Landlord fails to
take such measures as may be reasonable in the circumstances to
restore the service or Utility without undue delay. If the Premises
are rendered untenantable in whole or in part for a period of over
three (3) full business days, by the making of repairs, replacements
or additions, other than those made at Tenant's request or caused by
misuse or neglect by Tenant or Tenant's agents, servants, visitors,
invitees, licensees or employees or those required by any governmental
authority due to the nature of Tenant's use of the Premises, there
shall be a proportionate abatement of rent during the period of such
untenantability.
SECTION 8
INSURANCE
8.01 LIABILITY INSURANCE: Tenant shall obtain, at its own expense, comprehensive
--------------------
general liability insurance coverage, including blanket contractual
coverage, against claims for or arising out of bodily injury, death or
property damage occurring in, on or about the Premises, which policy
or policies shall name Landlord as an additional insured. The policy
may be either a dual limit policy in the amounts of $1,000,000 per
person and $1,000,000 per occurrence for bodily injury and $1,000,000
per occurrence for property damage or a single limit policy in the
amount of $1,000,000. Landlord may require that the limits of such
insurance be increased in reasonably appropriate amounts as may be
determined by Landlord or any mortgagee of the Building; provided,
however, that the amount of coverage will not be increased more
frequently than at one (1) year intervals. Such policy shall be issued
by an insurance company acceptable to Landlord. The policy procured by
Tenant under this Subsection 8.01 must provide for at least thirty
(30) days written notice to Landlord of any cancellation. On or before
the Commencement Date, Tenant shall deliver to Landlord, at Landlord's
option, a certificate of insurance or a certified copy of the original
policy, together with receipts evidencing payment of the premiums
therefor. Tenant will deliver certificates of renewal for such
policies to Landlord at least thirty (30) days prior to the expiration
dates thereof. The insurance provided by Tenant under this Subsection
8.01 may be in the form of a blanket insurance policy covering other
properties as well as the Premises; provided, however, that Tenant
must furnish Landlord with a written statement from the insurer(s)
under such policy or policies which statement shall (i) specify the
policy limits of the policy or policies, (ii) state that the Premises
and this Lease are covered by such policy or policies and (iii) state
the amount of total insurance allocated to the Premises; provided,
further, that any such policy or policies of blanket insurance must,
as to the Premises, otherwise comply as to insurance amounts,
endorsements, notice of cancellation and coverage with the other
provisions of this Subsection 8.01.
8.02 INTENTIONALLY OMITTED.
----------------------
8.03 INTENTIONALLY OMITTED.
----------------------
SECTION 9
-7-
PAYMENT FOR SERVICES RENDERED BY LANDLORD
9.01 PAYMENT FOR SERVICES: If Landlord at any time (i) does any work or
---------------------
performs any service in connection with the Premises, or (ii) supplies
any materials to the Premises, and the cost of such services, work or
materials is Tenant's responsibility under the provisions of this
Lease, Landlord will invoice Tenant for the reasonable cost, payable
on the next Rent Day or within ten (10) days after delivery of the
invoice, whichever is later. This Section 9.01 will apply only to any
such work, service or materials, furnished at Tenant's request,
whether furnished or caused to be furnished by Landlord, its agents,
employees or contractors. All amounts payable under this Section 9.01
will be additional rental and failure by Tenant to pay them when due
will be a default under this Lease and, in addition to any other
remedies provided in this Lease upon default, will result in the
assessment of late charges and interest under Section 5.
SECTION 10
USE OF PREMISES
10.01 PERMITTED USES: The Premises will be used and occupied by Tenant for the
---------------
Permitted Uses and for no other purpose without prior written consent
of Landlord. Tenant agrees that it will not use or permit any person
to use the Premises or any part thereof for any use or purposes in
violation of the laws of the United States, the laws, ordinances or
other regulations of the state and municipality in which the Premises
are located, or of any other lawful authorities. During the Term,
Tenant will keep the Premises and every part thereof in a clean and
wholesome condition and will comply with all lawful health and police
regulations and with the Rules and Regulations attached as Rider B.
10.02 RULES AND REGULATIONS: The Landlord may, from time to time, establish
----------------------
reasonable rules and regulations ("Rules and Regulations") for use of
the Premises, the Building and the Common Areas by Tenant and all
other persons. Those Rules and Regulations in effect on the date of
this Lease are attached as Rider B. All such rules and regulations may
be amended or replaced, at Landlord's option, upon written notice to
Tenant (sent by mail or otherwise delivered to the Premises). All such
amendments or replacements shall be deemed to automatically amend and
replace those Rules and Regulations set forth in Rider B.
SECTION 11
DAMAGE
11.01 DAMAGE: If the Premises are damaged or destroyed in whole or in part by
-------
any fire or other casualty during the Term hereof, Landlord will
repair and restore the same to good tenantable condition with
reasonable dispatch, and that the rent herein provided for shall abate
entirely in case the entire Premises are untenantable and prorata on
an equitable basis for the portion rendered untenantable, in case a
part only is untenantable, until the same shall be restored to a
tenantable condition. The foregoing shall be subject to all of the
following: (i) if Tenant shall fail to remove its damaged goods,
wares, equipment or property within a reasonable time, and as a result
thereof the repairing and restoration is delayed, there shall be no
abatement of rental during the period of such resulting delay; (ii)
that if Tenant shall use any part of the Building other than the
Premises for storage, during the period of repair, a reasonable charge
shall be made therefor against Tenant; (iii) that in case the Building
shall be destroyed to the extent of more than one-half (1/2) of the
value thereof, Landlord may at its option terminate this Lease
forthwith by a written notice to Tenant stating the date upon which
this Lease will terminate, but only if all leases in the Building are
similarly terminated; and (iv) that in case the Premises shall be
destroyed in whole or in part and Landlord shall fail to repair and
restore the Premises to good tenantable condition within twelve (12)
months (including force majeure) of the date of such destruction,
Tenant may at its option terminate
-8-
this Lease forthwith by a written notice to Landlord stating the date
upon which this Lease will terminate.
SECTION 12
MAINTENANCE AND REPAIRS
12.01 MAINTENANCE AND REPAIRS: Landlord will maintain, repair and keep the roof
------------------------
and all structural, electrical, mechanical and plumbing systems of
the Building (other than such systems installed by Tenant after the
Commencement Date) and any other improvements on the land which serve
the entire Building, including the parking lot, at all times, in good
appearance and repair. Landlord will also maintain the grounds,
sidewalks, driveways and parking areas. Landlord assumes the
responsibility for the operation, security, management, maintenance
and repair of the Common Area.
12.02 COST OF REPAIRS: From and after the Commencement Date, any repairs,
----------------
additions or alterations to the Building including any of its systems
(e.g., plumbing, electrical, mechanical) structural or non-
structural, or to the Premises, which are required by any law,
statute, ordinance, rule, regulation or governmental authority or
insurance carrier, including, without limitation, OSHA, arising out
of Tenant's use or occupancy of the Premises during the Term, will be
made by Landlord at Tenant's expense including, without limitation,
those which require the making of any structural, unforeseen or
extraordinary changes. The foregoing shall not apply to any such
repairs, additions or alterations that are required because of use of
the Building generally as an office building, it being understood and
agreed that such repair, addition and alteration obligations shall be
the obligations of Landlord. Tenant agrees to pay the total costs
incurred by Landlord for repairs made under this Subsection 12.02
within thirty (30) days after the delivery of an invoice for same.
All amounts payable under this Section 12.02 will be additional
rental and failure by Tenant to pay them when due will be a default
under this Lease and, in addition to any other remedies provided in
this Lease upon default, will result in the assessment of late
charges and interest as set forth in Section 5.
12.03 MAINTENANCE: Tenant agrees at its own expense to maintain the Premises
------------
and all improvements thereto, including any improvements made by
Tenant, at all times in good appearance and repair, reasonable and
normal wear and tear, fire and damage caused by the elements, and
repairs caused by Landlord's failure to make repairs required under
Section 12.01 excepted.
12.04 JANITORIAL SERVICES: Landlord will provide janitorial services to the
--------------------
Premises.
SECTION 13
LEASEHOLD IMPROVEMENTS
13.01 PLANS/ALLOWANCE: Landlord and Tenant agree that the Premises may be
----------------
improved ("Leasehold Improvements") in accordance with certain plans
and specifications to be prepared by Tenant or Tenant's agents, which
plans and specifications shall be subject to Landlord's approval in
the same manner as provided in Section 14.01.
13.02 INTENTIONALLY OMITTED.
----------------------
SECTION 14
ALTERATIONS
14.01 ALTERATIONS: Landlord must review plans for and approve any structural
------------
alterations, additions, or improvements, exterior or interior, to the
Premises including alterations made at the request of Tenant.
Landlord's consent for any interior improvements will not be
unreasonably
-9-
withheld; provided that Landlord's consent to exterior improvements
may be withheld in Landlord's sole and absolute discretion. Any
modification of the Premises other than as specifically set forth in
the Work Agreement as Landlord's expense will be at the expense of
Tenant. All work will be done in accordance with standards and
specifications provided by Landlord to Tenant.
14.02 RESTORATION OF PREMISES: All alterations, additions and improvements made
------------------------
by either of the parties hereto on the Premises will be the property
of Landlord and will remain on and be surrendered with the Premises
at the termination of this Lease provided, however, that Tenant shall
remove, at Landlord's option, all alterations, additions or
improvements to the Premises (other than normal office tenant
improvements) made for Tenant during the Term, including without
limitation, specialty fixtures, if any, and Tenant shall repair all
damage caused by such removal and restore the Premises to a condition
which is consistent with the condition of the remainder of the
Premises at such time.
SECTION 15
LIENS
15.01 LIENS: Tenant will keep the Building, Premises and surrounding land free
------
of liens of any sort attributable to the acts of Tenant during the
Term and will hold Landlord harmless from any liens which may be
placed on the Building during the Term, Premises or surrounding land
except those attributable to the acts of Landlord or other tenants;
provided, however, that nothing herein shall prohibit Tenant from
providing Landlord with a bond acceptable to Landlord while Tenant is
contesting any claim giving rise to a lien.
SECTION 16
EMINENT DOMAIN
16.01 EMINENT DOMAIN: If the Premises are taken by any public authority under
---------------
power of eminent domain, or by private sale in lieu of eminent
domain, this Lease will terminate as of the date of such taking or
sale, and Tenant may receive a prorata refund of any rents, deposits
or other sums paid in advance. Landlord reserves the right, however,
to elect to demolish, rebuild or reconstruct the Building if the
portion of the Premises or Building so taken reduces the value of the
Building by more than one-half, and if Landlord so elects, whether or
not the Premises are involved in the taking, this Lease may be
terminated by Landlord on written notice to Tenant (but only if all
leases in the Building are similarly terminated) and the rent will be
adjusted to the date Tenant's possession of the Premises is
terminated. Tenant may terminate this Lease if as a result of a
taking the square footage of the office space in the Premises is
reduced by more than twenty percent (20%).
16.02 CONDEMNATION AWARD: The whole of any award or compensation for any
-------------------
portion of the Premises taken, condemned or conveyed in lieu of
taking or condemnation shall be solely the property of and payable to
Landlord. Nothing herein contained shall be deemed to preclude Tenant
from seeking at its own cost and expense, an award from the
condemning authority for loss of its business, the value of any trade
fixtures or other personal property of Tenant in the Premises or
moving expenses, provided that the award for such claim or claims
shall not be in diminution of the award made to Landlord.
SECTION 17
ASSIGNMENT OR SUBLETTING
17.01 ASSIGNMENT OR SUBLETTING: Tenant agrees not to assign or in any manner
-------------------------
transfer this Lease or any interest in this Lease without the
previous written consent of Landlord, which consent shall
-10-
not be unreasonably withheld, and not to sublet the Premises or any
part of the Premises or allow anyone to use or to come in, with,
through or under it without like consent, which consent shall not be
unreasonably withheld. Upon any attempted unconsented assignment or
sublease for which consent is required hereunder, Landlord shall have
the right to terminate this Lease. One such consent will not be
deemed a consent to any subsequent assignment, subletting, occupation
or use by any other person. Any sublease of the Premises executed by
Tenant and a third party must terminate when the Term of this Lease
expires. The acceptance of rent from an assignee, subtenant or
occupant will not constitute a release of Tenant from the further
performance of the obligations of Tenant contained in this Lease. In
the event of any such assignment or sublease of all or any portion of
the Premises where the rental or other consideration reserved in the
sublease or by the assignment exceeds the rental or prorata portion
of the rental, as the case may be, for such space reserved in this
Lease, Tenant agrees to pay Landlord monthly, as additional rental,
on the Rent Day, fifty percent (50%) the excess (after netting out
Tenant's reasonable expenses for tenant improvements, brokerage fees,
attorneys' fees and other reasonable out of pocket expenses incurred
in connection with such assignment or sublease) of the rental or
other consideration reserved in the sublease or assignment that is
from time to time received by Tenant over the rental reserved in this
Lease applicable to the subleased/assigned space. Nothwithstanding
the foregoing, Tenant shall not be required to obtain Landlord's
consent in the event of an an assignment of this Lease or subletting
of all or any portion of the Premises to (i) an entity into which
Tenant is merged or consolidated or to which all or substantially all
of Tenant's assets are sold or transferred, or (ii) an entity which
controls, is controlled by, or is under common control with, Tenant.
SECTION 18
INSPECTION AND ALTERATION OF PUBLIC PORTIONS
18.01 INSPECTION: Tenant agrees to permit Landlord and the authorized
-----------
representatives of Landlord to enter the Premises at all times for
the purpose of inspecting the same.
18.02 RIGHT TO ENTER AND ALTER PREMISES: Upon notice from Landlord, Tenant
----------------------------------
shall permit Landlord to erect, use and maintain pipes and conduits
in and through the Premises. Landlord or its agents or designees
shall have the right to enter the Premises, for the purpose of making
such repairs or alterations as Landlord shall be required or shall
have the right to make by the provisions of this Lease and, subject
to the foregoing, shall also have the right to enter the Premises for
the purpose of exhibiting them to prospective purchasers of the
Building or to prospective mortgagees or to prospective assignees of
any such mortgagees, provided Landlord shall give reasonable notice
(except in case of emergency) to minimize any inconvenience or
disruption to Tenant. Landlord shall be allowed to take all material
into and upon the Premises that may be required for the repairs or
alterations above mentioned without the same constituting an eviction
of Tenant in whole or in part, and the rent reserved shall in no wise
abate, except as otherwise provided in this Lease, while said repairs
or alterations are being made. Landlord shall at all times have and
retain a key with which to unlock all of the doors in, on or about
the Premises (excluding Tenant's vaults, safes and similar areas
designated in writing by Tenant in advance ); and Landlord shall have
the right to use any and all means which Landlord may deem proper to
open said doors in an emergency in order to obtain entry to the
Premises, and any entry to the Premises obtained by Landlord by any
of said means, or otherwise, shall not under any circumstances be
construed or deemed to be a forcible or unlawful entry into or a
detainer of the Premises or an eviction, actual or constructive, of
Tenant from the Premises, or any portion thereof.
18.03 RIGHT TO SHOW PREMISES: During the twelve (12) months prior to the
-----------------------
expiration of the Term of this Lease, Landlord may exhibit the
Premises to prospective tenants during normal business hours.
-11-
18.04 RIGHT TO ALTER PUBLIC PORTIONS OF BUILDING: Landlord shall have the right
-------------------------------------------
at any time without thereby creating an actual or constructive
eviction or incurring any liability to Tenant therefore, to change
the arrangement or location of entrances, passageways, doors, and
doorways, corridors, stairs, toilets and other like public service
portions of the Building. Tenant shall at all times be provided with
an entrance to the Premises.
18.05 PRIOR NOTICE: In exercising any of Landlord's rights described in
-------------
Sections 18.01, 18.02, 18.03 and 18.04 above, Landlord shall give
reasonable prior notice (except in case of emergency) to Tenant and
shall use reasonable efforts to minimize any inconvenience or
disruption to Tenant.
18.06 NAME OF BUILDING: Subject to Tenant's prior written consent, which shall
-----------------
not be unreasonably withheld, Landlord shall have the right at any
time to name the Building for any person(s), tenant(s) or entity(s)
and to change any and all such names at any time thereafter.
SECTION 19
FIXTURES AND EQUIPMENT
19.01 LANDLORD'S PROPERTY: All fixtures and equipment paid for by Landlord and
--------------------
all improvements, fixtures and equipment which may be paid for and
placed on the Premises by Tenant from time to time but which are so
incorporated and affixed to the Premises that their removal would
involve damage or structural change to the Premises, will be and
remain the property of Landlord; provided, however, that any
specialty fixtures may be removed by Tenant provided that Tenant
shall repair all damage caused by such removal and restore the
Premises to a condition which is consistent with the condition of the
remainder of the Premises at such time.
19.02 TENANT'S PROPERTY: All improvements, furnishings, equipment and fixtures
------------------
other than those specified in Subsection 19.01, which are paid for
and placed on the Premises by Tenant from time to time will remain
the property of Tenant and be removed by Tenant at the expiration of
the Lease.
SECTION 20
NOTICES OR DEMANDS
20.01 NOTICES OR DEMANDS: All bills, notices, statements, communications or
-------------------
demands (collectively, "notices or demands") upon Landlord or Tenant
desired or required to be given under any of the provisions hereof
must be in writing. Any such notices or demands from Landlord to
Tenant will be deemed to have been duly and sufficiently given if a
copy thereof has been if sent by reputable overnight courier in an
envelope, or mailed by United States mail in an envelope properly
stamped, and addressed to Tenant at the address of the Premises or at
such other address as Tenant may have last furnished in writing to
Landlord for such purpose. Any such notices or demands from Tenant to
Landlord will be deemed to have been duly and sufficiently given if
sent by reputable overnight courier in an envelope, or mailed by
United States mail in an envelope properly stamped, and addressed to
Landlord at the address set forth in the Lease Summary or such other
address as the Landlord may designate in writing from time to time.
The effective date of such notice or demand will be deemed to be the
time when delivered to such reputable courier or mailed as herein
provided, except that when any time period is specified under this
Lease to commence from notice, such time period shall be deemed to
commence when such notice was delivered or when delivery was first
attempted.
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SECTION 21
BREACH; INSOLVENCY; RE-ENTRY
21.01 DEFAULT: If any rental payable by Tenant to Landlord remains unpaid for
--------
more than seven (7) days after written notice to Tenant of
nonpayment, or if Tenant violates or defaults in the performance of
any of its obligations in this Lease and the violation or default
continues for a period of thirty (30) days after written notice
(provided that Tenant shall be given such additional period of time
as is necessary to cure such default if such default is not
reasonably susceptible to being cured within such thirty (30) day
period, provided that Tenant diligently commences such cure and
diligently continues to pursue the curing of such default), then
Landlord may (but will not be required to) declare this Lease
forfeited and the Term ended, or re-enter the Premises, or may
exercise all other remedies available under Michigan law. Landlord
will not be liable for damages to person or property by reason of any
legitimate re-entry or forfeiture. Tenant, by the execution of this
Lease, waives notice of re-entry by Landlord. In the event of re-
entry by Landlord without declaration of forfeiture, the liability of
Tenant for the rent provided herein will not be relinquished or
extinguished for the balance of the Term, and any rentals prepaid may
be retained by Landlord and applied against the costs of re-entry, or
the costs of enforcement of this Lease, including the cost of any
proceeding under the Federal Bankruptcy Code.
21.02 BANKRUPTCY: If Tenant is adjudged bankrupt or insolvent, files or
-----------
consents to the filing of a petition in bankruptcy under Federal or
State law, applies for or consents to the appointment of a receiver
for all or substantially all of its assets, or makes a general
assignment for the benefit of its creditors, then Tenant shall be in
default under this Lease and, to the extent from time to time
permitted by applicable law, including but not limited to the Federal
Bankruptcy Code, Landlord shall be entitled to exercise all remedies
set forth in Section 21.01. In a reorganization under Chapter 11 of
the Federal Bankruptcy Code, the debtor or trustee must assume this
Lease or assign it within sixty (60) days from the filing of the
proceeding, or he shall be deemed to have rejected and terminated
this Lease. Tenant acknowledges that its selection to be the tenant
hereunder was premised in material part on Landlord's determination
of Tenant's creditworthiness and the character of its occupancy and
use of the Premises would be compatible with the nature of the
Premises and other adjacent properties and tenants of Landlord.
Therefore, if Tenant, as debtor, or its trustee elects to assume this
Lease, in addition to complying with all other requirements for
assumption under the Federal Bankruptcy Code, then Tenant, as debtor,
or its trustee or assignee, as the case may be, must also provide the
adequate assurance of future performance, including but not limited
to a deposit, the amount of which shall be reasonably determined
based on the duration of time remaining in the Term, the physical
condition of the Premises at the time the proceeding was filed, and
such damages as may be reasonably anticipated after reinstatement of
the Lease.
21.03 RE-LEASING OF PREMISES: In the event of declaration of forfeiture at or
-----------------------
after the time of re-entry, Landlord may re-lease the Premises or any
portion(s) of the Premises for a term or terms and at a rent which
may be less than or exceed the balance of the term of and the rent
reserved under this Lease. In such event Tenant will pay Landlord as
liquidated damages for Tenant's default any deficiency between the
total rent reserved and the net amount, if any, of the rents
collected on account of the lease or leases of the Premises which
otherwise would have constituted the balance of the term of this
Lease. In computing such liquidated damages, there will be added to
the deficiency reasonable expenses which Landlord may incur in
connection with re-leasing, such as legal expenses, attorneys' fees,
brokerage fees and expenses, advertising and for keeping the Premises
in good order or for preparing the Premises for re-leasing. Any such
liquidated damages will be paid in monthly installments by Tenant on
the Rent Day and any such suit brought to collect the deficiency for
any month will not prejudice Landlord's right to collect the
deficiency for any subsequent month by a similar proceeding. In lieu
of the foregoing computation of liquidated damages, Landlord may
elect, at its sole option, to receive liquidated damages in one
payment equal to any deficiency between the total rent reserved
hereunder and the fair and reasonable rental of the
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Premises, both discounted at five percent (5%) per annum to present
value at the time of declaration of forfeiture.
21.04 FAILURE TO RE-LEASE PREMISES: Whether or not forfeiture has been
-----------------------------
declared, Landlord will attempt to re-lease the Premises, however,
Landlord will not be responsible in any way for failure to re-lease
the Premises, or in the event that the Premises are re-leased, for
failure to collect the rent under such re-leasing. The failure of
Landlord to re-lease all or any part of the Premises will not release
or affect Tenant's liability for rent or damages.
SECTION 22
SURRENDER OF PREMISES ON TERMINATION
22.01 CONDITION OF PREMISES UPON TERMINATION: At the expiration (or earlier
---------------------------------------
termination) of the Term, Tenant will surrender the Premises broom
clean and in as good condition and repair as they were at the
Commencement Date, reasonable and normal wear and tear, fire and
damage by the elements, and repairs caused by Landlord's failure to
make repairs required under Section 12.01 excepted, and promptly upon
surrender will deliver all keys and building security cards for the
Premises to Landlord at the place then fixed for payment of rent. All
reasonable costs and expenses incurred by Landlord in connection with
repairing or restoring the Premises to the condition called for
herein, together with the costs, if any, of removing from the
Premises any property of Tenant left therein, together with
liquidated damages in an amount equal to the amount of minimum net
rental plus all other charges which would have been payable by Tenant
under this Lease if the term of this Lease had been extended for the
period of time reasonably required for Landlord to repair or restore
the Premises to the condition called for herein, shall be invoiced to
Tenant and shall be payable as additional rental within ten (10) days
of the date of such invoice.
22.02 STORAGE OF TENANT'S PROPERTY: If Tenant fails to remove all its property
-----------------------------
(or property of others in its possession) from the Premises on
termination of this Lease (for any cause), Landlord at its option may
remove the property in any manner that it chooses and may store the
property without liability to Tenant for loss, whether based on
contract, tort or otherwise. Tenant agrees to pay Landlord on demand
any and all expenses incurred in such removal, including court costs,
attorneys' fees and storage charges on the property for any length of
time it is in Landlord's possession. Tenant will indemnify and hold
Landlord harmless from any claim by third parties with respect to
property owned or claimed by them, left in the Premises by Tenant,
and removed by Landlord pursuant to this paragraph. Under no
circumstances will Landlord be obligated to retain any property left
in the Premises or in Landlord's possession longer than two (2)
months after termination of this Lease (for any cause) and Landlord
may after two (2) months dispose of the property in any manner it
deems appropriate, including public or private sale or by
destruction, discard or abandonment and the proceeds of any such sale
will be applied against any sums due Landlord under this Lease.
SECTION 23
PERFORMANCE BY LANDLORD OF THE COVENANTS OF TENANT
23.01 TENANT'S FAILURE TO PERFORM: If during the Term Tenant fails to pay any
----------------------------
sum of money, other than rental, required to be paid hereunder or
fails to perform any act on its part to be performed hereunder and
such failure shall continue for a period of thirty (30) days after
written notice from Landlord (or a reasonable period of less than
thirty (30) days when life, person or property is in jeopardy,
provided that in all other cases Tenant shall be given such
additional period of time beyond thirty (30) days as is necessary to
cure such default if such default is not reasonably susceptible to
being cured within such thirty (30) day period, provided that Tenant
diligently commences such cure and diligently continues to pursue the
curing of such default), Landlord may (but shall not be required to),
and without waiving or releasing Tenant from any of Tenant's
obligations, make any such payment or perform any such other act. All
-14-
sums paid by Landlord and all reasonable incidental costs, including
without limitation the cost of repair, maintenance or restoration of
the Premises if so performed by Landlord hereunder, shall be deemed
additional rental and, together with interest thereon at the rate set
forth in Section 5.02 from the date of payment by Landlord until the
date of repayment by Tenant to Landlord, shall be payable to Landlord
within fifteen (15) days after receipt of invoice by Tenant. On
default in such payment, Landlord shall have the same remedies as on
default in payment of rent. The rights and remedies granted to
Landlord under this Section 23 shall be in addition to and not in
lieu of all other remedies, if any, available to Landlord under this
Lease or otherwise, and nothing herein contained shall be construed
to limit such other remedies of Landlord with respect to any matters
covered herein.
SECTION 24
SUBORDINATION; ESTOPPEL CERTIFICATES
24.01 SUBORDINATION: Tenant agrees, that at Landlord's option, Tenant will
--------------
subordinate this Lease to any construction loans, mortgages, trust
deeds and ground or underlying leases now or hereafter affecting the
Premises and to any and all advances to be made thereunder, and to
the interest and charge thereon, and all renewals, replacements and
extensions thereon, provided the mortgagee, lessor or trustee named
in any such mortgages, trust deeds or leases delivers to Tenant a
commercially reasonable non-disturbance agreement in recordable form
pursuant to which such party shall recognize the lease of Tenant in
the event of foreclosure or other enforcement of such instruments if
Tenant is not in default. Tenant will execute promptly any instrument
or certificate that Landlord may reasonably request to effectuate
such subordination, subject to Tenant's receipt of such non-
disturbance agreement. In addition, Tenant agrees that Landlord may
from time to time subordinate any construction loans, mortgages,
trust deeds, ground leases or underlying leases now or hereafter
affecting the Premises, and any renewals, replacements and extensions
thereon, to this Lease, and Tenant will execute promptly any
instrument or certificate that Landlord may reasonably request to
confirm the superior status of this Lease with respect to such
subordination. Landlord represents and warrants that as of the date
hereof there are no construction loans, mortgages, trust deeds and
ground or underlying leases affecting the Premises for which Tenant
has not been provided a non-disturbance agreement in the form
required hereunder.
SECTION 25
INTENTIONALLY OMITTED
SECTION 26
QUIET ENJOYMENT
26.01 QUIET ENJOYMENT: Landlord agrees that at all times during the Term of
----------------
this Lease when Tenant is not in default beyond the expiration of any
applicable grace and cure period after notice, Tenant's quiet and
peaceable enjoyment of the Premises will not be disturbed or
interfered with by Landlord or any person claiming by, through, or
under Landlord.
SECTION 27
HOLDING OVER
27.01 HOLDING OVER: Upon written consent from the Landlord, if Tenant remains
-------------
in possession of the Premises after expiration of this Lease without
executing a new lease, it will be deemed to be occupying the Premises
as a tenant from month-to-month (regardless of whether rent is
reserved annually or monthly hereunder), subject to all the
provisions of this Lease to the extent that they can be applicable to
a month-to-month tenancy, except that the minimum
-15-
rental for each month (the "Monthly Holdover Rental") will be one
hundred twenty percent (120%) of the Base Monthly Rental. If without
Landlord's written consent Tenant remains in possession of the
Premises after the expiration of this Lease, (a) Tenant shall pay
Landlord the Monthly Holdover Rental for each month (or portion
thereof) during such holdover period, and (b) if such possession by
Tenant continues for more than thirty (30) days after the expiration
of this Lease, Tenant shall be liable to Landlord for and indemnify
Landlord against (i) the loss of the benefit of the bargain if any
tenant obtained by Landlord for all or any part of the Premises (a
"New Tenant") shall terminate its lease by reason of the holding over
by Tenant, and (ii) any claim for damages by any New Tenant, provided
that Landlord gives written notice to Tenant on or after the
expiration date for this Lease that Landlord intends to enforce such
indemnification if Tenant does not vacate the Premises within thirty
(30) days from the date of such notice.
SECTION 28
REMEDIES NOT EXCLUSIVE; WAIVER
28.01 REMEDIES: Each and every of the rights, remedies and benefits provided by
---------
this Lease are cumulative and are not exclusive of any other of said
rights, remedies and benefits, or of any other rights, remedies and
benefits allowed by law.
28.02 WAIVER OF COVENANT: One or more waivers of any covenant or condition by
-------------------
Landlord will not be construed as a waiver of a further or subsequent
breach of the same covenant or condition, and the consent or approval
by Landlord to or of any act by Tenant requiring Landlord's consent
or approval will not be deemed to waive or render unnecessary
Landlord's consent to or approval of any subsequent similar act by
Tenant.
SECTION 29
WAIVER OF CLAIMS
29.01 WAIVER OF CLAIMS: Landlord and Tenant hereby waive any and all right of
-----------------
recovery against each other for any loss or damage caused by fire or
any of the risks covered by standard fire and extended coverage,
vandalism and malicious mischief insurance policies.
SECTION 30
INDEMNIFICATION
30.01 INDEMNIFICATION: Tenant at its expense will defend, indemnify and save
----------------
Landlord and its licensees, servants, agents, employees and
contractors, harmless from any claim for personal injury or property
damage arising out of any condition of the Premises, the use or
misuse thereof by Tenant or any other person, the acts or omissions
of Tenant, its agents, employees or contractors, the failure of
Tenant to comply with any provision of this Lease, or any other event
occurring in the Premises, whatever the causes; provided, however,
that nothing herein shall be construed to require Tenant to defend,
indemnify and hold harmless Landlord or its licensees, servants,
agents, employees, and contractors against (i) Landlord's or its
licensees', servants', agents', employees' and contractors' own acts,
omissions or neglect, and (ii) any acts or omissions of Tenant prior
to, or conditions existing as of, the Commencement Date.
-16-
SECTION 31
ASSIGNMENT BY LANDLORD
31.01 ASSIGNMENT BY LANDLORD: The term "Landlord" as used in this Lease so far
-----------------------
as covenants, agreements, stipulations or obligations on the part of
the Landlord are concerned is limited to mean and include only the
owner or owners of fee title (or of a ground leasehold interest or
land contract vendee's interest) to the Premises at the time in
question, and in the event of any transfer or transfers of the title
to such fee the Landlord herein named (and in case of any subsequent
transfers or conveyances the then grantor) will automatically be
freed and relieved from and after the date of such transfer or
conveyance of all liability for the performance of any covenants or
obligations on the part of the Landlord contained in this Lease
thereafter to be performed.
31.02 LANDLORD'S DEFAULT: If Landlord fails to perform any provision of this
-------------------
Lease upon Landlord's part to be performed, and if as a consequence
of such default Tenant recovers a money judgment against Landlord,
such judgment may be satisfied only out of the proceeds of sale
received upon execution of such judgment and levied thereon against
the right, title and interest of Landlord in the Building and out of
rents or other income from such property receivable by Landlord and
Landlord shall not be personally liable for any deficiency.
SECTION 32
SECURITY DEPOSIT
32.01 SECURITY DEPOSIT: Landlord hereby acknowledges the receipt of the
-----------------
Security Deposit, if any. If Tenant defaults in any of the provisions
of this Lease, Landlord may use, apply or retain all or any part of
the Security Deposit for the payment of rents and/or other charges
which are the obligation of Tenant under this Lease in default or for
any other sum which Landlord may expend by reasons of Tenant's
default, including any damages or deficiency in the releasing of the
Premises. If Tenant fully complies with all the provisions of this
Lease, the Security Deposit, or balance thereof, will be returned to
Tenant without interest after (i) the termination of this Lease, (ii)
the removal of Tenant, and (iii) the surrender of possession of the
Premises to Landlord. Unless Landlord is shown evidence satisfactory
to it that the right to receive the Security Deposit has been
assigned, Landlord may return the Security Deposit to the original
Tenant regardless of one or more assignments of the Lease itself.
SECTION 33
HAZARDOUS MATERIALS
33.01 NO HAZARDOUS MATERIALS: Tenant covenants that the Premises will not be
-----------------------
used by Tenant, or anyone acting by or through Tenant or any of its
agents, affiliates, subsidiaries, representatives, successors or
assigns to dispose of, refine, generate, manufacture, produce, use,
store, handle, treat, transfer, release, process or transport any
"Hazardous Materials" except in small quantities consistent with
general office use and in compliance with and in a manner that would
not reasonably be expected to lead to liability under Environmental
Laws. Hazardous Materials shall mean all substances (including,
without limitation, petroleum and any derivative thereof), wastes or
materials classified as hazardous or toxic under, or otherwise
regulated under, any applicable "Environmental Laws". "Environmental
Laws" means any statute, law, regulation or rule, in each case as in
effect on or prior to the Commencement Date, that has as its
principal purpose the protection of the environment or natural
resources.
-17-
33.02 USE OF PREMISES: Tenant shall not cause or permit the Premises to be used
----------------
to generate, manufacture, refine, transport, treat, store, use,
handle, dispose of, transfer, produce or process Hazardous Materials,
except in small quantities consistent with general office use and in
compliance with and in a manner that would not reasonably be expected
to lead to liability under Environmental Laws, nor shall Tenant cause
or permit, as a result of any intentional or unintentional act or
omission on the part of Tenant or any of its agents, affiliates,
subsidiaries, representatives, successors or assigns, a release of
Hazardous Materials onto, under or from, the Premises. Tenant agrees
to promptly deliver to the Landlord copies of all notices received by
Tenant from any federal, state or local authority regarding
environmental problems affecting the Premises. The provisions hereof
shall be in addition to any and all other obligations and liabilities
Tenant may have to the Landlord in common law and shall survive
termination of this Lease and the satisfaction of all other
obligations of Tenant hereunder.
33.03 PRESENCE OF HAZARDOUS MATERIALS/INDEMNITY: If Tenant fails to comply with
------------------------------------------
this Section 33 or if Hazardous Materials are present at, on or under
or migrate from the Premises after the Commencement Date by Tenant's
breach of Section 33.02 or by an act or omission of Tenant or any of
its agents, affiliates, subsidiaries, representatives, successors or
assigns after the Commencement Date, Tenant shall: (i) conduct and
complete all investigations, studies, sampling and testing, and all
remedial, removal and other actions necessary to clean up and remove
such Hazardous Materials on, under, from or affecting the Premises in
accordance with all applicable Environmental Law ("Remediation
Activities"); provided that, Tenant shall (A) keep Landlord informed
of any Remediation Activities being planned or conducted and shall
provide sufficient notice of such Remediation Activities to enable
Landlord to comment thereon, (B) consider in good faith any comments
by Landlord regarding Remediation Activities and (C) secure state
approval (if and to the extent applicable state procedures provide
for such) upon completion of any Remediation Activities in a form
reasonably acceptable to Landlord; and (ii) defend, indemnify and
hold harmless Landlord, its employees, agents, officers and directors
from and against any claims, demands, penalties, fines, liabilities,
settlements, damages, costs or expenses of whatever kind or nature,
known or unknown, contingent or otherwise, arising out of or in any
way related to: (A) the presence, disposal, release or threatened
release of any Hazardous Materials on, over, under, from or affecting
the Premises or the soil, water, vegetation, buildings, personal
property, persons or animals thereon; (B) any personal injury
(including wrongful death) or property damage (real or personal)
arising out of or related to such Hazardous Materials; (C) any
lawsuit brought or threatened, settlement reached or government order
relating to such Hazardous Materials; or (D) any violation of laws,
orders, regulations, requirements or demands of government
authorities, or any policies or requirements of Landlord, which are
based upon or in any way related to such Hazardous Materials,
including, without limitation, attorney's and consultant's fees,
investigation and laboratory fees, court costs and litigation
expenses. In no event shall Tenant have any liability for: (i) any
act of negligence of the Landlord or its agents, affiliates,
subsidiaries, representatives, successors or assigns, (ii) conditions
not in existence on such date as Landlord, its successors or assigns,
re-takes possession of the Premises; or (iii) conditions aggravated
or worsened by Landlord, or its agents, affiliates, subsidiaries,
representatives, successors, assigns or any third party, after such
date as Landlord or its successors and assigns re-takes such
possession. Tenant shall have the right to contest in good faith the
applicability or any alleged violation of any Environmental Law. In
any event, provided enforcement is stayed, there shall be no
liability with respect to any Remediation Activities until Tenant's
rights to appeal any governmental order (state or federal) relating
to such Remediation Activities shall have been exhausted, waived, or
terminated, provided that nothing herein shall alter Tenant's
obligations pursuant to Section 15.01 with respect to liens. If
Hazardous Materials are present at, on or under or migrate from the
Premises (i) by an act or omission of Landlord, any tenant other than
Tenant or any of Landlord's agents, affiliates, subsidiaries,
representatives, successors or assigns or (ii) prior to the
Commencement Date, Landlord shall defend, indemnify and hold harmless
Tenant, its employees, agents, officers and directors from and
against any claims, demands, penalties, fines, liabilities,
settlements,
-18-
damages, costs or expenses of whatever kind or nature, known or
unknown, contingent or otherwise, arising out of or in any way
related to: (A) the presence, disposal, release or threatened release
of any such Hazardous Materials on, over, under, from or affecting
the Premises or the soil, water, vegetation, buildings, personal
property, persons or animals thereon; (B) any personal injury
(including wrongful death) or property damage (real or personal)
arising out of or related to such Hazardous Materials; (C) any
lawsuit brought or threatened, settlement reached or government order
relating to such Hazardous Materials; or (D) any violation of laws,
orders, regulations, requirements or demands of government
authorities which are based upon or in any way related to such
Hazardous Materials, including, without limitation, attorney's and
consultant's fees, investigation and laboratory fees, court costs and
litigation expenses; provided, however, that nothwithstanding
anything herein to the contrary, in no event shall Landlord have any
liability for: (i) any act of negligence of Tenant or its agents,
affiliates, subsidiaries, representatives, successors or assigns,
(ii) any act or omission of Tenant or its agents, affiliates,
subsidiaries, representatives, successors or assigns prior to
Commencement Date, or (iii) conditions aggravated or worsened by
Tenant, or its agents, affiliates, subsidiaries, representatives,
successors or assigns.
SECTION 34
MOVEMENT OF TENANT'S PROPERTY
34.01 MOVING TENANT'S PROPERTY: All activities of Tenant in connection with (a)
-------------------------
Tenant's move into the Premises at the commencement of this Lease,
(b) the movement of equipment, furniture or other bulky items into,
out of or within the Premises during the Term, or (c) Tenant's move
out of the Premises at any time (whether or not on the termination of
this Lease) will be subject to the following:
A. DESIGNATED ACCESS: All furniture, equipment and all other items of
------------------
personal property being moved or transferred will enter and leave the
Building solely through and by way of such area or entrance as may be
designated from time to time by Landlord for such purposes;
B. TENANT RESPONSIBLE: Tenant will be responsible for the active
-------------------
supervision (on-site) of all workmen and others performing the move,
and will indemnify and hold harmless Landlord against and from all
liability for damage to property (whether belonging to Landlord,
other tenants or any other person) and injuries to persons in
connection with the move and the actions, or failure to act, of or by
those performing the move;
C. DAMAGE: Tenant will be responsible for any damage to the Building,
-------
the Common Areas, the Premises, or the premises and property of other
tenants, caused by or incurred in connection with the move or the
activities connected therewith. Landlord will perform such
inspection(s) as Landlord in its sole discretion determines to be
appropriate, and will invoice Tenant for the costs of repair of all
such damage or the replacement, if necessary, of damaged items. All
determinations of the extent of damage and the costs of repair or
replacement will be made by Landlord in the exercise of its
reasonable discretion. The invoiced sums will constitute amounts
included within and payable under Section 9, above.
SECTION 35
NON-TERMINABILITY, COMPLIANCE WITH LAWS, COSTS, SEVERABILITY
35.01 NON-TERMINABILITY: Except as otherwise specifically provided in this
------------------
Lease, this Lease shall neither terminate nor shall Tenant have any
right to terminate this Lease or to be released, relieved or
discharged from any obligations or liabilities hereunder for any
reason whatsoever, including, without limitation:
-19-
A. DAMAGE: Any damage to, or destruction of, the Premises or any portion
-------
thereof.
B. CONDEMNATION: Any condemnation, confiscation, requisition or other
-------------
taking or sale of the possession, use, occupancy or title to the
Premises or any portion thereof.
C. OMISSION: Any action, omission or breach on the part of Landlord under
---------
this Lease or under any other agreement at the time existing between
Landlord and Tenant.
D. OTHER CLAIMS: Any claim as a result of any other business dealings of
-------------
Landlord and Tenant.
E. IMPOSSIBILITY: The impossibility or illegality of performance by
--------------
Landlord or Tenant or both.
F. FORCE MAJEURE: Force majeure.
--------------
G. GOVERNMENTAL ACTION: Any action or threatened or pending action of any
--------------------
court, administrative agency or other governmental authority.
Except as otherwise specifically provided in this Lease, Tenant shall remain
obligated under this Lease in accordance with its terms, and will not
take any action to terminate, rescind or avoid this Lease for any reason,
notwithstanding any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution or other proceeding affecting
Landlord or any assignee of Landlord or any action with respect to this
Lease which may be taken by any receiver, trustee or liquidator (or other
similar official) or by any court. All payments by Tenant hereunder shall
be final and Tenant will not seek to recover any such payment or any part
thereof for any reason. Tenant waives all rights now or hereafter
conferred by statute or otherwise to quit, terminate or surrender this
Lease, or to any abatement, suspension, deferment, diminution or
reduction of rent, additional rent or other amounts payable by Tenant
hereunder, or for damage, loss, cost or expense suffered by Tenant, on
account of any of the reasons referred to herein or otherwise.
Notwithstanding anything to the contrary contained in this Lease,
provided that Tenant is not in default under this Lease beyond the
expiration of any applicable grace and cure period after notice, in the
event the Premises are rendered substantially untenantable (other than in
the event of casualty or condemnation) through no fault of Tenant for a
period in excess of (i) thirty (30) consecutive days (or three (3) days
if the second sentence of Section 7.07 is applicable), Tenant shall be
entitled to a proportionate abatement of rent during the period of such
untenantability, and (ii) twelve (12) consecutive months, Tenant shall
have the right to terminate this Lease.
SECTION 36
ENTIRE AGREEMENT; MERGER AGREEMENT
36.01 ENTIRE AGREEMENT: MERGER AGREEMENT This Lease and the Riders attached
----------------------------------
hereto which are hereby incorporated herein and form a part hereof,
together with the Merger Agreement, set forth all of the covenants,
agreements, stipulations, promises, conditions and understandings
between Landlord and Tenant concerning the Premises and there are no
covenants, agreements, stipulations, promises, conditions or
understandings, either oral or written, between them concerning the
Premises other than in the Merger Agreement and herein set forth.
Prior to the Commencement Date, Tenant was affiliated with Landlord
and Tenant and certain of its other affiliates occupied the Premises.
As of the Commencement Date, a change of control of Tenant was
effectuated by merger. Accordingly, notwithstanding anything expressed
or implied in this Lease to the contrary, references in this Lease to
"Tenant," or to acts or omissions or obligations of Tenant, its
agents, representatives, officers, employees, contractors, successors
and assigns shall be deemed to refer only to periods subsequent to the
Commencement Date except where such reference explicitly indicates
otherwise, and Tenant shall have no liability hereunder for periods
prior to the Commencement Date, all with the same effect as if Tenant
first occupied the Premises on the Commencement Date. However, nothing
contained herein shall in any way affect or
-20-
vitiate any provisions of the Merger Agreement, and in the event of
any inconsistency between this Lease and the Merger Agreement, the
Merger Agreement shall control.
SECTION 37
RECORDING
37.01 RECORDING: This Lease shall not be recorded by Tenant; however, Tenant
----------
shall have the right to file or record a memorandum of lease or
affidavit of claim with respect to this Lease or the Premises. At
Landlord's option, Landlord may record this Lease. Upon either
party's request, the other party shall execute and deliver to the
requesting party a memorandum of lease or affidavit of claim for
recording by the requesting party.
SECTION 38
GENERAL
38.01 GENERAL TERMS: Many references in this Lease to persons, entities and
--------------
items have been generalized for ease of reading. Therefore, reference
to a single person, entity or item will also mean more than one
person, entity or thing whenever such usage is appropriate.
Similarly, pronouns of any gender should be considered
interchangeable with pronouns of other genders.
38.02 JOINT AND SEVERAL: In the event more than one party signs this Lease as
------------------
Tenant such parties shall be both jointly and severally liable for
payment of amounts due hereunder and performance of the terms and
conditions hereof. This Lease may be enforced by Landlord against any
of such parties at Landlord's sole discretion. Each Tenant consents
to the in personam jurisdiction of the Michigan Courts located in
Washtenaw County, Michigan and the United States Federal Court for
the Eastern District of Michigan.
38.03 CAPTIONS: Captions to sections and paragraphs are provided solely for the
---------
sake of convenience and shall have no substantive effect whatsoever.
38.04 AMENDMENTS: This lease can be modified or amended only by a written
-----------
agreement signed by Landlord and Tenant.
38.05 BINDING LEASE: All provisions of this Lease are and will be binding on
--------------
the heirs, executors, administrators, personal representatives,
successors and assigns of Landlord and Tenant.
38.06 GOVERNING LAW: The laws of the State of Michigan will control in the
--------------
construction and enforcement of this Lease.
It is hereby agreed between Landlord and Tenant that the Second
Amended and Restated Lease for Phase I through Phase V between Landlord
and Tenant dated November 24, 1997, is terminated effective the date
hereof and shall be no longer in force or effect as of said date.
This Lease may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signature thereto
and hereto were upon the same instrument.
-21-
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day
and year first above written.
LANDLORD:
DOMINO'S FARMS OFFICE PARK
LIMITED PARTNERSHIP
(a Michigan limited partnership)
By: DOMINO'S FARMS HOLDING LLC
(A Michigan limited liability company)
Its General Partner
By: DOMINO'S FARMS ENTERPRISES
LIMITED PARTNERSHIP
(a Michigan limited partnership)
Its Managing Member
By: /s/ Thomas S. Monaghan
----------------------
THOMAS S. MONAGHAN
Its General Partner
WITNESS
/s/ Jeffrey Randolph
- ------------------------------
/s/ Dianne Anderson
- ------------------------------
WITNESS: TENANT:
-22-
DOMINO'S PIZZA, INC.
(a Michigan corporation)
/s/ By: /s/ Harry J. Silverman
- ------------------------------ ------------------------------
Name: Harry J. Silverman
Its: Vice President
/s/ Peter S. Bevacqua
- ------------------------------
-23-
RIDER A
OFFICE LOCATION
Current Space (Occupied by)
- -------------
Per attached drawing
-24-
RIDER B
RULES AND REGULATIONS
The Landlord, or the Agent of the Landlord, as the case may be, reserves
the right to make such other further and reasonable rules and regulations as in
its judgment may from time to time be necessary or desirable for the safety and
preservation of good order and prestige therein.
Wherever the word "Tenant" occurs, it is understood and agreed that it
shall mean Tenant's employees, agents, clerks, servants and visitors. Wherever
the word "Landlord" occurs, it is understood and agreed that it shall mean
Landlord's assigns, agents, clerks, servants and visitors.
1. No sign, picture, lettering, notice or advertisement of any kind shall be
painted, taped or displayed on or from the windows, doors, roof or
outside wall of the premises. Landlord shall have the right to approve
all signs, exhibits and displays to be made by Tenant in and from
common areas of the building. All of Tenant's interior sign painting
or lettering shall be approved by Landlord and the cost thereof shall
be paid by Tenant. Notwithstanding the foregoing, Tenant shall be
permitted to maintain all signage in existence on the date hereof.
2. No electric or other wires for any purpose shall be brought into the
premises without Landlord's written permission specifying the manner
in which same may be done. This shall prohibit use of hot plates
(cooking) and only approved electric percolators or coffee makers
shall be permitted. No boring, cutting or stringing of wire shall be
done without Landlord's prior written consent. Tenant shall not
disturb or in any way interfere with the electric light fixtures, and
all work upon or alterations to the same shall be done by persons
authorized by Landlord.
3. Water closets and other toilet fixtures shall not be used for any purpose
other than that for which the same is intended, and any damage
resulting to same from Tenant's misuse shall be paid for by Tenant. No
person shall waste water by interfering or tampering with the faucets
or otherwise.
4. No person shall disturb the occupants of this or adjoining buildings or
premises by the use of radios, television sets, loud speakers, or
musical instruments, or by making loud or disturbing noises.
5. No bicycle or other vehicle and no pets shall be allowed in offices, hall,
corridors or elsewhere in the building.
6. No floor load exceeding an average rate of 60 pounds of live load per
square foot of floor area can be allowed. Tenant's business machines
and mechanical equipment which cause vibration or noise that may be
transmitted to the building structure or to any other leased space in
the building shall be placed and maintained by Tenant in settings of
cork, rubber, spring or other types of vibration eliminators
sufficient to reduce to an appropriate level such vibration or noise.
7. Any safe, vault, heavy equipment, furniture, or machinery moved in or out
of the premises shall be moved in such manner and at such times as
Landlord shall in each instance approve, which approval shall not be
unreasonably withheld.
8. No additional lock or locks shall be placed on any door in the building
without Landlord's prior written consent. Upon the termination of this
Lease, the Tenant shall surrender to Landlord all keys and card access
to the premises. A twenty-five dollar fine will be imposed for each
key or card access not returned to Landlord.
9. Tenant shall not install or operate any steam or gas engine or boiler, or
carry on any mechanical business on said premises, or use oil burning
fluids or gasoline for heating or lighting or for any other purpose.
No article deemed extra hazardous on account of fire or other
dangerous properties, or any explosive, shall be brought into said
premises.
-25-
10. The premises shall not be used for lodging or sleeping, or for any immoral
or illegal purposes.
11. Any newspaper, magazine or other advertising done from the said premises or
referring to the said premises, Domino's Farms or Prairie House, which
in the reasonable opinion of the Landlord is objectionable, shall be
immediately discontinued upon notice from the Landlord.
12. The sidewalk, entry, passage hall and stairway shall not be obstructed or
used for any purpose other than those of ingress and egress without
the express written consent of the Landlord.
13. Window coverings other than those which may be provided by Landlord, either
inside or outside of the windows, may only be installed with the
Landlord's prior written consent, which consent shall not be
unreasonably withheld, and must be furnished, installed and maintained
at the expense of the Tenant and at Tenant's risk, and must be of such
shape, color, material, quality and design as may be prescribed by the
Landlord. Tenant shall exercise reasonable care in placing furniture,
equipment, etc. in such a position as to not obstruct the windows.
14. Tenant will exercise reasonable discretion with regard to thermostat
settings within the tenant space. Acceptable temperatures for heating
will not exceed 72 degrees or fall below 68 degrees for cooling.
15. Tenant will be responsible for vending service located within the tenant
premises. Landlord will reasonably approve vending contractors within
the building. Tenant will coordinate vending installation with
Landlord.
16. Domino's Farms Prairie House is a smoke free building; smoking of cigars,
pipes and cigarettes are not allowed inside the building.
17. Subject to the terms of the Lease between Tenant and Landlord, Landlord
will provide normal heating, ventilation and air conditioning as
reasonably required by prevailing weather conditions to the leased
premises.
18. Periodic fire drills and emergency evacuation drills (to include severe
weather) will be conducted by the building Security Department. Tenant
participation is mandatory.
-26-
RIDER C
ADDITIONAL PROVISIONS
1. PARKING SPACES
--------------
Tenant shall be provided a minimum of twelve (12) parking spaces in the
parking lot adjacent to Lobby G.
2. OPTIONS TO RENEW
----------------
(a) First Extended Term
-------------------
Tenant may extend the term of this Lease for one additional term consisting
of five (5) years (the "First Extended Term ") upon expiration of the
initial Term, provided that Tenant is not then in default beyond the
expiration of any applicable grace and cure period after notice.
The First Extended Term shall be upon the same conditions as provided in
this Lease, except that (i) the Base Annual Rent for the First Extended
Term shall be as follows:
Year Base Annual Rent
---- ----------------
Year 6 $4,668,913
Year 7 $4,793,410
Year 8 $4,936,510
Year 9 $5,053,852
Year 10 $5,189,797
, and (ii) in addition to the payment of Base Annual Rent, Tenant shall
during the First Extended Term pay to Landlord for the use of the fitness
center a reasonable price or fee which the Landlord may then be charging to
Tenant and the other tenants in the Building on a prorata basis (based upon
the rentable square feet of the Premises in relation to the rentable square
feet of all of Domino's Farms), which amount shall be payable in equal
monthly installments on each Rent Day; provided, however that Tenant shall
not be obligated to pay such price or fee at such times as Tenant provides
Landlord with written notice that it elects not to use such fitness center
during the First Extended Term. The Tenant shall exercise the option for
the First Extended Term by notifying the Landlord in writing at least 180
days before the current Term expires. Upon such exercise this Lease shall
be deemed to be extended without the execution of any further lease or
other instrument, except for any instrument that may be prepared by
Landlord to confirm the agreement of the parties, which Tenant agrees to
execute and deliver to Landlord promptly on request. Time shall be of the
essence with respect to the exercise of such option by Tenant.
(b) Second Extended Term
--------------------
Tenant may extend the Term of this Lease for a second additional term
consisting of five (5) years (the "Second Extended Term ") upon expiration
of the First Extended Term, provided that Tenant (i) has exercised its
option for the First Extended Term, and (ii) is not then in default beyond
the expiration of any applicable grace and cure period after notice.
The Second Extended Term shall be upon the same conditions as provided in
this Lease, except that (i) the Base Annual Rent for the Second Extended
Term shall be the fair market rent for the Premises (the "FMV") on the date
which is nine years, two hundred ten days after the Commencement Date (the
"Rent Appraisal Date"), and (ii) in addition to the payment of Base Annual
Rent, Tenant shall during the Second Extended Term pay to Landlord for the
use of the fitness center a reasonable price or fee which the Landlord may
then be charging to Tenant and the other tenants in the Building on
-27-
a prorata basis (based upon the rentable square feet of the Premises in
relation to the rentable square feet of all of Domino's Farms), which
amount shall be payable in equal monthly installments on each Rent Day;
provided, however that Tenant shall not be obligated to pay such price or
fee at such times as Tenant provides Landlord with written notice that it
elects not to use such fitness center during the Second Extended Term.
The Tenant shall exercise the option for the Second Extended Term by
notifying the Landlord in writing at least 180 days before the First
Extended Term expires. Upon such exercise this Lease shall be deemed to be
extended without the execution of any further lease or other instrument,
except for any instrument that may be prepared by Landlord to confirm the
agreement of the parties, which Tenant agrees to execute and deliver to
Landlord promptly on request. Time shall be of the essence with respect to
the exercise of such option by Tenant.
The FMV shall be determined by the mutual written agreement of Landlord and
Tenant. In the event that Landlord and Tenant shall not have reached mutual
agreement as to the FMV on or before the sixtieth (60th) day following the
Rent Appraisal Date, but Landlord's determination of the FMV is less than
five percent (5%) greater than Tenant's determination of the FMV (which
respective determinations shall be based on blind written bids submitted at
the end of the sixty (60) day period by each of Landlord and Tenant to the
other), the FMV will be the average of Landlord's and Tenant's respective
determinations. In the event that Landlord and Tenant shall not have
reached mutual agreement as to the FMV on or before the sixtieth (60th) day
following the Rent Appraisal Date and Landlord's determination of the FMV
is more that five percent (5%) greater than Tenant's determination of the
FMV, then Landlord and Tenant each shall, no later than the seventy-fifth
(75th) day following the Rent Appraisal Date, select a Real Estate
Appraiser, as hereinafter defined. If either party shall fail to so appoint
a Real Estate Appraiser, the one Real Estate Appraiser so appointed shall
proceed to determine the FMV. In the event that the Real Estate Appraisers
selected by Landlord and Tenant agree as to the FMV, said determination
shall be binding on Landlord and Tenant. In the event that the Real Estate
Appraisers selected by Landlord and Tenant cannot agree as to the FMV on or
before the one hundred fifth (105th) day following the Rent Appraisal Date,
then said Real Estate Appraisers shall each designate his or her
calculation of FMV and shall jointly select a third Real Estate Appraiser,
provided that if they cannot agree on the third Real Estate Appraiser on or
before the one hundred twentieth (120th) day following the Rent Appraisal
Date, then said third Real Estate Appraiser shall be selected by the
President of the American Arbitration Association of Southfield, Michigan
(or any successor thereto). The third Real Estate Appraiser shall designate
his or her calculation of FMV no later than the one hundred fiftieth
(150th) day following the Rent Appraisal Date and the average of the three
FMV's designated by the three Real Estate Appraisers shall be the FMV as
determined hereunder, except that for the purpose of such averaging each
and every designated FMV which varies by more than ten percent (10%) from
the amount which is the average of the other two (2) designated FMV's shall
be ignored (it being understood that if two (2) designated FMV's so vary,
the remaining designated FMV shall be the FMV as determined hereunder). The
term "Real Estate Appraiser" shall mean a fit and impartial person having
not less than five (5) years experience as an appraiser of leasehold
estates relating to first class office space in Ann Arbor, Michigan. The
appraisal shall be conducted in accordance with the provisions of this
Section and, to the extent not inconsistent herewith, in accordance with
the prevailing rules of the American Arbitration Association in Michigan or
any successor thereto. The final determination of the Real Estate
Appraiser(s) shall be in writing and shall be binding and conclusive upon
the parties, each of which shall receive counterpart copies thereof. In
rendering such decision the Real Estate Appraiser(s) shall not add to,
subtract from or otherwise modify the provisions of this Lease. The fees
and expenses of the Real Estate Appraisers shall be shared equally by
Landlord and Tenant.
In rendering the determination of FMV the real estate appraiser(s) shall
assume or take into consideration as appropriate all of the following: (1)
Landlord and Tenant are typically motivated; (2) the Landlord and
prospective Tenant are well informed and well advised and each is acting in
what it considers its own best interest; (3) a reasonable time under then-
existing market conditions is allowed for exposure of the Premises on the
open market; (4) the rent is unaffected by any obligation of Landlord to
pay brokerage commissions or tenant improvement allowances, or by
concessions, special financing amounts and/or terms, or unusual services,
fees, costs or credits in
-28-
connection with the leasing transaction; (5) the Premises are fit for
immediate occupancy and use "as is" and require no additional work by
Landlord and that no work has been carried out therein by the Tenant, its
subtenant, or their predecessors in interest during the Term which has
diminished the rental value of the Premises; (6) in the event the Premises
have been destroyed or damaged by fire or other casualty, they have been
fully restored; (7) that the Premises are to be let with vacant possession
and subject to the provisions of this Lease; and (8) market rents then
being charged for comparable space in other similar office buildings in the
same area, provided that arm's-length leases of space in the Building
during the preceding year shall be the best evidence of FMV. In rendering
such decision and award, the arbitrators shall not modify the provisions of
this Lease. The decision and award of the reals estate appraisers shall be
in writing and shall be final and conclusive on all parties and counterpart
copies thereof shall be delivered to each of said parties. Judgment may be
had on the decision and award of the arbitrators so rendered in any court
of competent jurisdiction.
3. RIGHT OF FIRST OFFER FOR ADDITIONAL SPACE
-----------------------------------------
Tenant shall have the right of first offer with respect to leasing
additional space in Phase 1, Phase 2 and Phase 3 of the Building as such
space ("Additional Space") becomes available for leasing by the Landlord,
provided that (1) this Lease is then in full force and effect, and (2) at
least one (1) year of its term then remain (or, if less than one (1) year
remain, Tenant has given notice of its option to extend the initial term of
this Lease).
Landlord shall notify (the "Offer Notice") Tenant when Additional Space
becomes available for leasing and the terms and conditions (including
without limitation, provisions for increase in rent and additional rent,
provided that the expiration date for the lease of such Additional Space
shall be coterminous with this Lease) upon which Landlord is willing to
lease the Additional Space to Tenant (the "Offer Terms"), and Tenant shall
then have 30 days to notify Landlord that it agrees to lease all (but not
less than all, unless Landlord agrees to lease only part of the Additional
Space to Tenant) of the Additional Space on the Offer Terms.
If Tenant declines to accept all (or such lesser amount as Landlord may
approve, which approval shall not be unreasonably withheld provided that
(i) Tenant pays for all costs incurred to reconfigure the Additional Space,
and (ii) the portion of the Additional Space which Tenant proposes to lease
such be located entirely at one end of the Additional Space) of the
Additional Space on the Offer Terms, or fails to reply to Landlord's notice
of the availability of Additional Space within the 30 day period specified
above, Tenant's right to lease the Additional Space which is the subject of
the offer shall expire and Landlord may lease the Additional Space to any
other party on terms no less favorable to Landlord than those contained in
the Offer Terms, without further liability to Tenant; provided, however,
that if within 180 days from the date of the Offer Notice Landlord fails to
consummate a lease of the Additional Space to any other party on terms no
less favorable to Landlord as aforesaid, then the provisions of this
Paragraph 3 shall again apply.
If Tenant agrees by reply notice to lease all (or such lesser amount in
accordance with the immediately prior sentence) of the Additional Space
offered on the Offered Terms, Landlord and Tenant shall promptly enter into
a modification of this Lease to incorporate the subject space into this
Lease.
-29-
EXHIBIT 10.4
MANAGEMENT AGREEMENT
This Management Agreement (this "Agreement") is entered into as of the 21st
day of December 1998 by and between TISM, Inc., a Michigan corporation (together
with each of its direct and indirect subsidiaries signatory hereto or hereafter
becoming party hereto by executing a counterpart signature page hereof, the
"Company") and Bain Capital Partners VI, L.P., a Delaware limited partnership
("Bain").
WHEREAS, TM Transitory Merger Corporation ("MergerCo") was formed for
the purpose of effecting the recapitalization of the Company (the
"Recapitalization"), all on the terms and subject to the conditions of that
certain Agreement and Plan of Merger dated as of September 25, 1998 (as
amended, restated, supplemented or otherwise modified, the "Merger
Agreement") among the Company, MergerCo and Thomas S. Monaghan
("Monaghan");
WHEREAS, Bain is providing advisory and other services in connection
with the senior secured financing (the "Senior Financing") being provided
for the Recapitalization pursuant to a Credit Agreement dated on or about
the date hereof by J.P. Morgan Securities Inc., as arranger and syndication
agent, Morgan Guaranty Trust Company of New York, as administrative agent,
and the lending institutions from time to time party thereto (the "Credit
Agreement");
WHEREAS, certain funds (the "Bain Funds") affiliated with Bain are
providing equity financing (the "Equity Investments") in connection with
the Recapitalization; and
WHEREAS, subject to the terms and conditions of this Agreement, the
Company desires to retain Bain to provide certain management and advisory
services to the Company, and Bain desires to provide such services;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. SERVICES. Bain hereby agrees that, during the term of this Agreement (the
"Term"), it will:
(a) provide the Company with advice in connection with the negotiation and
consummation of agreements, contracts, documents and instruments
necessary to provide the Company with financing from banks or other
financial institutions or other entities on terms and conditions
satisfactory to the Company; and
(b) provide the Company with financial, managerial and operational advice
in connection with its day-to-day operations, including, without
limitation:
(i) advice with respect to the investment of funds; and
(ii) advice with respect to the development and implementation of
strategies for improving the operating, marketing and financial
performance of the Company.
2. PAYMENT OF FEES. The Company hereby agrees to:
(a) pay to Bain (or an affiliate of Bain designated by it) a fee in the
amount of $11.75 million in connection with the structuring of the
Senior Financing for the Recapitalization, together with reimbursement
of Bain's expenses incurred on behalf of the Company through the
Closing Date (as defined in the Merger Agreement) in connection with
the Recapitalization, such fees and expenses being payable by the
Company at the closing of the Recapitalization or, if the
Recapitalization is not consummated, promptly after the time the
Company has abandoned the Recapitalization;
(b) during the Term, pay to Bain (or an affiliate of Bain designated by
it) a management fee in an amount not to exceed $2 million per annum
in exchange for the services provided to the Company by Bain, as more
fully described in Section 1, such fee being payable by the Company
quarterly in advance, the first such payment to be made at the closing
of the Recapitalization; and
(c) during the Term, allow Bain to participate in the negotiation and
consummation of senior financing for any recapitalization or
acquisition or other similar transactions by the Company, and pay to
Bain (or an affiliate of Bain designated by it) a fee in connection
therewith equal to one percent (1%) of the gross purchase price of the
transaction (including all liabilities assumed or otherwise included
in the transaction), such fee to be due and payable for the foregoing
services at the closing of such transaction, whether or not any such
senior financing is actually committed or drawn upon.
Each payment made pursuant to this Section 2 shall be paid by wire transfer
of immediately available federal funds to the account specified on Schedule
1 hereto, or to such other account(s) as Bain may specify to the Company in
writing prior to such payment.
Bain hereby acknowledges that the Credit Agreement contains certain limits
on the fees payable to Bain pursuant to this Section 2.
mutual consent of the parties, for so long as Bain (or any successor or
permitted assign, as the case may be) continues to carry on the business of
providing services of the type described in Section 1; provided, however,
that (a) either party may terminate this Agreement following a material
breach of the terms of this Agreement by the other party hereto and a
failure to cure such breach within 30 days following written notice thereof
and (b) Bain may terminate this Agreement upon not less than 60 days
written notice to the Company; and provided further that each of (x) the
obligations of the Company under Section 4, (y) any and all accrued and
unpaid obligations of the Company owed under Section 2 and (z) the
provisions of Section 7 shall survive any termination of this Agreement to
the maximum extent permitted under applicable law.
4. EXPENSES; INDEMNIFICATION.
(a) Expenses. The Company agrees to pay on demand all expenses incurred
by Bain, the Bain Funds and Bain Capital, Inc. (or any of them) in
connection with this Agreement, the Recapitalization and such other
transactions and all operations hereunder or in respect of the Equity
Investments or otherwise incurred in connection with the
Recapitalization or the Company, including but not limited to (i) the
fees and disbursements of: (A) Ropes & Gray, special counsel to Bain
Capital, Inc. and the Bain Funds, (B) PricewaterhouseCoopers LLP,
accountant to Bain Capital, Inc. and the Bain Funds and (C) any other
consultants or advisors retained by Bain, Bain Capital, Inc., the Bain
Funds or either of the parties identified in clauses (A) and (B)
arising in connection therewith (including but not limited to the
preparation, negotiation and execution of this Agreement and any other
agreement executed in connection herewith or in connection with the
Recapitalization, the Senior Financing or the consummation of the
other transactions contemplated hereby (and any and all amendments,
modifications, restructurings and waivers, and exercises and
preservations of rights and remedies hereunder or thereunder) and the
operations of the Company) and (ii) any out-of-pocket expenses
incurred by Bain, the Bain Funds and Bain Capital, Inc. (or any of
them) in connection with the provision of services hereunder or the
attendance at any meeting of the board of directors (or any committee
thereof) of the Company or any of its affiliates.
(b) Indemnity and Liability. In consideration of the execution and
delivery of this Agreement by Bain and the provision of the Equity
Investments by the Bain Funds, the Company hereby agrees to indemnify,
exonerate and hold each of Bain, Bain Capital, Inc. and each Bain
Fund, and each of their respective partners, shareholders, affiliates,
directors, officers, fiduciaries, employees and agents and each of the
partners, shareholders, affiliates, directors, officers, fiduciaries,
employees and agents of each of the foregoing (collectively, the
"Indemnitees") free and harmless from and against any and all actions,
causes of action, suits, losses, liabilities and damages, and expenses
in connection therewith, including without limitation attorneys' fees
and disbursements (collectively, "Liabilities"), incurred by the
Indemnitees or any of them as a result of, or arising out of, or
relating to the Recapitalization, the execution, delivery,
performance, enforcement or existence of this Agreement or the
transactions contemplated hereby (including but not limited to any
indemnification obligations assumed or incurred by any Indemnitee to
or on behalf of Seller, or any of its accountants or other
representatives, agents or affiliates) (collectively, the "Indemnified
Liabilities") except for any such Indemnified Liabilities arising on
account of such Indemnitee's willful misconduct, and if and to the
extent that the foregoing undertaking may be unenforceable for any
reason, the Company hereby agrees to make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities
which is permissible under applicable law.
5. ASSIGNMENT, ETC. Except as provided below, neither party shall have the
right to assign this Agreement. Bain acknowledges that its services under
this Agreement are unique. Accordingly, any purported assignment by Bain
(other than as provided below) shall be void. Notwithstanding the
foregoing, (a) Bain may assign all or part of its rights and obligations
hereunder to any affiliate of Bain which provides services similar to those
called for by this Agreement, in which event Bain shall be released of all
of its rights and obligations hereunder and (b) the provisions hereof for
the benefit of the Bain Funds shall inure to the benefit of their
successors and assigns.
6. AMENDMENTS AND WAIVERS. No amendment or waiver of any term, provision or
condition of this Agreement shall be effective, unless in writing and
executed by each of Bain and the Company. No waiver on any one occasion
shall extend to or effect or be construed as a waiver of any right or
remedy on any future occasion. No course of dealing of any person nor any
delay or omission in exercising any right or remedy shall constitute an
amendment of this Agreement or a waiver of any right or remedy of any party
hereto.
7. MISCELLANEOUS.
(a) Choice of Law. This Agreement shall be governed by and construed in
accordance with the domestic substantive laws of The Commonwealth of
Massachusetts without giving effect to any choice or conflict of law
provision or rule that would cause the application of the domestic
substantive laws of any other jurisdiction.
(b) Consent to Jurisdiction. Each of the parties agrees that all actions,
suits or proceedings arising out of or based upon this Agreement or
the subject matter
hereof shall be brought and maintained exclusively in the federal and
state courts of The Commonwealth of Massachusetts. Each of the parties
hereto by execution hereof (i) hereby irrevocably submits to the
jurisdiction of the federal and state courts in The Commonwealth of
Massachusetts for the purpose of any action, suit or proceeding
arising out of or based upon this Agreement or the subject matter
hereof and (ii) hereby waives to the extent not prohibited by
applicable law, and agrees not to assert, by way of motion, as a
defense or otherwise, in any such action, suit or proceeding, any
claim that it is not subject personally to the jurisdiction of the
above-named courts, that it is immune from extraterritorial injunctive
relief or other injunctive relief, that its property is exempt or
immune from attachment or execution, that any such action, suit or
proceeding may not be brought or maintained in one of the above-named
courts, that any such action, suit or proceeding brought or maintained
in one of the above-named courts should be dismissed on grounds of
forum non conveniens, should be transferred to any court other than
----- --- ----------
one of the above-named courts, should be stayed by virtue of the
pendency of any other action, suit or proceeding in any court other
than one of the above-named courts, or that this Agreement or the
subject matter hereof may not be enforced in or by any of the above-
named courts. Each of the parties hereto hereby consents to service
of process in any such suit, action or proceeding in any manner
permitted by the laws of The Commonwealth of Massachusetts, agrees
that service of process by registered or certified mail, return
receipt requested, at the address specified in or pursuant to Section
9 is reasonably calculated to give actual notice and waives and agrees
not to assert by way of motion, as a defense or otherwise, in any such
action, suit or proceeding any claim that service of process made in
accordance with Section 9 does not constitute good and sufficient
service of process. The provisions of this Section 7(b) shall not
restrict the ability of any party to enforce in any court any judgment
obtained in a federal or state court of The Commonwealth of
Massachusetts.
(c) Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW
WHICH CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES, AND
COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT, OR
OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY
ISSUE, CLAIM, DEMAND, CAUSE OF ACTION, ACTION, SUIT OR PROCEEDING
ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER
HEREOF, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND
WHETHER IN CONTRACT OR TORT OR OTHERWISE. Each of the parties hereto
acknowledges that it has been informed by each other party that the
provisions of this Section 7(c) constitute a material inducement upon
which such party is relying and will rely in entering into this
Agreement and the transactions contemplated hereby. Any of the
parties hereto may file an original counterpart or a copy of this
Agreement with any court as written
evidence of the consent of each of the parties hereto to the waiver of
its right to trial by jury.
8. MERGER/ENTIRE AGREEMENT. This Agreement contains the entire understanding
of the parties with respect to the subject matter hereof and supersedes any
prior communication or agreement with respect thereto.
9. NOTICE. All notices, demands, and communications of any kind which any
party may require or desire to serve upon any other party under this
Agreement shall be in writing and shall be served upon such other party and
such other party's copied persons as specified below by personal delivery
to the address set forth for it below or to such other address as such
party shall have specified by notice to each other party or by mailing a
copy thereof by certified or registered mail, or by Federal Express or any
other reputable overnight courier service, postage prepaid, with return
receipt requested, addressed to such party and copied persons at such
addresses. In the case of service by personal delivery, it shall be deemed
complete on the first business day after the date of actual delivery to
such address. In case of service by mail or by overnight courier, it shall
be deemed complete, whether or not received, on the third day after the
date of mailing as shown by the registered or certified mail receipt or
courier service receipt. Notwithstanding the foregoing, notice to any
party or copied person of change of address shall be deemed complete only
upon actual receipt by an officer or agent of such party or copied person.
If to the Company, to it at:
TISM, Inc.
30 Frank Lloyd Wright Drive
P.O. Box 997
Ann Arbor, MI 48106-0997
Attention: Chief Executive Officer
with a copy to:
Bain Capital Partners VI, L.P.
Two Copley Place, 7th Floor
Boston, MA 02116
Attention: Mark E. Nunnelly
Robert F. White
Andrew B. Balson
If to Bain, to it at:
Two Copley Place, 7th Floor
Boston, MA 02116
Attention: Mark E. Nunnelly
Robert F. White
Andrew B. Balson
with a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Attention: R. Newcomb Stillwell
10. SEVERABILITY. If in any judicial or arbitral proceedings a court or
arbitrator shall refuse to enforce any provision of this Agreement, then
such unenforceable provision shall be deemed eliminated from this Agreement
for the purpose of such proceedings to the extent necessary to permit the
remaining provisions to be enforced. To the full extent, however, that the
provisions of any applicable law may be waived, they are hereby waived to
the end that this Agreement be deemed to be valid and binding agreement
enforceable in accordance with its terms, and in the event that any
provision hereof shall be found to be invalid or unenforceable, such
provision shall be construed by limiting it so as to be valid and
enforceable to the maximum extent consistent with and possible under
applicable law.
11. DISCLAIMER AND LIMITATION OF LIABILITY.
(a) Disclaimer. Bain makes no representations or warranties, express or
implied, in respect of the services to be provided by it hereunder.
(b) Standard of Care. Neither Bain nor any other Indemnitee shall be
liable to the Company or any of its affiliates for any act, alleged
act, omission or alleged omission suffered or taken by Bain or any
other Indemnitee that does not constitute willful misconduct.
(c) Freedom to Pursue Opportunities, Etc. In anticipation that the
Company and Bain (or one or more affiliates, associated investment
funds or portfolio companies, or clients of Bain) may engage in the
same or similar activities or lines of business and have an interest
in the same areas of corporate opportunities, and in recognition of
the benefits to be derived by the Company from the services to be
provided under this Agreement and in recognition of the difficulties
which may confront any advisor who desires and endeavors fully to
satisfy such advisor's duties in determining the full scope of such
duties in any particular situation, the provisions of this clause (c)
are set forth to regulate, define and guide the conduct of certain
affairs of the Company as they may involve Bain. Except as Bain may
otherwise agree in writing after the date hereof:
(i) Bain shall have the right to, and shall have no duty
(contractual or otherwise) not to, directly or indirectly:
(A) engage in the same or similar business activities or
lines of business as the Company, including those competing
with the Company and (B) do business with any client or
customer of the Company;
(ii) Neither Bain nor any officer, director, employee, partner,
affiliate or associated entity thereof shall be liable to the
Company or its affiliates for breach of any duty (contractual
or otherwise) by reason of any such activities of or of such
person's participation therein; and
(iii) In the event that Bain acquires knowledge of a potential
transaction or matter that may be a corporate opportunity for
both the Company and Bain or any other person, Bain shall
have no duty (contractual or otherwise) to communicate or
present such corporate opportunity to the Company and,
notwithstanding any provision of this Agreement to the
contrary, shall not be liable to the Company or its
affiliates for breach of any duty (contractual or otherwise)
by reason of the fact that Bain directly or indirectly
pursues or acquires such opportunity for itself, directs such
opportunity to another person, or does not present such
opportunity to the Company.
(d) Limitation of Liability. In no event will either party hereto be
liable to the other for any indirect, special, incidental or
consequential damages, including lost profits or savings, whether or
not such damages are foreseeable, or in respect of any Liabilities
relating to any third party claims (whether based in contract, tort or
otherwise) other than the Indemnified Liabilities, relating to the
services to be provided by Bain hereunder.
11. COUNTERPARTS. This Agreement may be executed in any number of counterparts
and by each of the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf as an instrument under seal as of the date first above
written by its officer or representative thereunto duly authorized.
The Company: TISM, INC.
By /s/ Harry J. Silverman
------------------------------
Name: Harry J. Silverman
Title: Vice President
DOMINO'S, INC.
By /s/ Harry J. Silverman
------------------------------
Name: Harry J. Silverman
Title: Vice President
DOMINO'S PIZZA, INC.
By /s/ Harry J. Silverman
------------------------------
Name: Harry J. Silverman
Title: Vice President
BLUEFENCE, INC.
By /s/ Harry J. Silverman
------------------------------
Name: Harry J. Silverman
Title: President
Bain: BAIN CAPITAL PARTNERS VI, L.P.
By Bain Capital Investors VI, Inc.,
its general partner
By /s/ Mark E. Nunnelly
--------------------------
Name: Mark E. Nunnelly
Title: Managing Director
Schedule 1 to
Management Agreement
--------------------
WIRE TRANSFER INSTRUCTIONS FOR
BAIN CAPITAL PARTNERS VI, L.P.
Citibank, N.A.
ABA # 021 000 089
For Brown Brothers Harriman
Account # 09250276
To Further Credit:
Bain Capital Partners VI, L.P.
Acct. # 610276-8
EXHIBIT 10.5
STOCKHOLDERS AGREEMENT
This Stockholders Agreement (the "Agreement") is made as of December 21,
---------
1998 by and among:
(i) TISM, Inc., a Michigan corporation (the "Company");
-------
(ii) Domino's, Inc., a Delaware corporation ("Domino's");
(iii) each of Bain Capital Fund VI, L.P., Bain Capital VI Coinvestment
Fund, L.P., BCIP, Bain Capital Pacific Fund I, L.P., Sankaty High
Yield Asset Partners, L.P., and Brookside Capital Partners Fund, L.P.
(collectively, the "Investors");
---------
(iv) RGIP, LLC, DP Investors I, LLC, DP Investors II, LLC, J.P. Morgan
Capital Corporation, Sixty Wall Street Fund, L.P., DP Transitory
Corporation and such other Persons who from time to time become party
hereto by executing a counterpart signature page hereof and are
designated by the Company as "Other Investors" (the "Other
-----
Investors");
(v) Thomas S. Monaghan, individually and in his capacity as trustee, and
Marjorie Monaghan, individually and in her capacity as trustee (the
"Sellers");
-------
(vi) Harry J. Silverman, Michael D. Soignet, Stuart K. Mathis, Patrick
Kelly, Gary M. McCausland, Cheryl Bachelder and such other
individuals who from time to time become party hereto by executing a
counterpart signature page hereof and are designated by the Company
as "Managers" (the "Managers", and together with the Investors, the
--------
Other Investors, the Sellers, and the Financers, the "Stockholders").
------------
Recitals
--------
1. On or about the date hereof, TM Transitory Merger Corporation, a
Michigan corporation ("Merger Corp"), shall be merged with and into the Company
-----------
pursuant to an Agreement and Plan of Merger dated as of September 25, 1998 by
and between Merger Corp, the Company and Thomas S. Monaghan, as amended and in
effect on the date hereof (the "Merger Agreement").
----------------
2. Upon the Closing (as defined below), the Company's Class A Common
Stock, par value $.001 per share (the "Class A Stock"), and the Company's Class
-------------
L Common Stock,
par value $.001 per share (the "Class L Stock"), and all Options to purchase
-------------
Common Stock are held as set forth on Schedule I hereto.
3. The parties believe that it is in the best interests of the Company
and the Stockholders to set forth herein their agreements on certain matters.
Agreement
---------
Therefore, the parties hereto hereby agree as follows:
1. EFFECTIVENESS; DEFINITIONS.
1.1 Closing. This Agreement shall become effective upon consummation of
-------
the closing (the "Closing") under the Merger Agreement.
-------
1.2 Definitions. Certain terms are used in this Agreement as specifically
-----------
defined herein. These definitions are set forth or referred to in Section 16
hereof.
2. VOTING AGREEMENT.
2.1 Election of Directors. Each holder of Shares hereby agrees to cast
---------------------
all votes to which such holder is entitled in respect of the Shares, whether at
any annual or special meeting, by written consent or otherwise, (a) to fix the
number of members of the board of directors of the Company (the "Board") at two
-----
or such higher number as may be specified from time to time by the Majority
Investors (the "Number of Directors") and (b) to elect as directors of the
Company such individuals, if any, as shall have been nominated as follows:
(i) such individuals, not to exceed in number one-half (1/2) of the
Number of Directors, as shall have been nominated by the Majority
Investors.
(ii) such individuals, not to exceed in number the excess of the
Number of Directors over the number of individuals nominated pursuant to
clause (i) above, as shall have been nominated by the Majority
Shareholders.
2.2 Section 4.2 Transactions. Each holder of Shares agrees to cast all
------------------------
votes to which such holder is entitled in respect of the Shares, whether at any
annual or special meeting, by written consent or otherwise, in the same
proportion as Shares held by members of the Prospective Selling Group are voted
by the holders thereof to approve any sale, recapitalization, merger,
consolidation, reorganization or any other transaction or series of transactions
involving the Company or its subsidiaries (or all or any portion of their
respective assets) in connection with, or in furtherance of, the exercise by any
Prospective Selling Group of their rights under Section 4.2.
-2-
2.3 Consent to Amendment. Each holder of Shares agrees to cast all votes
--------------------
to which such holder is entitled in respect of the Shares, whether at any annual
or special meeting, by written consent or otherwise, to increase the number of
authorized shares of Class A Stock to the extent necessary to permit the
conversion of Common Stock as set forth in the Company's Articles of
Incorporation.
2.4 Grant of Proxy. Each holder of Shares other than the Investors hereby
--------------
grants to the Company an irrevocable proxy to vote his Shares in accordance with
his agreements contained in this Section 2, which proxy shall be valid and
remain in effect until the provisions of this Section 2 expire pursuant to
Section 2.6.
2.5 The Company. The Company agrees not to give effect to any action by
-----------
any holder of Shares or any other Person which is in contravention of this
Section 2.
2.6 Period. The foregoing provisions of this Section 2 shall constitute a
------
voting agreement executed pursuant to Section 450.1461 of the Michigan Business
Corporation Act and shall expire on the earlier of (a) a Change of Control and
(b) the last date permitted by law.
2.7 Regulated Stockholder. No Regulated Stockholder shall have any rights
---------------------
under or to enforce the provisions of this Section 2, and the terms of this
Section 2 may be amended without the consent of any Regulated Stockholder
provided that such amendment does not impose any additional obligations on such
Regulated Stockholder.
3. CERTAIN COVENANTS.
3.1 Initial and Follow-on Public Offerings. The Company covenants and
--------------------------------------
agrees that it shall not, without the prior written consent of the Majority
Investors, do any of the following, and each holder of Shares covenants and
agrees that it shall not, without the prior written consent of the Majority
Investors, vote its Shares, either at a stockholder meeting or by written
consent, so as to cause or permit the Company to:
3.1.1. conduct an Initial Public Offering; or
3.1.2. conduct the Public Offering, if any, immediately succeeding
the Company's Initial Public Offering.
3.2 Certain Significant Transactions. The Company, on its own behalf and
--------------------------------
on behalf of each of its present and future subsidiaries, covenants and agrees
that after the date of Closing neither it nor any of such subsidiaries shall,
without the prior written consent of the Majority Investors, do any of the
following, and each holder of Shares covenants and agrees that after the date of
Closing it shall not, without the prior written consent of the Majority
-3-
Investors, vote its Shares, either at a stockholder meeting or by written
consent, so as to cause or permit the Company or any of its subsidiaries to:
3.2.1. authorize or issue any equity security or amend any term or
provision of any equity security;
3.2.2. amend, modify or repeal the Company's or any subsidiary's
certificate of incorporation or by-laws or comparable document;
3.2.3. merge or consolidate with, or sell, assign, lease, license or
otherwise dispose of or voluntarily part with the control of (whether in
one transaction or in a series of transactions), a material portion of its
assets to, any Person, or permit any subsidiary to do any of the foregoing,
except for sales or other dispositions of assets in the ordinary course of
business;
3.2.4. purchase or otherwise acquire a material portion of the
assets of any Person or 10 percent or more of the equity of any Person;
3.2.5. create any subsidiary that is not a wholly-owned subsidiary
or sell or otherwise dispose of any shares of capital stock of any
subsidiary;
3.2.6. declare or pay any dividends or make any distributions on any
class of the Company's or any subsidiary's capital stock now or hereafter
outstanding, other than dividends or distributions to the Company or any
subsidiary;
3.2.7. purchase, redeem or otherwise acquire or retire any of the
Company's or any subsidiary's capital stock of any class now or hereafter
outstanding or otherwise return capital or make distributions of assets to
stockholders as such;
3.2.8. enter into or amend any partnership or joint venture;
3.2.9. elect, appoint or remove the chief executive officer or any
other senior officer of the Company or any subsidiary;
3.2.10. enter into, amend, modify or waive any term or condition of
any existing or future contract, arrangement or transaction with any holder
of Shares or any Affiliate of the Company or its subsidiaries or of any
holder of Shares;
3.2.11. approve its annual budget, capital expenditure budget,
business plans and strategic plans and any amendments thereto, or expend
any amounts not set forth in an annual budget or a capital expenditure
budget approved in accordance with the preceding clause;
-4-
3.2.12. (i) Transfer any of its assets (other than the expenditure of
cash or the sale of cash-equivalents otherwise in accordance with this
Agreement) in a single transaction or a series of related transactions
having a fair market value in excess of $1 million, (ii) enter into any
contract other than in the ordinary course of business, which contract
involves liabilities in excess of $2.5 million or has a term or is
extendible without its consent for an aggregate term in excess of six
months, (iii) incur any expense (or enter into a commitment therefor) in
excess of $1.5 million; or (iv) acquire any capital assets for aggregate
consideration in excess of $1.0 million;
3.2.13. establish, amend, modify or waive any term or condition of
any stock option plan, restricted stock or similar plan or any other
material employee benefit plan of the Company or any Subsidiary;
3.2.14. enter into, amend, modify or waive any material term or
condition of any employment or other contract or agreement concerning
employment with any senior officer of the Company or any subsidiary;
3.2.15. pay any bonus or other compensation to any senior officer of
the Company or any subsidiary, except as provided in the annual budget of
the Company;
3.2.16. grant any stock option or similar right to any employee of
the Company or any subsidiary;
3.2.17. initiate or settle any lawsuit, arbitration or similar
proceeding involving an amount in excess of $1.5 million;
3.2.18. make an assignment for the benefit of creditors, decide to
subject the Company or any subsidiary to any proceedings under any
bankruptcy or insolvency law, decide to avail the Company or any subsidiary
of the benefit of any other legislation for the benefit of debtors, or take
steps to wind up or terminate the Company existence;
3.2.19. select or remove the independent certified public accountant
or counsel for the Company or any subsidiary or adopt, or modify in any
material respect, any significant accounting policy or tax policy;
3.2.20. acquire (i) any interest in any real property (other than as
lessee) or (ii) any investment in another Person other than the Company or
a wholly-owned subsidiary (other than in accordance with a short-term
investment policy adopted by the Board of Directors of the Company);
3.2.21. guarantee any obligation of any Person other than the
Company or any subsidiary;
-5-
3.2.22. authorize any indebtedness of the Company or any subsidiary
for borrowed money other than draws in the ordinary course under the Credit
Agreement or amend any term or provision of any document relating to any
indebtedness; or
3.2.23. make any material change in the nature of its business as
carried on at the date hereof or as described in the Offering Memorandum
dated December 10, 1998 or enter into any new line of business.
Notwithstanding anything to the contrary in this Section 3.2, none of the
actions, agreements, transactions or other events identified in Subsections
3.2.1 through 3.2.23 shall require consent pursuant to the first sentence of
this Section 3.2 where such action, agreement, transaction or other event
involves only the Company and its wholly-owned Subsidiaries and does not involve
making any payment to, entering into any agreement with, issuing any securities
to or otherwise involve any third party.
3.3 Exercise of Drag Along Rights. No holder of Shares shall exercise
-----------------------------
its drag along rights under Section 4.2 of the Stockholders Agreement in
connection with any Transfer of any Shares held by such holder except with the
prior written consent of the Majority Investors.
3.4 The Company; Subsidiaries. The Company agrees not to give effect to
-------------------------
any action by any holder of Shares or any other Person which is in contravention
of this Section 3. The Company agrees to bind each subsidiary to the covenants
set forth in this Section 3 as though such Subsidiary was a party to this
Agreement.
3.5 Period. The foregoing provisions of this Section 3 shall expire on a
------
Change of Control.
3.6 Regulated Stockholders. No Regulated Stockholder shall have any
----------------------
rights under or to enforce the provisions of this Section 3, and the terms of
this Section 3 may be amended without the consent of any Regulated Stockholder
provided that such amendment does not impose any additional obligations on such
Regulated Stockholder.
4. "TAG ALONG" AND "DRAG ALONG" RIGHTS.
4.1 Tag Along. No holder of Investor Shares (collectively, for purposes
---------
of Sales pursuant to this Section 4.1, the "Prospective Selling Group") shall
-------------------------
Transfer for value (a "Sale") any such Shares to any Person (a "Prospective
---- -----------
Buyer") except in compliance with this Section 4.1. Any attempted Transfer of
- -----
Investor Shares not in compliance with this Section 4 shall be null and void,
and the Company shall not in any way give effect to any such impermissible
Transfer.
-6-
4.1.1. Notice. A written notice (the "Tag Along Notice") shall be
------ ----------------
furnished by the Prospective Selling Group to each other holder of Shares
other than Investor Shares (each a "Tag Along Holder") at least ten
----------------
business days prior to such Transfer. The Tag Along Notice shall include:
(a) The principal terms of the proposed Sale insofar as it
relates to the Common Stock, including the number of Shares to be
purchased from the Prospective Selling Group, the percentage of the
total number of Investor Shares which such number of Shares
constitutes (the "Tag Along Sale Percentage"), the maximum and minimum
-------------------------
per share purchase price and the name and address of the Prospective
Buyer; and
(b) An invitation to each Tag Along Holder to make an offer to
include in the proposed Sale to the Prospective Buyer an additional
number of Shares (not in any event to exceed the Tag Along Sale
Percentage of the total number of Shares held by such Tag Along
Holder) owned by such Tag Along Holder, on the same terms and
conditions, subject to Section 4.3.4 in the case of Options, with
respect to each Share Sold, as the Prospective Selling Group shall
Sell each of their Shares.
4.1.2. Exercise. In the event the consideration in the sale includes
--------
any non-cash consideration, the Prospective Selling Group will use
reasonable commercial efforts during the period of ten business days after
the effectiveness of the Tag Along Notice to respond to reasonable requests
for information to enable the Tag Along Holders to evaluate such non-cash
consideration, but shall have no liability as to the accuracy or
completeness of any information furnished in response to any such request.
Within ten business days after the effectiveness of the Tag Along Notice,
each Tag Along Holder desiring to make an offer to include Shares in the
proposed Sale (each a "Participating Seller" and, together with the
--------------------
Prospective Selling Group, collectively, the "Tag Along Sellers") shall
-----------------
furnish a written offer (the "Tag Along Offer") to the Prospective Selling
---------------
Group specifying the number of Shares (not in any event to exceed the Tag
Along Sale Percentage of the total number of Shares held by such
Participating Seller) which such Participating Seller desires to have
included in the proposed Sale. Each Tag Along Holder who does not accept
the Prospective Selling Group's invitation to make an offer to include
Shares in the proposed Sale shall be deemed to have waived all of his
rights with respect to such proposed Sale, and the Tag Along Sellers shall
thereafter be free to Sell to the Prospective Buyer, at a per share price
no greater than the maximum per share price set forth in the Tag Along
Notice and on other principal terms which are not materially more favorable
to the Tag Along Sellers than those set forth in the Tag Along Notice,
without any further obligation to such non-accepting Tag Along Holders.
-7-
4.1.3. Irrevocable Offer. The offer of each Participating Seller
-----------------
contained in his Tag Along Offer shall be irrevocable, and, to the extent
such offer is accepted, such Participating Seller shall be bound and
obligated to Sell in the proposed Sale on the same terms and conditions,
with respect to each Share Sold (subject to Section 4.3.4 in the case of
Options), as the Prospective Selling Group, up to such number of Shares as
such Participating Seller shall have specified in his Tag Along Offer;
provided, however, that if the principal terms of the proposed Sale change
-------- -------
with the result that the per share price shall be less than the minimum per
share price set forth in the Tag Along Notice or the other principal terms
shall be materially less favorable to the Tag Along Selle rs than those set
forth in the Tag Along Notice, each Participating Seller shall be permitted
to withdraw the offer contained in his Tag Along Offer and shall be
released from his obligations thereunder.
4.1.4. Reduction of Shares Sold. The Prospective Selling Group shall
------------------------
attempt to obtain the inclusion in the proposed Sale of the entire number
of Shares which the Tag Along Sellers requested to have included in the
Sale (as evidenced in the case of the Prospective Selling Group by the Tag
Along Notice and in the case of each Participating Seller by such
Participating Seller's Tag Along Offer). In the event the Prospective
Selling Group shall be unable to obtain the inclusion of such entire number
of Shares in the proposed Sale, the number of Shares to be sold in the
proposed Sale by each Tag Along Seller shall be reduced on a pro rata basis
according to the proportion which the number of Shares which each such Tag
Along Seller desires to have included in the Sale bears to the total number
of Shares which all of the Tag Along Sellers desire to have included in the
Sale.
4.1.5. Additional Compliance. If (a) prior to consummation, the terms
---------------------
of the proposed Sale shall change with the result that the per share price
to be paid in such proposed Sale shall be greater than the maximum per
share price set forth in the Tag Along Notice or the other principal terms
of such proposed Sale shall be materially more favorable to the Tag Along
Sellers than those set forth in the Tag Along Notice, the Tag Along Notice
shall be null and void, and it shall be necessary for a separate Tag Along
Notice to be furnished, and the terms and provisions of this Section 4.1
separately complied with, in order to consummate such proposed Sale
pursuant to this Section 4.1; provided, however, that in the case of such a
-------- -------
separate Tag Along Notice, the applicable period to which reference is made
in Sections 4.1.1 and 4.1.2 shall be five business days and (b) the
Prospective Selling Group have not completed the proposed Sale by the end
of the 180th day following the date of the effectiveness of the Tag Along
Notice, each Participating Seller shall be released from his obligations
under his Tag Along Offer, the Tag Along Notice shall be null and void, and
it shall be necessary for a separate Tag Along Notice to be furnished, and
the terms and provisions of this Section 4.1 separately complied with, in
order to consummate such proposed Sale pursuant to this Section 4.1, unless
the failure to complete such proposed
-8-
Sale resulted from any failure by any Participating Seller to comply with
the terms of this Section 4.1.
4.1.6. Excluded Transactions. Notwithstanding the foregoing, (i)
---------------------
holders of Investor Shares shall not be obligated to comply with the
foregoing provisions of this Section 4.1 and (ii) no other holder of Shares
shall have any right of participation pursuant to the provisions of this
Section 4.1 or otherwise, in each case, with respect to any Transfer of
Investor Shares:
(a) subject to the provisions of Section 12.1, to an Investor or
an Affiliated Fund;
(b) subject to the provisions of Section 12.1, by a holder of
Investor Shares to its direct or indirect partners;
(c) to any director, officer or employee of, or consultant or
adviser to, or franchisee (or Affiliate thereof) of, the
Company or its subsidiaries, provided, however, that the
aggregate amount of Investor Shares Transferred pursuant to
this Section 4.1.6(c) shall not exceed ten percent (10%) of
the Shares originally issued to the Investors ;
(d) subject to the provisions of Section 11.4.4, in a Public
Offering or, after the closing of an Initial Public Offering,
pursuant to Rule 144;
(e) with respect to which the Majority Investors exercise their
"drag along" rights pursuant to Section 4.2 of this
Agreement; or
(f) if, after giving effect to such Transfer, the Investors and
the Affiliated Funds will continue to own not less than 80%
of the Shares originally issued to the Investors.
4.2 Drag Along. Each holder of Shares hereby agrees, if requested by the
----------
Majority Shareholders (collectively, for purposes of Sales pursuant to this
Section 4.2, the "Prospective Selling Group") to Sell a specified percentage
-------------------------
(the "Drag Along Sale Percentage") of such Shares, directly or indirectly, to a
--------------------------
Prospective Buyer in the manner and on the terms set forth in this Section 4.2
in connection with the Sale by the Prospective Selling Group of the Drag Along
Sale Percentage of the total number of Shares held by the Prospective Selling
Group to the Prospective Buyer.
4.2.1. Exercise. If the Prospective Selling Group elect to exercise
--------
their rights under this Section 4.2, the Prospective Selling Group shall
furnish a written notice (the
-9-
"Drag Along Notice") to each other holder of Shares. The Drag Along Notice
-----------------
shall set forth the principal terms of the proposed Sale insofar as it
relates to the Common Stock, including the number of Shares to be acquired
from the Prospective Selling Group, the Drag Along Sale Percentage, the per
Share consideration to be received in the proposed Sale and the name and
address of the Prospective Buyer and whether or not the Prospective Buyer
is an Affiliate of the Majority Investors. If the Prospective Selling Group
consummate the proposed Sale to which reference is made in the Drag Along
Notice, each other holder of Shares (each a "Participating Seller", and,
--------------------
together with the Prospective Selling Group, collectively, the "Drag Along
----------
Sellers") shall be bound and obligated to Sell the Drag Along Sale
-------
Percentage of his Shares in the proposed Sale on the same terms and
conditions, with respect to each Share Sold (subject to Section 4.3.4 in
the case of Options), as the Prospective Selling Group shall Sell each
Share in the Sale (subject to Section 4.3.4 in the case of Options).
Further, in the event that the Prospective Selling Group is given an option
as to the form and amount of consideration to be received, all Drag Along
Sellers will be given the same option, and if any Drag Along Seller is
prohibited by applicable law or regulation (other than federal or state
securities law) from receiving such form of consideration, the Company
and/or Prospective Selling Group shall use reasonable commercial efforts to
cause the prospective purchaser to accommodate such holder to the fullest
extent possible, including without limitation, complying with Section 17 of
this Agreement. If at the end of the 180th day following the date of the
effectiveness of the Drag Along Notice the Prospective Selling Group have
not completed the proposed Sale, each Participating Seller shall be
released from his obligation under the Drag Along Notice, the Drag Along
Notice shall be null and void, and it shall be necessary for a separate
Drag Along Notice to be furnished and the terms and provisions of this
Section 4.2 separately complied with, in order to consummate such proposed
Sale pursuant to this Section 4.2.
4.2.2. Drag Along Fairness Opinion, etc. The provision of this
---------------------------------
Section 4.2.2 shall apply in the case of a proposed Sale pursuant to
Section 4.2 to a Prospective Buyer which is an Affiliate of the Majority
Investors.
4.2.2.1. Objection Notice. In the case of a proposed Sale
----------------
pursuant to Section 4.2 to a Prospective Buyer which is an Affiliate
of the Majority Investors, if, within ten business days after the
effectiveness of the Drag Along Notice in respect of such proposed
Sale, the Majority Sellers or the Majority Non-Investor Shareholders
shall furnish a written notice to the Company and the Prospective
Selling Group to the effect that they dispute the fairness of the per
share price to be paid in the proposed Sale as set forth in such Drag
Along Notice (an "Objection Notice"), then such proposed Sale shall
----------------
not be effected pursuant to the provisions of Section 4.2 until the
Company or the Prospective Selling Group shall have complied with the
terms of Section 4.2.2.2.
-10-
4.2.2.2. Consultation and Fairness Opinion. (a) After receipt of
---------------------------------
an Objection Notice, the Prospective Selling Group shall meet with the
holders of Shares who shall have delivered such Objection Notice to
discuss the per share price to be paid in such proposed Sale as set
forth in the Drag Along Notice.
(b) The Prospective Selling Group may effect a proposed Sale
pursuant to Section 4.2 which shall have been the subject of a meeting
described in the foregoing clause (a) after the third business day
following such meeting unless the Majority Sellers and/or the Majority
Non-Investor Shareholders (as applicable) shall have furnished the
Company and the Prospective Selling Group with a written notice
requesting a fairness opinion. Following such a request, such
proposed Sale shall not be effected pursuant to Section 4.2 until the
Prospective Selling Group shall have furnished to, or caused to be
furnished to, such requesting holders of Shares (with a copy to each
other holder of Shares) a notice which includes a favorable written
opinion of an Independent Investment Banking Firm to the effect that
the Sale is fair to such holders of Shares from a financial point of
view (a "Drag Along Fairness Opinion"). In rendering such Drag Along
---------------------------
Fairness Opinion, such Independent Investment Banking Firm shall
consider (i) the form and amount of consideration to be received
pursuant to such Sale in respect of shares of Common Stock by holders
of shares of Common Stock and (ii) other factors it may deem relevant.
In the event the Company or the Prospective Selling Group shall
furnish a Drag Along Fairness Opinion to the holders of Shares other
than Investor Shares prior to the consummation of a Sale pursuant to
the provisions of Section 4.2, there shall be no requirement that the
Prospective Selling Group comply with the foregoing provisions of this
Section 4.2.2. All fees and costs of such Independent Investment
Banking Firm shall be paid by the Company.
4.2.2.3. Preferred Drag Along. In the event that, at the time
--------------------
of a proposed Sale pursuant to this Section 4.2 to a Prospective Buyer
which is an Affiliate of the Majority Investors, the Prospective
Selling Group holds shares of the 11.5% Cumulative Preferred Stock of
the Company (the "Preferred") such that the Prospective Selling Group
possesses the power to cause a Sale of such Preferred Stock pursuant
to Section 7.2 of the 11.5% Cumulative Preferred Stock Purchase
Agreement dated December 21, 1998 (the "Preferred Agreement") to which
the Company and certain subscribers are party, then the Prospective
Selling Group will exercise its rights under the Preferred Agreement
to cause the Sale to such Prospective Buyer of a Drag Along Percentage
of the Preferred Stock under the Preferred Stock Agreement equal to
the Drag Along Percentage being sold under this Section 4.2.
4.3 Miscellaneous. The following provisions shall be applied to any
-------------
prospective Sale to which Section 4.1 or 4.2 applies:
-11-
4.3.1. Certain Legal Requirements. In the event the consideration to
--------------------------
be paid in exchange for Shares in a proposed Sale pursuant to Section 4.1
or Section 4.2 includes any securities, and the receipt thereof by a
Participating Seller would require under applicable law (a) the
registration or qualification of such securities or of any person as a
broker or dealer or agent with respect to such securities or (b) the
provision to any Tag Along Seller or Drag Along Seller of any information
other than such information as a prudent issuer would furnish to investors
in an offering made pursuant to Regulation D solely to "accredited
investors", the Prospective Selling Group shall be obligated only to use
their reasonable efforts to cause the requirements under Regulation D to be
complied with to the extent necessary to permit such Participating Seller
to receive such securities, it being understood and agreed that the
Prospective Selling Group shall not be under any obligation to effect a
registration of such securities under the Securities Act or similar
statutes. Notwithstanding any provisions of this Section 4, if use of
reasonable efforts does not result in the requirements under Regulation D
being complied with to the extent necessary to permit such Participating
Seller to receive such securities, the Prospective Selling Group shall
cause to be paid to such Participating Seller in lieu thereof, against
surrender of the Shares (in accordance with Section 4.3.6 hereof) which
would have otherwise been Sold by such Participating Seller to the
Prospective Buyer in the Sale, an amount in cash equal to the Fair Market
Value of such Shares as of the date of the issuance of securities in
exchange for Shares. The obligation of the Prospective Selling Group to use
reasonable efforts to cause such requirements to have been complied with to
the extent necessary to permit a Participating Seller to receive such
securities shall be conditioned on such Participating Seller executing such
documents and instruments, and taking such other actions (including without
limitation if required by the Prospective Selling Group, agreeing to be
represented during the course of such transaction by a "purchaser
representative" (as defined in Regulation D) in connection with evaluating
the merits and risks of the prospective investment and acknowledging that
he was so represented), as the Prospective Selling Group shall reasonably
request in order to permit such requirements to be complied with. Unless
the Participating Seller in question shall have taken all actions
reasonably requested by the Prospective Selling Investors in order to
comply with the requirements under Regulation D, such Participating Seller
shall not have the right to require the payment of cash in lieu of
securities under this Section 4.3.1.
4.3.2. Further Assurances. Each Participating Seller, whether in his
------------------
capacity as a Participating Seller, stockholder, officer or director of the
Company, or otherwise, shall take or cause to be taken all such actions as
may be necessary or reasonably desirable in order expeditiously to
consummate each Sale pursuant to Section 4.1 or Section 4.2 and any related
transactions, including without limitation executing, acknowledging and
delivering consents, assignments, waivers and other documents or
instruments; furnishing information and copies of documents; filing
applications, reports, returns, filings and other documents or instruments
with governmental
-12-
authorities; and otherwise cooperating with the Prospective Selling Group
and the Prospective Buyer; provided, however, that Participating Sellers
-------- -------
shall be obligated to become liable in respect of any representations,
warranties, covenants, indemnities or otherwise to the Prospective Buyer
solely to the extent provided in the immediately following sentence.
Without limiting the generality of the foregoing, each Participating Seller
agrees to execute and deliver such agreements as may be reasonably
specified by the Prospective Selling Group to which such Prospective
Selling Group will also be party, including without limitation agreements
to (a) make individual representations, warranties, covenants and other
agreements as to the unencumbered title to its Shares and the power,
authority and legal right to Transfer such Shares and the absence of any
Adverse Claim with respect to such Shares and (b) be liable (whether by
purchase price adjustment, indemnity payments or otherwise) in respect of
representations, warranties, covenants and agreements in respect of the
Company and its subsidiaries; provided, however, that, except with respect
-------- -------
to individual representations, warranties, covenants, indemnities and other
agreements of Participating Sellers of the type described in clause (a)
above, the aggregate amount of such liability shall not exceed either (i)
such Participating Seller's pro rata portion of any such liability, to be
determined in accordance with such Participating Seller's portion of the
total number of Shares included in such Sale or (ii) the proceeds to such
Participating Seller in connection with such Sale.
4.3.3. Sale Process. The Prospective Selling Group shall, in their
------------
sole discretion, decide whether or not to pursue, consummate, postpone or
abandon any proposed Sale and the terms and conditions thereof. No
Prospective Selling Group or any Affiliate of any member of the Prospective
Selling Group shall have any liability to any other holder of Shares
arising from, relating to or in connection with the pursuit, consummation,
postponement, abandonment or terms and conditions of any proposed Sale
except to the extent such member of the Prospective Selling Group shall
have failed to comply with the provisions of this Section 4.
4.3.4. Treatment of Options. If any Participating Seller shall Sell
--------------------
Options in any Sale pursuant to Section 4.1 or 4.2, such Participating
Seller shall receive in exchange for such Options consideration equal to
the amount (if greater than zero) determined by multiplying (a) the
purchase price per share of Common Stock received by the holders of the
Prospective Selling Group in such Sale less the exercise price per share of
such Option by (b) the number of shares of Common Stock issuable upon
exercise of such Option (to the extent exercisable at the time of such
Sale), subject to reduction for any tax or other amounts required to be
withheld under applicable law.
4.3.5. Expenses. All reasonable costs and expenses incurred by the
--------
Prospective Selling Group or the Company in connection with any proposed
Sale pursuant to this Section 4 (whether or not consummated), including
without limitation all attorneys fees and expenses, all accounting fees and
charges and all finders,
-13-
brokerage or investment banking fees, charges or commissions, shall be paid
by the Company. The reasonable fees and expenses of a single legal counsel
representing any or all of the other Tag Along Sellers or Drag Along
Sellers in connection with any proposed Sale pursuant to this Section 4
(whether or not consummated) shall be paid by the Company. Any other costs
and expenses incurred by or on behalf of any or all of the other Tag Along
Sellers or Drag Along Sellers in connection with any proposed Sale pursuant
to this Section 4 (whether or not consummated) shall be borne by such Tag
Along Seller(s) or Drag Along Seller(s).
4.3.6. Closing. The closing of a Sale pursuant to Section 4.1 or 4.2
-------
shall take place at such time and place as the Prospective Selling Group
shall specify by notice to each Participating Seller. At the closing of any
Sale under this Section 4, each Participating Seller shall deliver the
certificates evidencing the Shares to be Sold by such Participating Seller,
duly endorsed, or with stock (or equivalent) powers duly endorsed, for
transfer with signature guaranteed, free and clear of any liens or
encumbrances, with any stock (or equivalent) transfer tax stamps affixed,
against delivery of the applicable consideration.
4.4 Period. The foregoing provisions of this Section 4 shall expire on the
------
earlier of (a) a Change of Control or (b) the closing of a Qualified Public
Offering.
5. OTHER INVESTOR TRANSFER RIGHTS.
5.1 Transfer Restrictions. No holder of Other Investor Shares shall
---------------------
Transfer any of such Shares to any other Person except as set forth below:
5.1.1 Investors and Company. Any holder of Other Investor Shares may
---------------------
Transfer any or all of such Other Investor Shares to (a) any Investor or
(b) with the Board's approval, (i) the Company or any subsidiary of the
Company or (ii) to any director, officer or employee of, or consultant or
adviser to, or franchisee (or Affiliate thereof) of, the Company or its
subsidiaries.
5.1.2. Permitted Transferees. Subject to the provisions of Section
---------------------
12.1, any holder of Other Investor Shares may Transfer any or all of such
Other Investor Shares to (A) a Person under common control with such holder
or (b) in the case of any Regulated Stockholder (as such term is defined in
Section 17) pursuant to Section 17(b)(i).
5.1.3. Tag Alongs, Drag Alongs, etc. Any holder of Other Investor
----------------------------
Shares may Transfer any or all of such Other Investor Shares in accordance
with the provisions, terms and conditions of Section 4 hereof.
-14-
5.1.4. Public. Subject to the provisions of Section 11.4.4, any
------
holder of Other Investor Shares may Transfer any or all of such Other
Investor Shares in a Public Offering or, after the closing of an Initial
Public Offering, pursuant to Rule 144.
5.1.5. Pledge. DP Transitory Corporation may pledge any or all of its
------
Other Investor Shares and, upon any foreclosure of such pledge such Other
Investor Shares may be Transferred free of any restrictions other than
restrictions imposed by applicable securities laws.
Any attempted Transfer of Other Investor Shares not in compliance with this
Section 5 shall be null and void, and the Company shall not in any way give
effect to any such impermissible Transfer.
5.2 Period. The foregoing provisions of this Section 5 shall expire upon
------
the earlier of (a) a Change of Control and (b) the closing of a Qualified Public
Offering.
6. SELLER TRANSFER RIGHTS.
6.1 Transfer Restrictions. No holder of Seller Shares shall Transfer any
---------------------
of such Shares to any other Person except as set forth below
6.1.1. Members of Immediate Family. Subject to the provisions of
---------------------------
Section 12.1, any holder of Seller Shares may Transfer any or all of such
Seller Shares (i) to a Member of the Immediate Family of such holder or
(ii) after May 31, 2000, to a Charitable Organization.
6.1.2. Upon Death. Subject to the provisions of Section 12.1, upon
----------
the death of any holder of Seller Shares, the Seller Shares held by such
holder may be distributed by will or other instrument taking effect at
death or by applicable laws of descent and distribution to such holder's
estate, executors, administrators and personal representatives, and then to
such holder's heirs, legatees or distributees, whether or not such
recipients are Members of the Immediate Family of such holder.
6.1.3. Investors and Company. Any holder of Seller Shares may
---------------------
Transfer any or all of such Seller Shares to (a) any Investor or (b) with
the Board's approval, the Company or any subsidiary of the Company.
6.1.4. Tag Alongs, Drag Alongs, etc. Any holder of Seller Shares may
----------------------------
Transfer any or all of such Seller Shares in accordance with the
provisions, terms and conditions of Section 4 hereof.
-15-
6.1.5 Public. Subject to the provisions of Section 11.4.4, any holder
------
of Seller Shares may Transfer any or all of such Seller Shares in a Public
Offering or, after the closing of an Initial Public Offering, pursuant to
Rule 144.
Any attempted Transfer of Seller Shares not in compliance with this Section 6
shall be null and void, and the Company shall not in any way give effect to any
such impermissible Transfer.
6.2 Period. The foregoing provisions of this Section 6 shall expire upon
------
the earlier of (a) a Change of Control and (b) the closing of a Qualified Public
Offering.
7. INTENTIONALLY DELETED
8. MANAGEMENT TRANSFER RIGHTS.
8.1 Transfer Restrictions. No holder of Management Shares shall Transfer
---------------------
any of such Shares to any other Person except as set forth below:
8.1.1. Members of Immediate Family. Subject to the provisions of
---------------------------
Section 12.1, any holder of Management Shares may Transfer any or all of
his Management Shares to a Member of the Immediate Family of such holder.
8.1.2. Upon Death. Subject to the provisions of Sections 9 and 12.1,
----------
upon the death of any holder of Management Shares, the Management Shares
held by such holder may be distributed by will or other instrument taking
effect at death or by applicable laws of descent and distribution to such
holder's estate, executors, administrators and personal representatives,
and then to such holder's heirs, legatees or distributees, whether or not
such recipients are Members of the Immediate Family of such holder.
8.1.3. Investors and Company. Any holder of Management Shares may
---------------------
Transfer any or all of such Management Shares to (a) any Investor or (b)
with the Board's approval, the Company or any subsidiary of the Company.
8.1.4. Puts and Calls. Any holder of Management Shares may Transfer
--------------
any or all of such Management Shares in accordance with the provisions,
terms and conditions of Section 9 hereof or pursuant to any put or call
right set forth in any agreement between the Company and a Manager which
governs Management Shares.
8.1.5. Tag Alongs, Drag Alongs, etc. Any holder of Management Shares
----------------------------
may Transfer any or all of such Management Shares in accordance with the
provisions, terms and conditions of Section 4 hereof.
-16-
8.1.6. Public. Subject to the provisions of Section 11.4.4, any
------
holder of Management Shares may Transfer any or all of such Management
Shares in a Public Offering or, after the closing of an Initial Public
Offering, pursuant to Rule 144.
Any attempted Transfer of Management Shares not in compliance with this Section
8 shall be null and void, and the Company shall not in any way give effect to
any such impermissible Transfer.
8.2 Period. The foregoing provisions of this Section 8 shall expire upon
------
the earlier of (a) a Change of Control and (b) the closing of a Qualified Public
Offering.
9. OPTIONS TO PURCHASE SHARES.
9.1 Call Options. Except as the Company may otherwise agree, upon any
------------
termination of the employment by the Company and its subsidiaries of any holder
of Management Shares, the Company shall have the right to purchase for cash or
notes (as provided below in this Section 9.1) all or any portion of the
Management Shares, held by such holder or originally issued to such holder but
held by one or more Permitted Transferees (collectively, the "Stockholder Call
----------------
Group") on the following terms:
- -----
9.1.1. Termination of Employment For Cause.
-----------------------------------
(a) If the employment of any Manager with the Company or any of
its subsidiaries is terminated by the Company or its subsidiaries for
Cause, then the Company may purchase all or any portion of the
Management Shares held by such Manager's Stockholder Call Group at a
price equal to the lesser of the Cost or the Fair Market Value of such
Shares on the date of such termination.
(b) Subject to the provisions of Section 9.2, in each case
Shares are purchased pursuant to clause (a) above, the Company will
pay for such Management Shares in cash.
9.1.2. Other Termination of Employment.
-------------------------------
(a) If the employment of any Manager with the Company or any of
its subsidiaries is terminated for any reason other than by the
Company or its subsidiaries for Cause, then the Company may purchase
all or any portion of the Management Shares held by such Manager's
Stockholder Call Group at a price equal to the Fair Market Value of
such Shares on the date of such termination.
(b) Subject to the provisions of Section 9.2, in each case
Shares are purchased pursuant to clause (a) above, the Company will
pay for such Management Shares in cash.
-17-
9.1.3. Treatment of Options. If any Management Shares to be Sold to
--------------------
the Company pursuant to this Section 9.1 are Options, the holder of such
Management Shares shall receive in exchange for such Options consideration
equal to the amount (if greater than zero) determined by multiplying (a)
the purchase price per share of Common Stock determined as set forth in
this Section 9.1 less the exercise price per share of such Option by (b)
the number of shares of Common Stock issuable upon exercise of such Option
(to the extent exercisable at the time of such Sale), subject to reduction
for any tax or other amounts required to be withheld under applicable law.
9.1.4. Notices, etc. Any Call Option may be exercised by delivery of
------------
written notice thereof (the "Call Notice") to all members of the applicable
-----------
Stockholder Call Group within 60 days of the effectiveness of the
termination of employment in question (the "Call Option Exercise Period").
---------------------------
The Call Notice shall state that the Company has elected to exercise the
Call Option, and the number and price of the Shares with respect to which
the Call Option is being exercised.
9.1.5. Prepayment. Any promissory note issued under this Section 9.1
----------
may be prepaid in whole or in part at any time and from time to time
without premium or penalty.
9.2 Cash Payments. If any payment of cash required upon the purchase and
-------------
sale of Management Shares to the Company upon the exercise of any Call Option or
any payment on a promissory note issued under this Section 9.2 would (a)
constitute, result in or give rise to any breach or violation of, or any default
or right or cause of action under, any agreement to which the Company or any of
its subsidiaries is, from time to time, a party or (b) leave the Company and its
subsidiaries with less cash than, in the good faith judgment of the Board, is
necessary to operate the business of the Company and its subsidiaries in the
ordinary course of business, then,
(i) in the case of a cash payment due at a closing of any
purchase and sale of Management Shares to the Company upon the
exercise of any Call Option, the Company will issue a promissory note
of the Company in the aggregate principal amount of such payment, the
principal amount of which note will be due and payable in four equal
annual installments, the first such installment becoming due and
payable on the first anniversary of the issuance of such note, and
interest will accrue on such note from the date of issuance at a
floating rate equal to the Credit Agreement Rate and be payable
annually in arrears, in each case subject to the provisions of clause
(ii) below, and
(ii) in the case of the cash payment in respect of a promissory
note issued under this Section 9.2, notwithstanding any of the
provisions of such note, including without limitation, the stated
maturity of such note and the stated date on which interest payments
are due, such payment will not become due and
-18-
payable until such time as such payment can be made without violating
any such agreement and not resulting in the Company and its
subsidiaries having less cash than the Board determines is necessary
to operate the business as contemplated above; provided, however, that
-------- -------
the promissory note shall be payable in full upon a Change of Control.
9.3 Closing. The closing of any purchase and sale of Management Shares
-------
pursuant to this Section 9 shall take place as soon as reasonably practicable
and in no event later than 30 days after termination of the applicable Call
Option Exercise Period at the principal office of the Company, or at such other
time and location as the parties to such purchase may mutually determine. At
the closing of any purchase and sale of Management Shares pursuant to any Call
Options, the holders of Shares to be sold shall deliver to the Company a
certificate or certificates representing the Shares to be purchased by the
Company duly endorsed, or with stock (or equivalent) powers duly endorsed, for
transfer with signature guaranteed, free and clear of any lien or encumbrance,
with any necessary stock (or equivalent) transfer tax stamps affixed, and the
Company shall pay to such holder by certified or bank check or wire transfer of
immediately available federal funds or note, as may be applicable, the purchase
price of the Shares being purchased by the Company. The delivery of a
certificate or certificates for Shares by any Person selling Shares pursuant to
any Call Option shall be deemed a representation and warranty by such Person
that: (a) such Person has full right, title and interest in and to such Shares,
(b) such Person has all necessary power and authority and has taken all
necessary action to sell such Shares as contemplated, (c) such Shares are free
and clear of any and all liens or encumbrances and (d) there is no Adverse Claim
with respect to such Shares.
9.4 Acknowledgment. Each holder of Management Shares acknowledges and
--------------
agrees that neither the Company nor any Person directly or indirectly affiliated
with the Company (in each case whether as a director, officer, manager,
employee, agent or otherwise) shall have any duty or obligation to affirmatively
disclose to him, and he shall not have any right to be advised of, any material
information regarding the Company or otherwise at any time prior to, upon, or in
connection with any termination of his employment by the Company and its
subsidiaries or any repurchase of the Shares upon the exercise of any Call
Option.
9.5 Period. The foregoing provisions of this Section 9 shall expire upon
------
the earlier of (a) a Change of Control and (b) the closing of the Qualified
Public Offering.
10. PREEMPTIVE RIGHT. The Company shall not issue or sell any shares of any of
its capital stock or any securities convertible into or exchangeable for any
shares of its capital stock, issue or grant any options or warrants for the
purchase of, or enter into any agreements providing for the issuance (contingent
or otherwise) of, any of its capital stock or any stock or securities
convertible into or exchangeable for any shares of its capital stock, in each
case, to any Investor or an Affiliate thereof (each an "Issuance" of "Subject
-------- -------
Securities"), except in compliance with the following provisions of this Section
- ----------
10.
-19-
10.1. Right of Participation.
----------------------
10.1.1. Offer. Not fewer than twenty days prior to the consummation
-----
of the Issuance, a notice (the "Preemption Notice") shall be furnished by
-----------------
the Company to each holder of Investor Shares, Other Investor Shares,
Seller Shares, and Management Shares (the "Preemptive Offerees"). The
-------------------
Preemption Notice shall include:
(a) The principal terms of the proposed Issuance, including
without limitation the amount and kind of Subject Securities to be
included in the Issuance, the number of Equivalent Shares represented
by such Subject Securities (if applicable), the percentage of the
total number of Equivalent Shares outstanding as of immediately prior
to giving effect to such Issuance which the number of Equivalent
Shares held by such Preemptive Offeree constitutes (the "Preemptive
----------
Portion"), the maximum and minimum price (including without limitation
-------
if applicable, the maximum and minimum Price Per Equivalent Share) per
unit of the Subject Securities and the name and address of the
Investor or Affiliate to whom the Subject Securities will be Issued
(the "Prospective Subscriber"); and
----------------------
(b) An offer by the Company to Issue, at the option of each
Preemptive Offeree, to such Preemptive Offeree such portion of the
Subject Securities to be included in the Issuance as may be requested
by such Preemptive Offeree (not to exceed the Preemptive Portion of
the total amount of Subject Securities to be included in the
Issuance), on the same terms and conditions, with respect to each unit
of Subject Securities issued to the Preemptive Offerees, as each of
the Prospective Subscribers shall be Issued units of Subject
Securities.
10.1.2. Exercise.
--------
10.1.2.1. General. Each Preemptive Offeree desiring to accept
-------
the offer contained in the Preemption Notice shall send a written
commitment to the Company within twenty days after the effectiveness
of the Preemption Notice specifying the amount of Subject Securities
(not in any event to exceed the Preemptive Portion of the total amount
of Subject Securities to be included in the Issuance) which such
Preemptive Offeree desires to be issued (each a "Participating
-------------
Buyer"). Each Preemptive Offeree who has not so accepted such offer
-----
shall be deemed to have waived all of his rights with respect to the
Issuance, and the Company shall thereafter be free to Issue Subject
Securities in the Issuance to the Prospective Subscriber and any
Participating Buyers, at a price no less than the minimum price set
forth in the Preemption Notice and on other principal terms not
substantially more favorable to the Prospective
-20-
Subscriber than those set forth in the Preemption Notice, without any
further obligation to such non-accepting Preemptive Offerees. If,
prior to consummation, the terms of such proposed Issuance shall
change with the result that the price shall be less than the minimum
price set forth in the Preemption Notice or the other principal terms
shall be substantially more favorable to the Prospective Subscriber
than those set forth in the Preemption Notice, it shall be necessary
for a separate Preemption Notice to be furnished, and the terms and
provisions of this Section 10.1 separately complied with, in order to
consummate such Issuance pursuant to this Section 10.1.
10.1.2.2. Irrevocable Acceptance. The acceptance of each
----------------------
Participating Buyer shall be irrevocable except as hereinafter
provided, and each such Participating Buyer shall be bound and
obligated to acquire in the Issuance on the same terms and conditions,
with respect to each unit of Subject Securities Issued, as the
Prospective Subscriber, such amount of Subject Securities as such
Participating Buyer shall have specified in such Participating Buyer's
written commitment.
10.1.2.3. Time Limitation. If at the end of the 180th day
---------------
following the date of the effectiveness of the Preemption Notice the
Company has not completed the Issuance, each Participating Buyer shall
be released from his obligations under the written commitment, the
Preemption Notice shall be null and void, and it shall be necessary
for a separate Preemption Notice to be furnished, and the terms and
provisions of this Section 10.1 separately complied with, in order to
consummate such Issuance pursuant to this Section 10.1.
10.1.3. Other Securities. The Company may condition the participation
----------------
of the Preemptive Offerees in an Issuance upon the purchase by such
Preemptive Offerees of any securities (including without limitation debt
securities) other than Subject Securities ("Other Securities") in the event
----------------
that the participation of the Prospective Subscriber in such Issuance is so
conditioned. In such case, each Participating Buyer shall acquire in the
Issuance, together with the Subject Securities to be acquired by it, Other
Securities in the same proportion to the Subject Securities to be acquired
by it as the proportion of Other Securities to Subject Securities being
acquired by the Prospective Subscriber in the Issuance, on the same terms
and conditions, as to each unit of Subject Securities and Other Securities
issued to the Participating Buyers, as the Prospective Subscriber shall be
issued units of Subject Securities and Other Securities.
10.1.4. Certain Legal Requirements. In the event that the
--------------------------
participation in the Issuance by a holder of Shares as a Participating
Buyer would require under applicable law (a) the registration or
qualification of such securities or of any person as a broker or dealer or
agent with respect to such securities or (b) the provision to any
participant in the Sale of any information other than such information as a
prudent issuer would
-21-
furnish to investors in an offering made pursuant to Regulation D solely to
"accredited investors", the Company shall be obligated only to use its
reasonable efforts to cause the requirements under Regulation D to be
complied with to the extent necessary to permit such Participating Buyer to
receive such securities, it being understood and agreed that the Company
shall not be under any obligation to effect a registration of such
securities under the Securities Act or similar state statutes.
Notwithstanding any provision of this Section 10, if the use of reasonable
efforts shall not result in such requirements being complied with to the
extent necessary to permit such holder of Shares to participate in the
Issuance, such holder shall not be entitled to participate in the Issuance.
The obligation of the Company to use reasonable efforts to cause such
requirements to be complied with to the extent necessary to permit a holder
of Shares to participate in the Issuance shall be conditioned upon such
holder of Shares executing such documents and instruments, and taking such
other actions (including without limitation if required by the Company,
agreeing to be represented during the course of such transaction by a
"purchaser representative" (as defined in Regulation D) in connection with
evaluating the merits and risks of the prospective investment and
acknowledging that he was so represented), as the Company shall reasonably
request in order to permit such requirements to have been complied with.
Unless the holder of Shares in question shall have taken all actions
reasonably requested by the Company in connection with the Issuance in
order to comply with the requirements under Regulation D, such holder shall
not have the right to participate in the Issuance.
10.1.5. Further Assurances. Each Preemptive Offeree and each
------------------
Stockholder to whom the Shares held by such Preemptive Offeree were
originally issued, shall, whether in his capacity as a Participating Buyer,
Stockholder, officer or director of the Company, or otherwise, take or
cause to be taken all such reasonable actions as may be necessary or
reasonably desirable in order expeditiously to consummate each Issuance
pursuant to this Section 10.1 and any related transactions, including
without limitation executing, acknowledging and delivering consents,
assignments, waivers and other documents or instruments; filing
applications, reports, returns, filings and other documents or instruments
with governmental authorities; and otherwise cooperating with the Company
and the Prospective Subscriber. Without limiting the generality of the
foregoing, each Participating Buyer and Stockholder agrees to execute and
deliver such subscription and other agreements specified by the Company to
which the Prospective Subscriber will be party.
10.1.6. Expenses. All reasonable costs and expenses incurred by the
--------
holders of Investor Shares or the Company in connection with any proposed
Issuance of Subject Securities (whether or not consummated), including
without limitation all attorney's fees and charges, all accounting fees and
charges and all finders, brokerage or investment banking fees, charges or
commissions, shall be paid by the Company. The reasonable fees and
expenses of a single legal counsel representing any or all of the other
holders of Shares in connection with such proposed Issuance of Subject
Securities
-22-
(whether or not consummated) shall be paid by the Company. Any other costs
and expenses incurred by or on behalf of any other holder of Shares in
connection with such proposed Issuance of Subject Securities (whether or
not consummated) shall be borne by such holder.
10.1.7. Closing. The closing of an Issuance pursuant to Section 10.1
-------
shall take place at such time and place as the Company shall specify by
notice to each Participating Buyer. At the Closing of any Issuance under
this Section 10.1.7, each Participating Buyer shall be delivered the notes,
certificates or other instruments evidencing the Subject Securities (and,
if applicable, Other Securities) to be Issued to such Participating Buyer,
registered in the name of such Participating Buyer or his designated
nominee, free and clear of any liens or encumbrances, with any transfer tax
stamps affixed, against delivery by such Participating Buyer of the
applicable consideration.
10.2. Excluded Transactions. Notwithstanding the preceding provisions of
---------------------
this Section 10, the preceding provisions of this Section 10 shall not restrict:
(a) Any Issuance of Common Stock upon the exercise or conversion of
any Options or Convertible Securities outstanding on the date hereof or
Issued after the date hereof in compliance with the provisions of this
Section 10;
(b) The Issuance of Shares to the Investors and the Other Investors at
Closing in accordance with the Merger Agreement; and
(c) Any Issuance of Class A Common Stock upon exchange of Class A
Common Stock pursuant to the Bain Subscription Agreement.
10.3. Period. The foregoing provisions of this Section 10 shall expire on
------
the earlier of (a) a Change of Control or (b) the closing of the Initial Public
Offering.
11. REGISTRATION RIGHTS. The Company will perform and comply, and cause each
of its subsidiaries to perform and comply, with such of the following provisions
as are applicable to it. Each holder of Shares will perform and comply with
such of the following provisions as are applicable to such holder.
11.1. Demand Registration Rights for Investor Shares.
----------------------------------------------
11.1.1. General. One or more holders of Investor Shares representing
-------
at least 25% of the total amount of Investor Shares then outstanding
("Initiating Investors"), by notice to the Company specifying the intended
--------------------
method or methods of disposition, may request that the Company effect the
registration under the Securities Act for a Public Offering of all or a
specified part of the Registrable Securities held by such Initiating
-23-
Investors (for purposes of this Agreement, "Registrable Investor
--------------------
Securities" shall mean Registrable Securities constituting Investor
----------
Shares). The Company will then use its best efforts to effect the
registration under the Securities Act of the Registrable Securities which
the Company has been requested to register by such Initiating Investors
together with all other Registrable Securities which the Company has been
requested to register pursuant to Section 11.3 or by other holders of
Registrable Investor Securities by notice delivered to the Company within
20 days after the Company has given the notice required by Section 11.3.1
(which request shall specify the intended method of disposition of such
Registrable Securities), all to the extent requisite to permit the
disposition (in accordance with the intended methods thereof as aforesaid)
of the Registrable Securities which the Company has been so requested to
register; provided, however, that the Company shall not be obligated to
-------- -------
take any action to effect any such registration pursuant to this Section
11.1.1:
(a) Within 180 days immediately following the effective
date of any registration statement pertaining to an underwritten
public offering of securities of the Company for its own account
(other than a Rule 145 Transaction, or a registration relating
solely to employee benefit plans); or
(b) On any form other than Form S-3 (or any successor
form) if the Company has previously effected three or more
registrations of Registrable Securities under this Section 11.1.1
on any form other than Form S-3 (or any successor form);
provided, however, that no registrations of Registrable
-------- -------
Securities which shall not have become and remained effective in
accordance with the provisions of this Section 11, and no
registrations of Registrable Securities pursuant to which the
Initiating Investors and all other holders of Registrable
Investor Securities joining therein are not able to include at
least 90% of the Registrable Securities which they desired to
include, shall be included in the calculation of numbers of
registrations contemplated by this clause (b).
11.1.1.1. Form. Except as otherwise provided above, each
----
registration requested pursuant to this Section 11.1.1 shall be
effected by the filing of a registration statement on Form S-1 (or any
other form which includes substantially the same information as would
be required to be included in a registration statement on such form as
currently constituted), unless the use of a different form has been
agreed to in writing by holders of at least a majority of the
Registrable Investor Securities to be included in the proposed
registration statement in question (the "Majority Participating
----------------------
Investors").
----------
-24-
11.1.2. Payment of Expenses. The Company shall pay all reasonable
-------------------
expenses of holders of Investor Shares incurred in connection with each
registration of Registrable Securities requested pursuant to this Section
11.1, other than underwriting discount and commission, if any, and
applicable transfer taxes, if any.
11.1.3. Additional Procedures. In the case of a registration pursuant
---------------------
to Section 11.1 hereof, whenever the Majority Participating Investors shall
request that such registration shall be effected pursuant to an
underwritten o ffering, the Company shall include such information in the
written notices to holders of Registrable Securities referred to in Section
11.3. In such event, the right of any holder of Registrable Securities to
have securities owned by such holder included in such registration pursuant
to Section 11.1 shall be conditioned upon such holder's participation in
such underwriting and the inclusion of such holder's Registrable Securities
in the underwriting (unless otherwise mutually agreed upon by the Majority
Participating Investors and such holder). If requested by such
underwriters, the Company together with the holders of Registrable
Securities proposing to distribute their securities through such
underwriting will enter into an underwriting agreement with such
underwriters for such offering containing such representations and
warranties by the Company and such holders and such other terms and
provisions as are customarily contained in underwriting agreements with
respect to secondary distributions, including without limitation customary
indemnity and contribution provisions (subject, in each case, to the
limitations on such liabilities set forth in this Agreement).
11.2. [INTENTIONALLY DELETED]
11.3. Piggyback Registration Rights.
-----------------------------
11.3.1. Piggyback Registration.
----------------------
11.3.1.1. General. Each time the Company proposes to register
-------
any shares of Common Stock under the Securities Act on a form which
would permit registration of Registrable Securities for sale to the
public, for its own account or pursuant to Section 11.1.1 (or at any
other time an Investor or an Affiliated Fund is participating in the
registration of Registrable Securities), for sale in a Public
Offering, the Company will give notice to all holders of Registrable
Securities of its intention to do so. Any such holder may, by written
response delivered to the Company within 20 days after the
effectiveness of such notice, request that all or a specified part of
the Registrable Securities held by such holder be included in such
registration. The Company thereupon will use its reasonable efforts to
cause to be included in such registration under the Securities Act all
shares of Common Stock which the Company has been so requested to
register by such holders, to the extent required to permit the
-25-
disposition (in accordance with the methods to be used by the Company
or other holders of shares of Common Stock in such Public Offering) of
the Registrable Securities to be so registered. No registration of
Registrable Securities effected under this Section 11.3 shall relieve
the Company of any of its obligations to effect registrations of
Registrable Securities pursuant to Section 11.1 hereof.
11.3.1.2. Excluded Transactions. The Company shall not be
---------------------
obligated to effect any registration of Registrable Securities under
this Section 11.3 incidental to the registration of any of its
securities in connection with:
(a) Any Public Offering relating to employee benefit plans
or dividend reinvestment plans or to any equity plan for
franchisees or sale of equity to any franchisee (or Affiliate
thereof);
(b) Any Public Offering relating to the acquisition or
merger after the date hereof by the Company or any of its
subsidiaries of or with any other businesses; or
(c) The Initial Public Offering unless (i) such offering
shall have been initiated by the Investors pursuant to Section
11.1.1 or (b) one or more Investors shall have requested that all
or a specified part of its Registrable Securities be included in
such offering pursuant to this Section 11.3.1.
11.3.2. Payment of Expenses. The Company shall pay all reasonable
-------------------
expenses of a single legal counsel representing any and all holders of
Registrable Securities incurred in connection with each registration of
Registrable Securities requested pursuant to this Section 11.3.
11.3.3. Additional Procedures. Holders of Shares participating in any
---------------------
Public Offering pursuant to this Section 11.3 shall take all such actions
and execute all such documents and instruments that are reasonably
requested by the Company to effect the sale of their Shares in such Public
Offering, including without limitation being parties to the underwriting
agreement entered into by the Company and any other selling shareholders in
connection therewith and being liable in respect of the representations and
warranties by, and the other agreements (including without limitation
customary selling stockholder representations, warranties, indemnifications
and "lock-up" agreements) for the benefit of the underwriters provided,
--------
however, that (a) with respect to individual representations, warranties,
-------
indemnities and agreements of sellers of Shares in such Public Offering,
the aggregate amount of such liability shall not exceed such holder's net
proceeds from such offering and (b) to the extent selling stockholders give
further representations, warranties and indemnities, then with respect to
all other representations, warranties and indemnities of sellers of shares
in such Public Offering,
-26-
the aggregate amount of such liability shall not exceed the lesser of (i)
such holder's pro rata portion of any such liability, in accordance with
such holder's portion of the total number of Shares included in the
offering or (ii) such holder's net proceeds from such offering.
11.4. Certain Other Provisions.
-----------------------
11.4.1. Underwriter's Cutback. In connection with any registration
---------------------
of shares, the underwriter may determine that marketing factors (including
without limitation an adverse effect on the per share offering price)
require a limitation of the number of shares to be underwritten.
Notwithstanding any contrary provision of this Section 11 and subject to
the terms of this Section 11.4.1, the underwriter may limit the number of
shares which would otherwise be included in such registration by excluding
any or all Registrable Securities from such registration (it being
understood that the number of shares which the Company seeks to have
registered in such registration shall not be subject to exclusion, in whole
or in part, under this Section 11.4.1). Upon receipt of notice from the
underwriter of the need to reduce the number of shares to be included in
the registration, the Company shall advise all holders of the Company's
securities that would otherwise be registered and underwritten pursuant
hereto, and the number of shares of such securities, including Registrable
Securities, that may be included in the registration shall be allocated in
the following manner, unless the underwriter shall determine that marketing
factors require a different allocation: shares, other than Registrable
Securities, requested to be included in such registration by shareholders
shall be excluded unless the Company has, with the consent of the Majority
Investors, granted registration rights which are to be treated on an equal
basis with Registrable Securities for the purpose of the exercise of the
underwriter cutback; and, if a limitation on the number of shares is still
required, the number of Registrable Securities and other shares of Common
Stock that may be included in such registration shall be allocated among
holders thereof in proportion, as nearly as practicable, to the respective
amounts of Common Stock which each shareholder requested be registered in
such registration. For purposes of any underwriter cutback, all Common
Stock held by any holder of Registrable Securities which is a partnership
or corporation shall also include any Common Stock held by the partners,
retired partners, shareholders or affiliated entities of such holder, or
the estates and family members of any such partners and retired partners
and any trusts for the benefit of any of the foregoing persons, and such
holder and other persons shall be deemed to be a single selling holder, and
any pro rata reduction with respect to such selling holder shall be based
upon the aggregate amount of Common Stock owned by all entities and
individuals included in such selling holder, as defined in this sentence.
No securities excluded from the underwriting by reason of the underwriter's
marketing limitation shall be included in such registration. If any holder
of Registrable Securities disapproves of the terms of the underwriting, it
may elect to withdraw therefrom by written notice to the Company and the
underwriter. The Registrable Securities so withdrawn shall also be
withdrawn from registration.
-27-
11.4.2. Other Actions. If and in each case when the Company is
-------------
required to use its best efforts to effect a registration of any
Registrable Securities as provided in this Section 11, the Company shall
take appropriate and customary actions in furtherance thereof, including,
without limitation: (a) promptly filing with the Commission a registration
statement and using reasonable efforts to cause such registration statement
to become effective, (b) preparing and filing with the Commission such
amendments and supplements to such registration statements as may be
required to comply with the Securities Act and to keep such registration
statement effective for a period not to exceed 180 days from the date of
effectiveness or such earlier time as the Registrable Securities covered by
such registration statement shall have been disposed of in accordance with
the intended method of distribution therefor or the expiration of the time
when a prospectus relating to such registration is required to be delivered
under the Securities Act, (c) use its best efforts to register or qualify
such Registrable Securities under the state securities or "blue sky" laws
of such jurisd ictions as the sellers shall reasonably request; provided,
--------
however, that the Company shall not be obligated to file any general
-------
consent to service of process or to qualify as a foreign corporation in any
jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it would
not otherwise be so subject, and (d) otherwise cooperate reasonably with,
and take such customary actions as may reasonably be requested by the
holders of Registrable Securities in connection with, such registration.
11.4.3. Selection of Underwriters and Counsel. The underwriters and
-------------------------------------
legal counsel to be retained in connection with any Public Offering shall
be selected by the Board or, in the case of an offering following a request
therefor under Section 11.1.1, the Initiating Investors.
11.4.4. Lock-Up. Without the prior written consent of the
underwriters managing any Public Offering, for a period beginning seven
days immediately preceding and ending on the 180th day following the
effective date of the registration statement used in connection with such
offering, no holder of Shares (whether or not a selling shareholder
pursuant to such registration statement) shall (a) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase,
lend, or otherwise Transfer, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
such Common Stock or (b) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences
of ownership of Common Stock, whether any such transaction described in
clause (a) or (b) above is to be settled by delivery of such Common Stock
or such other securities, in cash or otherwise; provided, however, that the
-------- -------
foregoing restrictions shall not apply to (i) transactions relating to
shares of Common Stock or other securities acquired in open market
transactions after the completion of the Initial Public Offering
-28-
or (ii) Transfers to a Permitted Transferee of such holder in accordance
with the terms of this Agreement or (iii) conversions of shares of Common
Stock into other classes of Common Stock without change of holder.
11.5. Indemnification and Contribution.
--------------------------------
11.5.1. Indemnities of the Company. In the event of any registration
--------------------------
of any Registrable Securities or other debt or equity securities of the
Company or any of its subsidiaries under the Securities Act pursuant to
this Section 11 or otherwise, and in connection with any registration
statement or any other disclosure document produced by or on behalf of the
Company or any of its subsidiaries including without limitation reports
required and other documents filed under the Exchange Act and other
documents purs uant to which any debt or equity securities of the Company
or any of its subsidiaries are sold (whether or not for the account of the
Company or its subsidiaries), the Company will, and hereby does, and will
cause each of its subsidiaries, jointly and severally to, indemnify and
hold harmless each seller of Registrable Securities, any Person who is or
might be deemed to be a controlling Person of the Company or any of its
subsidiaries within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, their respective direct and indirect
partners, advisory board members, directors, officers, trustees, members
and shareholders, and each other Person, if any, who controls any such
seller or any such holder within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act (each such person being
referred to herein as a "Covered Person"), against any losses, claims,
--------------
damages or liabilities (or actions or proceedings in respect thereof),
joint or several, to which such Covered Person may be or become subject
under the Securities Act, the Exchange Act, any other securities or other
law of any jurisdiction, the common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of or are based upon (a) any untrue statement or
alleged untrue statement of any material fact contained or incorporated by
reference in any registration statement under the Securities Act, any
preliminary prospectus or final prospectus included therein, or any related
summary prospectus, or any amendment or supplement thereto, or any document
incorporated by reference therein, or any other such disclosure document
(including without limitation reports and other documents filed under the
Exchange Act and any document incorporated by reference therein) or other
document or report, (b) any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading or (c) any violation or alleged violation
by the Company or any of its subsidiaries of any federal, state, foreign or
common law rule or regulation applicable to the Company or any of its
subsidiaries and relating to action or inaction in connection with any such
registration, disclosure document or other document or report, and will
reimburse such Covered Person for any legal or any other expenses incurred
by it in connection with investigating or defending any such loss, claim,
damage, liability, action or proceeding; provided, however, that
-------- -------
-29-
neither the Company nor any of its subsidiaries shall be liable to any
Covered Person in any such case to the extent that any such loss, claim,
damage, liability, action or proceeding arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement,
incorporated document or other such disclosure document or other document
or report, in reliance upon and in conformity with written information
furnished to the Company or to any of its subsidiaries through an
instrument duly executed by such Covered Person specifically stating that
it is for use in the preparation thereof. The indemnities of the Company
and of its subsidiaries contained in this Section 11.5.1 shall remain in
full force and effect regardless of any investigation made by or on behalf
of such Covered Person and shall survive any transfer of securities.
11.5.2. Indemnities to the Company. The Company and any of its
--------------------------
subsidiaries may require, as a condition to including any securities in any
registration statement filed pursuant to this Section 11, that the Company
and any of its subsidiaries shall have received an undertaking satisfactory
to it from the prospective seller of such securities, to indemnify and hold
harmless the Company and any of its subsidiaries, each director of the
Company or any of its subsidiaries, each officer of the Company or any of
its subsidiaries who shall sign such registration statement, each other
Person (other than such seller), if any, who controls the Company and any
of its subsidiaries within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act and each other prospective seller of such
securities with respect to any statement in or omission from such
registration statement, any preliminary prospectus, final prospectus or
summary prospectus included therein, or any amendment or supplement
thereto, or any other disclosure document (including without limitation
reports and other documents filed under the Exchange Act or any document
incorporated therein) or other document or report, if such statement or
omission was made in reliance upon and in conformity with written
information furnished to the Company or any of its subsidiaries through an
instrument executed by such seller specifically stating that it is for use
in the preparation of such registration statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement, incorporated
document or other document or report. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of
the Company, any of its subsidiaries or any such director, officer or
controlling Person and shall survive any transfer of securities.
11.5.3. Contribution. If the indemnification provided for in Sections
------------
11.5.1 or 11.5.2 hereof is unavailable to a party that would have been
entitled to indemnification pursuant to the foregoing provisions of this
Section 11.5 (an "Indemnitee") under any such Section in respect of any
losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) referred to therein, then each party that would have been
an indemnifying party thereunder shall, in lieu of indemnifying such
Indemnitee, contribute to the amount paid or payable by such
-30-
Indemnitee as a result of such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) in such proportion as is
appropriate to reflect the relative fault of such indemnifying party on the
one hand and such Indemnitee on the other in connection with the statements
or omissions which resulted in such losses, claims, damages or liabilities
(or actions or proceedings in respect thereof). The relative fault shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by such
indemnifying party or such Indemnitee and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The parties agree that it would not be just or
equitable if contribution pursuant to this Section 11.5.3 were determined
by pro rata allocation or by any other method of allocation which does not
take account of the equitable considerations referred to in the preceding
sentence. The amount paid or payable by a contributing party as a result of
the losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) referred to above in this Section 11.5.3 shall include any
legal or other expenses reasonably incurred by such Indemnitee in
connection with investigating or defending any such action or claim. No
Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
11.5.4. Limitation on Liability of Holders of Registrable Securities.
------------------------------------------------------------
The liability of each holder of Registrable Securities in respect of any
indemnification or contribution obligation of such holder arising under
this Section 11.5 shall not in any event exceed an amount equal to the net
proceeds to such holder (after deduction of all underwriters' discounts and
commissions) from the disposition of the Registrable Securities disposed of
by such holder pursuant to such registration.
12. CERTAIN ISSUANCES AND TRANSFERS, ETC.
12.1. Transfers to Permitted Transferees. Each holder of Shares agrees
----------------------------------
that no Transfer of any such Shares to any Permitted Transferee shall be
effective unless such Permitted Transferee has delivered to the Company a
written acknowledgment and agreement in form and substance reasonably
satisfactory to the Company that such Shares to be received by such Permitted
Transferee shall remain Investor Shares, Other Investor Shares, Seller Shares,
or Management Shares hereunder, as the case may be, and shall continue to be
subject to all of the provisions of this Agreement and that such Permitted
Transferee shall be bound by and a party to this Agreement as the holder of
Investor Shares, Other Investor Shares, Seller Shares, or Management Shares, as
the case may be, hereunder.
12.2. Other Transfers and Issuances. Notwithstanding any other provision
-----------------------------
of this Agreement, (a) Shares Transferred (i) pursuant to Section 4.1 (other
than 4.1.6(a), (b) or (c)) or 4.2 hereof or (ii) in a Public Offering or after
the Initial Public Offering pursuant to
-31-
Rule 144 or (iii) after foreclosure pursuant to Section 5.1.5 shall be
conclusively deemed thereafter not to be Shares (or Investor Sha res, Other
Investor Shares, Seller Shares or Management Shares) under this Agreement and
not to be subject to any of the provisions hereof or entitled to the benefit of
any of the provisions hereof, (b) Shares Transferred as described in Section
4.1.6(c) shall upon acquisition be deemed for all purposes hereof to be either
Management Shares or Other Investor Shares hereunder (as the Board of Directors
may specify) and each holder of Investor Shares agrees that it will not Transfer
any such Shares to any Person described in Section 4.1.6(c) unless such Person
shall have executed a counterpart signature page to this Agreement and has
delivered to the Company a written acknowledgment and agreement in form and
substance reasonably satisfactory to the Company that such Shares to be received
shall be deemed to be Management Shares or Other Investor Shares, as applicable,
and shall be subject to all of the provisions of this Agreement and that such
Person shall be bound by and a party to this Agreement as a holder of Management
Shares or Other Investor Shares hereunder and (c) any (i) Other Investor Shares
acquired by any holder of Shares pursuant to Section 5.1.1, (ii) Seller Shares
acquired by any holder of Shares pursuant to Section 6.1.1, (iii) Management
Shares acquired by any holder of Shares pursuant to Section 8.1.1 and (iv)
Subject Securities constituting Common Stock acquired by any holder of Shares
pursuant to Section 10 hereof shall upon such acquisition be deemed for all
purposes hereof to be Investor Shares, Other Investor Shares, Seller Shares or
Management Shares hereunder, as the case may be, of like kind with the other
Shares held by such acquiring holder.
13. REMEDIES.
13.1. Generally. The Company and each holder of Shares shall have all
---------
remedies available at law, in equity or otherwise in the event of any breach or
violation of this Agreement or any default hereunder by the Company or any
holder of Shares. The parties acknowledge and agree that in the event of any
breach of this Agreement, in addition to any other remedies which may be
available, each of the parties hereto shall be entitled to specific performance
of the obligations of the other parties hereto and, in addition, to such other
equitable remedies (including without limitation preliminary or temporary
relief) as may be appropriate in the circumstances.
13.2. Deposit. Without limiting the generality of Section 13.1, if any
-------
holder of Shares fails to deliver to the Company the certificate or certificates
evidencing Shares to be sold to the Company pursuant to Section 4 or 9 hereof,
the Company may, at its option, in addition to all other remedies it may have,
deposit the purchase price (including any promissory note constituting all or
any portion thereof) for such Shares with any national bank or trust company
having combined capital, surplus and undivided profits in excess of One Hundred
Million Dollars ($100,000,000) (the "Escrow Agent") and the Company shall cancel
------------
on its books the certificate or certificates representing such Shares and
thereupon all of such holder's rights in and to such Shares shall terminate.
Thereafter, upon delivery to the Company by such holder of the certificate or
certificates evidencing such Shares (duly endorsed, or with stock powers
-32-
duly endorsed, for transfer, with signature guaranteed, free and clear of any
liens or encumbrances, and with any stock transfer tax stamps affixed), the
Company shall instruct the Escrow Agent to deliver the purchase price (without
any interest from the date of the closing to the date of such delivery, any such
interest to accrue to the Company) to such holder.
14. LEGENDS.
14.1. Restrictive Legend. Each certificate representing Shares shall have
------------------
the following legend endorsed conspicuously thereupon:
The voting of the shares of stock represented by this certificate, and
the sale, encumbrance or other disposition thereof, are subject to the
provisions of a Stockholders Agreement to which the issuer and certain of
its stockholders are party, a copy of which may be inspected at the
principal office of the issuer or obtained from the issuer without charge.
Each certificate representing Investor Shares shall also have the following
legend endorsed conspicuously thereupon:
The shares of stock represented by this certificate were originally
issued to, or issued with respect to shares originally issued to, the
following Investor: .
-------------------------
Each certificate representing Other Investor Shares shall also have the
following legend endorsed conspicuously thereupon:
The shares of stock represented by this certificate were originally
issued to, or issued with respect to shares originally issued to, the
following Other Investor: .
-------------------------
Each certificate representing Seller Shares shall also have the following
legend endorsed conspicuously thereupon:
The shares of stock represented by this certificate were originally
issued to, or issued with respect to shares originally issued to, the
following Seller: .
-------------------------
Each certificate representing Management Shares shall also have the
following legend endorsed conspicuously thereupon:
The shares of stock represented by this certificate were originally
issued to, or issued with respect to shares originally issued to, the
following Manager: .
-------------------------
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Any person who acquires Shares which are not subject to all or part of the
terms of this Agreement shall have the right to have such legend (or the
applicable portion thereof) removed from certificates representing such Shares.
14.2. 1933 Act Legends. Each certificate representing Shares shall have
----------------
the following legend endorsed conspicuously thereupon:
The securities represented by this certificate were issued in a
private placement, without registration under the Securities Act of 1933,
as amended (the "Act"), and may not be sold, assigned, pledged or otherwise
transferred in the absence of an effective registration under the Act
covering the transfer or an opinion of counsel, satisfactory to the issuer,
that registration under the Act is not required.
14.3. Stop Transfer Instruction. The Company will instruct any transfer
------------------------
agent not to register the Transfer of any Shares until the conditions specified
in the foregoing legends are satisfied.
14.4. Termination of 1933 Act Legend. The requirement imposed by Section
------------------------------
13.2 hereof shall cease and terminate as to any particular Shares (a) when, in
the opinion of Ropes & Gray or other counsel reasonably acceptable to the
Company, such legend is no longer required in order to assure compliance by the
Company with the Securities Act or (b) when such Shares have been effectively
registered under the Securities Act or transferred pursuant to Rule 144.
Wherever (x) such requirement shall cease and terminate as to any Shares or (y)
such Shares shall be transferable under paragraph (k) of Rule 144, the holder
thereof shall be entitled to receive from the Company, without expense, new
certificates not bearing the legend set forth in Section 14.2 hereof.
15. AMENDMENT, TERMINATION, ETC.
15.1. Oral Modifications. This Agreement may not be orally amended,
------------------
modified, extended or terminated, nor shall any oral waiver of any of its terms
be effective.
15.2. Written Modifications. This Agreement may be amended, modified,
---------------------
extended or terminated, and the provisions hereof may be waived, only by an
agreement in writing signed by the Majority Shareholders; provided, however,
-------- -------
that (a) the consent of the Majority Investors shall be required for any
amendment, modification, extension, termination or waiver under this Agreement,
(b) the consent of the Majority Other Investors shall be required for any
amendment, modification, extension, termination or waiver which has a material
adverse effect on the rights of the holders of Other Investor Shares as such
under this Agreement, (c) the consent of the Majority Sellers shall be required
for any amendment, modification, extension, termination or waiver which has a
material adverse effect on the rights of the holders of Seller Shares as such
under this Agreement, (d) the consent of the Majority Managers shall be
-34-
required for any amendment, modification, extension, termination or waiver which
has a material adverse effect on the rights of the holders of Management Shares
as such under this Agreement and (e) the consent of each Regulated Stockholder
shall be required for any amendment, modification, extension, termination or
waiver of Section 17 hereof. Each such amendment, modification, extension,
termination and waiver shall be binding upon each party hereto and each holder
of Shares subject hereto. In addition, each party hereto and each holder of
Shares subject hereto may waive any right hereunder by an instrument in writing
signed by such party or holder.
15.3. Termination. No termination under this Agreement shall relieve any
-----------
Person of liability for breach prior to termination.
16. DEFINITIONS. For purposes of this Agreement:
16.1. Certain Matters of Construction. In addition to the definitions
-------------------------------
referred to or set forth below in this Section 16:
(a) The words "hereof", "herein", "hereunder" and words of similar
import shall refer to this Agreement as a whole and not to any particular
Section or provision of this Agreement, and reference to a particular
Section of this Agreement shall include all subsections thereof;
(b) Definitions shall be equally applicable to both nouns and verbs
and the singular and plural forms of the terms defined; and
(c) The masculine, feminine and neuter genders shall each include the
other.
16.2. Definitions. The following terms shall have the following meanings:
-----------
"Adverse Claim" shall have the meaning set forth in Section 8-302 of
-------------
the applicable Uniform Commercial Code.
"Affiliate" shall mean, with respect to any specified Person, (a) any
---------
other Person which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control
with, such specified Person (for the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled
by" and "under common control with"), as used with respect to any Person,
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or otherwise) and
(b) each Person of which such specified Person or an Affiliate (as defined
in clause (a) above) thereof shall, directly or indirectly, beneficially
own at least 25% of any class of outstanding capital stock or other
evidence of beneficial interest at such time. With respect to any
-35-
Person who is an individual, "Affiliate" shall also include, without
limitation, any member of such individual's Members of the Immediate
Family. When such term is used in the context of a Regulatory Problem (as
defined in Section 17(a)) it also has the meaning ascribed to it in any
Applicable Law.
"Affiliated Fund" shall mean each corporation, trust, limited
---------------
liability company, general or limited partnership or other entity under
common control with any Investor.
"Agreement" shall have the meaning set forth in the Preamble.
---------
"Applicable Law," with respect to any Person, means all provisions of
--------------
all laws, statutes, ordinances, rules, regulations, permits, certificates
or orders of any governmental authority applicable to such Person or any of
its assets or property or to which such Person or any of its assets or
property is subject, and all judgements, injunctions, orders and decrees of
all courts and arbitrators in proceedings or actions in which such Person
is a party or by which it or any of its assets or properties is or may be
bound or subject.
"Bain Subscription Agreement" shall mean the Bain Subscription
---------------------------
Agreement of even date between TM Transitory Merger Corporation and each of
the Investors.
"BCIP" shall mean, collectively, one or more of the following Persons:
----
BCIP Associates II, BCIP Trust Associates II, BCIP Associates II-B, BCIP
Trust Associates II-B and BCIP Associates II-C.
"Board" shall have the meaning set forth in Section 2.1.
-----
"Call Notice" shall have the meaning set forth in Section 9.1.4.
-----------
"Call Option" shall mean an option by the Company to purchase all or
-----------
any portion of the Management Shares held by, or originally issued to, any
Person upon the termination of such Person's employment by the Company and
its subsidiaries, including without limitation the option to purchase
Management Shares set forth in Section 9.
"Call Option Exercise Period" shall have the meaning set forth in
---------------------------
Section 9.1.4.
"Cause" with respect to any Manager, shall mean the following events
-----
or conditions: (i) the failure to devote substantially all of his or her
business time to the performance of his or her duties to the Company or any
of its Affiliates (other than by reason of disability), or refusal or
failure to follow or carry out any reasonable direction of the Board, and
the continuance of such refusal or failure for a period of ten days after
notice to the Manager, (ii) the material breach by the Manager of any
-36-
material agreement to which the Manager and the Company or any of its
Affiliates are party, (iii) the commission of fraud, embezzlement, theft or
other dishonesty by the Manager with respect to the Company or any of its
Affiliates; (iv) the conviction of the Manager of, or plea by the Manager
of nolo contendere to, any felony or any other crime involving dishonesty
or moral turpitude and (v) any other intentional action or intentional
omission that involves a material breach of fiduciary obligation on the
part of the Manager.
"Change of Control" shall mean (a) any change in the ownership of the
-----------------
capital stock of the Company if, immediately after giving effect thereto,
any Person (or group of Persons acting in concert) other than the Investors
and their Affiliates will have the direct or indirect power to elect a
majority of the members of the Board or (b) any change in the ownership of
the capital stock of the Company if, immediately after giving effect
thereto, the Investors and their Affiliates shall own less than 25% of the
Equivalent Shares.
"Charitable Organization" shall mean a charitable organization as
-----------------------
described by Section 501(c)(3) of the Internal Revenue Code of 1986, as in
effect from time to time.
"Class A Stock" shall have the meaning set forth in the Recitals.
-------------
"Class L Stock" shall have the meaning set forth in the Recitals.
-------------
"Closing" shall have the meaning set forth in Section 1.1.
-------
"Commission" shall mean the Securities and Exchange Commission.
----------
"Common Stock" shall mean the common stock of the Company including
------------
without limitation the Class A Common and the Class L Common.
"Company" shall have the meaning set forth in the Preamble.
-------
"Convertible Securities" shall mean any evidence of indebtedness,
----------------------
shares of stock (other than Common Stock or Options) or other securities
directly or indirectly convertible into or exchangeable or exercisable for
shares of Common Stock.
"Cost" shall mean, for any Share, the price paid to the issuer of such
----
Share.
"Covered Person" shall have the meaning set forth in Section 11.5.1.
--------------
"Credit Agreement" shall mean the Credit Agreement of even date
----------------
between the Company and certain of its subsidiaries and Morgan Guaranty
Trust Company of New
-37-
York and the other banks party thereto and all related documents and any
credit agreement and related documents relating to any direct or indirect
refinancing thereof.
"Credit Agreement Rate" shall mean the rate payable on revolving
---------------------
credit loans under the Credit Agreement.
"Drag Along Fairness Opinion" shall have the meaning set forth in
---------------------------
Section 4.2.2.
"Drag Along Notice" shall have the meaning set forth in Section 4.2.1.
-----------------
"Drag Along Sale Percentage" shall have the meaning set forth in
--------------------------
Section 4.2.
"Drag Along Sellers" shall have the meaning set forth in Section
------------------
4.2.1.
"Equivalent Shares" shall mean as to any outstanding shares of Common
-----------------
Stock, such number of shares of Common Stock, and as to any outstanding
Options or Convertible Securities, the maximum number of shares of Common
Stock for which or into which such Options or Convertible Securities may at
the time be exercised or converted.
"Escrow Agent" shall have the meaning set forth in Section 13.2.
------------
"Exchange Act" shall mean the Securities Exchange Act of 1934, as in
------------
effect from time to time.
"Fair Market Value" shall mean, as of any date, as to any Share of
-----------------
Common Stock, the Board's good faith determination of the fair value of
such Share as of the applicable reference date.
"Indemnitee" shall have the meaning set forth in Section 11.5.3.
----------
"Independent Investment Banking Firm" shall mean a nationally
-----------------------------------
recognized investment banking firm selected by the Board which does not
hold any equity interest in the Company or in any shareholder of the
Company and which is not employed by either the Company or any of the
Investors at the time the applicable Drag Along Fairness Opinion is
furnished (other than employment for the purpose of providing such Drag
Along Fairness Opinion).
"Initial Public Offering" means the initial Public Offering by the
-----------------------
Company for its own account registered on Form S-1 (or any successor form
under the Securities Act).
-38-
"Initiating Investors" shall have the meaning set forth in Section
--------------------
11.1.1.
"Investor Shares" shall mean all shares of Common Stock originally
---------------
issued to, or issued with respect to shares originally issued to, or held
by, the Investors, whenever issued, subject to Section 12.2.
"Investors" shall have the meaning set forth in the Preamble.
---------
"Issuance" shall have the meaning set forth in Section 10.
--------
"Majority Investors" shall mean, as of any date, the holders of a
------------------
majority of the Investor Shares outstanding on such date.
"Majority Managers" shall mean, as of any date, the holders of a
-----------------
majority of the Management Shares outstanding on such date.
"Majority Non-Investor Shareholders" shall mean, as of any date, the
----------------------------------
holders of a majority of the Shares (other than Investor Shares)
outstanding on such date.
"Majority Other Investors" shall mean, as of any date, the holders of
------------------------
a majority of the Other Investor Shares outstanding on such date.
"Majority Participating Financers" shall have the meaning set forth in
--------------------------------
Section 11.2.1.
"Majority Participating Investors" shall have the meaning set forth in
--------------------------------
Section 11.1.1.
"Majority Sellers" shall mean, as of any date, the holders of a
----------------
majority of the Seller Shares outstanding on such date.
"Majority Shareholders" shall mean, as of any date, the holders of
---------------------
Voting Shares constituting fifty-two percent (52%) of the total Equivalent
Shares represented by all of the Voting Shares outstanding on such date.
"Management Shares" shall mean (a) all shares of Common Stock
-----------------
originally issued to, or issued with respect to shares originally issued
to, or held by, a Manager, whenever issued, including without limitation
all shares of Common Stock issued pursuant to the exercise of any Option
and (b) all Options originally held by a Manager (treating such Options as
a number of Shares equal to the number of Equivalent Shares represented by
such Options for all purposes of this Agreement except (i) for purposes of
Section 10, Options granted after the date of the Closing and (ii) as
otherwise specifically set forth herein), subject to Section 12.2.
-39-
"Managers" shall have the meaning set forth in the Preamble.
--------
"Members of the Immediate Family" shall mean, with respect to any
-------------------------------
individual, each spouse or child or other descendants of such individual,
each trust created primarily for the benefit of one or more of the
aforementioned Persons and their spouses and each custodian or guardian of
any property of one or more of the aforementioned Persons in his capacity
as such custodian or guardian.
"Merger Agreement" shall have the meaning set forth in the Recitals.
----------------
"Merger Corp" shall have the meaning set forth in the Recitals.
-----------
"Objection Notice" shall have the meaning set forth in Section 4.2.2.
----------------
"Options" shall mean any options or warrants to subscribe for,
-------
purchase or otherwise acquire either Common Stock or Convertible
Securities.
"Other Investor Shares" shall mean all shares of Common Stock
---------------------
originally issued to, or issued with respect to shares originally issued
to, or held by, an Other Investor, whenever issued, subject to Section
12.2.
"Other Investors" shall have the meaning set forth in the Preamble.
---------------
"Other Securities" shall have the meaning set forth in Section 10.1.3.
----------------
"Participating Buyer" shall have the meaning set forth in Section
-------------------
10.1.2.
"Participating Seller" shall have the meaning set forth in Section
--------------------
4.1.2 and 4.2.1.
"Permitted Transferee" shall mean (a) as to each Investor Share, a
--------------------
Transferee of such Investor Share resulting from a Transfer referred to in
Section 4.1.6(a) or (b), (b) as to each Other Investor Share, a Transferee
of such Other Investor Share in compliance with Section 5.1.2, (c) as to
each Seller Share, a Transferee of such Seller Share in compliance with
Section 6.1.1 or 6.1.2 and (e) as to each Management Share, a Transferee of
such Management Share in compliance with Section 8.1.1 or 8.1.2.
"Person" shall mean any individual, partnership, corporation, company,
------
association, trust, joint venture, unincorporated organization, entity, or
any government, governmental department or agency or political subdivision
thereof.
"Preemption Notice" shall have the meaning set forth in Section
-----------------
10.1.1.
-40-
"Preemptive Offerees" shall have the meaning set forth in Section
-------------------
10.1.1.
"Preemptive Portion" shall have the meaning set forth in Section
------------------
10.1.1.
"Price Per Equivalent Share" shall mean the Board's good faith
--------------------------
determination of the price per Equivalent Share of any Convertible
Securities or Options which are the subject of an Issuance pursuant to
Section 10 hereof.
"Prospective Buyer" shall have the meaning set forth in Section 4.1.
-----------------
"Prospective Selling Group" shall have the meaning set forth in
-------------------------
Section 4.1 or 4.2., as applicable.
"Prospective Subscriber" shall have the meaning set forth in Section
----------------------
10.1.1.
"Public Offering" shall mean a public offering and sale of Common
---------------
Stock for cash pursuant to an effective registration statement under the
Securities Act.
"Qualified Public Offering" shall mean a Public Offering, other than
-------------------------
any Public Offering or sale pursuant to a registration statement on Form S-
8 or comparable form, in which the sum of the aggregate price to the public
of all Common Stock sold in such offering, together with the aggregate
price to the public of all Common Stock sold in all previous such Public
Offerings, shall exceed $75 million.
"Registrable Investor Securities" shall have the meaning set forth in
-------------------------------
Section 11.1.1.
"Registrable Securities" shall mean (a) all shares of Class A Stock,
----------------------
(b) all shares of Class A Stock issuable upon conversion of Shares of Class
L Stock, (c) all shares of Class A Stock issuable upon exercise of any
Option or Convertible Securities, and (d) all shares of Class A Stock
directly or indirectly issued or issuable with respect to the securities
referred to in clauses (a), (b) or (c) above by way of stock dividend or
stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization, in each
case constituting Shares. As to any particular Registrable Securities,
such shares shall cease to be Registrable Securities when (i) such shares
shall have been Transferred pursuant to Section 4.1 (other than Section
4.1(a), (b) or (c)) or 4.2 hereof, (ii) a registration statement with
respect to the sale of such securities shall have become effective under
the Securities Act and such securities shall have been disposed of in
accordance with such registration statement, (iii) such securities shall
have been Transferred pursuant to Rule 144, (iv) subject to the provisions
of Section 14 hereof, such securities shall have been otherwise
transferred, new certificates for them not bearing a legend restricting
further transfer shall have been delivered by the Company and subsequent
disposition of them shall not require
-41-
registration of them under the Securities Act and such securities may be
distributed without volume limitation or other restrictions on transfer
under Rule 144 (including without application of paragraphs (c), (e) (f)
and (h) of Rule 144) or (v) such securities shall have ceased to be
outstanding.
"Regulation D" shall mean Regulation D under the Securities Act.
------------
"Rule 144" shall mean Rule 144 under the Securities Act (or any
--------
successor provision).
"Rule 145 Transaction" shall mean a registration on Form S-4 pursuant
--------------------
to Rule 145 of the Securities Act.
"Sale" shall have the meaning set forth in Section 4.1.
----
"Securities Act" shall mean the Securities Act of 1933, as in effect
--------------
from time to time.
"Sellers" shall have the meaning set forth in the Preamble.
-------
"Seller Shares" shall mean all shares of Common Stock originally
-------------
issued to, or issued with respect to shares originally issued to, or held
by, the Sellers, whenever issued, subject to Section 12.2.
"Shares" shall mean all Investor Shares, Other Investor Shares, Seller
------
Shares, and Management Shares.
"Stockholder Call Group" shall have the meaning set forth in Section
----------------------
9.1.
"Stockholders" shall have the meaning set forth in the Preamble.
------------
"Subject Securities" shall have the meaning set forth in Section 10.
------------------
"Tag Along Holder" shall have the meaning set forth in Section 4.1.1.
----------------
"Tag Along Notice" shall have the meaning set forth in Section 4.1.1.
----------------
"Tag Along Offer" shall have the meaning set forth in Section 4.1.2.
---------------
"Tag Along Sale Percentage" shall have the meaning set forth in
-------------------------
Section 4.1.1.
"Tag Along Sellers" shall have the meaning set forth in Section 4.1.2.
-----------------
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"Transfer" shall mean any sale, pledge, assignment, encumbrance or
--------
other transfer or disposition of any Shares to any other Person, whether
directly, indirectly, voluntarily, involuntarily, by operation of law,
pursuant to judicial process or otherwise.
"Voting Shares" shall mean all shares of Common Stock other than
-------------
shares of Common Stock which pursuant to the Company's Articles of
Incorporation are not at the time and in the hands of the holder thereof
entitled to vote generally.
17. REGULATORY COMPLIANCE COOPERATION.
(a) Definitions.
"Applicable Law," with respect to any Person, means all provisions of
--------------
all laws, statues, ordinances, rules, regulations, permits, certificates or
orders of any Governmental Authority applicable to such person or any of
its assets or property or to which such Person or any of its assets or
property is subject, and all judgements, injunctions, orders and decrees of
all courts and arbitrators in proceedings or actions in which such Person
is a party to or by which it or any of its assets or properties is or may
be bound or subject.
"Conversion Event" shall mean (a) any public offering or public sale
----------------
of securities of the Company (including a public offering registered under
the Securities Act of 1933 and a public sale pursuant to Rule 144 of the
Securities and Exchange Commission or any similar rule then in force), (b)
any sale of securities of the Company to a person or group of persons
(within the meaning of the Securities Exchange Act of 1934, as amended (the
"1934 Act")) if, after such sale, such person or group of persons in the
aggregate would own or control securities which possess in the aggregate
the ordinary voting power to elect a majority of the Company's directors
(provided that such sale has been approved by the Company's Board of
Directors or a committee thereof), (c) any sale of securities of the
Company to a person or group of persons (within the meaning of the 1934
Act) if, after such sale, such person or group of persons in the aggregate
would own or control securities of the Company (excluding any nonvoting
Class A Stock being converted and disposed of in connection with such
Conversion Event) which possess in the aggregate the ordinary voting power
to elect a majority of the Company's directors, (d) any sale of securities
of the Company to a person or group of persons (within the meaning of the
1934 Act) if, after such sale, such person or group of persons would not,
in the aggregate, own, control or have the right to acquire more than two
percent (2%) of the outstanding securities of any class of voting
securities of the Company, (e) a merger, consolidation or similar
transaction involving the Company if, after such transaction, a person or
group of persons (within the meaning of the 1934 Act) in the aggregate
would own or control securities which possess in the aggregate the ordinary
voting power to elect a majority of the surviving
-43-
Company's directors (provided that the transaction has been approved by the
Company's Board or a committee thereof) and (f) any tag along sale or drag
along sale initiated by others, including any such sale pursuant to Section
4.
"Regulated Stockholder" shall mean DP Investors I, LLC, DP Investors
---------------------
II, LLC, J.P. Morgan Capital Corporation, Sixty Wall Street Fund, L.P., and
any other stockholder (i) that is subject to the provisions of Regulation Y
or Regulation K of the Board of Governors of the Federal Reserve System, 12
C.F.R. Part 225 (or any successor to such Regulations) and (ii) that holds
Securities of the Company and (iii) that has provided written notice to the
Company of its status as a "Regulated Stockholder" hereunder.
"Regulatory Problem" means any set of facts or circumstances wherein
------------------
it has been asserted by any governmental regulatory agency (or Regulated
Stockholder reasonably believes that there is a risk of such assertion)
that such Regulated Stockholder is not entitled to acquire, own, hold or
control, or exercise any significant right (including the right to vote)
with respect to, any Securities of the Company or any subsidiary of the
Company.
"Securities" means, with respect to any Person, such Person's
----------
"securities" as defined in Section 2(1) of the Securities Act of 1933, as
amended, and includes such Person's capital stock or other equity interests
or any options, warrants or other securities that are directly or
indirectly convertible into, or exercisable or exchangeable or, such
Person's capital stock or other equity or equity-linked interests,
including phantom stock and stock appreciation rights. Whenever a
reference herein to Securities is referring to any derivative Securities,
the rights of a Stockholder shall apply to such derivative Securities and
all underlying Securities directly or indirectly issuable upon conversion,
exchange or exercise of such derivative securities.
(b) Regulatory Matters Generally.
----------------------------
(i) If a Regulated Stockholder determines that it has a Regulatory Problem,
the Company agrees to take all such actions, subject to Applicable Law, as
are reasonably requested by such Regulated Stockholder (1) to effectuate
and facilitate any transfer by such Regulated Stockholder of any Securities
of the Company then held by such Regulated Stockholder to any Person
designated by such Regulated Stockholder, (2) to permit such Regulated
Stockholder (or any Affiliate of such Regulated Stockholder) to exchange
all or any portion of the voting Securities then held by such Person on a
share-for-share basis for shares of a class of nonvoting Securities of the
Company, which nonvoting Securities shall be identical in all respect to
such voting Securities, except that such new Securities shall be nonvoting
and shall be convertible into voting Securities on such terms as are
requested by such Regulated Stockholder in light of regulatory
considerations then prevailing, and (3) to continue and preserve the
-44-
respective allocation of the voting interests with respect to the Company
provided for in this Agreement and with respect to such Regulated
Stockholder's ownership of the Company's voting Securities. Such actions
may include, without limitation, (x) entering into such additional
agreements as are reasonably requested by such Regulated Stockholders to
permit any Person(s) designated by such Regulated Stockholder to exercise
any voting power which is relinquished by such Regulated Stockholder upon
any exchange of voting Securities for nonvoting Securities of the Company,
and (y) entering into such additional agreements, adopting such amendments
to the charter documents of the Company and taking such additional actions
as are reasonably requested by such Regulated Stockholder in order to
effectuate the intent of the foregoing.
(ii) If a Regulated Stockholder has the right or opportunity to
acquire any of the Company's Securities from the Company, any Stockholder
or any other Person (as the result of a preemptive offer, pro rata offer or
--- ----
otherwise), at such Regulated Stockholder's request the Company will offer
to sell (or if the Company is not the seller, to cooperate with the seller
and such Regulated Stockholder to permit such seller to sell) such non-
voting Securities on the same terms as would have existed has such
Regulated Stockholder acquired the Securities so offered and immediately
requested their exchange for non-voting Securities pursuant to clause (i)
above.
(iii) Each Stockholder agrees to cooperate with the Company in
complying with this Section 17, including without limitation, voting to
approve amending the Company's charter documents in a manner reasonably
requested by the Regulated Stockholder requesting such amendment.
(iv) The Company agrees not to amend or waive the voting or other
provisions of this Agreement or the Company's charter documents if such
amendment or waiver would cause any Regulated Stockholder to have a
Regulatory Problem, provided, that any such Regulated Stockholder notifies
--------
the Company that it would have a Regulatory Problem promptly after it has
notice of such amendment or waiver.
(v) If a Regulated Stockholder shall now or hereafter have a right to
appoint or designate a Director and such right shall, in the reasonable
judgment of such Regulated Stockholder, cause a Regulatory Problem, such
Regulatory Stockholder may, upon notice to the Company, relinquish its
right to appoint such Director at any time.
(c) Notice of Conversion to Other Regulated Stockholders; Deferral. The
--------------------------------------------------------------
Company shall not convert or directly or indirectly redeem, purchase or
otherwise acquire any shares of voting Class A Stock or any other class of
capital stock of the Company or take any other action affecting the voting
rights of such shares, if such action will increase the percentage of any class
of outstanding voting securities owned or controlled by any Regulated
Stockholder (other than any such stockholder which requested that the Company
take such action, or which
-45-
otherwise waives in writing its rights under this paragraph (c)), unless the
Company gives written notice (the "Deferral Notice") of such action to each
Regulated Stockholder. The Company will defer making any such conversion,
redemption, purchase or other acquisition, or taking any such other action for a
period of twenty (20) days (the "Deferral Period") after giving the Deferral
Notice in order to allow each Regulated Stockholder to determine whether it
wishes to convert or take any other action with respect to the Common Stock it
owns, controls or has the power to vote, and if any such Regulated Stockholder
than elects to convert any shares of voting Class A Stock, it shall notify the
Company in writing within ten (10) days of the issuance of the Deferral Notice,
in which case the Company shall (i) promptly notify from time to time prior to
the end of such 20-day period each other Regulated Stockholder holding shares of
each proposed conversion, and (ii) effect the conversions requested by all
Regulated Stockholders in response to the notices issued pursuant to this
paragraph (c) at the end of the Deferral Period. Upon complying with the
procedures hereinabove set forth in this paragraph (c), the Company may so
convert or directly or indirectly redeem, purchase or otherwise acquire any
shares or voting Class A Stock or any other class of capital stock of the
Company or take any other action affecting the voting rights of such shares.
(d) Restrictions on Redemptions, Etc. The Company shall not redeem, purchase,
---------------------------------
acquire to take any other action affecting outstanding shares of capital stock
if, after giving effect to such redemption, purchase, acquisition or other
action, a Regulated Stockholder would own more than 24.99% of the total equity
of the Company or more than 24.99% of the total value of all capital stock and
subordinated debt of the Company (in each case determined by assuming such
Regulated Holder (but no other holder) has exercised, converted or exchanged all
of its options, warrants and other convertible or exchangeable securities). The
Company shall not be a party to any merger, consolidation, recapitalization,
reorganization or other transaction pursuant to which a Regulated Holder would
be required to take any Securities or subordinated debt which might reasonably
be expected to cause such person to have a Regulatory Problem.
(e) Restrictions on Conversions and Transfers by a Regulated Stockholder.
--------------------------------------------------------------------
Notwithstanding anything to the contrary contained in this Agreement or in the
Company's Restated Articles of Incorporation:
(i) no Regulated Stockholder may, without the prior written consent of
the Company, convert any of its non-voting Class A Stock into voting shares of
Class A Stock to the extent that immediately prior thereto, or as a result of
such conversion, the number of shares of voting Class A Stock which constitute
voting stock held by such Regulated Stockholder would exceed the number of
shares of voting Class A Stock which such Regulated Stockholder reasonably
determines it and its Affiliates may own, control or have the power to vote
under any law, regulation, rule or other requirement of any governmental
authority at the time applicable to such Regulated Stockholder or its
Affiliates; provided, however, that each Regulated Stockholder may convert to
-------- -------
such nonvoting shares of Class A Stock into shares of voting Class A stock if
such Regulated Stockholder reasonably believes that such converted
-46-
shares will be Transferred within fifteen (15) days pursuant to a Conversion
Event and such holder agrees not to vote any such shares of voting Class A stock
prior to such Conversion Event and undertakes to promptly convert such shares
back into nonvoting shares of Class A Stock if such shares are not Transferred
pursuant to a Conversion Event.
(ii) In addition, without the prior written consent of the
Company, no Regulated Stockholder may Transfer any of its shares of nonvoting
Class A Stock unless such transfer is either (x) pursuant to a Conversion Event
or (y) as a condition to such transfer, such Regulated Stockholder shall obtain
the consent of any such transferee that such transferee shall be bound by the
same conversion and transfer restrictions contained in this Agreement and in the
Company's Restated Articles of Incorporation as if such transferee were a
Regulated Stockholder.
(iii) Each Regulated Stockholder may provide for further
restrictions upon the conversion of any shares of nonvoting Class A Stock by
providing the Company with signed, written instructions specifying such
additional restrictions and legending such shares as to the existence of such
restrictions.
18. MISCELLANEOUS.
18.1. Authority; Effect; etc. Each party hereto represents and warrants to
-----------------------
and agrees with each other party that the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized on behalf of such party and do not violate any agreement or
other instrument applicable to such party or by which its assets are bound. This
Agreement does not, and shall not be construed to, give rise to the creation of
a partnership among any of the parties hereto, or to constitute any of such
parties members of a joint venture or other association. Domino's shall be
jointly and severally liable for all obligations of the Company pursuant to this
Agreement.
18.2. Notices. Any notices and other communications required or permitted
-------
in this Agreement shall be effective if in writing and (a) delivered personally
or (b) sent (i) by Federal Express, DHL or UPS or (ii) by registered or
certified mail, postage prepaid, in each case, addressed as follows:
If to the Company or the Investors, to them:
c/o Bain Capital, Inc.
Two Copley Place, 7th Floor
Boston, Massachusetts 02116
Attention: Mark E. Nunnelly
Robert F. White
Andrew B. Balson
-47-
with a copy to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: R. Newcomb Stillwell
If to a Seller, to him or her:
c/o Thomas S. Monaghan
30 Frank Lloyd Wright Drive
P.O. Box 997
Ann Arbor, MI 48106-0997
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Dennis S. Hersch
If to the Other Investors, the Financers or the Managers, to them at
the addresses set forth in the stock record book of the Company.
Notice to the holder of record of any shares of capital stock shall be
deemed to be notice to the holder of such shares for all purposes hereof.
Unless otherwise specified herein, such notices or other communications
shall be deemed effective (a) on the date received, if personally delivered, (b)
two business days after being sent by Federal Express, DHL or UPS and (c) three
business days after deposit with the U.S. Postal Service, if sent by registered
or certified mail. Each of the parties hereto shall be entitled to specify a
different address by giving notice as aforesaid to each of the other parties
hereto.
18.3. Binding Effect, etc. Except for restrictions on the Transfer of
-------------------
Shares set forth in other agreements, plans or other documents, this Agreement
constitutes the entire agreement of the parties with respect to its subject
matter, supersedes all prior or contemporaneous oral or written agreements or
discussions with respect to such subject matter, and shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
representatives, successors and assigns.
-48-
18.4. Descriptive Headings. The descriptive headings of this Agreement are
--------------------
for convenience of reference only, are not to be considered a part hereof and
shall not be construed to define or limit any of the terms or provisions hereof.
18.5. Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one instrument.
18.6. Severability. In the event that any provision hereof would, under
------------
applicable law, be invalid or unenforceable in any respect, such provision shall
be construed by modifying or limiting it so as to be valid and enforceable to
the maximum extent compatible with, and possible under, applicable law. The
provisions hereof are severable, and in the event any provision hereof should be
held invalid or unenforceable in any respect, it shall not invalidate, render
unenforceable or otherwise affect any other provision hereof.
19. GOVERNING LAW.
19.1. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the domestic substantive laws of the State of New York without
giving effect to any choice or conflict of laws provision or rule that would
cause the application of the domestic substantive laws of any other
jurisdiction.
19.2. Consent to Jurisdiction. Each party to this Agreement, by its
-----------------------
execution hereof, (a) hereby irrevocably submits to the exclusive jurisdiction
of the state courts of the State of New York sitting in the County of New York
or the United States District Court for the Southern District of New York for
the purpose of any action, claim, cause of action or suit (in contract, tort or
otherwise), inquiry, proceeding or investigation arising out of or based upon
this Agreement or relating to the subject matter hereof, (b) hereby waives to
the extent not prohibited by applicable law, and agrees not to assert, and
agrees not to allow any of its subsidiaries to assert, by way of motion, as a
defense or otherwise, in any such action, any claim that it is not subject
personally to the jurisdiction of the above-named courts, that its property is
exempt or immune from attachment or execution, that any such proceeding brought
in one of the above-named courts is improper, or that this Agreement or the
subject matter hereof or thereof may not be enforced in or by such court and (c)
hereby agrees not to commence or maintain any action, claim, cause of action or
suit (in contract, tort or otherwise), inquiry, proceeding or investigation
arising out of or based upon this Agreement or relating to the subject matter
hereof or thereof other than before one of the above-named courts nor to make
any motion or take any other action seeking or intending to cause the transfer
or removal of any such action, claim, cause of action or suit (in contract, tort
or otherwise), inquiry, proceeding or investigation to any court other than one
of the above-named courts whether on the grounds of inconvenient forum or
otherwise. Notwithstanding the foregoing, to the extent that any party hereto
is or becomes a party in any litigation in connection with which it may assert
indemnification rights set forth in this agreement, the court in which such
-49-
litigation is being heard shall be deemed to be included in clause (a) above.
Each party hereto hereby consents to service of process in any such proceeding
in any manner permitted by New York law, and agrees that service of process by
registered or certified mail, return receipt requested, at its address specified
pursuant to Section 18.2 hereof is reasonably calculated to give actual notice.
19.3. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW
--------------------
WHICH CANNOT BE WAIVED, EACH PARTY HERETO HEREBY WAIVES AND COVENANTS THAT IT
WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO
TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE OR ACTION, CLAIM, CAUSE OF
ACTION OR SUIT (IN CONTRACT, TORT OR OTHERWISE), INQUIRY, PROCEEDING OR
INVESTIGATION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER
HEREOF OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE TRANSACTIONS
CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING.
EACH PARTY HERETO ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE OTHER PARTIES
HERETO THAT THIS SECTION 19.3 CONSTITUTES A MATERIAL INDUCEMENT UPON WHICH THEY
ARE RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT. ANY PARTY HERETO MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 19.3 WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO
TRIAL BY JURY.
19.4. Exercise of Rights and Remedies. No delay of or omission in the
-------------------------------
exercise of any right, power or remedy accruing to any party as a result of any
breach or default by any other party under this Agreement shall impair any such
right, power or remedy, nor shall it be construed as a waiver of or acquiescence
in any such breach or default, or of any similar breach or default occurring
later; nor shall any such delay, omission nor waiver of any single breach or
default be deemed a waiver of any other breach or default occurring before or
after that waiver.
-50-
Stockholders Agreement
December 21, 1998
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Agreement (or caused this Agreement to be executed on its behalf by its officer
or representative thereunto duly authorized) under seal as of the date first
above written.
THE COMPANY: TISM, Inc.
By /s/ Harry J. Silverman
--------------------------------
Name: Harry J. Silverman
Title: Vice President
DOMINO'S: DOMINO'S, INC.
By /s/ Harry J. Silverman
--------------------------------
Name: Harry J. Silverman
Title: Vice President
THE INVESTORS: Bain Capital Fund VI, L.P.
Bain Capital VI Coinvestment Fund, L.P.
By: Bain Capital Partners VI, L.P.,
their general partner
By: Bain Capital Investors VI, Inc.,
its general partner
By /s/ Mark E. Nunnelly
------------------------------
Name: Mark E. Nunnelly
Title: Managing Director
-51-
Stockholders Agreement
December 21, 1998
BCIP Associates II
BCIP Trust Associates II
BCIP Associates II-B
BCIP Trust Associates II-B
BCIP Associates II-C
By: Bain Capital, Inc.,
their Managing Partner
By /s/ Mark E. Nunnelly
--------------------------------
Name: Mark E. Nunnelly
Title: Managing Director
PEP Investments PTY Ltd.
By: Bain Capital, Inc.,
its attorney-in-fact
By /s/ Mark E. Nunnelly
----------------------------------
Name: Mark E. Nunnelly
Title: Managing Director
Sankaty High Yield Asset Partners, L.P.
By /s/ Mark E. Nunnelly
----------------------------------------
Title: Managing Director
Brookside Capital Partners Fund, L.P.
By /s/ Mark E. Nunnelly
-----------------------------------------
Title: Managing Director
-52-
Stockholders Agreement
December 21, 1998
THE OTHER INVESTORS: RGIP, LLC
By: /s/ R. Bradford Malt
--------------------------------
Name: R. Bradford Malt
Title: Authorized Signatory
DP Investors I, LLC
By: /s/ Mark E. Nunnelly
--------------------------------
Name: Mark E. Nunnelly
Title: Managing Director
DP Investors II, LLC
By: /s/ Mark E. Nunnelly
--------------------------------
Name: Mark E. Nunnelly
Title: Managing Director
J.P. Morgan Capital Corporation
By: /s/ Brian T. Murphy
--------------------------------
Name: Brian T. Murphy
Title: Managing Director
-53-
Stockholders Agreement
December 21, 1998
Sixty Wall Street Fund, L.P.
By: Sixty Wall Street Corporation, its general
partner
By: /s/ Brian T. Murphy
--------------------------------
Name: Brian T. Murphy
Title: Managing Director
DP Transitory Corporation
By: /s/ Andrew Balson
--------------------------------
Name: Andrew Balson
Title: President
THE SELLERS:
By /s/ Thomas S. Monaghan
-----------------------------------
Thomas S. Monaghan, individually and as
trustee
By /s/ Marjorie E. Monaghan
-----------------------------------
Marjorie E. Monaghan, individually and as
trustee
-54-
Stockholders Agreement
December 21, 1998
THE MANAGERS:
By /s/ Harry J. Silverman
-----------------------------------
Harry J. Silverman
By /s/ Michael D. Soignet
-----------------------------------
Michael D. Soignet
By /s/ Stuart K. Mathis
-----------------------------------
Stuart K. Mathis
By /s/ Patrick Kelly
-----------------------------------
Patrick Kelly
By /s/ Gary M. McCausland
-----------------------------------
Gary M. McCausland
By /s/ Cheryl A. Bachelder
-----------------------------------
Cheryl A. Bachelder
-55-
EXHIBIT 10.6
DOMINO'S PIZZA, INC.
SENIOR EXECUTIVE DEFERRED BONUS PLAN
(EFFECTIVE DECEMBER 21, 1998)
1. PURPOSE AND EFFECTIVE DATE
The purpose of this Plan is to set forth the terms and conditions under
which certain senior executives will become entitled to an amount of deferred
bonus (the "Deferred Bonus Amount") in consideration for their past service to
the Company. This Plan is effective December 21, 1998. The Plan is intended to
be "a plan which is unfunded and is maintained by an employer primarily for the
purpose of providing deferred compensation for a select group of management or
highly compensated employees" within the meaning of sections 201(2), 301(a)(3),
401(a)(1) and 4021(b)(6) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and shall be administered in a manner consistent with that
intent.
2. DEFINITIONS
(a) "Beneficiary" means the person (which may include trusts and is not
limited to one person) designated by the Participant, in such manner as
prescribed by the Plan Administrator, who shall be entitled to receive payment
of the Participant's Deferred Bonus Account in the event of the Participant's
death. If no such designation is made, or if the designated person predeceases
the Participant, payment shall be made to the Participant's estate.
(b) "Change of Control" has the meaning set forth in the Stockholders
Agreement.
(c) "Code" means the Internal Revenue Code of 1986 as amended from time to
time.
(d) "Committee" means the Compensation Committee of the Board of Directors
of the Company or if no such committee has been designated, the Board.
(e) "Company" means Domino's Pizza, Inc.
(f) "Deferred Bonus Account" means the account described in Section 3.
(g) "Effective Date" means December 21, 1998.
(h) "Participant" means each of the following senior executives of the
Company: Pat Kelly; Stuart Mathis; Gary McCausland; Harry Silverman; and
Michael Soignet.
(i) "Plan" means the Domino's Pizza, Inc. Senior Executive Deferred Bonus
Plan as set forth herein and as from time to time amended.
(j) "Plan Administrator" means the Committee.
(k) "Qualified Public Offering" has the meaning set forth in the
Stockholders Agreement.
(l) "Senior Management Option Agreements" means the Class A Option
Agreements, Class L Option Agreements and Preferred Option Agreement, as
applicable, dated as of December 21, 1998 between TISM, Inc. and each of the
Participants.
(m) "Stockholders Agreement" means the Stockholders Agreement dated as of
December 21, 1998 among TISM, Inc. and its stockholders.
Other terms are defined as provided throughout this Plan.
3. DEFERRED BONUS ACCOUNT
The Company shall establish on its books a Deferred Bonus Account for each
Participant as of the Effective Date. The amount credited to each such Account
shall be the amount set forth on Schedule A hereto which shall be fully vested
as of the Effective Date, and shall not be adjusted for interest or otherwise,
except to reflect distributions made to a Participant or his or her Beneficiary.
4. DISTRIBUTIONS
The amount credited to a Participant's Deferred Bonus Account shall become
payable to the Participant (or the Participant's Beneficiary, in the event of
death) upon the earliest of the following to occur after the date hereof (each,
a "Payment Date"):
(a) Change of Control. A Change of Control.
-----------------
(b) Qualified Public Offering. A Qualified Public Offering.
-------------------------
(c) Fixed Period. Ten years and one hundred and eighty (180) days after
------------
the date hereof.
(d) Cancellation or Forfeiture of Options. An exercise by TISM or such
-------------------------------------
Participant of the call options or put options pursuant to Section 5 of the
Senior Management Option
Agreements between TISM and such Participant or the cancellation or forfeiture
of the Options in accordance with Section 5 of the Senior Management Option
Agreements.
5. FORM OF PAYMENT; TIMING
The Company shall pay, or cause one or more of its affiliates to pay, the
amount due to a Participant or Beneficiary hereunder in cash in a single lump
sum payment as soon as administratably practicable following a Payment Date with
respect to the Participant, which in no case shall be more than 30 days
following the Payment Date. The Participant's Deferred Bonus Account will be
reduced by the amount of the payment (including any amount under Section 9
below).
6. ADMINISTRATION OF THE PLAN
This Plan shall be administered by the Committee, which shall have full
discretion to administer and interpret the Plan in accordance with its terms in
all respects.
7. NATURE OF CLAIM FOR PAYMENTS
Except as herein provided, the Company shall not be required to set aside
or segregate any assets of any kind to meet any of its obligations hereunder,
and all obligations of the Company hereunder shall be reflected by book entries
only. The Participant shall have no rights on account of this Plan in or to any
specific assets of the Company. Any rights that the Participant may have on
account of this Plan shall be those of a general, unsecured creditor of the
Company.
8. RIGHTS ARE NON-ASSIGNABLE
Other than by will or the laws of descent and distribution, neither the
Participant nor any Beneficiary nor any other person shall have any right to
assign or otherwise alienate the right to receive payments hereunder, in whole
or in part, which payments are expressly agreed to be non-assignable and non-
transferable, whether voluntarily or involuntarily.
9. TAXES
If the Company is required to withhold taxes from payments under the Plan
pursuant to federal, state or local law, the amounts payable to Participants
shall be reduced by the tax so withheld.
10. TERMINATION; AMENDMENTS
The Plan shall continue in effect until terminated by action of the
Company's Board of Directors. Upon termination of the Plan, no individual not a
Participant as of the date of
termination shall become a Participant thereafter. If, at the time of
termination, there is any Participant or Beneficiary of a Participant who is or
will be entitled to a payment hereunder, the Plan Administrator shall elect
either (a) to make payments to such Participants or beneficiaries in the normal
course as if the Plan had continued in effect, or (b) to pay to such
Participants or beneficiaries the balance in the Participant's Deferred Bonus
Account in a single lump-sum payment.
The Committee and Participants entitled to a majority of the aggregate
Deferred Bonus Accounts may at any time and from time to time amend the Plan in
any manner; provided that, subject to Section 12, without the consent of a
Participant, no such action shall materially and adversely affect the rights of
such Participant with respect to any rights to payment of amounts credited to
such Participant's Deferred Account, including by reducing the amounts
previously credited to the Deferred Bonus Account of such Participant or
otherwise.
11. EMPLOYMENT RIGHTS
Nothing in this Plan shall give any Participant any right to be employed or
to continue employment by the Company.
12. CHANGE IN OR INTERPRETATION OF LAW
In the event of any change in or interpretation of law which, in the
opinion of counsel acceptable to the Plan Administrator, would cause the Plan to
be other than an unfunded plan maintained primarily for the purpose of providing
deferred compensation for a select group of management or highly compensated
employees (such an unfunded plan being hereinafter referred to as an "exempt
plan") and to be subject to the funding requirements of Title I of ERISA, the
Plan Administrator may terminate the participation of such Participants as may
be necessary to preserve or restore the Plan's status as an exempt plan and may
accelerate payment of their Deferred Bonus Accounts or take such other action as
may be necessary to preserve or restore such status.
13. GOVERNING LAW
The validity, construction and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance with the laws
of the State of Michigan.
14. SUCCESSORS
This Plan shall inure to the benefit of and be binding upon the Participant
and the Company and their respective personal or legal representatives,
executors, administrators, and successors, including successors to all or
substantially all of the stock, business and/or assets, of the Company.
15. CONSENT TO JURISDICTION
Each party to this Agreement, by its execution hereof, (x) hereby
irrevocably submits to the exclusive jurisdiction of the state courts of the
State of Michigan sitting in the County of Washtenaw or the United States
District Court for the Eastern District of Michigan for the purpose of any
action, claim, cause of action or suit (in contract, tort or otherwise),
inquiry, proceeding or investigation arising out of or based upon this Agreement
or relating to the subject matter hereof, (y) hereby waives to the extent not
prohibited by applicable law, and agrees not to assert, and agrees not to allow
any of its subsidiaries to assert, by way of motion, as a defense or otherwise,
in any such action, any claim that it is not subject personally to the
jurisdiction of the above-named courts, that its property is exempt or immune
from attachment or execution, that any such proceeding brought in one of the
above-named courts is improper, or that this Agreement or the subject matter
hereof or thereof may not be enforced in or by such court and (z) hereby agrees
not to commence or maintain any action, claim, cause of action or suit (in
contract, tort or otherwise), inquiry, proceeding or investigation arising out
of or based upon this Agreement or relating to the subject matter hereof or
thereof other than before one of the above-named courts nor to make any motion
or take any other action seeking or intending to cause the transfer or removal
of any such action, claim, cause of action or suit (in contract, tort or
otherwise), inquiry, proceeding or investigation to any court other than one of
the above-named courts whether on the grounds of inconvenient forum or
otherwise. Notwithstanding the foregoing, to the extent that any party hereto is
or becomes a party in any litigation in connection with which it may assert
indemnification rights set forth in this agreement, the court in which such
litigation is being heard shall be deemed to be included in clause (x) above.
Each party hereto hereby consents to service of process in any such proceeding
in any manner permitted by Michigan law, and agrees that service of process by
registered or certified mail, return receipt requested, at its address specified
pursuant to the Stockholders Agreement is reasonably calculated to give actual
notice.
16. WAIVER OF JURY TRIAL
TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH
PARTICIPANT HERETO HEREBY WAIVES AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER
AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN
RESPECT OF ANY ISSUE OR ACTION, CLAIM, CAUSE OF ACTION OR SUIT (IN CONTRACT,
TORT OR OTHERWISE), INQUIRY, PROCEEDING OR INVESTIGATION ARISING OUT OF OR BASED
UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF OR IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING. THE COMPANY AND EACH PARTICIPANT
ACKNOWLEDGES THAT IT HAS BEEN INFORMED THAT THIS SECTION 16 CONSTITUTES A
MATERIAL INDUCEMENT UPON WHICH THEY ARE RELYING AND WILL RELY IN ENTERING INTO
THIS AGREEMENT. THE COMPANY AND EACH
PARTICIPANT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 16 WITH
ANY COURT AS WRITTEN EVIDENCE OF CONSENT TO THE WAIVER OF THE RIGHT TO TRIAL BY
JURY.
17. ATTORNEYS FEES
In the event of a dispute by the Company, the Participant or others as to
the validity or enforceability of, or liability under, any provision of this
Plan, the Company shall reimburse the Participant for all legal fees and
expenses incurred by him or her in connection with such dispute to the extent
the Participant shall prevail in such dispute.
DOMINO'S PIZZA, INC.
By: /s/ Thomas S. Monaghan
------------------------
Name: Thomas S. Monaghan
Title: President
Date: 12/21/1998
-------------------
SCHEDULE A
DEFERRED BONUS ACCOUNT CREDITS
Name of Participant Deferred Bonus Amount
- ------------------- ---------------------
Pat Kelly $750,000
SCHEDULE A
DEFERRED BONUS ACCOUNT CREDITS
Name of Participant Deferred Bonus Amount
- ------------------- ---------------------
Stuart Mathis $725,000
SCHEDULE A
DEFERRED BONUS ACCOUNT CREDITS
Name of Participant Deferred Bonus Amount
- ------------------- ---------------------
Gary McCausland $550,000
SCHEDULE A
DEFERRED BONUS ACCOUNT CREDITS
Name of Participant Deferred Bonus Amount
- ------------------- ---------------------
Harry Silverman $500,000
SCHEDULE A
DEFERRED BONUS ACCOUNT CREDITS
Name of Participant Deferred Bonus Amount
- ------------------- ---------------------
Michael Soignet $500,000
Exhibit 10.7
DOMINO'S PIZZA/(R)/
DEFERRED COMPENSATION PLAN
ADOPTED EFFECTIVE: JANUARY 4, 1999
AMENDMENT HISTORY:
PREAMBLE
- --------
This Domino's Pizza Deferred Compensation Plan is adopted by Domino's Pizza,
Inc. for the benefit of certain of its Executive Employees, effective as of
January 4, 1999 ("Effective Date"). The purpose of the Plan is to provide
supplemental retirement income and to permit eligible Employees the option to
defer receipt of Compensation, pursuant to the terms of the Plan. The Plan is
intended to be an unfunded deferred compensation plan maintained for the benefit
of a select group of management or highly compensated employees under sections
201(2), 301(a)(3), 401 (a)(1) and 4021(b)(6) of ERISA.
-2-
TABLE OF CONTENTS
- -----------------
ARTICLE 1
DEFINITIONS
1. 1 - Definitions
ARTICLE 2
ELIGIBILITY TO PARTICIPATE
2.1 - Date of Participation
2.2 - Resumption of Participation Following Re-employment
2.3 - Change in Employment Status
ARTICLE 3
CONTRIBUTIONS
3.1 - Deferral Contributions
3.2 - Employer Matching Contributions
3.3 - Supplemental Contributions
3.4 - Time of Making Contributions
ARTICLE 4
PARTICIPANTS' ACCOUNTS
4.1 - Individual Accounts
4.2 - Accounting for Distributions
4.3 - Separate Accounts
ARTICLE 5
INVESTMENT OF CONTRIBUTIONS
5.1 - Manner of Investment
5.2 - Investment Decisions
-3-
ARTICLE 6
RIGHT TO BENEFITS
6.1 - Retirement
6.2 - Termination of Employment
6.3 - Death
6.4 - Adjustment for Investment Experience
6.5 - Distributions Due to an Unforeseen Emergency
6.6 - Distributions upon a Change of Control
ARTICLE 7
DISTRIBUTION OF BENEFITS
7.1 - Distribution of Benefits to Participants and Beneficiaries
7.2 - Determination of Method of Distribution
7.3 - Notice to Trustee
7.4 - Withholding; Employment Taxes
ARTICLE 8
AMENDMENT AND TERMINATION
8.1 - Amendment by Employer
8.2 - Retroactive Amendments
8.3 - Termination
8.4 - Distribution Upon Termination of the Plan
8.5 - Termination of Participation
ARTICLE 9
TRUST
9.1 - Establishment of a Trust
ARTICLE 10
MISCELLANEOUS
10.1 - Communication to Participants
10.2 - Limitation or Rights
10.3 - Spendthrift Provision
10.4 - Facility of Payment
10.5 - Information between Employer and Trustee
10.6 - No Implied Rights; Rights on termination of Service
10.7 - No Right to Employer Assets
-4-
10.8 - No Employment Rights
10.9 - Offset
10.10 - Gender and Number
10.11 - Notices
10.12 - Governing Law
ARTICLE 11
PLAN ADMINISTRATION
11.1 - Powers and responsibilities of the Administrator
11.2 - Nondiscriminatory Exercise of Authority
11.3 - Claims and Review Procedures
11.4 - Plan's Administrative Costs
-5-
PLAN PROVISIONS FOR THE
DOMINO'S PIZZA(R) DEFERRED
COMPENSATION PLAN
Article 1. Definitions.
-----------
1.1. DEFINITIONS. Wherever used herein, the following terms have the meanings
set forth below, unless a different meaning is clearly required by the context:
(a) "ACCOUNT" means an account established on the books of the Employer for the
purpose of recording amounts credited on behalf of a Participant and any income,
expenses, gains or losses included thereon.
(b) "ADMINISTRATOR" means the Employer adopting this Plan, or, such other person
or persons designated by the Employer to be responsible for the administration
of the Plan. For purposes of interaction between the Employer and any third
party administrator, the person that holds the title of Benefits Manager for the
Employer shall be charged with communicating the Employer's direction regarding
the plan to such third party administrator.
(c) "BENEFICIARY" means the person or persons entitled under Section 7.1 to
receive benefits under the Plan upon the death of a Participant.
(d) "CHANGE OF CONTROL" means one or more of the following events:
(i) The occurrence of an event in which title or voting rights with respect
to more than fifty percent (50%) of the voting securities of the Employer
become owned by any parties or entities other than the existing
shareholders of record of said company's voting common stock as of the
effective date of the Plan; or
(ii) The occurrence of an event in which the Employer is either acquired by
and/or merged with another organization or corporate entity owned or
controlled by parties or entities other than the existing principal
shareholder of the Employer's voting common stock as of the effective
date of the Plan, resulting in Employer's voting common stock not being
the surviving voting common stock subsequent to the establishment of the
merged organization; or
(iii) The occurrence of an event in which more than fifty percent (50%) in
value of the assets of the Employer are disposed of by the Employer
pursuant to partial or complete liquidation, a sale of assets or
otherwise and the proceeds are not paid or used to reduce Employees debt
nor are such proceeds invested in the principal business of the Employer.
-6-
For purposes of this definition only, the term "Employer" shall include Domino's
Pizza, Inc. and any parent business entity.
(e) "CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
(f) "COMPENSATION" means the base salary and bonus paid to a Participant before
employee elective deferrals into the Wrightsaver Plan and any salary reductions
under the Domino's Employee Benefits Program.
(g) "ELIGIBLE EMPLOYEE" means an Employee of the Employer designated for
participation by the Compensation Committee of the Board of Directors who is a
member of a "select group of management or highly compensated employees" of the
Employer.
(h) "EMPLOYEE" means any employee of the Employer.
(i) "EMPLOYER" means Domino's Pizza, Inc., and any successors and assigns
unless otherwise provided herein, and shall include any Related Employers
adopting this Plan.
(j) "ENTRY DATE" means the first day of the Plan Year after the Employee
becomes an Eligible Employee, The Employer may also permit Eligible Employees to
become Participants within thirty (30) days of their having become an Eligible
Employee, providing they have made an election prior to the receipt of any
Compensation deferred and the Employer is permitted to do so under the rulings,
regulations and governing law applicable to the Plan.
(k) "ERISA" means the Employee Retirement Income Security Act of 1974, as from
time to time amended.
(1) "NORMAL RETIREMENT AGE" means age sixty-five (65).
(m) "PARTICIPANT" means the Employee who participates in the Plan In accordance
with Article 3 herein.
(n) "PLAN" means the plan established by the Employer as set forth herein.
(o) "PLAN YEAR" means the 12-consecutive month period beginning January 1 and
ending December 31.
(p) "RELATED EMPLOYER" means any employer other than the Employer named herein,
if the Employer and such other employer are members of a controlled group of
corporations (as defined in Section 414(b) of the Code) or an affiliated service
group (as defined in Section 414(m)), or are trades or businesses (whether or
not incorporated) which are under common control (as defined in Section 414(c)),
or such other employer is required to be aggregated with the Employer pursuant
to regulations issued under Code Section 414(o).
-7-
(q) "TRUST" means the trust fund established pursuant to the terms other Plan.
(r) "TRUSTEE" means the corporation or individuals named in the agreement
establishing the Trust and such successor and/or additional trustees as may be
named in accordance with the Trust Agreement.
(s) "VALUATION DATE" means the last day of the Plan Year and such other date(s)
as designated by the Employer.
ARTICLE 2. PARTICIPATION.
-------------
2.1. DATE OF PARTICIPATION. Each Eligible Employee on the Effective Date shall
---------------------
be become a Participant as of that date provided the Eligible Employee has filed
an election to defer Compensation in accordance with Section 4. 1. Other
Eligible Employees will become Participant(s) in the Plan on the first Entry
Date after which they become an Eligible Employee if he/she has flied an
election to defer Compensation pursuant to Section 4.1. If the Eligible Employee
does not file an election pursuant to Section 4.1 prior to their first Entry
Date, then the Eligible Employee will become a Participant in the Plan as of the
first day of a Plan Year for which they have filed a prior election to defer
Compensation.
2.2. RESUMPTION OF PARTICIPATION FOLLOWING RE-EMPLOYMENT. If a Participant
---------------------------------------------------
ceases to be an Employee and thereafter returns to the employ of the Employer
he/she will again become a Participant as of an Entry Date following the date on
which they again begin service for the Employer following their re employment,
provided he/she is an Eligible Employee and has filed an election to defer
Compensation pursuant to Section 4.1.
2.3. CHANGE IN EMPLOYMENT STATUS. If any Participant continues in the employ of
---------------------------
the Employer or Related Employer but ceases to be an Eligible Employee, the
individual shall continue to be a Participant until the entire amount of their
benefit is distributed according to the distribution provisions of Article 6;
provided, however, the individual shall not be entitled to make Deferral
Contributions or receive an allocation of Employer contributions during the
period that he/she is not an Eligible Employee. In the event that the
individual subsequently again becomes an Eligible Employee, the individual shall
resume full participation in accordance with Section 3.1. If a Participant has a
voluntary or involuntary change in employment duties or pay grade classification
change but the Participant remains an Eligible Employee, the Participant shall
remain entitled to participate, based upon the percentage deferral and company
match terms of their current pay grade after such change, effective upon the
date of the next paycheck to which they become entitled. All Distributions shall
be made only when distribution is required pursuant to Article 6.
-8-
ARTICLE 3. CONTRIBUTIONS.
-------------
3.1. DEFERRAL CONTRIBUTIONS. Each Participant may elect to execute a salary
----------------------
reduction agreement with the Employer to reduce their Compensation by a
specified percentage: determined by the Compensation Committee of the Board of
Directors of the Employer not exceeding the percentage of his or her
Compensation applicable to their particular job grade and position as described
on the attached Exhibit B in a whole number multiple of five (5) percent. Such
agreement shall become effective on the first day of the period as set forth in
the Participant's election. The election will be effective to defer Compensation
relating to all services performed in a Plan Year subsequent to the filing of
such an election. An election once made will remain in effect until a new
election is made. A new election will be effective as of the first day of the
following Plan Year and will apply only to Compensation payable with respect to
services rendered after such date. Amounts credited to a Participant's account
prior to the effective date of any new election will not be affected and will be
paid in accordance with that prior election. A Participant shall have
nonforfeitable right to his or her Deferral Contributions.
The Employer shall credit an amount to the account maintained on behalf of the
Participant corresponding to the amount of said reduction. Under no
circumstances may an election to defer Compensation be adopted retroactively. A
Participant may not revoke an election to defer Compensation for a Plan Year
during that year.
Pursuant to Code Section 3121(v), FICA taxes are due and payable at the time of
deferral rather than at the time of distribution to the Participant.
Accordingly, at the time of deferral, each Participant will be required to pay
to the Employer, either by payroll deduction or check, the Participant's share
of FICA taxes due and payable.
3.2. EMPLOYER MATCHING CONTRIBUTIONS. The Employer shall credit an Employer
-------------------------------
Matching Contribution to be credited to the account maintained on behalf of each
Participant who made Deferral Contributions during the year based upon a
percentage of Compensation deferred not to exceed the limits specified below.
The Employer Matching Contribution shall be credited at the same time as the
Employee Deferral Contributions. The amount of the Employer Matching
Contribution shall be as follows:
The Employer Matching Contribution for a Plan Year shall be limited to that
percentage or Compensation for the Participant involved according to the
provisions of Exhibit B applicable to the Participant during the Plan Year.
If the Participant has elected to defer Compensation in excess of such
percentage the Employer shall provide an Employer Matching Contribution
equal to the Company Match Percentage designated on Exhibit B applicable to
the Participant and Employer shall have no obligations to provide an
Employer Matching Contribution in excess of such amount.
-9-
3.3. SUPPLEMENTAL CONTRIBUTIONS. The Employer shall credit additional
--------------------------
contributions to the Plan based upon performance of the Employer as described
below. The amount of the Employer's contributions shall vary depending upon the
performance of the Employer in the current fiscal year according to the table
attached hereto as Exhibit A and the Participant's deferral amounts. The
Employer may revise the allocation percentage and the EBITDA thresholds on an
annual basis. Each revision shall be attached hereto as a succeeding Exhibit A
which shall be effective for such succeeding calendar year.
The Employer shall determine and credit its Supplemental Contribution as
follows: subject to the following limitation, within sixty (60) days after the
end of the Employer's Fiscal year, or within five (5) days of the completion of
the Employer's audited financial statements, whichever first occurs, the
Employer shall make a Supplemental Contribution (the "Supplemental
Contribution"), if such an allocation is warranted based upon the Employer's
performance according to Exhibit A for that year, to each Participant's account.
No Participant shall be entitled to the additional allocation referred to in the
preceding sentence unless they are actively employed by the Employer on the last
day of the Employer's fiscal year to which such Supplemental Contribution
relates.
3.4 TIME OF MAKING EMPLOYER CONTRIBUTIONS. With the exception of the Employer
-------------------------------------
Contribution made necessary as a result of a Change of Control, the Employer
will from time to time make a transfer of assets to the Trustee for each Plan
Year no less frequently than monthly. The Employer shall provide the Trustee
with information on the amount to be credited to each Participant's account.
ARTICLE 4. PARTICIPANTS' ACCOUNTS.
- ---------------------------------
4.1. INDIVIDUAL ACCOUNTS. The Administrator will establish and maintain an
-------------------
Account for each Participant which will reflect Deferral Contributions, Employer
Matching Contributions and Supplemental Contributions credited to the Account on
behalf of the Participant plus credits as described in Article 5 below. The
Administrator will establish and maintain such other accounts and records as it
decides in its discretion to be reasonably required or appropriate in order to
discharge its duties under the Plan. Participants will be furnished statements
of their Account values at least quarterly during each Plan Year.
4.2 ACCOUNTING FOR DISTRIBUTION. As of any date of a distribution to a
---------------------------
Participant or a Beneficiary hereunder, the distribution to the Participant or
to the Participant's Beneficiary(ies) shall be charged to the Participant's
Account.
4.3 DESIGNATION OF INVESTMENT OPTIONS. The Administrator shall have the
---------------------------------
discretion, subject to exercise from time to time, to designate the investment
options that shall be available to the Participants as the measurement by which
Earnings Credits be determined. The Administrator may change the investment
options available to Participants from time to time without approval from the
Participants. Such change of investment options shall become applicable as
-10-
determined by the Administrator in the exercise of its discretion. The
investment options available to Participants shall be described on Exhibit C.
The Administrator may change the available investment options by attaching a
revised Exhibit C which shall include the date of the amended investment option
Exhibit.
ARTICLE 5. EARNINGS CREDITS.
5.1. MANNER OF DETERMINATION. Earnings Credits with respect to the Accounts of
-----------------------
Participants shall be determined as though the Accounts were invested and
reinvested in the eligible investments selected by the Employer in the
proportion designed by the Participant pursuant to Section 5.2 and credited at
least quarterly based on the then current fair market value of the option.
5.2. INVESTMENT DECISIONS. Investments in which the Accounts of Participants
--------------------
shall be treated as invested and reinvested shall be directed by the Employer or
by each Participant, or both.
(a) All dividends, interest gains and distributions of any nature earned
in respect of an investment alternative in which the Account is
treated as investing shall be credited to the Account in an amount
equal to the net increase or decrease in the net asset value of each
investment option since the preceding Valuation Date in accordance
with the ratio that the portion of the Account of each Participant
that is invested in the designated investment option bears to the
aggregate of all amounts invested in the same investment option.
(b) Expenses attributable to the acquisition of investments, including
without limitation, expense ratio fees, shall be charged to the
Account(s) of the Participant(s) for which such investment is made.
(c) Participant elections relating to investment decisions shall be
limited to those investment options permitted by the Employer as
described in the attached Exhibit C, which Exhibit may be amended from
time to time in the exercise of the sole discretion of the Employer.
If the Employer determines to change the Investment Options available
to Participants described on Exhibit C, any amounts credited to a
terminated Investment Option shall be reallocated to the remaining
Investment Options elected by the Participant on a pro-rata basis.
(d) To the extent directed by the Employer, the Trustee shall invest
amounts held in the Trust in accordance with the standing investment
direction of Participants, provided, however, that the Employer shall
be under no obligation to do so. Notwithstanding the foregoing,
however, at least once annually the Employer shall contribute such
additional amounts as may be necessary to assure that the sum of the
assets held in the Trust is at least equal to the sum of the Account
balances.
-11-
ARTICLE 6. RIGHT TO BENEFITS.
6.1. RETIREMENT. Each Participant who attains his/her Normal Retirement Age will
have a interest in their Account to be distributed as he/she has previously
elected as provided below.
6.2. TERMINATION OF EMPLOYMENT. If a Participant retires on or after attainment
-------------------------
of Normal Retirement Age, the balance of the Participant's Account, plus any
amounts thereafter credited to their Account, will be distributed to him or her
in accordance with Article 7. If a Participant terminates his/her employment
for any reason other than death or normal retirement they will be entitled to a
termination benefit equal to the value of the Employer Match Contributions and
Employer Supplemental Contributions to their Account, as adjusted for income,
expense, gain, or loss, and the value of the Deferral Contributions to their
Account as adjusted for income, expense, gain or loss. The amount payable under
this Section will be distributed in accordance with Article 7.
6.3. DEATH. If a Participant dies before the distribution of their Account has
-----
commenced, or before such distribution has been completed, his/her designated
Beneficiary or Beneficiaries will be entitled to receive the balance or
remaining balance of their Account, plus any amounts thereafter credited to
their Account. Distribution to the Beneficiary or Beneficiaries will be made in
accordance with Article 7.
A Participant may designate a Beneficiary or Beneficiaries, or change any prior
designation of Beneficiary or Beneficiaries by giving notice to the
Administrator on a form designated by the Administrator. If more than one
person is designated us the Beneficiary, their respective interests shall be as
indicated on the designation form.
A copy of the death certificate or other sufficient documentation must be filed
with and approved by the Administrator. If upon the death of the Participant
there is, in the opinion of the Administrator, no designated Beneficiary for
part or all of the Participant's Account, such amount will be paid to his/her
surviving spouse or, if none, to his/her estate (such spouse or estate shall be
deemed to be the Beneficiary for purposes of the Plan). If a Beneficiary dies
after benefits to such Beneficiary have commenced, but before they have been
completed, and, in the opinion of the Administrator, no person has been
designated to receive such remaining benefits, then such benefits shall be paid
to the deceased Beneficiary's estate.
6.4. ADJUSTMENT FOR INVESTMENT EXPERIENCE. If any distribution under this
------------------------------------
Article 6 is not made in a single payment, the amount remaining in the Account
after the distribution will be subject to adjustment until distributed to
reflect the income and gain or loss on the investments as described in Article
5.
6.5. DISTRIBUTION DUE TO AN UNFORESEEN EMERGENCY. Subject to the provisions of
-------------------------------------------
Article 7, a Participant shall not be permitted to withdraw his/her Account (and
earnings thereon) prior to retirement or termination of employment, except a
Participant may apply to the Administrator
-12-
to withdraw some or all of his/her Account if such withdrawal is made on account
of a financial hardship resulting from an unforeseen emergency in accordance
with procedures set forth by the Administrator. The Administrator shall
establish criteria to determine what constitutes financial hardship, provided
the Employer shall fund the following conditions to exist:
(a) the financial emergency must have been unanticipated and the result of an
event beyond the control of the Participant or Beneficiary; and
(b) the financial emergency would result in a severe financial hardship to the
individual if the withdrawal is not permitted; and
(c) the amount to be withdrawn does not exceed the amount necessary to meet the
severe financial emergency.
The Employer in its discretion may make the distribution to the Participant or
Participant's Beneficiary upon such terms and in such form as it deems
appropriate and shall consider Treasury regulations and Internal Revenue Service
revenue rulings in making all determinations.
6.6. DISTRIBUTIONS UPON A CHANGE OF CONTROL. Upon the happening of an event
--------------------------------------
that constitutes a Change of Control, the Employer shall pay to the Participant
in lump sum payment, the amount of the Participants Account, calculated as of
the date that a Change of Control occurs (the "Change of Control Date"). Such
lump sum payment shall be made within sixty (60) days of the Change of Control
Date, and any adjustments to the Participant's Account, as a result of the
application of Paragraph 5.2 above, shall be made based upon the Change of
Control Date.
ARTICLE 7. DISTRIBUTION OF BENEFITS.
7.1. DISTRIBUTION OF BENEFITS TO PARTICIPANTS AND BENEFICIARIES. (a)
----------------------------------------------------------
Distributions under the Plan to a Participant or to the Beneficiary of the
Participant shall be made in cash, in a lump sum, or, if elected by the Employer
and specified in the Participant's election to defer the respective amounts of
Compensation, under a systematic withdrawal plan, (installment(s)) not exceeding
3 years in the form of the distribution noted below elected by the Participant,
upon retirement, death or other termination of employment:
(i) Quarterly installments commencing on the first day of the next
calendar quarter (January 1, March 1, July 1 or October 1) following the
event described above, payable in periodic amounts over a period of three
(3) years; or
(ii) A lump sum payment within sixty (60) days of such event; or
-13-
(iii) A lump sum payment within sixty (60) days of the beginning of
the calendar year following the occurrence of such event.
For installment payments described in subparagraph (i) above, the Employer (or
Trustee, if applicable) shall determine the funds remaining credited to the
Participant for each installment payment due, and shall distribute that fraction
of the sums remaining credited to the Participant determined by dividing the
number of installments which remain payable into one (1) (e.g., for installment
one, the Employer or Trustee shall distribute 1/12th of the amounts credited to
the Participant, for the third installment, the Employer shall distribute 1/10th
of the amounts credited to the Participant, and so on).
Notwithstanding the Participant's election pursuant to this Plan, (1) any
Participant who is involuntarily terminated by the Employer shall be paid
his/her or her entire Account balance within sixty (60) days of the
Participant's last date of service for the Employer, and (2) unless otherwise
directed by the Employer, if the Plan is terminated by the Employer, the
termination benefit shall be payable in a lump sum within sixty (60) days
following the termination of the Plan.
Subject to the consent of the Employer, an Eligible Participant may file a
request to change their election with respect to the timing of commencement of
benefits, payment method and/or payment period for deferrals relating to any
succeeding Plan Year. Such new election must be filed with the Employer prior
to the commencement of the Plan Year to which it relates, and at least 365 days
prior to the date on which payment of benefits would commence under either the
original or any election for a succeeding plan year. If the Employer approves
the Participant's request to change the benefit election, such election shall be
applicable to deferrals for such Plan Year and shall not be subject to
revocation or change of election as to such Plan Year. If the Participant fails
to make an election for distributions for any Plan Year, the Participant shall
be deemed to have made the same election for the current Plan Year that they had
made for the prior Plan Year.
7.2. DETERMINATION OF METHOD OF DISTRIBUTION. The Participant will determine
---------------------------------------
the method of distribution of benefits to himself and the method of distribution
to his/her Beneficiary as to each Plan Year. Such determination will be made at
the time the Participant makes a deferral election and shall apply to the
allocable portion of the Account, and shall be irrevocable once made. If the
Participant does not determine the method of distribution to his or her
Beneficiary, the method shall be a lump sum.
7.3. NOTICE TO TRUSTEE. The Administrator will notify the Trustee in writing
-----------------
whenever any Participant or Beneficiary is entitled to receive benefits under
the Plan. The Administrator's notice shall indicate the form, amount and
frequency of benefits that such Participant or Beneficiary shall receive.
-14-
7.4 WITHHOLDING: EMPLOYMENT TAXES. To the extent required by the law in effect
-----------------------------
at the time payments are made, the Employer shall withhold any taxes required to
be withheld by any Federal, state or local government.
ARTICLE 8. AMENDMENT AND TERMINATION.
8.1 AMENDMENT BY EMPLOYER. The Employer reserves the authority to amend the
---------------------
Plan, a restated Plan document or amended Exhibits A, B and C, executed by the
Employer only in which the Employer has indicated a change or changes in
provisions previously elected by it. Such changes are to be effective on the
effective date of such amendment, restated Plan document or Exhibit A, B or C.
Any such change notwithstanding, no Participant's Account shall be reduced by
such change below the amount to which the Participant would have been entitled
if he/she had voluntarily left the employ of the Employer immediately prior to
the date of the change. The Employer may from time to time make any amendment to
the Plan that may be necessary to satisfy the Code or ERISA. The Employer's
board of directors or other individual specified in the resolution adopting this
Plan shall act on behalf of the Employer for purposes of this Section.
8.2 RETROACTIVE AMENDMENTS. An amendment made by the Employer in accordance
----------------------
with Section may be made effective on a date prior to the first day of the Plan
Year in which it is adopted if such amendment is necessary or appropriate to
enable the Plan and Trust to satisfy the applicable requirements of the Code or
ERISA or to conform the Plan, to any change in federal law or to any regulations
or ruling thereunder. Any retroactive amendment by the Employer shall be
subject to the provisions of Section 8.1.
8.3. PLAN TERMINATION. The Employer has adopted the Plan with the intention and
----------------
expectation that it will be continued indefinitely. However, said Employer has
no obligation or liability whatsoever to maintain the Plan for any length of
time and may discontinue Employer Matching Contributions and Employer
Supplemental Contributions under the Plan or terminate the Plan at any time by
written notice delivered to the Participants without any liability hereunder for
any such discontinuance or termination.
8.4. DISTRIBUTION UPON TERMINATION OF THE PLAN. Upon termination of the Plan,
-----------------------------------------
no further Deferral Contributions or Employer Contributions shall be made under
the Plan, but Accounts of Participants maintained under the Plan at the time of
termination shall continue to be governed by the terms of the Plan until paid
out in accordance with the terms of the Plan.
8.5. TERMINATION OF PARTICIPATION. To the extent necessary to maintain the
----------------------------
Plan's status as a Plan described in ERISA sections 201(2), 301 (a)(3), 40
l(a)(1) and 4021 (b)(6), the Administrator may cause the termination of
participation by any one or more employees, and promptly distribute to them the
amount of their Account Balance.
-15-
ARTICLE 9. THE TRUST
9.1 Establishment of Trust. The Employer shall establish the Trust between
----------------------
the Employer and the Trustee, in accordance with the terms and conditions as set
forth in the Trust Under the Domino's Pizza Executive Compensation Plan, under
which assets are held, administered and managed, subject to the claims of the
Employer's creditors in the event of the Employer's insolvency, until paid to
Participants and their Beneficiaries as specified in the Plan. The Trust is
intended to be treated as a grantor trust under the Code, and the establishment
of the Trust is not intended to cause Participants to realize current income on
amounts contributed thereto.
ARTICLE 10. MISCELLANEOUS.
-------------
10.1. COMMUNICATION TO PARTICIPANTS. The Plan and Exhibits applicable to the
-----------------------------
Participant, along with any amendments, will be communicated to each Participant
by the Employer promptly after the Plan or Exhibit is adopted or amended.
Participants shall have no right to receive Plan documentation or information
that is not applicable to their participation in the Plan.
10.2. LIMITATION OF RIGHTS. Neither the establishment of the Plan and the
--------------------
Trust, nor any amendment thereof, nor the creation of any find or account, nor
the payment or any benefits, will be construed as giving to any Participant or
other person any legal or equitable right against the Employer, Administrator or
Trustee, except as provided herein; and in no event will the terms of employment
or service of any Participant be modified or in any way affected hereby.
10.3 SPENDTHRIFT PROVISION. The benefits provided hereunder will not be
---------------------
subject to alienation, assignment, garnishment, attachment, execution or levy of
any kind, either voluntarily or involuntarily, and any attempt to cause such
benefits to be so subjected will not be recognized, except to such extent as may
be required by law.
10.4. FACILITY OF PAYMENT. In the event the Administrator determines, on the
-------------------
basis of medical reports or other evidence satisfactory to the Administrator,
that the recipient of any benefit payments under the Plan is incapable of
handling his/her affairs by reason of minority, illness, infirmity or other
incapacity, the Administrator may direct the Trustee to disburse such payments
to a person or institution designated by a court which has jurisdiction over
such recipient or a person or institution otherwise having the legal authority
under State law for the care and control of such recipient. The receipt by such
person or institution of any such payments therefore, and any such payment to
the extent thereof, shall discharge the liability of the Trust for the payment
of benefits hereunder to such recipient.
10.5. INFORMATION BETWEEN EMPLOYER AND TRUSTEE. The Employer agrees to furnish
----------------------------------------
the Trustee, and the Trustee agrees to furnish the Employer with such
information relating to the Plan and Trust as may he required by the other in
order to carry out their respective duties
-16-
hereunder, including without limitation information required under the Code or
ERISA and any regulations issued or forms adopted thereunder.
10.6. NO IMPLIED RIGHTS; RIGHTS ON TERMINATION OF SERVICE. Neither the
---------------------------------------------------
establishment of the Plan nor any amendment or restatement thereof shall be
construed as giving any Participant, Beneficiary, or any other person any legal
or equitable right unless such right shall be specifically provided for in the
Plan or conferred by specific action of the Employer in accordance with the
terms and provisions of the Plan. Except as expressly provided In this Plan,
the Employer shall not be required or be liable to make any payment under this
Plan.
10.7. NO RIGHT TO EMPLOYER ASSETS. Neither the Participant nor any other person
---------------------------
shall acquire by reason of the Plan any right in or title to any assets, funds
or property of the Employer whatsoever including, without limiting the
generality or the foregoing, any specific funds, assets. or other property which
the Employer, in its sole discretion, may set aside in anticipation of a
liability hereunder. Any benefits which become payable hereunder shall be paid
from the general assets of the Employer. Participants and Beneficiaries shall
have the status of general unsecured creditors of the Employer. The Participant
shall have only a contractual right to the amounts, if any, payable hereunder
unsecured by any asset of the Employer. Nothing herein contained in the Plan
constitutes a guarantee by the Employer that the assets of the Employer shall be
sufficient to pay any benefit to any person.
10.8. NO EMPLOYMENT RIGHTS. Nothing herein shall constitute a contract of
--------------------
employment or of continuing service or in any manner obligate the Employer to
continue the services of the Participant, or obligate the Participant to
continue in the service of the Employer, or as a limitation of the right of the
Employer to discharge any of its employees, with or without cause. Nothing
herein shall be construed as fixing or regulating the compensation payable to
the Participant.
10.9. OFFSET. If, at the time payments or installments of payments are to be
------
made hereunder, the Participant or the Beneficiary or both are indebted or
obligated to the Employer, then the payments remaining to be made to the
Participant or the Beneficiary or both may, at the discretion of the Employer,
be reduced by the amount of such indebtedness or obligation, provided, however,
that an election by the Employer not to reduce any such payment or payments
shall not constitute a waiver of its claim for such indebtedness or obligations.
10.10. GENDER AND NUMBER. Wherever appropriate herein, the masculine may mean
-----------------
the feminine and the singular may mean the plural or vice versa.
10.12. NOTICES. Any notice or other communication in connection with this Plan
-------
shall be deemed delivered in writing if addressed as provided below and if
either actually delivered at said address or, in the case of a letter, three
business days shall have elapsed after the same shall have been deposited in the
United States mails, first-class postage prepaid and registered or certified:
-17-
(a) If it is sent to the Employer or Administrator, it will be at the address
specified by the Employer;
Domino's Pizza, Inc.
30 Frank Lloyd Wright Drive
Ann Arbor, MI 48105
Attention: Benefit Manager
(b) If it is sent to the Trustee, it will be sent to the address set forth in
the Trust Agreement; or, in each case at such other address as the addressee
shall have specified by written notice delivered in accordance with the
foregoing to the addresser's then effective notice address.
10.13. GOVERNING LAW. The Plan will be construed, administered and enforced
-------------
according to applicable provisions of ERISA, and to the extent not preempted
thereby, the laws of the State of Michigan.
ARTICLE 11. PLAN ADMINISTRATION.
11.1. POWERS AND RESPONSIBILITIES OF THE ADMINISTRATOR. The Administrator has
------------------------------------------------
the full power and the full responsibility to administer the Plan in all of its
details, subject, however, to the applicable requirements of ERISA. The
Administrator's powers and responsibilities include, but are not limited to, the
following:
(a) To make and enforce such rules and regulations as it deems necessary or
proper for the efficient administration of the Plan;
(b) To interpret the Plan;
(c) To decide all questions concerning the Plan and the eligibility of any
person to participate in the Plan;
(d) To administer the claims and review procedures specified in Section 11.3;
(e) To compute the amount of benefits which will be payable to any
Participant, former Participant or Beneficiary in accordance with the
provisions of the Plan;
(f) To determine the person or persons to whom such benefits will be paid;
(g) To authorize the payment of benefits;
(h) To comply with the reporting and disclosure requirements of Part I of
Subtitle B of Title I of ERISA;
-18-
(i) To appoint such agents, counsel, accountants, and consultants as may be
required to assist in administering the Plan;
(j) By written instrument, to allocate and delegate is responsibilities,
including the formation of an Administrative Committee to administer the
Plan;
11.2. EFFECT OF INTERPRETATION OR DETERMINATION. Any interpretation or
-----------------------------------------
determination by the Administrator with respect to the Plan shall be final,
binding and conclusive upon the persons in the absence of clear and convincing
evidence that the Administrator acted arbitrarily and capriciously.
11.3. CLAIMS AND REVIEW PROCEDURES.
----------------------------
(a) Claims Procedure. it any person believes he/she is being denied any rights
or benefits under the Plan, such person may file a claim in writing with the
Administrator. If any such claim is wholly or partially denied, the
Administrator will notify such person of its decision in writing. Such
notification will contain (i) specific reasons for the denial, (ii) specific
reference to pertinent Plan provisions, (iii) a description of any additional
material or information necessary for such person to perfect such claim and an
explanation of why such material or information is necessary, and (iv)
information as to the steps to be taken if the person wishes to submit a request
for review. Such notification will be given within 90 days after the claim is
received by the Administrator (or within 180 days, if special circumstances
require an extension of time for processing the claim, and if written notice of
such extension and circumstances is given to such person within the initial 90-
day period). If such notification Is not given within such period, the claim
will be considered denied as of the last day of such period and such person may
request a review of his/her claim.
(b) Review Procedure Within 60 days after the date on which a person receives
----------------
such denial is considered to have occurred), such person (or his/her duly
authorized representative) may (i) file a written request with the Administrator
for a review of his/her denied claim and of pertinent documents and (ii) submit
written notice of a denied claim (or, if applicable, within 60 days alter the
date on issues and comments to the Administrator. The Administrator will notify
such person of its decision in writing. Such notification will be written in a
manner calculated to be understood by such person and will contain specific
reasons for the decision as well as specific references to pertinent Plan
provisions. The decision on review will be made within 60 days after the request
for review is received by the Administrator (or within 120 days, if special
circumstances require an extension of time for processing the request, such as
an election by the Administrator to hold a hearing, and if written notice of
such extension and circumstances is given to such pers. on within the initial
60-day period). If the decision on review is not made within such period, the
claim will be considered denied.
-19-
11.4. PLAN ADMINISTRATIVE COSTS
-------------------------
The Employer shall pay all reasonable costs and expenses (including legal,
accounting, and employee communication fees) incurred by the Administrator and
the Trustee in administering the Plan and Trust Fund.
IN WITNESS WHERE OF, the Employer by its duly authorized officer(s), has caused
this Plan to be adopted on _____ day of December, 1998.
DOMINO'S PIZZA, INC.
By: /s/ Harry Silverman
-------------------------
Its: Vice President
------------------------
-20-
EXHIBIT A
Supplemental Contributions (Section 3.3) for the plan year commencing January 4,
1999,
If EBITDA is less than $140,000,000, there is no company supplemental match;
If EBITDA is between $140,000,001 and $143,500,000, the company supplemental
match is 5% of the Participant's deferral;
If EBITDA is between $143,500,001 and $147,000,000, the company supplemental
match is 10% of the Participant's deferral;
If EBITDA is between $147,000,001 and S t 50,500,000, the company supplemental
match is 15% of the Participant's deferral;
If EBITDA is greater than $150,500,000, the company supplemental match is 20% of
the Participant's deferral.
-21-
EXHIBIT B
ELIGIBLE EMPLOYEES
- ------------------
Corporate Operations Directors
Directors and Senior Directors in Grade I10
All Employees in Grades I11-I12
Managers, Directors, and Sr. Directors in Grade I13
The maximum percentage of Compensation for deferral is forty percent (40%). The
Company Match is thirty percent (30%). The Company VAR match thirty percent
(30%) on the first fifteen percent (15%) of Compensation. If you choose to defer
more than fifteen percent (15%) of Compensation, the amount that exceeds fifteen
percent (15%) will not be matched.
-22-
EXHIBIT C
DATE OF DESIGNATION OF INVESTMENT OPTIONS: JANUARY 4, 1999
INVESTMENT OPTIONS AVAILABLE TO PARTICIPANTS:
Fidelity Retirement Money Market
Fidelity Puritan
Spartan US Equity Index
Fidelity Fund
Fidelity Dividend Growth
Fidelity Emerging Growth
Fidelity Diversified International
-23-
EXHIBIT 10.8
TISM, Inc.
Stock Option Plan
1. Purpose
The purpose of this Stock Option Plan (the "Plan") is to advance the
interests of TISM, Inc., a Michigan corporation (the "Company"), by enhancing
the ability of the Company and its subsidiaries (if any) to attract and retain
able employees of the Company; to reward such individuals for their
contributions; and to encourage such individuals to take into account the long-
term interests of the Company through interests in shares of the Company's
Common Stock, $.001 par value per share (the "Stock"). Any employee selected to
receive an award under the Plan is referred to as a "participant".
2. Administration
The Plan shall be administered by the Board of Directors (the "Board") of
the Company. Subject to applicable law, the Board shall have discretionary
authority, not inconsistent with the express provisions of the Plan, (a) to
grant option awards to such eligible persons as the Board may select; (b) to
determine the time or times when awards shall be granted and the number of
shares of Stock subject to each award; (c) to determine the terms and conditions
of each award; (d) to prescribe the form or forms of any instruments evidencing
awards and any other instruments required under the Plan and to change such
forms from time to time; (e) to adopt, amend, and rescind rules and regulations
for the administration of the Plan; and (f) to interpret the Plan and to decide
any questions and settle all controversies and disputes that may arise in
connection with the Plan. Such determinations of the Board shall be conclusive
and shall bind all parties. Subject to Section 9 the Board shall also have the
authority, both generally and in particular instances, to waive compliance by a
participant with any obligation to be performed by him or her under an award, to
waive any condition or provision of an award, and to amend or cancel any award
(and if an award is canceled, to grant a new award on such terms as the Board
shall specify), except that the Board may not take any action with respect to an
outstanding award that would adversely affect the rights of the participant
under such award without such participant's consent. Nothing in the preceding
sentence shall be construed as limiting the power of the Board to make
adjustments required by Section 4(c) and Section 6(g).
The Board may, in its discretion, delegate some or all of its powers
with respect to the Plan to a committee (the "Committee"), in which event all
references (as appropriate) to
the Board hereunder shall be deemed to refer to the Committee. The Committee, if
one is appointed, shall consist of at least two directors. A majority of the
members of the Committee shall constitute a quorum, and all determinations of
the Committee shall be made by a majority of its members. Any determination of
the Committee under the Plan may be made without notice or meeting of the
Committee by a writing signed by a majority of the Committee members. On and
after registration of the Stock under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), the Board shall delegate the power to select directors
and officers to receive awards under the Plan and the timing, pricing, and
amount of such awards to a Committee, all members of which shall be "non-
employee directors" within the meaning of Rule 16b-3 under the 1934 Act and
"outside directors" within the meaning of section 162(m)(4)(c)(i) of the
Internal Revenue Code of 1986, as amended (the "Code"), in which event all
references (as appropriate) to the Board hereunder shall be deemed to refer to
the Committee.
3. Effective Date and Term of Plan
The Plan shall become effective on December 21, 1998, subject to approval
of the stockholders of the Company. Grants of awards under the Plan may be made
prior to that date (but after Board adoption of the Plan), subject to approval
of the Plan by the stockholders.
No awards shall be granted under the Plan after the completion of ten years
from the date on which the Plan was adopted by the Board, but awards previously
granted may extend beyond that date.
4. Shares Subject to the Plan
(a) Number of Shares. Subject to adjustment as provided in Section 4(c),
the aggregate number of shares of Stock that may be the subject of awards
granted under the Plan shall be 563,181 shares of Class A-3 Common Stock and
62,576 shares of Class L Common Stock. If any award granted under the Plan
terminates without having been exercised in full, or upon exercise is satisfied
other than by delivery of Stock, the number of shares of Stock as to which such
award was not exercised shall be available for future grants.
(b) Shares to be Delivered. Shares delivered under the Plan shall be
authorized but unissued Stock, or if the Board so decides in its sole
discretion, previously issued Stock acquired by the Company and held in its
treasury. No fractional shares of Stock shall be delivered under the Plan.
(c) Changes in Stock. In the event of a stock dividend, stock split or
combination of shares, recapitalization, or other transaction or event that
affects the Company's capital stock, the number and kind of shares of stock or
securities of the Company subject to awards then
-2-
outstanding or subsequently granted under the Plan, the exercise price of such
awards, the maximum number of shares or securities that may be delivered under
the Plan, and other relevant provisions shall be appropriately adjusted to
prevent enlargement or dilution of benefits intended to be made available under
the Plan by the Board, whose determination shall be binding on all persons.
The Board may in good faith also adjust the number of shares subject to
outstanding awards, the exercise price of outstanding awards, and the terms of
outstanding awards, to take into consideration material changes in accounting
practices or principles, extraordinary dividends, consolidations or mergers
(except those described in Section 6(g)), acquisitions or dispositions of stock
or property, or any other event if it is determined by the Board that such
adjustment is appropriate to avoid distortion in the operation of the Plan.
5. Eligibility and Participation
Persons eligible to receive awards under the Plan shall be those persons
who, in the opinion of the Board, are in a position to make a significant
contribution to the success of the Company and its subsidiaries. A subsidiary
for purposes of the Plan shall be a corporation in which the Company owns,
directly or indirectly, stock possessing 50% or more of the total combined
voting power of all classes of stock.
6. Terms and Conditions of Options
(a) Exercise Price of Options. The exercise price of each option shall
be determined by the Board, but the exercise price shall not be less, in the
case of an original issue of authorized stock, than par value.
(b) Duration of Options. An option shall be exercisable during such
period or periods as the Board may specify. The latest date on which an option
may be exercised (the "Expiration Date") shall be the date that is eleven years
from the date the option was granted or such earlier date as may be specified by
the Board at the time the option is granted.
(c) Exercise of Options.
(1) An option shall become exercisable at such time or times and upon such
conditions as the Board shall specify. In the case of an option not
immediately exercisable in full, the Board may at any time accelerate
the time at which all or any part of the option may be exercised.
(2) Any exercise of an option shall be in writing, signed by the proper
person and furnished to the Company, accompanied by (i) such documents
as may be
-3-
required by the Board and (ii) payment in full as specified below in
Section 6(d) for the number of shares for which the option is
exercised.
(3) The Board shall have the right to require that the participant
exercising the option remit to the Company an amount sufficient to
satisfy any federal, state, or local withholding tax requirements (or
make other arrangements satisfactory to the Company with regard to
such taxes) prior to the delivery of any Stock pursuant to the
exercise of the option. If permitted by the Board, either at the time
of the grant of the option or in connection with exercise, the
participant may elect, at such time and in such manner as the Board
may prescribe, to satisfy such withholding obligation by (i)
delivering to the Company Stock owned by such individual having a fair
market value equal to such withholding obligation, or (ii) requesting
that the Company withhold from the shares of Stock to be delivered
upon the exercise a number of shares of Stock having a fair market
value equal to such withholding obligation.
In addition, if at the time the option is exercised the Board
determines that under applicable law and regulations the Company could
be liable for the withholding of any federal or state tax with respect
to a disposition of the Stock received upon exercise, the Board may
require as a condition of exercise that the participant exercising the
option agree to give such security as the Board deems adequate to meet
the potential liability of the Company for the withholding of tax, and
to augment such security from time to time in any amount reasonably
deemed necessary by the Board to preserve the adequacy of such
security.
(4) If an option is exercised by the executor or administrator of a
deceased participant, or by the person or persons to whom the option
has been transferred by the participant's will or the applicable laws
of descent and distribution, the Company shall be under no obligation
to deliver Stock pursuant to such exercise until the Company is
satisfied as to the authority of the person or persons exercising the
option.
(d) Payment for and Delivery of Stock. Stock purchased upon exercise of
an option under the Plan shall be paid for as follows: (i) in cash, check
acceptable to the Company (determined in accordance with such guidelines as the
Board may prescribe), or money order payable to the order of the Company, or
(ii) if so permitted by the Board, (A) through the delivery of shares of Stock
(which, in the case of Stock acquired from the Company, shall have been held for
at least six months unless the Board specifies a shorter period) having a fair
market value on the last business day preceding the date of exercise equal to
the purchase price, or (B) by delivery of a promissory note of the participant
to the Company, such note to be payable on such terms as are specified by the
Board, or (C) by delivery of an unconditional
-4-
and irrevocable undertaking by a broker to deliver promptly to the Company
sufficient funds to pay the exercise price, or (D) by any combination of the
permissible forms of payment; provided, that if the Stock delivered upon
exercise of the option is an original issue of authorized Stock, at least so
much of the exercise price as represents the par value of such Stock shall be
paid other than with a personal check or promissory note of the person
exercising the option.
(e) Delivery of Stock. A participant shall not have the rights of a
stockholder with regard to awards under the Plan except as to Stock actually
received by him under the Plan.
The Company shall not be obligated to deliver any shares of Stock (i)
until, in the opinion of the Company's counsel, all applicable federal and state
laws and regulations have been complied with, (ii) if the outstanding Stock is
at the time listed on any stock exchange, until the shares to be delivered have
been listed or authorized to be listed on such exchange upon official notice of
issuance, and (iii) until all other legal matters in connection with the
issuance and delivery of such shares have been approved by the Company's
counsel. Without limiting the generality of the foregoing, if the sale of Stock
has not been registered under the Securities Act of 1933, as amended, the
Company may require, as a condition to exercise of the award, such
representations or agreements as counsel for the Company may consider
appropriate to avoid violation of such Act and may require that the certificates
evidencing such Stock bear an appropriate legend restricting transfer.
(f) Nontransferability of Awards. Except as specifically provided in an
option approved by the Board, no option or other award may be transferred other
than by will or by the laws of descent and distribution, and during a
participant's lifetime an award may be exercised only by him or her.
(g) Mergers, etc. In the event of any merger, consolidation,
dissolution, or liquidation of the Company, the Board in its sole discretion
may, as to any outstanding options or other awards, make such substitution or
adjustment in the aggregate number of shares reserved for issuance under the
Plan and in the number and purchase price (if any) of shares subject to such
awards as it may determine, or accelerate, amend, or terminate such awards upon
such terms and conditions as it shall provide (which, in the case of the
termination of the vested portion of any award, shall require payment or other
consideration that the Board deems equitable in the circumstances).
7. Termination of Employment
(a) If a participant's employment with the Company and its subsidiaries
terminates prior to the Expiration Date, the Board in its sole discretion may
provide (either prior to or within 30 days following termination) that (i) any
or all of such portion of any option not
-5-
otherwise vested (i.e., exercisable) prior to termination shall be treated as
having become vested immediately prior to termination, in which case, as to that
number of shares of Stock for which the award was vested, or deemed vested by
action of the Board, immediately prior to termination, such award shall continue
to be exercisable thereafter during the period prior to the Expiration Date and
within 90 days following the termination (180 days in the event that a
participant's service terminates by reason of death); or (ii) except if
otherwise set forth in an award, the participant or beneficiary receive in cash,
with respect to each share of Stock to which an option or other award relates,
the excess of (x) the share's fair market value on the date of the participant's
termination over (y) the option exercise price. Except as otherwise provided in
an award, after completion of the 90-day (or 180-day) period, such awards shall
terminate to the extent not previously exercised, expired, or terminated. No
option shall be exercised or surrendered in exchange for a cash payment after
the Expiration Date.
(b) Notwithstanding the foregoing, except as otherwise provided in an
award, if the participant is terminated for "cause" (as defined in (c) below)
all options and other awards shall immediately terminate as to all shares of
Stock subject hereto, whether or not vested immediately prior to such
termination for cause.
(c) "Cause" with respect to any participant, shall mean the following
events or conditions: (i) the failure to devote substantially all of his or her
business time to the performance of his or her duties to the Company or any of
its subsidiaries (other than by reason of disability), or refusal or failure to
follow or carry out any reasonable direction of the Board of Directors, and the
continuance of such refusal or failure for a period of ten days after notice to
such participant; (ii) the material breach by the participant of any material
agreement to which such participant and the Company or any of its affiliates are
party; (iii) the commission of fraud, embezzlement, theft or other dishonesty by
such participant with respect to the Company or any of its affiliates; (iv) the
conviction of such participant of, or plea by such participant of nolo
contendere to, any felony or any other crime involving dishonesty or moral
turpitude; and (v) any other intentional action or intentional omission that
involves a material breach of fiduciary obligation on the part of such
participant.
(d) The Board may provide in the case of any award for post-termination
exercise provisions different from those expressly set forth in this Section 7,
including without limitation terms allowing a later exercise by a former
employee (or, in the case of a former employee who is deceased, the person or
persons to whom the award is transferred by will or the laws of descent and
distribution) as to all or any portion of the award not exercisable immediately
prior to termination of employment or other service, but in no case may an award
be exercised after the Expiration Date.
8. Employment Rights
-6-
Neither the adoption of the Plan nor the grant of awards shall confer upon
any participant any right to continue as an employee of the Company, its parent,
or any subsidiary or affect in any way the right of the Company, its parent, or
a subsidiary to terminate the participant's relationship at any time. Except as
specifically provided by the Board in any particular case, the loss of existing
or potential profit in awards granted under this Plan shall not constitute an
element of damages in the event of termination of the relationship of a
participant.
9. Effect, Discontinuance, Cancellation, Amendment, and Termination
Neither adoption of the Plan nor the grant of awards to a participant shall
affect the Company's right to make awards to such participant that are not
subject to the Plan, to issue to such participant Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock may be issued. No
option granted pursuant to the Plan is intended to be an incentive stock option
under Section 422 of the Code.
The Board may at any time or times amend the Plan or any outstanding award
for the purpose of satisfying the requirements of any changes in applicable laws
or regulations or for any other purpose that may at the time be permitted by
law, or may at any time terminate the Plan as to any further grants of awards;
provided that, except to the extent expressly required by the Plan, no such
amendment shall adversely affect the rights of any participant (without his or
her consent) under any award previously granted, nor shall such amendment,
without the approval of the stockholders of the Company, effectuate a change for
which stockholder approval is required to comply with any tax or regulatory
requirement including in order for the Plan to continue to qualify under Rule
16b-3 promulgated under Section 16 of the 1934 Act.
10. Miscellaneous
The Plan shall be governed by Michigan law. The Board may provide in a
particular case that an award shall be evidenced by an award agreement or
certificate.
-7-
Exhibit 10.9
SEVERANCE AGREEMENT
AGREEMENT dated as of August 4, 1998 between Domino's Pizza, Inc., a
Michigan corporation ("DPI") and Stuart Mathis ("EXECUTIVE").
WHEREAS, Executive is currently a valued employee of DPI; and
WHEREAS, DPI desires to retain the services of Executive in anticipation of
a possible transaction which may result in a Change of Control (as defined
below) and to obtain the covenants set forth herein; and
WHEREAS, the parties desire to enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein and for other good and valuable consideration, the parties agree as
follows:
1. Definitions. For purposes of this Agreement, the following terms shall
have the meanings indicated.
"ABANDONMENT OF SALE" means a termination by the Chief Executive Officer of
DPI of the sale process initiated pursuant to the letter dated May 1, 1998
addressed to TISM from J.P. Morgan Securities Inc., as evidenced by an
affirmative action by said Chief Executive Officer such as written notice of
termination of the process to J.P. Morgan Securities Inc.
"BASE SEVERANCE AMOUNT" means $549,912.
"CAUSE" means (i) Executive's continued failure to devote substantially all
of his business time and energies to the performance of his duties to the
Company (other than as a result of total or partial incapacity due to physical
or mental illness or as a result of termination by Executive for Good Reason)
after a written demand for substantial performance is delivered to Executive and
Executive shall have failed during the 30 day period following such written
demand to have corrected such failure, (ii) any willful act or omission by
Executive constituting dishonesty, fraud or other malfeasance against the
Company, (iii) Executive's conviction of a felony under the laws of the United
States or any state thereof or any other jurisdiction in which the Company
conducts business or (iv) breach by Executive of any of the restrictive
covenants contained in Section 4 of this Agreement. No act or failure to act on
Executive's part shall be deemed willful unless done or omitted to be done by
Executive not in good faith and without reasonable belief that Executive's
action or omission was in the best interest of the Company.
"CHANGE OF CONTROL" means the first of the following events to occur
following the date hereof:
(i) Any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act) (a "PERSON"), other than any entity or
group in which Executive has not less than a 5% beneficial interest (an
"EXECUTIVE ENTITY"), shall become the beneficial owner (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of more than 51% of the then
outstanding shares of common stock of the Company or TISM; or
(ii) Consummation of any reorganization, merger or consolidation with
respect to the Company or TISM (each a "REORGANIZATION"), other than with an
Executive Entity, unless following such Reorganization more than 51% of the
outstanding equity of the entity resulting from such Reorganization continues to
be beneficially owned, directly or indirectly, by the Majority Owner; or
(iii) The sale or other disposition (or the last in a series of such
transactions) of all or substantially all of the assets of the Company or TISM,
other than to an Executive Entity or to an entity with respect to which
following such sale or other disposition more than 51% of the outstanding equity
is beneficially owned, directly or indirectly, by the Majority Owner.
"COMPANY" means DPI and any successor (whether direct or indirect) to all
or substantially all of the stock, assets or business of DPI.
"DOMINO GROUP" means TISM, the Company and its subsidiaries and Domino's
Farms Office Park Limited Partnership, collectively.
"EXCHANGE ACT" means the Securities and Exchange Act of 1934, as amended.
"GOOD REASON" means:
(i) Removal from, or failure to be reappointed or reelected to, the
position Executive holds with the Company immediately prior to a Change of
Control (other than as a result of a promotion);
(ii) Material diminution in Executive's title, position, duties or
responsibilities, the assignment to Executive of duties that are
inconsistent, in a material respect, with the scope of duties and
responsibilities associated with the position of Executive immediately
prior to the Change of Control;
(iii) Failure by the Company to pay Executive any compensation
otherwise vested and due if such failure continues for ten business days
following notice to the Company thereof;
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(iv) Reduction in base salary, bonus opportunity or benefits;
(v) Relocation of Executive to an office of the Company more than
50 miles from his current office;
(vi) Any reason during the 30 day period following the first
anniversary of a Change of Control; or
(vii) Failure of the Company to obtain the assumption of this
Agreement pursuant to Section 6(g) hereof;
provided that any such event occurring prior to the first anniversary of a
Change of Control shall not be deemed to constitute Good Reason following such
anniversary.
"MAJORITY OWNER" means Thomas S. Monaghan.
"MULTIPLE" means three in the case of a termination of Executive's
employment prior to or upon the first anniversary of a Change of Control and two
in the case of such termination on or after the first anniversary of a Change of
Control but prior to or upon the second anniversary of such a Change of Control.
"NON-COMPETE TERM" means the period from the date of this Agreement until
the earliest of (i) the date of Executive's termination of employment by the
Company without Cause prior to a Change of Control, (ii) the date eighteen
months following any other termination of Executive's employment prior to a
Change of Control or any termination of Executive's employment upon or following
a Change of Control and prior to or upon the first anniversary of such Change of
Control, (iii) the date twelve months following any termination of Executive's
employment after the first anniversary of a Change of Control but prior to or
upon the second anniversary of such Change of Control, and (iv) the date of any
termination of Executive's employment following or upon the expiration of this
Agreement.
"TARGET BONUS" means, with respect to any fiscal year of the Company, the
higher of (i) the target annual bonus for Executive for such year, if any, and
(ii) the average of the annual bonuses paid to Executive for each of the years
following the year ended December 31, 1995 and prior to the year in which the
Change of Control occurs.
"TISM" means TISM, Inc., a Michigan corporation.
2. Term of Agreement. This Agreement shall be in effect from the date
hereof until the earliest of (i) the second anniversary of a Change of Control,
(ii) January 31, 2000 if no Change of Control shall occur prior to such date,
and (iii) the date of an Abandonment of Sale, except to the extent necessary to
give effect to the provisions hereof. Notwithstanding the foregoing, prior to a
Change of Control and following the expiration of this Agreement,
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Executive's employment shall be deemed an employment at will and Executive's
employment may be terminated at will by Executive or the Company.
3. Severance.
(a) Without Cause by the Company; by Executive for Good Reason. If
Executive's employment with the Company is terminated upon a Change of
Control or prior to or upon the second anniversary of a Change of Control
(x) by the Company without Cause (other than by reason of disability
(within the meaning of the Company's disability program, "DISABILITY") or
death) or (y) by Executive for Good Reason, in lieu of any other severance
benefits to which Executive would be entitled under any other plans or
programs of the Company, Executive shall be entitled to the following
benefits.
(i) The Company shall pay Executive, within ten days of the date of such
termination of employment (the "DATE OF TERMINATION") in a lump sum payment
(A) accrued unpaid base salary through the Date of Termination, (B) any
prior year bonus earned but not paid, (C) any bonus earned by Executive
solely by reason of Executive's being employed by any member of the Domino
Group upon a Change of Control ("CHANGE OF CONTROL BONUS") if and to the
extent such bonus has not been paid, (D) the Target Bonus for the year of
termination, pro-rated through the Date of Termination and (E) severance
equal to the Multiple times the Base Severance Amount.
(ii) The Company shall make monthly payments to Executive such that, after
payment by Executive of all applicable taxes thereon, Executive retains an
amount which, when added to the amount of Executive's contribution if any
to his current health insurance arrangement, will enable Executive to
purchase health insurance benefits at the same level enjoyed by Executive
as of the Date of Termination, or at the date of Change of Control, if
greater, for the lesser of a period of the Multiple number of years
following the Date of Termination or until Executive is eligible for
comparable health insurance from a successor employer.
(iii) Executive shall receive any other benefits under other plans or
programs of the Company in accordance with their terms.
(iv) Other than the benefits set forth in this Section 4(a), the Company
and its affiliates will have no further obligations hereunder with respect
to Executive following such Date of Termination.
(v) Executive shall not be required to mitigate damages or the amount of
any payment provided for under this Agreement by seeking other employment
or otherwise, nor will any payments hereunder be subject to offset in
respect of any claims which the Company may have against Executive, nor,
except as provided in subparagraph (ii),
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shall the amount of any payment or benefit provided for in this Section 4
be reduced by any compensation earned as a result of Executive's employment
with another employer.
(b) Upon Death or Disability. If Executive's employment with the Company
is terminated upon a Change of Control or prior to or upon the second
anniversary of a Change of Control by the Company by reason of Disability or
death, in lieu of any other severance benefits to which Executive would be
entitled under any other plans or programs of the Company, Executive shall be
entitled to the following benefits.
(i) The Company shall pay Executive or his estate, as applicable, within
ten days of the Date of Termination in a lump sum payment (A) accrued
unpaid base salary through the Date of Termination, (B) any prior year
bonus earned but not paid, (C) any Change of Control Bonus if and to the
extent it has not been paid, (D) the Target Bonus for the year of
termination, pro-rated through the Date of Termination and (E) severance
equal to the Base Severance Amount.
(ii) Executive shall receive any other benefits, including without
limitation disability and/or death benefits, under other plans or programs
of the Company in accordance with their terms.
(iii) Other than the benefits set forth in this Section 4(b), the Company
and its affiliates will have no further obligations hereunder with respect
to Executive following such Date of Termination.
(c) Any Other Termination. If Executive is terminated during the term of
this Agreement following a Change in Control for any reason other than set forth
in Section 4(a) or 4(b), Executive shall be entitled to receive his accrued
unpaid base salary through the Date of Termination, any prior year bonus earned
but not paid and the any Change of Control Bonus if and to the extent it has not
been paid, all of the foregoing payable in a lump sum within ten days of the
Date of Termination, and any other benefits under other plans and programs of
the Company in accordance with their terms, and the Company and its affiliates
will have no further obligations under this Agreement with respect to Executive
following the Date of Termination.
(d) Notice of Termination. Any purported termination of employment by the
Company or by Executive following a Change of Control shall be communicated by
written notice of termination to the other party hereto in accordance with
Section 6(i) hereof which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of employment under
the provision so indicated.
4. Non-Competition; Non-solicitation; Confidentiality. (a) Executive
acknowledges and recognizes the highly competitive nature of the business of the
Company and its affiliates
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and accordingly agrees that, in consideration of this Agreement, the rights
conferred hereunder, any Change of Control Bonus and any payments hereunder,
during the Non-Compete Term, Executive will not engage, either directly or
indirectly, as a principal for his own account or jointly with others, or as a
stockholder in any corporation or joint stock association, in any business other
than the Company that is principally engaged in the sale of fast food pizza
(whether as home delivery, eat-in or carry-out) (the "BUSINESS") within the
United States; provided, that nothing herein shall prevent Executive from (i)
owning, directly or indirectly, not more than five percent of the outstanding
shares of, or any other equity interest in, any entity engaged in the Business
and listed or traded on a national securities exchanges or in an over-the-
counter securities market or (ii) being a franchisee of the Company.
(b) During the Non-Compete Term, Executive will not (i) employ or solicit,
or receive or accept the performance of services by any current employee with
managerial responsibility or other current key employee of the Company or any
subsidiary of the Company, except in connection with general, non-targeted
recruitment efforts such as advertisements and job listings or (ii) solicit for
business any person who is a customer or former customer of the Company or any
of its affiliates unless such person should have ceased to have been a customer
of the Company or any of its affiliates for a period of at least six (6) months.
(c) Executive will not at any time (whether during or after his employment
with the Company) disclose or use for his own benefit or purposes or the benefit
or purposes of any other person, firm, partnership, joint venture, association,
corporation or other business organization, entity or enterprise other than the
Company and any of its subsidiaries or affiliates, any trade secrets,
information, data, or other confidential information relating to customers,
development programs, costs, marketing, trading, investment, sales activities,
promotion, credit and financial data, financing methods, plans, or the business
and affairs of the Company generally, or of any subsidiary or affiliate of the
Company, unless required to do so by applicable law or court order, subpoena or
decree or otherwise required by law, with reasonable evidence of such
determination promptly provided to the Company. The preceding sentence of this
paragraph (c) shall not apply to information which is not unique to the Company
or which is generally known to the industry or the public other than as a result
of Executive's breach of this covenant. Executive agrees that upon termination
of his employment with the Company for any reason, he will return to the Company
immediately all memoranda, books, papers, plans, information, letters and other
data, and all copies thereof or therefrom, in any way relating to the business
of the Company and its affiliates, except that he may retain personal notes,
notebooks and diaries. Executive further agrees that he will not retain or use
for his account at any time any trade names, trademark or other proprietary
business designation used or owned in connection with the business of the
Company or its affiliates.
(d) It is expressly understood and agreed that although Executive and the
Company consider the restrictions contained in this Section 4 to be reasonable,
if a final judicial
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determination is made by a court of competent jurisdiction that the time or
territory or any other restriction contained in this Agreement is an
unenforceable restriction against Executive, the provisions of this Agreement
shall not be rendered void but shall be deemed amended to apply as to such
maximum time and territory and to such maximum extent as such court may
judiciary determine or indicate to be enforceable. Alternatively, if any
tribunal of competent jurisdiction finds that any restriction contained in this
Agreement is unenforceable, and such restriction cannot be amended so as to make
it enforceable, such finding shall not affect the enforceability of any of the
other restrictions contained herein.
5. Remedies. (a) Executive acknowledges and agrees that the Company's
remedies at law for a breach or threatened breach of any of the provisions of
Section 4 hereof would be inadequate and, in recognition of this fact, Executive
agrees that, in the event of such a breach or threatened breach, in addition to
any remedies at law, the Company, without posting any bond, shall be entitled to
seek equitable relief in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable remedy which may
then be available.
(b) Notwithstanding any provision of this Agreement to the contrary, from
and after any breach by Executive of the provisions of Section 4 of this
Agreement, the Company shall cease to have any obligations to make payments or
provide benefits to Executive under this Agreement.
6. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of Michigan.
(b) Entire Agreement/Amendments. This Agreement contains the entire
understanding of the parties with respect to the severance payable to Executive
in the event of a termination of employment following a Change of Control during
the term of this Agreement. There are no restrictions, agreements, promises,
warranties, covenants or undertakings between the parties with respect to the
subject matter herein other than those expressly set forth herein or therein.
This Agreement may not be altered, modified, or amended except by written
instrument signed by the parties hereto.
(c) No Waiver. The failure of a party to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a waiver of
such party's rights or deprive such party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.
(d) Severability. In the event that any one or more of the provisions of
this Agreement shall be or become invalid, illegal or unenforceable in any
respect, the validity,
-7-
legality and enforceability of the remaining provisions of this Agreement shall
not be affected thereby.
(e) Arbitration. With respect to any dispute between the parties hereto
arising from or relating to the terms of this Agreement, except as provided in
Section 6(a), the parties agree to submit such dispute to arbitration in Ann
Arbor, Michigan under the auspices of and the employment rules of the American
Arbitration Association. The determination of the arbitrator(s) shall be
conclusive and binding on the Company and Executive and judgment upon the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof.
(f) Attorneys Fees. In the event of a dispute by the Company, Executive or
others as to the validity or enforceability of, or liability under, any
provision of this Agreement, the Company shall reimburse Executive for all legal
fees and expenses incurred by him in connection with such dispute except to the
extent (i) in the case of a dispute prior to a Change of Control, Executive
shall not prevail to any material extent or (ii) in the case of severance under
Section 3 hereof or any other dispute following a Change of Control, Executive's
position is found by a tribunal of competent jurisdiction to have been
frivolous.
(g) Assignment. This Agreement shall not be assignable by Executive and
shall be assignable by the Company only with the consent of Executive; provided,
however, that the Company shall require any successor to substantially all of
the stock, assets or business of the Company to assume this Agreement.
(h) Successors; Binding Agreement. This Agreement shall inure to the
benefit of and be binding upon the personal or legal representatives, executors,
administrators, successors, including successors to all or substantially all of
the stock, business and/or assets of the Company, heirs, distributees, devisees
and legatees of the parties.
(i) Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the execution page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the Board
of Directors of the Company with a copy to the Secretary of the Company, or to
such other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
(j) Withholding Taxes. The Company may withhold from any amounts payable
under this Agreement such U.S. federal, state and local taxes as may be required
to be withheld pursuant to any applicable law or regulation.
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(k) Counterparts. This Agreement may be signed in counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have duty executed this Agreement as
of the day and year first above written.
DOMINO'S PIZZA, INC.
By: /s/ Thomas S. Monaghan
------------------------------
Title: Chief Executive Officer
Address: 30 Frank Lloyd Wright Drive
P.O. Box 997
Ann Arbor, Michigan 48106-0997
STUART MATHIS
/s/ Stuart Mathis
---------------------------------
Address: 11645 Lehigh Court
Plymouth, MI 48170
-9-
Exhibit 10.10
SEVERANCE AGREEMENT
AGREEMENT dated as of August 4, 1998 between Domino's Pizza, Inc., a
Michigan corporation ("DPI") and Pat Kelly ("EXECUTIVE").
WHEREAS, Executive is currently a valued employee of DPI; and
WHEREAS, DPI desires to retain the services of Executive in anticipation of
a possible transaction which may result in a Change of Control (as defined
below) and to obtain the covenants set forth herein; and
WHEREAS, the parties desire to enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein and for other good and valuable consideration, the parties agree as
follows:
1. Definitions. For purposes of this Agreement, the following terms shall
have the meanings indicated.
"ABANDONMENT OF SALE" means a termination by the Chief Executive Officer of
DPI of the sale process initiated pursuant to the letter dated May 1, 1998
addressed to TISM from J.P. Morgan Securities Inc., as evidenced by an
affirmative action by said Chief Executive Officer such as written notice of
termination of the process to J.P. Morgan Securities Inc.
"BASE SEVERANCE AMOUNT" means $431,904.
"CAUSE" means (i) Executive's continued failure to devote substantially all
of his business time and energies to the performance of his duties to the
Company (other than as a result of total or partial incapacity due to physical
or mental illness or as a result of termination by Executive for Good Reason)
after a written demand for substantial performance is delivered to Executive and
Executive shall have failed during the 30 day period following such written
demand to have corrected such failure, (ii) any willful act or omission by
Executive constituting dishonesty, fraud or other malfeasance against the
Company, (iii) Executive's conviction of a felony under the laws of the United
States or any state thereof or any other jurisdiction in which the Company
conducts business or (iv) breach by Executive of any of the restrictive
covenants contained in Section 4 of this Agreement. No act or failure to act on
Executive's part shall be deemed willful unless done or omitted to be done by
Executive not in good faith and without reasonable belief that Executive's
action or omission was in the best interest of the Company.
"CHANGE OF CONTROL" means the first of the following events to occur
following the date hereof:
(i) Any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act) (a "PERSON"), other than any entity or
group in which Executive has not less than a 5% beneficial interest (an
"EXECUTIVE ENTITY"), shall become the beneficial owner (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of more than 51% of the then
outstanding shares of common stock of the Company or TISM; or
(ii) Consummation of any reorganization, merger or consolidation with
respect to the Company or TISM (each a "REORGANIZATION"), other than with an
Executive Entity, unless following such Reorganization more than 51% of the
outstanding equity of the entity resulting from such Reorganization continues to
be beneficially owned, directly or indirectly, by the Majority Owner; or
(iii) The sale or other disposition (or the last in a series of such
transactions) of all or substantially all of the assets of the Company or TISM,
other than to an Executive Entity or to an entity with respect to which
following such sale or other disposition more than 51% of the outstanding equity
is beneficially owned, directly or indirectly, by the Majority Owner.
"COMPANY" means DPI and any successor (whether direct or indirect) to all
or substantially all of the stock, assets or business of DPI.
"DOMINO GROUP" means TISM, the Company and its subsidiaries and Domino's
Farms Office Park Limited Partnership, collectively.
"EXCHANGE ACT" means the Securities and Exchange Act of 1934, as amended.
"GOOD REASON" means:
(i) Removal from, or failure to be reappointed or reelected to, the
position Executive holds with the Company immediately prior to a Change of
Control (other than as a result of a promotion);
(ii) Material diminution in Executive's title, position, duties or
responsibilities, the assignment to Executive of duties that are
inconsistent, in a material respect, with the scope of duties and
responsibilities associated with the position of Executive immediately
prior to the Change of Control;
(iii) Failure by the Company to pay Executive any compensation
otherwise vested and due if such failure continues for ten business days
following notice to the Company thereof;
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(iv) Reduction in base salary, bonus opportunity or benefits;
(v) Relocation of Executive to an office of the Company more than 50
miles from his current office;
(vi) Any reason during the 30 day period following the first
anniversary of a Change of Control; or
(vii) Failure of the Company to obtain the assumption of this
Agreement pursuant to Section 6(g) hereof;
provided that any such event occurring prior to the first anniversary of a
Change of Control shall not be deemed to constitute Good Reason following such
anniversary.
"MAJORITY OWNER" means Thomas S. Monaghan.
"MULTIPLE" means three in the case of a termination of Executive's
employment prior to or upon the first anniversary of a Change of Control and two
in the case of such termination on or after the first anniversary of a Change of
Control but prior to or upon the second anniversary of such a Change of Control.
"NON-COMPETE TERM" means the period from the date of this Agreement until
the earliest of (i) the date of Executive's termination of employment by the
Company without Cause prior to a Change of Control, (ii) the date eighteen
months following any other termination of Executive's employment prior to a
Change of Control or any termination of Executive's employment upon or following
a Change of Control and prior to or upon the first anniversary of such Change of
Control, (iii) the date twelve months following any termination of Executive's
employment after the first anniversary of a Change of Control but prior to or
upon the second anniversary of such Change of Control, and (iv) the date of any
termination of Executive's employment following or upon the expiration of this
Agreement.
"TARGET BONUS" means, with respect to any fiscal year of the Company, the
higher of (i) the target annual bonus for Executive for such year, if any, and
(ii) the average of the annual bonuses paid to Executive for each of the years
following the year ended December 31, 1995 and prior to the year in which the
Change of Control occurs.
"TISM" means TISM, Inc., a Michigan corporation.
2. Term of Agreement. This Agreement shall be in effect from the date
hereof until the earliest of (i) the second anniversary of a Change of Control,
(ii) January 31, 2000 if no Change of Control shall occur prior to such date,
and (iii) the date of an Abandonment of Sale, except to the extent necessary to
give effect to the provisions hereof. Notwithstanding the foregoing, prior to a
Change of Control and following the expiration of this Agreement,
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Executive's employment shall be deemed an employment at will and Executive's
employment may be terminated at will by Executive or the Company.
3. Severance.
(a) Without Cause by the Company; by Executive for Good Reason. If
Executive's employment with the Company is terminated upon a Change of Control
or prior to or upon the second anniversary of a Change of Control (x) by the
Company without Cause (other than by reason of disability (within the meaning of
the Company's disability program, "DISABILITY") or death) or (y) by Executive
for Good Reason, in lieu of any other severance benefits to which Executive
would be entitled under any other plans or programs of the Company, Executive
shall be entitled to the following benefits.
(i) The Company shall pay Executive, within ten days of the date of such
termination of employment (the "DATE OF TERMINATION") in a lump sum payment
(A) accrued unpaid base salary through the Date of Termination, (B) any
prior year bonus earned but not paid, (C) any bonus earned by Executive
solely by reason of Executive's being employed by any member of the Domino
Group upon a Change of Control ("CHANGE OF CONTROL BONUS") if and to the
extent such bonus has not been paid, (D) the Target Bonus for the year of
termination, pro-rated through the Date of Termination and (E) severance
equal to the Multiple times the Base Severance Amount.
(ii) The Company shall make monthly payments to Executive such that, after
payment by Executive of all applicable taxes thereon, Executive retains an
amount which, when added to the amount of Executive's contribution if any
to his current health insurance arrangement, will enable Executive to
purchase health insurance benefits at the same level enjoyed by Executive
as of the Date of Termination, or at the date of Change of Control, if
greater, for the lesser of a period of the Multiple number of years
following the Date of Termination or until Executive is eligible for
comparable health insurance from a successor employer.
(iii) Executive shall receive any other benefits under other plans or
programs of the Company in accordance with their terms.
(iv) Other than the benefits set forth in this Section 4(a), the Company
and its affiliates will have no further obligations hereunder with respect
to Executive following such Date of Termination.
(v) Executive shall not be required to mitigate damages or the amount of
any payment provided for under this Agreement by seeking other employment
or otherwise, nor will any payments hereunder be subject to offset in
respect of any claims which the Company may have against Executive, nor,
except as provided in subparagraph (ii),
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shall the amount of any payment or benefit provided for in this Section 4
be reduced by any compensation earned as a result of Executive's employment
with another employer.
(b) Upon Death or Disability. If Executive's employment with the Company
is terminated upon a Change of Control or prior to or upon the second
anniversary of a Change of Control by the Company by reason of Disability or
death, in lieu of any other severance benefits to which Executive would be
entitled under any other plans or programs of the Company, Executive shall be
entitled to the following benefits.
(i) The Company shall pay Executive or his estate, as applicable, within
ten days of the Date of Termination in a lump sum payment (A) accrued
unpaid base salary through the Date of Termination, (B) any prior year
bonus earned but not paid, (C) any Change of Control Bonus if and to the
extent it has not been paid, (D) the Target Bonus for the year of
termination, pro-rated through the Date of Termination and (E) severance
equal to the Base Severance Amount.
(ii) Executive shall receive any other benefits, including without
limitation disability and/or death benefits, under other plans or programs
of the Company in accordance with their terms.
(iii) Other than the benefits set forth in this Section 4(b), the Company
and its affiliates will have no further obligations hereunder with respect
to Executive following such Date of Termination.
(c) Any Other Termination. If Executive is terminated during the term of
this Agreement following a Change in Control for any reason other than set forth
in Section 4(a) or 4(b), Executive shall be entitled to receive his accrued
unpaid base salary through the Date of Termination, any prior year bonus earned
but not paid and the any Change of Control Bonus if and to the extent it has not
been paid, all of the foregoing payable in a lump sum within ten days of the
Date of Termination, and any other benefits under other plans and programs of
the Company in accordance with their terms, and the Company and its affiliates
will have no further obligations under this Agreement with respect to Executive
following the Date of Termination.
(d) Notice of Termination. Any purported termination of employment by the
Company or by Executive following a Change of Control shall be communicated by
written notice of termination to the other party hereto in accordance with
Section 6(i) hereof which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of employment under
the provision so indicated.
4. Non-Competition; Non-solicitation; Confidentiality. (a) Executive
acknowledges and recognizes the highly competitive nature of the business of the
Company and its affiliates
-5-
and accordingly agrees that, in consideration of this Agreement, the rights
conferred hereunder, any Change of Control Bonus and any payments hereunder,
during the Non-Compete Term, Executive will not engage, either directly or
indirectly, as a principal for his own account or jointly with others, or as a
stockholder in any corporation or joint stock association, in any business other
than the Company that is principally engaged in the sale of fast food pizza
(whether as home delivery, eat-in or carry-out) (the "BUSINESS") within the
United States; provided, that nothing herein shall prevent Executive from (i)
owning, directly or indirectly, not more than five percent of the outstanding
shares of, or any other equity interest in, any entity engaged in the Business
and listed or traded on a national securities exchanges or in an over-the-
counter securities market or (ii) being a franchisee of the Company.
(b) During the Non-Compete Term, Executive will not (i) employ or solicit,
or receive or accept the performance of services by any current employee with
managerial responsibility or other current key employee of the Company or any
subsidiary of the Company, except in connection with general, non-targeted
recruitment efforts such as advertisements and job listings or (ii) solicit for
business any person who is a customer or former customer of the Company or any
of its affiliates unless such person should have ceased to have been a customer
of the Company or any of its affiliates for a period of at least six (6) months.
(c) Executive will not at any time (whether during or after his employment
with the Company) disclose or use for his own benefit or purposes or the benefit
or purposes of any other person, firm, partnership, joint venture, association,
corporation or other business organization, entity or enterprise other than the
Company and any of its subsidiaries or affiliates, any trade secrets,
information, data, or other confidential information relating to customers,
development programs, costs, marketing, trading, investment, sales activities,
promotion, credit and financial data, financing methods, plans, or the business
and affairs of the Company generally, or of any subsidiary or affiliate of the
Company, unless required to do so by applicable law or court order, subpoena or
decree or otherwise required by law, with reasonable evidence of such
determination promptly provided to the Company. The preceding sentence of this
paragraph (c) shall not apply to information which is not unique to the Company
or which is generally known to the industry or the public other than as a result
of Executive's breach of this covenant. Executive agrees that upon termination
of his employment with the Company for any reason, he will return to the Company
immediately all memoranda, books, papers, plans, information, letters and other
data, and all copies thereof or therefrom, in any way relating to the business
of the Company and its affiliates, except that he may retain personal notes,
notebooks and diaries. Executive further agrees that he will not retain or use
for his account at any time any trade names, trademark or other proprietary
business designation used or owned in connection with the business of the
Company or its affiliates.
(d) It is expressly understood and agreed that although Executive and the
Company consider the restrictions contained in this Section 4 to be reasonable,
if a final judicial
-6-
determination is made by a court of competent jurisdiction that the time or
territory or any other restriction contained in this Agreement is an
unenforceable restriction against Executive, the provisions of this Agreement
shall not be rendered void but shall be deemed amended to apply as to such
maximum time and territory and to such maximum extent as such court may
judiciary determine or indicate to be enforceable. Alternatively, if any
tribunal of competent jurisdiction finds that any restriction contained in this
Agreement is unenforceable, and such restriction cannot be amended so as to make
it enforceable, such finding shall not affect the enforceability of any of the
other restrictions contained herein.
5. Remedies. (a) Executive acknowledges and agrees that the Company's
remedies at law for a breach or threatened breach of any of the provisions of
Section 4 hereof would be inadequate and, in recognition of this fact, Executive
agrees that, in the event of such a breach or threatened breach, in addition to
any remedies at law, the Company, without posting any bond, shall be entitled to
seek equitable relief in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable remedy which may
then be available.
(b) Notwithstanding any provision of this Agreement to the contrary, from
and after any breach by Executive of the provisions of Section 4 of this
Agreement, the Company shall cease to have any obligations to make payments or
provide benefits to Executive under this Agreement.
6. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of Michigan.
(b) Entire Agreement/Amendments. This Agreement contains the entire
understanding of the parties with respect to the severance payable to Executive
in the event of a termination of employment following a Change of Control during
the term of this Agreement. There are no restrictions, agreements, promises,
warranties, covenants or undertakings between the parties with respect to the
subject matter herein other than those expressly set forth herein or therein.
This Agreement may not be altered, modified, or amended except by written
instrument signed by the parties hereto.
(c) No Waiver. The failure of a party to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a waiver of
such party's rights or deprive such party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.
(d) Severability. In the event that any one or more of the provisions of
this Agreement shall be or become invalid, illegal or unenforceable in any
respect, the validity,
-7-
legality and enforceability of the remaining provisions of this Agreement shall
not be affected thereby.
(e) Arbitration. With respect to any dispute between the parties hereto
arising from or relating to the terms of this Agreement, except as provided in
Section 6(a), the parties agree to submit such dispute to arbitration in Ann
Arbor, Michigan under the auspices of and the employment rules of the American
Arbitration Association. The determination of the arbitrator(s) shall be
conclusive and binding on the Company and Executive and judgment upon the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof.
(f) Attorneys Fees. In the event of a dispute by the Company, Executive or
others as to the validity or enforceability of, or liability under, any
provision of this Agreement, the Company shall reimburse Executive for all legal
fees and expenses incurred by him in connection with such dispute except to the
extent (i) in the case of a dispute prior to a Change of Control, Executive
shall not prevail to any material extent or (ii) in the case of severance under
Section 3 hereof or any other dispute following a Change of Control, Executive's
position is found by a tribunal of competent jurisdiction to have been
frivolous.
(g) Assignment. This Agreement shall not be assignable by Executive and
shall be assignable by the Company only with the consent of Executive; provided,
however, that the Company shall require any successor to substantially all of
the stock, assets or business of the Company to assume this Agreement.
(h) Successors; Binding Agreement. This Agreement shall inure to the
benefit of and be binding upon the personal or legal representatives, executors,
administrators, successors, including successors to all or substantially all of
the stock, business and/or assets of the Company, heirs, distributees, devisees
and legatees of the parties.
(i) Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the execution page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the Board
of Directors of the Company with a copy to the Secretary of the Company, or to
such other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
(j) Withholding Taxes. The Company may withhold from any amounts payable
under this Agreement such U.S. federal, state and local taxes as may be required
to be withheld pursuant to any applicable law or regulation.
-8-
(k) Counterparts. This Agreement may be signed in counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have duty executed this Agreement as
of the day and year first above written.
DOMINO'S PIZZA, INC.
By: /s/ Thomas S. Monaghan
-----------------------------
Title: Chief Executive Officer
Address: 30 Frank Lloyd Wright Drive
P.O. Box 997
Ann Arbor, Michigan 48106-0997
PAT KELLY
/s/ Pat Kelly
-------------------------------------------
Address: 10989 Charring Cross
Whitmore Lake, MI 48189
-9-
Exhibit 10.11
SEVERANCE AGREEMENT
AGREEMENT dated as of August 4, 1998 between Domino's Pizza, Inc., a
Michigan corporation ("DPI") and Harry Silverman ("EXECUTIVE").
WHEREAS, Executive is currently a valued employee of DPI; and
WHEREAS, DPI desires to retain the services of Executive in anticipation of
a possible transaction which may result in a Change of Control (as defined
below) and to obtain the covenants set forth herein; and
WHEREAS, the parties desire to enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein and for other good and valuable consideration, the parties agree as
follows:
1. Definitions. For purposes of this Agreement, the following terms shall
have the meanings indicated.
"ABANDONMENT OF SALE" means a termination by the Chief Executive Officer of
DPI of the sale process initiated pursuant to the letter dated May 1, 1998
addressed to TISM from J.P. Morgan Securities Inc., as evidenced by an
affirmative action by said Chief Executive Officer such as written notice of
termination of the process to J.P. Morgan Securities Inc.
"BASE SEVERANCE AMOUNT" means $514,105.
"CAUSE" means (i) Executive's continued failure to devote substantially all
of his business time and energies to the performance of his duties to the
Company (other than as a result of total or partial incapacity due to physical
or mental illness or as a result of termination by Executive for Good Reason)
after a written demand for substantial performance is delivered to Executive and
Executive shall have failed during the 30 day period following such written
demand to have corrected such failure, (ii) any willful act or omission by
Executive constituting dishonesty, fraud or other malfeasance against the
Company, (iii) Executive's conviction of a felony under the laws of the United
States or any state thereof or any other jurisdiction in which the Company
conducts business or (iv) breach by Executive of any of the restrictive
covenants contained in Section 4 of this Agreement. No act or failure to act on
Executive's part shall be deemed willful unless done or omitted to be done by
Executive not in good faith and without reasonable belief that Executive's
action or omission was in the best interest of the Company.
"CHANGE OF CONTROL" means the first of the following events to occur
following the date hereof:
(i) Any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act) (a "PERSON"), other than any entity or
group in which Executive has not less than a 5% beneficial interest (an
"EXECUTIVE ENTITY"), shall become the beneficial owner (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of more than 51% of the then
outstanding shares of common stock of the Company or TISM; or
(ii) Consummation of any reorganization, merger or consolidation with
respect to the Company or TISM (each a "REORGANIZATION"), other than with an
Executive Entity, unless following such Reorganization more than 51% of the
outstanding equity of the entity resulting from such Reorganization continues to
be beneficially owned, directly or indirectly, by the Majority Owner; or
(iii) The sale or other disposition (or the last in a series of such
transactions) of all or substantially all of the assets of the Company or TISM,
other than to an Executive Entity or to an entity with respect to which
following such sale or other disposition more than 51% of the outstanding equity
is beneficially owned, directly or indirectly, by the Majority Owner.
"COMPANY" means DPI and any successor (whether direct or indirect) to all
or substantially all of the stock, assets or business of DPI.
"DOMINO GROUP" means TISM, the Company and its subsidiaries and Domino's
Farms Office Park Limited Partnership, collectively.
"EXCHANGE ACT" means the Securities and Exchange Act of 1934, as amended.
"GOOD REASON" means:
(i) Removal from, or failure to be reappointed or reelected to, the
position Executive holds with the Company immediately prior to a Change of
Control (other than as a result of a promotion);
(ii) Material diminution in Executive's title, position, duties or
responsibilities, the assignment to Executive of duties that are
inconsistent, in a material respect, with the scope of duties and
responsibilities associated with the position of Executive immediately
prior to the Change of Control;
(iii) Failure by the Company to pay Executive any compensation
otherwise vested and due if such failure continues for ten business days
following notice to the Company thereof;
-2-
(iv) Reduction in base salary, bonus opportunity or benefits;
(v) Relocation of Executive to an office of the Company more than
50 miles from his current office;
(vi) Any reason during the 30 day period following the first
anniversary of a Change of Control; or
(vii) Failure of the Company to obtain the assumption of this
Agreement pursuant to Section 6(g) hereof;
provided that any such event occurring prior to the first anniversary of a
Change of Control shall not be deemed to constitute Good Reason following such
anniversary.
"MAJORITY OWNER" means Thomas S. Monaghan.
"MULTIPLE" means three in the case of a termination of Executive's
employment prior to or upon the first anniversary of a Change of Control and two
in the case of such termination on or after the first anniversary of a Change of
Control but prior to or upon the second anniversary of such a Change of Control.
"NON-COMPETE TERM" means the period from the date of this Agreement until
the earliest of (i) the date of Executive's termination of employment by the
Company without Cause prior to a Change of Control, (ii) the date eighteen
months following any other termination of Executive's employment prior to a
Change of Control or any termination of Executive's employment upon or following
a Change of Control and prior to or upon the first anniversary of such Change of
Control, (iii) the date twelve months following any termination of Executive's
employment after the first anniversary of a Change of Control but prior to or
upon the second anniversary of such Change of Control, and (iv) the date of any
termination of Executive's employment following or upon the expiration of this
Agreement.
"TARGET BONUS" means, with respect to any fiscal year of the Company, the
higher of (i) the target annual bonus for Executive for such year, if any, and
(ii) the average of the annual bonuses paid to Executive for each of the years
following the year ended December 31, 1995 and prior to the year in which the
Change of Control occurs.
"TISM" means TISM, Inc., a Michigan corporation.
2. Term of Agreement. This Agreement shall be in effect from the date
hereof until the earliest of (i) the second anniversary of a Change of Control,
(ii) January 31, 2000 if no Change of Control shall occur prior to such date,
and (iii) the date of an Abandonment of Sale, except to the extent necessary to
give effect to the provisions hereof. Notwithstanding the foregoing, prior to a
Change of Control and following the expiration of this Agreement,
-3-
Executive's employment shall be deemed an employment at will and Executive's
employment may be terminated at will by Executive or the Company.
3. Severance.
(a) Without Cause by the Company; by Executive for Good Reason. If
Executive's employment with the Company is terminated upon a Change of Control
or prior to or upon the second anniversary of a Change of Control (x) by the
Company without Cause (other than by reason of disability (within the meaning of
the Company's disability program, "DISABILITY") or death) or (y) by Executive
for Good Reason, in lieu of any other severance benefits to which Executive
would be entitled under any other plans or programs of the Company, Executive
shall be entitled to the following benefits.
(i) The Company shall pay Executive, within ten days of the date of such
termination of employment (the "DATE OF TERMINATION") in a lump sum payment
(A) accrued unpaid base salary through the Date of Termination, (B) any
prior year bonus earned but not paid, (C) any bonus earned by Executive
solely by reason of Executive's being employed by any member of the Domino
Group upon a Change of Control ("CHANGE OF CONTROL BONUS") if and to the
extent such bonus has not been paid, (D) the Target Bonus for the year of
termination, pro-rated through the Date of Termination and (E) severance
equal to the Multiple times the Base Severance Amount.
(ii) The Company shall make monthly payments to Executive such that, after
payment by Executive of all applicable taxes thereon, Executive retains an
amount which, when added to the amount of Executive's contribution if any
to his current health insurance arrangement, will enable Executive to
purchase health insurance benefits at the same level enjoyed by Executive
as of the Date of Termination, or at the date of Change of Control, if
greater, for the lesser of a period of the Multiple number of years
following the Date of Termination or until Executive is eligible for
comparable health insurance from a successor employer.
(iii) Executive shall receive any other benefits under other plans or
programs of the Company in accordance with their terms.
(iv) Other than the benefits set forth in this Section 4(a), the Company
and its affiliates will have no further obligations hereunder with respect
to Executive following such Date of Termination.
(v) Executive shall not be required to mitigate damages or the amount of
any payment provided for under this Agreement by seeking other employment
or otherwise, nor will any payments hereunder be subject to offset in
respect of any claims which the Company may have against Executive, nor,
except as provided in subparagraph (ii),
-4-
shall the amount of any payment or benefit provided for in this Section 4
be reduced by any compensation earned as a result of Executive's employment
with another employer.
(b) Upon Death or Disability. If Executive's employment with the Company
is terminated upon a Change of Control or prior to or upon the second
anniversary of a Change of Control by the Company by reason of Disability or
death, in lieu of any other severance benefits to which Executive would be
entitled under any other plans or programs of the Company, Executive shall be
entitled to the following benefits.
(i) The Company shall pay Executive or his estate, as applicable, within
ten days of the Date of Termination in a lump sum payment (A) accrued
unpaid base salary through the Date of Termination, (B) any prior year
bonus earned but not paid, (C) any Change of Control Bonus if and to the
extent it has not been paid, (D) the Target Bonus for the year of
termination, pro-rated through the Date of Termination and (E) severance
equal to the Base Severance Amount.
(ii) Executive shall receive any other benefits, including without
limitation disability and/or death benefits, under other plans or programs
of the Company in accordance with their terms.
(iii) Other than the benefits set forth in this Section 4(b), the Company
and its affiliates will have no further obligations hereunder with respect
to Executive following such Date of Termination.
(c) Any Other Termination. If Executive is terminated during the term of
this Agreement following a Change in Control for any reason other than set forth
in Section 4(a) or 4(b), Executive shall be entitled to receive his accrued
unpaid base salary through the Date of Termination, any prior year bonus earned
but not paid and the any Change of Control Bonus if and to the extent it has not
been paid, all of the foregoing payable in a lump sum within ten days of the
Date of Termination, and any other benefits under other plans and programs of
the Company in accordance with their terms, and the Company and its affiliates
will have no further obligations under this Agreement with respect to Executive
following the Date of Termination.
(d) Notice of Termination. Any purported termination of employment by the
Company or by Executive following a Change of Control shall be communicated by
written notice of termination to the other party hereto in accordance with
Section 6(i) hereof which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of employment under
the provision so indicated.
4. Non-Competition; Non-solicitation; Confidentiality. (a) Executive
acknowledges and recognizes the highly competitive nature of the business of the
Company and its affiliates
-5-
and accordingly agrees that, in consideration of this Agreement, the rights
conferred hereunder, any Change of Control Bonus and any payments hereunder,
during the Non-Compete Term, Executive will not engage, either directly or
indirectly, as a principal for his own account or jointly with others, or as a
stockholder in any corporation or joint stock association, in any business other
than the Company that is principally engaged in the sale of fast food pizza
(whether as home delivery, eat-in or carry-out) (the "BUSINESS") within the
United States; provided, that nothing herein shall prevent Executive from (i)
owning, directly or indirectly, not more than five percent of the outstanding
shares of, or any other equity interest in, any entity engaged in the Business
and listed or traded on a national securities exchanges or in an over-the-
counter securities market or (ii) being a franchisee of the Company.
(b) During the Non-Compete Term, Executive will not (i) employ or solicit,
or receive or accept the performance of services by any current employee with
managerial responsibility or other current key employee of the Company or any
subsidiary of the Company, except in connection with general, non-targeted
recruitment efforts such as advertisements and job listings or (ii) solicit for
business any person who is a customer or former customer of the Company or any
of its affiliates unless such person should have ceased to have been a customer
of the Company or any of its affiliates for a period of at least six (6) months.
(c) Executive will not at any time (whether during or after his employment
with the Company) disclose or use for his own benefit or purposes or the benefit
or purposes of any other person, firm, partnership, joint venture, association,
corporation or other business organization, entity or enterprise other than the
Company and any of its subsidiaries or affiliates, any trade secrets,
information, data, or other confidential information relating to customers,
development programs, costs, marketing, trading, investment, sales activities,
promotion, credit and financial data, financing methods, plans, or the business
and affairs of the Company generally, or of any subsidiary or affiliate of the
Company, unless required to do so by applicable law or court order, subpoena or
decree or otherwise required by law, with reasonable evidence of such
determination promptly provided to the Company. The preceding sentence of this
paragraph (c) shall not apply to information which is not unique to the Company
or which is generally known to the industry or the public other than as a result
of Executive's breach of this covenant. Executive agrees that upon termination
of his employment with the Company for any reason, he will return to the Company
immediately all memoranda, books, papers, plans, information, letters and other
data, and all copies thereof or therefrom, in any way relating to the business
of the Company and its affiliates, except that he may retain personal notes,
notebooks and diaries. Executive further agrees that he will not retain or use
for his account at any time any trade names, trademark or other proprietary
business designation used or owned in connection with the business of the
Company or its affiliates.
(d) It is expressly understood and agreed that although Executive and the
Company consider the restrictions contained in this Section 4 to be reasonable,
if a final judicial
-6-
determination is made by a court of competent jurisdiction that the time or
territory or any other restriction contained in this Agreement is an
unenforceable restriction against Executive, the provisions of this Agreement
shall not be rendered void but shall be deemed amended to apply as to such
maximum time and territory and to such maximum extent as such court may
judiciary determine or indicate to be enforceable. Alternatively, if any
tribunal of competent jurisdiction finds that any restriction contained in this
Agreement is unenforceable, and such restriction cannot be amended so as to make
it enforceable, such finding shall not affect the enforceability of any of the
other restrictions contained herein.
5. Remedies. (a) Executive acknowledges and agrees that the Company's
remedies at law for a breach or threatened breach of any of the provisions of
Section 4 hereof would be inadequate and, in recognition of this fact, Executive
agrees that, in the event of such a breach or threatened breach, in addition to
any remedies at law, the Company, without posting any bond, shall be entitled to
seek equitable relief in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable remedy which may
then be available.
(b) Notwithstanding any provision of this Agreement to the contrary, from
and after any breach by Executive of the provisions of Section 4 of this
Agreement, the Company shall cease to have any obligations to make payments or
provide benefits to Executive under this Agreement.
6. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of Michigan.
(b) Entire Agreement/Amendments. This Agreement contains the entire
understanding of the parties with respect to the severance payable to Executive
in the event of a termination of employment following a Change of Control during
the term of this Agreement. There are no restrictions, agreements, promises,
warranties, covenants or undertakings between the parties with respect to the
subject matter herein other than those expressly set forth herein or therein.
This Agreement may not be altered, modified, or amended except by written
instrument signed by the parties hereto.
(c) No Waiver. The failure of a party to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a waiver of
such party's rights or deprive such party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.
(d) Severability. In the event that any one or more of the provisions of
this Agreement shall be or become invalid, illegal or unenforceable in any
respect, the validity,
-7-
legality and enforceability of the remaining provisions of this Agreement shall
not be affected thereby.
(e) Arbitration. With respect to any dispute between the parties hereto
arising from or relating to the terms of this Agreement, except as provided in
Section 6(a), the parties agree to submit such dispute to arbitration in Ann
Arbor, Michigan under the auspices of and the employment rules of the American
Arbitration Association. The determination of the arbitrator(s) shall be
conclusive and binding on the Company and Executive and judgment upon the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof.
(f) Attorneys Fees. In the event of a dispute by the Company, Executive or
others as to the validity or enforceability of, or liability under, any
provision of this Agreement, the Company shall reimburse Executive for all legal
fees and expenses incurred by him in connection with such dispute except to the
extent (i) in the case of a dispute prior to a Change of Control, Executive
shall not prevail to any material extent or (ii) in the case of severance under
Section 3 hereof or any other dispute following a Change of Control, Executive's
position is found by a tribunal of competent jurisdiction to have been
frivolous.
(g) Assignment. This Agreement shall not be assignable by Executive and
shall be assignable by the Company only with the consent of Executive; provided,
however, that the Company shall require any successor to substantially all of
the stock, assets or business of the Company to assume this Agreement.
(h) Successors; Binding Agreement. This Agreement shall inure to the
benefit of and be binding upon the personal or legal representatives, executors,
administrators, successors, including successors to all or substantially all of
the stock, business and/or assets of the Company, heirs, distributees, devisees
and legatees of the parties.
(i) Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the execution page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the Board
of Directors of the Company with a copy to the Secretary of the Company, or to
such other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
(j) Withholding Taxes. The Company may withhold from any amounts payable
under this Agreement such U.S. federal, state and local taxes as may be required
to be withheld pursuant to any applicable law or regulation.
-8-
(k) Counterparts. This Agreement may be signed in counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have duty executed this Agreement as
of the day and year first above written.
DOMINO'S PIZZA, INC.
By: /s/ Thomas S. Monaghan
---------------------------
Title: Chief Executive Officer
Address: 30 Frank Lloyd Wright Drive
P.O. Box 997
Ann Arbor, Michigan 48106-0997
HARRY SILVERMAN
/s/ Harry Silverman
-----------------------------
Address: 1833 Wintergreen Court
Ann Arbor, MI 48103
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Exhibit 10.12
SEVERANCE AGREEMENT
AGREEMENT dated as of August 4, 1998 between Domino's Pizza, Inc., a
Michigan corporation ("DPI") and Gary McCausland ("EXECUTIVE").
WHEREAS, Executive is currently a valued employee of DPI; and
WHEREAS, DPI desires to retain the services of Executive in anticipation of
a possible transaction which may result in a Change of Control (as defined
below) and to obtain the covenants set forth herein; and
WHEREAS, the parties desire to enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein and for other good and valuable consideration, the parties agree as
follows:
1. Definitions. For purposes of this Agreement, the following terms shall have
the meanings indicated.
"ABANDONMENT OF SALE" means a termination by the Chief Executive Officer of
DPI of the sale process initiated pursuant to the letter dated May 1, 1998
addressed to TISM from J.P. Morgan Securities Inc., as evidenced by an
affirmative action by said Chief Executive Officer such as written notice of
termination of the process to J.P. Morgan Securities Inc.
"BASE SEVERANCE AMOUNT" means $465,366.
"CAUSE" means (i) Executive's continued failure to devote substantially all
of his business time and energies to the performance of his duties to the
Company (other than as a result of total or partial incapacity due to physical
or mental illness or as a result of termination by Executive for Good Reason)
after a written demand for substantial performance is delivered to Executive and
Executive shall have failed during the 30 day period following such written
demand to have corrected such failure, (ii) any willful act or omission by
Executive constituting dishonesty, fraud or other malfeasance against the
Company, (iii) Executive's conviction of a felony under the laws of the United
States or any state thereof or any other jurisdiction in which the Company
conducts business or (iv) breach by Executive of any of the restrictive
covenants contained in Section 4 of this Agreement. No act or failure to act on
Executive's part shall be deemed willful unless done or omitted to be done by
Executive not in good faith and without reasonable belief that Executive's
action or omission was in the best interest of the Company.
"CHANGE OF CONTROL" means the first of the following events to occur
following the date hereof:
(i) Any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act) (a "PERSON"), other than any entity or
group in which Executive has not less than a 5% beneficial interest (an
"EXECUTIVE ENTITY"), shall become the beneficial owner (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of more than 51% of the then
outstanding shares of common stock of the Company or TISM; or
(ii) Consummation of any reorganization, merger or consolidation with
respect to the Company or TISM (each a "REORGANIZATION"), other than with an
Executive Entity, unless following such Reorganization more than 51% of the
outstanding equity of the entity resulting from such Reorganization continues to
be beneficially owned, directly or indirectly, by the Majority Owner; or
(iii) The sale or other disposition (or the last in a series of such
transactions) of all or substantially all of the assets of the Company or TISM,
other than to an Executive Entity or to an entity with respect to which
following such sale or other disposition more than 51% of the outstanding equity
is beneficially owned, directly or indirectly, by the Majority Owner.
"COMPANY" means DPI and any successor (whether direct or indirect) to all
or substantially all of the stock, assets or business of DPI.
"DOMINO GROUP" means TISM, the Company and its subsidiaries and Domino's
Farms Office Park Limited Partnership, collectively.
"EXCHANGE ACT" means the Securities and Exchange Act of 1934, as amended.
"GOOD REASON" means:
(i) Removal from, or failure to be reappointed or reelected to, the
position Executive holds with the Company immediately prior to a Change of
Control (other than as a result of a promotion);
(ii) Material diminution in Executive's title, position, duties or
responsibilities, the assignment to Executive of duties that are
inconsistent, in a material respect, with the scope of duties and
responsibilities associated with the position of Executive immediately
prior to the Change of Control;
(iii) Failure by the Company to pay Executive any compensation
otherwise vested and due if such failure continues for ten business days
following notice to the Company thereof;
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(iv) Reduction in base salary, bonus opportunity or benefits;
(v) Relocation of Executive to an office of the Company more than
50 miles from his current office;
(vi) Any reason during the 30 day period following the first
anniversary of a Change of Control; or
(vii) Failure of the Company to obtain the assumption of this
Agreement pursuant to Section 6(g) hereof;
provided that any such event occurring prior to the first anniversary of a
Change of Control shall not be deemed to constitute Good Reason following such
anniversary.
"MAJORITY OWNER" means Thomas S. Monaghan.
"MULTIPLE" means three in the case of a termination of Executive's
employment prior to or upon the first anniversary of a Change of Control and two
in the case of such termination on or after the first anniversary of a Change of
Control but prior to or upon the second anniversary of such a Change of Control.
"NON-COMPETE TERM" means the period from the date of this Agreement until
the earliest of (i) the date of Executive's termination of employment by the
Company without Cause prior to a Change of Control, (ii) the date eighteen
months following any other termination of Executive's employment prior to a
Change of Control or any termination of Executive's employment upon or following
a Change of Control and prior to or upon the first anniversary of such Change of
Control, (iii) the date twelve months following any termination of Executive's
employment after the first anniversary of a Change of Control but prior to or
upon the second anniversary of such Change of Control, and (iv) the date of any
termination of Executive's employment following or upon the expiration of this
Agreement.
"TARGET BONUS" means, with respect to any fiscal year of the Company, the
higher of (i) the target annual bonus for Executive for such year, if any, and
(ii) the average of the annual bonuses paid to Executive for each of the years
following the year ended December 31, 1995 and prior to the year in which the
Change of Control occurs.
"TISM" means TISM, Inc., a Michigan corporation.
2. Term of Agreement. This Agreement shall be in effect from the date
hereof until the earliest of (i) the second anniversary of a Change of Control,
(ii) January 31, 2000 if no Change of Control shall occur prior to such date,
and (iii) the date of an Abandonment of Sale, except to the extent necessary to
give effect to the provisions hereof. Notwithstanding the foregoing, prior to a
Change of Control and following the expiration of this Agreement,
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Executive's employment shall be deemed an employment at will and Executive's
employment may be terminated at will by Executive or the Company.
3. Severance.
(a) Without Cause by the Company; by Executive for Good Reason. If
Executive's employment with the Company is terminated upon a Change of Control
or prior to or upon the second anniversary of a Change of Control (x) by the
Company without Cause (other than by reason of disability (within the meaning of
the Company's disability program, "DISABILITY") or death) or (y) by Executive
for Good Reason, in lieu of any other severance benefits to which Executive
would be entitled under any other plans or programs of the Company, Executive
shall be entitled to the following benefits.
(i) The Company shall pay Executive, within ten days of the date of such
termination of employment (the "DATE OF TERMINATION") in a lump sum payment
(A) accrued unpaid base salary through the Date of Termination, (B) any
prior year bonus earned but not paid, (C) any bonus earned by Executive
solely by reason of Executive's being employed by any member of the Domino
Group upon a Change of Control ("CHANGE OF CONTROL BONUS") if and to the
extent such bonus has not been paid, (D) the Target Bonus for the year of
termination, pro-rated through the Date of Termination and (E) severance
equal to the Multiple times the Base Severance Amount.
(ii) The Company shall make monthly payments to Executive such that, after
payment by Executive of all applicable taxes thereon, Executive retains an
amount which, when added to the amount of Executive's contribution if any
to his current health insurance arrangement, will enable Executive to
purchase health insurance benefits at the same level enjoyed by Executive
as of the Date of Termination, or at the date of Change of Control, if
greater, for the lesser of a period of the Multiple number of years
following the Date of Termination or until Executive is eligible for
comparable health insurance from a successor employer.
(iii) Executive shall receive any other benefits under other plans or
programs of the Company in accordance with their terms.
(iv) Other than the benefits set forth in this Section 4(a), the Company
and its affiliates will have no further obligations hereunder with respect
to Executive following such Date of Termination.
(v) Executive shall not be required to mitigate damages or the amount of
any payment provided for under this Agreement by seeking other employment
or otherwise, nor will any payments hereunder be subject to offset in
respect of any claims which the Company may have against Executive, nor,
except as provided in subparagraph (ii),
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shall the amount of any payment or benefit provided for in this Section 4
be reduced by any compensation earned as a result of Executive's employment
with another employer.
(b) Upon Death or Disability. If Executive's employment with the Company
is terminated upon a Change of Control or prior to or upon the second
anniversary of a Change of Control by the Company by reason of Disability or
death, in lieu of any other severance benefits to which Executive would be
entitled under any other plans or programs of the Company, Executive shall be
entitled to the following benefits.
(i) The Company shall pay Executive or his estate, as applicable, within
ten days of the Date of Termination in a lump sum payment (A) accrued
unpaid base salary through the Date of Termination, (B) any prior year
bonus earned but not paid, (C) any Change of Control Bonus if and to the
extent it has not been paid, (D) the Target Bonus for the year of
termination, pro-rated through the Date of Termination and (E) severance
equal to the Base Severance Amount.
(ii) Executive shall receive any other benefits, including without
limitation disability and/or death benefits, under other plans or programs
of the Company in accordance with their terms.
(iii) Other than the benefits set forth in this Section 4(b), the Company
and its affiliates will have no further obligations hereunder with respect
to Executive following such Date of Termination.
(c) Any Other Termination. If Executive is terminated during the term of
this Agreement following a Change in Control for any reason other than set forth
in Section 4(a) or 4(b), Executive shall be entitled to receive his accrued
unpaid base salary through the Date of Termination, any prior year bonus earned
but not paid and the any Change of Control Bonus if and to the extent it has not
been paid, all of the foregoing payable in a lump sum within ten days of the
Date of Termination, and any other benefits under other plans and programs of
the Company in accordance with their terms, and the Company and its affiliates
will have no further obligations under this Agreement with respect to Executive
following the Date of Termination.
(d) Notice of Termination. Any purported termination of employment by the
Company or by Executive following a Change of Control shall be communicated by
written notice of termination to the other party hereto in accordance with
Section 6(i) hereof which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of employment under
the provision so indicated.
4. Non-Competition; Non-solicitation; Confidentiality. (a) Executive
acknowledges and recognizes the highly competitive nature of the business of the
Company and its affiliates
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and accordingly agrees that, in consideration of this Agreement, the rights
conferred hereunder, any Change of Control Bonus and any payments hereunder,
during the Non-Compete Term, Executive will not engage, either directly or
indirectly, as a principal for his own account or jointly with others, or as a
stockholder in any corporation or joint stock association, in any business other
than the Company that is principally engaged in the sale of fast food pizza
(whether as home delivery, eat-in or carry-out) (the "BUSINESS") within the
United States; provided, that nothing herein shall prevent Executive from (i)
owning, directly or indirectly, not more than five percent of the outstanding
shares of, or any other equity interest in, any entity engaged in the Business
and listed or traded on a national securities exchanges or in an over-the-
counter securities market or (ii) being a franchisee of the Company.
(b) During the Non-Compete Term, Executive will not (i) employ or solicit,
or receive or accept the performance of services by any current employee with
managerial responsibility or other current key employee of the Company or any
subsidiary of the Company, except in connection with general, non-targeted
recruitment efforts such as advertisements and job listings or (ii) solicit for
business any person who is a customer or former customer of the Company or any
of its affiliates unless such person should have ceased to have been a customer
of the Company or any of its affiliates for a period of at least six (6) months.
(c) Executive will not at any time (whether during or after his employment
with the Company) disclose or use for his own benefit or purposes or the benefit
or purposes of any other person, firm, partnership, joint venture, association,
corporation or other business organization, entity or enterprise other than the
Company and any of its subsidiaries or affiliates, any trade secrets,
information, data, or other confidential information relating to customers,
development programs, costs, marketing, trading, investment, sales activities,
promotion, credit and financial data, financing methods, plans, or the business
and affairs of the Company generally, or of any subsidiary or affiliate of the
Company, unless required to do so by applicable law or court order, subpoena or
decree or otherwise required by law, with reasonable evidence of such
determination promptly provided to the Company. The preceding sentence of this
paragraph (c) shall not apply to information which is not unique to the Company
or which is generally known to the industry or the public other than as a result
of Executive's breach of this covenant. Executive agrees that upon termination
of his employment with the Company for any reason, he will return to the Company
immediately all memoranda, books, papers, plans, information, letters and other
data, and all copies thereof or therefrom, in any way relating to the business
of the Company and its affiliates, except that he may retain personal notes,
notebooks and diaries. Executive further agrees that he will not retain or use
for his account at any time any trade names, trademark or other proprietary
business designation used or owned in connection with the business of the
Company or its affiliates.
(d) It is expressly understood and agreed that although Executive and the
Company consider the restrictions contained in this Section 4 to be reasonable,
if a final judicial
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determination is made by a court of competent jurisdiction that the time or
territory or any other restriction contained in this Agreement is an
unenforceable restriction against Executive, the provisions of this Agreement
shall not be rendered void but shall be deemed amended to apply as to such
maximum time and territory and to such maximum extent as such court may
judiciary determine or indicate to be enforceable. Alternatively, if any
tribunal of competent jurisdiction finds that any restriction contained in this
Agreement is unenforceable, and such restriction cannot be amended so as to make
it enforceable, such finding shall not affect the enforceability of any of the
other restrictions contained herein.
5. Remedies. (a) Executive acknowledges and agrees that the Company's
remedies at law for a breach or threatened breach of any of the provisions of
Section 4 hereof would be inadequate and, in recognition of this fact, Executive
agrees that, in the event of such a breach or threatened breach, in addition to
any remedies at law, the Company, without posting any bond, shall be entitled to
seek equitable relief in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable remedy which may
then be available.
(b) Notwithstanding any provision of this Agreement to the contrary, from
and after any breach by Executive of the provisions of Section 4 of this
Agreement, the Company shall cease to have any obligations to make payments or
provide benefits to Executive under this Agreement.
6. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of Michigan.
(b) Entire Agreement/Amendments. This Agreement contains the entire
understanding of the parties with respect to the severance payable to Executive
in the event of a termination of employment following a Change of Control during
the term of this Agreement. There are no restrictions, agreements, promises,
warranties, covenants or undertakings between the parties with respect to the
subject matter herein other than those expressly set forth herein or therein.
This Agreement may not be altered, modified, or amended except by written
instrument signed by the parties hereto.
(c) No Waiver. The failure of a party to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a waiver of
such party's rights or deprive such party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.
(4) Severability. In the event that any one or more of the provisions of this
Agreement shall be or become invalid, illegal or unenforceable in any respect,
the validity,
-7-
legality and enforceability of the remaining provisions of this Agreement shall
not be affected thereby.
(e) Arbitration. With respect to any dispute between the parties hereto
arising from or relating to the terms of this Agreement, except as provided in
Section 6(a), the parties agree to submit such dispute to arbitration in Ann
Arbor, Michigan under the auspices of and the employment rules of the American
Arbitration Association. The determination of the arbitrator(s) shall be
conclusive and binding on the Company and Executive and judgment upon the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof.
(f) Attorneys Fees. In the event of a dispute by the Company, Executive or
others as to the validity or enforceability of, or liability under, any
provision of this Agreement, the Company shall reimburse Executive for all legal
fees and expenses incurred by him in connection with such dispute except to the
extent (i) in the case of a dispute prior to a Change of Control, Executive
shall not prevail to any material extent or (ii) in the case of severance under
Section 3 hereof or any other dispute following a Change of Control, Executive's
position is found by a tribunal of competent jurisdiction to have been
frivolous.
(g) Assignment. This Agreement shall not be assignable by Executive and
shall be assignable by the Company only with the consent of Executive; provided,
however, that the Company shall require any successor to substantially all of
the stock, assets or business of the Company to assume this Agreement.
(h) Successors; Binding Agreement. This Agreement shall inure to the
benefit of and be binding upon the personal or legal representatives, executors,
administrators, successors, including successors to all or substantially all of
the stock, business and/or assets of the Company, heirs, distributees, devisees
and legatees of the parties.
(i) Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the execution page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the Board
of Directors of the Company with a copy to the Secretary of the Company, or to
such other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
(j) Withholding Taxes. The Company may withhold from any amounts payable
under this Agreement such U.S. federal, state and local taxes as may be required
to be withheld pursuant to any applicable law or regulation.
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(k) Counterparts. This Agreement may be signed in counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have duty executed this Agreement as
of the day and year first above written.
DOMINO'S PIZZA, INC.
By: /s/ Thomas S. Monaghan
-----------------------------
Title: Chief Executive Officer
Address: 30 Frank Lloyd Wright Drive
P.O. Box 997
Ann Arbor, Michigan 48106-0997
GARY MCCAUSLAND
/s/ Gary McCausland
-------------------------------
Address: 1010 Shannon Court
Northville, MI 48167
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Exhibit 10.13
SEVERANCE AGREEMENT
AGREEMENT dated as of August 4, 1998 between Domino's Pizza, Inc., a
Michigan corporation ("DPI") and Cheryl Bachelder ("EXECUTIVE").
WHEREAS, Executive is currently a valued employee of DPI; and
WHEREAS, DPI desires to retain the services of Executive in anticipation of
a possible transaction which may result in a Change of Control (as defined
below) and to obtain the covenants set forth herein; and
WHEREAS, the parties desire to enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein and for other good and valuable consideration, the parties agree as
follows:
1. Definitions. For purposes of this Agreement, the following terms shall
have the meanings indicated.
"ABANDONMENT OF SALE" means a termination by the Chief Executive Officer of
DPI of the sale process initiated pursuant to the letter dated May 1, 1998
addressed to TISM from J.P. Morgan Securities Inc., as evidenced by an
affirmative action by said Chief Executive Officer such as written notice of
termination of the process to J.P. Morgan Securities Inc.
"BASE SEVERANCE AMOUNT" means $498,083.
"CAUSE" means (i) Executive's continued failure to devote substantially all
of his business time and energies to the performance of his duties to the
Company (other than as a result of total or partial incapacity due to physical
or mental illness or as a result of termination by Executive for Good Reason)
after a written demand for substantial performance is delivered to Executive and
Executive shall have failed during the 30 day period following such written
demand to have corrected such failure, (ii) any willful act or omission by
Executive constituting dishonesty, fraud or other malfeasance against the
Company, (iii) Executive's conviction of a felony under the laws of the United
States or any state thereof or any other jurisdiction in which the Company
conducts business or (iv) breach by Executive of any of the restrictive
covenants contained in Section 4 of this Agreement. No act or failure to act on
Executive's part shall be deemed willful unless done or omitted to be done by
Executive not in good faith and without reasonable belief that Executive's
action or omission was in the best interest of the Company.
"CHANGE OF CONTROL" means the first of the following events to occur
following the date hereof:
(i) Any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act) (a "PERSON"), other than any entity or
group in which Executive has not less than a 5% beneficial interest (an
"EXECUTIVE ENTITY"), shall become the beneficial owner (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of more than 51% of the then
outstanding shares of common stock of the Company or TISM; or
(ii) Consummation of any reorganization, merger or consolidation with
respect to the Company or TISM (each a "REORGANIZATION"), other than with an
Executive Entity, unless following such Reorganization more than 51% of the
outstanding equity of the entity resulting from such Reorganization continues to
be beneficially owned, directly or indirectly, by the Majority Owner; or
(iii) The sale or other disposition (or the last in a series of such
transactions) of all or substantially all of the assets of the Company or TISM,
other than to an Executive Entity or to an entity with respect to which
following such sale or other disposition more than 51% of the outstanding equity
is beneficially owned, directly or indirectly, by the Majority Owner.
"COMPANY" means DPI and any successor (whether direct or indirect) to all
or substantially all of the stock, assets or business of DPI.
"DOMINO GROUP" means TISM, the Company and its subsidiaries and Domino's
Farms Office Park Limited Partnership, collectively.
"EXCHANGE ACT" means the Securities and Exchange Act of 1934, as amended.
"GOOD REASON" means:
(i) Removal from, or failure to be reappointed or reelected to, the
position Executive holds with the Company immediately prior to a Change of
Control (other than as a result of a promotion);
(ii) Material diminution in Executive's title, position, duties or
responsibilities, the assignment to Executive of duties that are
inconsistent, in a material respect, with the scope of duties and
responsibilities associated with the position of Executive immediately
prior to the Change of Control;
(iii) Failure by the Company to pay Executive any compensation
otherwise vested and due if such failure continues for ten business days
following notice to the Company thereof;
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(iv) Reduction in base salary, bonus opportunity or benefits;
(v) Relocation of Executive to an office of the Company more than
50 miles from his current office;
(vi) Any reason during the 30 day period following the first
anniversary of a Change of Control; or
(vii) Failure of the Company to obtain the assumption of this
Agreement pursuant to Section 6(g) hereof;
provided that any such event occurring prior to the first anniversary of a
Change of Control shall not be deemed to constitute Good Reason following such
anniversary.
"MAJORITY OWNER" means Thomas S. Monaghan.
"MULTIPLE" means three in the case of a termination of Executive's
employment prior to or upon the first anniversary of a Change of Control and two
in the case of such termination on or after the first anniversary of a Change of
Control but prior to or upon the second anniversary of such a Change of Control.
"NON-COMPETE TERM" means the period from the date of this Agreement until
the earliest of (i) the date of Executive's termination of employment by the
Company without Cause prior to a Change of Control, (ii) the date eighteen
months following any other termination of Executive's employment prior to a
Change of Control or any termination of Executive's employment upon or following
a Change of Control and prior to or upon the first anniversary of such Change of
Control, (iii) the date twelve months following any termination of Executive's
employment after the first anniversary of a Change of Control but prior to or
upon the second anniversary of such Change of Control, and (iv) the date of any
termination of Executive's employment following or upon the expiration of this
Agreement.
"TARGET BONUS" means, with respect to any fiscal year of the Company, the
higher of (i) the target annual bonus for Executive for such year, if any, and
(ii) the average of the annual bonuses paid to Executive for each of the years
following the year ended December 31, 1995 and prior to the year in which the
Change of Control occurs.
"TISM" means TISM, Inc., a Michigan corporation.
2. Term of Agreement. This Agreement shall be in effect from the date
hereof until the earliest of (i) the second anniversary of a Change of Control,
(ii) January 31, 2000 if no Change of Control shall occur prior to such date,
and (iii) the date of an Abandonment of Sale, except to the extent necessary to
give effect to the provisions hereof. Notwithstanding the foregoing, prior to a
Change of Control and following the expiration of this Agreement,
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Executive's employment shall be deemed an employment at will and Executive's
employment may be terminated at will by Executive or the Company.
3. Severance.
(a) Without Cause by the Company; by Executive for Good Reason. If
Executive's employment with the Company is terminated upon a Change of Control
or prior to or upon the second anniversary of a Change of Control (x) by the
Company without Cause (other than by reason of disability (within the meaning of
the Company's disability program, "DISABILITY") or death) or (y) by Executive
for Good Reason, in lieu of any other severance benefits to which Executive
would be entitled under any other plans or programs of the Company, Executive
shall be entitled to the following benefits.
(i) The Company shall pay Executive, within ten days of the date of such
termination of employment (the "DATE OF TERMINATION") in a lump sum payment
(A) accrued unpaid base salary through the Date of Termination, (B) any
prior year bonus earned but not paid, (C) any bonus earned by Executive
solely by reason of Executive's being employed by any member of the Domino
Group upon a Change of Control ("CHANGE OF CONTROL BONUS") if and to the
extent such bonus has not been paid, (D) the Target Bonus for the year of
termination, pro-rated through the Date of Termination and (E) severance
equal to the Multiple times the Base Severance Amount.
(ii) The Company shall make monthly payments to Executive such that, after
payment by Executive of all applicable taxes thereon, Executive retains an
amount which, when added to the amount of Executive's contribution if any
to his current health insurance arrangement, will enable Executive to
purchase health insurance benefits at the same level enjoyed by Executive
as of the Date of Termination, or at the date of Change of Control, if
greater, for the lesser of a period of the Multiple number of years
following the Date of Termination or until Executive is eligible for
comparable health insurance from a successor employer.
(iii) Executive shall receive any other benefits under other plans or
programs of the Company in accordance with their terms.
(iv) Other than the benefits set forth in this Section 4(a), the Company
and its affiliates will have no further obligations hereunder with respect
to Executive following such Date of Termination.
(v) Executive shall not be required to mitigate damages or the amount of
any payment provided for under this Agreement by seeking other employment
or otherwise, nor will any payments hereunder be subject to offset in
respect of any claims which the Company may have against Executive, nor,
except as provided in subparagraph (ii),
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shall the amount of any payment or benefit provided for in this Section 4
be reduced by any compensation earned as a result of Executive's employment
with another employer.
(b) Upon Death or Disability. If Executive's employment with the Company
is terminated upon a Change of Control or prior to or upon the second
anniversary of a Change of Control by the Company by reason of Disability or
death, in lieu of any other severance benefits to which Executive would be
entitled under any other plans or programs of the Company, Executive shall be
entitled to the following benefits.
(i) The Company shall pay Executive or his estate, as applicable, within
ten days of the Date of Termination in a lump sum payment (A) accrued
unpaid base salary through the Date of Termination, (B) any prior year
bonus earned but not paid, (C) any Change of Control Bonus if and to the
extent it has not been paid, (D) the Target Bonus for the year of
termination, pro-rated through the Date of Termination and (E) severance
equal to the Base Severance Amount.
(ii) Executive shall receive any other benefits, including without
limitation disability and/or death benefits, under other plans or programs
of the Company in accordance with their terms.
(iii) Other than the benefits set forth in this Section 4(b), the Company
and its affiliates will have no further obligations hereunder with respect
to Executive following such Date of Termination.
(c) Any Other Termination. If Executive is terminated during the term of
this Agreement following a Change in Control for any reason other than set forth
in Section 4(a) or 4(b), Executive shall be entitled to receive his accrued
unpaid base salary through the Date of Termination, any prior year bonus earned
but not paid and the any Change of Control Bonus if and to the extent it has not
been paid, all of the foregoing payable in a lump sum within ten days of the
Date of Termination, and any other benefits under other plans and programs of
the Company in accordance with their terms, and the Company and its affiliates
will have no further obligations under this Agreement with respect to Executive
following the Date of Termination.
(d) Notice of Termination. Any purported termination of employment by the
Company or by Executive following a Change of Control shall be communicated by
written notice of termination to the other party hereto in accordance with
Section 6(i) hereof which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of employment under
the provision so indicated.
4. Non-Competition; Non-solicitation; Confidentiality. (a) Executive
acknowledges and recognizes the highly competitive nature of the business of the
Company and its affiliates
-5-
and accordingly agrees that, in consideration of this Agreement, the rights
conferred hereunder, any Change of Control Bonus and any payments hereunder,
during the Non-Compete Term, Executive will not engage, either directly or
indirectly, as a principal for his own account or jointly with others, or as a
stockholder in any corporation or joint stock association, in any business other
than the Company that is principally engaged in the sale of fast food pizza
(whether as home delivery, eat-in or carry-out) (the "BUSINESS") within the
United States; provided, that nothing herein shall prevent Executive from (i)
owning, directly or indirectly, not more than five percent of the outstanding
shares of, or any other equity interest in, any entity engaged in the Business
and listed or traded on a national securities exchanges or in an over-the-
counter securities market or (ii) being a franchisee of the Company.
(b) During the Non-Compete Term, Executive will not (i) employ or solicit,
or receive or accept the performance of services by any current employee with
managerial responsibility or other current key employee of the Company or any
subsidiary of the Company, except in connection with general, non-targeted
recruitment efforts such as advertisements and job listings or (ii) solicit for
business any person who is a customer or former customer of the Company or any
of its affiliates unless such person should have ceased to have been a customer
of the Company or any of its affiliates for a period of at least six (6) months.
(c) Executive will not at any time (whether during or after his
employment with the Company) disclose or use for his own benefit or purposes or
the benefit or purposes of any other person, firm, partnership, joint venture,
association, corporation or other business organization, entity or enterprise
other than the Company and any of its subsidiaries or affiliates, any trade
secrets, information, data, or other confidential information relating to
customers, development programs, costs, marketing, trading, investment, sales
activities, promotion, credit and financial data, financing methods, plans, or
the business and affairs of the Company generally, or of any subsidiary or
affiliate of the Company, unless required to do so by applicable law or court
order, subpoena or decree or otherwise required by law, with reasonable evidence
of such determination promptly provided to the Company. The preceding sentence
of this paragraph (c) shall not apply to information which is not unique to the
Company or which is generally known to the industry or the public other than as
a result of Executive's breach of this covenant. Executive agrees that upon
termination of his employment with the Company for any reason, he will return to
the Company immediately all memoranda, books, papers, plans, information,
letters and other data, and all copies thereof or therefrom, in any way relating
to the business of the Company and its affiliates, except that he may retain
personal notes, notebooks and diaries. Executive further agrees that he will not
retain or use for his account at any time any trade names, trademark or other
proprietary business designation used or owned in connection with the business
of the Company or its affiliates.
(d) It is expressly understood and agreed that although Executive and the
Company consider the restrictions contained in this Section 4 to be reasonable,
if a final judicial
-6-
determination is made by a court of competent jurisdiction that the time or
territory or any other restriction contained in this Agreement is an
unenforceable restriction against Executive, the provisions of this Agreement
shall not be rendered void but shall be deemed amended to apply as to such
maximum time and territory and to such maximum extent as such court may
judiciary determine or indicate to be enforceable. Alternatively, if any
tribunal of competent jurisdiction finds that any restriction contained in this
Agreement is unenforceable, and such restriction cannot be amended so as to make
it enforceable, such finding shall not affect the enforceability of any of the
other restrictions contained herein.
5. Remedies. (a) Executive acknowledges and agrees that the Company's
remedies at law for a breach or threatened breach of any of the provisions of
Section 4 hereof would be inadequate and, in recognition of this fact, Executive
agrees that, in the event of such a breach or threatened breach, in addition to
any remedies at law, the Company, without posting any bond, shall be entitled to
seek equitable relief in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable remedy which may
then be available.
(b) Notwithstanding any provision of this Agreement to the contrary, from
and after any breach by Executive of the provisions of Section 4 of this
Agreement, the Company shall cease to have any obligations to make payments or
provide benefits to Executive under this Agreement.
6. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of Michigan.
(b) Entire Agreement/Amendments. This Agreement contains the entire
understanding of the parties with respect to the severance payable to Executive
in the event of a termination of employment following a Change of Control during
the term of this Agreement. There are no restrictions, agreements, promises,
warranties, covenants or undertakings between the parties with respect to the
subject matter herein other than those expressly set forth herein or therein.
This Agreement may not be altered, modified, or amended except by written
instrument signed by the parties hereto.
(c) No Waiver. The failure of a party to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a waiver of
such party's rights or deprive such party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.
(d) Severability. In the event that any one or more of the provisions of
this Agreement shall be or become invalid, illegal or unenforceable in any
respect, the validity,
-7-
legality and enforceability of the remaining provisions of this Agreement shall
not be affected thereby.
(e) Arbitration. With respect to any dispute between the parties hereto
arising from or relating to the terms of this Agreement, except as provided in
Section 6(a), the parties agree to submit such dispute to arbitration in Ann
Arbor, Michigan under the auspices of and the employment rules of the American
Arbitration Association. The determination of the arbitrator(s) shall be
conclusive and binding on the Company and Executive and judgment upon the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof.
(f) Attorneys Fees. In the event of a dispute by the Company, Executive or
others as to the validity or enforceability of, or liability under, any
provision of this Agreement, the Company shall reimburse Executive for all legal
fees and expenses incurred by him in connection with such dispute except to the
extent (i) in the case of a dispute prior to a Change of Control, Executive
shall not prevail to any material extent or (ii) in the case of severance under
Section 3 hereof or any other dispute following a Change of Control, Executive's
position is found by a tribunal of competent jurisdiction to have been
frivolous.
(g) Assignment. This Agreement shall not be assignable by Executive and
shall be assignable by the Company only with the consent of Executive; provided,
however, that the Company shall require any successor to substantially all of
the stock, assets or business of the Company to assume this Agreement.
(h) Successors; Binding Agreement. This Agreement shall inure to the
benefit of and be binding upon the personal or legal representatives, executors,
administrators, successors, including successors to all or substantially all of
the stock, business and/or assets of the Company, heirs, distributees, devisees
and legatees of the parties.
(i) Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the execution page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the Board
of Directors of the Company with a copy to the Secretary of the Company, or to
such other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
(j) Withholding Taxes. The Company may withhold from any amounts payable
under this Agreement such U.S. federal, state and local taxes as may be required
to be withheld pursuant to any applicable law or regulation.
-8-
(k) Counterparts. This Agreement may be signed in counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have duty executed this Agreement as
of the day and year first above written.
DOMINO'S PIZZA, INC.
By: /s/ Thomas S. Monaghan
-------------------------------
Title: Chief Executive Officer
Address: 30 Frank Lloyd Wright Drive
P.O. Box 997
Ann Arbor, Michigan 48106-0997
CHERYL BACHELDER
/s/ Cheryl Bachelder
---------------------------------
Address: 1029 Andover
Northville, MI 48167
-9-
Exhibit 10.14
SEVERANCE AGREEMENT
AGREEMENT dated as of August 4, 1998 between Domino's Pizza, Inc., a
Michigan corporation ("DPI") and Michael Soignet ("EXECUTIVE").
WHEREAS, Executive is currently a valued employee of DPI; and
WHEREAS, DPI desires to retain the services of Executive in anticipation of
a possible transaction which may result in a Change of Control (as defined
below) and to obtain the covenants set forth herein; and
WHEREAS, the parties desire to enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein and for other good and valuable consideration, the parties agree as
follows:
1. Definitions. For purposes of this Agreement, the following terms shall
have the meanings indicated.
"ABANDONMENT OF SALE" means a termination by the Chief Executive Officer of
DPI of the sale process initiated pursuant to the letter dated May 1, 1998
addressed to TISM from J.P. Morgan Securities Inc., as evidenced by an
affirmative action by said Chief Executive Officer such as written notice of
termination of the process to J.P. Morgan Securities Inc.
"BASE SEVERANCE AMOUNT" means $512,069.
"CAUSE" means (i) Executive's continued failure to devote substantially all
of his business time and energies to the performance of his duties to the
Company (other than as a result of total or partial incapacity due to physical
or mental illness or as a result of termination by Executive for Good Reason)
after a written demand for substantial performance is delivered to Executive and
Executive shall have failed during the 30 day period following such written
demand to have corrected such failure, (ii) any willful act or omission by
Executive constituting dishonesty, fraud or other malfeasance against the
Company, (iii) Executive's conviction of a felony under the laws of the United
States or any state thereof or any other jurisdiction in which the Company
conducts business or (iv) breach by Executive of any of the restrictive
covenants contained in Section 4 of this Agreement. No act or failure to act on
Executive's part shall be deemed willful unless done or omitted to be done by
Executive not in good faith and without reasonable belief that Executive's
action or omission was in the best interest of the Company.
"CHANGE OF CONTROL" means the first of the following events to occur
following the date hereof:
(i) Any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act) (a "PERSON"), other than any entity or
group in which Executive has not less than a 5% beneficial interest (an
"EXECUTIVE ENTITY"), shall become the beneficial owner (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of more than 51% of the then
outstanding shares of common stock of the Company or TISM; or
(ii) Consummation of any reorganization, merger or consolidation with
respect to the Company or TISM (each a "REORGANIZATION"), other than with an
Executive Entity, unless following such Reorganization more than 51% of the
outstanding equity of the entity resulting from such Reorganization continues to
be beneficially owned, directly or indirectly, by the Majority Owner; or
(iii) The sale or other disposition (or the last in a series of such
transactions) of all or substantially all of the assets of the Company or TISM,
other than to an Executive Entity or to an entity with respect to which
following such sale or other disposition more than 51% of the outstanding equity
is beneficially owned, directly or indirectly, by the Majority Owner.
"COMPANY" means DPI and any successor (whether direct or indirect) to all
or substantially all of the stock, assets or business of DPI.
"DOMINO GROUP" means TISM, the Company and its subsidiaries and Domino's
Farms Office Park Limited Partnership, collectively.
"EXCHANGE ACT" means the Securities and Exchange Act of 1934, as amended.
"GOOD REASON" means:
(i) Removal from, or failure to be reappointed or reelected to, the
position Executive holds with the Company immediately prior to a Change of
Control (other than as a result of a promotion);
(ii) Material diminution in Executive's title, position, duties or
responsibilities, the assignment to Executive of duties that are
inconsistent, in a material respect, with the scope of duties and
responsibilities associated with the position of Executive immediately
prior to the Change of Control;
(iii) Failure by the Company to pay Executive any compensation
otherwise vested and due if such failure continues for ten business days
following notice to the Company thereof;
-2-
(iv) Reduction in base salary, bonus opportunity or benefits;
(v) Relocation of Executive to an office of the Company more than
50 miles from his current office;
(vi) Any reason during the 30 day period following the first
anniversary of a Change of Control; or
(vii) Failure of the Company to obtain the assumption of this
Agreement pursuant to Section 6(g) hereof;
provided that any such event occurring prior to the first anniversary of a
Change of Control shall not be deemed to constitute Good Reason following such
anniversary.
"MAJORITY OWNER" means Thomas S. Monaghan.
"MULTIPLE" means three in the case of a termination of Executive's
employment prior to or upon the first anniversary of a Change of Control and two
in the case of such termination on or after the first anniversary of a Change of
Control but prior to or upon the second anniversary of such a Change of Control.
"NON-COMPETE TERM" means the period from the date of this Agreement until
the earliest of (i) the date of Executive's termination of employment by the
Company without Cause prior to a Change of Control, (ii) the date eighteen
months following any other termination of Executive's employment prior to a
Change of Control or any termination of Executive's employment upon or following
a Change of Control and prior to or upon the first anniversary of such Change of
Control, (iii) the date twelve months following any termination of Executive's
employment after the first anniversary of a Change of Control but prior to or
upon the second anniversary of such Change of Control, and (iv) the date of any
termination of Executive's employment following or upon the expiration of this
Agreement.
"TARGET BONUS" means, with respect to any fiscal year of the Company, the
higher of (i) the target annual bonus for Executive for such year, if any, and
(ii) the average of the annual bonuses paid to Executive for each of the years
following the year ended December 31, 1995 and prior to the year in which the
Change of Control occurs.
"TISM" means TISM, Inc., a Michigan corporation.
2. Term of Agreement. This Agreement shall be in effect from the date
hereof until the earliest of (i) the second anniversary of a Change of Control,
(ii) January 31, 2000 if no Change of Control shall occur prior to such date,
and (iii) the date of an Abandonment of Sale, except to the extent necessary to
give effect to the provisions hereof. Notwithstanding the foregoing, prior to a
Change of Control and following the expiration of this Agreement,
-3-
Executive's employment shall be deemed an employment at will and Executive's
employment may be terminated at will by Executive or the Company.
3. Severance.
(a) Without Cause by the Company; by Executive for Good Reason. If
Executive's employment with the Company is terminated upon a Change of Control
or prior to or upon the second anniversary of a Change of Control (x) by the
Company without Cause (other than by reason of disability (within the meaning of
the Company's disability program, "DISABILITY") or death) or (y) by Executive
for Good Reason, in lieu of any other severance benefits to which Executive
would be entitled under any other plans or programs of the Company, Executive
shall be entitled to the following benefits.
(i) The Company shall pay Executive, within ten days of the date of such
termination of employment (the "DATE OF TERMINATION") in a lump sum payment
(A) accrued unpaid base salary through the Date of Termination, (B) any
prior year bonus earned but not paid, (C) any bonus earned by Executive
solely by reason of Executive's being employed by any member of the Domino
Group upon a Change of Control ("CHANGE OF CONTROL BONUS") if and to the
extent such bonus has not been paid, (D) the Target Bonus for the year of
termination, pro-rated through the Date of Termination and (E) severance
equal to the Multiple times the Base Severance Amount.
(ii) The Company shall make monthly payments to Executive such that,
after payment by Executive of all applicable taxes thereon, Executive
retains an amount which, when added to the amount of Executive's
contribution if any to his current health insurance arrangement, will
enable Executive to purchase health insurance benefits at the same level
enjoyed by Executive as of the Date of Termination, or at the date of
Change of Control, if greater, for the lesser of a period of the Multiple
number of years following the Date of Termination or until Executive is
eligible for comparable health insurance from a successor employer.
(iii) Executive shall receive any other benefits under other plans or
programs of the Company in accordance with their terms.
(iv) Other than the benefits set forth in this Section 4(a), the Company
and its affiliates will have no further obligations hereunder with respect
to Executive following such Date of Termination.
(v) Executive shall not be required to mitigate damages or the amount of
any payment provided for under this Agreement by seeking other employment
or otherwise, nor will any payments hereunder be subject to offset in
respect of any claims which the Company may have against Executive, nor,
except as provided in subparagraph (ii),
-4-
shall the amount of any payment or benefit provided for in this Section 4
be reduced by any compensation earned as a result of Executive's employment
with another employer.
(b) Upon Death or Disability. If Executive's employment with the Company
is terminated upon a Change of Control or prior to or upon the second
anniversary of a Change of Control by the Company by reason of Disability or
death, in lieu of any other severance benefits to which Executive would be
entitled under any other plans or programs of the Company, Executive shall be
entitled to the following benefits.
(i) The Company shall pay Executive or his estate, as applicable, within
ten days of the Date of Termination in a lump sum payment (A) accrued
unpaid base salary through the Date of Termination, (B) any prior year
bonus earned but not paid, (C) any Change of Control Bonus if and to the
extent it has not been paid, (D) the Target Bonus for the year of
termination, pro-rated through the Date of Termination and (E) severance
equal to the Base Severance Amount.
(ii) Executive shall receive any other benefits, including without
limitation disability and/or death benefits, under other plans or programs
of the Company in accordance with their terms.
(iii) Other than the benefits set forth in this Section 4(b), the Company
and its affiliates will have no further obligations hereunder with respect
to Executive following such Date of Termination.
(c) Any Other Termination. If Executive is terminated during the term of
this Agreement following a Change in Control for any reason other than set forth
in Section 4(a) or 4(b), Executive shall be entitled to receive his accrued
unpaid base salary through the Date of Termination, any prior year bonus earned
but not paid and the any Change of Control Bonus if and to the extent it has not
been paid, all of the foregoing payable in a lump sum within ten days of the
Date of Termination, and any other benefits under other plans and programs of
the Company in accordance with their terms, and the Company and its affiliates
will have no further obligations under this Agreement with respect to Executive
following the Date of Termination.
(d) Notice of Termination. Any purported termination of employment by the
Company or by Executive following a Change of Control shall be communicated by
written notice of termination to the other party hereto in accordance with
Section 6(i) hereof which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of employment under
the provision so indicated.
4. Non-Competition; Non-solicitation; Confidentiality. (a) Executive
acknowledges and recognizes the highly competitive nature of the business of the
Company and its affiliates
-5-
and accordingly agrees that, in consideration of this Agreement, the rights
conferred hereunder, any Change of Control Bonus and any payments hereunder,
during the Non-Compete Term, Executive will not engage, either directly or
indirectly, as a principal for his own account or jointly with others, or as a
stockholder in any corporation or joint stock association, in any business other
than the Company that is principally engaged in the sale of fast food pizza
(whether as home delivery, eat-in or carry-out) (the "BUSINESS") within the
United States; provided, that nothing herein shall prevent Executive from (i)
owning, directly or indirectly, not more than five percent of the outstanding
shares of, or any other equity interest in, any entity engaged in the Business
and listed or traded on a national securities exchanges or in an over-the-
counter securities market or (ii) being a franchisee of the Company.
(b) During the Non-Compete Term, Executive will not (i) employ or solicit,
or receive or accept the performance of services by any current employee with
managerial responsibility or other current key employee of the Company or any
subsidiary of the Company, except in connection with general, non-targeted
recruitment efforts such as advertisements and job listings or (ii) solicit for
business any person who is a customer or former customer of the Company or any
of its affiliates unless such person should have ceased to have been a customer
of the Company or any of its affiliates for a period of at least six (6) months.
(c) Executive will not at any time (whether during or after his employment
with the Company) disclose or use for his own benefit or purposes or the benefit
or purposes of any other person, firm, partnership, joint venture, association,
corporation or other business organization, entity or enterprise other than the
Company and any of its subsidiaries or affiliates, any trade secrets,
information, data, or other confidential information relating to customers,
development programs, costs, marketing, trading, investment, sales activities,
promotion, credit and financial data, financing methods, plans, or the business
and affairs of the Company generally, or of any subsidiary or affiliate of the
Company, unless required to do so by applicable law or court order, subpoena or
decree or otherwise required by law, with reasonable evidence of such
determination promptly provided to the Company. The preceding sentence of this
paragraph (c) shall not apply to information which is not unique to the Company
or which is generally known to the industry or the public other than as a result
of Executive's breach of this covenant. Executive agrees that upon termination
of his employment with the Company for any reason, he will return to the Company
immediately all memoranda, books, papers, plans, information, letters and other
data, and all copies thereof or therefrom, in any way relating to the business
of the Company and its affiliates, except that he may retain personal notes,
notebooks and diaries. Executive further agrees that he will not retain or use
for his account at any time any trade names, trademark or other proprietary
business designation used or owned in connection with the business of the
Company or its affiliates.
(d) It is expressly understood and agreed that although Executive and the
Company consider the restrictions contained in this Section 4 to be reasonable,
if a final judicial
-6-
determination is made by a court of competent jurisdiction that the time or
territory or any other restriction contained in this Agreement is an
unenforceable restriction against Executive, the provisions of this Agreement
shall not be rendered void but shall be deemed amended to apply as to such
maximum time and territory and to such maximum extent as such court may
judiciary determine or indicate to be enforceable. Alternatively, if any
tribunal of competent jurisdiction finds that any restriction contained in this
Agreement is unenforceable, and such restriction cannot be amended so as to make
it enforceable, such finding shall not affect the enforceability of any of the
other restrictions contained herein.
5. Remedies. (a) Executive acknowledges and agrees that the Company's
remedies at law for a breach or threatened breach of any of the provisions of
Section 4 hereof would be inadequate and, in recognition of this fact, Executive
agrees that, in the event of such a breach or threatened breach, in addition to
any remedies at law, the Company, without posting any bond, shall be entitled to
seek equitable relief in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable remedy which may
then be available.
(b) Notwithstanding any provision of this Agreement to the contrary, from
and after any breach by Executive of the provisions of Section 4 of this
Agreement, the Company shall cease to have any obligations to make payments or
provide benefits to Executive under this Agreement.
6. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of Michigan.
(b) Entire Agreement/Amendments. This Agreement contains the entire
understanding of the parties with respect to the severance payable to Executive
in the event of a termination of employment following a Change of Control during
the term of this Agreement. There are no restrictions, agreements, promises,
warranties, covenants or undertakings between the parties with respect to the
subject matter herein other than those expressly set forth herein or therein.
This Agreement may not be altered, modified, or amended except by written
instrument signed by the parties hereto.
(c) No Waiver. The failure of a party to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a waiver of
such party's rights or deprive such party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.
(d) Severability. In the event that any one or more of the provisions of
this Agreement shall be or become invalid, illegal or unenforceable in any
respect, the validity,
-7-
legality and enforceability of the remaining provisions of this Agreement shall
not be affected thereby.
(e) Arbitration. With respect to any dispute between the parties hereto
arising from or relating to the terms of this Agreement, except as provided in
Section 6(a), the parties agree to submit such dispute to arbitration in Ann
Arbor, Michigan under the auspices of and the employment rules of the American
Arbitration Association. The determination of the arbitrator(s) shall be
conclusive and binding on the Company and Executive and judgment upon the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof.
(f) Attorneys Fees. In the event of a dispute by the Company, Executive or
others as to the validity or enforceability of, or liability under, any
provision of this Agreement, the Company shall reimburse Executive for all legal
fees and expenses incurred by him in connection with such dispute except to the
extent (i) in the case of a dispute prior to a Change of Control, Executive
shall not prevail to any material extent or (ii) in the case of severance under
Section 3 hereof or any other dispute following a Change of Control, Executive's
position is found by a tribunal of competent jurisdiction to have been
frivolous.
(g) Assignment. This Agreement shall not be assignable by Executive and
shall be assignable by the Company only with the consent of Executive; provided,
however, that the Company shall require any successor to substantially all of
the stock, assets or business of the Company to assume this Agreement.
(h) Successors; Binding Agreement. This Agreement shall inure to the
benefit of and be binding upon the personal or legal representatives, executors,
administrators, successors, including successors to all or substantially all of
the stock, business and/or assets of the Company, heirs, distributees, devisees
and legatees of the parties.
(i) Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the execution page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the Board
of Directors of the Company with a copy to the Secretary of the Company, or to
such other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
(j) Withholding Taxes. The Company may withhold from any amounts payable
under this Agreement such U.S. federal, state and local taxes as may be required
to be withheld pursuant to any applicable law or regulation.
-8-
(k) Counterparts. This Agreement may be signed in counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have duty executed this Agreement as
of the day and year first above written.
DOMINO'S PIZZA, INC.
By: /s/ Thomas S. Monaghan
---------------------------------------
Title: Chief Executive Officer
Address: 30 Frank Lloyd Wright Drive
P.O. Box 997
Ann Arbor, Michigan 48106-0997
MICHAEL SOIGNET
/s/ Michael Soignet
-----------------------------------------
Address: 954 Penniman
Plymouth, MI 48170
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Exhibit 10.15
================================================================================
CREDIT AGREEMENT
DATED AS OF DECEMBER 21, 1998
AMONG
DOMINO'S, INC.
AND
BLUEFENCE, INC.,
AS BORROWERS,
TISM, INC.,
AS GUARANTOR,
THE LENDERS LISTED HEREIN,
AS LENDERS,
J.P. MORGAN SECURITIES INC.,
AS ARRANGER,
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
AS ADMINISTRATIVE AGENT,
NBD BANK,
AS SYNDICATION AGENT,
AND
COMERICA BANK,
AS DOCUMENTATION AGENT
================================================================================
TABLE OF CONTENTS
Page
----
SECTION 1.
DEFINITIONS...................................................................................... 2
1.1 Certain Defined Terms................................................................... 2
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement...... 44
1.3 Other Definitional Provisions and Rules of Construction................................. 45
1.4 Changes in GAAP......................................................................... 45
SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS....................................................... 46
2.1 Commitments: Making of Loans; Register; Notes........................................... 46
2.2. Interest on the Loans................................................................... 54
2.3. Fees.................................................................................... 57
2.4. Repayments, Prepayments and Reductions in Revolving Loan Commitments; General
Provisions Regarding Payments; Application of Proceeds of Collateral and Payments
Under Guaranties........................................................................ 58
2.5 Use of Proceeds......................................................................... 72
2.6 Special Provisions Governing Eurodollar Rate Loans...................................... 72
2.7 Increased Costs; Taxes; Capital Adequacy................................................ 75
2.8 Obligation of Lenders and Issuing Lenders to Mitigate................................... 79
2.9 Defaulting Lenders...................................................................... 80
2.10 Removal or Replacement of a Lender...................................................... 81
SECTION 3.
LETTERS OF CREDIT................................................................................ 83
3.1 Issuance of Letters of Credit and Lenders' Purchase of Participations Therein........... 83
3.2 Letter of Credit Fees................................................................... 86
3.3 Drawings and Reimbursement of Amounts Paid Under Letters of Credit...................... 87
3.4 Obligations Absolute.................................................................... 89
3.5 Indemnification; Nature of Issuing Lenders' Duties...................................... 90
3.6 Increased Costs and Taxes Relating to Letters of Credit................................. 91
SECTION 4.
CONDITIONS TO LOANS AND LETTERS OF CREDIT........................................................ 92
4.1 Conditions To Term Loans and Recapitalization Revolving Loans........................... 92
4.2 Conditions to All Loans................................................................. 101
(i)
Page
----
SECTION 5.
CREDIT AGREEMENT PARTIES' REPRESENTATIONS AND WARRANTIES........................................... 102
5.1 Organization, Powers, Qualification, Good Standing, Business and Subsidiaries............. 103
5.2 Authorization of Borrowing etc............................................................ 103
5.3 Financial Condition....................................................................... 105
5.4 No Material Adverse Change................................................................ 106
5.5 Title to Properties: Liens; Real Property................................................. 106
5.6 Litigation; Adverse Facts................................................................. 106
5.7 Payment of Taxes.......................................................................... 107
5.8 Performance of Agreements; Materially Adverse Agreements.................................. 107
5.9 Governmental Regulation................................................................... 107
5.10 Securities Activities..................................................................... 107
5.11 Employee Benefit Plans.................................................................... 108
5.12 Certain Fees.............................................................................. 108
5.13 Environmental Protection.................................................................. 109
5.14 Employee Matters.......................................................................... 109
5.17 Related Agreements........................................................................ 111
5.18 Disclosure................................................................................ 111
5.19 Subordination of Permitted Seller Notes and Shareholder Subordinated Notes................ 112
5.20 Year 2000 Compliance...................................................................... 112
SECTION 6.
CREDIT AGREEMENT PARTIES' AFFIRMATIVE COVENANTS.................................................... 112
6.1 Financial Statements and Other Reports.................................................... 112
6.2 Corporate Existence, etc.................................................................. 117
6.3 Payment of Taxes and Claims; Tax Consolidation............................................ 117
6.4 Maintenance of Properties; Insurance; Application of Net Insurance/ Condemnation
Proceeds.................................................................................. 118
6.5 Inspection Rights; Audits of Inventory and Accounts Receivable; Lender Meeting............ 120
6.6 Compliance with Laws, etc................................................................. 120
6.7 Environmental Review and Investigation, Disclosure, Etc.; Actions Regarding Hazardous
Materials Activities, Environmental Claims and Violations of Environmental Laws........... 120
6.8 Execution of Subsidiary Guaranty and Personal Property Collateral Documents by
Future Subsidiaries....................................................................... 123
6.9 Conforming Leasehold Interests; Matters Relating to Additional Real Property
Collateral................................................................................ 124
6.10 Interest Rate Protection.................................................................. 126
6.11 Additional Foreign Subsidiary Collateral.................................................. 126
6.12 Year 2000 Compliance...................................................................... 127
6.13 Post-Closing Deliveries................................................................... 127
(ii)
Page
----
SECTION 7.
CREDIT AGREEMENT PARTIES' NEGATIVE COVENANTS...................................................... 127
7.1 Indebtedness............................................................................. 128
7.2 Liens and Related Matters................................................................ 130
7.3 Investments; Joint Ventures.............................................................. 132
7.4 Contingent Obligations................................................................... 134
7.5 Restricted Junior Payments............................................................... 136
7.6 Financial Covenants...................................................................... 137
7.7 Restriction on Fundamental Changes; Asset Sales and Recapitalizations.................... 142
7.8 Consolidated Capital Expenditures........................................................ 146
7.9 Sales and Lease-Backs.................................................................... 147
7.10 Sale or Discount of Receivables.......................................................... 147
7.11 Transactions with Shareholders and Affiliates............................................ 148
7.12 Disposal of Subsidiary Stock............................................................. 148
7.13 Conduct of Business...................................................................... 149
7.14 Amendments or Waivers of Certain Agreements; Amendments of Documents
Relating to Subordinated Indebtedness; Designation of "Designated Senior Debt"........... 149
7.15 Fiscal Year.............................................................................. 150
SECTION 8.
EVENTS OF DEFAULT................................................................................. 150
8.1 Failure to Make Payments When Due........................................................ 150
8.2 Default in Other Agreements.............................................................. 151
8.3 Breach of Certain Covenants.............................................................. 151
8.4 Breach of Warranty....................................................................... 151
8.5 Other Defaults Under Loan Documents...................................................... 151
8.6 Involuntary Bankruptcy, Appointment of Receiver, etc..................................... 151
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc....................................... 152
8.8 Judgments and Attachments................................................................ 152
8.9 Dissolution.............................................................................. 152
8.10 Employee Benefit Plans................................................................... 153
8.11 Change in Control........................................................................ 153
8.12 Invalidity of Guaranties; Failure of Security; Repudiation of Obligations................ 153
8.13 Failure to Consummate Recapitalization Transactions or Merger............................ 154
SECTION 9.
AGENTS............................................................................................ 155
9.1 Appointment.............................................................................. 155
9.2 Powers and Duties; General Immunity...................................................... 156
9.3 Representations and Warranties; No Responsibility for Appraisal of
Creditworthiness......................................................................... 158
9.4 Right to Indemnity....................................................................... 158
9.5 Successor Administrative Agent and Swing Line Lender..................................... 158
(iii)
Page
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9.6 Collateral Documents and Guaranty................................................. 159
SECTION 10.
MISCELLANEOUS.............................................................................. 160
10.1 Assignments and Participations in Loans and Letters of Credit..................... 160
10.2 Expenses.......................................................................... 163
10.3 Indemnity......................................................................... 164
10.4 Set-Off; Security Interest in Deposit Accounts.................................... 165
10.5 Ratable Sharing................................................................... 166
10.7 Independence of Covenants......................................................... 168
10.8 Notices........................................................................... 168
10.9 Survival of Representations, Warranties and Agreements............................ 168
10.10 Failure or Indulgence Not Waiver; Remedies Cumulative............................. 168
10.11 Marshalling; Payments Set Aside................................................... 169
10.12 Severability...................................................................... 169
10.13 Obligations Several; Independent Nature of Lenders' Rights........................ 169
10.14 Headings.......................................................................... 169
10.15 Applicable Law.................................................................... 170
10.16 Successors and Assigns............................................................ 170
10.17 Consent to Jurisdiction and Service of Process.................................... 170
10.18 Waiver of Jury Trial.............................................................. 171
10.19 Confidentiality................................................................... 171
(iv)
EXHIBITS
I FORM OF NOTICE OF BORROWING
II FORM OF NOTICE OF CONVERSION/CONTINUATION
III FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT
IV FORM OF TRANCHE A TERM NOTE
V FORM OF TRANCHE B TERM NOTE
VI FORM OF TRANCHE C TERM NOTE
VII FORM OF REVOLVING NOTE
VIII FORM OF SWING LINE NOTE
IX FORM OF COMPLIANCE CERTIFICATE
X FORM OF OPINION OF ROPES & GRAY
XI FORM OF OPINION OF WHITE & CASE LLP
XII FORM OF ASSIGNMENT AGREEMENT
XIII FORM OF CERTIFICATE RE NON-BANK STATUS
XIV FORM OF FINANCIAL CONDITION CERTIFICATE
XV FORM OF BORROWER PLEDGE AGREEMENT
XVI FORM OF BORROWER SECURITY AGREEMENT
XVII FORM OF BORROWER PATENT AND TRADEMARK SECURITY AGREEMENT
XVIII FORM OF SUBSIDIARY GUARANTY
XIX FORM OF SUBSIDIARY PLEDGE AGREEMENT
XX FORM OF SUBSIDIARY SECURITY AGREEMENT
XXI FORM OF SUBSIDIARY PATENT AND TRADEMARK SECURITY AGREEMENT
XXII FORM OF HOLDINGS GUARANTY
XXIII FORM OF HOLDINGS PLEDGE AGREEMENT
XXIV FORM OF HOLDINGS SECURITY AGREEMENT
XXV FORM OF MORTGAGE
XXVI FORM OF MINNESOTA NOTE
XXVII FORM OF SUBORDINATION PROVISIONS
XXVIII FORM OF COLLATERAL ACCOUNT AGREEMENT
SCHEDULES
1.1(i) ADD-BACKS TO CONSOLIDATED ADJUSTED EBITDA
1.1(ii) RECAPITALIZATION TRANSACTIONS
1.1(iii) EXISTING LIENS
1.1(iv) SPECIAL ADJUSTMENTS TO CONSOLIDATED ADJUSTED EBITDA
2.1 LENDER'S COMMITMENTS AND PRO RATA SHARES
3.1D EXISTING LETTERS OF CREDIT
4.1C CORPORATE AND CAPITAL STRUCTURE; OWNERSHIP
4.1I CLOSING DATE MORTGAGED PROPERTIES
4.1K CLOSING DATE ENVIRONMENTAL REPORTS
5.1 SUBSIDIARIES OF HOLDINGS
5.5 REAL PROPERTY
5.12 CERTAIN FEES
6.13 POST-CLOSING DELIVERIES
7.1(v) EXISTING FOREIGN SUBSIDIARY INTERCOMPANY INDEBTEDNESS
7.1(vii) CERTAIN EXISTING INDEBTEDNESS
7.3(vii) CERTAIN EXISTING INVESTMENTS
7.3(xiii) EXISTING FOREIGN SUBSIDIARY CAPITAL CONTRIBUTIONS
7.3(xviii) CERTAIN PROPOSED INVESTMENTS
7.4 CERTAIN EXISTING CONTINGENT OBLIGATIONS
10.8 NOTICES
CREDIT AGREEMENT
This CREDIT AGREEMENT is dated as of December 21, 1998 and entered
into by and among Domino's, Inc., a Delaware corporation ("Company"), Bluefence,
Inc., a Michigan corporation ("Subsidiary Borrower" and, together with Company,
each, a "Borrower" and, collectively, "Borrowers"), TISM, INC., a Michigan
corporation ("Holdings"), J.P. MORGAN SECURITIES INC., as arranger (in such
capacity, "Arranger"), THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES
HEREOF (each individually referred to herein as a "Lender" and collectively as
"Lenders"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK ("Morgan Guaranty"), as
administrative agent for Lenders (in such capacity, "Administrative Agent"), NBD
BANK ("NBD BANK"), AS SYNDICATION AGENT (IN SUCH CAPACITY, "SYNDICATION AGENT"),
AND COMERICA BANK ("COMERICA"), AS DOCUMENTATION AGENT (IN SUCH CAPACITY,
"DOCUMENTATION AGENT)".
R E C I T A L S
- - - - - - - -
WHEREAS, Bain and the Other Investors have formed TM Transitory Merger
Corporation, a Michigan corporation ("Merger Corp."), for the purpose of
engaging with Holdings and Borrowers in a series of Recapitalization
Transactions, including the Merger (capitalized terms used herein having the
meanings assigned to those terms in subsection 1.1), whereby Bain and the Other
Investors will acquire not less than a majority of the aggregate issued and
outstanding capital stock of Holdings and the Existing Shareholders will retain
a minority of the aggregate issued and outstanding capital stock of Holdings by
way of a roll-over of their existing equity in Holdings;
WHEREAS, Borrowers, wholly owned subsidiaries of Holdings, have
requested Lenders to extend, and Lenders have agreed to extend, certain credit
facilities in an aggregate principal amount of $545,000,000 to Borrowers on a
joint and several basis, the proceeds of which will be used (i) in the aggregate
principal amount of $445,000,000, together with (a) not less than $247,200,000
in gross proceeds from the Equity Contribution, (b) not less than $275,000,000
in gross cash proceeds (prior to discount) from the issuance and sale by Company
of the Senior Subordinated Notes and (c) not less than $105,000,000 in gross
cash proceeds (prior to discount) from the issuance by Holdings of the
Cumulative Preferred Stock, to finance the consummation of the Merger, to
refinance certain existing indebtedness of Holdings and its Subsidiaries and to
pay related fees and expenses, and (ii) in the aggregate principal amount of
$100,000,000, to provide financing for working capital and other general
corporate purposes of Borrowers and their respective Subsidiaries;
WHEREAS, pursuant to the Recapitalization Transactions, Merger Corp.
will merge with and into Holdings, with Holdings being the surviving corporation
and the direct owner of 100% of the outstanding common stock of Company and the
indirect owner of 100% of the outstanding capital stock of Subsidiary Borrower;
WHEREAS, each Borrower desires to secure all of the Obligations
hereunder and under the other Loan Documents by granting to Collateral Agent, on
behalf of Secured Parties, a First Priority Lien on certain of its real and
mixed property and on substantially all of its personal property, including a
pledge of all of the capital stock of each of its Domestic Subsidiaries and 65%
of the capital stock of each of its Foreign Subsidiaries which is directly owned
by such Borrower; and
WHEREAS, Holdings and all Subsidiaries of Company (other than
Subsidiary Borrower and the Excluded Subsidiaries) desire to guarantee the
Obligations hereunder and under the other Loan Documents and to secure their
guaranties by granting to Collateral Agent, on behalf of Secured Parties, a
First Priority Lien on certain of their respective real and mixed property and
on substantially all of their respective personal property, including (i) in the
case of Holdings, a pledge of all of the capital stock of Company and (ii) in
the case of a Subsidiary Guarantor, a pledge of all of the capital stock of each
Domestic Subsidiary of such Subsidiary Guarantor and 65% of the capital stock of
each Foreign Subsidiary which is directly owned by such Subsidiary Guarantor;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Credit Agreement Parties, Lenders and
Agents agree as follows:
SECTION 1.
DEFINITIONS
1.1 Certain Defined Terms.
---------------------
The following terms used in this Agreement shall have the following
meanings:
"Accounting Period" means each of the thirteen four-week periods or
one five-week period and twelve four-week periods, as the case may be,
comprising a Fiscal Year.
"Accounting Quarter" means, for any Fiscal Year, each of (i) the first
three Accounting Periods of such Fiscal Year, (ii) the fourth through the sixth
Accounting Periods of such Fiscal Year, (iii) the seventh through the ninth
Accounting Periods of such Fiscal Year and (iv) the tenth through the thirteenth
Accounting Periods of such Fiscal Year, as the case may be.
"Acquired LTM Revenue" has the meaning assigned to that term in
subsection 7.8.
"Additional Mortgage" has the meaning assigned to that term in
subsection 6.9B.
"Additional Mortgage Policy" has the meaning assigned to that term in
subsection 6.9B.
"Additional Mortgaged Property" has the meaning assigned to that term
in subsection 6.9B.
-2-
"Adjusted Eurodollar Rate" means, for any Interest Rate Determination
Date with respect to an Interest Period for a Eurodollar Rate Loan, the rate per
annum obtained by dividing (i) the arithmetic average (rounded upward to the
--------
nearest 1/16 of one percent) of the offered quotations, if any, to first class
banks in the interbank Eurodollar market by Reference Lenders for U.S. dollar
deposits of amounts in same day funds comparable to the respective principal
amounts of the Eurodollar Rate Loans of Reference Lenders for which the Adjusted
Eurodollar Rate is then being determined (which principal amount shall be deemed
to be $1,000,000 in the case of any Reference Lender not making, converting to
or continuing such a Eurodollar Rate Loan) with maturities comparable to such
Interest Period as of approximately 10:00 A.M. (New York time) on such Interest
Rate Determination Date by (ii) a percentage equal to 100% minus the stated
-- -----
maximum rate of all reserve requirements (including any marginal, emergency,
supplemental, special or other reserves) applicable on such Interest Rate
Determination Date to any member bank of the Federal Reserve System in respect
of "Eurocurrency liabilities" as defined in Regulation D (or any successor
category of liabilities under Regulation D); provided that if any Reference
--------
Lender fails to provide Administrative Agent with its aforementioned quotation
then the Adjusted Eurodollar Rate shall be determined based on the quotation(s)
provided to Administrative Agent by the other Reference Lender(s).
"Administrative Agent" has the meaning assigned to that term in the
introduction to this Agreement and also means and includes any successor
Administrative Agent appointed pursuant to subsection 9.5A.
"Affected Lender" has the meaning assigned to that term in subsection
2.6C.
"Affected Loans" has the meaning assigned to that term in subsection
2.6C.
"Affiliate", as applied to any Person, means any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"Agent" means, individually, each of Arranger, Administrative Agent,
Syndication Agent and Documentation Agent, and for the purposes of Section 9
only (except as expressly noted), Collateral Agent, and "Agents" means Arranger,
Administrative Agent, Syndication Agent, and Documentation Agent, and for the
purposes of Section 9 only (except as expressly noted), Collateral Agent,
collectively.
"Agreement" means this Credit Agreement dated as of December 21, 1998,
as it may be amended, supplemented or otherwise modified from time to time.
"Applicable Base Rate Margin" means (i) in the case of Tranche A Term
Loans and Revolving Loans, (a) for the period from the Closing Date up to (but
excluding) the date of commencement of the first Pricing Period, 2.00% per annum
and (b) for any date thereafter, a rate per annum equal to the percentage set
forth below opposite the Applicable Leverage Ratio in
-3-
effect as of such date of determination, any change in any such Applicable Base
Rate Margin to be effective on the date of any corresponding change in the
Applicable Leverage Ratio:
==========================================================================
APPLICABLE APPLICABLE BASE RATE MARGIN
LEVERAGE RATIO FOR TRANCHE A TERM LOANS
AND REVOLVING LOANS
--------------------------------------------------------------------------
greater than or equal 2.00
to 5.25:1.00
--------------------------------------------------------------------------
less than 5.25:1.00 but 1.750
greater than or equal
to 4.75:1.00
--------------------------------------------------------------------------
less than 4.75:1.00 but 1.500
greater than or equal
to 4.25:1.00
--------------------------------------------------------------------------
less than 4.25:1.00 but 1.250
greater than or equal
to 3.75:1.00
--------------------------------------------------------------------------
less than 3.75:1.00 but 1.000
greater than or equal
to 3.25:1.00
--------------------------------------------------------------------------
less than 3.25:1.0 but 0.750
greater than or equal
to 2.75:1.0
--------------------------------------------------------------------------
less than 2.75:1.00 0.500
==========================================================================
, (ii) in the case of Tranche B Term Loans, 2.50% per annum and (iii) in the
case of Tranche C Term Loans, 2.75% per annum; provided that notwithstanding
--------
anything to the contrary contained in this definition, at any time an Event of
Default is then in existence, the Applicable Base Rate Margin for Tranche A Term
Loans and Revolving Loans shall be 2.00% per annum.
"Applicable Commitment Fee Percentage" means, (a) for the period from
the Closing Date up to (but excluding) the date of commencement of the first
Pricing Period, 1/2 of
-4-
1% per annum and (b) at any date of determination thereafter, a rate per annum
equal to the percentage set forth below opposite the Applicable Leverage Ratio
in effect as of such date of determination, any change in the Applicable
Commitment Fee Percentage to be effective on the date of any corresponding
change in the Applicable Leverage Ratio:
===================================================
APPLICABLE
APPLICABLE COMMITMENT
LEVERAGE RATIO FEE PERCENTAGE
---------------------------------------------------
greater than or equal to 0.500%
4.25:1.00
---------------------------------------------------
less than 4.25:1.00 but 0.375%
greater than or equal to
2.75:1.00
---------------------------------------------------
less than 2.75:1.00 0.250%
===================================================
Notwithstanding anything to the contrary contained in this definition, at any
time an Event of Default is then in existence, the Applicable Commitment Fee
Percentage shall be 1/2 of 1% per annum.
"Applicable Leverage Ratio" means, with respect to any date of
determination, the Leverage Ratio set forth in the Pricing Certificate (as
defined below) in effect for the Pricing Period (as defined below) in which such
date of determination occurs. For purposes of this definition, (i) "Pricing
Certificate" means an Officer's Certificate of Holdings certifying as to the
Leverage Ratio as of the last day of any Accounting Quarter and setting forth
the calculation of such Leverage Ratio in reasonable detail, which Officer's
Certificate may be delivered to Administrative Agent at any time on or after the
date of delivery by Holdings of the Compliance Certificate (the "Related
Compliance Certificate") with respect to the period ending on the last day of
such Accounting Quarter pursuant to subsection 6.1(iv), and (ii) "Pricing
Period" means each period commencing on the first Business Day after the
delivery to Administrative Agent of a Pricing Certificate and ending on the
first Business Day after the next Pricing Certificate is delivered to
Administrative Agent; provided that, anything contained in this definition to
--------
the contrary notwithstanding, (a) the first Pricing Period for purposes of
calculating the Applicable Leverage Ratio shall commence no earlier than the
date which is six months after the Closing Date, and the Pricing Certificate in
respect of such first Pricing Period may be delivered at any time on or after
such six-month anniversary date and shall relate to the most recent financial
statements delivered by Holdings to Administrative Agent prior to such date
pursuant to subsection 6.1(ii) or 6.1(iii), (b) the Applicable Leverage Ratio
for the period from the Closing Date to but excluding the date of commencement
of such first Pricing Period shall be deemed to be 5.25:1.00 for purposes of
making the relevant calculation referred to above, and (c) in the
-5-
event that, after the commencement of such first Pricing Period, Holdings fails
to deliver a Pricing Certificate to Administrative Agent setting forth the
Leverage Ratio as of the last day of any Accounting Quarter on or before the
last day on which Holdings is required to deliver the Related Compliance
Certificate (such last day being the "Cutoff Date"), then the Applicable
Leverage Ratio in effect for purposes of making the relevant calculation
referred to above for the period from the Cutoff Date to the date of delivery by
Holdings of the next Pricing Certificate shall be deemed to be 5.25:1.0.
"Applicable Eurodollar Rate Margin" means (i) in the case of Tranche A
Term Loans and Revolving Loans, (a) for the period from the Closing Date up to
(but excluding) the date of commencement of the first Pricing Period, 3.00% per
annum and (b) for any date thereafter, a rate per annum equal to the percentage
set forth below opposite the Applicable Leverage Ratio in effect as of such date
of determination, any change in any such Applicable Eurodollar Rate Margin to be
effective on the date of any corresponding change in the Applicable Leverage
Ratio:
-6-
=========================================================================
APPLICABLE EURODOLLAR
APPLICABLE RATE MARGIN FOR TRANCHE A
LEVERAGE RATIO TERM LOANS AND REVOLVING LOANS
-------------------------------------------------------------------------
greater than or equal to 3.000
5.25:1.00
-------------------------------------------------------------------------
less than 5.25:1.00 but 2.750
greater than or equal
to 4.75:1.00
-------------------------------------------------------------------------
less than 4.75:1.00 but 2.500
greater than or equal
to 4.25:1.00
-------------------------------------------------------------------------
less than 4.25:1.00 but 2.250
greater than or equal
to 3.75:1.00
-------------------------------------------------------------------------
less than 3.75:1.00 but 2.000
greater than or equal
to 3.25:1.00
-------------------------------------------------------------------------
less than 3.25:1.00 but 1.750
greater than or equal
to 2.75:1.00
-------------------------------------------------------------------------
less than 2.75:1.00 1.500
=========================================================================
, (ii) in the case of Tranche B Term Loans, 3.50% per annum and (iii) in the
case of Tranche C Term Loans, 3.75% per annum; provided that notwithstanding
--------
anything to the contrary contained in this definition, at any time an Event of
Default is then in existence, the Applicable Eurodollar Rate Margin for Tranche
A Term Loans and Revolving Loans shall be 3.00% per annum.
"Applied Amount" has the meaning assigned to that term in subsection
2.4B(iv)(b).
"Arranger" has the meaning assigned to that term in the introduction
to this Agreement.
-7-
"Asset Sale" means the sale by Holdings or any of its Subsidiaries to
any Person other than Holdings or any of its wholly owned Subsidiaries of (i)
any of the stock of any of Holdings' Subsidiaries, (ii) substantially all of the
assets of any division or line of business of Holdings or any of its
Subsidiaries, or (iii) any other assets (whether tangible or intangible) of
Holdings or any of its Subsidiaries (other than (a) assets acquired for resale
to franchisees and inventory sold in the ordinary course of business and (b) any
such other assets to the extent that the aggregate fair market value of such
assets (at the time of sale thereof) sold in any single transaction or related
series of transactions is equal to $1,000,000 or less); provided, however, that
-------- -------
Asset Sales shall not include (1) any sale or discount, in each case without
recourse, of accounts receivable arising in the ordinary course of business, but
only in connection with the compromise or collection thereof, (2) any sale or
exchange of specific items of equipment, so long as the purpose of each such
sale or exchange is to acquire (and results within 90 days of such sale or
exchange in the acquisition of) replacement items of equipment which are the
functional equivalent of the item of equipment so sold or exchanged, (3) the
leasing (pursuant to leases in the ordinary course of business) or licensing of
real or personal property, including intellectual property, or (4) disposals of
obsolete, uneconomical, negligible, worn out or surplus property in the ordinary
course of business.
"Assignment Agreement" means an Assignment Agreement in substantially
the form of Exhibit XII annexed hereto.
-----------
"B Lenders" shall have the meaning assigned to that term in subsection
2.4B(iv)(d).
"Bain" means Bain Capital, Inc. and/or one or more of its Affiliates.
"Bain Advisory Services Agreement" means that certain Advisory
Services Agreement by and among Holdings, certain Subsidiaries of Holdings and
Bain, in the form delivered to Arranger and Administrative Agent prior to the
Closing Date and as such agreement may thereafter be amended, supplemented or
otherwise modified from time to time to the extent permitted under Subsection
7.14A.
"Bain Management Fees" means the fees (including one-time fees payable
in connection with acquisitions, divestitures, recapitalizations, financings and
refinancings) payable by Holdings and its Subsidiaries to Bain pursuant to the
Bain Advisory Services Agreement.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"Base Rate" means a fluctuating interest rate per annum in effect from
time to time, which rate per annum shall at all times be equal to the higher of:
(i) the rate of interest announced publicly by Morgan Guaranty in New
York, New York, from time to time, as Morgan Guaranty's base rate; and
(ii) 1/2 of 1% per annum above the Federal Funds Effective Rate.
-8-
"Base Rate Loans" means Loans bearing interest at rates determined by
reference to the Base Rate as provided in subsection 2.2A.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3
and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular Person, such Person shall be deemed to have
beneficial ownership of all securities that such Person has the right to
acquire, whether such right is currently exercisable or is exercisable only upon
the occurrence of subsequent condition.
"Borrower" has the meaning assigned to that term in the introduction
to this Agreement.
"Borrower Patent and Trademark Security Agreement" means the Borrower
Patent and Trademark Security Agreement executed and delivered by each Borrower
and Collateral Agent on the Closing Date, substantially in the form of Exhibit
-------
XVII annexed hereto, as such Borrower Patent and Trademark Security Agreement
- ----
may thereafter be amended, supplemented or otherwise modified from time to time
as permitted thereunder and hereunder.
"Borrower Pledge Agreement" means the Borrower Pledge Agreement
executed and delivered by each Borrower and Collateral Agent on the Closing
Date, substantially in the form of Exhibit XV annexed hereto, as such Borrower
----------
Pledge Agreement may thereafter be amended, supplemented or otherwise modified
from time to time as permitted thereunder and hereunder.
"Borrower Security Agreement" means the Borrower Security Agreement
executed and delivered by each Borrower and Collateral Agent on the Closing
Date, substantially in the form of Exhibit XVI annexed hereto, as such Borrower
-----------
Security Agreement may thereafter be amended, supplemented or otherwise modified
from time to time as permitted thereunder and hereunder.
"Business Day" means (i) any day excluding Saturday, Sunday and any
day which is a legal holiday under the laws of the State of New York or is a day
on which banking institutions located in such state are authorized or required
by law or other governmental action to close, and (ii) with respect to all
notices, determinations, fundings and payments in connection with the Adjusted
Eurodollar Rate or any Eurodollar Rate Loans, any day that is a Business Day
described in clause (i) above and that is also a day for trading by and between
banks in Dollar deposits in the London interbank market.
"C Lenders" has the meaning assigned to that term in subsection
2.4B(iv)(d).
"Capital Lease", as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee that, in
conformity with GAAP, would be required to be accounted for as a capital lease
on the balance sheet of that Person.
"Carryforward" has the meaning assigned to that term in subsection
7.8A.
"Cash" means money, currency or a credit balance in a Deposit Account.
-9-
"Cash Equivalents" means: (i) marketable direct obligations issued by,
or unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Ratings Group ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances (or, with respect to foreign
banks, similar instruments) maturing within one year from the date of
acquisition thereof issued by any bank organized under the laws of the United
States of America or any state thereof or the District of Columbia, Japan or any
member of the European Economic Community or any U.S. branch of a foreign bank
having at the date of acquisition thereof combined capital and surplus of not
less than $200,000,000; (v) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clause (i) above
entered into with any bank meeting the qualifications specified in clause (iv)
above; and (vi) investments in money market funds which invest substantially all
of their assets in securities of the types described in clauses (i) through (v)
above.
"Certificate of Merger" means the Certificate of Merger dated as of
December 21, 1998, by and between Merger Corp. and Holdings, in the form
delivered to Arranger, Administrative Agent and Lenders prior to or concurrently
with their execution of this Agreement and as such Certificate of Merger may be
amended from time to time thereafter to the extent permitted under subsection
7.14A.
"Certificate re Non-Bank Status" means a certificate substantially in
the form of Exhibit XIII annexed hereto delivered by a Lender to Administrative
------------
Agent pursuant to subsection 2.7B(iii).
"Class" means, as applied to Lenders, each of the following classes of
Lenders: (i) Lenders having Tranche A Term Loan Exposure, (ii) Lenders having
Tranche B Term Loan Exposure, (iii) Lenders having Tranche C Term Loan Exposure
and (iv) Lenders having Revolving Loan Exposure.
"Closing Date" means the date on or before January 15, 1999, on which
the initial Loans are made.
"Closing Date Mortgage" has the meaning assigned to that term in
subsection 4.1I.
"Closing Date Mortgage Policies" has the meaning assigned to that term
in subsection 4.1I.
"Closing Date Mortgaged Property" has the meaning assigned to that
term in subsection 4.1I.
-10-
"Collateral" means, collectively, all of the real, personal and mixed
property (including capital stock) in which Liens are purported to be granted
pursuant to the Collateral Documents as security for the Obligations.
"Collateral Account Agreement" means the Collateral Account Agreement
executed and delivered by each Borrower and Collateral Agent on the Closing
Date, substantially in the form of Exhibit XXVIII annexed hereto, as such
--------------
Collateral Account Agreement may hereafter be amended, supplemented or otherwise
modified from time to time.
"Collateral Agent" means Morgan Guaranty acting in its capacity as
collateral agent under the applicable Collateral Documents on behalf of the
Lenders.
"Collateral Documents" means the Holdings Security Agreement, the
Holdings Pledge Agreement, the Borrower Pledge Agreement, the Borrower Security
Agreement, the Borrower Patent and Trademark Security Agreement, the Subsidiary
Pledge Agreement, the Subsidiary Security Agreement, the Subsidiary Patent and
Trademark Security Agreement, the Mortgages, the Collateral Account Agreement
and all other instruments or documents delivered by any Loan Party pursuant to
this Agreement or any of the other Loan Documents in order to grant to
Collateral Agent, on behalf of Lenders, a Lien on any real, personal or mixed
property of that Loan Party as security for the Obligations.
"Comerica" has the meaning assigned to that term in the introduction
to this Agreement.
"Commercial Letter of Credit" means any letter of credit or similar
instrument issued for the purpose of providing the primary payment mechanism in
connection with the purchase of any materials, goods or services by any Borrower
or any of its Subsidiaries in the ordinary course of business of such Borrower
or such Subsidiary.
"Commitments" means the commitments of Lenders to make Loans as set
forth in subsection 2.1A.
"Company" has the meaning assigned to that term in the introduction to
this Agreement.
"Compliance Certificate" means a certificate substantially in the form
of Exhibit IX annexed hereto delivered to Administrative Agent by Holdings
----------
pursuant to subsection 6.1(iv).
"Confidential Information Memorandum" means that certain Confidential
Information Memorandum prepared by J.P. Morgan Securities, Inc. relating to the
Loans, dated November 1998.
"Conforming Leasehold Interest" means any Recorded Leasehold Interest
as to which the lessor has substantially agreed in writing for the benefit of
Administrative Agent (which writing has been delivered to Administrative Agent),
whether under the terms of the applicable lease, under the terms of a Landlord
Consent and Estoppel, or otherwise, to the matters described in the definition
of "Landlord Consent and Estoppel," which interest, if a subleasehold or sub-
-11-
subleasehold interest, is not subject to any contrary restrictions contained in
a superior lease or sublease.
"Consolidated Adjusted EBITDA" means, for any period, the sum of the
amounts for such period of (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) provisions for taxes based on income (including, without
duplication, foreign withholding taxes, the Michigan Single Business Tax and
other similar state taxes), (iv) total depreciation expense, (v) total
amortization expense, (vi) other non-cash items reducing Consolidated Net Income
(including without limitation non-cash purchase accounting adjustments and debt
extinguishment costs but excluding accruals of expenses and the establishment of
reserves in the ordinary course of business) less other non-cash items
----
increasing Consolidated Net Income (other than accruals of revenue or reversals
of reserves in the ordinary course of business), (vii) to the extent deducted in
determining Consolidated Net Income, those items described on Schedule 1.1(i)
---------------
annexed hereto, and (viii) the cumulative effect of accounting changes to the
extent such changes result in a reduction of Consolidated Net Income less the
----
cumulative effect of accounting changes to the extent such changes result in an
increase in Consolidated Net Income, all of the foregoing as determined on a
consolidated basis for Holdings and its Subsidiaries in conformity with GAAP;
provided that Consolidated Adjusted EBITDA for each Test Period ending prior to
- --------
the Fiscal Year 1999 shall mean the sum of (x) Consolidated Adjusted EBITDA for
such Test Period as determined without regard to this proviso plus (y) any
amount set forth in Schedule 1.1(iv) hereto as applicable to Consolidated
Adjusted EBITDA for such Test Period (to the extent (and only to the extent)
such amount has not been included in Consolidated Adjusted EBITDA for such Test
Period by virtue of the cost savings represented by such amount not having been
realized in such Test Period). Notwithstanding anything to the contrary
contained above, to the extent Consolidated Adjusted EBITDA is to be determined
for any Test Period which ends prior to the first anniversary of the Closing
Date, Consolidated Adjusted EBITDA for all portions of such period occurring
prior to the Closing shall be calculated in accordance with the definition of
Test Period contained herein.
"Consolidated Capital Expenditures" means, for any period, the
aggregate of all expenditures (whether paid in cash or other consideration or
accrued as a liability and including that portion of Capital Leases which is
capitalized on the consolidated balance sheet of Holdings and its Subsidiaries)
by Holdings and its Subsidiaries during that period that, in conformity with
GAAP, are included in "purchases of property, plant or equipment" or comparable
items reflected in the consolidated statement of cash flows of Holdings and its
Subsidiaries; provided, however, that the following shall in any event be
-------- -------
excluded from the definition of Consolidated Capital Expenditures: (a) any such
expenditures made with, or subsequently reimbursed out of, the proceeds of
insurance, condemnation awards (or payments in lieu thereof), indemnity payments
or payments in respect of judgments or settlements received from third parties
for purposes of replacing or repairing the assets in respect of which such
proceeds, awards or payments were received, so long as such expenditures are
commenced within 270 days, and completed within 360 days, of the later of the
occurrence of the damage to or loss of the assets being replaced or repaired and
the receipt of such proceeds, awards or payments in respect thereof and (b) any
such expenditures constituting the reinvestment of proceeds from the sales of
assets in equipment or other productive assets of Borrowers and their respective
Subsidiaries, so long as such expenditures are commenced within 270 days and
completed within 360 days of the receipt of
-12-
such proceeds; and provided further, however, that Consolidated Capital
-------- ------- -------
Expenditures shall not include any expenditures made by Company or any of its
Subsidiaries to acquire in a Permitted Acquisition the business, property or
fixed assets of any Person, or the stock or other evidence of beneficial
ownership of any Person that, as a result of such acquisition, becomes a
Subsidiary of Company or a Joint Venture to which Company or any of its
Subsidiaries is a party.
"Consolidated Cash Interest Expense" means, for any period,
Consolidated Interest Expense for such period excluding, however, (i) any
--------- -------
interest expense not payable in Cash (including interest expense paid in kind
and amortization of discount, of deferred financing fees, of premiums paid on
Hedge Agreements and of debt issuance costs) and (ii) any interest expense
attributable to deferred payments under the Consulting Agreement.
Notwithstanding anything to the contrary contained above, to the extent
Consolidated Cash Interest Expense is to be determined for any Test Period which
ends prior to the first anniversary of the Closing Date, Consolidated Cash
Interest Expense for all portions of such period occurring prior to the Closing
Date shall be calculated in accordance with the definition of Test Period
contained herein.
"Consolidated Excess Cash Flow" means, for any period, an amount (if
positive) equal to (i) the sum, without duplication, of the amounts for such
period of (a) Consolidated Adjusted EBITDA, (b) payments made to Holdings or any
of its Subsidiaries as an adjustment to purchase price after the Closing Date
under the Recapitalization Agreement and (c) the Investment Amount (if
positive), minus (ii) the sum, without duplication, of the amounts for such
-----
period (to the extent not financed with the proceeds of related financings) of
(a) voluntary and scheduled repayments of Consolidated Total Debt (excluding
repayments of Revolving Loans except to the extent the Revolving Loan
Commitments are permanently reduced in connection with such repayments), (b)
Consolidated Capital Expenditures (net of any proceeds of any related financings
with respect to such expenditures) plus (or minus, if negative) the Carryforward
---- -----
for such period to be carried forward to the next period less the unspent
----
Carryforward (if any) for the preceding period carried forward to the current
period, (c) Consolidated Cash Interest Expense, (d) payments made by Holdings
and its Subsidiaries as an adjustment to purchase price after the Closing Date
under the Recapitalization Agreement, (e) any add-backs to Consolidated Adjusted
EBITDA made during such period with respect to items set forth on Schedule
--------
1.1(i) annexed hereto, (f) the provision for current taxes based on income
- ------
(including, without duplication, foreign withholding taxes, the Michigan Single
Business Tax and other similar state taxes) of Holdings and its Subsidiaries and
payable in cash with respect to such period, including taxes payable in cash
within 90 days following the end of such period, (g) non-cash charges added in
calculating Consolidated Adjusted EBITDA in a prior period to the extent such
non-cash charges are paid in cash in the current period, (h) to the extent not
otherwise deducted in determining Consolidated Excess Cash Flow, tender
payments, fees and expenses paid during such period in connection with the
exchange of the Senior Subordinated Notes and cash payments made during such
period with respect to non-current liabilities, (i) distributions by Holdings
made pursuant to Section 7.5(ix) during such period, to the extent such
distributions are not deducted in calculating Consolidated Adjusted EBITDA
during such period, (j) the amount of cash expended in respect of Permitted
Acquisitions during such period and (k) the Investment Amount (if negative).
"Consolidated Interest Expense" means, for any period, total cash and
non-cash interest expense (including that portion attributable to Capital Leases
in accordance with GAAP
-13-
and capitalized interest) of Holdings and its Subsidiaries on a consolidated
basis in accordance with GAAP with respect to all outstanding Indebtedness of
Holdings and its Subsidiaries, including all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, net costs under Interest Rate Agreements, commitment fees accrued
under subsection 2.3A and any administrative agent's fees payable to
Administrative Agent.
"Consolidated Net Income" means, for any period, the net income (or
loss) of Holdings and its Subsidiaries on a consolidated basis for such period
taken as a single accounting period determined in conformity with GAAP; provided
--------
that there shall be excluded (i) the income (or loss) of any Person (other than
a Subsidiary of Holdings) in which any other Person (other than Holdings or any
of its Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to Holdings or any of its
Subsidiaries by such Person during such period, (ii) the income (or loss) of any
Person accrued prior to the date it becomes a Subsidiary of Holdings or is
merged into or consolidated with Holdings or any of its Subsidiaries or that
Person's assets are acquired by Holdings or any of its Subsidiaries, (iii) the
income of any Subsidiary of Holdings to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary of that income
is not at the time permitted by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary, (iv) any after-tax gains or losses
attributable to sales of assets or returned surplus assets of any Pension Plan,
and (v) (to the extent not included in clauses (i) through (iv) above) any net
extraordinary, unusual or non-recurring gains or net extraordinary, unusual or
non-recurring losses.
"Consolidated Total Debt" means, as at any date of determination, the
remainder of (x) the aggregate stated balance sheet amount of all Indebtedness
of Holdings and its Subsidiaries, determined on a consolidated basis in
accordance with GAAP less (y) the aggregate amount of the Seller Contingent
----
Note, to the extent included as balance sheet Indebtedness pursuant to clause
(x).
"Consulting Agreement" means the Consulting Agreement between Thomas
S. Monaghan, Holdings and certain Subsidiaries of Holdings, in the form
delivered to Arranger, Administrative Agent and Lenders prior to their execution
of this Agreement and as such agreement may be amended from time to time
thereafter to the extent permitted by subsection 7.14A.
"Contingent Obligation", as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another 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 (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account of that Person or as
to which that Person is otherwise liable for reimbursement of drawings, or (iii)
under Hedge Agreements. Contingent Obligations shall include (a) the direct or
indirect guaranty, endorsement (otherwise than for collection or deposit in the
ordinary course of
-14-
business), co-making, discounting with recourse or sale with recourse by such
Person of the obligation of another, (b) the obligation to make take-or-pay or
similar payments if required regardless of non-performance by any other party or
parties to an agreement, and (c) any liability of such Person for the obligation
of another through any agreement (contingent or otherwise) (X) 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
(Y) to maintain the solvency or any balance sheet item, level of income or
financial condition of another if, in the case of any agreement described under
subclauses (X) or (Y) of this sentence, the primary purpose or intent thereof is
as described in the preceding sentence. The amount of any Contingent Obligation
shall be equal to (A) the amount of the obligation so guaranteed or otherwise
supported or, if less, the amount to which such Contingent Obligation is
specifically limited (including netting of obligations under Hedge Agreements),
or (B) if neither amount in clause (A) is stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform) as determined by such Person in good faith. Contingent
Obligations shall not include standard contractual indemnities entered into in
the ordinary course of business.
"Continuing Director" means, as of any date of determination, any
member of the Board of Directors of any Person who (i) was a member of the Board
of Directors of such Person on the Closing Date or (ii) was nominated for
election or elected to such Board of Directors with the affirmative vote of Bain
and the Other Investors.
"Contractual Obligation", as applied to any Person, means any
provision of any Security issued by that Person or of any material indenture,
mortgage, deed of trust, contract, undertaking, agreement or other instrument to
which that Person is a party or by which it or any of its properties is bound or
to which it or any of its properties is subject.
"Credit Agreement Party" means and includes Holdings and each
Borrower.
"Cumulative Preferred Stock" means the 11.5% cumulative preferred
stock of Holdings, $.01 par value per share, issued pursuant to the Cumulative
Preferred Stock Certificate of Designation.
"Cumulative Preferred Stock Certificate of Designation" means the
Restated Articles of Incorporation of Merger Corp., as the same may be amended,
modified or supplemented from time to time to the extent permitted by subsection
7.14B.
"Cumulative Preferred Stock Documents" means, collectively, the
Cumulative Preferred Stock Certificate of Designation and the exhibits thereto,
the Cumulative Preferred Stock, the Cumulative Preferred Stock Purchase
Agreement and all other documents and instruments entered into in connection
with the issuance of the Cumulative Preferred Stock.
"Cumulative Preferred Stock Purchase Agreement" means the 11.5%
Cumulative Preferred Stock Purchase Agreement, dated as of December 21, 1998, as
the same may be
-15-
amended, modified or supplemented from time to time to the extent permitted by
subsection 7.14B.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement, futures contract, option contract, synthetic cap or other
similar agreement or arrangement to which Holdings or any of its Subsidiaries is
a party.
"Default Excess" has the meaning assigned to that term in subsection
2.9.
"Default Period" has the meaning assigned to that term in subsection
2.9.
"Defaulted Revolving Loan" has the meaning assigned to that term in
subsection 2.9.
"Defaulting Lender" has the meaning assigned to that term in
subsection 2.9.
"Deposit Account" means a demand, time, savings, passbook or like
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate of
deposit.
"Documentation Agent" has the meaning assigned to that term in the
introduction to this Agreement.
"Dollars" and the sign "$" mean the lawful money of the United States
of America.
"Domestic Subsidiary" means any Subsidiary of Holdings which is
organized under the laws of the United States or any state thereof.
"Eligible Assets" has the meaning assigned to that term in subsection
2.4B(iii)(a).
"Eligible Assignee" means (A) (i) a commercial bank organized under
the laws of the United States or any state thereof; (ii) a savings and loan
association or savings bank organized under the laws of the United States or any
state thereof; (iii) a commercial bank organized under the laws of any other
country or a political subdivision thereof; provided that (x) such bank is
--------
acting through a branch or agency located in the United States or (y) such bank
is organized under the laws of a country that is a member of the Organization
for Economic Cooperation and Development or a political subdivision of such
country; and (iv) any other entity which is an "accredited investor" (as defined
in Regulation D under the Securities Act) which extends credit or buys loans as
one of its businesses including insurance companies, funds, investment companies
and lease financing companies; and (B) any Lender, any Affiliate of any Lender
and, with respect to any Lender that is an investment fund that invests in
commercial loans, any other investment fund that invests in commercial loans and
that is managed or advised by the same investment advisor as such Lender or by
an Affiliate of such investment advisor; provided that no Affiliate of Holdings
--------
shall be an Eligible Assignee.
"Employee Benefit Plan" means any "employee benefit plan" as defined
in Section 3(3) of ERISA which is maintained or contributed to by (or to which
there is an obligation to
-16-
contribute of) Holdings, any of its Subsidiaries or any of their respective
ERISA Affiliates and, with respect to each such employee benefit plan which is a
"pension plan" (as defined in Section 3(2) of ERISA) which is subject to Title
IV of ERISA, each such pension plan for the five-year period immediately
following the latest date on which Holdings, any of its Subsidiaries or any of
their respective ERISA Affiliates maintained, contributed to or had an
obligation to contribute to such pension plan.
"Environmental Claim" means any investigation, notice, notice of
violation, claim, action, suit, proceeding, demand, abatement order or other
order or directive (conditional or otherwise), by any governmental authority or
any other Person, arising (i) pursuant to or in connection with any actual or
alleged violation of any Environmental Law, (ii) in connection with any
Hazardous Materials or any actual or alleged Hazardous Materials Activity, or
(iii) in connection with any actual or alleged damage, injury, threat or harm to
health, safety, natural resources or the environment.
"Environmental Laws" means any and all current or future statutes,
ordinances, orders, rules, regulations, judgments, Governmental Authorizations,
or any other requirements of governmental authorities relating to (i)
environmental matters, including those relating to any Hazardous Materials
Activity, (ii) the generation, use, storage, transportation or disposal of
Hazardous Materials, or (iii) occupational safety and health, industrial
hygiene, land use or the protection of human, plant or animal health or welfare
from environmental hazards (including Hazardous Materials), in any manner
applicable to Holdings or any of its Subsidiaries or any Facility, including the
Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C.
(S) 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. (S)
-- ----
1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. (S) 6901 et
-- ---- --
seq.), the Federal Water Pollution Control Act (33 U.S.C. (S) 1251 et seq.), the
- ---- -- ----
Clean Air Act (42 U.S.C. (S) 7401 et seq.), the Toxic Substances Control Act (15
-- ----
U.S.C. (S) 2601 et seq.), the Federal Insecticide, Fungicide and Rodenticide Act
-- ----
(7 U.S.C. (S) 136 et seq.), the Occupational Safety and Health Act (29 U.S.C.
-- ----
(S) 651 et seq.), the Oil Pollution Act (33 U.S.C. (S) 2701 et seq.) and the
-- ---- -- ----
Emergency Planning and Community Right-to-Know Act (42 U.S.C. (S) 11001 et
--
seq.), each as amended or supplemented, any analogous present or future state or
- ----
local statutes or laws, and any regulations promulgated pursuant to any of the
foregoing.
"Equity Contribution" means, collectively, (i) the contribution by
Bain and the Other Investors to Merger Corp. of cash in exchange for all of the
outstanding common stock of Merger Corp. in an aggregate amount of $229,700,000
(with the contribution of Bain equal to at least 50% of such aggregate
contribution) and (ii) the rollover equity contribution by the Existing
Shareholders in an aggregate amount of $17,500,000.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor thereto, and the regulations
promulgated and rulings issued thereunder.
"ERISA Affiliate" means, as applied to any Person, (i) any corporation
which is a member of a controlled group of corporations within the meaning of
Section 414(b) of the Internal Revenue Code of which that Person is a member;
(ii) any trade or business (whether or
-17-
not incorporated) which is a member of a group of trades or businesses under
common control within the meaning of Section 414(c) of the Internal Revenue Code
of which that Person is a member; and (iii) any member of an affiliated service
group within the meaning of Section 414(m) or (o) of the Internal Revenue Code
of which that Person, any corporation described in clause (i) above or any trade
or business described in clause (ii) above is a member. Any former ERISA
Affiliate of Holdings or any of its Subsidiaries shall continue to be considered
an ERISA Affiliate of Holdings or such Subsidiary within the meaning of this
definition with respect to the period such entity was an ERISA Affiliate of
Holdings or such Subsidiary and with respect to liabilities arising after such
period for which Holdings or such Subsidiary could be liable under the Internal
Revenue Code or ERISA.
"ERISA Event" means (i) a "reportable event" within the meaning of
Section 4043 of ERISA and the regulations issued thereunder with respect to any
Pension Plan (excluding those for which the provision for 30-day notice to the
PBGC has been waived by regulation); (ii) the failure to meet the minimum
funding standard of Section 412 of the Internal Revenue Code with respect to any
Pension Plan (whether or not waived in accordance with Section 412(d) of the
Internal Revenue Code) or the failure to make by its due date a required
installment under Section 412(m) of the Internal Revenue Code with respect to
any Pension Plan or the failure to make any required contribution to a
Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan
pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such
plan in a distress termination described in Section 4041(c) of ERISA; (iv) the
withdrawal by Holdings, any of its Subsidiaries or any of their respective ERISA
Affiliates from any Pension Plan with two or more contributing sponsors or the
termination of any such Pension Plan resulting in liability pursuant to Section
4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to
terminate any Pension Plan, or the occurrence of any event or condition which
might constitute grounds under ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan; (vi) the imposition of liability
on Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates
pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of
Section 4212(c) of ERISA; (vii) the withdrawal of Holdings, any of its
Subsidiaries or any of their respective ERISA Affiliates in a complete or
partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from
any Multiemployer Plan if there is any potential liability therefor, or the
receipt by Holdings, any of its Subsidiaries or any of their respective ERISA
Affiliates of notice from any Multiemployer Plan that it is in reorganization or
insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to
terminate or has terminated under Section 4041A or 4042 of ERISA; (viii) the
occurrence of an act or omission which could give rise to the imposition on
Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates of
material fines, material penalties, material taxes or material related charges
under Chapter 43 of the Internal Revenue Code or under Section 409, Section
502(c), (i) or (1), or Section 4071 of ERISA in respect of any Employee Benefit
Plan; (ix) the assertion of a material claim (other than routine claims for
benefits) against any Employee Benefit Plan other than a Multiemployer Plan or
the assets thereof, or against Holdings, any of its Subsidiaries or any of their
respective ERISA Affiliates in connection with any Employee Benefit Plan; (x)
receipt from the Internal Revenue Service of notice of the failure of any
Pension Plan (or any other Employee Benefit Plan intended to be qualified under
Section 401 (a) of the Internal Revenue Code) to qualify under Section 401(a) of
the Internal Revenue Code, or the failure of any trust
-18-
forming part of any Pension Plan to qualify for exemption from taxation under
Section 501(a) of the Internal Revenue Code if such trust was intended to so
qualify; or (xi) the imposition of a Lien pursuant to Section 401(a)(29) or
412(n) of the Internal Revenue Code or pursuant to ERISA with respect to any
Pension Plan.
"Eurodollar Rate Loans" means Loans bearing interest at rates
determined by reference to the Adjusted Eurodollar Rate as provided in
subsection 2.2A.
"Event of Default" means each of the events set forth in Section 8.
"Excess Proceeds Amount" shall initially be $0, which amount shall be
(i) increased (a) on the date of delivery in any Fiscal Year of an Officer's
---------
Certificate setting forth the calculation of Consolidated Excess Cash Flow for
the preceding Fiscal Year pursuant to subsection 2.4B(iii)(f) (each such date
being an "Excess Cash Payment Date"), so long as any prepayment required
pursuant to subsection 2.4B(iii)(e) has been made, by an amount equal to the
amount of such Consolidated Excess Cash Flow which is not so prepaid, and (b) on
the date of the receipt by Holdings of any Net Equity Proceeds, so long as any
prepayment required pursuant to subsection 2.4B(iii)(d) has been made, by an
amount equal to such Net Equity Proceeds which are not so prepaid, and (ii)
reduced (a) on each Excess Cash Payment Date where Consolidated Excess Cash Flow
- -------
for the immediately preceding Fiscal Year is a negative number, by such amount,
(b) at the time any Consolidated Capital Expenditure is made pursuant to
subsection 7.8B, by the amount of such expenditure, (c) at the time any
intercompany loan is made pursuant to the second proviso to subsection 7.1(v),
by the principal amount of such loan, (d) at the time any Investment is made
pursuant to subsection 7.3(xiv), by the amount of such Investment, (e) at the
time any Cumulative Preferred Stock is redeemed pursuant to subsection 7.5(xi),
by the amount of any proceeds expended in connection with such redemption, (f)
at the time any cash dividend is paid with respect to Cumulative Preferred Stock
pursuant to subsection 7.5(xii), by the amount of such dividend, (g) at the time
any cash dividend is paid with respect to Holdings Common Stock pursuant to
subsection 7.5(xiii), by the amount of such cash dividend, (h) at the time any
Permitted Company Cumulative Preferred Stock is redeemed pursuant to subsection
7.5(xv), by the amount of any proceeds expended in connection with such
redemption, (i) at the time any cash dividend is paid with respect to Permitted
Company Cumulative Preferred Stock pursuant to subsection 7.5(xvi), by the
amount of such dividend and (j) at the time any acquisition is made pursuant to
subsection 7.7(xviii), by the amount of cash proceeds expended in connection
with such acquisition, it being understood that the Excess Proceeds Amount may
be reduced to an amount below $0 after giving effect to the reductions
enumerated in clause (ii)(a) above.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.
"Exchange Senior Subordinated Notes" means Senior Subordinated Notes
which are substantially identical securities to the Senior Subordinated Notes
issued on or prior to the Closing Date, which Exchange Senior Subordinated Notes
shall be issued pursuant to a registered exchange offer or private exchange
offer for the Senior Subordinated Notes and pursuant to the Senior Subordinated
Note Indenture. In no event will the issuance of any Exchange Senior
Subordinated Notes increase the aggregate principal amount of Senior
Subordinated Notes then
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outstanding or otherwise result in an increase in an interest rate applicable to
the Senior Subordinated Notes.
"Excluded Subsidiaries" means, collectively, all Foreign Subsidiaries
which are not Subsidiary Guarantors.
"Existing Credit Agreement" means that certain Credit Agreement dated
as of November 24, 1997, by and among Company, Domino's Farms Office Park
Limited Partnership, various lenders named herein, Comerica Bank, as co-agent,
Morgan Guaranty, as documentation agent and NDB Bank as agent, as amended prior
to the Closing Date.
"Existing Letter of Credit" shall have the meaning provided in
subsection 3.1D.
"Existing Shareholders" means certain existing shareholders of
Holdings disclosed to Arranger and Administrative Agent.
"Facilities" means any and all real property (including all buildings,
fixtures or other improvements located thereon) now, hereafter or (for purposes
of subsection 5.13 only) heretofore owned, leased, operated or used by Holdings
or any of its Subsidiaries or any of their respective predecessors or
Affiliates.
"Federal Funds Effective Rate" means, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by Administrative Agent from three Federal funds brokers
of recognized standing selected by Administrative Agent.
"Financial Plan" has the meaning assigned to that term in subsection
6.1(xiii).
"First Priority" means, with respect to any Lien purported to be
created in any Collateral pursuant to any Collateral Document, that (i) such
Lien has priority over any other Lien on such Collateral (other than Permitted
Encumbrances of the type referred to in clauses (v), (vi), (vii), (xiii), (xiv)
and (xv) of the definition thereof, Permitted Encumbrances of the type that are,
under applicable law and notwithstanding their subsequent creation, accorded
priority over Liens on the Collateral created pursuant to the Collateral
Documents and Liens permitted pursuant to subsection 7.2A(iii), 7.2A(iv) or (v))
and (ii) such Lien is the only Lien (other than Permitted Encumbrances and Liens
permitted pursuant to subsection 7.2) to which such Collateral is subject.
"Fiscal Year" means the fiscal year of Holdings and its Subsidiaries
ending on the Sunday nearest to December 31 of each calendar year. For purposes
of this Agreement, any particular Fiscal Year shall be designated by reference
to the calendar year in which the majority of such Fiscal Year falls.
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"Flood Hazard Property" means a Mortgaged Property located in an area
designated by the Federal Emergency Management Agency as having special flood or
mud slide hazards.
"Foreign Borrowing Base Amount" means, at any time, the sum of (i) 85%
of the book value of all accounts receivable of all Foreign Subsidiaries of
Holdings and (ii) 60% of the book value of all inventory of all Foreign
Subsidiaries of Holdings.
"Foreign Cash Equivalents" means certificates of deposit or bankers
acceptances of any bank organized under the laws of Canada, Japan or any country
that is a member of the European Economic Community whose short-term commercial
paper rating from S&P is at least A-2 or the equivalent thereof or from Moody's
is at least P-2 or the equivalent thereof, in each case with maturities of not
more than one year from the date of acquisition.
"Foreign Subsidiary" means a Subsidiary of Holdings other than a
Domestic Subsidiary.
"Foreign Subsidiary Working Capital Indebtedness" has the meaning
assigned to that term in subsection 7.1(xi).
"Funding and Payment Office" means (i) the office of Administrative
Agent and Swing Line Lender located at 500 Station Christiana Road, Newark,
Delaware or (ii) such other office of Administrative Agent and Swing Line Lender
as may from time to time hereafter be designated as such in a written notice
delivered by Administrative Agent and Swing Line Lender to Borrowers and each
Lender.
"Funding Date" means the date of the funding of a Loan.
"Funding Default" has the meaning assigned to that term in subsection
2.9.
"GAAP" means, subject to the limitations on the application thereof
set forth in subsections 1.2 and 1.4, generally accepted accounting principles
set forth in opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, in each case as the same are applicable to the
circumstances as of the date of determination.
"Governmental Acts" has the meaning assigned to that term in
subsection 3.5A.
"Governmental Authorization" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any federal, state
or local governmental authority, agency or court.
"Guaranties" means the Holdings Guaranty and the Subsidiary Guaranty.
-21-
"Hazardous Materials" means (i) any chemical, material or substance at
any time defined in any statute or regulation as or included in the definition
in any statute or regulation of "hazardous substances", "hazardous wastes",
"hazardous materials", "extremely hazardous waste", "acutely hazardous waste",
"radioactive waste", "biohazardous waste", "pollutant", "toxic pollutant",
"contaminant", "restricted hazardous waste", "infectious waste", "toxic
substances", or any other term or expression intended to define, list or
classify substances by reason of properties harmful to health, safety or the
indoor or outdoor environment (including harmful properties such as
ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive
toxicity, "TCLP toxicity" or "EP toxicity" or words of similar meaning and
regulatory effect under any applicable Environmental Laws); (ii) any oil,
petroleum, petroleum fraction or petroleum derived substance; (iii) any drilling
fluids, produced waters and other wastes associated with the exploration,
development or production of crude oil, natural gas or geothermal resources;
(iv) any flammable substances or explosives; (v) any radioactive materials; (vi)
any asbestos-containing materials; (vii) urea formaldehyde foam insulation;
(viii) polychlorinated biphenyls, including any oil or dielectric fluid
containing polychlorinated biphenyls; (ix) pesticides; and (x) any other
chemical, material or substance which could pose a hazard to the health and
safety of the owners, occupants or any Persons in the vicinity of any Facility
or to the indoor or outdoor environment.
"Hazardous Materials Activity" means any past, present or future
activity, event or occurrence involving any Hazardous Materials, including the
use, manufacture, possession, storage, holding, migration, Release, threatened
Release, discharge, placement, generation, transportation, processing,
treatment, abatement, removal, remediation, disposal, disposition or handling of
any Hazardous Materials, and any corrective action or response action with
respect to any of the foregoing.
"Hedge Agreement" means an Interest Rate Agreement or a Currency
Agreement designed to hedge against fluctuations in interest rates or currency
values, respectively.
"Holdings" has the meaning assigned to that term in the first
paragraph of this Agreement.
"Holdings Common Stock" means, collectively, (i) the Class A Common
Stock of Holdings, par value $.01 per share and (ii) the Class L Common Stock of
Holdings, par value $.01 per share.
"Holdings Guaranty" means the Holdings Guaranty executed and delivered
by Holdings on the Closing Date, substantially in the form of Exhibit XXII
------------
annexed hereto, as such Holdings Guaranty may thereafter be amended,
supplemented or otherwise modified from time to time as permitted thereunder and
hereunder.
"Holdings Pledge Agreement" means the Holdings Pledge Agreement
executed and delivered by Holdings and Collateral Agent on the Closing Date,
substantially in the form of Exhibit XXIII annexed hereto, as such Holdings
-------------
Pledge Agreement may thereafter be amended, supplemented or otherwise modified
from time to time as permitted thereunder and hereunder.
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"Holdings Security Agreement" means the Holdings Security Agreement
executed and delivered by Holdings and Collateral Agent on the Closing Date,
substantially in the form of Exhibit XXIV annexed hereto, as such Holdings
------------
Security Agreement may thereafter be amended, supplemented or otherwise modified
from time to time as permitted thereunder and hereunder.
"Immaterial Subsidiaries" means, with respect to any Person, any
Subsidiary or Subsidiaries of such Person the assets of which constitute,
individually or in the aggregate, less than 5 % of the total assets of such
Person and its Subsidiaries on a consolidated basis.
"Increased-Cost Lender" has the meaning assigned to that term in
subsection 2.10A(i).
"Indebtedness", as applied to any Person, means (i) all indebtedness
for borrowed money, (ii) that portion of obligations with respect to Capital
Leases that is properly classified as a liability on a balance sheet in
conformity with GAAP, (iii) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed money,
(iv) any obligation owed for all or any part of the deferred purchase price of
property or services (excluding any such obligations incurred under ERISA, any
accrued expenses or trade payables and any obligations in respect of employment
agreements of Holdings and its Subsidiaries (including under the Consulting
Agreement)), (a) which obligation in accordance with GAAP would be shown as a
liability on the balance sheet of such Person or (b) which purchase price is
evidenced by a note or similar written instrument, and (v) all indebtedness
secured by any Lien on any property or asset owned or held by that Person
regardless of whether the indebtedness secured thereby shall have been assumed
by that Person or is nonrecourse to the credit of that Person. The amount of any
Indebtedness which is non-recourse to the obligor thereunder or to any other
obligor and for which recourse is limited to an identified asset or assets shall
be equal to the lesser of (1) the stated amount of such obligation and (2) the
fair market value of such asset or assets. Obligations under Interest Rate
Agreements and Currency Agreements constitute (X) in the case of Hedge
Agreements, Contingent Obligations, and (Y) in all other cases, Investments, and
in neither case constitute Indebtedness.
"Indemnitee" has the meaning assigned to that term in subsection 10.3.
"Independent Public Accountant" means any of the five largest public
accounting firms in the United States selected by Holdings or Company.
"Information Systems and Equipment" means all computer hardware,
firmware and software, as well as other information processing systems, or any
equipment containing embedded microchips, whether directly owned, licensed,
leased, operated or otherwise controlled by Holdings or any of its Subsidiaries,
including through third-party service providers, and which, in whole or in part,
are used, operated, relied upon, or integral to, Holdings' or any of its
Subsidiaries' conduct of their business.
"Initial Period" means the period commencing on and including the
Closing Date and ending on (but excluding) the earlier of (i) the date on which
Arranger notifies Borrowers that
-23-
it has concluded its primary syndication of the Loans and Commitments and (ii)
the date which is 30 days after the Closing Date.
"Insignificant Permitted Acquisition" has the meaning assigned to that
term in subsection 7.7(xvi).
"Intellectual Property" means all patents, trademarks, tradenames,
copyrights, technology, know-how and processes which are used in the conduct of
the business of Holdings and its Subsidiaries as currently conducted that are
material to the condition (financial or otherwise), business or operations of
Holdings and its Subsidiaries, taken as a whole.
"Interest Payment Date" means (i) with respect to any Base Rate Loan,
each March 31, June 30, September 30 and December 31 of each year, commencing on
the first such date to occur after the Closing Date, and (ii) with respect to
any Eurodollar Rate Loan, the last day of each Interest Period applicable to
such Loan; provided that in the case of each Interest Period of longer than
--------
three months, "Interest Payment Date" shall also include each date that is three
months, or an integral multiple thereof, after the commencement of such Interest
Period.
"Interest Period" has the meaning assigned to that term in subsection
2.2B.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement to which Holdings or any of its Subsidiaries is a
party.
"Interest Rate Determination Date" means, with respect to any Interest
Period, the second Business Day prior to the first day of such Interest Period.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter, and any successor
statute, and the regulations promulgated by the Internal Revenue Service
thereunder.
"Inventory" means, with respect to any Person as of any date of
determination, all goods, merchandise and other personal property which are then
held by such Person for sale or lease, including raw materials and work in
process.
"Investment" means (i) any direct or indirect purchase or other
acquisition by Holdings or any of its Subsidiaries of, or of a beneficial
interest in, any Securities of any other Person (including any Subsidiary of
Holdings), (ii) any direct or indirect redemption, retirement, purchase or other
acquisition for value, by any Subsidiary of Holdings from any Person other than
Holdings or any of its Subsidiaries, of any equity Securities of such
Subsidiary, (iii) any direct or indirect loan, advance (other than advances to
employees for moving, entertainment and travel expenses, drawing accounts and
similar expenditures in the ordinary course of business) or capital contribution
by Holdings or any of its Subsidiaries to any other Person, including all
indebtedness and accounts receivable from that other Person that are not current
assets or did not arise from sales to that other Person in the ordinary course
of business, or (iv) Interest Rate Agreements or Currency Agreements not
constituting Hedge Agreements. The amount of any Investment shall be the
original cost of such Investment plus the cost of all additions thereto, without
any
-24-
adjustments for increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment.
"Investment Amount" means, for any period, the remainder of (i) the
amount received by Holdings or any of its Subsidiaries during such period as a
return of capital in respect of Investments by Holdings and its Subsidiaries
made pursuant to subsections 7.3(xxi), (xxii) and (xxiii) less (ii) the
----
aggregate amount expended by Holdings and its Subsidiaries during such period in
making Investments pursuant to subsections 7.3(xxi), (xxii) and (xxiii).
"IP Collateral" means, collectively, the Collateral under the Borrower
Patent and Trademark Security Agreement and the Subsidiary Patent and Trademark
Security Agreement.
"Issuing Lender" means, with respect to any Letter of Credit, the
Lender which issues or is otherwise obligated to issue such Letter of Credit,
determined as provided in subsection 3.1B(ii), provided that with respect to any
--------
Existing Letter of Credit, NBD Bank shall be deemed to be the "Issuing Lender"
for all purposes of this Agreement.
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form, provided
--------
that in no event shall any corporate Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.
"Landlord Consent and Estoppel" means, with respect to any Leasehold
Property, a letter, certificate or other instrument in writing from the lessor
under the related lease, reasonably satisfactory in form and substance to
Administrative Agent, pursuant to which such lessor substantially agrees, for
the benefit of Administrative Agent, (i) that without any further consent of
such lessor or any further action on the part of the Loan Party holding such
Leasehold Property, such Leasehold Property may be encumbered pursuant to a
Mortgage and may be assigned to the purchaser at a foreclosure sale or in a
transfer in lieu of such a sale (and to a subsequent third party assignee if
Administrative Agent, any Lender, or an Affiliate of either so acquires such
Leasehold Property), (ii) that such lessor shall not terminate such lease as a
result of a default by such Loan Party thereunder without first giving
Administrative Agent notice of such default and at least 60 days (or, if such
default cannot reasonably be cured by Administrative Agent within such period,
such longer period as may reasonably be required) to cure such default and (iii)
to such other matters relating to such Leasehold Property as Administrative
Agent may reasonably request; provided, however, that Administrative Agent may
-------- -------
determine in its reasonable discretion that any one or more of the agreements
set forth in clauses (i) through (iii) may be modified or omitted from a
Landlord Consent and Estoppel with respect to a particular Leasehold Property.
"Leasehold Property" means any leasehold interest of any Loan Party as
lessee under any lease of real property, other than any such leasehold interest
designated from time to time by Administrative Agent in its reasonable
discretion as not being required to be included in the Collateral.
-25-
"Lender" and "Lenders" means the Persons identified as "Lenders" and
listed on the signature pages of this Agreement, together with their successors
and permitted assigns pursuant to subsection 10.1, and the term "Lenders" shall
include Swing Line Lender unless the context otherwise requires; provided that
--------
the term "Lenders", when used in the context of a particular Commitment, shall
mean Lenders having that Commitment.
"Letter of Credit" or "Letters of Credit" means Commercial Letters of
Credit and Standby Letters of Credit issued or to be issued by Issuing Lenders
for the joint and several account of Borrowers pursuant to subsection 3.1.
"Letter of Credit Usage" means, as at any date of determination, the
sum of (i) the maximum aggregate amount which is or at any time thereafter may
become available for drawing under all Letters of Credit then outstanding plus
----
(ii) the aggregate amount of all drawings under Letters of Credit honored by
Issuing Lenders and not theretofore reimbursed by Borrowers (including any such
reimbursement out of the proceeds of Revolving Loans pursuant to subsection
3.3B).
"Leverage Ratio" means, at any time of determination, the ratio of (i)
Consolidated Total Debt as of the last day of the Test Period then most recently
ended to (ii) Consolidated Adjusted EBITDA for the Test Period then most
recently ended, in each case as set forth in the most recent Compliance
Certificate delivered by Holdings to Administrative Agent pursuant to clause
(iv) of subsection 6.1; provided, however, that with respect to any Test Period
-------- -------
during which a Permitted Acquisition occurs, for purposes of calculating the
Leverage Ratio under subsection 2.4B(iii)(e) and in the definition of Applicable
Leverage Ratio, Consolidated Adjusted EBITDA shall be determined in accordance
with the provisions of subsection 7.6D, except that any cost savings that would
otherwise be given effect in calculating Consolidated Adjusted EBITDA as a
result of such provisions shall not be given effect until such cost savings are
actually realized.
"Lien" means any lien, mortgage, pledge, assignment, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest) and any option, trust or other
preferential arrangement having the practical effect of any of the foregoing.
"Loan" or "Loans" means one or more of the Tranche A Term Loans,
Tranche B Term Loans, Tranche C Term Loans, Revolving Loans or Swing Line Loans
or any combination thereof.
"Loan Documents" means this Agreement, the Notes, the Letters of
Credit (and any applications for, or reimbursement agreements or other documents
or certificates executed by Borrowers in favor of an Issuing Lender relating to,
the Letters of Credit), the Guaranties and the Collateral Documents.
"Loan Party" means each Credit Agreement Party and any of Holdings'
Subsidiaries from time to time executing a Loan Document, and "Loan Parties"
means all such Persons, collectively.
-26-
"Margin Stock" has the meaning assigned to that term in Regulation U
of the Board of Governors of the Federal Reserve System as in effect from time
to time.
"Material Adverse Effect" means (i) a material adverse effect upon the
business, operations, properties, assets or condition (financial or otherwise)
of Holdings and its Subsidiaries, taken as a whole or (ii) the impairment of the
ability of any Credit Agreement Party to perform, or of Administrative Agent,
Collateral Agent or Lenders to enforce, the Obligations; provided that
--------
consummation of the Recapitalization Transactions in accordance with the terms
of the Recapitalization Agreement shall not be deemed to have a Material Adverse
Effect for purposes of subsection 5.4.
"Material Contract" means any contract or arrangement to which
Holdings or any of its Subsidiaries is a party (other than the Loan Documents)
for which breach, nonperformance, cancellation or failure to renew would
reasonably be expected to have a Material Adverse Effect.
"Material Leasehold Property" means any Leasehold Property set forth
on Schedule 4.1I hereto and any Leasehold Property acquired after the Closing
Date reasonably determined by Administrative Agent to be of material value as
Collateral or of material importance to the operations of Holdings or any of its
Subsidiaries; provided, however, that, no Leasehold Property with respect to
-------- -------
which the aggregate amount of all rents payable during any one Fiscal Year does
not exceed $300,000 shall be a "Material Leasehold Property".
"Maximum Consolidated Capital Expenditures Amount" has the meaning
assigned to that term in subsection 7.8A.
"Merger" means the merger of Merger Corp. with and into Holdings in
accordance with the terms of the Recapitalization Agreement and the Certificate
of Merger, with Holdings being the surviving corporation in such merger.
"Merger Corp." has the meaning assigned to that term in the recitals
of this Agreement.
"Minnesota Note" means the Intercompany Note, dated as of December 21,
1998, in an aggregate principal amount equal to $5,000,000 executed and
delivered by Domino's Pizza, Inc. on the Closing Date, substantially in the form
of Exhibit XXVI, as such Intercompany Note may be amended, supplemented or
------------
otherwise modified from time to time as permitted thereunder and hereunder.
"Morgan Guaranty" has the meaning assigned to that term in the
introduction to this Agreement.
"Mortgage" means (i) a security instrument (whether designated as a
deed of trust or a mortgage or by any similar title) executed and delivered by
any Loan Party, substantially in the form of Exhibit XXV annexed hereto or in
-----------
such other form or with such changes thereto or omissions therefrom as may be
approved by Administrative Agent in its reasonable discretion, in each case with
such changes thereto as may be recommended by Administrative Agent's local
counsel based on local laws or customary local mortgage or deed of trust
practices, or (ii) at
-27-
Administrative Agent's option, in the case of an Additional Mortgaged Property,
an amendment to an existing Mortgage, in form reasonably satisfactory to
Administrative Agent, adding such Additional Mortgaged Property to the Real
Property Assets encumbered by such existing Mortgage, in either case as such
security instrument or amendment may be amended, supplemented or otherwise
modified from time to time. "Mortgages" means all such instruments, including
the Closing Date Mortgages and any Additional Mortgages, collectively.
"Mortgaged Property" means a Closing Date Mortgaged Property or an
Additional Mortgaged Property.
"Multiemployer Plan" means any Employee Benefit Plan which is a
"multiemployer plan" as defined in Section 3(37) of ERISA.
"NAIC" means the National Association of Insurance Commissioners.
"NBD Bank" has the meaning assigned to that term in the introduction
to this Agreement.
"Net Asset Sale/Net Insurance Proceeds Payment Period" has the meaning
assigned to that term in subsection 2.4B(iii)(a).
"Net Asset Sale Proceeds" means, with respect to any Asset Sale, Cash
payments (including any Cash received by way of deferred payment pursuant to, or
by monetization of, a note receivable or otherwise, but only as and when so
received) received from such Asset Sale, net of any bona fide costs incurred in
connection with such Asset Sale, including (i) income taxes reasonably estimated
to be actually payable within two years of the date of such Asset Sale as a
result of any gain recognized in connection with such Asset Sale and (ii)
payment of the outstanding principal amount of, premium or penalty, if any, and
interest on any Indebtedness (other than the Loans) that is secured by a Lien on
the stock or assets in question and that is repaid as a result of such Asset
Sale.
"Net Equity Proceeds" has the meaning assigned to that term in
subsection 2.4B(iii)(d).
"Net Indebtedness Proceeds" has the meaning assigned to that term in
subsection 2.4B(iii)(c).
"Net Insurance/Condemnation Proceeds" means any Cash payments or
proceeds received by Holdings or any of its Subsidiaries (i) under any business
interruption insurance policy or casualty insurance policy in respect of a
covered loss thereunder or (ii) as a result of the taking of any assets of
Holdings or any of its Subsidiaries by any Person pursuant to the power of
eminent domain, condemnation or otherwise, or pursuant to a sale of any such
assets to a purchaser with such power under threat of such a taking, in each
case net of any actual and documented costs incurred by Holdings or any of its
Subsidiaries in connection with the adjustment or settlement of any claims of
Holdings or such Subsidiary in respect thereof, including (i) income taxes
reasonably estimated to be actually payable within two years of the date of
receipt of such payments or proceeds as a result of any gain recognized in
connection with the
-28-
receipt of such payment or proceeds and (ii) payment of the outstanding amount
of premium or penalty, if any, and interest of any Indebtedness (other than the
Loans) that is secured by a Lien on the stock or assets in question and that is
repaid as a result of receipt of such payments or proceeds.
"Net Proceeds Amount" has the meaning assigned to that term in
subsection 2.4B(iii) (f).
"New Business" means any assets or business acquired by Company or any
of its Subsidiaries in a Permitted Acquisition.
"Non-Consenting Lender" has the meaning assigned to that term in
subsection 2.10A(iii).
"Non-US Lender" has the meaning assigned to that term in subsection
2.7B(iii)(a).
"Notes" means one or more of the Tranche A Term Notes, Tranche B Term
Notes, Tranche C Term Notes, Revolving Notes or Swing Line Note or any
combination thereof.
"Notice of Borrowing" means a notice substantially in the form of
Exhibit I annexed hereto delivered by Borrowers to Administrative Agent pursuant
- ----------
to subsection 2.1B with respect to a proposed borrowing.
"Notice of Conversion/Continuation" means a notice substantially in
the form of Exhibit II annexed hereto delivered by Borrowers to Administrative
----------
Agent pursuant to subsection 2.2D with respect to a proposed conversion or
continuation of the applicable basis for determining the interest rate with
respect to the Loans specified therein.
"Notice of Issuance of Letter of Credit" means a notice substantially
in the form of Exhibit III annexed hereto delivered by Borrowers to
-----------
Administrative Agent pursuant to subsection 3.1B(i) with respect to the proposed
issuance of a Letter of Credit.
"Obligations" means all obligations of every nature of each Loan Party
from time to time owed to Agents, Lenders or their respective Affiliates or any
of them under the Loan Documents, whether for principal, interest, reimbursement
of amounts drawn under Letters of Credit, fees, expenses, indemnification or
otherwise.
"Officers' Certificate" means, as applied to any corporation, a
certificate executed on behalf of such corporation by its chairman of the board
(if an officer) or its president or one of its vice presidents and by its
principal financial officer or principal accounting officer or its treasurer;
provided that every Officers' Certificate with respect to the compliance with a
- --------
condition precedent to the making of any Loans hereunder shall include (i) a
statement that the officer or officers making or giving such Officers'
Certificate have read such condition and any definitions or other provisions
contained in this Agreement relating thereto, (ii) a statement that, in the
opinion of the signers, they have made or have caused to be made such
examination or investigation as is necessary to enable them to express an
informed opinion as to whether or not such
-29-
condition has been complied with, and (iii) a statement as to whether, in the
opinion of the signers, such condition has been complied with.
"Operating Lease" means, as applied to any Person, any lease
(including leases that may be terminated by the lessee at any time) of any
property (whether real, personal or mixed) that is not a Capital Lease other
than any such lease under which that Person is the lessor.
"Other Investors" means RGIP, LLC, DP Investors I, LLC, DP Investors
II, LLC, J.P. Morgan Capital Corporation, Sixty Wall Street Fund, L.P. and DP
Transitory Corporation.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"Pension Plan" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code
or Section 302 of ERISA.
"Permitted Acquired Debt" has the meaning assigned to that term in
subsection 7.1(x).
"Permitted Acquisition" means the acquisition of assets, stock or
other equity interests of a business effected in accordance with the provisions
of subsection 7.7(xvi).
"Permitted Acquisition Cost" means, with respect to any Permitted
Acquisition, the sum (without duplication) of (i) all cash paid by Holdings or
any of its Subsidiaries in connection with any such Permitted Acquisition, (ii)
the fair market value of the Holdings Common Stock (based on the good faith
determination of senior management of Holdings or, after an initial public
offering, the closing trading price of Holdings Common Stock on the date of such
Permitted Acquisition on the stock exchange on which such stock is listed)
issued as consideration pursuant to such Permitted Acquisition, (iii) the
aggregate amount (determined by using the face amount of the debt or the amount
payable at maturity, whichever is greater) of Permitted Seller Notes issued by
Company in connection with such Permitted Acquisition, (iv) the amount of all
Permitted Acquired Debt assumed in connection with such Permitted Acquisition
and (v) the aggregate amount of all Qualified Preferred Stock issued by Holdings
in connection with such Permitted Acquisition (determined by using (x) the
maximum liquidation preference thereof, (y) the gross cash proceeds from the
issuance thereof or (z) the fair market value (as determined in good faith by
senior management of Holdings) of the assets received from the direct issuance
thereof as consideration, whichever is greatest).
"Permitted Company Cumulative Preferred Stock" means any Preferred
Stock issued by Company to holders of Cumulative Preferred Stock in exchange for
shares of such Cumulative Preferred Stock, provided that the terms of such
--------
Preferred Stock (including, without limitation, dividend rate, redemption
provisions and covenants) shall be no more favorable to the holders thereof than
the terms of the Cumulative Preferred Stock and the documentation governing such
Preferred Stock shall be reasonably satisfactory to the Administrative Agent.
"Permitted Encumbrances" means the following types of Liens (excluding
any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by
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ERISA, any such Lien relating to or imposed in connection with any Environmental
Claim, and any such Lien expressly prohibited by any applicable terms of any of
the Collateral Documents):
(i) Liens for taxes, assessments or governmental charges or claims
the payment of which is not, at the time, required by subsection 6.3;
(ii) statutory Liens of landlords, statutory Liens of banks and
rights of set-off, statutory Liens of carriers, warehousemen, mechanics,
repairmen, workmen and materialmen, and other Liens imposed by law, in each
case incurred in the ordinary course of business (a) for amounts not yet
overdue or (b) for amounts that are overdue and that (in the case of any
such amounts overdue for a period in excess of 5 days) are being contested
in good faith by appropriate proceedings, so long as (1) such reserves or
other appropriate provisions, if any, as shall be required by GAAP shall
have been made for any such contested amounts, and (2) in the case of a
Lien with respect to any portion of the Collateral, such contest
proceedings conclusively operate to stay the sale of any portion of the
Collateral on account of such Lien;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money), so long as no foreclosure, sale or similar
proceedings have been commenced with respect to any portion of the
Collateral on account thereof;
(iv) any attachment or judgment Lien not constituting an Event of
Default under subsection 8.8;
(v) leases or subleases granted to third parties in the ordinary
course of business and not interfering in any material respect with the
ordinary conduct of the business of Holdings or any of its Subsidiaries or
resulting in a material diminution in the value of any Collateral as
security for the Obligations;
(vi) easements, rights-of-way, restrictions, encroachments, and
other defects or irregularities in title, in each case which do not and
will not interfere in any material respect with the ordinary conduct of the
business of Holdings or any of its Subsidiaries or result in a material
diminution in the value of any Collateral as security for the Obligations;
(vii) any (a) interest or title of a lessor or sublessor under any
lease not prohibited hereby, (b) restriction or encumbrance that the
interest or title of such lessor or sublessor may be subject to, or (c)
subordination of the interest of the lessee or sublessee under such lease
to any restriction or encumbrance referred to in the preceding clause (b);
(viii) Liens arising from filing UCC financing statements relating
solely to leases not prohibited by this Agreement;
-31-
(ix) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(x) any zoning or similar law or right reserved to or vested in any
governmental office or agency to control or regulate the use of any real
property;
(xi) Liens securing obligations (other than obligations representing
Indebtedness for borrowed money) under operating, reciprocal easement or
similar agreements entered into in the ordinary course of business of
Holdings and its Subsidiaries;
(xii) licenses of patents, trademarks and other intellectual property
rights granted by Holdings or any of its Subsidiaries in the ordinary
course of business and not interfering in any material respect with the
ordinary conduct of the business of Holdings or such Subsidiary;
(xiii) Liens existing on the Closing Date and described in the
Closing Date Mortgage Policies;
(xiv) Liens in existence on the Closing Date which are listed, and
the property subject thereto described, in Schedule 1.1(iii), plus
-----------------
renewals and extensions of such Liens, provided that (x) the aggregate
-------------
principal amount of the Indebtedness, if any, secured by such Liens does
not increase from that amount outstanding at the time of any such renewal
or extension and (y) any such renewal or extension does not encumber any
additional assets or properties of Holdings or any of its Subsidiaries; and
(xv) Liens on property or assets acquired pursuant to a Permitted
Acquisition, or on property or assets of a Subsidiary of Company in
existence at the time such Subsidiary is acquired pursuant to a Permitted
Acquisition, provided that (i) any Indebtedness that is secured by such
--------
Liens is permitted to exist under subsection 7.1(x), and (ii) such Liens
are not incurred in connection with, or in contemplation or anticipation
of, such Permitted Acquisition and do not attach to any other asset of
Holdings or any of its Subsidiaries.
"Permitted Group" means any group of investors if deemed to be a
"person" (as such term is used in Section 13(d)(3) of the Exchange Act) by
virtue of the Stockholders Agreement, as the same may be amended, modified or
supplemented from time to time, provided that (i) Bain is party to the
--------
Stockholders Agreement, (ii) the persons party to the Stockholders Agreement as
so amended, supplemented or modified from time to time that were not parties,
and are not Affiliates of persons who were parties, to the Stockholders
Agreement on the Closing Date, together with their respective Affiliates
(collectively, the "New Investors") are not the direct or indirect Beneficial
Owners (determined without reference to the Stockholders Agreement) of more than
50% of the voting interest in Holdings' equity Securities owned by all parties
to the Stockholders Agreement as so amended, supplemented or modified and (iii)
the New Investors, individually or in the aggregate, do not, directly or
indirectly, have the right, pursuant to the Stockholders Agreement (as so
amended, supplemented or modified) or otherwise
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to designate more than one-half of the directors of the Board of Directors of
Holdings or any direct or indirect parent entity of Holdings.
"Permitted Seller Note" means a promissory note containing
subordination provisions in substantially the form of, or no less favorable to
Lenders (in the reasonable judgment of Administrative Agent) than the
subordination provisions contained in, Exhibit XXVII annexed hereto,
-------------
representing any Indebtedness of Company incurred in connection with any
Permitted Acquisition payable to the seller in connection therewith, as such
note may be amended, supplemented or otherwise modified from time to time to the
extent permitted under subsection 7.14B; provided that no Permitted Seller Note
--------
shall (i) be guaranteed by Holdings or any Subsidiary of Holdings or secured by
any property of Holdings or any of its Subsidiaries, (ii) bear cash interest at
a rate greater than 15% per annum or (iii) provide for any prepayment or
repayment of all or any portion of the principal thereof prior to the date of
the final scheduled installment of principal of any of the Loans, except to the
extent any such prepayment or repayment is made expressly subject to the payment
restrictions set forth in subsection 7.5(x).
"Person" means and includes natural persons, corporations, limited
partnerships general partnerships, limited liability companies, limited
liability partnerships, joint stock companies, Joint Ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments (whether federal,
state or local, domestic or foreign, and including political subdivisions
thereof) and agencies or other administrative or regulatory bodies thereof.
"Pledged Collateral" means, collectively, the "Pledged Collateral" as
defined in the Holdings Pledge Agreement, the Borrower Pledge Agreement and the
Subsidiary Pledge Agreement.
"Post-Acquisition Leverage Ratio" has the meaning assigned to that
term in subsection 7.7(xvi).
"Potential Event of Default" means a condition or event that, after
notice or lapse of time or both, would constitute an Event of Default.
"Pre-Acquisition Leverage Ratio" has the meaning assigned to that term
in subsection 7.7(xvi).
"Preferred Stock," as applied to the capital stock of any Person,
means capital stock of such Person (other than common stock of such Person) of
any class or classes (however designed) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of capital
stock of any other class of such Person, and shall include Cumulative Preferred
Stock and, on and after the issuance thereof in accordance with the requirements
hereof, Qualified Preferred Stock and Permitted Company Cumulative Preferred
Stock.
"Pricing Certificate" has the meaning assigned to that term in the
definition of Applicable Leverage Ratio.
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"Pricing Period" has the meaning assigned to that term in the
definition of Applicable Leverage Ratio.
"Proceedings" has the meaning assigned to that term in subsection
6.1(x).
"Proposed Asset Sale Reinvestment Proceeds" has the meaning assigned
to that term in subsection 2.4B(iii)(a).
"Proposed Insurance Reinvestment Proceeds" has the meaning assigned to
that term in subsection 6.4C(ii).
"Pro Rata Share" means (i) with respect to all payments, computations
--------
and other matters relating to the Tranche A Term Loan Commitment or the Tranche
A Term Loan of any Lender, the percentage obtained by dividing (x) the Tranche A
--------
Term Loan Exposure of that Lender by (y) the aggregate Tranche A Term Loan
--
Exposure of all Lenders, (ii) with respect to all payments, computations and
other matters relating to the Tranche B Term Loan Commitment or the Tranche B
Term Loan of any Lender, the percentage obtained by dividing (x) the Tranche B
--------
Term Loan Exposure of that Lender by (y) the aggregate Tranche B Term Loan
--
Exposure of all Lenders, (iii) with respect to all payments, computations and
other matters relating to the Tranche C Term Loan Commitment or the Tranche C
Term Loan of any Lender, the percentage obtained by dividing (x) the Tranche C
--------
Term Loan Exposure of that Lender by (y) the aggregate Tranche C Term Loan
--
Exposure of all Lenders, (iv) with respect to all payments, computations and
other matters relating to the Revolving Loan Commitment or the Revolving Loans
of any Lender or any Letters of Credit issued or participations therein
purchased by any Lender or any participations in any Swing Line Loans purchased
by any Lender, the percentage obtained by dividing (x) the Revolving Loan
---------
Exposure of that Lender by (y) the aggregate Revolving Loan Exposure of all
--
Lenders, and (v) for all other purposes with respect to each Lender, the
percentage obtained by dividing (x) the sum of the Tranche A Term Loan Exposure
--------
of that Lender plus the Tranche B Term Loan Exposure of that Lender plus the
Tranche C Term Loan Exposure of that Lender plus the Revolving Loan Exposure of
----
that Lender by (y) the aggregate Tranche A Term Loan Exposure of all Lenders
--
plus the aggregate Tranche B Term Loan Exposure of all Lenders plus the
- ---- ----
aggregate Tranche C Term Loan Exposure of all Lenders plus the aggregate
----
Revolving Loan Exposure of all Lenders, in any such case as the applicable
percentage may be adjusted by assignments permitted pursuant to subsection 10.1.
The initial Pro Rata Share of each Lender for purposes of each of clauses (i),
--------
(ii), (iii), (iv) and (v) of the preceding sentence is set forth opposite the
name of that Lender in Schedule 2.1 annexed hereto.
------------
"PTO" means the United States Patent and Trademark Office or any
successor or substitute office in which filings are necessary in order to create
or perfect Liens on any IP Collateral.
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"Qualified Preferred Stock" means any Preferred Stock of Holdings, so
long as (i) the express terms that are applicable thereto shall provide that
dividends thereon shall not be required to be paid at any time (and to the
extent) that such payment would be prohibited by the terms of this Agreement or
any other agreement of Holdings relating to outstanding Indebtedness and (ii)
such Preferred Stock, by the terms applicable thereto (including the terms of
any security into which it is convertible or for which it is exchangeable) or
upon the happening of any event, cannot mature and is not mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable,
or required to be repurchased, at the sole option of the holder thereof
(including, without limitation, upon the occurrence of any Default or Event of
Default under subsection 8.11), in whole or in part, on or prior to the date
occurring December 21, 2008; provided that any Preferred Stock that would not
--------
constitute Qualified Preferred Stock as provided above solely because the
holders thereof have the right to require Holdings to repurchase such Preferred
Stock upon the occurrence of a "change of control" or an "asset sale" shall
constitute Qualified Preferred Stock if the terms applicable thereto provide
that Holdings may not repurchase or redeem any such Preferred Stock pursuant to
the documentation governing same unless such repurchase or redemption complies
with the requirements of subsection 7.5.
"Quarterly Payment Date" means the last Business Day of each March,
June, September and December.
"Real Property Asset" means, at any time of determination, any
interest then owned by any Loan Party in any real property.
"Recapitalization Agreement" means that certain Agreement and Plan of
Merger dated as of September 25, 1998 and as amended prior to the Closing Date,
by and among Merger Corp., Holdings and Thomas S. Monaghan, in the form
delivered to Arranger, Administrative Agent and Lenders prior to their execution
of this Agreement and as such agreement may be amended from time to time
thereafter to the extent permitted under subsection 7.14A.
"Recapitalization Financing Requirements" means the aggregate of all
amounts necessary to finance the Recapitalization Transactions.
"Recapitalization Revolving Loans" has the meaning assigned to that
term in subsection 2.5A.
"Recapitalization Transactions" means the series of transactions
described in Schedule 1.1(ii) annexed hereto, together with (i) the repayment of
----------------
all amounts outstanding under the Existing Credit Agreement, (ii) the Merger and
(iii) the payment of Transaction Costs and the other transactions contemplated
by the Recapitalization Agreement.
"Recorded Leasehold Interest" means a Leasehold Property with respect
to which a Record Document (as hereinafter defined) has been recorded in all
places necessary or desirable, in Administrative Agent's reasonable judgment, to
give constructive notice of such Leasehold Property to third-party purchasers
and encumbrances of the affected real property. For purposes of this
definition, the term "Record Document" means, with respect to any Leasehold
Property, (a) the lease evidencing such Leasehold Property or a memorandum
thereof, executed and
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acknowledged by the owner of the affected real property, as lessor, or (b) if
such Leasehold Property was acquired or subleased from the holder of a Recorded
Leasehold Interest, the applicable assignment or sublease documents, executed
and acknowledged by such holder, in each case in form sufficient to give such
constructive notice upon recordation and otherwise in form reasonably
satisfactory to Administrative Agent.
"Reference Lenders" means Morgan Guaranty, NBD Bank and Comerica.
"Refinancing Documents" means the documents and instruments entered
into in connection with the refinancing of the Existing Credit Agreement
pursuant to subsection 4.1F.
"Refunded Swing Line Loans" has the meaning assigned to that term in
subsection 2.1A(v).
"Register" has the meaning assigned to that term in subsection 2.1D.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing reserve requirements.
"Regulation T" means Regulation T of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing reserve requirements.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing margin requirements.
"Reimbursement Date" has the meaning assigned to that term in
subsection 3.3B.
"Related Agreements" means, collectively, the Recapitalization
Agreement, the Certificate of Merger, the Stockholders Agreement, the Consulting
Agreement, the Seller Contingent Note, the Senior Subordinated Note Indenture,
the Senior Subordinated Notes, the Cumulative Preferred Stock Documents and the
Refinancing Documents.
"Release" means any release, spill, emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping,
leaching or migration of Hazardous Materials into the indoor or outdoor
environment (including the abandonment or disposal of any barrels, containers or
other closed receptacles containing any Hazardous Materials), including the
migration of any Hazardous Materials through the air, soil, surface water or
groundwater.
"Replacement Lender" has the meaning assigned to that term in
subsection 2.10B(ii).
"Requisite Class Lenders" means, at any time of determination (i) for
the Class of Lenders having Tranche A Term Loan Exposure, Lenders having or
holding more than 50% of the sum of the aggregate Tranche A Term Loan Exposure
of all Lenders, (ii) for the Class of
-36-
Lenders having Tranche B Term Loan Exposure, Lenders having or holding more than
50% of the sum of the aggregate Tranche B Term Loan Exposure of all Lenders,
(iii) for the Class of Lenders having Tranche C Term Loan Exposure, Lenders
having or holding more than 50% of the sum of the aggregate Tranche C Term Loan
Exposure of all Lenders, and (iv) for the Class of Lenders having Revolving Loan
Exposure, Lenders having or holding more than 50% of the sum of the aggregate
Revolving Loan Exposure of all Lenders.
"Requisite Lenders" means Lenders having or holding more than 50% of
the sum of (i) the aggregate Tranche A Term Loan Exposure of all Lenders, (ii)
the aggregate Tranche B Term Loan Exposure of all Lenders, (iii) the aggregate
Tranche C Term Loan Exposure of all Lenders and (iv) the aggregate Revolving
Loan Exposure of all Lenders.
"Responsible Officer" means any of the chairman of the board (if an
officer), the president, any senior or executive vice president, the general
counsel, its principal financial officer or principal accounting officer, the
secretary or the treasurer of Holdings or, as applicable, any Subsidiary of
Holdings.
"Restricted Junior Payment" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock
of any Loan Party now or hereafter outstanding, except, in the case of Holdings,
a dividend payable solely in shares of that class of stock (or common stock of
any other class) to the holders of that class, (ii) any redemption, retirement,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any shares of any class of stock of any Loan Party now or
hereafter outstanding, (iii) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of stock of any Loan Party now or hereafter outstanding,
(iv) any payment or prepayment of principal of, premium, if any, or interest on,
or redemption, purchase, retirement, defeasance (including in-substance or legal
defeasance), sinking fund or similar payment with respect to, any Subordinated
Indebtedness (except, in the case of the Senior Subordinated Notes, through the
issuance of Exchange Senior Subordinated Notes as contemplated in the definition
of Senior Subordinated Notes and consistent with the requirements of the
definition of Exchange Senior Subordinated Notes), (v) any conversion or
exchange of the Cumulative Preferred Stock, except into or for Holdings Common
Stock, Qualified Preferred Stock or Permitted Company Cumulative Preferred
Stock, (vi) any payment by Holdings or any of its Subsidiaries of the Bain
Management Fees to Bain pursuant to the Bain Advisory Services Agreement and
(vii) any repayment by Domino's Pizza, Inc. to Company of amounts owing under
the Minnesota Note, it being understood and agreed that in no event shall the
accumulation of dividends on the Cumulative Preferred Stock be deemed to be a
"Restricted Junior Payment".
"Restricted Permitted Acquisition" has the meaning assigned to that
term in subsection 7.7(xvi).
"Revolving Loan Commitment" means the commitment of a Lender to make
Revolving Loans to Borrowers pursuant to subsection 2.1A(iv), to purchase
participations in Swingline Loans pursuant to subsection 2.1A(v) and to issue
and/or participate in Letters of Credit pursuant to Section 3, and "Revolving
Loan Commitments" means such commitments of all Lenders in the aggregate, as
same may be reduced as provided in subsection 2.4B(ii).
-37-
"Revolving Loan Commitment Termination Date" means the earlier of (i)
December 21, 2004 and (ii) the date of termination in whole of the Revolving
Loan Commitments pursuant to subsection 2.4B or Section 8.
"Revolving Loan Exposure" means, with respect to any Lender as of any
date of determination (i) prior to the termination of the Revolving Loan
Commitments, that Lender's Revolving Loan Commitment and (ii) after the
termination of the Revolving Loan Commitments, the sum of (a) the aggregate
outstanding principal amount of the Revolving Loans of that Lender plus (b) in
----
the event that Lender is an Issuing Lender, the aggregate Letter of Credit Usage
in respect of all Letters of Credit issued by that Lender (in each case net of
any participations purchased by other Lenders in such Letters of Credit or any
unreimbursed drawings thereunder) plus (c) the aggregate amount of all
----
participations purchased by that Lender in any outstanding Letters of Credit or
any unreimbursed drawings under any Letters of Credit plus (d) in the case of
----
Swing Line Lender, the aggregate outstanding principal amount of all Swing Line
Loans (net of any participations therein purchased by other Lenders) plus (e)
----
the aggregate amount of all participations purchased by that Lender in any
outstanding Swing Line Loans.
"Revolving Loans" means the Loans made by Lenders to Borrowers
pursuant to subsection 2.1A(iv).
"Revolving Notes" means any promissory notes of Borrowers issued (on a
joint and several basis) pursuant to subsection 2.1E to evidence the Revolving
Loans of any Lenders, substantially in the form of Exhibit VII annexed hereto,
-----------
as they may be amended, supplemented or otherwise modified from time to time.
"Secured Parties" has the meaning assigned to that term in the
Collateral Documents.
"Securities" means any stock, shares, partnership interests, voting
trust certificates, certificates of interest or participation in any profit-
sharing agreement or arrangement, options, warrants, bonds, debentures, notes,
or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as
"securities" or any certificates of interest, shares or participations in
temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and any successor statute.
"Seller Contingent Note" means the Promissory Note, dated as of
December 21, 1998, issued by Holdings to Thomas S. Monaghan, in the form
delivered to Arranger, Administrative Agent and Lenders prior to their execution
of this Agreement and as such note may be amended from time to time thereafter
to the extent permitted under subsection 7.14A.
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"Senior Subordinated Note Indenture" means the indenture pursuant to
which the Senior Subordinated Notes are issued, as such indenture may be
amended, modified or supplemented from time to time to the extent permitted
under subsection 7.14B.
"Senior Subordinated Notes" means the $275,000,000 in aggregate
principal amount of 10-3/8% Senior Subordinated Notes due 2009 of Company issued
pursuant to the Senior Subordinated Note Indenture. As used herein, the term
"Senior Subordinated Notes" shall include any Exchange Senior Subordinated Notes
issued pursuant to the Senior Subordinated Note Indenture in exchange for
theretofore outstanding Senior Subordinated Notes, as contemplated by the
Offering Memorandum, dated as of November 24, 1998, and the definition of
Exchange Senior Subordinated Notes.
"Shareholder Subordinated Note" means an unsecured junior subordinated
note issued by Holdings (and not guaranteed or supported in any way by any of
its Subsidiaries) containing subordination provisions substantially in the form
of, or no less favorable to Lenders (in the reasonable judgment of
Administrative Agent) than the subordination provisions contained in Exhibit
-------
XXVII annexed hereto, as such note may be amended, supplemented or otherwise
- -----
modified from time to time to the extent permitted under subsection 7.14B.
"Solvent" means, with respect to any Person, that as of the date of
determination (A) the aggregate value of such Person's assets, at fair value and
present fair saleable value, exceeds (i) its total liabilities (including
contingent, subordinated, unmatured and unliquidated liabilities) and (ii) the
amount required to pay such liabilities as they become absolute and matured in
the normal course of business; (B) such Person has the ability to pay its debts
and liabilities (including contingent, subordinated, unmatured and unliquidated
liabilities) as they become absolute and matured in the normal course of
business; (C) such Person does not have an unreasonably small amount of capital
with which to conduct its business; and (D) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due. For purposes of this
definition, the amount of any contingent liability at any time shall be computed
as the amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.
"Standby Letter of Credit" means any standby letter of credit or
similar instrument issued for the purpose of supporting (i) Indebtedness of
Holdings or any of its Subsidiaries in respect of industrial revenue or
development bonds or financings, (ii) workers' compensation liabilities of
Holdings or any of its Subsidiaries, (iii) the obligations of third party
insurers of Holdings or any of its Subsidiaries arising by virtue of the laws of
any jurisdiction requiring third party insurers, (iv) obligations with respect
to Capital Leases or Operating Leases of Holdings or any of its Subsidiaries,
(v) performance, payment, deposit or surety obligations of Holdings or any of
its Subsidiaries, in any case if required by law or governmental rule or
regulation or in accordance with custom and practice in the industry, (vi) any
other general insurance obligations of the Company or any of its Subsidiaries,
and (vii) such other obligations of Borrowers and their respective Subsidiaries
as are reasonably acceptable to Administrative Agent and the Issuing Lender and
otherwise permitted to exist pursuant to the terms of this Agreement; provided
--------
that Standby Letters of Credit may not be issued for the purpose of supporting
(a) trade payables or
-39-
(b) any Indebtedness constituting "antecedent debt" (as that term is used in
Section 547 of the Bankruptcy Code).
"Stockholders Agreement" means that certain Stockholders Agreement by
and among Holdings, Bain, the Other Investors and the Existing Shareholders, in
the form delivered to Arranger, Administrative Agent and Lenders prior to their
execution of this Agreement and as such agreement may be amended from time to
time thereafter to the extent permitted under subsection 7.14A.
"Subordinated Indebtedness" means (i) the Indebtedness of Company
evidenced by the Senior Subordinated Notes, (ii) Indebtedness of Holdings
evidenced by any Shareholder Subordinated Note, (iii) Indebtedness of Company
evidenced by any Permitted Seller Notes and (iv) any other Indebtedness of
Holdings, Borrowers or any of their respective Subsidiaries subordinated in
right of payment to the Obligations pursuant to documentation containing
maturities, amortization schedules, covenants, defaults, remedies, subordination
provisions and other material terms in form and substance reasonably
satisfactory to Administrative Agent and Requisite Lenders.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, limited liability company, association, joint venture or other
business entity of which more than 50% of the total voting power of shares of
stock or other ownership interests entitled (without regard to the occurrence of
any contingency) to vote in the election of the Person or Persons (whether
directors, managers, trustees or other Persons performing similar functions)
having the power to direct or cause the direction of the management and policies
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a combination
thereof.
"Subsidiary Borrower" has the meaning assigned to that term in the
introduction to this Agreement.
"Subsidiary Guarantor" means any Subsidiary of Holdings, other than
Borrowers, that executes and delivers a counterpart of the Subsidiary Guaranty
on the Closing Date or from time to time thereafter pursuant to subsection 6.8.
"Subsidiary Guaranty" means the Subsidiary Guaranty executed and
delivered by all Subsidiaries of Holdings (other than Borrowers and the Excluded
Subsidiaries) on the Closing Date and to be executed and delivered by additional
Subsidiaries of Holdings from time to time thereafter in accordance with
subsection 6.8, substantially in the form of Exhibit XVIII annexed hereto, as
-------------
such Subsidiary Guaranty may hereafter be amended, supplemented or otherwise
modified from time to time as permitted thereunder and hereunder.
"Subsidiary Patent and Trademark Security Agreement" means each
Subsidiary Patent and Trademark Security Agreement executed and delivered by
each existing Subsidiary Guarantor and Collateral Agent on the Closing Date and
executed and delivered by any additional Subsidiary Guarantor from time to time
thereafter in accordance with subsection 6.8, substantially in the form of
Exhibit XXI annexed hereto, as such Subsidiary Patent and Trademark Security
- -----------
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Agreement may be amended, supplemented or otherwise modified from time to time
as permitted thereunder and hereunder.
"Subsidiary Pledge Agreement" means the Subsidiary Pledge Agreement
executed and delivered by each existing Subsidiary Guarantor and Collateral
Agent on the Closing Date and executed and delivered by any additional
Subsidiary Guarantor from time to time thereafter in accordance with subsection
6.8, substantially in the form of Exhibit XIX annexed hereto, as such Subsidiary
-----------
Pledge Agreement may be amended, supplemented or otherwise modified from time to
time as permitted thereunder and hereunder.
"Subsidiary Security Agreement" means the Subsidiary Security
Agreement executed and delivered by each existing Subsidiary Guarantor and
Collateral Agent on the Closing Date or executed and delivered by any additional
Subsidiary Guarantor from time to time thereafter in accordance with subsection
6.8, substantially in the form of Exhibit XX annexed hereto, as such Subsidiary
----------
Security Agreement may be amended, supplemented or otherwise modified from time
to time as permitted thereunder and hereunder.
"Supplemental Collateral Agent" has the meaning assigned to that term
in subsection 9.1B.
"Swing Line Lender" means Morgan Guaranty, or any Person serving as a
successor Administrative Agent hereunder, in its capacity as Swing Line Lender
hereunder.
"Swing Line Loan Commitment" means the commitment of Swing Line Lender
to make Swing Line Loans to Borrowers pursuant to subsection 2.1A(v).
"Swing Line Loans" means the Loans made by Swing Line Lender to
Borrowers pursuant to subsection 2.1A(v).
"Swing Line Note" means any promissory note of Borrowers issued (on a
joint and several basis) pursuant to subsection 2.1E to evidence the Swing Line
Loans of Swing Line Lender, substantially in the form of Exhibit VIII annexed
------------
hereto, as it may be amended, supplemented or otherwise modified from time to
time.
"Syndication Agent" has the meaning assigned to that term in the
introduction to this Agreement.
"Tax" or "Taxes" means any present or future tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature and whatever called, by
whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or
assessed (including any foreign withholding tax and the Michigan Single Business
Tax); provided that "Tax on the overall net income" of a Person shall be
--------
construed as a reference to a tax imposed by the jurisdiction in which that
Person is organized or in which that Person's principal office (and/or, in the
case of a Lender, its lending office) is located or in which that Person
(and/or, in the case of a Lender, its lending office) is deemed to be doing
business (unless such Person would be treated as doing business in such
jurisdiction solely as a result of entering into the transactions contemplated
by the Loan Documents) on all or part of the net income, profits or gains
(whether worldwide, or only insofar
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as such income, profits or gains are considered to arise in or to relate to a
particular jurisdiction, or otherwise) of that Person including a franchise tax
imposed in lieu of a net income tax (and/or, in the case of a Lender, its
lending office).
"Terminated Lender" has the meaning assigned to that term in
subsection 2.10A(iii).
"Term Loan" means each Tranche A Term Loan, each Tranche B Term Loan
and each Tranche C Term Loan.
"Test Period" means each period of four consecutive Accounting
Quarters then last ended, in each case taken as one accounting period.
Notwithstanding anything to the contrary contained above or otherwise required
by GAAP, in the case of any Test Period ending prior to the date occurring
fifty-three weeks after the Closing Date, such period shall be a fifty-three
week period ending on the last day of the Accounting Quarter last ended, with
any calculations of (x) Consolidated Cash Interest Expense required in
determining compliance with subsection 7.6A to be made on a pro forma basis in
--- -----
accordance with, and to the extent provided in, the immediately succeeding
sentence and (y) Consolidated Adjusted EBITDA required in determining compliance
with subsections 7.6A, B and C to be made on a pro forma basis in accordance
--- -----
with, and to the extent provided in, the second succeeding sentence. To the
extent the respective Test Period (i) includes the first Accounting Quarter of
the Fiscal Year 1998, Consolidated Cash Interest Expense for such Accounting
Quarter shall be deemed to be $15,000,000, (ii) includes the second Accounting
Quarter of the Fiscal Year 1998, Consolidated Cash Interest Expense for such
Accounting Quarter shall be deemed to be $15,000,000, (iii) includes the third
Accounting Quarter of the Fiscal Year 1998, Consolidated Cash Interest Expense
for such Accounting Quarter shall be deemed to be $15,000,000 and (iv) includes
the fourth Accounting Quarter of the Fiscal Year 1998, Consolidated Cash
Interest Expense for such Accounting Quarter shall be deemed to be $20,000,000;
provided that any additional pro forma adjustments required by subsection 7.6D
- --------
for occurrences after the Closing Date (subject to the proviso in the definition
of Leverage Ratio) shall also be made. To the extent the respective Test Period
(i) includes the first Accounting Quarter of the Fiscal Year 1998, Consolidated
Adjusted EBITDA for such Accounting Quarter shall be deemed to be $26,510,000,
(ii) includes the second Accounting Quarter of the Fiscal Year 1998,
Consolidated Adjusted EBITDA for such Accounting Quarter shall be deemed to be
$28,820,000, (iii) includes the third Accounting Quarter of the Fiscal Year
1998, Consolidated Adjusted EBITDA for such Accounting Quarter shall be deemed
to be $28,600,000 and (iv) includes the fourth Accounting Quarter of the Fiscal
Year 1998, Consolidated Adjusted EBITDA for such Accounting Quarter shall be
deemed to be $46,270,000; provided that any additional pro forma adjustments
--------
required by subsection 7.6D for occurrences after the Closing Date (subject to
the proviso in the definition of Leverage Ratio) shall also be made.
"Title Company" means, collectively, Commonwealth Land Title Insurance
Company and/or one or more other title insurance companies reasonably
satisfactory to Arranger and Administrative Agent.
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"Total Utilization of Revolving Loan Commitments" means, as at any
date of determination, the sum of (i) the aggregate principal amount of all
outstanding Revolving Loans (other than Revolving Loans made for the purpose of
repaying any Refunded Swing Line Loans or reimbursing the applicable Issuing
Lender for any amount drawn under any Letter of Credit but not yet so applied)
plus (ii) the aggregate principal amount of all outstanding Swing Line Loans
- ----
plus (iii) the Letter of Credit Usage.
- ----
"Tranche" means the respective facility and commitments utilized in
making Loans hereunder, with there being four separate Tranches, i.e., Tranche A
----
Term Loans, Tranche B Term Loans, Tranche C Term Loans and Revolving Loans.
"Tranche A Term Loan" means a Loan made by a Lender to a Borrower as a
term loan pursuant to subsection 2.1A(i), and "Tranche A Term Loans" means any
such Loan or Loans, collectively.
"Tranche A Term Loan Commitment" means the commitment of a Lender to
make Tranche A Term Loans to Borrowers pursuant to subsection 2.1A(i), and
"Tranche A Term Loan Commitments" means such commitments of all Lenders in the
aggregate.
"Tranche A Term Loan Exposure" means, with respect to any Lender as of
any date of determination (i) prior to the funding of the Tranche A Term Loans,
that Lender's Tranche A Term Loan Commitment and (ii) after the funding of the
Tranche A Term Loans, the outstanding principal amount of the Tranche A Term
Loans of that Lender.
"Tranche A Term Notes" means any promissory notes of Borrowers issued
(on a joint and several basis) pursuant to subsection 2.1E to evidence the
Tranche A Term Loans of any Lenders, substantially in the form of Exhibit IV
----------
annexed hereto, as they may be amended, supplemented or otherwise modified from
time to time.
"Tranche B Term Loan" means a Loan made by a Lender to a Borrower as a
term loan pursuant to subsection 2.1A(ii), and "Tranche B Term Loans" means any
such Loan or Loans, collectively.
"Tranche B Term Loan Commitment" means the commitment of a Lender to
make Tranche B Term Loans to Borrowers pursuant to subsection 2.1A(ii), and
"Tranche B Term Loan Commitments" means such commitments of all Lenders in the
aggregate.
"Tranche B Term Loan Exposure" means, with respect to any Lender as of
any date of determination (i) prior to the funding of the Tranche B Term Loans,
that Lender's Tranche B Term Loan Commitment and (ii) after the funding of the
Tranche B Term Loans, the outstanding principal amount of the Tranche B Term
Loans of that Lender.
"Tranche B Term Notes" means any promissory notes of Borrowers issued
(on a joint and several basis) pursuant to subsection 2.1E to evidence the
Tranche B Term Loans of any Lenders, substantially in the form of Exhibit V
---------
annexed hereto, as they may be amended, supplemented or otherwise modified from
time to time.
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"Tranche C Term Loan" means a Loan made by a Lender to a Borrower as a
term loan pursuant to subsection 2.1A(iii), and "Tranche C Term Loans" means any
such Loan or Loans, collectively.
"Tranche C Term Loan Commitment" means the commitment of a Lender to
make Tranche C Term Loans to Borrowers pursuant to subsection 2.1A(iii), and
"Tranche C Term Loan Commitments" means such commitments of all Lenders in the
aggregate.
"Tranche C Term Loan Exposure" means, with respect to any Lender as of
any date of determination (i) prior to the funding of the Tranche C Term Loans,
that Lender's Tranche C Term Loan Commitment and (ii) after the funding of the
Tranche C Term Loans, the outstanding principal amount of the Tranche C Term
Loans of that Lender.
"Tranche C Term Notes" means any promissory notes of Borrowers issued
(on a joint and several basis) pursuant to subsection 2.1E to evidence the
Tranche C Term Loans of any Lenders, substantially in the form of Exhibit VI
----------
annexed hereto, as they may be amended, supplemented or otherwise modified from
time to time.
"Transaction Costs" means the fees, costs and expenses payable by
Credit Agreement Parties in connection with the transactions contemplated by the
Loan Documents and the Related Agreements.
"UCC" means the Uniform Commercial Code (or any similar or equivalent
legislation) as in effect in any applicable jurisdiction.
"Voting Stock" means, as to any Person, any equity Securities of such
Person entitled (without regard to the occurrence of any contingency) to vote
for the election of members of the Board of Directors of such Person.
"Waivable Mandatory Repayment" has the meaning assigned to that term
in subsection 2.4B(iv)(d).
"Year 2000 Compliant" means that all Information Systems and Equipment
accurately process date data (including, but not limited to, calculating,
comparing and sequencing), before, during and after the year 2000, as well as
same and multi-century dates, or between the years 1999 and 2000, taking into
account all leap years, including the fact that the year 2000 is a leap year,
and further, that when used in combination with, or interfacing with, other
Information Systems and Equipment, shall accurately accept, release and exchange
date data, and shall in all material respects continue to function in the same
manner as it performs today and shall not otherwise impair the accuracy or
functionality of Information Systems and Equipment.
1.2 Accounting Terms; Utilization of GAAP for Purposes of
-----------------------------------------------------
Calculations Under Agreement.
---------------------------
Except as otherwise expressly provided in this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP.
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Financial statements and other information required to be delivered by Holdings
to Lenders pursuant to clauses (i), (ii), (iii) and (xiii) of subsection 6.1
shall be prepared in accordance with GAAP as in effect at the time of such
preparation (and delivered together with the reconciliation statements provided
for in subsection 6.1(v)). Calculations in connection with the definitions,
covenants and other provisions of this Agreement shall utilize accounting
principles and policies in conformity with those used to prepare the financial
statements referred to in subsection 5.3. Notwithstanding the foregoing, except
as otherwise specifically provided herein, all computations determining
compliance with subsection 2.4 and Section 7, including the definitions used
therein, shall utilize accounting principles and policies in effect at the time
of the preparation of, and in conformity with those used to prepare, the
December 28, 1997 financial statements of Holdings and its Subsidiaries
delivered to the Lenders, without giving effect to purchase accounting
adjustments required or permitted by APB 16 and its interpretations (including
non-cash write-ups and non-cash charges relating to inventory, fixed assets and
in-process research and development, in each case arising in connection with any
Permitted Acquisitions) and APB 17 and its interpretations (including non-cash
charges relating to intangibles and goodwill arising in connection with any
Permitted Acquisitions).
1.3 Other Definitional Provisions and Rules of Construction.
-------------------------------------------------------
A. Any of the terms defined herein may, unless the context otherwise
requires, be used in the singular or the plural, depending on the reference.
B. References to "Sections" and "subsections" shall be to Sections
and subsections, respectively, of this Agreement unless otherwise specifically
provided.
C. The use herein of the word "include" or "including", when
following any general statement, term or matter, shall not be construed to limit
such statement, term or matter to the specific items or matters set forth
immediately following such word or to similar items or matters, whether or not
nonlimiting language (such as "without limitation" or "but not limited to" or
words of similar import) is used with reference thereto, but rather shall be
deemed to refer to all other items or matters that fall within the broadest
possible scope of such general statement, term or matter.
D. Each reference to a "Accounting Quarter period" of a specified
number of Accounting Quarters shall be a reference to a period of consecutive
Accounting Quarters of such number.
1.4 Changes in GAAP.
---------------
In the event that a change in GAAP or other accounting principles and
policies after the date hereof affects in any material respect the calculations
of the compliance by Holdings and its Subsidiaries with the covenants contained
herein, Lenders and Credit Agreement Parties agree to negotiate in good faith to
amend the affected covenants (and related definitions) to compensate for the
effect of such changes so that the restrictions, limitations and performance
standards effectively imposed by such covenants, as so amended, are
substantially identical to the restrictions, limitations and performance
standards imposed by such covenants as in effect on the
-45-
date hereof; provided that if Requisite Lenders and Credit Agreement Parties
--------
fail to reach agreement with respect to such amendment within a reasonable
period of time following the date of effectiveness of any such change,
calculation of compliance by Holdings and its Subsidiaries with the covenants
contained herein shall be determined in accordance with GAAP as in effect
immediately prior to such change.
SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 Commitments: Making of Loans; Register; Notes.
---------------------------------------------
A. Commitments. Subject to the terms and conditions of this
-----------
Agreement and in reliance upon the representations and warranties of Credit
Agreement Parties herein set forth, each Lender hereby severally agrees to make
the Loans described in subsections 2.1A(i), 2.1A(ii), 2.1A(iii), and 2.1A(iv)
and Swing Line Lender hereby agrees to make the Loans described in subsection
2.1A(v).
(i) Tranche A Term Loans. Each Lender with a Tranche A Term Loan
--------------------
Commitment severally agrees to lend to one or both Borrowers (on a joint
and several basis) on the Closing Date an amount not exceeding its Pro Rata
--------
Share of the aggregate amount of the Tranche A Term Loan Commitments to be
used for the purposes identified in subsection 2.5A. The amount of each
Lender's Tranche A Term Loan Commitment is set forth opposite its name on
Schedule 2.1 annexed hereto and the aggregate amount of the Tranche A Term
------------
Loan Commitments is $175,000,000; provided that the Tranche A Term Loan
--------
Commitments of Lenders shall be adjusted to give effect to any assignments
of the Tranche A Term Loan Commitments pursuant to subsection 10.1B. Each
Lender's Tranche A Term Loan Commitment shall expire immediately and
without further action on January 15, 1999 if the Tranche A Term Loans are
not made on or before that date. Each Borrower may make only one borrowing
under the Tranche A Term Loan Commitments. The proceeds of each Tranche A
Term Loan shall be made available to Borrowers as directed by either of
them (with the proceeds to be used by one or both Borrowers as they may
determine), it being understood and agreed that Borrowers shall be jointly
and severally obligated with respect to each Tranche A Term Loan for the
repayment thereof and all amounts owing with respect thereto. Amounts
borrowed under this subsection 2.1A(i) and subsequently repaid or prepaid
may not be reborrowed.
(ii) Tranche B Term Loans. Each Lender with a Tranche B Term
--------------------
Loan Commitment severally agrees to lend to one or both Borrowers (on a
joint and several basis) on the Closing Date an amount not exceeding its
Pro Rata Share of the aggregate amount of the Tranche B Term Loan
--------
Commitments to be used for the purposes identified in subsection 2.5A. The
amount of each Lender's Tranche B Term Loan Commitment is set forth
opposite its name on Schedule 2.1 annexed hereto and the aggregate amount
------------
of the Tranche B Term Loan Commitments is $135,000,000; provided that the
--------
Tranche B Term Loan Commitments of Lenders shall be adjusted to give effect
to any assignments of the Tranche B Term Loan Commitments pursuant to
subsection 10.1B. Each Lender's Tranche B Term Loan Commitment shall
expire immediately and without further action on
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January 15, 1999 if the Tranche B Term Loans are not made on or before that
date. Each Borrower may make only one borrowing under the Tranche B Term
Loan Commitments. The proceeds of each Tranche B Term Loan shall be made
available to Borrowers as directed by either of them (with the proceeds to
be used by one or both Borrowers as they may determine), it being
understood and agreed that Borrowers shall be jointly and severally
obligated with respect to each Tranche B Term Loan for the repayment
thereof and all amounts owing with respect thereto. Amounts borrowed under
this subsection 2.1A(ii) and subsequently repaid or prepaid may not be
reborrowed.
(iii) Tranche C Term Loans. Each Lender with a Tranche C Term
--------------------
Loan Commitment severally agrees to lend to one or both Borrowers (on a
joint and several basis) on the Closing Date an amount not exceeding its
Pro Rata Share of the aggregate amount of the Tranche C Term Loan
--------
Commitments to be used for the purposes identified in subsection 2.5A. The
amount of each Lender's Tranche C Term Loan Commitment is set forth
opposite its name on Schedule 2.1 annexed hereto and the aggregate amount
------------
of the Tranche C Term Loan Commitments is $135,000,000; provided that the
--------
Tranche C Term Loan Commitments of Lenders shall be adjusted to give effect
to any assignments of the Tranche C Term Loan Commitments pursuant to
subsection 10.1B. Each Lender's Tranche C Term Loan Commitment shall
expire immediately and without further action on January 15, 1999 if the
Tranche C Term Loans are not made on or before that date. Each Borrower
may make only one borrowing under the Tranche C Term Loan Commitments. The
proceeds of each Tranche C Term Loan shall be made available to Borrowers
as directed by either of them (with the proceeds to be used by one or both
Borrowers as they may determine), it being understood and agreed that
Borrowers shall be jointly and severally obligated with respect to each
Tranche C Term Loan for the repayment thereof and all amounts owing with
respect thereto. Amounts borrowed under this subsection 2.1A(ii) and
subsequently repaid or prepaid may not be reborrowed.
(iv) Revolving Loans. Each Lender with a Revolving Loan
---------------
Commitment severally agrees, subject to the limitations set forth below
with respect to the maximum amount of Revolving Loans permitted to be
outstanding from time to time, to lend to one or both Borrowers (on a joint
and several basis) from time to time during the period from the Closing
Date to but excluding the Revolving Loan Commitment Termination Date an
aggregate amount not exceeding its Pro Rata Share of the aggregate amount
--------
of the Revolving Loan Commitments to be used for the purposes identified in
subsection 2.5B. The original amount of each Lender's Revolving Loan
Commitment is set forth opposite its name on Schedule 2.1 annexed hereto
------------
and the aggregate original amount of the Revolving Loan Commitments is
$100,000,000; provided that the Revolving Loan Commitments of Lenders shall
--------
be adjusted to give effect to any assignments of the Revolving Loan
Commitments pursuant to subsection 10.1B; and provided further, that the
----------------
amount of the Revolving Loan Commitments shall be reduced from time to time
by the amount of any reductions thereto made pursuant to subsections
2.4B(ii) and 2.4B(iii). Each Lender's Revolving Loan Commitment shall
expire on the Revolving Loan Commitment Termination Date and all Revolving
Loans and all other amounts owed hereunder with respect to the Revolving
Loans and the Revolving Loan Commitments shall be paid in full no later
than that date; provided that each Lender's
--------
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Revolving Loan Commitment shall expire immediately and without further
action on January 15, 1999 if the Term Loans are not made on or before that
date. Amounts borrowed under this subsection 2.1A(iv) may be repaid and
reborrowed to but excluding the Revolving Loan Commitment Termination Date.
The proceeds of each Revolving Loan shall be made available to Borrowers as
directed by either of them (with the proceeds to be used by one or both
Borrowers as they may determine), it being understood and agreed that
Borrowers shall be jointly and severally obligated with respect to each
Revolving Loan for the repayment thereof and all amounts owing with respect
thereto.
Anything contained in this Agreement to the contrary
notwithstanding, in no event shall the Total Utilization of Revolving Loan
Commitments at any time exceed the Revolving Loan Commitments then in
effect.
(v) Swing Line Loans. Swing Line Lender hereby agrees, subject
----------------
to the limitations set forth below with respect to the maximum amount of
Swing Line Loans permitted to be outstanding from time to time, to make a
portion of the Revolving Loan Commitments available to one or both
Borrowers (on a joint and several basis) from time to time during the
period from the Closing Date to but excluding the Revolving Loan Commitment
Termination Date by making Swing Line Loans to one or both Borrowers (on a
joint and several basis) in an aggregate amount not exceeding the amount of
the Swing Line Loan Commitment to be used for the purposes identified in
subsection 2.5B, notwithstanding the fact that such Swing Line Loans, when
aggregated with Swing Line Lender's outstanding Revolving Loans and Swing
Line Lender's Pro Rata Share of the Letter of Credit Usage then in effect,
--------
may exceed Swing Line Lender's Revolving Loan Commitment. The original
amount of the Swing Line Loan Commitment is $10,000,000; provided that any
--------
reduction of the Revolving Loan Commitments made pursuant to subsection
2.4B(ii) or 2.4B(iii) which reduces the aggregate Revolving Loan
Commitments to an amount less than the then current amount of the Swing
Line Loan Commitment shall result in an automatic corresponding reduction
of the Swing Line Loan Commitment to the amount of the Revolving Loan
Commitments, as so reduced, without any further action on the part of
either Borrower, Administrative Agent or Swing Line Lender. The Swing Line
Loan Commitment shall expire on the Revolving Loan Commitment Termination
Date and all Swing Line Loans and all other amounts owed hereunder with
respect to the Swing Line Loans shall be paid in full no later than that
date; provided that the Swing Line Loan Commitment shall expire immediately
--------
and without further action on January 15, 1999 if the Term Loans are not
made on or before that date. Amounts borrowed under this subsection
2.1A(v) may be repaid and reborrowed to but excluding the Revolving Loan
Commitment Termination Date. The proceeds of each Swing Line Loan shall be
made available to Borrowers as directed by either of them (with the
proceeds to be used by one or both Borrowers as they may determine), it
being understood and agreed that Borrowers shall be jointly and severally
obligated with respect to each Swing Line Loan for the repayment thereof
and all amounts owing with respect thereto.
-48-
Anything contained in this Agreement to the contrary
notwithstanding, in no event shall the Total Utilization of Revolving Loan
Commitments at any time exceed the Revolving Loan Commitments then in
effect.
With respect to any Swing Line Loans which have not been
voluntarily prepaid by Borrowers pursuant to subsection 2.4B(i), Swing Line
Lender may, at any time in its sole and absolute discretion, deliver to
Administrative Agent (with a copy to Borrowers), no later than 11:00 A.M.
(New York City time) on the first Business Day in advance of the proposed
Funding Date, a notice (which shall be deemed to be a Notice of Borrowing
given by Borrowers) requesting Lenders to make Revolving Loans that are
Base Rate Loans on such Funding Date in an amount equal to the amount of
such Swing Line Loans (the "Refunded Swing Line Loans") outstanding on the
date such notice is given which Swing Line Lender requests Lenders to
prepay. Anything contained in this Agreement to the contrary
notwithstanding, (i) the proceeds of such Revolving Loans made by Lenders
other than Swing Line Lender shall be immediately delivered by
Administrative Agent to Swing Line Lender (and not to Borrowers) and
applied to repay a corresponding portion of the Refunded Swing Line Loans
and (ii) on the day such Revolving Loans are made, Swing Line Lender's Pro
---
Rata Share of the Refunded Swing Line Loans shall be deemed to be paid with
----
the proceeds of a Revolving Loan made by Swing Line Lender, and such
portion of the Swing Line Loans deemed to be so paid shall no longer be
outstanding as Swing Line Loans and shall no longer be due under the Swing
Line Note, if any, of Swing Line Lender but shall instead constitute part
of Swing Line Lender's outstanding Revolving Loans and shall be due under
the Revolving Note, if any, of Swing Line Lender. Borrowers hereby
authorize Administrative Agent and Swing Line Lender to charge Borrowers'
accounts with Administrative Agent and Swing Line Lender (up to the amount
available in each such account) in order to immediately pay Swing Line
Lender the amount of the Refunded Swing Line Loans to the extent the
proceeds of such Revolving Loans made by Lenders, including the Revolving
Loan deemed to be made by Swing Line Lender, are not sufficient to repay in
full the Refunded Swing Line Loans. If any portion of any such amount paid
(or deemed to be paid) to Swing Line Lender should be recovered by or on
behalf of either Borrower from Swing Line Lender in bankruptcy, by
assignment for the benefit of creditors or otherwise, the loss of the
amount so recovered shall be ratably shared among all Lenders in the manner
contemplated by subsection 10.5.
If for any reason (a) Revolving Loans are not made upon the
request of Swing Line Lender as provided in the immediately preceding
paragraph in an amount sufficient to repay any amounts owed to Swing Line
Lender in respect of any outstanding Swing Line Loans or (b) the Revolving
Loan Commitments are terminated at a time when any Swing Line Loans are
outstanding, each Lender shall be deemed to, and hereby agrees to, have
purchased a participation in such outstanding Swing Line Loans in an amount
equal to its Pro Rata Share (calculated, in the case of the foregoing
--------
clause (b), immediately prior to such termination of the Revolving Loan
Commitments) of the unpaid amount of such Swing Line Loans, together with
accrued interest thereon. Upon one Business Day's notice from Swing Line
Lender, each Lender shall deliver to Swing Line Lender an amount equal to
its respective participation in same day funds at the Funding
-49-
and Payment Office. In order to further evidence such participation (and
without prejudice to the effectiveness of the participation provisions set
forth above), each Lender agrees to enter into a separate participation
agreement at the request of Swing Line Lender in form and substance
reasonably satisfactory to Swing Line Lender. In the event any Lender fails
to make available to Swing Line Lender the amount of such Lender's
participation as provided in this paragraph, Swing Line Lender shall be
entitled to recover such amount on demand from such Lender together with
interest thereon at the rate customarily used by Swing Line Lender for the
correction of errors among banks for three Business Days and thereafter at
the Base Rate. In the event Swing Line Lender receives a payment of any
amount in which other Lenders have purchased participations as provided in
this paragraph, Swing Line Lender shall promptly distribute to each such
other Lender its Pro Rata Share of such payment.
--- ----
Anything contained herein to the contrary notwithstanding, each
Lender's obligation to make Revolving Loans for the purpose of repaying any
Refunded Swing Line Loans pursuant to the second preceding paragraph and
each Lender's obligation to purchase a participation in any unpaid Swing
Line Loans pursuant to the immediately preceding paragraph shall be
absolute and unconditional and shall not be affected by any circumstance,
including (a) any set-off, counterclaim, recoupment, defense or other right
which such Lender may have against Swing Line Lender, either Borrower or
any other Person for any reason whatsoever; (b) the occurrence or
continuation of an Event of Default or a Potential Event of Default; (c)
any adverse change in the business, operations, properties, assets,
condition (financial or otherwise) or prospects of Holdings or any of its
Subsidiaries; (d) any breach of this Agreement or any other Loan Document
by any party thereto; or (e) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing; provided that
--------
such obligations of each Lender are subject to the condition that (X) Swing
Line Lender believed in good faith that all conditions under Section 4 to
the making of the applicable Refunded Swing Line Loans or other unpaid
Swing Line Loans, as the case may be, were satisfied at the time such
Refunded Swing Line Loans or unpaid Swing Line Loans were made or (Y) the
satisfaction of any such condition not satisfied had been waived in
accordance with subsection 10.6 prior to or at the time such Refunded Swing
Line Loans or other unpaid Swing Line Loans were made.
B. Borrowing Mechanics. Tranche A Term Loans, Tranche B Term Loans,
-------------------
Tranche C Term Loans or Revolving Loans made on any Funding Date (other than
Revolving Loans made pursuant to a request by Swing Line Lender pursuant to
subsection 2.1A(v) for the purpose of repaying any Refunded Swing Line Loans or
Revolving Loans made pursuant to subsection 3.3B for the purpose of reimbursing
any Issuing Lender for the amount of a drawing under a Letter of Credit issued
by it) shall be in an aggregate minimum amount of $500,000 and integral
multiples of $100,000 in excess of that amount; provided that Term Loans or
--------
Revolving Loans made on any Funding Date as Eurodollar Rate Loans with a
particular Interest Period shall be in an aggregate minimum amount of
$1,000,000, and integral multiples of $100,000 in excess of that amount. Swing
Line Loans made on any Funding Date shall be in an aggregate minimum amount of
$100,000 and integral multiples of $100,000 in excess of that amount. Whenever
Borrowers desire that Lenders make Term Loans or Revolving Loans they shall
deliver to
-50-
Administrative Agent a Notice of Borrowing no later than 12:00 Noon (New York
City time) at least three Business Days in advance of the proposed Funding Date
(in the case of a Eurodollar Rate Loan) or at least one Business Day in advance
of the proposed Funding Date (in the case of a Base Rate Loan). Whenever
Borrowers desire that Swing Line Lender make a Swing Line Loan, they shall
deliver to Administrative Agent a Notice of Borrowing no later than 12:00 Noon
(New York City time) on the proposed Funding Date. The Notice of Borrowing shall
specify (i) the proposed Funding Date (which shall be a Business Day), (ii) the
amount and type of Loans requested, (iii) in the case of Swing Line Loans, that
such Loans shall be Base Rate Loans, (iv) in the case of Term Loans and
Revolving Loans, whether such Loans shall be Base Rate Loans or Eurodollar Rate
Loans, and (v) in the case of any Loans requested to be made as Eurodollar Rate
Loans, the initial Interest Period requested therefor. Term Loans and Revolving
Loans may be continued as or converted into Base Rate Loans and Eurodollar Rate
Loans in the manner provided in subsection 2.1D. In lieu of delivering the
above-described Notice of Borrowing, either Borrower may give Administrative
Agent telephonic notice by the required time of any proposed borrowing under
this subsection 2.1B; provided that such notice shall be promptly confirmed in
--------
writing by delivery of a Notice of Borrowing to Administrative Agent on or
before the applicable Funding Date.
Neither Administrative Agent nor any Lender shall incur any liability
to Borrowers in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to borrow on behalf of either
Borrower or for otherwise acting in good faith under this subsection 2.1B, and
upon funding of Loans by Lenders in accordance with this Agreement pursuant to
any such telephonic notice Borrowers shall have effected Loans hereunder.
Borrowers shall notify Administrative Agent prior to the funding of
any Loans in the event that any of the matters to which Borrowers are required
to certify in the applicable Notice of Borrowing is no longer true and correct
as of the applicable Funding Date, and the acceptance by either Borrower of the
proceeds of any Loans shall constitute a re-certification by Borrowers, as of
the applicable Funding Date, as to the matters to which Borrowers are required
to certify in the applicable Notice of Borrowing.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a
Notice of Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu
thereof) shall be irrevocable on and after the related Interest Rate
Determination Date, and the relevant Borrower shall be bound to make a borrowing
in accordance therewith.
C. Disbursement of Funds. All Tranche A Term Loans, Tranche B Term
---------------------
Loans, Tranche C Term Loans and Revolving Loans under this Agreement shall be
made by Lenders simultaneously and proportionately to their respective Pro Rata
--------
Shares, it being understood that no Lender shall be responsible for any default
by any other Lender in that other Lender's obligation to make a Loan requested
hereunder nor shall the Commitment of any Lender to make the particular type of
Loan requested be increased or decreased as a result of a default by any other
Lender in that other Lender's obligation to make a Loan requested hereunder.
Promptly after receipt by Administrative Agent of a Notice of Borrowing pursuant
to subsection 2.1B (or telephonic notice in lieu thereof), Administrative Agent
shall notify each Lender or
-51-
Swing Line Lender, as the case may be, of the proposed borrowing. Each Lender
shall make the amount of its Loan available to Administrative Agent not later
than 1:00 P.M. (New York City time) on the applicable Funding Date, and Swing
Line Lender shall make the amount of its Swing Line Loan available to
Administrative Agent not later than 2:00 P.M. (New York City time) on the
applicable Funding Date, in each case in same day funds in Dollars, at the
Funding and Payment Office. Except as provided in subsection 2.1A(v) or
subsection 3.3B with respect to Revolving Loans used to repay Refunded Swing
Line Loans or to reimburse any Issuing Lender for the amount of a drawing under
a Letter of Credit issued by it, upon satisfaction or waiver of the conditions
precedent specified in subsections 4.1 (in the case of Loans made on the Closing
Date) and 4.2 (in the case of all Loans), Administrative Agent shall make the
proceeds of such Loans available to the relevant Borrower or Borrowers on the
applicable Funding Date by causing an amount of same day funds in Dollars equal
to the proceeds of all such Loans received by Administrative Agent from Lenders
or Swing Line Lender, as the case may be, to be credited to the account(s) of
the relevant Borrower or Borrowers at the Funding and Payment Office.
Unless Administrative Agent shall have been notified by any Lender
prior to the Funding Date for any Loans that such Lender does not intend to make
available to Administrative Agent the amount of such Lender's Loan requested on
such Funding Date, Administrative Agent may assume that such Lender has made
such amount available to Administrative Agent on such Funding Date and
Administrative Agent may, in its sole discretion, but shall not be obligated to,
make available to the relevant Borrower or Borrowers a corresponding amount on
such Funding Date. If such corresponding amount is not in fact made available
to Administrative Agent by such Lender, Administrative Agent shall be entitled
to recover such corresponding amount on demand from such Lender together with
interest thereon, for each day from such Funding Date until the date such amount
is paid to Administrative Agent, at the customary rate set by Administrative
Agent for the correction of errors among banks for three Business Days and
thereafter at the Base Rate. If such Lender does not pay such corresponding
amount forthwith upon Administrative Agent's demand therefor, Administrative
Agent shall promptly notify Borrowers and Borrowers jointly and severally agree
to pay immediately such corresponding amount to Administrative Agent together
with interest thereon, for each day from such Funding Date until the date such
amount is paid to Administrative Agent, at the rate of interest then applicable
to the Loan for which Administrative Agent has demanded payment. Nothing in
this subsection 2.1C shall be deemed to relieve any Lender from its obligation
to fulfill its Commitments hereunder or to prejudice any rights that Borrowers
may have against any Lender as a result of any default by such Lender hereunder.
D. The Register.
------------
(i) Administrative Agent shall maintain, at its address referred to
in subsection 10.8, a register for the recordation of the names and
addresses of Lenders and the Commitments and Loans of each Lender from time
to time (the "Register"). The Register shall be available for inspection by
Borrowers or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
-52-
(ii) Administrative Agent shall record in the Register the Tranche A
Term Loan Commitment, Tranche B Term Loan Commitment, Tranche C Term Loan
Commitment and Revolving Loan Commitment and the Tranche A Term Loans,
Tranche B Term Loans, Tranche C Term Loans and Revolving Loans from time to
time of each Lender, the Swing Line Loan Commitment and the Swing Line
Loans from time to time of Swing Line Lender, and each repayment or
prepayment in respect of the principal amount of the Tranche A Term Loans,
Tranche B Term Loans, Tranche C Term Loans or Revolving Loans of each
Lender or the Swing Line Loans of Swing Line Lender. Any such recordation
shall be conclusive and binding, on each Borrower and each Lender, absent
manifest error; provided that failure to make any such recordation, or any
--------
error in such recordation, shall not affect any Lender's Commitments or
Borrowers' Obligations in respect of any applicable Loans.
(iii) Each Lender shall record on its internal records (including the
Notes held by such Lender) the amount of any Tranche A Term Loan, Tranche B
Term Loan, Tranche C Term Loan and Revolving Loan made by it and each
payment in respect thereof. Any such recordation shall be conclusive and
binding on Borrowers, absent manifest error; provided that failure to make
--------
any such recordation, or any error in such recordation, shall not affect
any Lender's Commitments or Borrowers' Obligations in respect of any
applicable Loans; and provided further, that in the event of any
----------------
inconsistency between the Register and any Lender's records, the
recordations in the Register shall govern and be conclusive and binding on
such Lender, absent manifest error.
(iv) Borrowers, Administrative Agent and Lenders shall deem and treat
the Persons listed as Lenders in the Register as the holders and owners of
the corresponding Commitments and Loans listed therein for all purposes
hereof, and no assignment or transfer of any such Commitment or Loan shall
be effective, in each case unless and until an Assignment Agreement
effecting the assignment or transfer thereof shall have been accepted by
Administrative Agent and recorded in the Register as provided in subsection
10.1B(ii). Prior to such recordation, all amounts owed with respect to the
applicable Commitment or Loan shall be owed to the Lender listed in the
Register as the owner thereof, and any request, authority or consent of any
Person who, at the time of making such request or giving such authority or
consent, is listed in the Register as a Lender shall be conclusive and
binding on any subsequent holder, assignee or transferee of the
corresponding Commitments or Loans.
(v) Each Borrower hereby designates Morgan Guaranty to serve as such
Borrower's agent solely for purposes of maintaining the Register as
provided in this subsection 2.1D, and each Borrower hereby agrees that, to
the extent Morgan Guaranty serves in such capacity, Morgan Guaranty and its
officers, directors, employees, agents and affiliates shall constitute
Indemnitees for all purposes under subsection 10.3.
E. Optional Notes. If so requested by any Lender by written notice
--------------
to Borrowers (with a copy to Administrative Agent) at least two Business Days
prior to the Closing Date or at any time thereafter, Borrowers shall execute and
deliver to such Lender (and/or, if applicable and if so specified in such
notice, to any Person who is an assignee of such Lender pur-
-53-
suant to subsection 10.1) on the Closing Date (or, if such notice is delivered
after the Closing Date, promptly after Borrowers' receipt of such notice) a
promissory note or promissory notes to evidence such Lender's Tranche A Term
Loan, Tranche B Term Loan, Tranche C Term Loan, Revolving Loans or Swing Line
Loans, substantially in the form of Exhibit IV, Exhibit V, Exhibit VI, Exhibit
---------- --------- ---------- -------
VII or Exhibit VIII annexed hereto, respectively, with appropriate insertions.
- --- ------------
2.2. Interest on the Loans.
---------------------
A. Rate of Interest. Subject to the provisions of subsections 2.6
----------------
and 2.7, each Tranche A Term Loan, Tranche B Term Loan, Tranche C Term Loan and
Revolving Loan shall bear interest on the unpaid principal amount thereof from
the date made through maturity (whether by acceleration or otherwise) at a rate
determined by reference to the Base Rate or the Adjusted Eurodollar Rate.
Subject to the provisions of subsection 2.7, each Swing Line Loan shall bear
interest on the unpaid principal amount thereof from the date made through
maturity (whether by acceleration or otherwise) at a rate determined by
reference to the Base Rate. The applicable basis for determining the rate of
interest with respect to any Term Loan or any Revolving Loan shall be selected
by Borrowers initially at the time a Notice of Borrowing is given with respect
to such Loan pursuant to subsection 2.1B. The basis for determining the interest
rate with respect to any Term Loan or any Revolving Loan may be changed from
time to time pursuant to subsection 2.2D. If on any day a Term Loan or Revolving
Loan is outstanding with respect to which notice has not been delivered to
Administrative Agent in accordance with the terms of this Agreement specifying
the applicable basis for determining the rate of interest, then for that day
that Loan shall bear interest determined by reference to the Base Rate.
(i) Subject to the provisions of subsections 2.2E and 2.7, the
Tranche A Term Loans, Tranche B Term Loans, Tranche C Term Loans and
Revolving Loans shall bear interest through maturity as follows:
(a) if a Base Rate Loan, then at the sum of the Base Rate plus
----
the Applicable Base Rate Margin; or
(b) if a Eurodollar Rate Loan, then at the sum of the Adjusted
Eurodollar Rate plus the Applicable Eurodollar Rate Margin.
----
(ii) Subject to the provisions of subsections 2.2E and 2.7, the Swing
Line Loans shall bear interest through maturity at the sum of the Base Rate
plus the Applicable Base Rate Margin for Revolving Loans.
----
B. Interest Periods. In connection with each Eurodollar Rate Loan,
----------------
Borrowers may, pursuant to the applicable Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be, select an interest period (each, an
"Interest Period") to be applicable to such Loan, which Interest Period shall
be, at Borrowers' option, either a one, two, three or six-month period or (x) in
the case of any Revolving Loans or Tranche A Term Loan to be made or maintained
as a Eurodollar Rate Loan, if deposits in the interbank Eurodollar market are
generally available for such period (as determined by each Lender making,
converting to or continuing such Eurodollar Rate Loan), a two-week, nine-month
or twelve-month period or
-54-
(y) in the case of any Tranche B Term Loan or Tranche C Term Loan to be made or
maintained as a Eurodollar Rate Loan, if agreed to by each Lender making,
converting to or continuing such Eurodollar Rate Loan, a two-week, nine-month or
twelve-month period; provided that:
--------
(i) the initial Interest Period for any Eurodollar Rate Loan shall
commence on the Funding Date in respect of such Loan, in the case of a Loan
initially made as a Eurodollar Rate Loan, or on the date specified in the
applicable Notice of Conversion/Continuation, in the case of a Loan
converted to a Eurodollar Rate Loan;
(ii) in the case of immediately successive Interest Periods
applicable to a Eurodollar Rate Loan continued as such pursuant to a Notice
of Conversion/Continuation, each successive Interest Period shall commence
on the day on which the next preceding Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day that is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided that, if any Interest Period would
--------
otherwise expire on a day that is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(iv) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall,
subject to clause (v) of this subsection 2.2B, end on the last Business Day
of a calendar month;
(v) no Interest Period with respect to any portion of the Tranche A
Term Loans shall extend beyond December 21, 2004, no Interest Period with
respect to any portion of the Tranche B Term Loans shall extend beyond
December 21, 2006, no Interest Period with respect to any portion of the
Tranche C Term Loans shall extend beyond December 21, 2007 and no Interest
Period with respect to any portion of the Revolving Loans shall extend
beyond the Revolving Loan Commitment Termination Date;
(vi) no Interest Period with respect to any borrowing of Term Loans
of a given Tranche shall extend beyond a date on which a mandatory
repayment of such Term Loans is required to be made under subsection
2.4A(i), (ii) or (iii), as the case may be, unless the sum of (a) the
aggregate principal amount of such Term Loans that are Base Rate Loans plus
----
(b) the aggregate principal amount of such Term Loans that are Eurodollar
Rate Loans with Interest Periods expiring on or before such date equals or
exceeds the principal amount of such mandatory repayment of Term Loans
required to be paid on such date;
(vii) Borrowers shall not select an Interest Period of longer than
one month prior to the end of the Initial Period;
(viii) there shall be no more than twenty (20) Interest Periods
outstanding at any time; and
-55-
(ix) in the event Borrowers fail to specify an Interest Period for
any Eurodollar Rate Loan in the applicable Notice of Borrowing or Notice of
Conversion/Continuation, Borrowers shall be deemed to have selected an
Interest Period of one month.
C. Interest Payments. Subject to the provisions of subsection 2.2E,
-----------------
interest on each Loan shall be payable in arrears on and to each Interest
Payment Date applicable to that Loan, upon any prepayment of that Loan (to the
extent accrued on the amount being prepaid) and at maturity (including final
maturity); provided that in the event any Swing Line Loans or any Revolving
--------
Loans that are Base Rate Loans are prepaid pursuant to subsection 2.4B(i),
interest accrued on such Swing Line Loans or Revolving Loans through the date of
such prepayment shall be payable on the next succeeding Interest Payment Date
applicable to Base Rate Loans (or, if earlier, at final maturity).
D. Conversion or Continuation. Subject to the provisions of
--------------------------
subsection 2.6, Borrowers shall have the option (i) to convert at any time all
or any part of its outstanding Tranche A Term Loans, Tranche B Term Loans,
Tranche C Term Loans or Revolving Loans equal to $500,000 and integral multiples
of $100,000 in excess of that amount from Loans bearing interest at a rate
determined by reference to one basis to Loans bearing interest at a rate
determined by reference to an alternative basis or (ii) upon the expiration of
any Interest Period applicable to a Eurodollar Rate Loan, to continue all or any
portion of such Loan equal to $1,000,000 and integral multiples of $100,000 in
excess of that amount as a Eurodollar Rate Loan; provided, however, that a
-------- -------
Eurodollar Rate Loan may only be converted into a Base Rate Loan on the
expiration date of an Interest Period applicable thereto; and provided further,
----------------
however, that Loans may not be continued as or converted to Eurodollar Rate
- -------
Loans with an Interest Period longer than one month prior to the end of the
Initial Period.
Borrowers shall deliver a Notice of Conversion/Continuation at any
time after the Closing Date to Administrative Agent no later than 12:00 Noon
(New York City time) at least one Business Day in advance of the proposed
conversion date (in the case of a conversion to a Base Rate Loan) and at least
three Business Days in advance of the proposed conversion/continuation date (in
the case of a conversion to, or a continuation of, a Eurodollar Rate Loan). A
Notice of Conversion/Continuation shall specify (i) the proposed
conversion/continuation date (which shall be a Business Day), (ii) the amount
and type of the Loan to be converted/continued, (iii) the nature of the proposed
conversion/continuation, (iv) in the case of a conversion to, or a continuation
of, a Eurodollar Rate Loan, the requested Interest Period, and (v) in the case
of a conversion to, or a continuation of, a Eurodollar Rate Loan, that no
Potential Event of Default or Event of Default has occurred and is continuing.
In lieu of delivering the above-described Notice of Conversion/Continuation,
either Borrower may give Administrative Agent telephonic notice by the required
time of any proposed conversion/continuation under this subsection 2.2D;
provided that such notice shall be promptly confirmed in writing by delivery of
- --------
a Notice of Conversion/Continuation to Administrative Agent on or before the
proposed conversion/ continuation date. Upon receipt of written or telephonic
notice of any proposed conversion/ continuation under this subsection 2.2D,
Administrative Agent shall promptly transmit such notice by telefacsimile or
telephone to each Lender.
-56-
Neither Administrative Agent nor any Lender shall incur any liability
to Borrowers in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to act on behalf of either
Borrower or for otherwise acting in good faith under this subsection 2.2D, and
upon conversion or continuation of the applicable basis for determining the
interest rate with respect to any Loans in accordance with this Agreement
pursuant to any such telephonic notice Borrowers shall have effected a
conversion or continuation, as the case may be, hereunder.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a
Notice of Conversion/Continuation for conversion to, or continuation of, a
Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable
on and after the related Interest Rate Determination Date, and Borrowers shall
be bound to effect a conversion or continuation in accordance therewith.
E. Post-Maturity Interest. Any principal payments on the Loans not
----------------------
paid when due and, to the extent permitted by applicable law, any interest
payments on the Loans or any fees or other amounts owed hereunder not paid when
due, in each case whether at stated maturity, by notice of prepayment, by
acceleration or otherwise, shall, if Requisite Lenders so elect in writing,
thereafter bear interest (including post-petition interest in any proceeding
under the Bankruptcy Code or other applicable bankruptcy laws) payable on demand
at a rate which is 2% per annum in excess of the interest rate otherwise payable
at maturity under this Agreement with respect to the applicable Loans (or, in
the case of any such fees and other amounts, at a rate which is 2% per annum in
excess of the interest rate otherwise payable under this Agreement for Base Rate
Loans); provided that, in the case of Eurodollar Rate Loans, upon the expiration
--------
of the Interest Period in effect at the time any such increase in interest rate
is effective, such Eurodollar Rate Loans shall thereupon become Base Rate Loans
and shall thereafter bear interest payable upon demand at a rate which is 2% per
annum in excess of the interest rate otherwise payable under this Agreement for
Base Rate Loans. Payment or acceptance of the increased rates of interest
provided for in this subsection 2.2E is not a permitted alternative to timely
payment and shall not constitute a waiver of any Event of Default or otherwise
prejudice or limit any rights or remedies of Administrative Agent or any Lender.
F. Computation of Interest. Interest on the Loans shall be computed
-----------------------
(i) in the case of Base Rate Loans, on the basis of a 365-day or 366-day year,
as the case may be, and (ii) in the case of Eurodollar Rate Loans, on the basis
of a 360-day year, in each case for the actual number of days elapsed in the
period during which it accrues. In computing interest on any Loan, the date of
the making of such Loan or the first day of an Interest Period applicable to
such Loan or, with respect to a Base Rate Loan being converted from a Eurodollar
Rate Loan, the date of conversion of such Eurodollar Rate Loan to such Base Rate
Loan, as the case may be, shall be included, and the date of payment of such
Loan or the expiration date of an Interest Period applicable to such Loan or,
with respect to a Base Rate Loan being converted to a Eurodollar Rate Loan, the
date of conversion of such Base Rate Loan to such Eurodollar Rate Loan, as the
case may be, shall be excluded; provided that if a Loan is repaid on the same
--------
day on which it is made, one day's interest shall be paid on that Loan.
2.3. Fees.
----
-57-
A. Commitment Fees. Borrowers jointly and severally agree to pay to
---------------
Administrative Agent, for distribution to each Lender in proportion to that
Lender's Pro Rata Share, commitment fees for the period from and including the
Closing Date to and excluding the Revolving Loan Commitment Termination Date
equal to the average of the daily excess of the Revolving Loan Commitments over
the sum of (i) the aggregate principal amount of outstanding Revolving Loans
(but not any outstanding Swing Line Loans) plus (ii) the Letter of Credit Usage
----
multiplied by the Applicable Commitment Fee Percentage, such commitment fees to
- -------------
be calculated on the basis of a 360-day year and the actual number of days
elapsed and to be payable quarterly in arrears on each Quarterly Payment Date,
commencing on the first such date to occur after the Closing Date, and on the
Revolving Loan Commitment Termination Date.
B. Other Fees. Borrowers jointly and severally agree to pay to
----------
Arranger and Administrative Agent such fees in the amounts and at the times
separately agreed upon between Merger Corp., Holdings, Borrowers, Arranger and
Administrative Agent.
2.4. Repayments, Prepayments and Reductions in Revolving Loan
--------------------------------------------------------
Commitments; General Provisions Regarding Payments; Application
----------------------------------------------------------------
of Proceeds of Collateral and Payments Under Guaranties.
-------------------------------------------------------
A. Scheduled Payments of Term Loans.
--------------------------------
(i) Borrowers shall make principal payments on the Tranche A Term
Loans in installments on the dates and in the amounts set forth below:
-----------------------------------------------------------------
SCHEDULED REPAYMENT
DATE OF TRANCHE A TERM
LOANS
-----------------------------------------------------------------
March 31, 2000 $ 2,750,000
-----------------------------------------------------------------
June 30, 2000 $ 2,750,000
-----------------------------------------------------------------
September 30, 2000 $ 2,750,000
-----------------------------------------------------------------
December 31, 2000 $ 2,750,000
-----------------------------------------------------------------
March 31, 2001 $ 4,750,000
-----------------------------------------------------------------
June 30, 2001 $ 4,750,000
-----------------------------------------------------------------
-58-
-----------------------------------------------------------------
SCHEDULED REPAYMENT
DATE OF TRANCHE A TERM
LOANS
-----------------------------------------------------------------
September 30, 2001 $ 4,750,000
-----------------------------------------------------------------
December 31, 2001 $ 4,750,000
-----------------------------------------------------------------
March 31, 2002 $ 9,682,500
-----------------------------------------------------------------
June 30, 2002 $ 9,682,500
-----------------------------------------------------------------
September 30, 2002 $ 9,682,500
-----------------------------------------------------------------
December 31, 2002 $ 9,682,500
-----------------------------------------------------------------
March 31, 2003 $13,055,000
-----------------------------------------------------------------
June 30, 2003 $13,055,000
-----------------------------------------------------------------
September 30, 2003 $13,055,000
-----------------------------------------------------------------
December 31, 2003 $13,055,000
-----------------------------------------------------------------
March 31, 2004 $13,512,500
-----------------------------------------------------------------
June 30, 2004 $13,512,500
-----------------------------------------------------------------
September 30, 2004 $13,512,500
-----------------------------------------------------------------
December 21, 2004 $13,512,500
-----------------------------------------------------------------
-59-
; provided that the scheduled installments of principal of the Tranche A Term
--------
Loans set forth above shall be reduced in connection with any voluntary or
mandatory prepayments of the Tranche A Term Loans in accordance with subsection
2.4B(iv); and provided, further, that the Tranche A Term Loans and all other
-------- -------
amounts owed hereunder with respect to the Tranche A Term Loans shall be paid in
full no later than December 21, 2004 and the final installment payable by
Borrowers in respect of the Tranche A Term Loans on such date shall be in an
amount, if such amount is different from that specified above, sufficient to
repay all amounts owing by Borrowers under this Agreement with respect to the
Tranche A Term Loans.
(ii) Borrowers shall make principal payments on the Tranche B Term
Loans in installments on the dates and in the amounts set forth below:
-----------------------------------------------------------------
SCHEDULED REPAYMENT
DATE OF TRANCHE A TERM
LOANS
-----------------------------------------------------------------
December 31, 1999 $ 680,000
-----------------------------------------------------------------
March 31, 2000 $ 170,000
-----------------------------------------------------------------
June 30, 2000 $ 170,000
-----------------------------------------------------------------
September 30, 2000 $ 170,000
-----------------------------------------------------------------
December 31, 2000 $ 170,000
-----------------------------------------------------------------
March 31, 2001 $ 170,000
-----------------------------------------------------------------
June 30, 2001 $ 170,000
-----------------------------------------------------------------
September 30, 2001 $ 170,000
-----------------------------------------------------------------
December 31, 2001 $ 170,000
-----------------------------------------------------------------
March 31, 2002 $ 170,000
-----------------------------------------------------------------
-60-
-----------------------------------------------------------------
SCHEDULED REPAYMENT
DATE OF TRANCHE A TERM
LOANS
-----------------------------------------------------------------
June 30, 2002 $ 170,000
-----------------------------------------------------------------
September 30, 2002 $ 170,000
-----------------------------------------------------------------
December 31, 2002 $ 170,000
-----------------------------------------------------------------
March 31, 2003 $ 170,000
-----------------------------------------------------------------
June 30, 2003 $ 170,000
-----------------------------------------------------------------
September 30, 2003 $ 170,000
-----------------------------------------------------------------
December 31, 2003 $ 170,000
-----------------------------------------------------------------
March 31, 2004 $ 170,000
-----------------------------------------------------------------
June 30, 2004 $ 170,000
-----------------------------------------------------------------
September 30, 2004 $ 170,000
-----------------------------------------------------------------
December 31, 2004 $ 170,000
-----------------------------------------------------------------
March 31, 2005 $16,365,000
-----------------------------------------------------------------
June 30, 2005 $16,365,000
-----------------------------------------------------------------
September 30, 2005 $16,365,000
-----------------------------------------------------------------
December 31, 2005 $16,365,000
-----------------------------------------------------------------
-61-
-----------------------------------------------------------------
SCHEDULED REPAYMENT
DATE OF TRANCHE A TERM
LOANS
-----------------------------------------------------------------
March 31, 2006 $16,365,000
-----------------------------------------------------------------
June 30, 2006 $16,365,000
-----------------------------------------------------------------
September 30, 2006 $16,365,000
-----------------------------------------------------------------
December 21, 2006 $16,365,000
-----------------------------------------------------------------
; provided that the scheduled installments of principal of the Tranche B Term
--------
Loans set forth above shall be reduced in connection with any voluntary or
mandatory prepayments of the Tranche B Term Loans in accordance with subsection
2.4B(iv); and provided, further, that the Tranche B Term Loans and all other
-------- -------
amounts owed hereunder with respect to the Tranche B Term Loans shall be paid in
full no later than December 21, 2006, and the final installment payable by
Borrowers in respect of the Tranche B Term Loans on such date shall be in an
amount, if such amount is different from that specified above, sufficient to
repay all amounts owing by Borrowers under this Agreement with respect to the
Tranche B Term Loans.
(iii) Borrowers shall make principal payments on the Tranche C Term
Loans in installments on the dates and in the amounts set forth below:
-----------------------------------------------------------------
SCHEDULED REPAYMENT
DATE OF TRANCHE A TERM
LOANS
-----------------------------------------------------------------
December 31, 1999 $ 540,000
-----------------------------------------------------------------
March 31, 2000 $ 135,000
-----------------------------------------------------------------
June 30, 2000 $ 135,000
-----------------------------------------------------------------
September 30, 2000 $ 135,000
-----------------------------------------------------------------
December 31, 2000 $ 135,000
-----------------------------------------------------------------
-62-
-----------------------------------------------------------------
SCHEDULED REPAYMENT
DATE OF TRANCHE A TERM
LOANS
-----------------------------------------------------------------
March 31, 2001 $ 135,000
-----------------------------------------------------------------
June 30, 2001 $ 135,000
-----------------------------------------------------------------
September 30, 2001 $ 135,000
-----------------------------------------------------------------
December 31, 2001 $ 135,000
-----------------------------------------------------------------
March 31, 2002 $ 135,000
-----------------------------------------------------------------
June 30, 2002 $ 135,000
-----------------------------------------------------------------
September 30, 2002 $ 135,000
-----------------------------------------------------------------
December 31, 2002 $ 135,000
-----------------------------------------------------------------
March 31, 2003 $ 135,000
-----------------------------------------------------------------
June 30, 2003 $ 135,000
-----------------------------------------------------------------
September 30, 2003 $ 135,000
-----------------------------------------------------------------
December 31, 2003 $ 135,000
-----------------------------------------------------------------
March 31, 2004 $ 135,000
-----------------------------------------------------------------
June 30, 2004 $ 135,000
-----------------------------------------------------------------
September 30, 2004 $ 135,000
-----------------------------------------------------------------
-63-
-----------------------------------------------------------------
SCHEDULED REPAYMENT
DATE OF TRANCHE A TERM
LOANS
-----------------------------------------------------------------
December 31, 2004 $ 135,000
-----------------------------------------------------------------
March 31, 2005 $ 135,000
-----------------------------------------------------------------
June 30, 2005 $ 135,000
-----------------------------------------------------------------
September 30, 2005 $ 135,000
-----------------------------------------------------------------
December 31, 2005 $ 135,000
-----------------------------------------------------------------
March 31, 2006 $ 135,000
-----------------------------------------------------------------
June 30, 2006 $ 135,000
-----------------------------------------------------------------
September 30, 2006 $ 135,000
-----------------------------------------------------------------
December 31, 2006 $ 135,000
-----------------------------------------------------------------
March 31, 2007 $32,670,000
-----------------------------------------------------------------
June 30, 2007 $32,670,000
-----------------------------------------------------------------
September 30, 2007 $32,670,000
-----------------------------------------------------------------
December 21, 2007 $32,670,000
-----------------------------------------------------------------
; provided that the scheduled installments of principal of the Tranche C Term
--------
Loans set forth above shall be reduced in connection with any voluntary or
mandatory prepayments of the Tranche C Term Loans in accordance with subsection
2.4B(iv); and provided, further, that the Tranche C Term Loans and all other
-------- -------
amounts owed hereunder with respect to the Tranche C Term Loans shall be paid in
full no later than December 21, 2007 and the final installment payable
-64-
by Borrowers in respect of the Tranche C Term Loans on such date shall be in an
amount, if such amount is different from that specified above, sufficient to
repay all amounts owing by Borrowers under this Agreement with respect to the
Tranche C Term Loans.
B. Prepayments and Reductions in Revolving Loan Commitments.
--------------------------------------------------------
(i) Voluntary Prepayments. Either Borrower may, upon written or
---------------------
telephonic notice to Administrative Agent on or prior to 12:00 Noon (New York
City time) on the date of prepayment, which notice, if telephonic, shall be
promptly confirmed in writing, at any time and from time to time prepay any
Swing Line Loan on any Business Day in whole or in part in an aggregate minimum
amount of $100,000 and integral multiples of $100,000 in excess of that amount.
Either Borrower may, upon written or telephonic notice on the date of
prepayment, in the case of Base Rate Loans, and three Business Days' prior
written or telephonic notice, in the case of Eurodollar Rate Loans, in each case
given to Administrative Agent by 12:00 Noon (New York City time) on the date
required and, if given by telephone, promptly confirmed in writing to
Administrative Agent (which original written or telephonic notice to
Administrative Agent will promptly transmit by telefacsimile or telephone to
each Lender), at any time and from time to time prepay any Tranche A Term Loans,
Tranche B Term Loans, Tranche C Term Loans or Revolving Loans on any Business
Day in whole or in part in an aggregate minimum amount of $500,000 and integral
multiples of $100,000 in excess of that amount. Notice of prepayment having
been given as aforesaid, the principal amount of the Loans specified in such
notice shall become due and payable on the prepayment date specified therein.
Any such voluntary prepayment shall be applied as specified in subsection
2.4B(iv).
(ii) Voluntary Reductions of Revolving Loan Commitments. Either
--------------------------------------------------
Borrower may, upon not less than three Business Days' prior written or
telephonic notice confirmed in writing to Administrative Agent (which original
written or telephonic notice Administrative Agent will promptly transmit by
telefacsimile or telephone to each Lender), at any time and from time to time
terminate in whole or permanently reduce in part, without premium or penalty,
the Revolving Loan Commitments in an amount up to the amount by which the
Revolving Loan Commitments exceed the Total Utilization of Revolving Loan
Commitments at the time of such proposed termination or reduction; provided that
--------
any such partial reduction of the Revolving Loan Commitments shall be in an
aggregate minimum amount of $5,000,000 and integral multiples of $1,000,000 in
excess of that amount. The applicable Borrower's notice to Administrative Agent
shall designate the date (which shall be a Business Day) of such termination or
reduction and the amount of any partial reduction, and such termination or
reduction of the Revolving Loan Commitments shall be effective on the date
specified in such Borrower's notice and shall reduce the Revolving Loan
Commitment of each Lender proportionately to its Pro Rata Share.
--------
(iii) Mandatory Prepayments and Mandatory Reductions of Revolving
-----------------------------------------------------------
Loan Commitments. The Loans shall be prepaid and/or the Revolving Loan
- ----------------
Commitments shall be permanently reduced in the amounts and under the
circumstances set forth below, all such prepayments and/or reductions to be
applied as set forth below or as more specifically provided in subsection
2.4B(iv).
-65-
(a) Prepayments and Reductions From Net Asset Sale Proceeds. No later
-------------------------------------------------------
than the fifth Business Day following the date of receipt by Holdings or any of
its Subsidiaries of any Net Asset Sale Proceeds in respect of any Asset Sale,
Borrowers shall prepay the Loans and/or the Revolving Loan Commitments shall be
permanently reduced in an aggregate amount equal to such Net Asset Sale
Proceeds; provided, however, that upon receipt by Holdings or any of its
-------- -------
Subsidiaries of any such Net Asset Sales Proceeds, so long as no Event of
Default shall have occurred and be continuing and to the extent that the
aggregate amount of Net Asset Sale Proceeds and Net Insurance/Condemnation
Proceeds from the Closing Date through the date of determination does not exceed
$30,000,000, Company may deliver to Administrative Agent an Officers'
Certificate setting forth (1) that portion of such Net Asset Sale Proceeds (such
portion being the "Proposed Asset Sale Reinvestment Proceeds") that Company or
any of its Subsidiaries intends to reinvest (or enter into a contract to
reinvest) in equipment or other productive assets of the general type used in
the business (including capital stock of a corporation engaged in such business)
of Company and its Subsidiaries (such equipment and other assets being "Eligible
Assets") within 360 days of such date of receipt and (2) the proposed use of
such Proposed Asset Sale Reinvestment Proceeds and such other information with
respect to such reinvestment as Administrative Agent may reasonably request, and
Company shall, or shall cause one or more of its Subsidiaries to, promptly apply
such Proposed Asset Sale Reinvestment Proceeds to such reinvestment purposes;
provided, however, that at Borrowers' option and pending such application, such
- -------- -------
Proposed Asset Sale Reinvestment Proceeds may be applied to prepay outstanding
Revolving Loans (without a reduction in Revolving Loan Commitments) to the full
extent thereof. In addition, Borrowers shall, no later than 360 days after
receipt of such Proposed Asset Sale Reinvestment Proceeds that have not
theretofore been applied to the Obligations, make an additional prepayment of
the Loans (and/or the Revolving Loan Commitments shall be reduced) in the full
amount of all such Proposed Asset Sale Reinvestment Proceeds that have not
theretofore been so reinvested in Eligible Assets. Notwithstanding the foregoing
provisions of this subsection 2.4B(iii)(a), so long as no Event of Default shall
have occurred and be continuing, no mandatory prepayment of Loans or mandatory
reduction of Revolving Loan Commitments shall be required pursuant to this
subsection 2.4B(iii)(a) until each date on which the sum of the Net Asset Sale
Proceeds plus Net Insurance/Condemnation Proceeds received during the period
----
commencing on the later of (x) the Closing Date and (y) the immediately
preceding date on which a mandatory repayment or commitment reduction was made
pursuant to this subsection 2.4B(iii)(a) or subsection 2.4B(iii)(b) as a result
of the receipt of Net Asset Sale Proceeds and/or Net Insurance/Condemnation
Proceeds not reinvested as provided above or pursuant to subsection 6.4C, as
applicable, and ending on the date of determination (the "Net Asset Sale/Net
Insurance Proceeds Payment Period"), equals or exceeds $7,500,000. If Company
is required to apply any portion of Net Asset Sale Proceeds to prepay
Indebtedness evidenced by the Senior Subordinated Notes (under the terms of the
Senior Subordinated Note Indenture), then notwithstanding anything contained in
this Agreement to the contrary (but subject to subsection 2.4B(iv)(d) hereof),
Borrowers shall apply such Net Asset Sale Proceeds to the prepayment of Tranche
A Term Loans, Tranche B Term Loans and Tranche C Term Loans pro rata according
--------
to the respective outstanding principal amount, if any, of each, then to the
----
prepayment of Revolving Loans and/or the reduction of Revolving Loan
Commitments, in each case so as to eliminate or minimize any obligation to
prepay any such Indebtedness evidenced by the Senior Subordinated Notes.
-66-
(b) Prepayments and Reductions from Net Insurance/Condemnation
----------------------------------------------------------
Proceeds. No later than the fifth Business Day following the date of receipt by
- --------
Administrative Agent or by Holdings or any of its Subsidiaries of any Net
Insurance/Condemnation Proceeds that are required to be applied to prepay the
Loans and/or reduce the Revolving Loan Commitments pursuant to the provisions of
subsection 6.4C, Borrowers shall prepay the Loans and/or the Revolving Loan
Commitments shall be permanently reduced in an aggregate amount equal to the
amount of such Net Insurance/Condemnation Proceeds minus (if (1) no Event of
-----
Default shall have occurred and be continuing and (2) Holdings shall have
delivered to Administrative Agent, on or before such fifth Business Day, the
Officers' Certificate described in subsection 6.4C(ii)), any Proposed Insurance
Reinvestment Proceeds; provided, however, that at Borrowers' option and pending
-------- -------
such application, such Proposed Insurance Reinvestment Proceeds may be applied
to prepay outstanding Revolving Loans (without a reduction in Revolving Loan
Commitments) to the full extent thereof. In addition, no later than 360 days
after receipt of any Proposed Insurance Reinvestment Proceeds, Borrowers shall
prepay the Loans and/or the Revolving Loan Commitments shall be permanently
reduced in an amount equal to the amount of any such Proposed Insurance
Reinvestment Proceeds that have not theretofore been applied to the costs of
repairing, restoring or replacing the applicable assets of Holdings or its
Subsidiaries or reinvested in Eligible Assets. Notwithstanding the foregoing
provisions of this subsection 2.4B(iii)(b), so long as no Event of Default shall
have occurred and be continuing, no mandatory prepayment of Loans or mandatory
reduction of Revolving Loan Commitments shall be required pursuant to this
subsection 2.4B(iii)(b) until each date on which the sum of the Net Asset Sale
Proceeds plus Net Insurance/Condemnation Proceeds received during the Net Asset
----
Sale/Net Insurance Proceeds Period not reinvested pursuant to subsection
2.4B(iii)(a) or 6.4C, as applicable, equals or exceeds $7,500,000.
(c) Prepayments and Reductions Due to Issuance of Debt. On the date
--------------------------------------------------
of receipt by Holdings or any of its Subsidiaries of the Cash proceeds of any
Indebtedness, including debt Securities of Holdings or any of its Subsidiaries
(other than the Loans and any other Indebtedness permitted under subsections
7.1(i) through (xii) (such proceeds, net of underwriting discounts and
commissions and other reasonable costs and expenses associated therewith,
including reasonable legal fees and expenses, being the "Net Indebtedness
Proceeds")), Borrowers shall prepay the Loans and/or the Revolving Loan
Commitments shall be permanently reduced in an aggregate amount equal to such
Net Indebtedness Proceeds; provided, however, that payment or acceptance of the
-------- -------
amounts provided for in this subsection 2.4B(iii)(c) shall not constitute a
waiver of any Event of Default resulting from the incurrence of such
Indebtedness or otherwise prejudice any rights or remedies of Agents or Lenders.
(d) Prepayments and Reductions Due to Issuance of Equity Securities.
---------------------------------------------------------------
On the date of receipt by Holdings or any of its Subsidiaries of Cash proceeds
(any such proceeds, net of underwriting discounts and commissions and other
reasonable costs and expenses associated therewith, including reasonable legal
fees and expenses, being "Net Equity Proceeds") from the issuance of any equity
Securities of Holdings or such Subsidiary after the Closing Date (other than (A)
capital contributions by Holdings and its Subsidiaries and (B) issuances of
Holdings Common Stock (x) to employees, officers, directors and consultants of
Holdings and its Subsidiaries to the extent such Holdings Common Stock
constitutes compensation to such individuals, (y) to Bain or the Other Investors
to the extent the Cash proceeds thereof are not in excess of $40,000,000 and
-67-
(z) as payment of all or any portion of the purchase price of a business or
assets in a Permitted Acquisition), Borrowers shall prepay the Loans and/or the
Revolving Loan Commitments shall be permanently reduced in an aggregate amount
equal to 50% of such Net Equity Proceeds of Holdings or any of its Subsidiaries.
(e) Prepayments and Reductions from Consolidated Excess Cash Flow. In
-------------------------------------------------------------
the event that there shall be Consolidated Excess Cash Flow for any Fiscal Year
(commencing with Fiscal Year 1999), Borrowers shall, no later than 90 days after
the end of such Fiscal Year, prepay the Loans and/or the Revolving Loan
Commitments shall be permanently reduced in an aggregate amount equal to 75 %
(or, if the Leverage Ratio is not more than 4.5 to 1.0 on the last day of any
such Fiscal Year, 50%) of such Consolidated Excess Cash Flow.
(f) Calculations of Net Proceeds Amounts; Additional Prepayments and
----------------------------------------------------------------
Reductions Based on Subsequent Calculations. Concurrently with any prepayment
- -------------------------------------------
of the Loans and/or reduction of the Revolving Loan Commitments pursuant to
subsections 2.4B(iii)(a)-(e), Company shall deliver to Administrative Agent an
Officers' Certificate demonstrating the calculation of the amount (the "Net
Proceeds Amount") of the applicable Net Asset Sale Proceeds, Net
Insurance/Condemnation Proceeds, Net Indebtedness Proceeds, Net Equity Proceeds
or the applicable Consolidated Excess Cash Flow, as the case may be, that gave
rise to such prepayment and/or reduction. In the event that Company shall
subsequently determine that the actual Net Proceeds Amount was greater than the
amount set forth in such Officers' Certificate, Borrowers shall promptly make an
additional prepayment of the Loans (and/or, if applicable, the Revolving Loan
Commitments shall be permanently reduced) in an amount equal to the amount of
such excess, and Company shall concurrently therewith deliver to Administrative
Agent an Officers' Certificate demonstrating the derivation of the additional
Net Proceeds Amount resulting in such excess.
(g) Prepayments Due to Reductions or Restrictions of Revolving Loan
---------------------------------------------------------------
Commitments. Borrowers shall from time to time prepay, first, the Swing Line
- ----------- -----
Loans and, second, the Revolving Loans to the extent necessary so that the Total
------
Utilization of Revolving Loan Commitments shall not at any time exceed the
Revolving Loan Commitments then in effect.
(iv) Application of Prepayments.
--------------------------
(a) Application of Voluntary Prepayments by Type of Loans and Order
---------------------------------------------------------------
of Maturity. Any voluntary prepayments pursuant to subsection 2.4B(i) shall be
- -----------
applied as specified by the applicable Borrower in the applicable notice of
prepayment; provided that (i) each prepayment of Tranche A Term Loans, Tranche B
--------
Term Loans or Tranche C Term Loans pursuant to subsection 2.4B(i) must consist
of a pro rata payment of outstanding Tranche A Term Loans, Tranche B Term Loans
--------
and Tranche C Term Loans (based upon the then outstanding principal amount of
Tranche A Term Loans, Tranche B Term Loans and Tranche C Term Loans) and (ii) in
the event such Borrower fails to specify the Loans to which any such prepayment
shall be applied, such prepayment shall be applied first to repay outstanding
-----
Swing Line Loans to the full extent thereof, second to repay outstanding
------
Revolving Loans to the full extent thereof, and third to repay outstanding
-----
Tranche A Term Loans, Tranche B Term Loans and Tranche C Term Loans on a pro
---
rata basis (based upon the then outstanding principal amount of Tranche A Term
- ----
-68-
Loans, Tranche B Term Loans and Tranche C Term Loans) to the full extent
thereof. Any voluntary prepayments of the Term Loans of a respective Tranche
pursuant to subsection 2.4B(i) shall be applied to reduce the scheduled
installments of principal of such Term Loans set forth in subsection 2.4A(i),
(ii) or (iii), as the case may be, on a pro rata basis (in accordance with the
--------
respective outstanding principal amounts of such Term Loans).
(b) Application of Mandatory Prepayments by Type of Loans. Any amount
-----------------------------------------------------
(the "Applied Amount") required to be applied as a mandatory prepayment of the
Loans and/or a reduction of the Revolving Loan Commitments pursuant to
subsections 2.4B(iii)(a)-(e) shall be applied first, subject to the provisions
-----
of subsection 2.4B(iv)(d), to prepay the Tranche A Term Loans, the Tranche B
Term Loans and the Tranche C Term Loans on a pro rata basis (based upon the then
--- ----
outstanding principal amount of Tranche A Term Loans, Tranche B Term Loans and
Tranche C Term Loans) to the full extent thereof, second, to the extent of any
------
remaining portion of the Applied Amount, to prepay the Swing Line Loans to the
full extent thereof and to permanently reduce the Revolving Loan Commitments by
the amount of such prepayment, third, to the extent of any remaining portion of
-----
the Applied Amount, to prepay the Revolving Loans to the full extent thereof and
to further permanently reduce the Revolving Loan Commitments by the amount of
such prepayment, and fourth, to the extent of any remaining portion of the
------
Applied Amount, to further permanently reduce the Revolving Loan Commitments to
the full extent thereof.
(c) Application of Mandatory Prepayments of Term Loans to the
---------------------------------------------------------
Scheduled Installments of Principal Thereof. Any mandatory prepayments of the
- -------------------------------------------
Term Loans of any Tranche pursuant to subsection 2.4B(iii) shall be applied on a
pro rata basis (in accordance with the respective outstanding principal amounts
- --- ----
of the Term Loans of such Tranche) to each scheduled installment of principal of
the Term Loans of the respective Tranche as set forth in subsection 2.4A(i),
(ii) or (iii), as the case may be, that is unpaid at the time of such
prepayment.
(d) Waiver of Certain Mandatory Prepayments. Notwithstanding anything
---------------------------------------
to the contrary contained in this subsection 2.4 or elsewhere in this Agreement,
Borrowers shall have the option, in their sole discretion, to give Lenders with
outstanding Tranche B Term Loans ("B Lenders") and Tranche C Term Loans ("C
Lenders") the option to waive a mandatory repayment of such Loans pursuant to
subsections 2.4B(iii)(a)-(e) (each such repayment, a "Waivable Mandatory
Repayment") upon the terms and provisions set forth in this subsection
2.4B(iv)(d). If Borrowers elect to exercise the option referred to in the
preceding sentence, Borrowers shall give to Administrative Agent written notice
of their intention to give B Lenders and C Lenders the right to waive a Waivable
Mandatory Repayment at least five Business Days prior to such repayment, which
notice Administrative Agent shall promptly forward to all B Lenders and C
Lenders (indicating in such notice the amount of such repayment to be applied to
each such Lender's outstanding Term Loans under such Tranches). Borrowers'
offer to permit such Lenders to waive any such Waivable Mandatory Repayment may
apply to all or part of such repayment, provided that any offer to waive part of
--------
such repayment must be made ratably to such Lenders on the basis of their
outstanding Tranche B Term Loans and Tranche C Term Loans. In the event any
such B Lender or C Lender desires to waive such Lender's right to receive any
such Waivable Mandatory Repayment in whole or in part, such Lender shall so
advise Administrative Agent no later than the close of business two Business
Days after the date of such notice from
-69-
Administrative Agent, which notice shall also include the amount such Lender
desires to receive in respect of such repayment. If any Lender does not reply to
Administrative Agent within the two Business Days, it will be deemed not to have
waived any part of such repayment. If any Lender does not specify an amount it
wishes to receive, it will be deemed to have accepted 100% of the total payment.
In the event that any such Lender waives all or part of such right to receive
any such Waivable Mandatory Repayment, Administrative Agent shall apply 100% of
the amount so waived by such Lender to the Tranche A Term Loans in accordance
with Section 2.4B(iv)(b).
(e) Application of Prepayments to Base Rate Loans and Eurodollar Rate
-----------------------------------------------------------------
Loans. Considering Tranche A Term Loans, Tranche B Term Loans, Tranche C Term
- -----
Loans and Revolving Loans being prepaid separately, any prepayment thereof
shall be applied first to Base Rate Loans to the full extent thereof before
application to Eurodollar Rate Loans, in each case in a manner which minimizes
the amount of any payments required to be made by Borrowers pursuant to
subsection 2.6D.
C. General Provisions Regarding Payments.
-------------------------------------
(i) Manner and Time of Payment. All payments by a Borrower of
--------------------------
principal, interest, fees and other Obligations hereunder and under the Notes
shall be made in Dollars in same day funds, without defense, setoff or
counterclaim, free of any restriction or condition, and delivered to
Administrative Agent not later than 1:00 P.M. (New York City time) on the date
due at the Funding and Payment Office for the account of Lenders; funds received
by Administrative Agent after that time on such due date shall be deemed to have
been paid by the applicable Borrower on the next succeeding Business Day. Each
Borrower hereby authorizes Administrative Agent to charge its account with
Administrative Agent in order to cause timely payment to be made to
Administrative Agent of all principal, interest, fees and expenses due hereunder
(subject to sufficient funds being available in its accounts for that purpose).
(ii) Application of Payments to Principal and Interest. Except as
-------------------------------------------------
provided in subsection 2.2C, all payments in respect of the principal amount of
any Loan shall include payment of accrued interest on the principal amount being
repaid or prepaid, and all such payments (and, in any event, any payments in
respect of any Loan on a date when interest is due and payable with respect to
such Loan) shall be applied to the payment of interest before application to
principal.
(iii) Apportionment of Payments. Aggregate principal and interest
-------------------------
payments in respect of Tranche A Term Loans, Tranche B Term Loans, Tranche C
Term Loans and Revolving Loans shall be apportioned among all outstanding Loans
to which such payments relate, in each case proportionately to Lenders'
respective Pro Rata Shares. Administrative Agent shall promptly distribute to
--- ----
each Lender, at its primary address set forth below its name on the appropriate
signature page hereof or at such other address as such Lender may request, its
Pro Rata Share of all such payments received by Administrative Agent and the
- --- ----
commitment fees of such Lender when received by Administrative Agent pursuant to
subsection 2.3. Notwithstanding the foregoing provisions of this subsection
2.4C(iii), if, pursuant to the provisions of subsection 2.6C, any Notice of
Conversion/Continuation is withdrawn as to any Affected Lender or if any
Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any
--- ----
Eurodollar Rate
-70-
Loans, Administrative Agent shall give effect thereto in apportioning payments
received thereafter.
(iv) Payments on Business Days. Whenever any payment to be made
-------------------------
hereunder shall be stated to be due on a day that is not a Business Day, such
payment shall be made on the next succeeding Business Day and such extension of
time shall be included in the computation of the payment of interest hereunder
or of the commitment fees hereunder, as the case may be.
(v) Notation of Payment. Each Lender agrees that before disposing of
-------------------
any Note held by it, or any part thereof (other than by granting participations
therein), that Lender will make a notation thereon of all Loans evidenced by
that Note and all principal payments previously made thereon and of the date to
which interest thereon has been paid; provided that the failure to make (or any
--------
error in the making of) a notation of any Loan made under such Note shall not
limit or otherwise affect the obligations of Borrowers hereunder or under such
Note with respect to any Loan or any payments of principal or interest on such
Note.
D. Application of Proceeds of Collateral and Payments Under
--------------------------------------------------------
Guaranties.
- ----------
(i) Application of Proceeds of Collateral. Except as provided in
-------------------------------------
subsections 2.4B(iii)(a) and 2.4B(iii)(b) with respect to prepayments from Net
Asset Sale Proceeds and Net Insurance/Condemnation Proceeds, all proceeds
received by Administrative Agent in respect of any sale of, collection from, or
other realization upon all or any part of the Collateral under any Collateral
Document may, in the discretion of Administrative Agent, be held by
Administrative Agent as Collateral for, and/or (then or at any time thereafter)
applied in full or in part by Administrative Agent against, the applicable
Secured Obligations (as defined in such Collateral Document) in the following
order of priority:
(a) To the payment of all costs and expenses of such sale, collection
or other realization, including all expenses, liabilities and advances made
or incurred by Administrative Agent and its agents and counsel in
connection therewith, and all amounts for which Administrative Agent is
entitled to indemnification under such Collateral Document and all advances
made by Administrative Agent thereunder for the account of the applicable
Loan Party, and to the payment of all costs and expenses paid or incurred
by Administrative Agent in connection with the exercise of any right or
remedy under such Collateral Document, all in accordance with the terms of
this Agreement and such Collateral Document;
(b) thereafter, to the extent of any excess such proceeds, to the
payment of all other such Secured Obligations then due and owing for the
ratable benefit of the holders thereof; and
(c) thereafter, to the extent of any excess such proceeds, to the
payment to or upon the order of such Loan Party or to whosoever may be
lawfully entitled to receive the same or as a court of competent
jurisdiction may direct.
-71-
(iii) Application of Payments Under Guaranties. All payments
-----------------------------------------
received by Administrative Agent under either Guaranty shall be applied promptly
from time to time by Administrative Agent in the following order of priority:
(a) To the payment of the costs and expenses of any collection or
other realization under such Guaranty, including all expenses, liabilities
and advances made or incurred by Administrative Agent and its agents and
counsel in connection therewith, all in accordance with the terms of this
Agreement and such Guaranty;
(b) thereafter, to the extent of any excess such payments, to the
payment of all other Guarantied Obligations (as defined in such Guaranty)
for the ratable benefit of the holders thereof; and
(c) thereafter, to the extent of any excess such payments, to the
payment to Holdings or the applicable Subsidiary Guarantor or to whomsoever
may be lawfully entitled to receive the same or as a court of competent
jurisdiction may direct.
2.5 Use of Proceeds.
---------------
A. Term Loans and Recapitalization Revolving Loans. The Term Loans
-----------------------------------------------
and up to $20,000,000 in aggregate principal amount of Revolving Loans made on
the Closing Date (the "Recapitalization Revolving Loans"), together with the
proceeds of the debt and equity capitalization of Holdings, Merger Corp. and
Company described in subsections 4.1D(i), (ii) and (iii), shall be applied by
Holdings, Merger Corp. and Company, as applicable, to fund the Recapitalization
Financing Requirements.
B. Post-Closing Date Revolving Loans and Swing Line Loans. Revolving
------------------------------------------------------
Loans and Swing Line Loans made after the Closing Date may be used by Borrowers
for working capital and general corporate purposes, which may include the making
of intercompany loans to any of the wholly owned Subsidiaries of Borrowers, in
accordance with subsection 7.1(iv) or 7.1(v), for their own working capital and
general corporate purposes and the making of intercompany loans to Company's
Joint Ventures to the extent such Indebtedness is permitted hereunder, for their
own working capital and general corporate purposes.
C. Margin Regulations. No portion of the proceeds of any borrowing
------------------
under this Agreement shall be used by Holdings or any of its Subsidiaries in any
manner that might cause the borrowing or the application of such proceeds to
violate Regulation U, Regulation T or Regulation X of the Board of Governors of
the Federal Reserve System or any other regulation of such Board or to violate
the Exchange Act, in each case as in effect on the date or dates of such
borrowing and such use of proceeds.
2.6 Special Provisions Governing Eurodollar Rate Loans.
--------------------------------------------------
Notwithstanding any other provision of this Agreement to the contrary,
the following provisions shall govern with respect to Eurodollar Rate Loans as
to the matters covered:
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A. Determination of Applicable Interest Rate. As soon as practicable
-----------------------------------------
after 10:00 A.M. (New York City time) on each Interest Rate Determination
Date, Administrative Agent shall determine (which determination shall,
absent manifest error, be final, conclusive and binding upon all parties)
the interest rate that shall apply to the Eurodollar Rate Loans for which
an interest rate is then being determined for the applicable Interest
Period and shall promptly give notice thereof (in writing or by telephone
confirmed in writing) to Borrowers and each Lender.
B. Inability to Determine Applicable Interest Rate. In the event
-----------------------------------------------
that Administrative Agent shall have determined (which determination shall
be final and conclusive and binding upon all parties hereto), on any
Interest Rate Determination Date with respect to any Eurodollar Rate Loans,
that by reason of circumstances affecting the interbank Eurodollar market
adequate and fair means do not exist for ascertaining the interest rate
applicable to such Loans on the basis provided for in the definition of
Adjusted Eurodollar Rate, Administrative Agent shall on such date give
notice (by telefacsimile or by telephone confirmed in writing) to each
Borrower and each Lender of such determination, whereupon (i) no Loans may
be made as, or converted to, Eurodollar Rate Loans until such time as
Administrative Agent notifies Borrowers and Lenders that the circumstances
giving rise to such notice no longer exist and (ii) any Notice of Borrowing
or Notice of Conversion/Continuation given by Borrowers with respect to the
Loans in respect of which such determination was made shall be deemed to be
rescinded by Borrowers.
C. Illegality or Impracticability of Eurodollar Rate Loans. In the
-------------------------------------------------------
event that on any date any Lender shall have determined (which
determination shall be final and conclusive and binding upon all parties
hereto but shall be made only after consultation with Borrowers and
Administrative Agent) that the making, maintaining or continuation of its
Eurodollar Rate Loans (i) has become unlawful as a result of compliance by
such Lender in good faith with any law, treaty, governmental rule,
regulation, guideline or order (or would conflict with any such treaty,
governmental rule, regulation, guideline or order not having the force of
law even though the failure to comply therewith would not be unlawful) or
(ii) has become impracticable, or would cause such Lender material
hardship, as a result of contingencies occurring after the date of this
Agreement which materially and adversely affect the interbank Eurodollar
market or the position of such Lender in that market, then, and in any such
event, such Lender shall be an "Affected Lender" and it shall on that day
give notice (by telefacsimile or by telephone confirmed in writing) to
Borrowers and Administrative Agent of such determination (which notice
Administrative Agent shall promptly transmit to each other Lender).
Thereafter (a) the obligation of the Affected Lender to make Loans as, or
to convert Loans to, Eurodollar Rate Loans shall be suspended until such
notice shall be withdrawn by the Affected Lender, (b) to the extent such
determination by the Affected Lender relates to a Eurodollar Rate Loan then
being requested by Borrowers pursuant to a Notice of Borrowing or a Notice
of Conversion/ Continuation, the Affected Lender shall make such Loan as
(or convert such Loan to, as the case may be) a Base Rate Loan, (c) the
Affected Lender's obligation to maintain its outstanding Eurodollar Rate
Loans (the "Affected Loans") shall be terminated at the earlier to occur of
the expiration of the Interest Period
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then in effect with respect to the Affected Loans or when required by law,
and (d) the Affected Loans shall automatically convert into Base Rate Loans
on the date of such termination. Notwithstanding the foregoing, to the
extent a determination by an Affected Lender as described above relates to
a Eurodollar Rate Loan then being requested by Borrowers pursuant to a
Notice of Borrowing or a Notice of Conversion/Continuation, Borrowers shall
have the option, subject to the provisions of subsection 2.6D, to rescind
such Notice of Borrowing or Notice of Conversion/Continuation as to all
Lenders by giving notice (by telefacsimile or by telephone confirmed in
writing) to Administrative Agent of such rescission on the date on which
the Affected Lender gives notice of its determination as described above
(which notice of rescission Administrative Agent shall promptly transmit to
each other Lender). Except as provided in the immediately preceding
sentence, nothing in this subsection 2.6C shall affect the obligation of
any Lender other than an Affected Lender to make or maintain Loans as, or
to convert Loans to, Eurodollar Rate Loans in accordance with the terms of
this Agreement.
D. Compensation For Breakage or Non-Commencement of Interest
---------------------------------------------------------
Periods. Borrowers joint and severally agree to compensate each Lender,
-------
promptly upon written request by that Lender (which request shall set forth
the basis for requesting such amounts), for all reasonable losses, expenses
and liabilities (including any interest paid by that Lender to lenders of
funds borrowed by it to make or carry its Eurodollar Rate Loans and any
loss, expense or liability sustained by that Lender in connection with the
liquidation or re-employment of such funds but excluding loss of
anticipated profits with respect to any Loans) which that Lender may
sustain: (i) if for any reason (other than a default by that Lender) a
borrowing of any Eurodollar Rate Loan does not occur on a date specified
therefor in a Notice of Borrowing or a telephonic request for borrowing, or
a conversion to or continuation of any Eurodollar Rate Loan does not occur
on a date specified therefor in a Notice of Conversion/Continuation or a
telephonic request for conversion or continuation, (ii) if any prepayment
(including any prepayment pursuant to subsection 2.4B(i)) or other
principal payment or any conversion of any of its Eurodollar Rate Loans
occurs on a date prior to the last day of an Interest Period applicable to
that Loan or (iii) if any prepayment of any of its Eurodollar Rate Loans is
not made on any date specified in a notice of prepayment given by either
Borrower.
E. Booking of Eurodollar Rate Loans. Subject to its obligations
--------------------------------
under subsection 2.8, any Lender may make, carry or transfer Eurodollar
Rate Loans at, to, or for the account of any of its branch offices or the
office of an Affiliate of that Lender.
F. Assumptions Concerning Funding of Eurodollar Rate Loans.
-------------------------------------------------------
Calculation of all amounts payable to a Lender under this subsection 2.6
and under subsection 2.7A shall be made as though that Lender had actually
funded each of its relevant Eurodollar Rate Loans through the purchase of a
Eurodollar deposit bearing interest at the rate obtained pursuant to clause
(i) of the definition of Adjusted Eurodollar Rate in an amount equal to the
amount of such Eurodollar Rate Loan and having a maturity comparable to the
relevant Interest Period and through the transfer of such Eurodollar
deposit from an offshore office of that Lender to a domestic office of that
Lender in the United States of America; provided, however, that each Lender
-------- -------
may fund each of its Eurodollar Rate
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Loans in any manner it sees fit and the foregoing assumptions shall be
utilized only for the purposes of calculating amounts payable under this
subsection 2.6 and under subsection 2.7A.
G. Eurodollar Rate Loans After Default. After the occurrence of and
-----------------------------------
during the continuation of an Event of Default, unless the Required Lenders
otherwise consent, (i) Borrowers may not elect to have a Loan be made or
maintained as, or converted to, a Eurodollar Rate Loan after the expiration
of any Interest Period then in effect for that Loan and (ii) subject to the
provisions of subsection 2.6D, any Notice of Borrowing or Notice of
Conversion/Continuation given by Borrowers with respect to a requested
borrowing or conversion/continuation that has not yet occurred shall be
deemed to be rescinded by Borrowers.
2.7 Increased Costs; Taxes; Capital Adequacy.
----------------------------------------
A. Compensation for Increased Costs and Taxes. Subject to the
------------------------------------------
provisions of subsection 2.7B (which shall be controlling with respect to the
matters covered thereby), in the event that any Lender shall determine (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto) that any law, treaty or governmental rule, regulation
or order, or any change therein or in the interpretation, administration or
application thereof (including the introduction of any new law, treaty or
governmental rule, regulation or order), or any determination of a court or
governmental authority, in each case that becomes effective after the date
hereof, or compliance by such Lender with any guideline, request or directive
issued or made after the date hereof by any central bank or other governmental
or quasi-governmental authority (whether or not having the force of law):
(i) subjects such Lender (or its applicable lending office) to any
additional Tax (other than any Tax on the overall net income of such
Lender) with respect to this Agreement or any of its obligations hereunder
or any payments to such Lender (or its applicable lending office) of
principal, interest, fees or any other amount payable hereunder;
(ii) imposes, modifies or holds applicable any reserve (including any
marginal, emergency, supplemental, special or other reserve), special
deposit, compulsory loan, FDIC insurance or similar requirement against
assets held by, or deposits or other liabilities in or for the account of,
or advances or loans by, or other credit extended by or any other
acquisition of funds by, any office of such Lender (other than any such
reserve or other requirements with respect to Eurodollar Rate Loans that
are reflected in the definition of Adjusted Eurodollar Rate); or
(iii) imposes any other condition (other than with respect to a Tax
matter) on or affecting such Lender (or its applicable lending office) or
its obligations hereunder or the interbank Eurodollar market;
and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make, making or maintaining Loans hereunder or to reduce any amount
received or receivable by such
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Lender (or its applicable lending office) with respect thereto; then, in any
such case, Borrowers jointly and severally agree to pay promptly to such Lender,
upon receipt of the statement referred to in the next sentence, such additional
amount or amounts (in the form of an increased rate of, or a different method of
calculating, interest or otherwise as such Lender in its sole discretion shall
determine) as may be necessary to compensate such Lender for any such increased
cost or reduction in amounts received or receivable hereunder; provided that
--------
notwithstanding anything to the contrary contained in this subsection 2.7A,
unless a Lender gives notice to the respective Borrower that is obligated to pay
an amount under this subsection within six months after the later of (x) the
date such Lender incurs such increased cost or suffers such reduction in amounts
received or receivable or (y) the date such Lender has actual knowledge of the
respective increased cost or reduction in amounts received or receivable, then
such Lender shall only be entitled to be compensated for such amount by
Borrowers pursuant to this subsection 2.7A to the extent of the increased cost
or reduction in amounts received or receivable that is incurred or suffered, as
the case may be, on or after the date which occurs six months prior to such
Lender giving notice to such Borrower that is obligated to pay the respective
amounts pursuant to this subsection 2.7A. Such Lender shall deliver to Borrowers
(with a copy to Administrative Agent) a written statement, setting forth in
reasonable detail the basis for calculating the additional amounts owed to such
Lender under this subsection 2.7A, which statement shall be conclusive and
binding upon all parties hereto absent manifest error.
B. Withholding of Taxes.
--------------------
(i) Payments to Be Free and Clear. All sums payable by Borrowers
-----------------------------
under this Agreement and the other Loan Documents shall (except to the extent
required by law) be paid free and clear of, and without any deduction or
withholding on account of, any Tax (other than a Tax on the overall net income
of any Lender) imposed, levied, collected, withheld or assessed by or within the
United States of America or any political subdivision in or of the United States
of America or any other jurisdiction from or to which a payment is made by or on
behalf of a Borrower or by any federation or organization of which the United
States of America or any such jurisdiction is a member at the time of payment.
(ii) Grossing-up of Payments. If a Borrower or any other Person is
-----------------------
required by law to make any deduction or withholding on account of any such Tax
from any sum paid or payable by such Borrower to Administrative Agent or any
Lender under any of the Loan Documents:
(a) such Borrower shall notify Administrative Agent of any such
requirement or any change in any such requirement as soon as such Borrower
becomes aware of it;
(b) such Borrower shall pay any such Tax before the date on which
penalties attach thereto, such payment to be made (if the liability to pay
is imposed on such Borrower) for its own account or (if that liability is
imposed on Administrative Agent or such Lender, as the case may be) on
behalf of and in the name of Administrative Agent or such Lender;
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(c) the sum payable by such Borrower in respect of which the relevant
deduction, withholding or payment is required shall be increased to the
extent necessary to ensure that, after the making of that deduction,
withholding or payment, Administrative Agent or such Lender, as the case
may be, receives on the due date a net sum equal to what it would have
received had no such deduction, withholding or payment been required or
made; and
(d) within 30 days after paying any sum from which it is required by
law to make any deduction or withholding, and within 30 days after the due
date of payment of any Tax which it is required by clause (b) above to pay,
such Borrower shall deliver to Administrative Agent evidence satisfactory
to the other affected parties of such deduction, withholding or payment and
of the remittance thereof to the relevant taxing or other authority;
provided that no such additional amount shall be required to be paid to any
--------
Lender under clause (c) above except to the extent that any change after
the date hereof (in the case of each Lender listed on the signature pages
hereof) or after the date of the Assignment Agreement pursuant to which
such Lender became a Lender (in the case of each other Lender) in any such
requirement for a deduction, withholding or payment as is mentioned therein
shall result in an increase in the rate of such deduction, withholding or
payment from that in effect at the date of this Agreement or at the date of
such Assignment Agreement, as the case may be, in respect of payments to
such Lender.
(iii) Evidence of Exemption from U.S. Withholding Tax.
-----------------------------------------------
(a) Each Lender that is organized under the laws of any jurisdiction
other than the United States or any state or other political subdivision thereof
(for purposes of this subsection 2.7B(iii), a "Non-US Lender") or that is
otherwise a non-U.S. person as defined in the Internal Revenue Code shall
deliver to Administrative Agent for transmission to Borrowers, on or prior to
the Closing Date (in the case of each Lender listed on the signature pages
hereof) or on or prior to the date of the Assignment Agreement pursuant to which
it becomes a Lender (in the case of each other Lender), and at such other times
as may be necessary in the determination of a Borrower or Administrative Agent
(each in the reasonable exercise of its discretion), (1) two original copies of
Internal Revenue Service Form 1001 or 4224 (or any successor forms), properly
completed and duly executed by such Lender, together with any other certificate
or statement of exemption required under the Internal Revenue Code or the
regulations issued thereunder to establish that such Lender is not subject to
deduction or withholding of United States federal income tax with respect to any
payments to such Lender of principal, interest, fees or other amounts payable
under any of the Loan Documents or (2) if such Lender is not a "bank" or other
Person described in Section 881(c)(3) of the Internal Revenue Code and cannot
deliver either Internal Revenue Service Form 1001 or 4224 pursuant to clause (1)
above, a Certificate re Non-Bank Status together with two original copies of
Internal Revenue Service Form W-8 (or any successor form), properly completed
and duly executed by such Lender, together with any other certificate or
statement of exemption required under the Internal Revenue Code or the
regulations issued thereunder to establish that such Lender is not subject to
deduction or withholding of United States federal income tax with respect to any
payments to such Lender of interest payable under any of the Loan Documents.
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(b) Each Lender required to deliver any forms, certificates or other
evidence with respect to United States federal income tax withholding matters
pursuant to subsection 2.7B(iii)(a) hereby agrees, from time to time after the
initial delivery by such Lender of such forms, certificates or other evidence,
whenever a lapse in time or change in circumstances or change in law renders
such forms, certificates or other evidence obsolete or inaccurate in any
material respect, that such Lender shall promptly (1) deliver to Administrative
Agent for transmission to Borrowers two new original copies of Internal Revenue
Service Form 1001 or 4224 (or any successor forms), or a Certificate re Non-Bank
Status and two original copies of Internal Revenue Service Form W-8 (or any such
successor form), as the case may be, properly completed and duly executed by
such Lender, together with any other certificate or statement of exemption
required in order to confirm or establish that such Lender is not subject to
deduction or withholding of United States federal income tax with respect to
payments to such Lender under the Loan Documents or (2) notify Administrative
Agent and Borrowers of its inability to deliver any such forms, certificates or
other evidence.
(c) Borrowers shall not be required to pay any additional amount to
any Non-US Lender under clause (c) of subsection 2.7B(ii) with respect to a
payment required to be made pursuant to the Loan Documents if such Lender shall
have failed to satisfy the requirements of clause (a) or (b) of this subsection
2.7B(iii) with respect to such payment; provided that if such Lender shall have
--------
satisfied the requirements of subsection 2.7B(iii)(a) on the Closing Date (in
the case of each Lender listed on the signature pages hereof) or on the date of
the Assignment Agreement pursuant to which it became a Lender (in the case of
each other Lender), nothing in this subsection 2.7B(iii)(c) shall relieve
Borrowers of their obligations to pay any additional amounts pursuant to clause
(c) of subsection 2.7B(ii) in the event that, as a result of any change in any
applicable law, treaty or governmental rule, regulation or order, or any change
in the interpretation, administration or application thereof, such Lender is no
longer properly entitled to deliver forms, certificates or other evidence at a
subsequent date establishing the fact that such Lender is not subject to
withholding as described in subsection 2.7B(iii)(a).
(d) If a Borrower pays any additional amount under clause (c) of
subsection 2.7B(ii) to a Lender and such Lender determines in its sole
discretion that it has actually received or realized in connection therewith any
refund or any reduction of, or credit against, its Taxes in or with respect to
the taxable year in which the additional amount is paid, such Lender shall pay
to such Borrower an amount that such Lender shall, in its sole discretion,
determine is equal to the net benefit, after tax, which was obtained by such
Lender in such year as a consequence of such refund, reduction or credit.
C. Capital Adequacy Adjustment. If any Lender shall have determined
---------------------------
that the adoption, effectiveness, phase-in or applicability after the date
hereof of any law, rule or regulation (or any provision thereof) regarding
capital adequacy, or any change therein or in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender (or its applicable lending office) with any guideline, request or
directive regarding capital adequacy (whether or not having the force of law) of
any such governmental authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on the capital of such Lender or
any corporation controlling such Lender as a consequence of, or
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with reference to, such Lender's Loans or Commitments or Letters of Credit or
participations therein or other obligations hereunder with respect to the Loans
or the Letters of Credit to a level below that which such Lender or such
controlling corporation could have achieved but for such adoption,
effectiveness, phase-in, applicability, change or compliance (taking into
consideration the policies of such Lender or such controlling corporation with
regard to capital adequacy), then from time to time, within five Business Days
after receipt by Borrowers from such Lender of the statement referred to in the
next sentence, Borrowers jointly and severally agree to pay to such Lender such
additional amount or amounts as will compensate such Lender or such controlling
corporation on an after-tax basis for such reduction; provided that
--------
notwithstanding anything to the contrary contained above in this subsection
2.7C, unless a Lender gives notice to the respective Borrower that it is
obligated to pay an amount under this subsection within six months after the
later of (x) the date such Lender suffers the respective reduction in return on
capital or (y) the date such Lender has actual knowledge of the respective
reduction in return on capital, then such Lender shall only be entitled to be
compensated for such amount by Borrowers pursuant to this subsection 2.7C to the
extent of the reduction in return on capital that is suffered on or after the
date which occurs six months prior to such Lender giving notice to such Borrower
that it is obligated to pay the respective amounts pursuant to this subsection
2.7C. Such Lender shall deliver to Borrowers (with a copy to Administrative
Agent) a written statement, setting forth in reasonable detail the basis of the
calculation of such additional amounts, which statement shall be conclusive and
binding upon all parties hereto absent manifest error.
2.8 Obligation of Lenders and Issuing Lenders to Mitigate.
-----------------------------------------------------
Each Lender and Issuing Lender agrees that, as promptly as practicable
after the officer of such Lender or Issuing Lender responsible for administering
the Loans or Letters of Credit of such Lender or Issuing Lender, as the case may
be, becomes aware of the occurrence of an event or the existence of a condition
that would cause such Lender to become an Affected Lender or that would entitle
such Lender or Issuing Lender to receive payments under subsection 2.7 or
subsection 3.6, it will, to the extent not inconsistent with the internal
policies of such Lender or Issuing Lender and any applicable legal or regulatory
restrictions, use reasonable efforts (i) to make, issue, fund or maintain the
Commitments of such Lender or the affected Loans or Letters of Credit of such
Lender or Issuing Lender through another lending or letter of credit office of
such Lender or Issuing Lender, or (ii) take such other measures as such Lender
or Issuing Lender may deem reasonable, if as a result thereof the circumstances
which would cause such Lender to be an Affected Lender would cease to exist or
the additional amounts which would otherwise be required to be paid to such
Lender or Issuing Lender pursuant to subsection 2.7 or subsection 3.6 would be
materially reduced and if, as determined by such Lender or Issuing Lender in its
sole discretion, the making, issuing, funding or maintaining of such Commitments
or Loans or Letters of Credit through such other lending or letter of credit
office or in accordance with such other measures, as the case may be, would not
otherwise materially adversely affect such Commitments or Loans or Letters of
Credit or the interests of such Lender or Issuing Lender; provided that such
--------
Lender or Issuing Lender will not be obligated to utilize such other lending or
letter of credit office pursuant to this subsection 2.8 unless Borrowers jointly
and severally agree to pay all incremental expenses incurred by such Lender or
Issuing Lender as a result of utilizing such other lending or letter of credit
office as described in clause (i) above. A certificate as to the amount of any
such expenses payable by Borrowers pursuant to this
-79-
subsection 2.8 (setting forth in reasonable detail the basis for requesting such
amount) submitted by such Lender or Issuing Lender to Borrowers (with a copy to
Administrative Agent) shall be conclusive absent manifest error.
2.9 Defaulting Lenders.
------------------
Anything contained herein to the contrary notwithstanding, in the
event that any Lender (a "Defaulting Lender") defaults (a "Funding Default") in
its obligation to fund any Revolving Loan (a "Defaulted Revolving Loan") in
accordance with subsection 2.1 as a result of the appointment of a receiver or
conservator with respect to such Lender at the direction or request of any
regulatory agency or authority, then (i) during any Default Period (as defined
below) with respect to such Defaulting Lender, such Defaulting Lender shall be
deemed not to be a "Lender" for purposes of voting on any matters (including the
granting of any consents or waivers) with respect to any of the Loan Documents,
(ii) to the extent permitted by applicable law, until such time as the Default
Excess (as defined below) with respect to such Defaulting Lender shall have been
reduced to zero, (a) any voluntary prepayment of the Revolving Loans pursuant to
subsection 2.4B(i) shall, if Borrower making such prepayment so directs at the
time of making such voluntary prepayment, be applied to the Revolving Loans of
other Lenders as if such Defaulting Lender had no Revolving Loans outstanding
and the Revolving Loan Exposure of such Defaulting Lender were zero, and (b) any
mandatory prepayment of the Revolving Loans pursuant to subsection 2.4B(iii)
shall, if Borrower making such prepayment so directs at the time of making such
mandatory prepayment, be applied to the Revolving Loans of other Lenders (but
not to the Revolving Loans of such Defaulting Lender) as if such Defaulting
Lender had funded all Defaulted Revolving Loans of such Defaulting Lender, it
being understood and agreed that a Borrower shall be entitled to retain any
portion of any mandatory prepayment of the Revolving Loans that is not paid to
such Defaulting Lender solely as a result of the operation of the provisions of
this clause (b), (iii) such Defaulting Lender's Revolving Loan Commitment and
outstanding Revolving Loans and such Defaulting Lender's Pro Rata Share of the
--------
Letter of Credit Usage shall be excluded for purposes of calculating the
commitment fee payable to Lenders pursuant to subsection 2.3A in respect of any
day during any Default Period with respect to such Defaulting Lender, and such
Defaulting Lender shall not be entitled to receive any commitment fee pursuant
to subsection 2.3A with respect to such Defaulting Lender's Revolving Loan
Commitment in respect of any Default Period with respect to such Defaulting
Lender, and (iv) the Total Utilization of Revolving Loan Commitments as at any
date of determination shall be calculated as if such Defaulting Lender had
funded all Defaulted Revolving Loans of such Defaulting Lender.
For purposes of this Agreement, (I) "Default Period" means, with
respect to any Defaulting Lender, the period commencing on the date of the
applicable Funding Default and ending on the earliest of the following dates:
(A) the date on which all Revolving Loan Commitments are canceled or terminated
and/or the Obligations are declared or become immediately due and payable, (B)
the date on which (1) the Default Excess with respect to such Defaulting Lender
shall have been reduced to zero (whether by the funding by such Defaulting
Lender of any Defaulted Revolving Loans of such Defaulting Lender or by the non-
pro rata application of any voluntary or mandatory prepayments of the Revolving
- --- ----
Loans in accordance with the terms of this subsection 2.9 or by a combination
thereof) and (2) such Defaulting Lender
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shall have delivered to Borrowers and Administrative Agent a written
reaffirmation of its intention to honor its obligations under this Agreement
with respect to its Revolving Loan Commitment, and (C) the date on which
Borrowers, Administrative Agent and Requisite Lenders waive all Funding Defaults
of such Defaulting Lender in writing, and (II) "Default Excess" means, with
respect to any Defaulting Lender, the excess, if any, of such Defaulting
Lender's Pro Rata Share of the aggregate outstanding principal amount of
--- ----
Revolving Loans of all Lenders (calculated as if all Defaulting Lenders (other
than such Defaulting Lender) had funded all of their respective Defaulted
Revolving Loans) over the aggregate outstanding principal amount of Revolving
Loans of such Defaulting Lender.
No Commitment of any Lender shall be increased or otherwise affected,
and, except as otherwise expressly provided in this subsection 2.9, performance
by Borrowers of their respective obligations under this Agreement and the other
Loan Documents shall not be excused or otherwise modified, as a result of any
Funding Default or the operation of this subsection 2.9. The rights and remedies
against a Defaulting Lender under this subsection 2.9 are in addition to other
rights and remedies which Borrowers may have against such Defaulting Lender with
respect to any Funding Default and which Administrative Agent or any Lender may
have against such Defaulting Lender with respect to any Funding Default.
2.10 Removal or Replacement of a Lender
----------------------------------
A. Anything contained in this Agreement to the contrary
notwithstanding, in the event that:
(i) (a) any Lender (an "Increased-Cost Lender") shall give notice to
Borrowers that such Lender is an Affected Lender or that such Lender is entitled
to receive payments under subsection 2.7 or subsection 3.6, (b) the
circumstances which have caused such Lender to be an Affected Lender or which
entitle such Lender to receive such payments shall remain in effect, and (c)
such Lender shall fail to withdraw such notice within five Business Days after
Borrowers' request for such withdrawal; or
(ii) (a) any Lender shall become a Defaulting Lender, (b) the Default
Period for such Defaulting Lender shall remain in effect, and (c) such
Defaulting Lender shall fail to cure the default as a result of which it has
become a Defaulting Lender within five Business Days after Borrowers' request
that it cure such default; or
(iii) (a) in connection with any proposed amendment, modification,
termination, waiver or consent with respect to any of the provisions of this
Agreement as contemplated by clauses (i) through (v) of the first proviso to
subsection 10.6A, the consent of Requisite Lenders shall have been obtained but
the consent of one or more of such other Lenders (each, a "Non-Consenting
Lender") whose consent is required shall not have been obtained, and (b) the
failure to obtain Non-Consenting Lenders' consents does not result solely from
the exercise of Non-Consenting Lenders' rights (and the withholding of any
required consents by Non-Consenting Lenders) pursuant to the second proviso to
subsection 10.6A;
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then, and in each such case, Borrowers shall have the right, at their option, to
remove or replace the applicable Increased-Cost Lender, Defaulting Lender or
Non-Consenting Lender (the "Terminated Lender") to the extent permitted by
subsection 2.10B.
B. Borrowers may, by giving written notice to Administrative Agent
and any Terminated Lender of their election to do so:
(i) elect to (a) terminate the Revolving Loan Commitment, if any, of
such Terminated Lender upon receipt by such Terminated Lender of such
notice and (b) prepay on the date of such termination any outstanding Loans
made by such Terminated Lender, together with accrued and unpaid interest
thereon and any other amounts payable to such Terminated Lender hereunder
pursuant to subsection 2.3, subsection 2.6, subsection 2.7 or subsection
3.6 or otherwise; provided that, in the event such Terminated Lender has
--------
any Loans outstanding at the time of such termination, the written consent
of Administrative Agent and Requisite Lenders (which consent shall not be
unreasonably withheld or delayed) shall be required in order for Borrowers
to make the election set forth in this clause (i); or
(ii) elect to cause such Terminated Lender (and such Terminated Lender
hereby irrevocably agrees) to assign its outstanding Loans and its
Revolving Loan Commitment, if any, in full to one or more Eligible
Assignees (each, a "Replacement Lender") in accordance with the provisions
of subsection 10.1B; provided that (a) on the date of such assignment, the
--------
relevant Borrower or Borrowers shall pay any amounts payable to such
Terminated Lender pursuant to subsection 2.3, subsection 2.6, subsection
2.7 or subsection 3.6 or otherwise as if it were a prepayment and (b) in
the event such Terminated Lender is a Non-Consenting Lender, each
Replacement Lender shall consent, at the time of such assignment, to each
matter in respect of which such Terminated Lender was a Non-Consenting
Lender;
provided that (X) Borrowers may not make either of the elections set forth in
- --------
clauses (i) or (ii) above with respect to any Non-Consenting Lender unless
Borrowers also make one of such elections with respect to each other Terminated
Lender which is a Non-Consenting Lender and (Y) Borrowers may not make either of
such elections with respect to any Terminated Lender that is an Issuing Lender
unless, prior to the effectiveness of such election, the relevant Borrower or
Borrowers shall have caused each outstanding Letter of Credit issued by such
Issuing Lender to be canceled.
C. Upon the prepayment of all amounts owing to any Terminated Lender
and the termination of such Terminated Lender's Revolving Loan Commitment, if
any, pursuant to clause (i) of subsection 2.10B, (i) Schedule 2.1 shall be
------------
deemed modified to reflect any corresponding changes in the Revolving Loan
Commitments and (ii) such Terminated Lender shall no longer constitute a
"Lender" for purposes of this Agreement; provided that any rights of such
--------
Terminated Lender to indemnification under this Agreement (including under
subsections 2.6D, 2.7, 3.6, 10.2 and 10.3) shall survive as to such Terminated
Lender.
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SECTION 3.
LETTERS OF CREDIT
3.1 Issuance of Letters of Credit and Lenders' Purchase of
------------------------------------------------------
Participations Therein.
- ----------------------
A. Letters of Credit. In addition to Borrowers requesting that
-----------------
Lenders make Revolving Loans pursuant to subsection 2.1A(iv) and that Swing Line
Lender make Swing Line Loans pursuant to subsection 2.1A(v), Borrowers may
request, in accordance with the provisions of this subsection 3.1, from time to
time during the period from the Closing Date to but excluding the Revolving Loan
Commitment Termination Date, that one or more Lenders issue Letters of Credit
for the joint and several account of Borrowers for the purposes specified in the
definitions of Commercial Letters of Credit and Standby Letters of Credit;
provided that all such Commercial Letters of Credit shall provide for sight
- --------
drawings. Subject to the terms and conditions of this Agreement and in reliance
upon the representations and warranties of Borrowers herein set forth, any one
or more Lenders may, but (except as provided in subsection 3.1B(ii)) shall not
be obligated to, issue such Letters of Credit in accordance with the provisions
of this subsection 3.1; provided that Borrowers shall not request that any
--------
Lender issue (and no Lender shall issue):
(i) any Letter of Credit if, after giving effect to such issuance,
the Total Utilization of Revolving Loan Commitments would exceed the
Revolving Loan Commitments then in effect;
(ii) any Letter of Credit if, after giving effect to such issuance,
the Letter of Credit Usage would exceed $35,000,000;
(iii) any Standby Letter of Credit having an expiration date later
than the earlier of (a) five Business Days prior to the Revolving Loan
Commitment Termination Date and (b) the date which is one year from the
date of issuance of such Standby Letter of Credit; provided that the
--------
immediately preceding clause (b) shall not prevent any Issuing Lender from
agreeing that a Standby Letter of Credit will automatically be extended for
one or more successive periods not to exceed one year each unless such
Issuing Lender elects not to extend for any such additional period; and
provided, further that such Issuing Lender shall elect not to extend such
-------- -------
Standby Letter of Credit if it has knowledge that an Event of Default has
occurred and is continuing (and has not been waived in accordance with
subsection 10.6) at the time such Issuing Lender must elect whether or not
to allow such extension; provided, however, that notwithstanding clause (a)
-------- -------
but subject to the other restrictions of this subsection, Borrowers may
request the issuance (on a date prior to five Business Days prior to the
Revolving Loan Commitment Termination Date) of a Standby Letter of Credit
having an expiration date later than five Business Days prior to the
Revolving Loan Commitment Termination Date if Borrowers, at the time of
such request, make arrangements in form and substance satisfactory to the
Issuing Lender thereof to cash collateralize such Letter of Credit,
provided that Issuing Lender shall be under no obligation to issue such a
--------
Letter of Credit if it shall reasonably determine that such cash
collateralization arrangements could reasonably be expected to be less
favorable to Issuing
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Lender than the reimbursement arrangements hereunder with respect to other
Letters of Credit; or
(iv) any Commercial Letter of Credit having an expiration date (a)
later than the earlier of (X) the date which is 30 days prior to the
Revolving Loan Commitment Termination Date and (Y) the date which is 180
days from the date of issuance (on a date prior to 30 days prior to the
Revolving Loan Commitment Termination Date) of such Commercial Letter of
Credit or (b) that is otherwise unacceptable to the applicable Issuing
Lender in its reasonable discretion; provided, however, that
-------- -------
notwithstanding clause (X) but subject to the other restrictions of this
subsection, Borrowers may request the issuance (on a date prior to 30 days
prior to the Revolving Loan Commitment Termination Date) of a Commercial
Letter of Credit having an expiration date later than the time set forth in
clause (X) if Borrowers, at the time of such request, make arrangements in
form and substance satisfactory to the Issuing Lender thereof to cash
collateralize such Letter of Credit, provided that Issuing Lender shall be
--------
under no obligation to issue such a Letter of Credit if it shall reasonably
determine that such cash collateralization arrangements could reasonably be
expected to be less favorable to Issuing Lender than the reimbursement
arrangements hereunder with respect to other Letters of Credit.
B. Mechanics of Issuance.
---------------------
(i) Notice of Issuance. Whenever Borrowers desire the issuance of a
------------------
Letter of Credit, they shall deliver to Administrative Agent a Notice of
Issuance of Letter of Credit substantially in the form of Exhibit III
-----------
annexed hereto no later than 11:00 A.M. (New York City time) at least three
Business Days (in the case of Standby Letters of Credit) or five Business
Days (in the case of Commercial Letters of Credit), or in each case such
shorter period as may be agreed to by the Issuing Lender in any particular
instance, in advance of the proposed date of issuance. The Notice of
Issuance of Letter of Credit shall specify (a) the proposed date of
issuance (which shall be a Business Day), (b) whether the Letter of Credit
is to be a Standby Letter of Credit or a Commercial Letter of Credit, (c)
the face amount of the Letter of Credit, (d) the expiration date of the
Letter of Credit, (e) the name and address of the beneficiary, and (f)
either the verbatim text of the proposed Letter of Credit or the proposed
terms and conditions thereof, including a precise description of any
documents to be presented by the beneficiary which, if presented by the
beneficiary prior to the expiration date of the Letter of Credit, would
require the Issuing Lender to make payment under the Letter of Credit;
provided that the Issuing Lender, in its reasonable discretion, may require
--------
changes in the text of the proposed Letter of Credit or any such documents;
and provided, further that no Letter of Credit shall require payment
-------- -------
against a conforming draft to be made thereunder on the same business day
(under the laws of the jurisdiction in which the office of the Issuing
Lender to which such draft is required to be presented is located) that
such draft is presented if such presentation is made after 10:00 A.M. (in
the time zone of such office of the Issuing Lender) on such business day.
Borrowers shall notify the applicable Issuing Lender (and
Administrative Agent, if Administrative Agent is not such Issuing Lender)
prior to the issuance of any Letter of
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Credit in the event that any of the matters to which Borrowers are required
to certify in the applicable Notice of Issuance of Letter of Credit is no
longer true and correct as of the proposed date of issuance of such Letter
of Credit, and upon the issuance of any Letter of Credit Borrowers shall be
deemed to have re-certified, as of the date of such issuance, as to the
matters to which Borrowers are required to certify in the applicable Notice
of Issuance of Letter of Credit.
(ii) Determination of Issuing Lender. Upon receipt by Administrative
-------------------------------
Agent of a Notice of Issuance of Letter of Credit pursuant to subsection
3.1B(i) requesting the issuance of a Letter of Credit, in the event
Administrative Agent elects to issue such Letter of Credit, Administrative
Agent shall promptly so notify Borrowers, and Administrative Agent shall be
the Issuing Lender with respect thereto. In the event that Administrative
Agent, in its sole discretion, elects not to issue such Letter of Credit,
Administrative Agent shall promptly so notify Borrowers, whereupon
Borrowers may request any other Lender to issue such Letter of Credit by
delivering to such Lender a copy of the applicable Notice of Issuance of
Letter of Credit. Any Lender so requested to issue such Letter of Credit
shall promptly notify Borrowers and Administrative Agent whether or not, in
its sole discretion, it has elected to issue such Letter of Credit, and any
such Lender which so elects to issue such Letter of Credit shall be the
Issuing Lender with respect thereto. In the event that all other Lenders
shall have declined to issue such Letter of Credit, notwithstanding the
prior election of Administrative Agent not to issue such Letter of Credit,
Administrative Agent shall be obligated to issue such Letter of Credit and
shall be the Issuing Lender with respect thereto, notwithstanding the fact
that the Letter of Credit Usage with respect to such Letter of Credit and
with respect to all other Letters of Credit issued by Administrative Agent,
when aggregated with Administrative Agent's outstanding Revolving Loans and
Swing Line Loans, may exceed Administrative Agent's Revolving Loan
Commitment then in effect.
(iii) Issuance of Letter of Credit. Upon satisfaction or waiver (in
----------------------------
accordance with subsection 10.6) of the conditions set forth in subsection
4.3, the Issuing Lender shall issue the requested Letter of Credit in
accordance with the Issuing Lender's standard operating procedures.
(iv) Notification to Lenders. Upon the issuance of any Letter of
-----------------------
Credit the applicable Issuing Lender shall promptly notify Administrative
Agent and each other Lender of such issuance, which notice shall be
accompanied by a copy of such Letter of Credit. Promptly after receipt of
such notice (or, if Administrative Agent is the Issuing Lender, together
with such notice), Administrative Agent shall notify each Lender of the
amount of such Lender's respective participation in such Letter of Credit,
determined in accordance with subsection 3.1C.
(v) Reports to Lenders. Within 15 days after the end of each calendar
-------------------
quarter ending after the Closing Date, so long as any Letter of Credit
shall have been outstanding during such calendar quarter, each Issuing
Lender shall deliver to each other Lender a report setting forth for such
calendar quarter the daily aggregate amount available to be
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drawn under the Letters of Credit issued by such Issuing Lender that were
outstanding during such calendar quarter.
C. Lenders' Purchase of Participations in Letters of Credit.
--------------------------------------------------------
Immediately upon the issuance of each Letter of Credit, each Lender having a
Revolving Loan Commitment shall be deemed to, and hereby agrees to, have
irrevocably purchased from the Issuing Lender a participation in such Letter of
Credit and any drawings honored thereunder in an amount equal to such Lender's
Pro Rata Share (with respect to the Revolving Loan Commitments) of the maximum
- --- ----
amount which is or at any time may become available to be drawn thereunder. On
the Revolving Loan Commitment Termination Date, the Issuing Lender shall be
deemed to, and hereby agrees to, irrevocably repurchase from each Lender such
Lender's participation in the Letters of Credit issued by such Issuing Lender
pursuant to the last proviso to subsection 3.1A(iii) or the last proviso to
subsection 3.1A(iv) to the extent any such Letter of Credit remains outstanding
and any amounts remain undrawn thereunder.
D. Existing Letters of Credit. Schedule 3.1D hereto contains a
-------------------------- -------------
description of all letters of credit issued pursuant to the Existing Credit
Agreement and outstanding on the Closing Date. Each such letter of credit,
including any extension or renewal thereof (each, as amended from time to time
in accordance with the terms hereof and thereof, an "Existing Letter of Credit")
shall constitute a "Letter of Credit" for all purposes of this Agreement,
issued, for purposes of subsection 3.1, on the Closing Date. In addition, each
letter of credit designated as a "Standby Letter of Credit" or "Commercial
Letter of Credit" on Schedule 3.1D shall constitute a "Standby Letter of Credit"
-------------
or "Commercial Letter of Credit", as the case may be, for all purposes of this
Agreement. Notwithstanding anything to the contrary contained above in this
subsection 3.1, any Lender hereunder to the extent it has issued an Existing
Letter of Credit shall constitute the "Issuing Lender" with respect to such
Letter of Credit for all purposes of this Agreement.
3.2 Letter of Credit Fees.
---------------------
Borrowers jointly and severally agree to pay the following amounts
with respect to Letters of Credit issued hereunder:
(i) with respect to each Standby Letter of Credit, (a) a fronting
fee, payable directly to the applicable Issuing Lender for its own account,
equal to 1/4 of 1% per annum of the daily amount available to be drawn
under such Standby Letter of Credit and (b) a letter of credit fee, payable
to Administrative Agent for the account of Lenders having Revolving Loan
Exposure, equal to the product of (x) the Applicable Eurodollar Rate Margin
for Revolving Loans and (y) the daily amount available to be drawn under
such Standby Letter of Credit, each such fronting fee or letter of credit
fee to be payable quarterly in arrears on each Quarterly Payment Date and
upon the first day on or after the Revolving Loan Commitment Termination
Date upon which no Letters of Credit remain outstanding and be computed on
the basis of a 360-day year for the actual number of days elapsed;
(ii) with respect to each Commercial Letter of Credit, (a) a fronting
fee, payable directly to the applicable Issuing Lender for its own account,
equal to 1/4 of 1 %
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per annum of the daily amount available to be drawn under such Commercial
Letter of Credit and (b) a letter of credit fee, payable to Administrative
Agent for the account of Lenders having Revolving Loan Exposure, equal to
the product of (x) the Applicable Eurodollar Rate Margin for Revolving
Loans and (y) the daily amount available to be drawn under such Commercial
Letter of Credit, each such fronting fee or letter of credit fee to be
payable quarterly in arrears on each Quarterly Payment Date and upon the
first day on or after the Revolving Loan Commitment Termination Date upon
which no Letters of Credit remain outstanding and be computed on the basis
of a 360-day year for the actual number of days elapsed; and
(iii) with respect to the issuance, amendment or transfer of each
Letter of Credit and each payment of a drawing made thereunder (without
duplication of the fees payable under clauses (i) and (ii) above),
documentary and processing charges payable directly to the applicable
Issuing Lender for its own account in accordance with such Issuing Lender's
standard schedule for such charges in effect at the time of such issuance,
amendment, transfer or payment, as the case may be.
For purposes of calculating any fees payable under clauses (i) and
(ii) of this subsection 3.2, the daily amount available to be drawn under any
Letter of Credit shall be determined as of the close of business on any date of
determination. Promptly upon receipt by Administrative Agent of any amount
described in clause (i)(b) or (ii)(b) of this subsection 3.2, Administrative
Agent shall distribute to each Lender its Pro Rata Share (with respect to its
--- ----
Revolving Loan Commitment) of such amount.
3.3 Drawings and Reimbursement of Amounts Paid Under Letters of
-----------------------------------------------------------
Credit.
- -------
A. Responsibility of Issuing Lender With Respect to Drawings. In
---------------------------------------------------------
determining whether to honor any drawing under any Letter of Credit by the
beneficiary thereof, the Issuing Lender shall be responsible only to examine the
documents delivered under such Letter of Credit with reasonable care so as to
ascertain whether they appear on their face to be in accordance with the terms
and conditions of such Letter of Credit.
B. Reimbursement by Borrowers of Amounts Paid Under Letters of
-----------------------------------------------------------
Credit. In the event an Issuing Lender has determined to honor a drawing under
- ------
a Letter of Credit issued by it, such Issuing Lender shall immediately notify
Borrowers and Administrative Agent, and Borrowers shall reimburse, on a joint
and several basis, such Issuing Lender on or before the Business Day immediately
following the date on which such drawing is honored (the "Reimbursement Date")
in an amount in Dollars and in same day funds equal to the amount of such
honored drawing; provided that, anything contained in this Agreement to the
---------
contrary notwithstanding, (i) unless Borrowers shall have notified
Administrative Agent and such Issuing Lender prior to 11:00 A.M. (New York City
time) on the date such drawing is honored that Borrowers intend to reimburse
such Issuing Lender for the amount of such honored drawing with funds other than
the proceeds of Revolving Loans, Borrowers shall be deemed to have given a
timely Notice of Borrowing to Administrative Agent requesting Lenders to make
Revolving Loans that are Base Rate Loans on the Reimbursement Date in an amount
in Dollars equal to the amount of such honored drawing and (ii) subject to
satisfaction or waiver of the conditions
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specified in subsection 4.2B, Lenders shall, on the Reimbursement Date, make
Revolving Loans that are Base Rate Loans in the amount of such honored drawing,
the proceeds of which shall be applied directly by Administrative Agent to
reimburse such Issuing Lender for the amount of such honored drawing; and
provided, further that if for any reason proceeds of Revolving Loans are not
- -------- -------
received by such Issuing Lender on the Reimbursement Date in an amount equal to
the amount of such honored drawing, Borrowers shall reimburse, on a joint and
several basis, such Issuing Lender, on demand, in an amount in same day funds
equal to the excess of the amount of such honored drawing over the aggregate
amount of proceeds of such Revolving Loans, if any, which are so received.
Nothing in this subsection 3.3B shall be deemed to relieve any Lender from its
obligation to make Revolving Loans on the terms and conditions set forth in this
Agreement, and Borrowers shall retain any and all rights they may have against
any Lender resulting from the failure of such Lender to make such Revolving
Loans under this subsection 3.3B.
C. Payment by Lenders of Unreimbursed Amounts Paid Under Letters of
----------------------------------------------------------------
Credit.
- ------
(i) Payment by Lenders. In the event that Borrowers shall fail for
------------------
any reason to reimburse any Issuing Lender as provided in subsection 3.3B
in an amount equal to the amount of any drawing honored by such Issuing
Lender under a Letter of Credit issued by it, such Issuing Lender shall
promptly notify each other Lender of the unreimbursed amount of such
honored drawing and of such other Lender's respective participation therein
based on such Lender's Pro Rata Share of the Revolving Loan Commitments.
--- ----
Each Lender shall make available to such Issuing Lender an amount equal to
its respective participation, in Dollars and in same day funds, at the
office of such Issuing Lender specified in such notice, not later than
12:00 Noon (New York City time) on the first business day (under the laws
of the jurisdiction in which such office of such Issuing Lender is located)
after the date notified by such Issuing Lender. In the event that any
Lender fails to make available to such Issuing Lender on such business day
the amount of such Lender's participation in such Letter of Credit as
provided in this subsection 3.3C, such Issuing Lender shall be entitled to
recover such amount on demand from such Lender together with interest
thereon at the rate customarily used by such Issuing Lender for the
correction of errors among banks for three Business Days and thereafter at
the Base Rate. Nothing in this subsection 3.3 shall be deemed to prejudice
the right of any Lender to recover from any Issuing Lender any amounts made
available by such Lender to such Issuing Lender pursuant to this subsection
3.3 in the event that it is determined by the final judgment of a court of
competent jurisdiction that the payment with respect to a Letter of Credit
by such Issuing Lender in respect of which payment was made by such Lender
constituted gross negligence or willful misconduct on the part of such
Issuing Lender.
(ii) Distribution to Lenders of Reimbursements Received From
-------------------------------------------------------
Borrowers. In the event any Issuing Lender shall have been reimbursed by
other Lenders pursuant to subsection 3.3C(i) for all or any portion of any
drawing honored by such Issuing Lender under a Letter of Credit issued by
it, such Issuing Lender shall distribute to each other Lender which has
paid all amounts payable by it under subsection 3.3C(i) with respect to
such honored drawing such other Lender's Pro Rata Share of all payments
--- ----
subsequently
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received by such Issuing Lender from Borrowers in reimbursement of such
honored drawing when such payments are received. Any such distribution
shall be made to a Lender at its primary address set forth below its name
on the appropriate signature page hereof or at such other address as such
Lender may request.
D. Interest on Amounts Paid Under Letters of Credit.
------------------------------------------------
(i) Payment of Interest by Borrowers. Borrowers jointly and severally
--------------------------------
agree to pay to each Issuing Lender, with respect to drawings honored under
any Letters of Credit issued by it, interest on the amount paid by such
Issuing Lender in respect of each such honored drawing from the date such
drawing is honored to but excluding the date such amount is reimbursed by
Borrowers (including any such reimbursement out of the proceeds of
Revolving Loans pursuant to subsection 3.3B) at a rate equal to (a) for the
period from the date such drawing is honored to but excluding the
Reimbursement Date, the Base Rate plus the Applicable Base Rate Margin for
Revolving Loans and (b) thereafter, a rate which is 2% per annum in excess
of the rate of interest otherwise payable under this Agreement with respect
to Revolving Loans that are Base Rate Loans. Interest payable pursuant to
this subsection 3.3D(i) shall be computed on the basis of a 365-day or 366
day year, as the case may be, for the actual number of days elapsed in the
period during which it accrues and shall be payable on demand or, if no
demand is made, on the date on which the related drawing under a Letter of
Credit is reimbursed in full.
(ii) Distribution of Interest Payments by Issuing Lender. Promptly
---------------------------------------------------
upon receipt by any Issuing Lender of any payment of interest pursuant to
subsection 3.3D(i) with respect to a drawing honored under a Letter of
Credit issued by it, (a) such Issuing Lender shall distribute to each other
Lender, out of the interest received by such Issuing Lender in respect of
the period from the date such drawing is honored to but excluding the date
on which such Issuing Lender is reimbursed for the amount of such drawing
(including any such reimbursement out of the proceeds of Revolving Loans
pursuant to subsection 3.3B), the amount that such other Lender would have
been entitled to receive in respect of the letter of credit fee that would
have been payable in respect of such Letter of Credit for such period
pursuant to subsection 3.2 if no drawing had been honored under such Letter
of Credit, and (b) in the event such Issuing Lender shall have been
reimbursed by other Lenders pursuant to subsection 3.3C(i) for all or any
portion of such honored drawing, such Issuing Lender shall distribute to
each other Lender which has paid all amounts payable by it under subsection
3.3C(i) with respect to such honored drawing such other Lender's Pro Rata
--- ----
Share of any interest received by such Issuing Lender in respect of that
portion of such honored drawing so reimbursed by other Lenders for the
period from the date on which such Issuing Lender was so reimbursed by
other Lenders to but excluding the date on which such portion of such
honored drawing is reimbursed by Borrowers. Any such distribution shall be
made to a Lender at its primary address set forth below its name on the
appropriate signature page hereof or at such other address as such Lender
may request.
3.4 Obligations Absolute.
--------------------
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The joint and several obligation of Borrowers to reimburse each
Issuing Lender for drawings honored under the Letters of Credit issued by it and
to repay any Revolving Loans made by Lenders pursuant to subsection 3.3B and the
obligations of Lenders under subsection 3.3C(i) shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances including any of the following circumstances:
(i) any lack of validity or enforceability of any Letter of Credit;
(ii) the existence of any claim, set-off, defense or other right
which any Borrower or any Lender may have at any time against a beneficiary
or any transferee of any Letter of Credit (or any Persons for whom any such
transferee may be acting), any Issuing Lender or other Lender or any other
Person or, in the case of a Lender, against any Borrower, whether in
connection with this Agreement, the transactions contemplated herein or any
unrelated transaction (including any underlying transaction between
Holdings or one of its Subsidiaries and the beneficiary for which any
Letter of Credit was procured);
(iii) any draft or other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;
(iv) any adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or prospects of Holdings or any
of its Subsidiaries;
(v) any breach of this Agreement or any other Loan Document by any
party thereto;
(vi) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing; or
(vii) the fact that an Event of Default or a Potential Event of
Default shall have occurred and be continuing;
provided, in each case, that payment by the applicable Issuing Lender under the
- --------
applicable Letter of Credit shall not have constituted bad faith, gross
negligence or willful misconduct of such Issuing Lender under the circumstances
in question.
3.5 Indemnification; Nature of Issuing Lenders' Duties.
--------------------------------------------------
A. Indemnification. In addition to amounts payable as provided in
---------------
subsection 3.6, Borrowers hereby jointly and severally agree to protect,
indemnify, pay and save harmless each Issuing Lender from and against any and
all claims, demands, liabilities, damages, losses, costs, charges and expenses
(including reasonable fees, expenses and disbursements of counsel and allocated
costs of internal counsel) which such Issuing Lender may incur or be subject to
as a consequence, direct or indirect, of (i) the issuance of any Letter of
Credit by such Issuing Lender, other than as a result of (a) the bad faith,
gross negligence or willful misconduct of such Issuing Lender or (b) subject to
the following clause (ii), the wrongful dishonor by such Issuing Lender of
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a proper demand for payment made under any Letter of Credit issued by it or (ii)
the failure of such Issuing Lender to honor a drawing under any such Letter of
Credit as a result of any act or omission, whether rightful or wrongful, of any
present or future de jure or de facto government or governmental authority (all
such acts or omissions herein called "Governmental Acts").
B. Nature of Issuing Lenders' Duties. As between Borrowers and any
---------------------------------
Issuing Lender, Borrowers assume all risks of the acts and omissions of, or
misuse of the Letters of Credit issued by such Issuing Lender by, the respective
beneficiaries of such Letters of Credit. In furtherance and not in limitation of
the foregoing, such Issuing Lender shall not be responsible for: (i) the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and issuance of
any such Letter of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) so long as such Issuing Lender
complies with its responsibilities under subsection 3.3A, failure of the
beneficiary of any such Letter of Credit to comply fully with any conditions
required in order to draw upon such Letter of Credit; (iv) errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail,
cable, telegraph, telex or otherwise, whether or not they be in cipher; (v)
errors in interpretation of technical terms; (vi) any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any such Letter of Credit or of the proceeds thereof; (vii) the
misapplication by the beneficiary of any such Letter of Credit of the proceeds
of any drawing under such Letter of Credit; or (viii) any consequences arising
from causes beyond the control of such Issuing Lender, including any
Governmental Acts, and none of the above shall affect or impair, or prevent the
vesting of, any of such Issuing Lender's rights or powers hereunder.
In furtherance and extension and not in limitation of the specific
provisions set forth in the first paragraph of this subsection 3.5B, any action
taken or omitted by any Issuing Lender under or in connection with the Letters
of Credit issued by it or any documents and certificates delivered thereunder,
if taken or omitted in good faith, shall not put such Issuing Lender under any
resulting liability to Borrowers.
Notwithstanding anything to the contrary contained in this subsection
3.5, each Borrower shall retain any and all rights it may have against any
Issuing Lender for any liability arising out of the bad faith, gross negligence
or willful misconduct of such Issuing Lender.
3.6 Increased Costs and Taxes Relating to Letters of Credit.
-------------------------------------------------------
Subject to the provisions of subsection 2.7B (which shall be
controlling with respect to the matters covered thereby), in the event that any
Issuing Lender or Lender shall determine (which determination shall, absent
manifest error, be final and conclusive and binding upon all parties hereto)
that any law, treaty or governmental rule, regulation or order, or any change
therein or in the interpretation, administration or application thereof
(including the introduction of any new law, treaty or governmental rule,
regulation or order), or any determination of a court or governmental authority,
in each case that becomes effective after the
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date hereof, or compliance by any Issuing Lender or Lender with any guideline,
request or directive issued or made after the date hereof by any central bank or
other governmental or quasi-governmental authority (whether or not having the
force of law):
(i) subjects such Issuing Lender or Lender (or its applicable
lending or letter of credit office) to any additional Tax (other than any
Tax on the overall net income of such Issuing Lender or Lender) with
respect to the issuing or maintaining of any Letters of Credit or the
purchasing or maintaining of any participations therein or any other
obligations under this Section 3, whether directly or by such being imposed
on or suffered by any particular Issuing Lender;
(ii) imposes, modifies or holds applicable any reserve (including any
marginal, emergency, supplemental, special or other reserve), special
deposit, compulsory loan, FDIC insurance or similar requirement in respect
of any Letters of Credit issued by any Issuing Lender or Participations
therein purchased by any Lender; or
(iii) imposes any other condition (other than with respect to a Tax
matter) on or affecting such Issuing Lender or Lender (or its applicable
lending or letter of credit office) regarding this Section 3 or any Letter
of Credit or any participation therein;
and the result of any of the foregoing is to increase the cost to such Issuing
Lender or Lender of agreeing to issue, issuing or maintaining any Letter of
Credit or agreeing to purchase, purchasing or maintaining any participation
therein or to reduce any amount received or receivable by such Issuing Lender or
Lender (or its applicable lending or letter of credit office) with respect
thereto; then, in any case, Borrowers jointly and severally agree to pay
promptly to such Issuing Lender or Lender, upon receipt of the statement
referred to in the next sentence, such additional amount or amounts as may be
necessary to compensate such Issuing Lender or Lender for any such increased
cost or reduction in amounts received or receivable hereunder. Such Issuing
Lender or Lender shall deliver to Borrowers a written statement, setting forth
in reasonable detail the basis for calculating the additional amounts owed to
such Issuing Lender or Lender under this subsection 3.6, which statement shall
be conclusive and binding upon all parties hereto absent manifest error.
SECTION 4.
CONDITIONS TO LOANS AND LETTERS OF CREDIT
The obligations of Lenders to make Loans and the issuance of Letters
of Credit hereunder are subject to the satisfaction of the following conditions.
4.1 Conditions To Term Loans and Recapitalization Revolving Loans.
-------------------------------------------------------------
The obligations of Lenders to make the Term Loans and any
Recapitalization Revolving Loans to be made on the Closing Date are, in addition
to the conditions precedent specified in subsection 4.2, subject to prior or
concurrent satisfaction of the following conditions:
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A. Loan Party Documents. On or before the Closing Date, Holdings
--------------------
shall, and shall cause each other Loan Party to, deliver to Lenders (or to
Administrative Agent for Lenders with sufficient originally executed copies,
where appropriate, for each Lender and its counsel) the following with respect
to Holdings or such Loan Party, as the case may be, each, unless otherwise
noted, dated the Closing Date:
(i) Certified copies of the Certificate or Articles of Incorporation
of such Person, together with a good standing certificate from the
Secretary of State of its jurisdiction of incorporation and each other
state in which such Person is qualified as a foreign corporation to do
business (except any such other state or states in which the failure to be
qualified could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect (provided that no such state
--------
shall be a state in which Closing Date Mortgaged Property of the applicable
Loan Party is located)) and, to the extent generally available, a
certificate or other evidence of good standing as to payment of any
applicable franchise or similar taxes from the appropriate taxing authority
of each of such jurisdictions, each dated a recent date prior to the
Closing Date;
(ii) Copies of the Bylaws of such Person, certified as of the Closing
Date by such Person's corporate secretary or an assistant secretary;
(iii) Resolutions of the Board of Directors of such Person approving
and authorizing the execution, delivery and performance of the Loan
Documents and Related Agreements to which it is a party, certified as of
the Closing Date by the corporate secretary or an assistant secretary of
such Person as being in full force and effect without modification or
amendment;
(iv) Signature and incumbency certificates of the officers of such
Person executing the Loan Documents to which it is a party;
(v) Executed originals of the Loan Documents to which such Person is
a party; and
(vi) Such other documents as Arranger or Administrative Agent may
reasonably request.
B. No Material Adverse Effect. (a) Since December 28, 1997, nothing
--------------------------
shall have occurred (and neither Agents nor Lenders shall have become aware of
any facts or conditions not previously known, whether as a result of their due
diligence investigations or otherwise) which Agents or Required Lenders shall
determine (i) has had, or would reasonably be expected to have a material
adverse effect on the rights or remedies of Lenders or Agents, or on the ability
of any Loan Party to perform its obligations to them hereunder or under any
other Loan Document or (ii) has had, or would reasonably be expected to have, a
material adverse effect on the Recapitalization Transactions or a Material
Adverse Effect.
C. Corporate and Capital Structure, Ownership, Management, Etc.
------------------------------------------------------------
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(i) Corporate Structure. The corporate organizational structure of
-------------------
Holdings and its Subsidiaries, after giving effect to the Recapitalization
Transactions, shall be as set forth on Schedule 4.1C annexed hereto.
-------------
(ii) Capital Structure and Ownership. The capital structure and
-------------------------------
ownership of Holdings and its Subsidiaries, after giving effect to the
Recapitalization Transactions, shall be reasonably satisfactory to Arranger
and Administrative Agent in all respects and as set forth on Schedule 4.1 C
--------------
annexed hereto.
D. Proceeds of Debt and Equity Capitalization of Merger Corp.,
-----------------------------------------------------------
Holdings and Borrowers.
- ----------------------
(i) Equity Capitalization. On or before the Closing Date, Bain, the
---------------------
Other Investors and the Existing Shareholders shall have made the Equity
Contribution.
(ii) Senior Subordinated Notes. On or before the Closing Date,
-------------------------
Company shall have issued and sold for Cash not less than $275,000,000 in
aggregate principal amount of Senior Subordinated Notes providing net Cash
proceeds to Company of not less than $266,750,000.
(iii) Cumulative Preferred Stock. On or before the Closing Date,
--------------------------
Holdings shall have issued shares of the Cumulative Preferred Stock
providing net Cash proceeds to Company of not less than $101,325,000.
(iv) Use of Proceeds. Holdings shall have provided evidence
---------------
reasonably satisfactory to Arranger and Administrative Agent that the
proceeds of the debt and equity capitalization of Merger Corp., Holdings
and Company described in the immediately preceding clauses (i), (ii) and
(iii) have been irrevocably committed, prior to the application of the
proceeds of the Term Loans and the Recapitalization Revolving Loans, to the
payment of a portion of the Recapitalization Financing Requirements.
E. Related Agreements.
------------------
(i) The Bain Advisory Services Agreement and the Related Agreements
shall each be reasonably satisfactory in form and substance to Arranger and
Administrative Agent.
(ii) Arranger and Administrative Agent shall each have received a
fully executed or conformed copy of the Bain Advisory Services Agreement
and each Related Agreement and any documents executed in connection
therewith, and the Bain Advisory Services Agreement and each Related
Agreement shall be in full force and effect and no provision thereof
related to payments thereunder shall have been modified or waived in any
respect reasonably determined by Arranger or Administrative Agent to be
material, in each case without the consent of Arranger and Administrative
Agent (such consent not to be unreasonably withheld).
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F. Matters Relating to Existing Indebtedness of Holdings and its
-------------------------------------------------------------
Subsidiaries.
- ------------
(i) Termination of Existing Credit Agreement and Related Liens;
-----------------------------------------------------------
Existing Letters of Credit. On the Closing Date, Holdings and its
--------------------------
Subsidiaries shall have (a) repaid in full all Indebtedness outstanding
under the Existing Credit Agreement, (b) terminated any commitments to lend
or make other extensions of credit thereunder, (c) delivered to Arranger
and Administrative Agent all documents or instruments necessary to release
all Liens securing Indebtedness or other obligations of Holdings and its
Subsidiaries thereunder and (d) caused any letters of credit outstanding
thereunder to be incorporated hereunder as Existing Letters of Credit
pursuant to subsection 3.1D.
(ii) No Existing Indebtedness to Remain Outstanding. Arranger and
----------------------------------------------
Administrative Agent shall have received an Officers' Certificate of
Holdings stating that, after giving effect to the transactions described in
this subsection 4.1F, Holdings and its Subsidiaries shall have no
Indebtedness outstanding to any Persons other than (w) Indebtedness under
the Loan Documents, (x) the Senior Subordinated Notes, (y) Indebtedness
among the Loan Parties and (z) Indebtedness set forth on Schedule 7.1(vii)
-----------------
annexed hereto.
G. Necessary Governmental Authorizations and Consents; Expiration of
-----------------------------------------------------------------
Waiting Periods, Etc. Holdings and its Subsidiaries shall have obtained all
- ---------------------
Governmental Authorizations and all consents of other Persons, in each case that
are necessary in connection with the Recapitalization Transactions, the Merger
and the other transactions contemplated by the Loan Documents and the Related
Agreements, and the continued operation of the business conducted by Holdings
and its Subsidiaries in substantially the same manner as conducted prior to the
consummation of the Recapitalization Transactions and the Merger, and each of
the foregoing shall be in full force and effect, in each case other than those
the failure to obtain or maintain which, either individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
All applicable waiting periods shall have expired without any action being taken
or threatened by any competent authority which would restrain, prevent or
otherwise impose adverse conditions on the Recapitalization Transactions or the
Merger or the financing thereof. No action, request for stay, petition for
review or rehearing, reconsideration, or appeal with respect to any of the
foregoing shall be pending, and the time for any applicable agency to take
action to set aside its consent on its own motion shall have expired.
H. Consummation of Recapitalization Transactions and Merger.
--------------------------------------------------------
(i) All conditions to the Recapitalization Transactions shall have
been satisfied pursuant to documentation, including, without limitation,
the Recapitalization Agreement and the Certificate of Merger, reasonably
satisfactory to Arranger and Administrative Agent or the fulfillment of
such conditions shall have been waived with the consent of Arranger and
Administrative Agent, such consent not to be unreasonably withheld;
(ii) The aggregate cash consideration paid to the holders of equity
interests in Holdings in respect of such equity interests in connection
with the Merger on the Closing Date shall not exceed $960,000,000;
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(iii) The Merger shall have become effective in accordance with the
terms of the Recapitalization Agreement, the Certificate of Merger and the
laws of the State of Delaware;
(iv) Transaction Costs shall not exceed $50,000,000; and
(v) Arranger and Administrative Agent shall have received an
Officers' Certificate of Holdings to the effect set forth in clauses (i)-
(iv) above and stating that Holdings and Borrowers will proceed to
consummate the Recapitalization Transactions immediately upon the making of
the initial Term Loans.
I. Closing Date Mortgages; Closing Date Mortgage Policies; Etc.
------------------------------------------------------------
Agents shall have received from Holdings, each Borrower and each Subsidiary
Guarantor, as applicable:
(i) Closing Date Mortgages. Fully executed and notarized Mortgages
----------------------
(each a "Closing Date Mortgage" and, collectively, the "Closing Date
Mortgages"), in proper form for recording in all appropriate places in all
applicable jurisdictions, encumbering each Real Property Asset listed in
Schedule 4.1I annexed hereto (each, a "Closing Date Mortgaged Property"
-------------
and, collectively, the "Closing Date Mortgaged Properties");
(ii) Opinions of Local Counsel. An opinion of counsel (which counsel
-------------------------
shall be reasonably satisfactory to Arranger and Administrative Agent) in
each state in which a Closing Date Mortgaged Property is located with
respect to the enforceability of the form(s) of Closing Date Mortgages to
be recorded in such state and such other matters as Arranger and
Administrative Agent may reasonably request, in each case in form and
substance reasonably satisfactory to Arranger and Administrative Agent;
provided, however, that Arranger and Administrative Agent may determine in
-------- -------
their reasonable discretion that an opinion of counsel in any one or more
of such states shall not be required hereunder;
(iii) Landlord Consents and Estoppels; Recorded Leasehold Interests.
-------------------------------------------------------------
In the case of each Closing Date Mortgaged Property consisting of a
Leasehold Property, (a) a Landlord Consent and Estoppel with respect
thereto and (b) evidence that such Leasehold Property is a Recorded
Leasehold Interest;
(iv) Title Insurance. (a) ALTA mortgagee title insurance policies or
---------------
unconditional commitments therefor (the "Closing Date Mortgage Policies")
issued by the Title Company with respect to the Closing Date Mortgaged
Properties listed in Part A of Schedule 4. 1I annexed hereto, in amounts
--------------
not less than the respective amounts designated therein with respect to any
particular Closing Date Mortgaged Properties, insuring fee simple title to,
or a valid leasehold interest in, each such Closing Date Mortgaged Property
vested in such Loan Party and assuring Administrative Agent that the
applicable Closing Date Mortgages create valid and enforceable First
Priority mortgage Liens on the respective Closing Date Mortgaged Properties
encumbered thereby, which Closing Date Mortgage Policies (1) shall include
an endorsement for mechanics' liens, for future advances (in each case, if
available) under this Agreement and for any other matters
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reasonably requested by Arranger or Administrative Agent and (2) shall
provide for affirmative insurance and such reinsurance as Administrative
Agent may reasonably request, all of the foregoing in form and substance
reasonably satisfactory to Arranger and Administrative Agent; and (b)
evidence reasonably satisfactory to Arranger and Administrative Agent that
such Loan Party has (i) delivered to the Title Company all certificates and
affidavits required by the Title Company in connection with the issuance of
the Closing Date Mortgage Policies and (ii) paid to the Title Company or to
the appropriate governmental authorities all expenses and premiums of the
Title Company in connection with the issuance of the Closing Date Mortgage
Policies and all recording and stamp taxes (including mortgage recording
and intangible taxes) payable in connection with recording the Closing Date
Mortgages in the appropriate real estate records:
(v) Copies of Documents Relating to Title Exceptions. Copies of all
------------------------------------------------
recorded documents listed as exceptions to title or otherwise referred to
in the Closing Date Mortgage Policies or in the title reports delivered
pursuant to subsection 4.1I(iv);
(vi) Matters Relating to Flood Hazard Properties. (a) Evidence, which
-------------------------------------------
may be in the form of a surveyor's note on a survey or a report from a
flood hazard search firm or a letter from an insurance broker or a
municipal engineer, as to whether (1) any Closing Date Mortgaged Property
is a Flood Hazard Property and (2) the community in which any such Flood
Hazard Property is located is participating in the National Flood Insurance
Program, (b) if there are any such Flood Hazard Properties, such Loan
Party's written acknowledgment of receipt of written notification from
Administrative Agent (1) as to the existence of each such Flood Hazard
Property and (2) as to whether the community in which each such Flood
Hazard Property is located is participating in the National Flood Insurance
Program, and (c) in the event any such Flood Hazard Property is located in
a community that participates in the National Flood Insurance Program,
evidence that Holdings and/or Borrowers have obtained flood insurance in
respect of such Flood Hazard Property to the extent required under the
applicable regulations of the Board of Governors of the Federal Reserve
System; and
(vii) Minnesota Note. Duly authorized and executed Minnesota Note.
--------------
J. Security Interests in Personal and Mixed Property. To the extent
-------------------------------------------------
not otherwise satisfied pursuant to subsection 4.1I, each of Arranger and
Administrative Agent shall have received evidence satisfactory to it that
Holdings, Borrowers and Subsidiary Guarantors shall have taken or caused to be
taken all such actions, executed and delivered or caused to be executed and
delivered all such agreements, documents and instruments, and made or caused to
be made all such filings and recordings (other than the filing or recording of
items described in clauses (iii), (iv) and (v) below) that may be necessary or,
in the reasonable opinion of Arranger and Administrative Agent, desirable in
order to create in favor of Administrative Agent, for the benefit of Lenders, a
valid and (upon such filing and recording) perfected First Priority security
interest in the entire personal and mixed property Collateral. Such actions
shall include the following:
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(i) Schedules to Collateral Documents. Delivery to Administrative
---------------------------------
Agent of accurate and complete schedules to all of the applicable
Collateral Documents.
(ii) Stock Certificates and Instruments. Delivery to Administrative
----------------------------------
Agent of (a) certificates (which certificates shall be accompanied by
irrevocable undated stock powers, duly endorsed in blank and otherwise
satisfactory in form and substance to Administrative Agent) representing
all capital stock pledged pursuant to the Holdings Pledge Agreement, the
Borrower Pledge Agreement and Subsidiary Pledge Agreement and (b) all
promissory notes or other instruments (duly endorsed, where appropriate, in
a manner satisfactory to Administrative Agent) evidencing any Collateral
(including, without limitation, the Minnesota Note);
(iii) Lien Searches and UCC Termination Statements. Delivery to
--------------------------------------------
Arranger and Administrative Agent of (a) the results of a recent search, by
a Person reasonably satisfactory to Arranger and Administrative Agent, of
all effective UCC financing statements and fixture filings and all judgment
and tax lien filings which may have been made with respect to any personal
or mixed property of any Loan Party, together with copies of all such
filings disclosed by such search, and (b) UCC termination statements duly
executed by all applicable Persons for filing in all applicable
jurisdictions as may be necessary to terminate any effective UCC financing
statements or fixture filings disclosed in such search (other than any such
financing statements or fixture filings in respect of Liens permitted to
remain outstanding pursuant to the terms of this Agreement).
(iv) UCC Financing Statements and Fixture Filings. Delivery to
--------------------------------------------
Administrative Agent of UCC financing statements and, where appropriate,
fixture filings, duly executed by each applicable Loan Party with respect
to all personal and mixed property Collateral of such Loan Party, for
filing in all jurisdictions as may be necessary or, in the opinion of
Arranger and Administrative Agent, desirable to perfect the security
interests created in such Collateral pursuant to the Collateral Documents;
(v) PTO Cover Sheets, Etc. Delivery to Administrative Agent of all
---------------------
cover sheets or other documents or instruments required to be recorded with
the PTO in order to create or perfect Liens in respect of any U.S. patents,
federally registered trademarks or copyrights, or applications for any of
the foregoing, included among the IP Collateral; and
(vi) Opinions of Local Counsel. Delivery to Arranger and
-------------------------
Administrative Agent of an opinion of counsel under the laws of each
jurisdiction for which an opinion is delivered under subsection 4.1I(ii)
and in which any Loan Party or any personal or mixed property Collateral is
located with respect to the creation and perfection of the security
interests in favor of Administrative Agent in such Collateral and such
other matters governed by the laws of such jurisdiction regarding such
security interests as Arranger and Administrative Agent may reasonably
request, in each case in form and substance reasonably satisfactory to
Arranger and Administrative Agent.
K. Environmental Reports. Arranger and Administrative Agent shall
---------------------
have received a Phase I environmental assessment for each of the Facilities
listed in Schedule 4.lK
-------------
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annexed hereto (collectively, the "Phase I Report") which (a) substantially
complies with the ASTM Standard Practice for Environmental Site Assessments:
Phase I Environmental Site Assessment Process, E 1527, and (b) was conducted no
more than six months prior to the Closing Date by Applied Science and
Technology, Inc. or one or more environmental consulting firms reasonably
satisfactory to Administrative Agent.
L. Financial Statements; Pro Forma Balance Sheet. On or before the
---------------------------------------------
Closing Date, Lenders shall have received from Holdings (i) audited consolidated
balance sheets of Holdings and its Subsidiaries for Fiscal Years 1996 and 1997,
the unaudited consolidated balance sheet of Holdings and its Subsidiaries for
the Fiscal Year 1995 and the related audited consolidated statements of income,
stockholders' equity and cash flows of Holdings and its Subsidiaries for each
such foregoing Fiscal Year, (ii) unaudited consolidated financial statements of
Holdings and its Subsidiaries for the period consisting of the ten Accounting
Periods ended subsequent to the date of the most recent financial statements
delivered pursuant to clause (i), consisting of a consolidated balance sheet and
the related consolidated statement of income, stockholders' equity and cash
flows for such period, all in reasonable detail and certified by the principal
financial officer or principal accounting officer of Holdings that they fairly
present, in all material respects, the financial condition of Holdings and its
Subsidiaries as at the dates indicated and the results of their operations and
their cash flows for the periods indicated, subject to changes resulting from
audit and normal year-end adjustments and the absence of footnotes, and (iii)
pro forma consolidated balance sheets of Holdings and its Subsidiaries as at the
- --- -----
date of the most recent consolidated balance sheet delivered pursuant to clause
(ii), prepared in accordance with GAAP and reflecting the consummation of the
Recapitalization Transactions and the Merger, the related financings and the
other transactions contemplated by the Loan Documents and the Related Agreements
as if such transactions had occurred on such date, which pro forma financial
--- -----
statements shall be in form and substance reasonably satisfactory to Lenders.
M. Financial Projections. Lenders shall have received financial
---------------------
projections reasonably satisfactory in form and substance to Agents and Lenders
for Holdings and its Subsidiaries for the period from the Closing Date through
December 31, 2007.
N. Solvency Assurances. On the Closing Date, Arranger,
-------------------
Administrative Agent and Lenders shall have received (i) a letter from Murray
Devine & Co., dated the Closing Date and addressed to Arranger, Administrative
Agent and Lenders, in form and substance reasonably satisfactory to Arranger
and Administrative Agent and with appropriate attachments, and (ii) a Financial
Condition Certificate dated the Closing Date, substantially in the form of
Exhibit XIV annexed hereto (with such changes thereto as shall be approved by
- -----------
Administrative Agent and Arranger in the exercise of their reasonable
discretion) and with appropriate attachments, in each case demonstrating that,
after giving effect to the consummation of the Recapitalization Transactions,
the related financings and the other transactions contemplated by the Loan
Documents and the Related Agreements, Holdings and its Subsidiaries will be
Solvent.
O. Evidence of Insurance. Arranger and Administrative Agent shall
---------------------
have received a certificate from Holdings' insurance broker or other evidence
satisfactory to it that all insurance required to be maintained pursuant to
subsection 6.4 is in full force and effect and that
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Administrative Agent on behalf of Lenders has been named as additional insured
and/or loss payee thereunder to the extent required under subsection 6.4.
P. Opinions of Counsel to Loan Parties. Lenders and their respective
-----------------------------------
counsel shall have received (i) originally executed copies of one or more
favorable written opinions of Ropes & Gray, counsel for Loan Parties, and of
Honigman Miller Schwartz and Cohn, special Michigan counsel for Loan Parties, in
form and substance reasonably satisfactory to Administrative Agent and Arranger
and its counsel, dated as of the Closing Date and setting forth substantially
the matters in the opinions designated in Exhibit X annexed hereto and as to
---------
such other matters as Administrative Agent or Arranger and acting on behalf of
Lenders may reasonably request and (ii) evidence satisfactory to Administrative
Agent and Arranger that Holdings has requested such counsel to deliver such
opinions to Lenders.
Q. Opinion of Agents' Counsel. Lenders shall have received
--------------------------
originally executed copies of one or more favorable written opinions of White &
Case LLP, counsel to Agents, dated as of the Closing Date, substantially in the
form of Exhibit XI annexed hereto and as to such other matters as Agents may
----------
reasonably request.
R. Opinions of Counsel Delivered Under Related Agreements.
------------------------------------------------------
Administrative Agent and Arranger and its counsel shall have received copies of
each of the opinions of counsel delivered to the parties under the Related
Agreements, together with a letter from each such counsel (to the extent not
inconsistent with such counsel's established internal policies) authorizing
Lenders to rely upon such opinion to the same extent as though it were addressed
to Lenders.
S. Fees and Expenses. Borrowers shall have paid to Arranger and
-----------------
Administrative Agent, for distribution (as appropriate) to Arranger,
Administrative Agent and Lenders, the fees payable on the Closing Date referred
to in subsection 2.3 and all reasonable expenses for which invoices have been
presented on or before the Closing Date.
T. Representations and Warranties; Performance of Agreements. Each
---------------------------------------------------------
Credit Agreement Party shall have delivered to Arranger and Administrative Agent
an Officers' Certificate, in form and substance reasonably satisfactory to
Arranger and Administrative Agent, to the effect that the representations and
warranties in Section 5 hereof are true, correct and complete in all material
respects on and as of the Closing Date to the same extent as though made on and
as of that date (or, to the extent such representations and warranties
specifically relate to an earlier date, that such representations and warranties
were true, correct and complete in all material respects on and as of such
earlier date) and that Credit Agreement Parties shall have performed in all
material respects all agreements and satisfied all conditions which this
Agreement provides shall be performed or satisfied by them on or before the
Closing Date except as otherwise disclosed to and agreed to in writing by
Arranger, Administrative Agent and Requisite Lenders.
U. Completion of Proceedings. All corporate and other proceedings
-------------------------
taken or to be taken in connection with the transactions contemplated hereby and
all documents incidental thereto not previously found acceptable by
Administrative Agent, acting on behalf of Lenders, or
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Arranger and its counsel shall be reasonably satisfactory in form and substance
to Administrative Agent and Arranger and such counsel, and Administrative Agent,
Arranger and such counsel shall have received all such counterpart originals or
certified copies of such documents as Administrative Agent or Arranger may
reasonably request.
Notwithstanding anything herein to the contrary, it is understood and
agreed that the documents and other items set forth on Schedule 6.13 annexed
-------------
hereto shall be delivered after the Closing Date in accordance with and to the
extent required under subsection 6.13.
4.2 Conditions to All Loans.
-----------------------
The obligations of Lenders to make Loans on each Funding Date are
subject to the following further conditions precedent:
A. Administrative Agent shall have received on or before that
Funding Date, in accordance with the provisions of subsection 2.1B, an
originally executed Notice of Borrowing, in each case signed by the chief
executive officer, the principal financial officer, the principal accounting
officer or the treasurer of each Borrower or by any authorized employee of each
Borrower designated by any of the above-described officers on behalf of such
Borrower in a writing delivered to Administrative Agent.
B. As of that Funding Date:
(i) The representations and warranties contained herein and in the
other Loan Documents shall be true, correct and complete in all material
respects on and as of that Funding Date to the same extent as though made
on and as of that date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case such
representations and warranties shall have been true, correct and complete
in all material respects on and as of such earlier date;
(ii) No event shall have occurred and be continuing or would result
from the consummation of the borrowing contemplated by such Notice of
Borrowing that would constitute an Event of Default or a Potential Event of
Default;
(iii) No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain any Lender from
making the Loans to be made by it on that Funding Date;
(iv) The making of the Loans requested on such Funding Date shall not
violate any law including Regulation T, Regulation U or Regulation X of the
Board of Governors of the Federal Reserve System; and
(v) There shall not be pending or, to the knowledge of any Credit
Agreement Party, threatened, any action, suit, proceeding, governmental
investigation or arbitration against or affecting Holdings or any of its
Subsidiaries or any property of Holdings or any of its Subsidiaries that
has not been disclosed by any Credit Agreement Party in writing pursuant to
subsection 5.6 or 6.1(x) prior to the making of the last preceding Loans
(or, in
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the case of the initial Loans, prior to the execution of this Agreement),
and there shall have occurred no development not so disclosed in any such
action, suit, proceeding, governmental investigation or arbitration so
disclosed, that, in either event, in the reasonable opinion of
Administrative Agent or of Requisite Lenders, would be expected to have a
Material Adverse Effect; and no injunction or other restraining order shall
have been issued and no hearing to cause an injunction or other restraining
order to be issued shall be pending or noticed with respect to any action,
suit or proceeding seeking to enjoin or otherwise prevent the consummation
of, or to recover any damages or obtain relief as a result of, the
transactions contemplated by this Agreement or the making of Loans
hereunder.
4.3 Conditions to Letters of Credit.
-------------------------------
The issuance of any Letter of Credit hereunder (whether or not the
applicable Issuing Lender is obligated to issue such Letter of Credit) is
subject to the following conditions precedent:
A. On or before the date of issuance of the initial Letter of Credit
pursuant to this Agreement, the initial Loans shall have been made.
B. On or before the date of issuance of such Letter of Credit,
Administrative Agent shall have received, in accordance with the provisions
of subsection 3.1B(i), an originally executed Notice of Issuance of Letter
of Credit, in each case signed by the chief executive officer, the
principal financial officer, the principal accounting officer or the
treasurer of each Borrower or by any authorized employee of each Borrower
designated by any of the above-described officers on behalf of such
Borrower in a writing delivered to Administrative Agent, together with all
other information specified in subsection 3.1B(i) and such other documents
or information as the applicable Issuing Lender may reasonably require in
connection with the issuance of such Letter of Credit.
C. On the date of issuance of such Letter of Credit, all conditions
precedent described in subsection 4.2B shall be satisfied to the same
extent as if the issuance of such Letter of Credit were the making of a
Loan and the date of issuance of such Letter of Credit were a Funding Date.
SECTION 5.
CREDIT AGREEMENT PARTIES' REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement and to make
the Loans, to induce Issuing Lenders to issue Letters of Credit and to induce
other Lenders to purchase participations therein, the Credit Agreement Parties
represent and warrant to each Lender, on the date of this Agreement, on each
Funding Date and on the date of issuance of each Letter of Credit, that the
following statements are true, correct and complete:
-102-
5.1 Organization, Powers, Qualification, Good Standing, Business and
----------------------------------------------------------------
Subsidiaries.
------------
A. Organization and Powers. Each Loan Party is a corporation
-----------------------
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation as specified in Schedule 5.1 annexed hereto. Each
------------
Loan Party has all requisite corporate power and authority to own and operate
its properties, to carry on its business as now conducted and as proposed to be
conducted, to enter into the Loan Documents and Related Agreements to which it
is a party and to carry out the transactions contemplated thereby.
B. Qualification and Good Standing. Each Loan Party is qualified to
-------------------------------
do business and in good standing in every jurisdiction where its assets are
located and wherever necessary to carry out its business and operations, except
in jurisdictions where the failure to be so qualified or in good standing has
not had and would not reasonably be expected to have a Material Adverse Effect.
C. Conduct of Business. Holdings and its Subsidiaries are engaged
-------------------
only in the businesses permitted to be engaged in pursuant to subsection 7.13.
D. Subsidiaries. All of the Subsidiaries of Holdings as of the
------------
Closing Date are identified in Schedule 5.1 annexed hereto. The capital stock
------------
of each of Holdings' Subsidiaries any portion of the capital stock of which is
pledged under the Collateral Documents is duly authorized, validly issued, fully
paid and nonassessable and none of such capital stock constitutes Margin Stock.
Each of the Subsidiaries of Holdings is a corporation organized, validly
existing and in good standing under the laws of its respective jurisdiction of
incorporation, has all requisite corporate power and authority to own and
operate its properties and to carry on its business as now conducted and as
proposed to be conducted, and is qualified to do business and in good standing
in every jurisdiction where its assets are located and wherever necessary to
carry out its business and operations, in each case except where failure to be
so qualified or in good standing or a lack of such corporate power and authority
has not had and will not have a Material Adverse Effect. Schedule 5.1 annexed
------------
hereto (as so supplemented) correctly sets forth, as of the Closing Date, the
ownership interest of Holdings and each of its Subsidiaries in each of the
Subsidiaries of Holdings identified therein.
5.2 Authorization of Borrowing etc.
-------------------------------
A. Authorization of Borrowing. The execution, delivery and
--------------------------
performance of the Loan Documents and the Related Agreements have been duly
authorized by all necessary corporate action on the part of each Loan Party that
is a party thereto.
B. No Conflict. The execution, delivery and performance by Loan
-----------
Parties of the Loan Documents and the Related Agreements to which they are
parties and the consummation of the transactions contemplated by the Loan
Documents and such Related Agreements do not (i) violate any provision of any
law or any governmental rule or regulation applicable to Holdings or any of its
Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of Holdings
or any of its Subsidiaries or any order, judgment or decree of any court or
other agency of government
-103-
binding on Holdings or any of its Subsidiaries, (ii) conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any Contractual Obligation of Holdings or any of its Subsidiaries, (iii)
result in or require the creation or imposition of any Lien upon any of the
properties or assets of Holdings or any of its Subsidiaries (other than any
Liens created under any of the Loan Documents in favor of Collateral Agent on
behalf of Lenders), or (iv) require any approval of stockholders or any approval
or consent of any Person under any Contractual Obligation of Holdings or any of
its Subsidiaries (except for such approvals or consents which will be obtained
on or before the Closing Date and disclosed in writing to Lenders), except in
the case of any violation, conflict, breach, default, result or requirement
pursuant to the foregoing clauses (i) through (iv) resulting from the execution,
delivery and performance of the Related Agreements, to the extent any such
violation, conflict, breach, default, result or requirement would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
C. Governmental Consents. The execution, delivery and performance by
---------------------
Loan Parties of the Loan Documents to which they are parties and the
consummation of the transactions contemplated by the Loan Documents do not
require any registration with, consent or approval of, or notice to, or other
action to, with or by, any federal, state or other governmental authority or
regulatory body except to the extent obtained or made and except for those
filings that are required to be made to perfect Liens under the Collateral
Documents. The execution, delivery and performance by Loan Parties of the
Related Agreements to which they are parties and the consummation of the
transactions contemplated by the such Related Agreements do not require any
registration with, consent or approval of, or notice to, or other action to,
with or by, any federal, state or other governmental authority or regulatory
body except (i) to the extent obtained or made or (ii) where the failure to
obtain or make any of the foregoing, individually or in the aggregate, is not
reasonably likely to have a Material Adverse Effect.
D. Binding Obligation. Each of the Loan Documents and Related
------------------
Agreements has been duly executed and delivered by each Loan Party that is a
party thereto and is the legally valid and binding obligation of such Loan
Party, enforceable against such Loan Party in accordance with its respective
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights generally
or by equitable principles relating to enforceability.
E. Valid Issuance of Holdings Capital Stock, Senior Subordinated
-------------------------------------------------------------
Notes and Cumulative Preferred Stock.
- ------------------------------------
(i) Holdings Common Stock. Holdings Common Stock issued on the
---------------------
Closing Date after giving effect to the Merger, when issued and delivered,
will be duly and validly issued, fully paid and nonassessable. The
issuance and sale of such Holdings Common Stock, upon such issuance and
sale, will either (a) have been registered or qualified under applicable
federal and state securities laws or (b) be exempt therefrom.
(ii) Senior Subordinated Notes. Company has the corporate power and
-------------------------
authority to issue the Senior Subordinated Notes. The Senior Subordinated
Notes, when issued and paid for, will be the legally valid and binding
obligations of Company,
-104-
enforceable against Company in accordance with their terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or limiting creditors' rights generally or by equitable
principles relating to enforceability. The subordination provisions of the
Senior Subordinated Notes will be enforceable against the holders thereof,
and the Loans and all other monetary Obligations hereunder are and will be
within the definitions of "Senior Debt" and "Designated Senior Debt"
included in such provisions. The Senior Subordinated Notes, when issued and
sold, will either (a) have been registered or qualified under applicable
federal and state securities laws or (b) be exempt therefrom.
(iii) Cumulative Preferred Stock. Cumulative Preferred Stock issued
--------------------------
on the Closing Date, when issued and delivered, will be duly and validly
issued, fully paid and nonassessable. The issuance and sale of such
Cumulative Preferred Stock, upon such issuance and sale, will either (a)
have been registered or qualified under applicable federal and state
securities laws or (b) be exempt therefrom.
5.3 Financial Condition.
-------------------
Holdings has heretofore delivered to Lenders, at Lenders' request, the
following financial statements and information: (i) the audited consolidated
balance sheets of Holdings and its Subsidiaries for each of Fiscal Years 1996
and 1997, the unaudited consolidated balance sheet of Holdings and its
Subsidiaries for the Fiscal Year 1995 and the related audited consolidated
statements of income, stockholders' equity and cash flows of Holdings and its
Subsidiaries for each such foregoing Fiscal Year and (ii) the unaudited
consolidated balance sheet of Holdings and its Subsidiaries for the period
consisting of the ten Accounting Periods ended subsequent to the date of the
most recent financial statements referred to in clause (i) and the related
unaudited consolidated statement of income, stockholders' equity and cash flows
of Holdings and its Subsidiaries for such period. All such statements were
prepared in conformity with GAAP and fairly present, in all material respects,
the financial position (on a consolidated basis) of the entities described in
such financial statements as at the respective dates thereof and the results of
operations and cash flows (on a consolidated basis) of the entities described
therein for each of the periods then ended, subject, in the case of any such
unaudited financial statements, to changes resulting from audit and normal year-
end adjustments and the absence of footnotes. On the Closing Date, Holdings and
its Subsidiaries do not (and will not following the funding of the initial
Loans) have any Contingent Obligation, contingent liability or liability for
taxes, long-term lease or unusual forward or long-term commitment required to be
reported in connection with GAAP that is not reflected in the foregoing
financial statements for the Fiscal Year 1997 or the notes thereto and which in
any such case is material in relation to the business, operations, properties,
assets or condition (financial or otherwise) of Holdings or any of its
Subsidiaries.
The financial projections delivered to Agents and Lenders pursuant to
subsection 4.1M are based on good-faith estimates and assumptions made by the
management of Holdings, and on the Closing Date such management believe that
said projections were reasonable, it being recognized by Lenders, however, that
projections as to future events are not to be viewed as facts and that the
actual results during the period or periods covered by said projections probably
will differ from the projected results and that the differences may be material.
-105-
5.4 No Material Adverse Change.
--------------------------
Since December 28, 1997, no event or change has occurred that has
caused or evidences, either in any case or in the aggregate, a Material Adverse
Effect.
5.5 Title to Properties: Liens; Real Property.
-----------------------------------------
A. Title to Properties; Liens. Holdings and its Subsidiaries have
--------------------------
(i) good, sufficient and legal title to (in the case of fee interests in real
property), (ii) valid leasehold interests in (in the case of leasehold interests
in real or personal property), (iii) valid licenses in (in the case of licensed
intangible properties), or (iv) good title to (in the case of all other personal
property), all of their respective material properties and assets reflected in
the most recent financial statements referred to in subsection 5.3 or in the
most recent financial statements delivered pursuant to subsection 6.1, in each
case subject to Permitted Encumbrances and Liens permitted under subsection 7.2
and except for assets disposed of since the date of such financial statements in
the ordinary course of business or as otherwise permitted under subsection 7.7.
Except as otherwise permitted by this Agreement, all such properties and assets
are free and clear of Liens.
B. Real Property. As of the Closing Date, Schedule 5.5 annexed
------------- ------------
hereto contains a true, accurate and complete list of (i) all Real Property
Assets owned in fee simple by any Loan Party and (ii) all leases, subleases or
assignments of leases (together with all amendments, modifications, supplements,
renewals or extensions of any thereof) affecting each Real Property Asset of any
Loan Party, regardless of whether such Loan Party is the landlord or tenant
(whether directly or as an assignee or successor in interest) under such lease,
sublease or assignment, except in the case of clause (i) or (ii), as the case
may be, all corporate stores owned in fee simple by any Loan Party and all
leases, subleases and assignments of leases affecting any corporate store of any
Loan Party. As of the Closing Date, except as specified in Schedule 5.5 annexed
------------
hereto, each agreement referenced in clause (ii) of the immediately preceding
sentence is in full force and effect and no Credit Agreement Party has any
knowledge of any default that has occurred and is continuing thereunder (except
where the consequences, direct or indirect, of such default or defaults, if any,
would not reasonably be expected to have a Material Adverse Effect), and each
such agreement constitutes the legally valid and binding obligation of each
applicable Loan Party, enforceable against such Loan Party in accordance with
its terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally or by equitable principles.
5.6 Litigation; Adverse Facts.
-------------------------
There are no actions, suits, proceedings, arbitrations or governmental
investigations (whether or not purportedly on behalf of Holdings or any of its
Subsidiaries) at law or in equity, or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign (including any Environmental Claims) that
are pending or, to the knowledge of any Credit Agreement Party, threatened
against or affecting Holdings or any of its Subsidiaries or any property of
Holdings or any of its Subsidiaries and that, individually or in the aggregate,
would reasonably be expected to
-106-
result in a Material Adverse Effect. Neither Holdings nor any of its
Subsidiaries (i) is in violation of any applicable laws (including Environmental
Laws) that, individually or in the aggregate, would reasonably be expected to
result in a Material Adverse Effect, or (ii) is subject to or in default with
respect to any final judgments, writs, injunctions, decrees, rules or
regulations of any court or any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, that, individually or in the aggregate, would reasonably be expected to
result in a Material Adverse Effect.
5.7 Payment of Taxes.
----------------
Except to the extent permitted by subsection 6.3, all federal, state
and other material tax returns and reports of Holdings and its Subsidiaries
required to be filed by any of them have been timely filed, and all taxes shown
on such tax returns to be due and payable and all assessments, fees and other
governmental charges upon Holdings and its Subsidiaries and upon their
respective properties, assets, income, businesses and franchises which are due
and payable have been paid when due and payable. No Credit Agreement Party
knows of any written proposed material tax assessment against Holdings or any of
its Subsidiaries which is not being actively contested by Holdings or such
Subsidiary in good faith and by appropriate proceedings; provided that such
--------
reserves or other appropriate provisions, if any, as shall be required in
conformity with GAAP shall have been made or provided therefor.
5.8 Performance of Agreements; Materially Adverse Agreements.
--------------------------------------------------------
A. Neither Holdings nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default, except where the consequences, direct or indirect, of
such default or defaults, if any, would not reasonably be expected to have a
Material Adverse Effect.
B. Neither Holdings nor any of its Subsidiaries is a party to or is
otherwise subject to any agreements or instruments or any charter or other
internal restrictions which, individually or in the aggregate, compliance with
which would reasonably be expected to result in a Material Adverse Effect.
5.9 Governmental Regulation.
-----------------------
Neither Holdings nor any of its Subsidiaries is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any other
federal or state statute or regulation which may limit its ability to incur
Indebtedness or which may otherwise render all or any portion of the Obligations
unenforceable.
5.10 Securities Activities.
---------------------
A. Neither Holdings nor any of its Subsidiaries is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or
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carrying any Margin Stock.
B. Following application of the proceeds of each Loan, not more than
25% of the value of the assets (either of Holdings only or of Holdings and its
Subsidiaries on a consolidated basis) subject to the provisions of subsection
7.2 or 7.7 or subject to any restriction contained in any agreement or
instrument, between Company and any Lender or any Affiliate of any Lender,
relating to Indebtedness and within the scope of subsection 8.2, will be Margin
Stock.
5.11 Employee Benefit Plans.
----------------------
A. Holdings and each of its Subsidiaries are in compliance in all
material respects with all applicable provisions and requirements of ERISA and
the regulations and published interpretations thereunder with respect to each
Employee Benefit Plan, and have performed in all material respects all their
obligations under each Employee Benefit Plan. Each Employee Benefit Plan which
is intended to qualify under Section 401(a) of the Internal Revenue Code is so
qualified or qualifies to have its qualified status preserved pursuant to Part
IV of Revenue Procedure 98-22.
B. No ERISA Event has occurred or, to the knowledge of Holdings, any
of its Subsidiaries or any of their respective ERISA Affiliates, is reasonably
expected to occur which has or would reasonably be expected to have a Material
Adverse Effect.
C. Except to the extent required under Section 4980B of the Internal
Revenue Code, the aggregate liabilities with respect to health or welfare
benefits (through the purchase of insurance or otherwise) provided or promised
for any retired or former employee of Holdings or any of its Subsidiaries do not
have a Material Adverse Effect.
D. As of the most recent valuation date for any Pension Plan, the
amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of
ERISA), individually or in the aggregate for all Pension Plans, does not exceed
$2,000,000.
E. As of the most recent valuation date for each Multiemployer Plan
for which the actuarial report is available, the potential liability of
Holdings, its Subsidiaries and their respective ERISA Affiliates for a complete
withdrawal from such Multiemployer Plan (within the meaning of Section 4203 of
ERISA), when aggregated with such potential liability for a complete withdrawal
from all Multiemployer Plans, based on information available pursuant to Section
4221(e) of ERISA, does not have a Material Adverse Effect.
5.12 Certain Fees.
------------
Except as set forth on Schedule 5.12 annexed hereto, no broker's or
-------------
finder's fee or commission will be payable with respect to this Agreement or any
of the transactions contemplated hereby, and Credit Agreement Parties hereby
indemnify Lenders on a joint and several basis against, and agree that they will
hold Lenders harmless from, any claim, demand or liability for any such broker's
or finder's fees alleged to have been incurred in connection herewith or
therewith and any expenses (including reasonable fees, expenses and
disbursements of counsel) arising in connection with any such claim, demand or
liability.
-108-
5.13 Environmental Protection.
------------------------
(i) Neither Holdings nor any of its Subsidiaries, nor any of their
respective Facilities or operations is subject to any outstanding (a)
Environmental Claim or (b) written order, consent decree or settlement
agreement with any Person relating to (i) any Environmental Law or (ii) any
Hazardous Materials Activity that, in the case of (a) or (b), individually
or in the aggregate, would reasonably be expected to have a Material
Adverse Effect;
(ii) Neither Holdings nor any of its Subsidiaries has received any
letter or written request for information from any governmental agency
under Section 104 of the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. 9604) or any comparable state
law with respect to any liability or liabilities that, individually or in
the aggregate, would reasonably be expected to have a Material Adverse
Effect;
(iii) There are no and have been no conditions, occurrences, or
Hazardous Materials Activities which could reasonably be expected to form
the basis of an Environmental Claim against Holdings or any of its
Subsidiaries that, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect;
(iv) Holdings has designated certain executives to monitor and
maintain compliance with Environmental Laws and correct any incidents of
noncompliance;
(v) Compliance with all current or reasonably foreseeable future
requirements pursuant to or under Environmental Laws would not,
individually or in the aggregate, reasonably be expected to give rise to a
Material Adverse Effect; and
(vi) No event or condition has occurred or is occurring with respect
to Holdings or any of its Subsidiaries relating to any Environmental Law,
any Release of Hazardous Materials, or any Hazardous Materials Activity
which individually or in the aggregate has had or would reasonably be
expected to have a Material Adverse Effect.
5.14 Employee Matters.
----------------
There is no strike or work stoppage in existence or threatened
involving Holdings or any of its Subsidiaries that would reasonably be expected
to have a Material Adverse Effect.
5.15 Solvency.
--------
Each Loan Party is and, upon the incurrence of any Obligations by such
Loan Party on any date on which this representation is made, will be, Solvent.
5.16 Matters Relating to Collateral.
------------------------------
A. Creation, Perfection and Priority of Liens. The execution and
------------------------------------------
delivery of the Collateral Documents by Loan Parties, together with (i) the
actions taken on or prior to the
-109-
date hereof pursuant to subsections 4.1I, 4.1J, 6.8 and 6.9 and (ii) the
delivery to Collateral Agent of any Pledged Collateral not delivered to
Collateral Agent at the time of execution and delivery of the applicable
Collateral Document (all of which Pledged Collateral has been so delivered to
the extent required by the respective Collateral Documents) are effective to
create in favor of Collateral Agent for the benefit of Lenders, as security for
the respective Secured Obligations (as defined in the applicable Collateral
Document in respect of any Collateral), a valid and perfected First Priority
Lien on all of the Collateral, and all filings and other actions necessary or
desirable to perfect and maintain the perfection and First Priority status of
such Liens have been duly made or taken and remain in full force and effect,
other than the filing of any UCC financing statements delivered to Collateral
Agent for filing (but not yet filed) and the periodic filing of UCC continuation
statements in respect of UCC financing statements filed by or on behalf of
Collateral Agent.
B. Governmental Authorizations. No authorization, approval or other
---------------------------
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for either (i) the pledge or grant by any Loan Party
of the Liens purported to be created in favor of Collateral Agent pursuant to
any of the Collateral Documents or (ii) the exercise by Collateral Agent of any
rights or remedies in respect of any Collateral (whether specifically granted or
created pursuant to any of the Collateral Documents or created or provided for
by applicable law), except for filings or recordings contemplated by subsection
5.16A and except as may be required, in connection with the disposition of any
Pledged Collateral, by laws generally affecting the offering and sale of
securities.
C. Absence of Third-Party Filings. Except such as may have been
------------------------------
filed in favor of Collateral Agent as contemplated by subsection 5.16A, (i) no
effective UCC financing statement, fixture filing or other instrument similar in
effect covering all or any part of the Collateral is on file in any filing or
recording office, except with respect to Permitted Encumbrances and Liens
permitted under subsection 7.2A, and (ii) no effective filing covering all or
any part of the IP Collateral is on file in the PTO.
D. Margin Regulations. The pledge of the Pledged Collateral
------------------
pursuant to the Collateral Documents does not violate Regulation T, U or X of
the Board of Governors of the Federal Reserve System.
E. Information Regarding Collateral. All information supplied to
--------------------------------
Administrative Agent or Collateral Agent by or on behalf of any Loan Party with
respect to any of the Collateral (in each case taken as a whole with respect to
any particular Collateral) is accurate and complete in all material respects.
5.17 Related Agreements.
------------------
A. Delivery of Related Agreements. Holdings and/or Borrowers have
------------------------------
delivered to Lenders complete and correct copies of each Related Agreement and
of all exhibits and schedules thereto.
-110-
B. Holdings' Warranties. Except to the extent otherwise set forth
--------------------
herein or in the schedules hereto, each of the representations and warranties
given by Holdings to Merger Corp. in the Recapitalization Agreement is true and
correct as of the date hereof (or as of any earlier date to which such
representation and warranty specifically relates) and will be true and correct
as of the Closing Date (or as of such earlier date, as the case may be), in each
case subject to the qualifications set forth in the schedules to the
Recapitalization Agreement, in each case except to the extent that the cause of
any failure of any such representation or warranty to be true and correct,
either individually or in the aggregate with the causes of the failures of any
other such representations and warranties to be true and correct, would not
reasonably be expected to have a Material Adverse Effect.
C. Warranties of Merger Corp. Subject to the qualifications set
-------------------------
forth therein, each of the representations and warranties given by Merger Corp.
to Holdings in the Recapitalization Agreement is true and correct as of the date
hereof and will be true and correct as of the Closing Date, in each case except
to the extent that the cause of any failure of any such representation or
warranty to be true and correct, either individually or in the aggregate with
the causes of the failures of any other such representations and warranties to
be true and correct, would not reasonably be expected to have a Material Adverse
Effect.
D. Survival. Notwithstanding anything in the Recapitalization
--------
Agreement to the contrary, the representations and warranties of Credit
Agreement Parties set forth in subsections 5.17B and 5.17C shall, solely for
purposes of this Agreement, survive the Closing Date for the benefit of Lenders.
5.18 Disclosure.
----------
All representations and warranties of Holdings or any of its
Subsidiaries and all information contained in the Confidential Information
Memorandum or in any Loan Document or Related Agreement or in any other
document, certificate or written statement furnished to Lenders by or on behalf
of Holdings or any of its Subsidiaries for use in connection with the
transactions contemplated by this Agreement, taken as a whole, are true and
correct in all material respects and do not omit to state a material fact (known
to any Credit Agreement Party, in the case of any document not furnished by it)
necessary in order to make the statements contained herein or therein (taken as
a whole) not misleading in light of the circumstances in which the same were
made. Any projections and pro forma financial information contained in such
--- -----
materials are based upon good faith estimates and assumptions believed by
Holdings and Borrowers to be reasonable at the time made, it being recognized by
Lenders that such projections as to future events are not to be viewed as facts
and that actual results during the period or periods covered by any such
projections may differ from the projected results. There are no facts known (or
which should upon the reasonable exercise of diligence be known) to any Credit
Agreement Party (other than matters of a general economic nature) that,
individually or in the aggregate, would reasonably be expected to result in a
Material Adverse Effect and that have not been disclosed herein or in such other
documents, certificates and statements furnished to Lenders for use in
connection with the transactions contemplated hereby.
5.19 Subordination of Permitted Seller Notes and Shareholder
-------------------------------------------------------
Subordinated
- ------------
-111-
Notes.
- -----
The subordination provisions of any Permitted Seller Notes and
Shareholder Subordinated Notes are enforceable against the holders thereof, and
the Loans and other Obligations hereunder are and will be within the definition
of "Senior Indebtedness" or "Senior Debt", as applicable, included in such
provisions.
5.20 Year 2000 Compliance.
--------------------
All Information Systems and Equipment are either Year 2000 Compliant,
or any reprogramming, remediation, or any other corrective action, including the
internal testing of all such Information Systems and Equipment, will be
completed by September 30, 1999, except where the failure to be Year 2000
Compliant or to complete such corrective actions would not reasonably be
expected to have a Material Adverse Effect. Further, to the extent that such
reprogramming/remediation and testing action is required, the cost thereof, as
well as the cost of the reasonably foreseeable consequences of failure to become
Year 2000 Compliant, to Holdings and its Subsidiaries (including, without
limitation, reprogramming errors and the failure of other systems or equipment)
could not reasonably be expected to (x) result in a Potential Event of Default
or an Event of Default or (y) have a Material Adverse Effect.
SECTION 6.
CREDIT AGREEMENT PARTIES' AFFIRMATIVE COVENANTS
Credit Agreement Parties covenant and agree that, so long as any of
the Commitments hereunder shall remain in effect and until payment in full of
all of the Loans and other Obligations (other than inchoate indemnification
obligations with respect to claims, losses or liabilities which have not yet
arisen and are not yet due and payable) and the cancellation or expiration of
all Letters of Credit, unless Requisite Lenders shall otherwise give prior
written consent, each Credit Agreement Party shall perform, and shall cause each
of its respective Subsidiaries to perform, all covenants in this Section 6.
6.1 Financial Statements and Other Reports.
--------------------------------------
Holdings will maintain, and cause each of its Subsidiaries to
maintain, a system of accounting established and administered in accordance with
sound business practices to permit preparation of financial statements in
conformity with GAAP. Holdings will deliver to Administrative Agent, with
sufficient copies for each Lender (and Administrative Agent will, after receipt
thereof, deliver to each Lender):
(i) Accounting Period Financials: as soon as available and in any
----------------------------
event within 30 days after the end of each Accounting Period, the
consolidated balance sheet of Holdings and its Subsidiaries as at the end
of such Accounting Period and the related consolidated statements of
income, stockholders' equity and cash flows of Holdings and its
Subsidiaries for such Accounting Period and for the period from the
beginning of the then current Fiscal Year to the end of such Accounting
Period, setting forth in each case in comparative form the corresponding
figures for the corresponding periods of the previous
-112-
Fiscal Year, all in reasonable detail and certified by the principal
financial officer or principal accounting officer of Holdings that they
fairly present, in all material respects, the financial condition of
Holdings and its Subsidiaries as at the dates indicated and the results of
their operations and their cash flows for the periods indicated, subject to
changes resulting from audit and normal year-end adjustments and the
absence of footnotes;
(ii) Quarterly Financials: as soon as available and in any event
--------------------
within 45 days after the end of each Accounting Quarter, (a) the
consolidated balance sheet of Holdings and its Subsidiaries as at the end
of such Accounting Quarter and the related consolidated statements of
income, stockholders' equity and cash flows of Holdings and its
Subsidiaries for such Accounting Quarter and for the period from the
beginning of the then current Fiscal Year to the end of such Accounting
Quarter, setting forth in each case in comparative form the corresponding
figures for the corresponding periods of the previous Fiscal Year and the
corresponding figures from the Financial Plan for the current Fiscal Year,
all in reasonable detail and certified by the principal financial officer
or principal accounting officer of Holdings that they fairly present, in
all material respects, the financial condition of Holdings and its
Subsidiaries as at the dates indicated and the results of their operations
and their cash flows for the periods indicated, subject to changes
resulting from audit and normal year-end adjustments and the absence of
footnotes, and (b) a narrative report describing the operations of Holdings
and its Subsidiaries in the form prepared for presentation to senior
management for such Accounting Quarter and for the period from the
beginning of the then current Fiscal Year to the end of such Accounting
Quarter;
(iii) Year-End Financials: as soon as available and in any event
-------------------
within 90 days after the end of each Fiscal Year, (a) the consolidated
balance sheet of Holdings and its Subsidiaries as at the end of such Fiscal
Year and the related consolidated statements of income, stockholders'
equity and cash flows of Holdings and its Subsidiaries for such Fiscal
Year, setting forth in each case in comparative form the corresponding
figures for the previous Fiscal Year and the corresponding figures from the
Financial Plan for the Fiscal Year covered by such financial statements,
all in reasonable detail and certified by the principal financial officer
or principal accounting officer of Holdings that they fairly present, in
all material respects, the financial condition of Holdings and its
Subsidiaries as at the dates indicated and the results of their operations
and their cash flows for the periods indicated, (b) a narrative report
describing the operations of Holdings and its Subsidiaries in the form
prepared for presentation to senior management for such Fiscal Year, and
(c) in the case of such consolidated financial statements, a report thereon
of an Independent Public Accountant, which report shall be unqualified,
shall express no doubts about the ability of Holdings and its Subsidiaries
to continue as a going concern, and shall state that such consolidated
financial statements fairly present, in all material respects, the
consolidated financial position of Holdings and its Subsidiaries as at the
dates indicated and the results of their operations and their cash flows
for the periods indicated in conformity with GAAP applied on a basis
consistent with prior years (except as otherwise disclosed in such
financial statements) and that the examination by such accountants in
connection with such consolidated financial statements has been made in
accordance with generally accepted auditing standards;
-113-
(iv) Officers' and Compliance Certificates: together with each
-------------------------------------
delivery of financial statements of Holdings and its Subsidiaries pursuant
to subdivisions (ii) and (iii) above, (a) an Officers' Certificate of
Holdings stating that the signers have reviewed the terms of this Agreement
and have made, or caused to be made under their supervision, a review in
reasonable detail of the transactions and condition of Holdings and its
Subsidiaries during the accounting period covered by such financial
statements and that such review has not disclosed the existence during or
at the end of such accounting period, and that the signers do not have
knowledge of the existence as at the date of such Officers' Certificate, of
any condition or event that constitutes an Event of Default or Potential
Event of Default, or, if any such condition or event existed or exists,
specifying the nature and period of existence thereof and what action
Holdings or any of its Subsidiaries has taken, is taking and proposes to
take with respect thereto; and (b) a Compliance Certificate of Holdings
demonstrating in reasonable detail compliance during and at the end of the
applicable accounting periods with the restrictions contained in Section 7,
in each case to the extent compliance with such restrictions is required to
be tested at the end of the applicable accounting period;
(v) Reconciliation Statements: if, as a result of any change in
-------------------------
accounting principles and policies from those used in the preparation of
the audited financial statements referred to in subsection 5.3, the
consolidated financial statements of Holdings and its Subsidiaries
delivered pursuant to subdivisions (i), (ii), (iii) or (xiii) of this
subsection 6.1 will differ in any material respect from the consolidated
financial statements that would have been delivered pursuant to such
subdivisions had no such change in accounting principles and policies been
made, then (1) together with the first delivery of financial statements
pursuant to subdivision (i),(ii), (iii) or (xiii) of this subsection 6.1
following such change, consolidated financial statements of Holdings and
its Subsidiaries for (y) the current Fiscal Year to the effective date of
such change and (z) the full Fiscal Year immediately preceding the Fiscal
Year in which such change is made, in each case prepared on a pro forma
--- -----
basis as if such change had been in effect during such periods, and (2)
together with each delivery of financial statements pursuant to subdivision
(i), (ii), (iii) or (xiii) of this subsection 6.1 following such change, a
written statement of the principal accounting officer or principal
financial officer of Holdings setting forth the differences (including any
differences that would affect any calculations relating to the financial
covenants set forth in subsection 7.6) which would have resulted if such
financial statements had been prepared without giving effect to such
change;
(vi) Accountants' Certification: together with each delivery of
--------------------------
consolidated financial statements of Holdings and its Subsidiaries pursuant
to subdivision (iii) above, a written statement by the independent
certified public accountants giving the report thereon (a) stating that
their audit examination has included a review of the terms of this
Agreement and the other Loan Documents as they relate to accounting
matters, (b) stating whether, in connection with their audit examination,
any condition or event that constitutes an Event of Default or Potential
Event of Default of a financial nature has come to their attention and, if
such a condition or event has come to their attention, specifying the
nature and period of existence thereof; provided that such accountants
--------
shall not be liable by reason of any failure to obtain knowledge of any
such Event of Default or
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Potential Event of Default that would not be disclosed in the course of
their audit examination, and (c) stating that based on their audit
examination nothing has come to their attention that causes them to believe
either or both that the information contained in the certificates delivered
therewith pursuant to subdivision (iv) above is not correct or that the
matters set forth in the Compliance Certificates delivered therewith
pursuant to clause (b) of subdivision (iv) above for the applicable Fiscal
Year are not stated in accordance with the terms of this Agreement;
(vii) Accountants' Reports: promptly upon receipt thereof (unless
--------------------
restricted by applicable professional standards), copies of all reports
submitted to Holdings by independent certified public accountants in
connection with each annual, interim or special audit of the financial
statements of Holdings and its Subsidiaries made by such accountants,
including any comment letter submitted by such accountants to management in
connection with their annual audit;
(viii) SEC Filings and Press Releases: promptly upon their becoming
------------------------------
available, copies of (a) all financial statements, reports, notices and
proxy statements sent or made available generally by Holdings to analysts
or its security holders or by any Subsidiary of Holdings to analysts or its
security holders other than Holdings or another Subsidiary of Holdings, (b)
all regular and periodic reports and all registration statements (other
than on Form S-8 or a similar form) and prospectuses, if any, filed by
Holdings or any of its Subsidiaries with any securities exchange or with
the Securities and Exchange Commission or any governmental or private
regulatory authority, and (c) all press releases and other written,
publicly announced notices by Holdings or any of its Subsidiaries
concerning material developments in the business of Holdings or any of its
Subsidiaries;
(ix) Events of Default, etc.: promptly upon any Responsible Officer
-----------------------
of any Credit Agreement Party obtaining knowledge (a) of any condition or
event that constitutes an Event of Default or Potential Event of Default,
or becoming aware that any Lender has given any notice (other than to
Administrative Agent) or taken any other action with respect to a claimed
Event of Default or Potential Event of Default, (b) that any Person has
given any notice to Holdings or any of its Subsidiaries or taken any other
action with respect to a claimed default or event or condition of the type
referred to in subsection 8.2, (c) of any condition or event that would be
required to be disclosed in a current report filed by any Credit Agreement
Party with the Securities and Exchange Commission on Form 8-K (Items 1, 2,
4, 5 and 6 of such Form as in effect on the date hereof) if such Credit
Agreement Party were required to file such reports under the Exchange Act,
or (d) of the occurrence of any event or change that has caused or
evidences, either in any case or in the aggregate, a Material Adverse
Effect, an Officers' Certificate specifying the nature and period of
existence of such condition, event or change, or specifying the notice
given or action taken by any such Person and the nature of such claimed
Event of Default, Potential Event of Default, default, event or condition,
and what action Holdings or any of its Subsidiaries has taken, is taking
and proposes to take with respect thereto;
(x) Litigation or Other Proceedings: promptly upon any Responsible
-------------------------------
Officer of any Credit Agreement Party obtaining knowledge of (a) the
institution of, or non-
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frivolous threat of, any action, suit, proceeding (whether administrative,
judicial or otherwise), governmental investigation or arbitration against
or affecting Holdings or any of its Subsidiaries or any property of
Holdings or any of its Subsidiaries (collectively, "Proceedings") not
previously disclosed in writing by any Credit Agreement Party to Lenders or
(b) any material development in any Proceeding that, in any case:
(1) if adversely determined, would reasonably be expected to have
a Material Adverse Effect; or
(2) seeks to enjoin or otherwise prevent the consummation of, or
to recover any damages or obtain relief as a result of, the
transactions contemplated hereby;
written notice thereof together with such other information as may be
reasonably available to any Credit Agreement Party to enable Lenders and
their counsel to evaluate such matters;
(xi) ERISA Events: promptly upon becoming aware of the occurrence of
------------
or forthcoming occurrence of (x) any ERISA Event (other than an ERISA Event
concerning a Multiemployer Plan) or (y) any ERISA Event concerning a
Multiemployer Plan which would reasonably be expected to result in a
material liability to Holdings, any of its Subsidiaries or any of their
respective ERISA Affiliates, a written notice specifying the nature
thereof, what action Holdings, any of its Subsidiaries or any of their
respective ERISA Affiliates has taken, is taking or proposes to take with
respect thereto and, when known, any action taken or threatened by the
Internal Revenue Service, the Department of Labor or the PBGC with respect
thereto;
(xii) ERISA Notices: with reasonable promptness, copies of (a) if
-------------
requested by the Required Lenders, each Schedule B (Actuarial Information)
to any annual report (Form 5500 Series) filed by Holdings, any of its
Subsidiaries or any of their respective ERISA Affiliates with the Internal
Revenue Service with respect to each Pension Plan, as Administrative Agent
shall reasonably request; (b) all notices received by Holdings, any of its
Subsidiaries or any of their respective ERISA Affiliates from a
Multiemployer Plan sponsor concerning an ERISA Event which would reasonably
be expected to result in a material liability to Holdings, any of its
Subsidiaries or any of their respective ERISA Affiliates; and (c) copies of
such other documents or governmental reports or filings relating to any
Employee Benefit Plan as Administrative Agent shall reasonably request;
(xiii) Financial Plans: as soon as practicable and in any event no
---------------
later than 45 days after the beginning of each Fiscal Year, a consolidated
plan and financial forecast for such Fiscal Year and the next succeeding
Fiscal Year (the "Financial Plan" for such Fiscal Years), including (a) a
forecasted consolidated balance sheet and forecasted consolidated
statements of income and cash flows of Holdings and its Subsidiaries for
each such Fiscal Year, together with a pro forma Compliance Certificate for
---------
the first such Fiscal Year and an explanation of the assumptions on which
such forecasts are based, and (b) such other information regarding such
projections as Administrative Agent may reasonably request;
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(xiv) Insurance: together with each delivery of financial statements
---------
of Holdings and its Subsidiaries pursuant to subdivision (iii), a report in
form and substance satisfactory to Administrative Agent outlining all
material changes made to insurance coverage maintained as of the Closing
Date or the date of the most recent such report by Holdings and its
Subsidiaries;
(xv) New Subsidiaries: promptly upon any Person becoming a
----------------
Subsidiary of Holdings, a written notice setting forth with respect to such
Person (a) the date on which such Person became a Subsidiary of Holdings
and (b) the ownership and debt and equity capitalization of such
Subsidiary;
(xvi) Material Contracts: promptly, and in any event within ten
------------------
Business Days after any Material Contract of Holdings or any of its
Subsidiaries is terminated or amended in a manner that is materially
adverse to Holdings or such Subsidiary, as the case may be, or any new
Material Contract is entered into, a written statement describing such
event with copies of such material amendments or new contracts, and an
explanation of any actions being taken with respect thereto; and
(xvii) Other Information: with reasonable promptness, such other
-----------------
information and data with respect to Holdings or any of its Subsidiaries as
from time to time may be reasonably requested by Administrative Agent or
the Requisite Lenders.
6.2 Corporate Existence, etc.
-------------------------
Except as permitted under subsection 7.7, Holdings will, and will
cause each of its Subsidiaries to, at all times preserve and keep in full force
and effect its corporate existence and all rights and franchises material to its
business; provided, however that neither Holdings nor any of its Subsidiaries
-------- -------
shall be required to preserve any such right or franchise if the Board of
Directors of Holdings or such Subsidiary shall determine that the preservation
thereof is no longer desirable in the conduct of the business of Holdings or
such Subsidiary, as the case may be, and that the loss thereof is not
disadvantageous in any material respect to Holdings, such Subsidiary or Lenders.
6.3 Payment of Taxes and Claims; Tax Consolidation.
----------------------------------------------
A. Holdings will, and will cause each of its Subsidiaries to, pay
all federal, state and other material taxes, assessments and other like
governmental charges imposed upon it or any of its properties or assets or in
respect of any of its income, businesses or franchises before any material
penalty accrues thereon, and all claims (including claims for labor, services,
materials and supplies) for sums that have become due and payable and by law
have or may become a Lien upon any of its properties or assets, prior to the
time when any penalty or fine shall be incurred with respect thereto; provided
--------
that no such charge or claim need be paid if it is being contested in good faith
by appropriate proceedings promptly instituted and diligently conducted, so long
as (1) such reserve or other appropriate provision, if any, as shall be required
in conformity with GAAP shall have been made therefor and (2) in the case of a
charge or claim which has or may become a
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Lien against any of the Collateral, such contest proceedings conclusively
operate to stay the sale of any portion of the Collateral to satisfy such charge
or claim.
B. Holdings will not, nor will it permit any of its Subsidiaries to,
file or consent to the filing of any consolidated income tax return with any
Person (other than any of its Subsidiaries).
6.4 Maintenance of Properties; Insurance; Application of Net
--------------------------------------------------------
Insurance/ Condemnation Proceeds.
- --------------------------------
A. Maintenance of Properties. Holdings will, and will cause each of
-------------------------
its Subsidiaries to, maintain or cause to be maintained in good repair, working
order and condition, ordinary wear and tear and damage by casualty excepted, all
material properties used or useful in the business of Holdings and its
Subsidiaries and from time to time will make or cause to be made all repairs,
renewals and replacements thereof which are useful, customary or appropriate for
companies in similar businesses.
B. Insurance. Holdings will maintain or cause to be maintained, with
---------
financially sound and reputable insurers, such public liability insurance, third
party property damage insurance, business interruption insurance and casualty
insurance with respect to liabilities, losses or damage in respect of the
assets, properties and businesses of Holdings and its Subsidiaries as may
customarily be carried or maintained under similar circumstances by corporations
of established reputation engaged in similar businesses, in each case in such
amounts (giving effect to self-insurance), with such deductibles, covering such
risks and otherwise on such terms and conditions as shall be customary for
corporations similarly situated in the industry. Without limiting the
generality of the foregoing, Holdings will maintain or cause to be maintained
flood insurance with respect to each Flood Hazard Property that is located in a
community that participates in the National Flood Insurance Program, in each
case in compliance with any applicable regulations of the Board of Governors of
the Federal Reserve System. Each such policy of insurance related to property
damage, casualty or business interruption shall (a) name Administrative Agent
for the benefit of Lenders as an additional insured thereunder as its interests
may appear and (b) in the case of each business interruption and property damage
insurance policy, contain a loss payable clause or endorsement, reasonably
satisfactory in form and substance to Administrative Agent, that names
Administrative Agent for the benefit of Lenders as the loss payee thereunder for
any covered loss in excess of $1,000,000 and provides for at least 30 days,
prior written notice to Administrative Agent of any modification or cancellation
of such policy.
C. Application of Net Insurance/Condemnation Proceeds.
--------------------------------------------------
(i) Business Interruption Insurance. Upon receipt by Holdings or any
-------------------------------
of its Subsidiaries of any business interruption insurance proceeds
constituting Net Insurance/ Condemnation Proceeds, (a) so long as no Event
of Default shall have occurred and be continuing, Holdings or such
Subsidiary may retain and apply such Net Insurance/Condemnation Proceeds
for working capital purposes of Company and its Subsidiaries, and (b) if an
Event of Default shall have occurred and be continuing,
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Borrowers shall within five Business Days of the receipt thereof apply an
amount equal to such Net Insurance/Condemnation Proceeds to prepay the
Loans (and/or the Revolving Loan Commitments shall be reduced) as provided
in subsection 2.4B(iii)(b);
(ii) Casualty Insurance/Condemnation Proceeds. Within five Business
----------------------------------------
Days of receipt by Holdings or any of its Subsidiaries of any Net
Insurance/Condemnation Proceeds other than from business interruption
insurance, (a) so long as no Event of Default shall have occurred and be
continuing and so long as the aggregate amount of Net Asset Sale Proceeds
and Net Insurance/Condemnation Proceeds received from the Closing Date to
the date of determination does not exceed $30,000,000, Holdings may deliver
to Administrative Agent an Officers' Certificate setting forth (1) that
portion of such Net Insurance/Condemnation Proceeds (the "Proposed
Insurance Reinvestment Proceeds") that Company or any of its Subsidiaries
intends to use (or enter into a contract to use) within 360 days of such
date of receipt to pay or reimburse the costs of repairing, restoring or
replacing the assets in respect of which such Net Insurance/Condemnation
Proceeds were received or to reinvest in Eligible Assets and (2) the
proposed use of the Proposed Insurance Reinvestment Proceeds and such other
information with respect to such proposed use as Administrative Agent may
reasonably request, and Company shall, or shall cause one or more of its
Subsidiaries to, promptly apply such Proposed Insurance Reinvestment
Proceeds to pay or reimburse the costs of repairing, restoring or replacing
the assets in respect of which such Proposed Insurance Reinvestment
Proceeds were received or to reinvestment in Eligible Assets, provided that
--------
if such Proposed Insurance Reinvestment Proceeds are not so applied within
360 days after the date of receipt thereof, then to the extent the sum of
the Net Asset Sale Proceeds plus Net Insurance/Condemnation Proceeds
----
received during the Net Asset Sale/Net Insurance Proceeds Period not
reinvested pursuant to subsection 2.4B(iii)(a) or this subsection 6.4C(ii),
as applicable, equals or exceeds $7,500,000, such Proposed Insurance
Reinvestment Proceeds shall be applied to prepay the Loans (and/or the
Revolving Loan Commitments shall be reduced) as provided in subsection
2.4B(iii)(b), and (b) if an Event of Default shall have occurred and be
continuing, Borrowers shall apply an amount equal to such Net
Insurance/Condemnation Proceeds to prepay the Loans (and/or the Revolving
Loan Commitments shall be reduced) as provided in subsection 2.4B(iii)(b).
(iii) Net Insurance/Condemnation Proceeds Received by Administrative
--------------------------------------------------------------
Agent. Within five Business Days of receipt by Administrative Agent of any
-----
Net Insurance/Condemnation Proceeds as loss payee, (a) if and to the extent
a Borrower would have been required to apply such Net
Insurance/Condemnation Proceeds (if it had received them directly) to
prepay the Loans and/or reduce the Revolving Loan Commitments,
Administrative Agent shall, and Borrowers hereby authorize Administrative
Agent to, apply such Net Insurance/Condemnation Proceeds to prepay the
Loans (and/or the Revolving Loan Commitments shall be reduced) as provided
in subsection 2.4B(iii)(b), and (b) to the extent the foregoing clause (a)
does not apply, Administrative Agent shall deliver such Net
Insurance/Condemnation Proceeds to Company, and Company shall, or shall
cause one or more of its Subsidiaries to, promptly apply such Net
Insurance/Condemnation Proceeds (other than any business interruption
insurance proceeds) to the costs of repairing, restoring, or replacing the
assets in respect of which
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such Net Insurance/Condemnation Proceeds were received or to reinvestment
in Eligible Assets.
6.5 Inspection Rights; Audits of Inventory and Accounts Receivable;
---------------------------------------------------------------
Lender Meeting.
- --------------
A. Inspection Rights. Holdings shall, and shall cause each of its
-----------------
Subsidiaries to, permit any authorized representatives designated by any Lender
to visit and inspect any of the properties of Holdings or any of its
Subsidiaries, to inspect, copy and take extracts from its and their financial
and accounting records, and to discuss its and their affairs, finances and
accounts with its and their officers and independent public accountants
(provided that Holdings or Borrowers may, if they so choose, be present at or
participate in any such discussion), all upon reasonable notice and at such
reasonable times during normal business hours as may be requested; provided,
--------
however, that (x) no more than one such audit and inspection shall occur during
- -------
any Fiscal Year unless an Event of Default has occurred and is continuing and
(y) each Lender shall at all times coordinate with Administrative Agent the
frequency and timing of such visits and inspections so as to reasonably minimize
the burden imposed on Holdings and its Subsidiaries.
B. Lender Meeting. Credit Agreement Parties will, upon the request
--------------
of Arranger, Administrative Agent or Requisite Lenders, participate in a meeting
of Administrative Agent and Lenders once during each Fiscal Year to be held at
Holdings' corporate offices (or at such other location as may be agreed to by
Credit Agreement Parties and Administrative Agent) at such time as may be agreed
to by Credit Agreement Parties and Administrative Agent.
6.6 Compliance with Laws, etc.
-------------------------
Holdings shall comply, and shall cause each of its Subsidiaries to
comply, with the requirements of all applicable laws, rules, regulations and
orders of any governmental authority (including all Environmental Laws), except
where noncompliance would not reasonably be expected to cause, individually or
in the aggregate, a Material Adverse Effect.
6.7 Environmental Review and Investigation, Disclosure, Etc.; Actions
-----------------------------------------------------------------
Regarding Hazardous Materials Activities, Environmental Claims
--------------------------------------------------------------
and Violations of Environmental Laws.
------------------------------------
A. Environmental Review and Investigation. Credit Agreement Parties
--------------------------------------
agree that Administrative Agent may, (i) at any time a fact, event or condition
arises that, in Administrative Agent's reasonable discretion, Administrative
Agent determines could give rise to environmental liabilities at any Facility
that would reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect, retain, at Borrowers' expense, an independent
professional consultant to review any environmental audits, investigations,
analyses and reports relating to Hazardous Materials at such Facility prepared
by or for Borrowers and (ii) in the event (a) Administrative Agent reasonably
believes that any Credit Agreement Party has breached any representation,
warranty or covenant contained in subsection 5.6 (as such subsection pertains to
environmental matters), 5.13, 6.6 (as such subsection pertains to environmental
matters) or 6.7 or that there has been a material violation of Environmental
Laws at any Facility or by Holdings or
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any of its Subsidiaries at any other location, conduct its own investigation of
such breach or violation or (b) an Event of Default has occurred and is
continuing and the repayment of any amount due hereunder has been accelerated,
conduct its own investigation of any Facility. For purposes of conducting an
investigation pursuant to clause (ii) of the preceding sentence, Credit
Agreement Parties hereby grant to Administrative Agent and its agents,
employees, consultants and contractors the right to enter into or onto any
Facilities currently owned, leased, operated or used by Holdings or any of its
Subsidiaries and to perform such tests on such property (including taking
samples of soil, groundwater and suspected asbestos-containing materials) as are
reasonably necessary in connection therewith (to the extent, at any Facility
leased by Holdings or any of its Subsidiaries, such actions are permitted by the
owner of such Facility). Any such investigation of any Facility shall be
conducted, unless otherwise agreed to by Holdings and Administrative Agent,
during normal business hours and, to the extent reasonably practicable, shall be
conducted so as not to interfere with the ongoing operations at such Facility or
to cause any damage or loss to any property at such Facility. Each Credit
Agreement Party and Administrative Agent hereby acknowledge and agree that any
report of any investigation conducted at the request of Administrative Agent
pursuant to this subsection 6.7A will be obtained and shall be used by
Administrative Agent and Lenders for the purposes of Lenders' internal credit
decisions, to monitor and police the Loans and to protect Lenders' security
interests, if any, created by the Loan Documents. Administrative Agent agrees to
deliver a copy of any such report to Holdings with the understanding that Credit
Agreement Parties acknowledge and agree that (x) they will indemnify and hold
harmless Administrative Agent and each Lender from any costs, losses or
liabilities relating to any Credit Agreement Party's use of or reliance on such
report, (y) neither Administrative Agent nor any Lender makes any representation
or warranty with respect to such report, and (z) by delivering such report to
Holdings, neither Administrative Agent nor any Lender is requiring or
recommending the implementation of any suggestions or recommendations contained
in such report.
B. Environmental Disclosure. Holdings will deliver to Administrative
------------------------
Agent, with sufficient copies for each Lender (and Administrative Agent will,
after receipt thereof, deliver to each Lender):
(i) Environmental Audits and Reports. As soon as practicable
--------------------------------
following receipt thereof, copies of all material environmental audits,
investigations, analyses and reports of any kind or character, whether
prepared by personnel of Holdings or any of its Subsidiaries or by
independent consultants, governmental authorities or any other Persons,
with respect to environmental matters at any Facility that would reasonably
be expected to have a Material Adverse Effect.
(ii) Notice of Certain Releases, Remedial Actions, Etc. Promptly upon
-------------------------------------------------
the occurrence thereof, written notice describing in reasonable detail (a)
any Release required to be reported to any federal, state or local
governmental or regulatory agency under any applicable Environmental Laws
unless such Release would not reasonably be expected to result in a
Material Adverse Effect, (b) any remedial action taken by any Credit
Agreement Party or any other Person in response to (1) any Hazardous
Materials Activities the existence of which would reasonably be expected to
result in one or more Environmental Claims having, individually or in the
aggregate, a Material Adverse Effect, or (2) any
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Environmental Claims of which Holdings or any of its Subsidiaries has
notice that, individually or in the aggregate, would reasonably be expected
to result in a Material Adverse Effect, and (c) any Credit Agreement
Party's discovery of any occurrence or condition on any real property
adjoining or in the vicinity of any Facility that would reasonably be
expected to cause such Facility or any part thereof to be subject to any
restrictions on the ownership, occupancy, transferability or use thereof
under any Environmental Laws, which would reasonably be expected to have a
Material Adverse Effect.
(iii) Written Communications Regarding Environmental Claims,
------------------------------------------------------
Releases, Etc. As soon as practicable following the sending or receipt
-------------
thereof by Holdings or any of its Subsidiaries, a copy of any and all
material written communications with respect to (a) any Environmental
Claims that, individually or in the aggregate, would reasonably be expected
to give rise to a Material Adverse Effect, (b) any Release required to be
reported to any federal, state or local governmental or regulatory agency
unless such Release would not reasonably be expected to result in a
Material Adverse Effect, and (c) any request for information from any
governmental agency that suggests such agency is investigating whether
Holdings or any of its Subsidiaries may be potentially responsible for any
Hazardous Materials Activity unless such Hazardous Materials Activity could
not reasonably be expected to have a Material Adverse Effect.
(iv) Notice of Certain Proposed Actions Having Environmental Impact.
--------------------------------------------------------------
Prompt written notice describing in reasonable detail (a) any proposed
acquisition of stock, assets, or property by Holdings or any of its
Subsidiaries that could reasonably be expected to (1) expose Holdings or
any of its Subsidiaries to, or result in, Environmental Claims that would
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect or (2) affect the ability of Holdings or any of its
Subsidiaries to maintain in full force and effect all material Governmental
Authorizations required under any Environmental Laws for their respective
operations and (b) any proposed action to be taken by Holdings or any of
its Subsidiaries to modify current operations in a manner that would
reasonably be expected to subject Holdings or any of its Subsidiaries to
any material additional obligations or requirements under any Environmental
Laws where such obligations or reimbursements would reasonably be expected
to have a Material Adverse Effect.
(v) Other Information. With reasonable promptness, such other
-----------------
documents and information as from time to time may be reasonably requested
by Administrative Agent or the Requisite Lenders in relation to any matters
disclosed pursuant to this subsection 6.7.
C. Actions Regarding Hazardous Materials Activities, Environmental
---------------------------------------------------------------
Claims and Violations of Environmental Laws. Holdings shall operate and
- -------------------------------------------
maintain, and shall cause each of its Subsidiaries to operate and maintain, all
Facilities, and shall conduct, and shall cause each of its Subsidiaries to
conduct, all Hazardous Materials Activity undertaken in connection with the
maintenance or operation of such Facilities, in compliance with applicable
Environmental Laws,
-122-
except for such noncompliance as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
6.8 Execution of Subsidiary Guaranty and Personal Property Collateral
-----------------------------------------------------------------
Documents by Future Subsidiaries.
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A. Execution of Subsidiary Guaranty and Personal Property Collateral
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Documents. In the event that any Person becomes a Domestic Subsidiary of
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Holdings after the date hereof, Holdings will promptly notify Administrative
Agent of that fact and cause such Subsidiary to execute and deliver to
Collateral Agent counterparts of the Subsidiary Guaranty, Subsidiary Pledge
Agreement, Subsidiary Security Agreement and Subsidiary Patent and Trademark
Security Agreement and to take all such further actions and execute all such
further documents and instruments (including actions, documents and instruments
comparable to those described in subsection 4.1J) as may be reasonably necessary
or, in the reasonable opinion of Administrative Agent, desirable to create in
favor of Collateral Agent, for the benefit of Lenders, a valid and perfected
First Priority Lien on all of the personal and mixed property assets of such
Subsidiary described in the applicable forms of Collateral Documents.
B. Subsidiary Charter Documents, Legal Opinions, Etc. Holdings shall
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deliver to Administrative Agent, together with such Loan Documents, (i)
certified copies of such Subsidiary's Certificate or Articles of Incorporation
(or equivalent organizational documents), together with a good standing
certificate from the Secretary of State of the jurisdiction of its organization
and, to the extent requested by Administrative Agent, each other state in which
such Person is qualified as a foreign entity to do business and, to the extent
generally available, a certificate or other evidence of good standing as to
payment of any applicable franchise or similar taxes from the appropriate taxing
authority of each of such jurisdictions, each to be dated a recent date prior to
their delivery to Administrative Agent, (ii) a copy of such Subsidiary's Bylaws
(or equivalent organizational documents), certified by its corporate secretary
or an assistant secretary as of a recent date prior to their delivery to
Administrative Agent, (iii) a certificate executed by the secretary or an
assistant secretary of such Subsidiary as to (a) the fact that the attached
resolutions of the Board of Directors of such Subsidiary approving and
authorizing the execution, delivery and performance of such Loan Documents are
in full force and effect and have not been modified or amended and (b) the
incumbency and signatures of the officers of such Subsidiary executing such Loan
Documents, and (iv) to the extent requested by Administrative Agent, a favorable
opinion of counsel to such Subsidiary, in form and substance reasonably
satisfactory to Administrative Agent and its counsel, as to (a) the due
organization and good standing of such Subsidiary, (b) the due authorization,
execution and delivery by such Subsidiary of such Loan Documents, (c) the
enforceability of such Loan Documents against such Subsidiary, (d) such other
matters (including matters relating to the creation and perfection of Liens in
any Collateral pursuant to such Loan Documents) as Administrative Agent may
reasonably request, all of the foregoing to be reasonably satisfactory in form
and substance to Administrative Agent and its counsel.
6.9 Conforming Leasehold Interests; Matters Relating to Additional
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Real Property Collateral.
------------------------
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A. Conforming Leasehold Interests. If Holdings or any of its
------------------------------
Subsidiaries acquires any Material Leasehold Property, Holdings shall use
commercially reasonable efforts to, or shall cause such Subsidiary to use
commercially reasonable efforts to, cause such Leasehold Property to be a
Conforming Leasehold Interest.
B. Additional Mortgages, Etc. From and after the Closing Date, in
-------------------------
the event that (i) Holdings, any Borrower or any Subsidiary Guarantor acquires
any fee interest in real property or any Material Leasehold Property or (ii) at
the time any Person becomes a Subsidiary Guarantor, such Person owns or holds
any fee interest in real property (other than a corporate store) or any Material
Leasehold Property, in either case excluding any such Real Property Asset the
encumbrancing of which requires the consent of any applicable lessor or (in the
case of clause (ii) above) then-existing senior lienholder, where Holdings and
its Subsidiaries are unable, after exercising commercially reasonable efforts,
to obtain such lessor's or senior lienholder's consent (any such non-excluded
Real Property Asset described in the foregoing clause (i) or (ii) being an
"Additional Mortgaged Property"), Holdings, such Borrower or such Subsidiary
Guarantor, as the case may be, shall deliver to Administrative Agent, as soon as
practicable after such Person acquires such Additional Mortgaged Property or
becomes a Subsidiary Guarantor, as the case may be, the following:
(i) Additional Mortgage. A fully executed and notarized Mortgage (an
-------------------
"Additional Mortgage"), in proper form for recording in all appropriate
places in all applicable jurisdictions, encumbering the interest of such
Loan Party in such Additional Mortgaged Property;
(ii) Opinions of Counsel. (a) A favorable opinion of counsel to such
-------------------
Loan Party, in form and substance satisfactory to Administrative Agent and
its counsel, as to the due authorization, execution and delivery by such
Loan Party of such Additional Mortgage and such other matters as
Administrative Agent may reasonably request, and (b) if required by
Administrative Agent, an opinion of counsel (which counsel shall be
reasonably satisfactory to Administrative Agent) in the state in which such
Additional Mortgaged Property is located with respect to the enforceability
of such Additional Mortgage and such other matters (including any matters
governed by the laws of such state regarding personal property security
interests in respect of any Collateral related to such Additional Mortgaged
Property) as Administrative Agent may reasonably request, in each case in
form and substance reasonably satisfactory to Administrative Agent;
(iii) Landlord Consent and Estoppel: Recorded Leasehold Interest. In
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the case of an Additional Mortgaged Property consisting of a Leasehold
Property, (a) a Landlord Consent and Estoppel and (b) evidence that such
Leasehold Property is a Recorded Leasehold Interest;
(iv) Title Insurance. (a) If required by Administrative Agent, an
---------------
ALTA mortgagee title insurance policy or an unconditional commitment
therefor (an "Additional Mortgage Policy") issued by the Title Company with
respect to such Additional Mortgaged Property, in an amount reasonably
satisfactory to Administrative Agent, insuring fee simple title to, or a
valid leasehold interest in, such Additional Mortgaged
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Property vested in such Loan Party and assuring Administrative Agent that
such Additional Mortgage creates a valid and enforceable First Priority
mortgage Lien on such Additional Mortgaged Property, subject only to a
standard survey exception, which Additional Mortgage Policy (1) shall
include an endorsement for mechanics' liens, for future advances (in each
case, if available) under this Agreement and for any other matters
reasonably requested by Administrative Agent and (2) shall provide for
affirmative insurance and such reinsurance as Administrative Agent may
reasonably request, all of the foregoing in form and substance reasonably
satisfactory to Administrative Agent; and (b) evidence satisfactory to
Administrative Agent that such Loan Party has (i) delivered to the Title
Company all certificates and affidavits required by the Title Company in
connection with the issuance of the Additional Mortgage Policy and (ii)
paid to the Title Company or to the appropriate governmental authorities
all expenses and premiums of the Title Company in connection with the
issuance of the Additional Mortgage Policy and all recording and stamp
taxes (including mortgage recording and intangible taxes) payable in
connection with recording the Additional Mortgage in the appropriate real
estate records; provided, however, that Administrative Agent shall allow
for such reasonable revisions to the applicable Mortgage and shall
otherwise take such steps as are reasonable and customary to minimize
recording, mortgage recording, stamp, documentary and intangible taxes, at
Borrowers' cost;
(v) Title Report. If no Additional Mortgage Policy is required with
------------
respect to such Additional Mortgaged Property, a title report issued by the
Title Company with respect thereto, last updated not more than 30 days
prior to the date such Additional Mortgage is to be recorded and reasonably
satisfactory in form and substance to Administrative Agent;
(vi) Copies of Documents Relating to Title Exceptions. Copies of all
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recorded documents listed as exceptions to title or otherwise referred to
in the Additional Mortgage Policy or title report delivered pursuant to
clause (iv) or (v) above;
(vii) Matters Relating to Flood Hazard Properties. (a) Evidence,
-------------------------------------------
which may be in the form of a surveyor's note on a survey or a report from
a flood hazard search firm or a letter from an insurance broker or a
municipal engineer, as to (1) whether such Additional Mortgaged Property is
a Flood Hazard Property and (2) if so, whether the community in which such
Flood Hazard Property is located is participating in the National Flood
Insurance Program, (b) if such Additional Mortgaged Property is a Flood
Hazard Property, such Loan Party's written acknowledgment of receipt of
written notification from Administrative Agent (1) that such Additional
Mortgaged Property is a Flood Hazard Property and (2) as to whether the
community in which such Flood Hazard Property is located is participating
in the National Flood Insurance Program, and (c) in the event such
Additional Mortgaged Property is a Flood Hazard Property that is located in
a community that participates in the National Flood Insurance Program,
evidence that Holdings or any of its Subsidiaries has obtained flood
insurance in respect of such Flood Hazard Property to the extent required
under the applicable regulations of the Board of Governors of the Federal
Reserve System; and
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(viii) Environmental Audit. If required by Administrative Agent,
-------------------
reports and other information, in form, scope and substance reasonably
satisfactory to Administrative Agent and prepared by environmental
consultants reasonably satisfactory to Administrative Agent, concerning any
environmental hazards or liabilities to which Holdings or any of its
Subsidiaries may be subject with respect to such Additional Mortgaged
Property.
C. Real Estate Appraisals. Holdings shall, and shall cause each of
----------------------
its Subsidiaries to, permit an independent real estate appraiser satisfactory to
Administrative Agent, upon reasonable notice, to visit and inspect any
Additional Mortgaged Property for the purpose of preparing an appraisal of such
Additional Mortgaged Property satisfying the requirements of any applicable laws
and regulations (in each case to the extent required under such laws and
regulations as determined by Administrative Agent in its discretion); provided,
--------
however, that no more than one such visit and inspection shall occur during any
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Fiscal Year unless an Event of Default has occurred and is continuing.
6.10 Interest Rate Protection.
------------------------
At all times after the date which is 60 days after the Closing Date,
Borrowers shall maintain in effect one or more Interest Rate Agreements with
respect to the Loans, each such Interest Rate Agreement to be for a term of at
least two years and in form and substance reasonably satisfactory to Arranger,
which Interest Rate Agreements shall effectively limit the Unadjusted Eurodollar
Rate Component (as hereinafter defined) of the interest costs to Borrowers with
respect to an aggregate notional principal amount of not less than 40% of the
aggregate principal amount of the Term Loans outstanding from time to time
(based on the assumption that such notional principal amount was a Eurodollar
Rate Loan with an Interest Period of three months) to a rate equal to not more
than 11.5% per annum. For purposes of this subsection 6.10, the term
"Unadjusted Eurodollar Rate Component" means that component of the interest
costs to Borrowers in respect of a Eurodollar Rate Loan that is based upon the
rate obtained pursuant to clause (i) of the definition of Adjusted Eurodollar
Rate.
6.11 Additional Foreign Subsidiary Collateral.
----------------------------------------
If, following a change in the relevant provisions of the Internal
Revenue Code, counsel for Holdings acceptable to Administrative Agent does not
within 30 days after a request from Administrative Agent or Requisite Lenders
deliver evidence, in form and substance satisfactory to Administrative Agent
with respect to any Foreign Subsidiary which has not already had all of its
capital stock pledged pursuant to the Collateral Documents, that (i) a pledge of
66 2/3% or more of the total combined voting power of all classes of capital
stock of such Foreign Subsidiary entitled to vote, and of any promissory note
issued by such Foreign Subsidiary to Holdings or any of its Domestic
Subsidiaries, and (ii) the entering into by such Foreign Subsidiary of a
guaranty in substantially the form of the Subsidiary Guaranty, in any such case
would cause the undistributed earnings of such Foreign Subsidiary as determined
for Federal income tax purposes to be treated as a deemed dividend to such
Foreign Subsidiary's United States parent for Federal income tax purposes, then:
in the case of a failure to deliver the evidence described in clause (i) above,
that portion of such Foreign Subsidiary's outstanding capital stock or any
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promissory notes so issued by such Foreign Subsidiary, in each case not
theretofore pledged pursuant to the Collateral Documents, shall be pledged to
Collateral Agent pursuant to the Collateral Documents (or another pledge
agreement in substantially similar form, if necessary), and in the case of a
failure to deliver the evidence described in clause (ii) above, such Foreign
Subsidiary shall execute and deliver the Subsidiary Guaranty and other
Collateral Documents (or other guaranty and security agreements in substantially
similar form, if necessary), granting Collateral Agent a security interest in
all of such Foreign Subsidiary's real, mixed and personal property and securing
the Obligations, in each case to the extent that such pledge of capital stock
and notes and entry into such guaranty and related documents is permitted by the
laws of the applicable foreign jurisdictions.
6.12 Year 2000 Compliance.
--------------------
Holdings will ensure that all Information Systems and Equipment are at
all times after September 30, 1999 Year 2000 Compliant, except insofar as the
failure to do so could not reasonably be expected to have a Material Adverse
Effect, and shall notify the Administrative Agent and each Lender promptly upon
detecting any failure of the Information Systems and Equipment to be Year 2000
Compliant. In addition, Holdings shall provide the Administrative Agent and
each Lender with such information about the year 2000 computer readiness
(including, without limitation, information as to contingency plans, budgets and
testing results) of Holdings and its Subsidiaries as the Administrative Agent or
such Lender shall reasonably request.
6.13 Post-Closing Deliveries.
-----------------------
Holdings and/or Borrowers shall cause any actions set forth on
Schedule 6.13 annexed hereto to be taken within the time period(s) specified on
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such Schedule 6.13 and in form and substance reasonably satisfactory to
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Administrative Agent and Arranger.
SECTION 7.
CREDIT AGREEMENT PARTIES' NEGATIVE COVENANTS
Credit Agreement Parties covenant and agree that, so long as any of
the Commitments hereunder shall remain in effect and until payment in full of
all of the Loans and other Obligations (other than inchoate indemnification
obligations with respect to claims, losses or liabilities which have not yet
arisen and are not yet due and payable) and the cancellation or expiration of
all Letters of Credit, unless Requisite Lenders shall otherwise give prior
written consent, Credit Agreement Parties shall perform, and shall cause each of
their respective Subsidiaries to perform, all covenants in this Section 7.
7.1 Indebtedness.
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Holdings shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or guaranty, or otherwise become
or remain directly or indirectly liable with respect to, any Indebtedness,
except:
(i) Borrowers may become and remain liable with respect to the
Obligations;
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(ii) Holdings and its Subsidiaries may become and remain liable with
respect to Contingent Obligations permitted by subsection 7.4 and, upon any
matured obligations actually arising pursuant thereto, the Indebtedness
corresponding to the Contingent Obligations so extinguished;
(iii) Borrowers and their respective Subsidiaries may become and
remain liable with respect to (a) Indebtedness in respect of Capital Leases
and (b) Indebtedness secured by Liens permitted under subsection 7.2A(iv),
provided that the aggregate amount of Indebtedness described in clauses (a)
--------
and (b) shall not exceed $15,000,000 at any time outstanding;
(iv) any Borrower may become and remain liable with respect to
Indebtedness to any Subsidiary Guarantor, and any Subsidiary Guarantor may
become and remain liable with respect to Indebtedness to any Borrower or
any other Subsidiary Guarantor; provided that (a) all such intercompany
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Indebtedness shall be evidenced by promissory notes, and (b) any payment by
any such Subsidiary of a Borrower under any guaranty of the Obligations
shall result in a pro tanto reduction of the amount of any intercompany
--- -----
Indebtedness owed by such Subsidiary to such Borrower or to any of such
Subsidiary Guarantors for whose benefit such payment is made;
(v) (a) any Borrower and any wholly owned Subsidiary of any Borrower
may become and remain liable with respect to Indebtedness to any wholly
owned Foreign Subsidiary, and (b) any wholly owned Foreign Subsidiary (x)
may remain liable with respect to Indebtedness to any Borrower or to any of
the Subsidiary Guarantors set forth on Schedule 7.1(v) annexed hereto in
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amounts not to exceed the respective amounts set forth on such Schedule and
(y) may become and remain liable with respect to additional Indebtedness to
any Borrower or any Subsidiary Guarantor so long as the aggregate
outstanding amount of such Indebtedness under this clause (y), plus the
----
aggregate amount of Investments of the type permitted under subsection
7.3(xiii), does not exceed $10,000,000 at any time; provided that (1) all
--------
intercompany Indebtedness described in clause (b) shall be evidenced by
promissory notes, and (2) all intercompany Indebtedness described in clause
(a) owed by any Borrower or any Subsidiary Guarantor to any wholly owned
Foreign Subsidiary shall be subordinated in right of payment to the payment
in full of the Obligations pursuant to the terms of the applicable
promissory notes or an intercompany subordination agreement; provided
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further, however, that any Borrower or any Subsidiary Guarantor may make
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additional intercompany loans in excess of such amounts to any wholly owned
Foreign Subsidiary so long as the conditions in clause (1) of the preceding
proviso are met and the Excess Proceeds Amount immediately prior to the
making of such loan equals or exceeds the principal amount of such loan;
(vi) Company may become and remain liable with respect to
Indebtedness evidenced by the Senior Subordinated Notes;
(vii) Holdings and its Subsidiaries, as applicable, may remain liable
with respect to Indebtedness described in Schedule 7.1 (vii) annexed
------------------
hereto;
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(viii) Holdings may become and remain liable with respect to
Shareholder Subordinated Notes issued in lieu of cash payments permitted
under subsection 7.5(ix) to repurchase capital stock of Holdings held by
terminated employees and officers, provided that the aggregate principal
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amount of Shareholder Subordinated Notes shall not exceed $5,000,000 at any
time outstanding;
(ix) Company may become and remain liable with respect to Permitted
Seller Notes issued as consideration in Permitted Acquisitions; provided
--------
that the aggregate principal amount of Permitted Seller Notes at any time
outstanding shall not exceed $20,000,000;
(x) Subject to the applicable restrictions of subsections 7.1(iii)
and 7.1(xii), Company or any Subsidiary of Company acquired pursuant to a
Permitted Acquisition may become or remain liable with respect to
Indebtedness of a Subsidiary of Company existing at the time of acquisition
by Company or a Subsidiary of a Subsidiary or assets pursuant to a
Permitted Acquisition ("Permitted Acquired Debt"), provided that (a) such
--------
Indebtedness was not incurred in connection with or in anticipation or
contemplation of such Permitted Acquisition, (b) such Indebtedness does not
constitute debt for borrowed money (other than debt for borrowed money
incurred in connection with industrial revenue or industrial development
bond financings), it being understood and agreed that Capital Lease
obligations and purchase money Indebtedness shall not constitute debt for
borrowed money for purposes of this clause (x), and (c) at the time of such
Permitted Acquisition such Indebtedness does not exceed 75% of the total
value of the assets of the Subsidiary so acquired, or of the assets so
acquired, as the case may be; provided, however, that (a) the aggregate
--------
amount of any such Capital Lease obligations and purchase money
Indebtedness, together with the aggregate amount of other Indebtedness of
the type permitted under subsection 7.1(iii), in each case at any time
outstanding, shall not exceed the maximum amount set forth in such
subsection, and (ii) the aggregate amount of any such Indebtedness other
than Capital Lease obligations and purchase money Indebtedness, together
with other Indebtedness of the type permitted under subsection 7.1(xii), in
each case at any time outstanding, shall not exceed the maximum amount set
forth in such subsection;
(xi) Foreign Subsidiaries of Holdings may become and remain liable
with respect to Indebtedness under lines of credit extended after the
Closing Date to any such Foreign Subsidiary by Persons other than Holdings
or any of its Subsidiaries, the proceeds of which Indebtedness are used for
such Foreign Subsidiary's working capital purposes, provided that the
--------
aggregate principal amount of all such Indebtedness outstanding at any time
for all such Foreign Subsidiaries (such Indebtedness being the "Foreign
Subsidiary Working Capital Indebtedness") shall not exceed the Foreign
Borrowing Base Amount in effect at such minus the amount of any outstanding
-----
Contingent Obligations of the type permitted under subsection 7.4(x); and
(xii) Company and its Subsidiaries may become and remain liable with
respect to Indebtedness not otherwise permitted under this subsection
(which may include Indebtedness evidenced by Permitted Seller Notes issued
as consideration in connection
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with Permitted Acquisitions); provided that the aggregate principal amount
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of such Indebtedness, together with (a) the maximum aggregate liability,
contingent or otherwise, with respect to Contingent Obligations incurred
pursuant to subsection 7.4(xi) and (b) the amount of any Indebtedness of
the type permitted under subsection 7.1(x) (other than Capital Lease
obligations and purchase money Indebtedness), shall not exceed $27,500,000
at any time outstanding.
7.2 Liens and Related Matters.
-------------------------
A. Prohibition on Liens. Holdings shall not, and shall not permit
--------------------
any of its Subsidiaries to, directly or indirectly, create, incur, assume or
permit to exist any Lien on or with respect to any property or asset of any kind
of Holdings or any of its Subsidiaries, whether now owned or hereafter acquired,
or any income or profits therefrom, or file or permit the filing of, or permit
to remain in effect, any financing statement or other similar notice of any Lien
with respect to any such property, asset, income or profits under the Uniform
Commercial Code of any State or under any similar recording or notice statute,
except:
(i) Permitted Encumbrances;
(ii) Liens created pursuant to the Collateral Documents in favor of
the Collateral Agent for the benefit of Lenders securing Loan Parties'
obligations under this Agreement and/or under Interest Rate Agreements with
any such Lenders and/or lenders or their respective affiliates;
(iii) Liens arising in connection with Capital Leases permitted under
subsection 7.1(iii)(a); provided that no such Lien shall extend to or cover
--------
any Collateral or assets other than the assets subject to such Capital
Leases;
(iv) Liens securing Indebtedness permitted by subsection 7.1(iii)(b)
incurred (a) to finance the acquisition, construction or improvement of any
real property or tangible personal property assets acquired or held by
Company or any of its Subsidiaries in the ordinary course of business;
provided that (1) such Liens shall be created within 180 days after the
--------
acquisition, construction or improvement of such assets, and (2) the
principal amount of Indebtedness secured by any such Liens shall at no time
exceed 100%, and the proceeds of such Indebtedness shall be used to provide
not less than 75%, of the original purchase price of such asset or the
amount expended to construct or improve such asset, as the case may be; or
(b) to renew, extend or refinance any Indebtedness described in clause (a);
provided that the amount of any such Indebtedness does not exceed the
--------
amount of Indebtedness so renewed, extended or refinanced which is unpaid
and outstanding immediately prior to such renewal, extension or
refinancing; and provided further, that in the case of clause (a) or (b),
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(1) such Liens attach solely to the assets financed with such Indebtedness,
(2) no recourse may be had under the Indebtedness secured by such Lien
against any Person other than the borrower of such Indebtedness for the
payment of principal, interest, fees, costs or premium on such Indebtedness
or for any claim based thereon, and (3) the financial covenants under any
Indebtedness secured by such Liens are, in each case, no more restrictive
than those set forth in this Agreement;
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(v) Other Liens securing Indebtedness in an aggregate amount not to
exceed $7,500,000 at any time outstanding; and
(vi) Liens securing Indebtedness evidenced by the Minnesota Note.
B. No Further Negative Pledges. Except (i) with respect to property
---------------------------
encumbered by a Permitted Encumbrance or to secure payment of particular
Indebtedness or to be sold pursuant to an executed agreement with respect to an
Asset Sale and (ii) for restrictions and encumbrances permitted pursuant to
clauses (d), (j) and (k) of subsection 7.2C below, neither Holdings nor any of
its Subsidiaries shall enter into any agreement (other than the Senior
Subordinated Note Indenture, any other agreement prohibiting only the creation
of Liens securing Subordinated Indebtedness or any Cumulative Preferred Stock
Document) prohibiting the creation or assumption of any Lien upon any of its
properties or assets, whether now owned or hereafter acquired.
C. No Restrictions on Subsidiary Distributions to Holdings or Other
----------------------------------------------------------------
Subsidiaries. Except as provided herein, Holdings will not, and will not permit
- ------------
any of its Subsidiaries to, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any such Subsidiary to (i) pay dividends or make any other
distributions on any of such Subsidiary's capital stock owned by Holdings or any
other Subsidiary of Holdings, (ii) repay or prepay any Indebtedness owed by such
Subsidiary to Holdings or any other Subsidiary of Holdings, (iii) make loans or
advances to Holdings or any other Subsidiary of Holdings, or (iv) transfer any
of its property or assets to Holdings or any other Subsidiary of Holdings,
except for such encumbrances or restrictions existing under or by reason of (a)
applicable law, (b) this Agreement and the other Credit Documents, (c) customary
provisions restricting subletting or assignment of any lease governing a
leasehold interest of Borrowers or any of their respective Subsidiaries, (d)
customary provisions restricting assignment of any agreement entered into by
Borrowers or any of their respective Subsidiaries in the ordinary course of
business, (e) the Senior Subordinated Note Indenture, (f) customary provisions
restricting the transfer of assets subject to Liens permitted under subsections
7.2A(iii) and 7.2A(iv), (g) any Cumulative Preferred Stock Document, (h) any
agreement or instrument governing Permitted Acquired Debt, which encumbrance or
restriction is not applicable to any Person or the properties or assets of any
Person, other than the Person or the properties or assets of the Person acquired
pursuant to the respective Permitted Acquisition and so long as the respective
encumbrances or restrictions were not created (or made more restrictive) in
connection with or in anticipation of the respective Permitted Acquisition, (i)
any Permitted Seller Note, (j) any restriction or encumbrance with respect to a
Subsidiary imposed pursuant to an agreement which has been entered into for the
sale or disposition of all or substantially all of the capital stock or assets
of such Subsidiary, so long as such sale or disposition of all or substantially
all of the capital stock or assets of such Subsidiary is permitted under this
Agreement, (k) restrictions applicable to any Joint Venture that is a Subsidiary
existing at the time of the acquisition thereof as a result of an Investment
pursuant to subsection 7.3 or a Permitted Acquisition effected in accordance
with subsection 7.7(xvi), provided that the restrictions applicable to the
--------
respective such Joint Venture are not made worse, or more burdensome, from the
perspective of Borrowers and its Subsidiaries, than those as in effect
immediately before giving effect to the consummation of the respective
Investment or Permitted Acquisition and (l) any document or instrument
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evidencing Foreign Subsidiary Working Capital Indebtedness permitted under
subsection 7.1(xi) so long as such encumbrance or restriction only applies to
the Foreign Subsidiary of Holdings incurring such Indebtedness.
7.3 Investments; Joint Ventures.
---------------------------
Holdings shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, make or own any Investment in any Person, including any
Joint Venture, except:
(i) Holdings and its Subsidiaries may make and own Investments in
Cash Equivalents;
(ii) Foreign Subsidiaries of Holdings may make and own Investments
in Foreign Cash Equivalents;
(iii) Holdings may continue to own the Investments owned by it as of
the Closing Date in Company, and Company and its Subsidiaries may continue
to own the Investments owned by them as of the Closing Date in any
Subsidiaries of Company and make additional Investments in Subsidiary
Borrower and/or such Subsidiaries that are Subsidiary Guarantors;
(iv) Holdings and its Subsidiaries may own Investments in their
respective Subsidiaries to the extent that such Investments reflect an
increase in the value of such Subsidiaries;
(v) Borrowers and their respective Subsidiaries may make
intercompany loans to the extent permitted under subsections 7.1(iv) and
7.1(v);
(vi) Borrowers and their respective Subsidiaries may make
Consolidated Capital Expenditures permitted by subsection 7.8;
(vii) Borrowers and their respective Subsidiaries may continue to own
the Investments owned by them and described in Schedule 7.3(vii) annexed
-----------------
hereto;
(viii) Borrowers and their respective Subsidiaries may make loans and
advances to employees, officers, executives or consultants to Borrowers and
their respective Subsidiaries in the ordinary course of business of
Borrowers and their respective Subsidiaries as presently conducted for the
purpose of purchasing capital stock of Holdings so long as no cash is paid
by Holdings or any of its Subsidiaries in connection with the acquisition
of such capital stock;
(ix) Borrowers and their respective Subsidiaries may acquire and
hold receivables owing to them, if created or acquired in the ordinary
course of business and payable or dischargeable in accordance with
customary trade terms (including the dating of receivables) of any such
Borrower or Subsidiary;
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(x) Borrowers and their respective Subsidiaries may acquire and
own Investments (including debt obligations) received in connection with
the bankruptcy or reorganization of franchisees, suppliers and customers
and in settlement of delinquent obligations of, and other disputes with,
customers and suppliers arising in the ordinary course of business;
(xi) Borrowers and their respective Subsidiaries may make and own
Investments consisting of deposits made in the ordinary course of business
consistent with past practices to secure the performance of leases;
(xii) Holdings may make equity contributions to the capital of
Company;
(xiii) Borrowers and their Domestic Subsidiaries may make and own
Investments consisting of cash capital contributions (in addition to cash
contributions made prior to the Closing Date and set forth on Schedule
--------
7.3(xiii) annexed hereto) to Foreign Subsidiaries of Company, or the
---------
capitalization or forgiveness of any Indebtedness owed to them by a Foreign
Subsidiary and outstanding under subsection 7.1(v); provided that the sum
--------
of (x) aggregate amount of such contributions, capitalization and
forgiveness made after the Closing Date, plus (y) the aggregate outstanding
----
principal amount of Indebtedness of the type permitted under subsection
7.1(v), shall not exceed the amounts set forth in subsection 7.1(v) at the
times set forth therein;
(xiv) Borrowers and their respective Subsidiaries may make and own
Investments not otherwise permitted under this subsection 7.3 so long as
immediately prior to the making of each such Investment the Excess Proceeds
Amount exceeds the amount of such Investment being made;
(xv) Borrowers and their respective Subsidiaries may make and own
Investments consisting of notes received in connection with any asset sale;
provided that the aggregate principal amount of such notes at any time
--------
outstanding shall not exceed $7,500,000;
(xvi) Borrowers and their respective Subsidiaries may make and own
Investments in any Person which (a) (1) result in the creation of an
account arising in the ordinary course of such Borrower's or such
Subsidiary's business or (2) result from the restructure, reorganization or
similar composition of trade account obligations which arose in the
ordinary course of business and which are owing to such Borrower or such
Subsidiary from financially distressed debtors, and (b) are, in each case,
subject to the Lien in favor of Collateral Agent under the Collateral
Documents;
(xvii) Holdings and its Subsidiaries may make and own Investments
permitted under subsection 7.7(xi), 7.7(xii) and 7.7(xiii);
(xviii) Borrowers and their respective Subsidiaries may make and own
the Investments described in Schedule 7.3(xviii) annexed hereto;
-------------------
-133-
(xix) Borrowers and their respective Subsidiaries may make and own
Investments in wholly owned Domestic Subsidiaries of Company consisting of
intercompany Indebtedness of such Subsidiaries converted to equity
Investments, provided that the underlying intercompany Indebtedness was
--------
permitted hereunder at the time of such conversion;
(xx) Company and its Subsidiaries may make and own Investments in
Subsidiaries acquired pursuant to Permitted Acquisitions under subsection
7.7(xvi);
(xxi) Company and its Subsidiaries may make and own Investments in
foreign franchisees in an aggregate amount not to exceed at any time
$27,000,000, so long as, in the case of any Investments in foreign
franchisees consisting of loans and advances to such foreign franchisees,
each such loan or advance shall be evidenced by a promissory note pledged
to the Collateral Agent pursuant to the Borrower Pledge Agreement or the
Subsidiary Pledge Agreement, as applicable;
(xxii) Company and its Subsidiaries may make and own Investments in
domestic franchisees consisting of loans and advances to such domestic
franchisees so long as (x) the aggregate amount of all such Investments
does not exceed $30,000,000 at any time and (y) each such loan or advance
shall be evidenced by a promissory note pledged to the Collateral Agent
pursuant to the Borrower Pledge Agreement or the Subsidiary Pledge
Agreement, as applicable; and
(xxiii) Borrowers and their respective Subsidiaries may make and own
other Investments in an aggregate amount not to exceed at any time
$20,000,000.
7.4 Contingent Obligations.
----------------------
Holdings shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to any
Contingent Obligation, except:
(i) Subsidiaries of Company (other than Subsidiary Borrower) may
become and remain liable with respect to Contingent Obligations in respect
of the Subsidiary Guaranty, and Holdings may become and remain liable with
respect to Contingent Obligations in respect of the Holdings Guaranty;
(ii) Borrowers may become and remain liable with respect to
Contingent Obligations in respect of Letters of Credit;
(iii) Borrowers may become and remain liable with respect to
Contingent Obligations under Hedge Agreements (x) required under subsection
6.10 and (y) providing protection against fluctuations in currency values
in connection with a Borrower's or any of its Subsidiaries' operations, so
long as management of such Borrower or such Subsidiary, as the case may be,
has determined that the entering into of any such Hedge Agreement is a bona
fide hedging activity (and is not for speculative purposes) and is in the
ordinary course of business;
-134-
(iv) Borrowers and their respective Subsidiaries may become and
remain liable with respect to Contingent Obligations in respect of (a)
customary indemnification and purchase price adjustment obligations
incurred in connection with Asset Sales or other sales of assets, (b)
endorsements of instruments for deposit or collection in the ordinary
course of business, and (c) standard contractual indemnities entered into
in the ordinary course of business;
(v) Borrowers and their respective Subsidiaries may become and
remain liable with respect to Contingent Obligations under guarantees in
the ordinary course of business of the obligations of suppliers, customers,
franchisees and licensees of Borrowers and their respective Subsidiaries;
(vi) Holdings and its Subsidiaries, as applicable, may remain liable
with respect to Contingent Obligations described in Schedule 7.4 annexed
------------
hereto;
(vii) Subsidiary Guarantors may become and remain liable with respect
to Contingent Obligations arising under their subordinated guaranties of
the Senior Subordinated Notes as set forth in the Senior Subordinated Note
Indenture;
(viii) Borrowers and their respective Subsidiaries may become and
remain liable with respect to Contingent Obligations consisting of
guarantees of obligations of any Subsidiary of either Borrower under any
worker's compensation self-insurance program of such Subsidiary
administered in accordance with applicable law relating to worker's
compensation;
(ix) Holdings and its Subsidiaries may become and remain liable with
respect to Contingent Obligations consisting of (a) guarantees by Holdings
and its Subsidiaries of Indebtedness, leases and other contractual
obligations permitted to be incurred by any Borrower or its wholly owned
Domestic Subsidiaries and (b) guarantees by Foreign Subsidiaries of
Holdings of Indebtedness, leases and other contractual obligations
permitted to be incurred by other wholly owned Foreign Subsidiaries of
Holdings; and
(x) Subject to the limitations set forth in subsection 7.1(xi),
Company may become and remain liable with respect to Contingent Obligations
consisting of guaranties by Company of Foreign Subsidiary Working Capital
Indebtedness (including letters of credit issued for the account of Company
and its Subsidiaries and in favor of lenders in respect of any such Foreign
Subsidiary Working Capital Indebtedness);
(xi) Borrowers and their respective Subsidiaries may become and
remain liable with respect to Contingent Obligations not otherwise
liability, contingent permitted under this subsection; provided that the
--------
maximum aggregate or otherwise, of Borrowers and their respective
Subsidiaries in respect of all such Contingent Obligations, together with
the aggregate principal amount of Indebtedness of Borrowers and their
respective Subsidiaries incurred pursuant to subsection 7.1(xii), shall at
no time exceed $27,500,000.
-135-
7.5 Restricted Junior Payments.
--------------------------
Holdings shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly, declare, order, pay, make or set apart any sum for any Restricted
Junior Payment; provided that (i) any Subsidiary of a Borrower can pay dividends
--------
to any Borrower or any wholly owned Subsidiary of any Borrower, (ii) Company may
make dividends to Holdings as is necessary to consummate the Recapitalization
Transactions, (iii) Holdings and Borrowers may make any Restricted Junior
Payments in accordance with the terms of, and only to the extent required by,
the Recapitalization Agreement, (iv) Company may make regularly scheduled
payments of interest in respect of the Senior Subordinated Notes in accordance
with the terms of, and only to the extent required by, and subject to the
subordination provisions contained in, the Senior Subordinated Notes and the
Senior Subordinated Note Indenture, (v) Company may make Restricted Junior
Payments to Holdings to the extent required for Holdings to make, and Holdings
may make, regularly scheduled payments of interest in respect of the Shareholder
Subordinated Notes in accordance with the terms of, and only to the extent
required by, and subject to the subordination provisions contained in, such
Shareholder Subordinated Notes, as applicable, (vi) Company may make Restricted
Junior Payments to Holdings, and Holdings may make Restricted Junior Payments
(a) in an aggregate amount not to exceed $1,500,000 in any Fiscal Year, to the
extent necessary to permit Holdings to pay general administrative costs and
expenses and (b) to the extent necessary to permit Holdings to discharge the
consolidated tax liabilities of Holdings and its Subsidiaries, (vii) so long as
no Event of Default under subsection 8.1, 8.6 or 8.7 shall have occurred and be
continuing, Holdings and its Subsidiaries may make payments of the Bain
Management Fees owing under the Bain Advisory Services Agreement when and as
due, provided that the portion of such fee that accrued but was not payable
--------
during the existence and continuation of such Event of Default shall be
permitted to be paid at such time as such Event of Default has been cured or
waived and no other Event of Default is then in existence, (viii) Company may
make Restricted Junior Payments to Holdings to the extent necessary to permit
payments by Holdings of fees owing under the Consulting Agreement in accordance
with the terms thereof, (ix) Company may make Restricted Junior Payments to
Holdings to the extent required for Holdings to make, and Holdings may make,
Restricted Junior Payments in an aggregate amount not to exceed $17,500,000 in
the aggregate on and after the Closing Date, to the extent necessary to make
repurchases of capital stock (and options or warrants to purchase such capital
stock) of Holdings from employees (a) upon termination (including by reason of
death, disability or retirement) of such employees or (b) pursuant to a
contractual obligation of Holdings or any of its Subsidiaries, provided that
--------
such amount shall be reduced by the aggregate amount of all principal and
interest payments made on any Shareholder Subordinated Notes permitted under
subsection 7.1(viii); (x) so long as no Event of Default is then in existence or
would result therefrom, Company may make scheduled interest and principal
payments in respect of Permitted Seller Notes permitted under subsection 7.l(ix)
in accordance with the terms of such Permitted Seller Notes, (xi) so long as no
Event of Default is then in existence or would result therefrom, Company may
make Restricted Junior Payments to Holdings to the extent necessary to enable
Holdings to, and Holdings may, redeem Cumulative Preferred Stock with an
aggregate liquidation preference not to exceed the Excess Proceeds Amount, (xii)
so long as no Event of Default is then in existence or would result therefrom,
Company may make Restricted Junior Payments to Holdings to the extent necessary
to enable Holdings to, and Holdings may, pay cash dividends with respect to the
Cumulative
-136-
Preferred Stock in accordance with the terms of the relevant Cumulative
Preferred Stock Documents, so long as the aggregate amount of all such cash
dividends does not exceed the Excess Proceeds Amount, (xiii) Company may make
Restricted Junior Payments to Holdings to enable Holdings to pay, and Holdings
may pay, cash dividends with respect to Holdings Common Stock, so long as (x) no
Event of Default is then in existence or would result therefrom and (y) the
aggregate amount of all such cash dividends does not exceed the Excess Proceeds
Amount; (xiv) Holdings may pay regularly accruing Dividends with respect to
Qualified Preferred Stock through the issuance of additional shares of Qualified
Preferred Stock (but not in cash) in accordance with the terms of the
documentation governing the same; (xv) so long as no Event of Default is then in
existence or would result therefrom, Company may redeem Permitted Company
Cumulative Preferred Stock with an aggregate liquidation preference not to
exceed the Excess Proceeds Amount; and (xvi) so long as no Event of Default is
then in existence or would result therefrom, Company may pay cash dividends with
respect to the Company Permitted Cumulative Preferred Stock in accordance with
the terms of the documentation governing the same, so long as the aggregate
amount of all such cash dividends does not exceed the Excess Proceeds Amount;
and provided, further that any Restricted Junior Payments by Company to Holdings
-------- -------
permitted under this subsection shall be applied by Holdings for the purposes
specified in this subsection
7.6 Financial Covenants.
----------------------
A. Minimum Interest Coverage Ratio. Holdings shall not permit the
-------------------------------
ratio of (i) Consolidated Adjusted EBITDA to (ii) Consolidated Cash Interest
Expense for any Test Period ending during any of the Accounting Quarters set
forth below to be less than the correlative ratio indicated:
============================================================
MINIMUM INTEREST
PERIOD COVERAGE RATIO
------------------------------------------------------------
Each Accounting Quarter in Fiscal 1.50:1.0
Year 1999
------------------------------------------------------------
1/st/ Accounting Quarter in Fiscal 1.50:1.0
Year 2000
------------------------------------------------------------
2/nd/ Accounting Quarter in Fiscal 1.50:1.0
Year 2000
------------------------------------------------------------
3/rd/ Accounting Quarter in Fiscal 1.50:1.0
Year 2000
------------------------------------------------------------
4/th/ Accounting Quarter in Fiscal 1.55:1.0
Year 2000
------------------------------------------------------------
1/st/ Accounting Quarter in Fiscal 1.60:1.0
Year 2001
------------------------------------------------------------
-137-
============================================================
MINIMUM INTEREST
PERIOD COVERAGE RATIO
------------------------------------------------------------
2/nd/ Accounting Quarter in Fiscal 1.60:1.0
Year 2001
------------------------------------------------------------
3/rd/ Accounting Quarter in Fiscal 1.70:1.0
Year 2001
------------------------------------------------------------
4/th/ Accounting Quarter in Fiscal 1.75:1.0
Year 2001
------------------------------------------------------------
1/st/ Accounting Quarter in Fiscal 1.80:1.0
Year 2002
------------------------------------------------------------
2/nd/ Accounting Quarter in Fiscal 1.85:1.0
Year 2002
------------------------------------------------------------
3/rd/ Accounting Quarter in Fiscal 1.90:1.0
Year 2002
------------------------------------------------------------
4/th/ Accounting Quarter in Fiscal 2.00:1.0
Year 2002
------------------------------------------------------------
1/st/ Accounting Quarter in Fiscal 2.00:1.0
Year 2003
------------------------------------------------------------
2/nd/ Accounting Quarter in Fiscal 2.10:1.0
Year 2003
------------------------------------------------------------
3/rd/ Accounting Quarter in Fiscal 2.15:1.0
Year 2003
------------------------------------------------------------
4/th/ Accounting Quarter in Fiscal 2.25:1.0
Year 2003 and each Accounting
Quarter thereafter
------------------------------------------------------------
B. Maximum Leverage Ratio. Holdings shall not permit the Leverage
----------------------
Ratio of the last day of any Test Period ending during any of the Accounting
Quarters set forth below to exceed the correlative ratio indicated:
===========================================================
MAXIMUM LEVERAGE
PERIOD RATIO
-138-
===========================================================
MAXIMUM LEVERAGE
PERIOD RATIO
-----------------------------------------------------------
Each Accounting Quarter in Fiscal 6.80:1.0
Year 1999
-----------------------------------------------------------
1/st/ Accounting Quarter in Fiscal 6.80:1.0
Year 2000
-----------------------------------------------------------
2/nd/ Accounting Quarter in Fiscal 6.70:1.0
Year 2000
-----------------------------------------------------------
3/rd/ Accounting Quarter in Fiscal 6.50:1.0
Year 2000
-----------------------------------------------------------
4/th/ Accounting Quarter in Fiscal 6.20:1.0
Year 2000
-----------------------------------------------------------
1/st/ Accounting Quarter in Fiscal 6.10:1.0
Year 2001
-----------------------------------------------------------
2/nd/ Accounting Quarter in Fiscal 5.90:1.0
Year 2001
-----------------------------------------------------------
3/rd/ Accounting Quarter in Fiscal 5.75:1.0
Year 2001
-----------------------------------------------------------
4/th/ Accounting Quarter in Fiscal 5.50:1.0
Year 2001
-----------------------------------------------------------
1/st/ Accounting Quarter in Fiscal 5.30:1.0
Year 2002
-----------------------------------------------------------
2/nd/ Accounting Quarter in Fiscal 5.20:1.0
Year 2002
-----------------------------------------------------------
3/rd/ Accounting Quarter in Fiscal 5.00:1.0
Year 2002
-----------------------------------------------------------
4/th/ Accounting Quarter in Fiscal 4.75:1.0
Year 2002
-----------------------------------------------------------
1/st/ Accounting Quarter in Fiscal 4.75:1.0
Year 2003
-----------------------------------------------------------
2/nd/ Accounting Quarter in Fiscal 4.75:1.0
-----------------------------------------------------------
-139-
===========================================================
MAXIMUM LEVERAGE
PERIOD RATIO
-----------------------------------------------------------
Year 2003
-----------------------------------------------------------
3/rd/ Accounting Quarter in Fiscal 4.50:1.0
Year 2003
-----------------------------------------------------------
4/th/ Accounting Quarter in Fiscal 4.50:1.0
Year 2003
-----------------------------------------------------------
1/st/ Accounting Quarter in Fiscal 4.50:1.0
Year 2004
-----------------------------------------------------------
2/nd/ Accounting Quarter in Fiscal 4.50:1.0
Year 2004
-----------------------------------------------------------
3/rd/ Accounting Quarter in Fiscal 4.25:1.0
Year 2004 and each Accounting
Quarter thereafter
-----------------------------------------------------------
C. Minimum Consolidated Adjusted EBITDA. Holdings shall not permit
------------------------------------
Consolidated Adjusted EBITDA for any Test Period ending during any Accounting
Quarter set forth below to be less than the correlative amount indicated:
=================================================================
MINIMUM CONSOLIDATED
PERIOD ADJUSTED EBITDA
-----------------------------------------------------------------
Each Accounting Quarter in Fiscal $108,040,000
Year 1999
-----------------------------------------------------------------
1/st/ Accounting Quarter in Fiscal $109,000,000
Year 2000
-----------------------------------------------------------------
2/nd/ Accounting Quarter in Fiscal $112,000,000
Year 2000
-----------------------------------------------------------------
3/rd/ Accounting Quarter in Fiscal $115,000,000
Year 2000
-----------------------------------------------------------------
4/th/ Accounting Quarter in Fiscal $120,930,000
Year 2000
-----------------------------------------------------------------
1/st/ Accounting Quarter in Fiscal $123,000,000
-----------------------------------------------------------------
-140-
==================================================================
MINIMUM CONSOLIDATED
PERIOD ADJUSTED EBITDA
------------------------------------------------------------------
Year 2001
------------------------------------------------------------------
2/nd/ Accounting Quarter in Fiscal
Year 2001 $126,000,000
------------------------------------------------------------------
3/rd/ Accounting Quarter in Fiscal
Year 2001 $130,000,000
------------------------------------------------------------------
4/th/ Accounting Quarter in Fiscal
Year 2001 $136,780,000
------------------------------------------------------------------
1/st/ Accounting Quarter in Fiscal
Year 2002 $138,000,000
------------------------------------------------------------------
2/nd/ Accounting Quarter in Fiscal
Year 2002 $140,000,000
------------------------------------------------------------------
3/rd/ Accounting Quarter in Fiscal
Year 2002 $143,000,000
------------------------------------------------------------------
4/th/ Accounting Quarter in Fiscal
Year 2002 $148,120,000
------------------------------------------------------------------
1/st/ Accounting Quarter in Fiscal
Year 2003 $149,000,000
------------------------------------------------------------------
2/nd/ Accounting Quarter in Fiscal
Year 2003 $151,000,000
------------------------------------------------------------------
3/rd/ Accounting Quarter in Fiscal
Year 2003 $153,000,000
------------------------------------------------------------------
4/th/ Accounting Quarter in Fiscal
Year 2003 $158,110,000
------------------------------------------------------------------
1/st/ Accounting Quarter in Fiscal
Year 2004 $159,000,000
------------------------------------------------------------------
2/nd/ Accounting Quarter in Fiscal
Year 2004 $162,000,000
------------------------------------------------------------------
3/rd/ Accounting Quarter in Fiscal
Year 2004 $165,000,000
------------------------------------------------------------------
-141-
==================================================================
MINIMUM CONSOLIDATED
PERIOD ADJUSTED EBITDA
------------------------------------------------------------------
Each Accounting Quarter $170,160,000
thereafter
--------------------------------------------------------------------
D. Certain Calculations. With respect to any period during which a
--------------------
Permitted Acquisition occurs, for purposes of determining compliance with the
financial covenants set forth in this subsection 7.6, Consolidated Adjusted
EBITDA and Consolidated Cash Interest Expense shall be calculated with respect
to such periods and such New Business on a pro forma basis (including pro forma
adjustments arising out of events which are directly attributable to a specific
transaction, are factually supportable and are expected to have a continuing
impact, in each case determined on a basis consistent with Article 11 of
Regulation S-X promulgated under the Securities Act and as interpreted by the
staff of the Securities and Exchange Commission as of January 1, 1997, which
would include cost savings resulting from head count reduction, closure of
facilities and similar restructuring charges whether (x) resulting from
decisions made by Holdings or Company or (y) implemented by the management of
the New Business within the six-month period immediately preceding the closing
of such Permitted Acquisition (provided that the cost savings described in
clause (y) are supportable and quantifiable by the underlying accounting records
of such business), which pro forma adjustments shall be certified by the
principal financial officer or principal accounting officer of Holdings) using
the historical financial statements of the New Business so acquired or to be
acquired and the consolidated financial statements of Holdings and its
Subsidiaries which shall be reformulated (i) as if such Permitted Acquisition,
and any acquisitions which have been consummated during such period, and any
Indebtedness or other liabilities incurred in connection with any such
acquisition had been consummated or incurred at the beginning of such period
(and assuming that such Indebtedness bears interest during any portion of the
applicable measurement period prior to the relevant acquisition at the weighted
average of the interest rates applicable to outstanding Loans during such
period), and (ii) otherwise in conformity with certain procedures to be agreed
upon between Administrative Agent, Holdings and Company, all such calculations
to be in form and substance reasonably satisfactory to Administrative Agent.
7.7 Restriction on Fundamental Changes; Asset Sales and
---------------------------------------------------
Recapitalizations.
- -----------------
Holdings shall not, and shall not permit any of its Subsidiaries to,
alter the corporate, capital or legal structure of Holdings or any of its
Subsidiaries, or issue any capital stock or enter into any transaction of merger
or consolidation, or liquidate, wind-up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease or sub-lease (as lessor or
sublessor), transfer or otherwise dispose of, in one transaction or a series of
transactions, all or any part of its business, property or assets, whether now
owned or hereafter acquired, or acquire by purchase or otherwise all or
substantially all the business, property or fixed assets of, or stock or other
evidence of beneficial ownership of, any Person or any division or line of
business of any Person, except:
-142-
(i) any Subsidiary of a Borrower may be merged with or into any
Borrower or any wholly owned Subsidiary Guarantor, or be liquidated, wound
up or dissolved, or all or any part of its business, property or assets may
be conveyed, sold, leased, transferred or otherwise disposed of, in one
transaction or a series of transactions, to any Borrower or any wholly
owned Subsidiary Guarantor; provided that, in the case of such a merger
--------
involving Company, Company shall be the continuing or surviving
corporation, in the case of such a merger involving Subsidiary Borrower
(other than a merger of Company and Subsidiary Borrower), Subsidiary
Borrower shall be the continuing or surviving corporation, and in the case
of any other such merger, such wholly owned Subsidiary Guarantor shall be
the continuing or surviving corporation;
(ii) any Foreign Subsidiary of Company may be merged with or into
any wholly owned Foreign Subsidiary, or be liquidated, wound up or
dissolved, or all or any part of its business, property or assets may be
conveyed, sold, leased, transferred or otherwise disposed of, in one
transaction or a series of transactions, to any wholly owned Foreign
Subsidiary; provided that (i) in the case of such a merger, such wholly
--------
owned Foreign Subsidiary shall be the continuing or surviving corporation
and (ii) in each case, the stock of such wholly owned Foreign Subsidiary is
pledged pursuant to, and to the extent required under, the Collateral
Documents;
(iii) Borrowers and their respective Subsidiaries may make
Consolidated Capital Expenditures permitted under subsection 7.8;
(iv) Borrowers and their respective Subsidiaries may dispose of
obsolete, uneconomical, negligible, worn out or surplus property (including
Intellectual Property) in the ordinary course of business;
(v) Borrowers and their respective Subsidiaries may sell or
otherwise dispose of assets in transactions that do not constitute Asset
Sales (including, without limitation, inventory and other assets acquired
for resale to franchisees in the ordinary course of business); provided
--------
that the consideration received for such assets shall be in an amount at
least equal to the fair market value thereof;
(vi) subject to subsection 7.12, Borrowers and their respective
Subsidiaries may make Asset Sales of assets having a fair market value not
in excess of $40,000,000; provided that (x) the consideration received for
--------
such assets shall be in an amount at least equal to the fair market value
thereof and (y) the proceeds of such Asset Sales shall be applied as
required by subsection 2.4B(iii)(a);
(vii) Borrowers and their respective Subsidiaries may sell or
discount, in each case without recourse, accounts receivable arising in the
ordinary course of business, but only in connection with the compromise or
collection thereof;
(viii) Borrowers and their respective Subsidiaries may sell or
exchange specific items of equipment, so long as the purpose of each such
sale or exchange is to acquire (and results within 90 days of such sale or
exchange in the acquisition of) replacement
-143-
items of equipment which are the functional equivalent of the item of
equipment so sold or exchanged;
(ix) Borrowers and their respective Subsidiaries may, in the
ordinary course of business, license as licensee or licensor patents,
trademarks, copyrights and know-how to or from third Persons, so long as
any such license by a Borrower or any of its Subsidiaries in its capacity
as licensor is permitted to be assigned pursuant to the Collateral
Documents (to the extent that a security interest in such patents,
trademarks, copyrights and know-how is granted thereunder) and does not
otherwise prohibit the granting of a Lien by such Borrower or any of its
Subsidiaries pursuant to the Collateral Documents in the Intellectual
Property covered by such license;
(x) Borrowers and their respective Subsidiaries may sell or
otherwise transfer inventory to their respective Subsidiaries for resale by
such Subsidiaries, and Subsidiaries of Borrowers may sell or otherwise
transfer inventory to any Borrower for resale by such Borrower so long as
the security interest granted to the Collateral Agent pursuant to the
Collateral Documents in the inventory so transferred shall remain in full
force and effect and perfected (to at least the same extent as in effect
immediately prior to such transfer);
(xi) Borrowers may contribute cash to one or more wholly owned
Domestic Subsidiaries that is a Subsidiary Guarantor;
(xii) Borrowers and their respective Domestic Subsidiaries may
transfer assets (other than inventory) to wholly owned Foreign Subsidiaries
so long as (x) the aggregate fair market value of all such assets (other
than Intellectual Property) so transferred (determined in good faith by the
Board of Directors or senior management of Holdings) to all such Foreign
Subsidiaries on and after the Closing Date does not exceed $5,000,000 and
(y) the aggregate fair market value of all Intellectual Property so
transferred (determined in good faith by the Board of Directors or senior
management of Holdings) to all such Foreign Subsidiaries on and after the
Closing Date does not exceed $2,500,000;
(xiii) Company and any Domestic Subsidiary of Company may transfer
assets to Company, Subsidiary Borrower or any other wholly owned Domestic
Subsidiary of Company that is a Subsidiary Guarantor, so long as the
security interests granted to Collateral Agent of Lenders pursuant to the
Collateral Documents in the assets so transferred shall remain in full
force and effect and perfected (to at least the same extent as in effect
immediately prior to such transfer);
(xiv) Holdings and its Subsidiaries may consummate the
Recapitalization Transactions;
(xv) Holdings may issue (x) Holdings Common Stock and (y) Qualified
Preferred Stock, so long as, with respect to each issuance thereof,
Holdings receives equivalent consideration therefor (as determined in good
faith by Holdings);
(xvi) either Borrower or any wholly-owned Subsidiary of a Borrower
may make
-144-
acquisitions of assets and businesses (including acquisitions of the
capital stock or other equity interests of another Person), provided that:
--------
(a) immediately prior to and after giving effect to any such
acquisition, Borrowers and their respective Subsidiaries shall be in
compliance with the provisions of subsection 7.13 hereof;
(b) if such acquisition is structured as a stock acquisition,
then either (A) the Person so acquired becomes a wholly owned
Subsidiary of either Borrower or (B) such Person is merged with and
into either Borrower or a wholly owned Subsidiary of either Borrower
(with such Borrower or such wholly owned Subsidiary being the
surviving corporation in such merger), and in any case, all of the
provisions of subsection 6.8 have been complied with in respect of
such Person;
(c) the only consideration paid in connection with such Permitted
Acquisition shall consist of cash, Holdings Common Stock, Qualified
Preferred Stock or Permitted Seller Notes;
(d) (1) Holdings shall be in compliance, on a pro forma basis
----------
giving effect to the proposed acquisition, with the covenants set
forth in subsection 7.6 hereof, (2) if at the time of the
consummation of the proposed acquisition, the Leverage Ratio for the
Test Period then most recently ended prior to the consummation of such
proposed acquisition (calculated without giving effect to such
proposed acquisition) (the Leverage Ratio as so calculated with
respect to any such proposed acquisition, the "Pre-Acquisition
Leverage Ratio") is less than or equal to 5.75:1.00, then such Pre-
Acquisition Leverage Ratio shall be equal to or greater than the
Leverage Ratio for the Test Period then most recently ended
(calculated on a pro forma basis after giving effect to the proposed
acquisition as provided in subsection 7.6D) (the Leverage Ratio as so
calculated with respect to any such proposed acquisition, the "Post-
Acquisition Leverage Ratio"), (3) if at the time of the consummation
of the proposed acquisition, (x) the Pre-Acquisition Leverage Ratio
calculated with respect to such proposed acquisition is greater than
5.75:1.00 or (y) the Post-Acquisition Leverage Ratio calculated with
respect to such proposed acquisition exceeds the Pre-Acquisition
Leverage Ratio calculated with respect to such proposed acquisition
(any such acquisition consummated or to be consummated in reliance on
this clause (3) (other than an Insignificant Permitted Acquisition), a
"Restricted Permitted Acquisition"), then the Permitted Acquisition
Cost of such proposed acquisition (other than an Insignificant
Permitted Acquisition) , when aggregated with the Permitted
Acquisition Costs of all other Restricted Permitted Acquisitions
consummated after the Closing Date and prior to the consummation of
such proposed acquisition, shall not exceed $35,000,000 and (4) no
Event of Default or Potential Event of Default shall have occurred and
be continuing at the time of such acquisition or shall be caused
thereby; and Holdings shall have delivered to Administrative Agent an
Officer's Certificate (together with supporting information therefor),
in form and substance
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reasonably satisfactory to Administrative Agent, certifying as to the
foregoing; provided that, notwithstanding the foregoing, in the event
--------
that the Permitted Acquisition Cost of the proposed acquisition is
less than or equal to $1,000,000 (each, an "Insignificant Permitted
Acquisition"), the provisions of subclauses (2) and (3) of, and the
requirement to provide an Officer's Certificate pursuant to, this
clause (d) shall not be applicable; and
(e) any assets acquired pursuant to such acquisition shall be
subject to a First Priority Lien in favor of Collateral Agent on
behalf of Lenders pursuant to the Collateral Documents; and
(xvii) so long as no Event of Default is then in existence, Company
may issue Permitted Company Cumulative Preferred Stock to holders of
Cumulative Preferred Stock in exchange for shares of such holders'
Cumulative Preferred Stock as contemplated by the definition of Permitted
Company Cumulative Preferred Stock;
(xviii) Borrowers and their respective Subsidiaries may acquire by
purchase or otherwise all or substantially all the business, property or
fixed assets of, or stock or other evidence of beneficial ownership of, any
Person or any division or line of business of any Person, so long as (v)
immediately prior to the making of each such acquisition, the Excess
Proceeds Amount exceeds the cash amount expended as consideration in
connection with such acquisition, (w) no Event of Default or Potential
Event of Default shall have occurred and be continuing at the time of such
acquisition or shall be caused thereby, (x) any assets acquired pursuant to
such acquisition shall be subject to a First Priority Lien in favor of
Collateral Agent on behalf of Lenders pursuant to the Collateral Documents,
(y) if such acquisition is structured as a stock acquisition, then either
(A) the Person so acquired becomes a wholly owned Subsidiary of either
Borrower or (B) such Person is merged with and into either Borrower or a
wholly owned Subsidiary of either Borrower (with such Borrower or such
wholly owned Subsidiary being the surviving corporation in such merger),
and in any case, all of the provisions of subsection 6.8 have been complied
with in respect of such Person and (z) immediately prior to and after
giving effect to any such acquisition, Borrowers and their respective
Subsidiaries shall be in compliance with the provisions of subsection 7.13
hereof; and
(xix) Borrowers and their respective Subsidiaries may issue capital
stock to the extent permitted by subsection 7.12(ii).
7.8 Consolidated Capital Expenditures.
---------------------------------
A. Credit Agreement Parties shall not, and shall not permit their
respective Subsidiaries to, make or incur Consolidated Capital Expenditures, in
any Fiscal Year indicated below, in an aggregate amount in excess of the
corresponding amount (as adjusted in accordance with the provisos hereto, the
"Maximum Consolidated Capital Expenditures Amount") set forth below opposite
such Fiscal Year; provided that the Maximum Consolidated Capital Expenditures
--------
Amount for any Fiscal Year shall be increased by an amount equal to the lesser
of (x) the excess, if any, of the Maximum Consolidated Capital Expenditures
Amount for the previous Fiscal Year
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(prior to adjustment in accordance with this proviso) over the actual amount of
Consolidated Capital Expenditures for such previous Fiscal Year and (y) 50% of
the Maximum Consolidated Capital Expenditures Amount (prior to adjustment in
accordance with this proviso) for such previous Fiscal Year (the amount of such
increase described in this proviso being the "Carryforward" from such preceding
Fiscal Year):
Fiscal Year Maximum Consolidated
-----------
Capital Expenditures
--------------------
1999 $40,500,000
2000 $45,400,000
2001 $45,800,000
2002 $39,000,000
2003 $37,300,000
2004 $38,500,000
2005 $39,750,000
2006 $41,000,000
2007 $42,325,000
; and provided further, that the Maximum Consolidated Capital Expenditures
-------- -------
Amount for each Fiscal Year shall be increased upon the consummation of the
acquisition of a New Business as follows:
(i) for the Fiscal Year during which such acquisition is consummated,
the Maximum Consolidated Capital Expenditures Amount shall be increased by
an amount equal to the product of (a) a fraction obtained by dividing the
number of days remaining in such Fiscal Year (following such acquisition)
by 365, multiplied by (b) 4.0% of the actual historical revenues of the New
-------------
Business for the most recently ended twelve-month period (the "Acquired LTM
Revenue") prior to such acquisition; and
(ii) for each Fiscal Year thereafter, the Maximum Consolidated Capital
Expenditures Amount shall be increased by an amount equal to 4.0% of the
Acquired LTM Revenue of such New Business.
B. Notwithstanding anything in this subsection to the contrary, so
long as no Event of Default or Potential Event of Default shall have occurred
and be continuing or shall be caused thereby, Borrowers and their respective
Subsidiaries may make Consolidated Capital Expenditures at any time in an
aggregate amount equal to the Excess Proceeds Amount at such
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time (which Consolidated Capital Expenditures shall not be included in any
determination of Consolidated Capital Expenditures under subsection 7.8A).
7.9 Sales and Lease-Backs.
----------------------
Holdings shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, become or remain liable as lessee or as a guarantor or
other surety with respect to any lease, whether an Operating Lease or a Capital
Lease, of any property (whether real, personal or mixed), whether now owned or
hereafter acquired, (i) which Holdings or any of its Subsidiaries has sold or
transferred or is to sell or transfer to any other Person (other than Holdings
or any of its Subsidiaries) or (ii) which Holdings or any of its Subsidiaries
intends to use for substantially the same purpose as any other property which
has been or is to be sold or transferred by Holdings or any of its Subsidiaries
to any Person (other than Holdings or any of its Subsidiaries) in connection
with such lease.
7.10 Sale or Discount of Receivables.
-------------------------------
Holdings shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, sell with recourse, or discount or otherwise sell for
less than the face value thereof, any of its notes or accounts receivable;
provided, however, that Borrowers and their respective Subsidiaries may, in the
- -------- -------
exercise of their reasonable business judgment in connection with efforts to
collect amounts owed thereunder, discount or sell (to the extent permitted under
subsection 7.7(vii)) for less than the face value thereof any accounts
receivable.
7.11 Transactions with Shareholders and Affiliates.
---------------------------------------------
Holdings shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction (including
the purchase, sale, lease or exchange of any property or the rendering of any
service) with any holder of 5% or more of any class of equity Securities of
Holdings or with any Affiliate of Holdings or of any such holder, on terms that
are less favorable to Holdings or that Subsidiary, as the case may be, than
those that might be obtained at the time from Persons who are not such a holder
or Affiliate; provided that the foregoing restriction shall not apply to (i) any
--------
transaction between Holdings and any of its wholly owned Subsidiaries or between
any of its wholly owned Subsidiaries, (ii) any payment from Company to Holdings
expressly permitted under subsection 7.5, (iii) any payment by Holdings or any
of its Subsidiaries of fees owing under the Consulting Agreement in accordance
with the terms thereof, (iv) any employment agreement entered into by Holdings
or any of its Subsidiaries in the ordinary course of business, (v) any issuance
of capital stock of Holdings in connection with employment arrangements, stock
options and stock ownership plans of Holdings or any of its Subsidiaries entered
into in the ordinary course of business, (vi) any of the Recapitalization
Transactions, (vii) reasonable and customary fees paid to members of the Boards
of Directors of Holdings and its Subsidiaries, (viii) so long as no Event of
Default under subsection 8.1, 8.6 or 8.7 is then in existence or would result
from the payment thereof, any payment by Holdings or any of its Subsidiaries of
Bain Management Fees under the Bain Advisory Services Agreement, provided if any
--------
such fees cannot be paid as provided above as a result of the existence of such
an Event of Default, such fees shall continue to accrue and shall be permitted
to
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be paid at such time as all such Events of Default have been cured or waived and
no other Event of Default is then in existence and (ix) the reimbursement of
Bain for its reasonable out-of-pocket expenses under the Bain Advisory Services
Agreement incurred in connection with performing management services to Holdings
and its Subsidiaries.
7.12 Disposal of Subsidiary Stock.
----------------------------
Except for any sale of 100% of the capital stock or other equity
Securities of any of its Subsidiaries in compliance with the provisions of
subsection 7.7(vi), Holdings shall not:
(i) directly or indirectly sell, assign, pledge or otherwise encumber
or dispose of any shares of capital stock or other equity Securities of any
of its Subsidiaries, except to qualify directors if required by applicable
law; or
(ii) permit any of its Subsidiaries directly or indirectly to sell,
assign, pledge or otherwise encumber or dispose of any shares of capital
stock or other equity Securities of any of its Subsidiaries (including such
Subsidiary), except (x) to Company or another Subsidiary of Holdings
(subject to the restrictions on such disposition otherwise imposed
hereinunder), (y) to qualify directors if required by applicable law or (z)
the issuance of shares of Permitted Company Cumulative Preferred Stock by
Company in accordance with the requirements of subsection 7.7(xvii).
7.13 Conduct of Business.
-------------------
From and after the Closing Date, Company shall not, and shall not
permit any of its Subsidiaries to, engage in any business other than (i) the
businesses engaged in by Company and its Subsidiaries on the Closing Date and
similar or related or supportive businesses and (ii) such other lines of
business as may be consented to by Requisite Lenders. Holdings shall engage in
no business and have no assets (including Intellectual Property) other than (i)
owning the stock of Company, (ii) the issuance of and activities related to the
maintenance and servicing of the Shareholder Subordinated Notes as permitted
hereunder, (iii) the entering into, and the performance of its obligations
under, the Holdings Guaranty, the Holdings Pledge Agreement, the Holdings
Security Agreement, the Related Agreements to which it is a party and the Bain
Advisory Services Agreement, (iv) the receipt of Cash dividends or Cash
distributions from Company in accordance with the provisions hereof, and (v)
activities associated with expenses paid with any dividends paid to Holdings
which are permitted under subsection 7.5. Notwithstanding the foregoing,
Holdings may engage in activities incidental to (a) the maintenance of its
corporate existence in compliance with applicable law, (b) legal, tax and
accounting matters in connection with any of the foregoing activities and (c)
entering into, and performing its obligations under, this Agreement and the Loan
Documents to which it is a party.
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7.14 Amendments or Waivers of Certain Agreements; Amendments of
----------------------------------------------------------
Documents Relating to Subordinated Indebtedness; Designation of
---------------------------------------------------------------
"Designated Senior Debt".
------------------------
A. Amendments or Waivers of Certain Agreements. No Credit Agreement
-------------------------------------------
Party or any of its Subsidiaries will agree to any amendment to, or waive any of
its rights under, the Bain Advisory Services Agreement or any Related Agreement
(other than any Related Agreement evidencing or governing any Subordinated
Indebtedness or any Cumulative Preferred Stock Document) after the Closing Date
if any such amendment or waiver would, individually or in the aggregate,
reasonably be expected to be materially adverse to Lenders without in each case
obtaining the prior written consent of Requisite Lenders to such amendment or
waiver.
B. Amendments of Documents Relating to Subordinated Indebtedness,
--------------------------------------------------------------
etc. (i) Credit Agreement Parties shall not, and shall not permit any of their
- ------
respective Subsidiaries to, amend or otherwise change the terms of any
Subordinated Indebtedness, or make any payment consistent with an amendment
thereof or change thereto, if the effect of such amendment or change is to
increase the interest rate on such Subordinated Indebtedness, change (to earlier
dates) any dates upon which payments of principal or interest are due thereon,
change any event of default or condition to an event of default with respect
thereto (other than to eliminate any such event of default or increase any grace
period related thereto), change the redemption, prepayment or defeasance
provisions thereof, change the subordination provisions of such Subordinated
Indebtedness (or of any guaranty thereof), or change any collateral therefor
(other than to release such collateral), or if the effect of such amendment or
change, together with all other amendments or changes made, is to increase
materially the obligations of the obligor thereunder or to confer any additional
rights on the holders of such Subordinated Indebtedness (or a trustee or other
representative on their behalf) which would reasonably be expected to be
materially adverse to any Loan Party or Lenders.
(ii) Credit Agreement Parties shall not, and shall not permit any of
their respective Subsidiaries to, amend or otherwise change the terms of any
Cumulative Preferred Stock Document, or make any payment consistent with an
amendment thereof or change thereto, if the effect of such amendment or change
is to increase the dividend rate on the Cumulative Preferred Stock, change (to
earlier dates) any dates upon which dividends are due thereon, change any event
of default or condition to an event of default with respect thereto (other than
to eliminate any such event of default or increase any grace period related
thereto), change the redemption provisions thereof, or if the effect of such
amendment or change, together with all other amendments or changes made, is to
confer any additional rights on the holders of such Cumulative Preferred Stock
which would reasonably be expected to be materially adverse to any Loan Party or
Lenders.
C. Designation of "Designated Senior Debt". Neither Holdings nor any
---------------------------------------
of its Subsidiaries shall designate any Indebtedness as "Designated Senior Debt"
(as defined in the Senior Subordinated Note Indenture) for purposes of the
Senior Subordinated Note Indenture without the prior written consent of
Requisite Lenders.
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D. Amendments to Minnesota Note. Company shall not, and shall not
----------------------------
permit Domino's Pizza, Inc., to amend or otherwise change the terms of the
Minnesota Note.
7.15 Fiscal Year.
-----------
Holdings and Borrowers shall not change their Fiscal Year-end from the
Sunday nearest to December 31.
SECTION 8.
EVENTS OF DEFAULT
If any of the following conditions or events ("Events of Default")
shall occur:
8.1 Failure to Make Payments When Due.
---------------------------------
Failure by any Borrower to pay any installment of principal of any
Loan when due, whether at stated maturity, by acceleration, by notice of
voluntary prepayment, by mandatory prepayment or otherwise; failure by any
Borrower to pay when due any amount payable to an Issuing Lender in
reimbursement of any drawing under a Letter of Credit; or failure by any
Borrower to pay any interest on any Loan or any fee or any other amount due
under this Agreement within three days after the date due; or
8.2 Default in Other Agreements.
---------------------------
(i) Failure of Holdings or any of its Subsidiaries to pay when due
any principal of or interest on or any other amount payable in respect of one or
more items of Indebtedness (other than Indebtedness referred to in subsection
8.1) or Contingent Obligations in an individual principal amount of $5,000,000
or more or with an aggregate principal amount of $10,000,000 or more, in each
case beyond the end of any grace period provided therefor; or (ii) breach or
default by Holdings or any of its Subsidiaries with respect to any other
material term of (a) one or more items of Indebtedness or Contingent Obligations
in the individual or aggregate principal amounts referred to in clause (i) above
or (b) any loan agreement, mortgage, indenture or other agreement relating to
such item(s) of Indebtedness or Contingent Obligation(s), if the effect of such
breach or default is to cause, or to permit the holder or holders of that
Indebtedness or Contingent Obligation(s) (or a trustee on behalf of such holder
or holders) to cause, that Indebtedness or Contingent Obligation(s) to become or
be declared due and payable prior to its stated maturity or the stated maturity
of any underlying obligation, as the case may be (upon the giving or receiving
of notice, lapse of time, both, or otherwise); or
8.3 Breach of Certain Covenants.
---------------------------
Failure of any Credit Agreement Party to perform or comply with any
term or condition contained in subsection 2.5 or 6.2 or Section 7 of this
Agreement; provided, however, that such failure with respect to the covenants
-------- -------
contained in subsections 7.1, 7.2, 7.3 and 7.4 shall not constitute an Event of
Default for ten days after such failure so long as Credit Agreement Parties are
diligently pursuing the cure of such failure; or
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8.4 Breach of Warranty.
------------------
Any representation, warranty, certification or other statement made by
Holdings or any of its Subsidiaries in any Loan Document or in any statement or
certificate at any time given by Holdings or any of its Subsidiaries in writing
pursuant hereto or thereto or in connection herewith or therewith shall be false
in any material respect on the date as of which made; or
8.5 Other Defaults Under Loan Documents.
-----------------------------------
Any Loan Party shall default in the performance of or compliance with
any term contained in this Agreement or any of the other Loan Documents, other
than any such term referred to in any other subsection of this Section 8, and
such default shall not have been remedied or waived within 30 days after the
earlier of (i) a Responsible Officer of such Loan Party becoming aware of such
default or (ii) receipt by Holdings and/or such Loan Party of notice from
Administrative Agent or any Lender of such default; or
8.6 Involuntary Bankruptcy, Appointment of Receiver, etc.
----------------------------------------------------
(i) A court having jurisdiction in the premises shall enter a decree
or order for relief in respect of Holdings or any of its Subsidiaries (other
than Immaterial Subsidiaries) in an involuntary case under the Bankruptcy Code
or under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect, which decree or order is not stayed; or any other similar
relief shall be granted under any applicable federal or state law; or (ii) an
involuntary case shall be commenced against Holdings or any of its Subsidiaries
(other than Immaterial Subsidiaries) under the Bankruptcy Code or under any
other applicable bankruptcy, insolvency or similar law now or hereafter in
effect; or a decree or order of a court having jurisdiction in the premises for
the appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over Holdings or any of its Subsidiaries
(other than Immaterial Subsidiaries), or over all or a substantial part of its
property, shall have been entered; or there shall have occurred the involuntary
appointment of an interim receiver, trustee or other custodian of Holdings or
any of its Subsidiaries (other than Immaterial Subsidiaries) for all or a
substantial part of its property; or a warrant of attachment, execution or
similar process shall have been issued against any substantial part of the
property of Holdings or any of its Subsidiaries (other than Immaterial
Subsidiaries), and any such event described in this clause (ii) shall continue
for 60 days unless dismissed, bonded or discharged; or
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc.
--------------------------------------------------
(i) Holdings or any of its Subsidiaries (other than Immaterial
Subsidiaries) shall have an order for relief entered with respect to it or
commence a voluntary case under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in effect, or
shall consent to the entry of an order for relief in an involuntary case, or to
the conversion of an involuntary case to a voluntary case, under any such law,
or shall consent to the appointment of or taking possession by a receiver,
trustee or other custodian for all or a substantial part of its property; or
Holdings or any of its Subsidiaries (other than Immaterial Subsidiaries) shall
make any assignment for the benefit of creditors; or (ii) Holdings or any of its
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Subsidiaries (other than Immaterial Subsidiaries) shall be unable, or shall fail
generally, or shall admit in writing its inability, to pay its debts as such
debts become due; or the Board of Directors of Holdings or any of its
Subsidiaries (or any committee thereof) shall adopt any resolution or otherwise
authorize any action to approve any of the actions referred to in clause (i)
above or this clause (ii); or
8.8 Judgments and Attachments.
-------------------------
Any money judgment, writ or warrant of attachment or similar process
involving (i) in any individual case an amount in excess of $5,000,000 or (ii)
in the aggregate at any time an amount in excess of $10,000,000 (in either case
not adequately covered by insurance as to which a solvent and unaffiliated
insurance company has acknowledged coverage without any material reservations of
right) shall be entered or filed against Holdings or any of its Subsidiaries or
any of their respective assets and shall remain undischarged, unvacated,
unbonded or unstayed for a period of 60 days (or in any event later than five
days prior to the date of any proposed sale thereunder); or
8.9 Dissolution.
-----------
Any order, judgment or decree shall be entered against Holdings or any
of its Subsidiaries decreeing the dissolution or split up of Holdings or that
Subsidiary and such order shall remain undischarged or unstayed for a period in
excess of 30 days; or
8.10 Employee Benefit Plans.
----------------------
There shall exist (i) one or more ERISA Events (other than an ERISA
Event concerning a Multiemployer Plan) which individually or in the aggregate
results in or would reasonably be expected to result in liability of Holdings or
any of its Subsidiaries in excess of $5,000,000 during the term of this
Agreement or (ii) one or more ERISA Events concerning a Multiemployer Plan
which, individually or in the aggregate, has or would reasonably be expected to
have a Material Adverse Effect; or
8.11 Change in Control.
-----------------
(i) Holdings shall cease to own directly 100% of the capital stock of
Company (other than, on and after the issuance thereof, Permitted Company
Cumulative Preferred Stock); or (ii) Company shall cease to own directly 100% of
the capital stock of Subsidiary Borrower; or (iii) Bain and the Other Investors,
collectively, shall beneficially own less than any other Person or "group"
(within the meaning of Rules 13d-3 and 13d-5 under the Securities Exchange Act
of 1934, as in effect on the Closing Date) other than a Permitted Group on a
fully diluted basis of the economic and voting interest in Holdings' Voting
Stock; or (iv) a majority of the members of the Board of Directors of Holdings,
Company or Subsidiary Borrower shall not be Continuing Directors; or (v) Bain
shall (a) cease to have a presently exercisable right to vote more of the issued
and outstanding Voting Stock of Holdings than any one of the Other Investors, or
(b) cease to beneficially own a greater percentage of the economic value of
Holdings' Voting Stock than the percentage beneficially owned by any one of the
Other Investors; or (vi) the ratio of (a)
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either (x) the percentage of the issued and outstanding Voting Stock of Holdings
or (y) the percentage of the economic value of Voting Stock of Holdings, in each
case held by Bain at any time, to (b) either (x) the percentage of the issued
and outstanding Voting Stock of Holdings or (y) the percentage of the economic
value of Voting Stock of Holdings, in each case held by Bain on the Closing Date
after giving effect to the Recapitalization Transactions, shall at any time be
less than .50:1.0; or (vii) a "Change of Control" under the Senior Subordinated
Note Indenture, any other Subordinated Indebtedness or any Preferred Stock or
any documentation governing the same (including, without limitation, the any
Cumulative Preferred Stock Document) shall occur; or
8.12 Invalidity of Guaranties; Failure of Security; Repudiation of
-------------------------------------------------------------
Obligations.
- -----------
At any time after the execution and delivery thereof, (i) any Guaranty
for any reason, other than the satisfaction in full of all Obligations (other
than inchoate indemnification obligations with respect to claims, losses or
liabilities which have not yet arisen and are not yet due and payable), shall
cease to be in full force and effect (other than in accordance with its terms)
or shall be declared to be null and void, (ii) any Collateral Document shall
cease to be in full force and effect (other than by reason of a release of
Collateral thereunder in accordance with the terms hereof or thereof, the
satisfaction in full of the Obligations (other than inchoate indemnification
obligations with respect to claims, losses or liabilities which have not yet
arisen and are not yet due and payable) or any other termination of such
Collateral Document in accordance with the terms hereof or thereof) or shall be
declared null and void, or Collateral Agent shall not have or shall cease to
have a valid and perfected First Priority Lien in any Collateral purported to be
covered thereby having a fair market value, individually or in the aggregate,
exceeding $5,000,000, in each case for any reason other than the failure of
Collateral Agent, Administrative Agent or any Lender to take any action within
its control, or (iii) any Loan Party shall contest the validity or
enforceability of any Loan Document in writing or deny in writing that it has
any further liability, including with respect to future advances by Lenders,
under any Loan Document to which it is a party; or
8.13 Failure to Consummate Recapitalization Transactions or Merger.
-------------------------------------------------------------
The Recapitalization Transactions or the Merger shall not be
consummated in accordance with this Agreement and the applicable Related
Agreements on the Closing Date, or the Recapitalization Transactions or the
Merger shall be unwound, reversed or otherwise rescinded in whole or in part for
any reason;
THEN (i) upon the occurrence of any Event of Default described in
subsection 8.6 or 8.7, each of (a) the unpaid principal amount of and
accrued interest on the Loans, (b) an amount equal to the maximum amount
that may at any time be drawn under all Letters of Credit then outstanding
(whether or not any beneficiary under any such Letter of Credit shall have
presented, or shall be entitled at such time to present, the drafts or
other documents or certificates required to draw under such Letter of
Credit), and (c) all other Obligations shall automatically become
immediately due and payable, without presentment, demand, protest or other
requirements of any kind, all of which are hereby expressly waived by each
Credit Agreement Party, and the obligation of each Lender to
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make any Loan, the obligation of Administrative Agent to issue any Letter
of Credit and the right of any Lender to issue any Letter of Credit
hereunder shall thereupon terminate, and (ii) upon the occurrence and
during the continuation of any other Event of Default, Administrative Agent
shall, upon the written request or with the written consent of Requisite
Lenders, by written notice to Borrowers, declare all or any portion of the
amounts described in clauses (a) through (c) above to be, and the same
shall forthwith become, immediately due and payable, and the obligation of
each Lender to make any Loan, the obligation of Administrative Agent to
issue any Letter of Credit and the right of any Lender to issue any Letter
of Credit hereunder shall thereupon terminate; provided that the foregoing
--------
shall not affect in any way the obligations of Lenders under subsection
3.3C(i) or the obligations of Lenders to purchase participations in any
unpaid Swing Line Loans as provided in subsection 2.1A(v).
Any amounts described in clause (b) above, when received by
Administrative Agent, shall be held by Collateral Agent pursuant to the terms of
the Collateral Account Agreement and shall be applied as therein provided.
Notwithstanding anything contained in the second preceding paragraph,
if at any time within 60 days after an acceleration of the Loans pursuant to
clause (ii) of such paragraph Borrowers shall pay all arrears of interest and
all payments on account of principal which shall have become due otherwise than
as a result of such acceleration (with interest on principal and, to the extent
permitted by law, on overdue interest, at the rates specified in this Agreement)
and all Events of Default and Potential Events of Default (other than non-
payment of the principal of and accrued interest on the Loans, in each case
which is due and payable solely by virtue of acceleration) shall be remedied or
waived pursuant to subsection 10.6, then Requisite Lenders, by written notice to
Borrowers, may at their option rescind and annul such acceleration and its
consequences; but such action shall not affect any subsequent Event of Default
or Potential Event of Default or impair any right consequent thereon. The
provisions of this paragraph are intended merely to bind Lenders to a decision
which may be made at the election of Requisite Lenders and are not intended,
directly or indirectly, to benefit any Credit Agreement Party, and such
provisions shall not at any time be construed so as to grant any Credit
Agreement Party the right to require Lenders to rescind or annul any
acceleration hereunder or to preclude Administrative Agent, Collateral Agent or
Lenders from exercising any of the rights or remedies available to them under
any of the Loan Documents, even if the conditions set forth in this paragraph
are met.
SECTION 9.
AGENTS
9.1 Appointment.
-----------
A. Appointment of Agents. J.P. Morgan Securities Inc. is hereby
---------------------
appointed Arranger hereunder, and each Lender hereby authorizes Arranger to act
as its agent in accordance with the terms of this Agreement and the other Loan
Documents. Morgan Guaranty is hereby appointed Administrative Agent hereunder
and under the other Loan Documents and each Lender hereby authorizes
Administrative Agent to act as its agent in accordance with the terms of this
Agreement and the other Loan Documents. NBD Bank is hereby appointed Syndication
Agent
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hereunder. Comerica is hereby appointed Documentation Agent hereunder. Each
Lender hereby authorizes and confirms the appointment by Administrative Agent of
Morgan Guaranty as Collateral Agent under the Collateral Documents and each
Lender hereby authorizes Collateral Agent to act as its agent in accordance with
the terms of this Agreement and the other Loan Documents. Each Agent hereby
agrees to act upon the express conditions contained in this Agreement and the
other Loan Documents, as applicable. The provisions of this Section 9 are solely
for the benefit of Agents and Lenders and no Loan Party shall have any rights as
a third party beneficiary of any of the provisions thereof. In performing its
functions and duties under this Agreement, each Agent shall act solely as an
agent of Lenders and does not assume and shall not be deemed to have assumed any
obligation towards or relationship of agency or trust with or for Holdings or
any of its Subsidiaries. Arranger, without consent of or notice to any party
hereto, may assign any and all of its rights or obligations hereunder to any of
its Affiliates. As of the date on which Arranger notifies Borrowers that it has
concluded its primary syndication of the Loans and Commitments, all obligations
of J.P. Morgan Securities, Inc., in its capacity as Arranger hereunder, shall
terminate. NDB Bank, in its capacity as Syndication Agent, shall have no
obligations hereunder. Comerica, in its capacity as Documentation Agent, shall
have no obligations hereunder.
B. Appointment of Supplemental Collateral Agents. It is the purpose
---------------------------------------------
of this Agreement and the other Loan Documents that there shall be no violation
of any law of any jurisdiction denying or restricting the right of banking
corporations or associations to transact business as agent or trustee in such
jurisdiction. It is recognized that in case of litigation under this Agreement
or any of the other Loan Documents, and in particular in case of the enforcement
of any of the Loan Documents, or in case Administrative Agent deems that by
reason of any present or future law of any jurisdiction it may not exercise any
of the rights, powers or remedies granted herein or in any of the other Loan
Documents or take any other action which may be desirable or necessary in
connection therewith, it may be necessary that Administrative Agent appoint an
additional individual or institution as a separate trustee, co-trustee,
collateral agent or collateral co-agent (any such additional individual or
institution being referred to herein individually as a "Supplemental Collateral
Agent" and collectively as "Supplemental Collateral Agents").
In the event that Administrative Agent appoints a Supplemental
Collateral Agent with respect to any Collateral, (i) each and every right,
power, privilege or duty expressed or intended by this Agreement or any of the
other Loan Documents to be exercised by or vested in or conveyed to
Administrative Agent with respect to such Collateral shall be exercisable by and
vest in such Supplemental Collateral Agent to the extent, and only to the
extent, necessary to enable such Supplemental Collateral Agent to exercise such
rights, powers and privileges with respect to such Collateral and to perform
such duties with respect to such Collateral, and every covenant and obligation
contained in the Loan Documents and necessary to the exercise or performance
thereof by such Supplemental Collateral Agent shall run to and be enforceable by
either Administrative Agent or such Supplemental Collateral Agent, and (ii) the
provisions of this Section 9 and of subsections 10.2 and 10.3 that refer to
Administrative Agent shall inure to the benefit of such Supplemental Collateral
Agent and all references therein to Administrative Agent shall be deemed to be
references to Administrative Agent and/or such Supplemental Collateral Agent, as
the context may require.
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Should any instrument in writing from any Credit Agreement Party or
any other Loan Party be required by any Supplemental Collateral Agent so
appointed by Administrative Agent for more fully and certainly vesting in and
confirming to him or it such rights, powers, privileges and duties, such Credit
Agreement Party shall, or shall cause such Loan Party to, execute, acknowledge
and deliver any and all such instruments promptly upon request by Administrative
Agent. In case any Supplemental Collateral Agent, or a successor thereto, shall
die, become incapable of acting, resign or be removed, all the rights, powers,
privileges and duties of such Supplemental Collateral Agent, to the extent
permitted by law, shall vest in and be exercised by Administrative Agent until
the appointment of a new Supplemental Collateral Agent.
9.2 Powers and Duties; General Immunity.
-----------------------------------
A. Powers; Duties Specified. Each Lender irrevocably authorizes each
------------------------
Agent to take such action on such Lender's behalf and to exercise such powers,
rights and remedies hereunder and under the other Loan Documents as are
specifically delegated or granted to such Agent by the terms hereof and thereof,
together with such powers, rights and remedies as are reasonably incidental
thereto. Each Agent shall have only those duties and responsibilities that are
expressly specified in this Agreement and the other Loan Documents. Each Agent
may exercise such powers, rights and remedies and perform such duties by or
through its agents or employees. No Agent shall have, by reason of this
Agreement or any of the other Loan Documents, a fiduciary relationship in
respect of any Lender; and nothing in this Agreement or any of the other Loan
Documents, expressed or implied, is intended to or shall be so construed as to
impose upon any Agent any obligations in respect of this Agreement or any of the
other Loan Documents except as expressly set forth herein or therein.
B. No Responsibility for Certain Matters. No Agent shall be
-------------------------------------
responsible to any Lender for the execution, effectiveness, genuineness,
validity, enforceability, collectibility or sufficiency of this Agreement or any
other Loan Document or for any representations, warranties, recitals or
statements made herein or therein or made in any written or oral statements or
in any financial or other statements, instruments, reports or certificates or
any other documents furnished or made by any Agent to Lenders or by or on behalf
of any Loan Party to any Agent or any Lender in connection with the Loan
Documents and the transactions contemplated thereby or for the financial
condition or business affairs of any Loan Party or any other Person liable for
the payment of any Obligations, nor shall any Agent be required to ascertain or
inquire as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained in any of the Loan Documents or as
to the use of the proceeds of the Loans or as to the existence or possible
existence of any Event of Default or Potential Event of Default. Anything
contained in this Agreement to the contrary notwithstanding, Administrative
Agent shall not have any liability arising from confirmations of the amount of
outstanding Loans or the Letter of Credit Usage or the component amounts
thereof.
C. Exculpatory Provisions. None of Agents nor any of their
----------------------
respective officers, partners, directors, employees or agents shall be liable to
Lenders for any action taken or omitted by any Agent under or in connection with
any of the Loan Documents except to the extent caused by such Agent's gross
negligence or willful misconduct. Each Agent shall be entitled to refrain from
any act or the taking of any action (including the failure to take an action)
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in connection with this Agreement or any of the other Loan Documents or from the
exercise of any power, discretion or authority vested in it hereunder or
thereunder unless and until such Agent shall have received instructions in
respect thereof from Requisite Lenders (or such other Lenders as may be required
to give such instructions under subsection 10.6) and, upon receipt of such
instructions from Requisite Lenders (or such other Lenders, as the case may be),
such Agent shall be entitled to act or (where so instructed) refrain from
acting, or to exercise such power, discretion or authority, in accordance with
such instructions. Without prejudice to the generality of the foregoing, (i)
each Agent shall be entitled to rely, and shall be fully protected in relying,
upon any communication, instrument or document believed by it to be genuine and
correct and to have been signed or sent by the proper person or persons, and
shall be entitled to rely and shall be protected in relying on opinions and
judgments of attorneys (who may be attorneys for Holdings and its Subsidiaries),
accountants, experts and other professional advisors selected by it; and (ii) no
Lender shall have any right of action whatsoever against any Agent as a result
of such Agent acting or (where so instructed) refraining from acting under this
Agreement or any of the other Loan Documents in accordance with the instructions
of Requisite Lenders (or such other Lenders as may be required to give such
instructions under subsection 10.6).
D. Agent Entitled to Act as Lender. The agency hereby created shall
-------------------------------
in no way impair or affect any of the rights and powers of, or impose any duties
or obligations upon, any Agent in its individual capacity as a Lender hereunder.
With respect to its participation in the Loans and the Letters of Credit, each
Agent shall have the same rights and powers hereunder as any other Lender and
may exercise the same as though it were not performing the duties and functions
delegated to it hereunder, and the term "Lender" or "Lenders" or any similar
term shall, unless the context clearly otherwise indicates, include each Agent
in its individual capacity. Any Agent and its Affiliates may accept deposits
from, lend money to and generally engage in any kind of banking, trust,
financial advisory or other business with Holdings or any of its Subsidiaries or
Affiliates as if it were not performing the duties specified herein, and may
accept fees and other consideration from Holdings and its Subsidiaries for
services in connection with this Agreement and otherwise without having to
account for the same to Lenders.
9.3 Representations and Warranties; No Responsibility for Appraisal
---------------------------------------------------------------
of Creditworthiness.
-------------------
Each Lender represents and warrants that it has made its own
independent investigation of the financial condition and affairs of Holdings and
its Subsidiaries in connection with the making of the Loans and the issuance of
Letters of Credit hereunder and that it has made and shall continue to make its
own appraisal of the creditworthiness of Holdings and its Subsidiaries. No
Agent shall have any duty or responsibility, either initially or on a continuing
basis, to make any such investigation or any such appraisal on behalf of Lenders
or to provide any Lender with any credit or other information with respect
thereto (except as provided in subsection 6.1), whether coming into its
possession before the making of the Loans or at any time or times thereafter,
and no Agent shall have any responsibility with respect to the accuracy of or
the completeness of any information provided to Lenders.
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9.4 Right to Indemnity.
------------------
Each Lender, in proportion to its Pro Rata Share, severally agrees to
--- ----
indemnify each Agent, to the extent that such Agent shall not have been
reimbursed by any Credit Agreement Party, for and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including counsel fees and disbursements) or disbursements of
any kind or nature whatsoever which may be imposed on, incurred by or asserted
against such Agent in exercising its powers, rights and remedies or performing
its duties hereunder or under the other Loan Documents or otherwise in its
capacity as such Agent in any way relating to or arising out of this Agreement
or the other Loan Documents; provided that no Lender shall be liable for any
--------
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from such Agent's
gross negligence or willful misconduct. If any indemnity furnished to any Agent
for any purpose shall, in the opinion of such Agent, be insufficient or become
impaired, such Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional indemnity is
furnished; provided that in no event shall this sentence require any Lender to
--------
indemnify any Agent against any liability, obligation, loss, damage, penalty,
action, judgment, suit, cost, expense or disbursement in excess of such Lender's
Pro Rata Share thereof; and provided further, that this sentence shall not be
- -------- -------- -------
deemed to require any Lender to indemnify any Agent against any liability,
obligation, loss, damage, penalty, action, judgment, suit, cost, expense or
disbursement described in the proviso to the immediately preceding sentence.
9.5 Successor Administrative Agent and Swing Line Lender.
----------------------------------------------------
A. Successor Administrative Agent. Administrative Agent may resign
------------------------------
at any time by giving 30 days' prior written notice thereof to Lenders and each
Borrower, and Administrative Agent may be removed at any time with or without
cause by an instrument or concurrent instruments in writing delivered to
Borrowers and Administrative Agent and signed by Requisite Lenders. Upon any
such notice of resignation or any such removal, Requisite Lenders shall have the
right, upon five Business Days' notice to Borrowers, to appoint a successor
Administrative Agent with the consent of each Borrower (which consent shall not
be unreasonably withheld or delayed). Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, that
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring or removed
Administrative Agent and the retiring or removed Administrative Agent shall be
discharged from its duties and obligations under this Agreement. After any
retiring or removed Administrative Agent's resignation or removal hereunder as
Administrative Agent, the provisions of this Section 9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement.
B. Successor Swing Line Lender. Any resignation or removal of
---------------------------
Administrative Agent pursuant to subsection 9.5A shall also constitute the
resignation or removal of Morgan Guaranty or its successor as Swing Line Lender,
and any successor Administrative Agent appointed pursuant to subsection 9.5A
shall, upon its acceptance of such appointment, become the successor Swing Line
Lender for all purposes hereunder. In such event (i) the relevant Borrower or
Borrowers shall prepay any outstanding Swing Line Loans made by the
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retiring or removed Administrative Agent in its capacity as Swing Line Lender,
(ii) upon such prepayment, the retiring or removed Administrative Agent and
Swing Line Lender shall surrender any Swing Line Note held by it to Borrowers
for cancellation, and (iii) if so requested by the successor Administrative
Agent and Swing Line Lender in accordance with subsection 2.1E, Borrowers shall
issue a new Swing Line Note to the successor Administrative Agent and Swing Line
Lender substantially in the form of Exhibit VIII annexed hereto, in the
------------
principal amount of the Swing Line Loan Commitment then in effect and with other
appropriate insertions.
9.6 Collateral Documents and Guaranty.
---------------------------------
Each Lender hereby further authorizes Collateral Agent, on behalf of
and for the benefit of Lenders, to enter into each Collateral Document as
secured party and to be the agent for and representative of the Lenders under
the Guaranties, and each Lender agrees to be bound by the terms of each
Collateral Document and each Guaranty; provided that Collateral Agent shall not
--------
enter into or consent to any material amendment, modification, termination or
waiver of any provision contained in any Collateral Document or Guaranty without
the prior consent of Requisite Lenders (or such other Lenders as may be required
to give such instructions under subsection 10.6); provided further, however,
-------- ------- -------
that, without further written consent or authorization from Lenders, Collateral
Agent may execute any documents or instruments necessary to (a) release any Lien
encumbering any item of Collateral that is the subject of a sale or other
disposition of assets permitted by this Agreement or as permitted or required
under the Collateral Documents or to which Requisite Lenders (or such other
Lenders as may be required to give such consent under subsection 10.6) have
otherwise consented or (b) release any Subsidiary Guarantor from the Subsidiary
Guaranty if all of the capital stock of such Subsidiary Guarantor is sold to any
Person pursuant to a sale or other disposition permitted hereunder or to which
Requisite Lenders (or such other Lenders as may be required to give such consent
under subsection 10.6) have otherwise consented; provided, however, that nothing
-------- -------
in this subsection shall require consent to release from the Subsidiary Guaranty
any Person which, immediately after such sale, shall be a Domestic Subsidiary of
Holdings which is obligated to and will enter into the Subsidiary Guaranty.
Anything contained in any of the Loan Documents to the contrary notwithstanding,
Credit Agreement Parties, Administrative Agent, Collateral Agent and each Lender
hereby agree that (X) no Lender shall have any right individually to realize
upon any of the Collateral under any Collateral Document or to enforce the
Subsidiary Guaranty, it being understood and agreed that all powers, rights and
remedies under the Collateral Documents and the Guaranties may be exercised
solely by Collateral Agent for the benefit of Secured Parties in accordance with
the terms thereof, and (Y) in the event of a foreclosure by Collateral Agent on
any of the Collateral pursuant to a public or private sale, Collateral Agent or
any Secured Party may be the purchaser of any or all of such Collateral at any
such sale and Collateral Agent, as agent for and representative of Secured
Parties (but not any Secured Party or Secured Parties in its or their respective
individual capacities unless Requisite Lenders shall otherwise agree in writing)
shall be entitled, for the purpose of bidding and making settlement or payment
of the purchase price for all or any portion of the Collateral sold at any such
public sale, to use and apply any of the Obligations as a credit on account of
the purchase price for any collateral payable by Collateral Agent at such sale.
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SECTION 10.
MISCELLANEOUS
10.1 Assignments and Participations in Loans and Letters of Credit.
-------------------------------------------------------------
A. General. Subject to subsection 10.1B, each Lender shall have the
-------
right at any time to (i) sell, assign or transfer to any Eligible Assignee, or
(ii) sell participations to any Person in, all or any part of its Commitments or
any Loan or Loans made by it or its Letters of Credit or participations therein
or any other interest herein or in any other Obligations owed to it; provided
--------
that no such sale, assignment, transfer or participation shall require such
Borrower to file a registration statement with the Securities and Exchange
Commission or apply to qualify such sale, assignment, transfer or participation
under the securities laws of any state; provided further that no such sale,
----------------
assignment or transfer described in clause (i) above shall be effective unless
and until an Assignment Agreement effecting such sale, assignment or transfer
shall have been accepted by Administrative Agent and recorded in the Register as
provided in subsection 10.1B(ii); provided further that no such sale,
----------------
assignment, transfer or participation of any Letter of Credit or any
participation therein may be made separately from a sale, assignment, transfer
or participation of a corresponding interest in the Revolving Loan Commitment
and the Revolving Loans of the Lender effecting such sale, assignment, transfer
or participation; and provided further that, anything contained herein to the
----------------
contrary notwithstanding, the Swing Line Loan Commitment and the Swing Line
Loans of Swing Line Lender may not be sold, assigned or transferred as described
in clause (i) above to any Person other than a successor Administrative Agent
and Swing Line Lender to the extent contemplated by subsection 9.5. Except as
otherwise provided in this subsection 10.1, no Lender shall, as between a
Borrower and such Lender, be relieved of any of its obligations hereunder as a
result of any sale, assignment or transfer of, or any granting of participations
in, all or any part of its Commitments or the Loans, the Letters of Credit or
participations therein, or the other Obligations owed to such Lender.
B. Assignments.
-----------
(i) Amounts and Terms of Assignments. Each Commitment, Loan, Letter
--------------------------------
of Credit or participation therein, or other Obligation may (a) be assigned in
any amount to (x) another Lender, or to an Affiliate of the assigning Lender or
another Lender or (y) in the case of any Lender that is a fund that invests in
bank loans, any other fund that invests in bank loans and is managed by the same
investment advisor of such Lender or by an Affiliate of such investment advisor,
in either case with the giving of notice to Company and Administrative Agent, or
(b) be assigned in an aggregate amount of not less than $5,000,000 (or such
lesser amount as shall constitute the aggregate amount of the Commitments,
Loans, Letters of Credit and participations therein, and other Obligations of
the assigning Lender) to any other Eligible Assignee with the consent of Company
and Administrative Agent (which consent of Company and Administrative Agent
shall not be unreasonably withheld or delayed); provided that, in the case of an
--------
assignment pursuant to clause (b) above, unless otherwise agreed to in writing
by Company and Administrative Agent, the assigning Lender shall have,
immediately after giving effect to such assignment, not less than an aggregate
amount of $5,000,000 in Commitments, Loans and Letters of Credit (except to the
extent such assigning Lender shall have assigned all of its Commitments, Loans,
Letters of Credit and participations therein, and other Obligations in
connection with such
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assignment); and provided further, however, that (x) upon the occurrence and
---------------- -------
during the continuance of an Event of Default, or (y) in the case of assignments
by Morgan Guaranty or (z) in the case of an assignment of a funded Term Loan, an
assignment in accordance with this clause (b) may be made without the consent of
Company or Administrative Agent, upon the giving of notice to Company and
Administrative Agent. To the extent of any such assignment in accordance with
either clause (a) or (b) above, the assigning Lender shall be relieved of its
obligations with respect to its Commitments, Loans, Letters of Credit or
participations therein, or other Obligations or the portion thereof so assigned.
The parties to each such assignment shall execute and deliver to Administrative
Agent, for its acceptance and recording in the Register, an Assignment
Agreement, together with a processing and recordation fee of $500 in the case of
assignments pursuant to clause (a) above and assignments by Morgan Guaranty, and
$3,500 in the case of all other assignments and such forms, certificates or
other evidence, if any, with respect to United States federal income tax
withholding matters as the assignee under such Assignment Agreement may be
required to deliver to Administrative Agent pursuant to subsection 2.7B(iii)(a).
Upon such execution, delivery, acceptance and recordation, from and after the
effective date specified in such Assignment Agreement, (y) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment
Agreement, shall have the rights and obligations of a Lender hereunder and (z)
the assigning Lender thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment Agreement,
relinquish its rights (other than any rights which survive the termination of
this Agreement under subsection 10.9B) and be released from its obligations
under this Agreement (and, in the case of an Assignment Agreement covering all
or the remaining portion of an assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto; provided that,
--------
anything contained in any of the Loan Documents to the contrary notwithstanding,
if such Lender is the Issuing Lender with respect to any outstanding Letters of
Credit such Lender shall continue to have all rights and obligations of an
Issuing Lender with respect to such Letters of Credit until the cancellation or
expiration of such Letters of Credit and the reimbursement of any amounts drawn
thereunder). The Commitments hereunder shall be modified to reflect the
Commitment of such assignee and any remaining Commitment of such assigning
Lender and, if any such assignment occurs after the issuance of any Notes
hereunder, the assigning Lender shall, upon the effectiveness of such assignment
or as promptly thereafter as practicable, surrender its applicable Notes, if
any, to Administrative Agent for cancellation, and thereupon new Notes shall, if
so requested by the assignee and/or the assigning Lenders in accordance with
Subsection 2.1E, be issued to the assignee and/or to the assigning Lender,
substantially in the form of Exhibit IV, Exhibit V, Exhibit VI, Exhibit VII or
---------- --------- ---------- -----------
Exhibit VIII annexed hereto, appropriate insertions, to reflect the new
- ------------
Commitments and/or outstanding Term Loans, as the case may be, of the assignee
and/or the assigning Lender.
(ii) Acceptance by Administrative Agent; Recordation in Register.
-----------------------------------------------------------
Upon its receipt of an Assignment Agreement executed by an assigning Lender and
an assignee representing that it is an Eligible Assignee, together with the
processing and recordation fee referred to in subsection 10.1B(i) and any forms,
certificates or other evidence with respect to United States federal income tax
withholding matters that such assignee may be required to deliver to
Administrative Agent pursuant to subsection 2.7B(iii)(a), Administrative Agent
shall, if
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Administrative Agent and Company have consented to the assignment evidenced
thereby (in each case to the extent such consent is required pursuant to
subsection 10.1B(i)), (a) accept such Assignment Agreement by executing a
counterpart thereof as provided therein (which acceptance shall evidence any
required consent of Administrative Agent to such assignment), (b) record the
information contained therein in the Register, and (c) give prompt notice
thereof to Company. Administrative Agent shall maintain a copy of each
Assignment Agreement delivered to and accepted by it as provided in this
subsection 10.1B(ii).
C. Participations. The holder of any participation, other than an
--------------
Affiliate of the Lender granting such participation, shall not be entitled to
require such Lender to take or omit to take any action hereunder except action
directly affecting (i) the extension of the scheduled final maturity date of any
Loan allocated to such participation or (ii) a reduction of the principal amount
of or the rate of interest or fees payable on any Loan allocated to such
participation, and all amounts payable by Borrowers hereunder (including amounts
payable to such Lender pursuant to subsections 2.6D, 2.7 and 3.6) shall be
determined as if such Lender had not sold such participation. Borrowers and
each Lender hereby acknowledge and agree that, solely for purposes of
subsections 10.4 and 10.5, (a) any participation will give rise to a direct
obligation of Borrowers to the participant and (b) the participant shall be
considered to be a "Lender".
D. Assignments to Federal Reserve Banks and Fund Trustees. In
------------------------------------------------------
addition to the assignments and participations permitted under the foregoing
provisions of this subsection 10. 1, any Lender may assign and pledge all or any
portion of its Loans, the other Obligations owed to such Lender, and its Notes
to any Federal Reserve Bank as collateral security pursuant to Regulation A of
the Board of Governors of the Federal Reserve System and any operating circular
issued by such Federal Reserve Bank, and with the consent of Company and
Administrative Agent any Lender which is an investment fund may pledge all or
any portion of its Notes or Loans to its trustee in support of its obligations
to such trustee; provided that (i) no Lender shall, as between a Borrower and
--------
such Lender, be relieved of any of its obligations hereunder as a result of any
such assignment and pledge and (ii) in no event shall such Federal Reserve Bank
or trustee be considered to be a "Lender" or be entitled to require the
assigning Lender to take or omit to take any action hereunder.
E. Information. Each Lender may furnish any information concerning
-----------
Holdings and its Subsidiaries in the possession of that Lender from time to time
to assignees and participants (including prospective assignees and
participants), subject to subsection 10.19.
F. Representations of Lenders. Each Lender listed on the signature
--------------------------
pages hereof hereby represents and warrants (i) that it is an Eligible Assignee
described in clause (A) of the definition thereof; (ii) that it has experience
and expertise in the making of loans such as the Loans; and (iii) that it will
make its Loans for its own account in the ordinary course of its business and
without a view to distribution of such Loans within the meaning of the
Securities Act or the Exchange Act or other federal securities laws (it being
understood that, subject to the provisions of this subsection 10.1, the
disposition of such Loans or any interests therein shall at all times remain
within its exclusive control). Each Lender that becomes a party hereto pursuant
to an Assignment Agreement shall be deemed to agree that the representations and
warranties of
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such Lender contained in Section 2(c) of such Assignment Agreement are
incorporated herein by this reference.
10.2 Expenses.
--------
If the transactions contemplated hereby are consummated, Borrowers
jointly and severally agree to pay promptly (i) all the actual and reasonable
costs and expenses of Agents in connection with the preparation of the Loan
Documents and any consents, amendments (requested by or for the benefit of any
Loan Party), waivers or other modifications thereto; (ii) all the costs of
furnishing all opinions by counsel for any Loan Party (including any opinions
requested by Lenders as to any legal matters arising hereunder) and of any Loan
Party's performance of and compliance with all agreements and conditions on its
part to be performed or complied with under this Agreement and the other Loan
Documents including with respect to confirming compliance with environmental,
insurance and solvency requirements; (iii) the reasonable fees, expenses and
disbursements of counsel to Arranger and counsel to Administrative Agent (in
each case including allocated costs of internal counsel) in connection with the
negotiation, preparation, execution and administration of the Loan Documents and
any consents, amendments (requested by or for the benefit of any Loan Party),
waivers or other modifications thereto and any other documents or matters
requested by any Loan Party; (iv) all the reasonable costs and reasonable
expenses of Administrative Agent and Collateral Agent in connection with the
creation and perfection of Liens in favor of Collateral Agent on behalf of
Lenders pursuant to any Collateral Document, including filing and recording
fees, expenses and taxes, stamp or documentary taxes, search fees, title
insurance premiums, and reasonable fees, expenses and disbursements of counsel
to Arranger, counsel to Administrative Agent and counsel to Collateral Agent and
of counsel providing any opinions that Arranger, Administrative Agent,
Collateral Agent or Requisite Lenders may request in respect of the Collateral
Documents or the Liens created pursuant thereto; (v) all the reasonable costs
and reasonable expenses (including the reasonable fees, expenses and
disbursements of any auditors, accountants or appraisers and any environmental
or other consultants, advisors and agents employed or retained by Administrative
Agent or Arranger and their respective counsel) of obtaining and reviewing any
appraisals provided for under subsection 6.9C and any environmental audits or
reports provided for under subsection 4.1K or 6.9B(viii); (vi) all the
reasonable costs and reasonable expenses (including the reasonable fees,
expenses and disbursements of any consultants, advisors and agents employed or
retained by Administrative Agent or Collateral Agent and its counsel) in
connection with the custody or preservation of any of the Collateral; (vii) all
other reasonable costs and expenses incurred by Arranger or Administrative Agent
in connection with the syndication of the Loans and/or the Commitments and the
negotiation, preparation and execution of the Loan Documents and any consents,
amendments (requested by or for the benefit of any Loan Party), waivers or other
modifications thereto and the transactions contemplated thereby; and (viii)
after the occurrence of an Event of Default, all costs and expenses, including
reasonable attorneys' fees (including allocated costs of internal counsel) and
costs of settlement, incurred by Arranger, Administrative Agent and Lenders in
enforcing any Obligations of or in collecting any payments due from any Loan
Party hereunder or under the other Loan Documents by reason of such Event of
Default (including in connection with the sale of, collection from, or other
realization upon any of the Collateral or the enforcement of the Guaranties) or
in connection with any refinancing or
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restructuring of the credit arrangements provided under this Agreement in the
nature of a "work-out" or pursuant to any insolvency or bankruptcy proceedings.
10.3 Indemnity.
---------
In addition to the payment of expenses pursuant to subsection 10.2,
whether or not the transactions contemplated hereby are consummated, Borrowers
jointly and severally agree to defend (subject to Indemnitees' selection of
counsel), indemnify, pay and hold harmless Agents (including Collateral Agent)
and Lenders, and the officers, partners, directors, trustees, employees, agents
and affiliates of any of Agents (including Collateral Agent) and Lenders
(collectively called the "Indemnitees"), from and against any and all
Indemnified Liabilities (as hereinafter defined); provided that no Borrower
--------
shall have any obligation to any Indemnitee hereunder with respect to any
Indemnified Liabilities to the extent such Indemnified Liabilities arise from
the gross negligence, bad faith or willful misconduct of that Indemnitee.
As used herein, "Indemnified Liabilities" means, collectively, any and
all liabilities, obligations, losses, damages (including natural resource
damages), penalties, actions, judgments, suits, claims (including Environmental
Claims), costs (including the costs of any investigation, study, sampling,
testing, abatement, cleanup, removal, remediation or other response action
necessary to remove, remediate, clean up or abate any Hazardous Materials
Activity), expenses and disbursements of any kind or nature whatsoever
(including the reasonable fees and disbursements of counsel for Indemnitees in
connection with any investigative, administrative or judicial proceeding
commenced or threatened by any Person, whether or not any such Indemnitee shall
be designated as a party or a potential party thereto, and any fees or expenses
incurred by Indemnitees in enforcing this indemnity), whether direct, indirect
or consequential and whether based on any federal, state or foreign laws,
statutes, rules or regulations (including securities and commercial laws,
statutes, rules or regulations and Environmental Laws), on common law or
equitable cause or on contract or otherwise, that may be imposed on, incurred
by, or asserted against any such Indemnitee, in any manner relating to or
arising out of (i) this Agreement or the other Loan Documents or the Related
Agreements or the transactions contemplated hereby or thereby (including
Lenders' agreement to make the Loans hereunder or the use or intended use of the
proceeds thereof or the issuance of Letters of Credit hereunder or the use or
intended use of any thereof, or any enforcement of any of the Loan Documents
(including any sale of, collection from, or other realization upon any of the
Collateral or the enforcement of the Guaranties)), (ii) the statements contained
in the commitment letter delivered by any Lender to Merger Corp. with respect
thereto, or (iii) any Environmental Claim or any Hazardous Materials Activity
relating to or arising from, directly or indirectly, any past or present
activity, operation, land ownership, or practice of Holdings or any of its
Subsidiaries.
To the extent that the undertakings to defend, indemnify, pay and hold
harmless set forth in this subsection 10.3 may be unenforceable in whole or in
part because they are violative of any law or public policy, each Borrower shall
contribute the maximum portion that it is permitted to pay and satisfy under
applicable law to the payment and satisfaction of all Indemnified Liabilities
incurred by Indemnitees or any of them.
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10.4 Set-Off; Security Interest in Deposit Accounts.
----------------------------------------------
(a) In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence and during the continuance of any Event of Default each Lender is
hereby authorized by each Borrower at any time or from time to time subject to
the consent of Collateral Agent, without notice to either Borrower or to any
other Person (other than Collateral Agent), any such notice being hereby
expressly waived, to set off and to appropriate and to apply any and all
deposits (general or special, including Indebtedness evidenced by certificates
of deposit, whether matured or unmatured, but not including trust accounts or
payroll accounts) and any other Indebtedness at any time held or owing by that
Lender to or for the credit or the account of such Borrower against and on
account of the obligations and liabilities of Borrowers which are then due and
payable to that Lender under this Agreement, the Letters of Credit and
participations therein and the other Loan Documents, including all claims of any
nature or description arising out of or connected with this Agreement, the
Letters of Credit and participations therein or any other Loan Document,
irrespective of whether or not that Lender shall have made any demand hereunder,
which are then due and payable. Each Borrower hereby further grants to
Collateral Agent and each Lender a security interest in all deposits and
accounts maintained with Collateral Agent or such Lender as security for the
Obligations.
(b) NOTWITHSTANDING THE FOREGOING SUBSECTION (a), AT ANY TIME THAT
THE LOANS OR ANY OTHER OBLIGATION SHALL BE SECURED BY REAL PROPERTY LOCATED IN
CALIFORNIA, NO LENDER SHALL EXERCISE A RIGHT OF SETOFF, LENDER'S LIEN OR
COUNTERCLAIM OR TAKE ANY COURT OR ADMINISTRATIVE ACTION OR INSTITUTE ANY
PROCEEDING TO ENFORCE ANY PROVISION OF THIS AGREEMENT OR ANY NOTE UNLESS IT IS
TAKEN WITH THE CONSENT OF THE REQUISITE LENDERS OR, TO THE EXTENT REQUIRED BY
SUBSECTION 10.6 OF THIS AGREEMENT, ALL OF THE LENDERS, AT ALL TIMES PRIOR TO THE
TIME ON WHICH ALL OBLIGATIONS HAVE BEEN PAID IN FULL, IF SUCH SETOFF OR ACTION
OR PROCEEDING WOULD OR MIGHT (PURSUANT TO SECTIONS 580a, 580b, 580d AND 726 OF
THE CALIFORNIA CODE OF CIVIL PROCEDURE OR SECTION 2924 OF THE CALIFORNIA CIVIL
CODE, IF APPLICABLE, OR OTHERWISE) AFFECT OR IMPAIR THE VALIDITY, PRIORITY, OR
ENFORCEABILITY OF THE LIENS GRANTED TO THE COLLATERAL AGENT PURSUANT TO THE
COLLATERAL DOCUMENTS OR THE ENFORCEABILITY OF THE NOTES AND OTHER OBLIGATIONS
HEREUNDER, AND ANY ATTEMPTED EXERCISE BY ANY LENDER OF ANY SUCH RIGHT WITHOUT
OBTAINING SUCH CONSENT OF THE PARTIES AS REQUIRED ABOVE, SHALL BE NULL AND VOID.
THIS SUBSECTION (b) SHALL BE SOLELY FOR THE BENEFIT OF EACH OF THE LENDERS
HEREUNDER.
10.5 Ratable Sharing.
---------------
Lenders hereby agree among themselves that if any of them shall,
whether by voluntary payment (other than a voluntary prepayment of Loans made
and applied in accordance with the terms of this Agreement), by realization upon
security, through the exercise of any right
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of set-off or banker's lien, by counterclaim or cross action or by the
enforcement of any right under the Loan Documents or otherwise, or as adequate
protection of a deposit treated as cash collateral under the Bankruptcy Code,
receive payment or reduction of a proportion of the aggregate amount of
principal, interest, amounts payable in respect of Letters of Credit, fees and
other amounts then due and owing to that Lender hereunder or under the other
Loan Documents (collectively, the "Aggregate Amounts Due" to such Lender) which
is greater than the proportion received by any other Lender in respect of the
Aggregate Amounts Due to such other Lender, then the Lender receiving such
proportionately greater payment shall (i) notify Administrative Agent and each
other Lender of the receipt of such payment and (ii) apply a portion of such
payment to purchase participations (which it shall be deemed to have purchased
from each seller of a participation simultaneously upon the receipt by such
seller of its portion of such payment) in the Aggregate Amounts Due to the other
Lenders so that all such recoveries of Aggregate Amounts Due shall be shared by
all Lenders in proportion to the Aggregate Amounts Due to them; provided that if
all or part of such proportionately greater payment received by such purchasing
Lender is thereafter recovered from such Lender upon the bankruptcy or
reorganization of any Borrower or otherwise, those purchases shall be rescinded
and the purchase prices paid for such participations shall be returned to such
purchasing Lender ratably to the extent of such recovery, but without interest.
Each Borrower expressly consents to the foregoing arrangement and agrees that
any holder of a participation so purchased may exercise any and all rights of
banker's lien, set-off or counterclaim with respect to any and all monies owing
by Borrowers to that holder with respect thereto as fully as if that holder were
owed the amount of the participation held by that holder.
10.6 Amendments and Waivers.
----------------------
A. No amendment, modification, termination or waiver of any
provision of the Loan Documents, or consent to any departure by any Credit
Agreement Party therefrom, shall in any event be effective without the written
concurrence of Requisite Lenders; provided that no such amendment, modification,
--------
termination, waiver or consent shall, without the consent of each Lender (with
Obligations directly affected in the case of the following clause (i)): (i)
extend the scheduled final maturity of any Loan or Note, or waive, reduce or
postpone any scheduled repayment set forth in subsection 2.4A, or extend the
stated expiration date of any Letter of Credit beyond the Revolving Loan
Commitment Termination Date, or reduce the rate of interest on any Loan (other
than any waiver of any increase in the interest rate applicable to any Loan
pursuant to subsection 2.2E) or any commitment fees or letter of credit fees
payable hereunder, or extend the time for payment of any such interest or fees,
or reduce the principal amount of any Loan or any reimbursement obligation in
respect of any Letter of Credit, (ii) amend, modify, terminate or waive any
provision of this subsection 10.6, (iii) reduce the percentage specified in the
definition of "Requisite Lenders" (it being understood that, with the consent of
Requisite Lenders, additional extensions of credit pursuant to this Agreement
may be included in the determination of "Requisite Lenders" on substantially the
same basis as the Tranche A Term Loan Commitments, the Tranche B Term Loan
Commitments, the Tranche C Term Loan Commitments and the Revolving Loan
Commitments and the Tranche A Term Loans, Tranche B Term Loans, Tranche C Term
Loans and Revolving Loans are included on the Closing Date), (iv) release all or
substantially all of the Collateral or Holdings from the Holdings Guaranty or
all or substantially all of the Subsidiary Guarantors from the Subsidiary
Guaranty, in each case except as
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expressly provided in the Loan Documents, or (v) consent to the assignment or
transfer by any Credit Agreement Party of any of its rights and obligations
under this Agreement; provided further that no such amendment, modification,
----------------
termination or waiver shall (1) increase the Commitments of any Lender over the
amount thereof then in effect, or extend the duration thereof, without the
consent of such Lender (it being understood that no amendment, modification or
waiver of any condition precedent, covenant, Potential Event of Default or Event
of Default shall constitute an increase or extension in the Commitment of any
Lender, and that no increase in the available portion of any Commitment of any
Lender shall constitute an increase in such Commitment of such Lender); (2)
amend, modify, terminate or waive any provision of subsection 2.1A(v) or any
other provision of this Agreement relating to the Swing Line Loan Commitment or
the Swing Line Loans without the consent of Swing Line Lender; (3) amend the
definition of "Requisite Class Lenders" without the consent of Requisite Class
Lenders of each Class, or alter the required application of any repayments or
prepayments as between Classes pursuant to subsection 2.4B(iv) without the
consent of Requisite Class Lenders of each Class which is being allocated a
lesser repayment or prepayment as a result thereof (although Requisite Lenders
may waive, in whole or in part, any mandatory prepayment (other than a scheduled
repayment set forth in subsection 2.4A) so long as the application, as between
Classes, of any portion of such prepayment which is still required to be made is
not altered) or alter any right of any Lender to waive mandatory prepayments
pursuant to subsection 2.4B(iv)(d) without the consent of Requisite Class
Lenders of each class whose waiver rights are being altered; (4) amend, modify,
terminate or waive any obligation of Lenders relating to the purchase of
participations in Letters of Credit as provided in subsection 3.1C without the
written concurrence of Administrative Agent and of each Issuing Lender which has
a Letter of Credit then outstanding or which has not been reimbursed for a
drawing under a Letter of Credit issued it; or (5) amend, modify, terminate or
waive any provision of Section 9 as the same applies to any Agent (including
Collateral Agent), or any other provision of this Agreement as the same applies
to the rights or obligations of any Agent (including Collateral Agent), in each
case without the consent of such Agent (including Collateral Agent).
B. Administrative Agent may, but shall have no obligation to, with
the concurrence of any Lender, execute amendments, modifications, waivers or
consents on behalf of that Lender. Any waiver or consent shall be effective
only in the specific instance and for the specific purpose for which it was
given. No notice to or demand on any Credit Agreement Party in any case shall
entitle such Credit Agreement Party to any other or further notice or demand in
similar or other circumstances. Any amendment, modification, termination,
waiver or consent effected in accordance with this subsection 10.6 shall be
binding upon each Lender at the time outstanding, each future Lender and, if
signed by a Credit Agreement Party, on such Credit Agreement Party.
10.7 Independence of Covenants.
-------------------------
All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or would otherwise be within
the limitations of, another covenant shall not avoid the occurrence of an Event
of Default or Potential Event of Default if such action is taken or condition
exists.
-168-
10.8 Notices.
-------
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed or sent by telefacsimile or United States mail
or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex, or three
Business Days after depositing it in the United States mail with postage prepaid
and properly addressed; provided that notices to Arranger or Administrative
--------
Agent shall not be effective until received. For the purposes hereof, the
address of each party hereto shall be as set forth on Schedule 10.8 hereto (or,
-------------
in the case of any Credit Agreement Party, under such Person's name on the
signature pages hereof) or (i) as to any Credit Agreement Party and
Administrative Agent, such other address as shall be designated by such Person
in a written notice delivered to the other parties hereto and (ii) as to each
other party, such other address as shall be designated by such party in a
written notice delivered to Administrative Agent.
10.9 Survival of Representations, Warranties and Agreements.
------------------------------------------------------
A. All representations, warranties and agreements made herein shall
survive the execution and delivery of this Agreement and the making of the Loans
and the issuance of the Letters of Credit hereunder.
B. Notwithstanding anything in this Agreement or implied by law to
the contrary, agreements of Credit Agreement Parties set forth in subsections
2.6D, 2.7, 3.5A, 3.6, 10.2, 10.3 and 10.4 and the agreements of Lenders set
forth in subsections 9.2C, 9.4 and 10.5 shall survive the payment of the Loans,
the cancellation or expiration of the Letters of Credit and the reimbursement of
any amounts drawn thereunder, and the termination of this Agreement.
10.10 Failure or Indulgence Not Waiver; Remedies Cumulative.
-----------------------------------------------------
No failure or delay on the part of Administrative Agent, Collateral
Agent or any Lender in the exercise of any power, right or privilege hereunder
or under any other Loan Document shall impair such power, right or privilege or
be construed to be a waiver of any default or acquiescence therein, nor shall
any single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other power, right or privilege.
All rights and remedies existing under this Agreement and the other Loan
Documents are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
10.11 Marshalling; Payments Set Aside.
-------------------------------
None of Administrative Agent, Collateral Agent or any Lender shall be
under any obligation to marshal any assets in favor of any Borrower or any other
party or against or in payment of any or all of the Obligations. To the extent
that a Borrower or Borrowers make(s) a payment or payments to Administrative
Agent, Collateral Agent or Lenders (or to Administrative Agent for the benefit
of Lenders), or Administrative Agent, Collateral Agent or Lenders enforce any
security interests or exercise their rights of setoff, and such payment or
payments or the proceeds of such enforcement or setoff or any part thereof are
subsequently invalidated, declared
-169-
to be fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy law, any other state
or federal law, common law or any equitable cause, then, to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied,
and all Liens, rights and remedies therefor or related thereto, shall be revived
and continued in full force and effect as if such payment or payments had not
been made or such enforcement or setoff had not occurred.
10.12 Severability.
------------
In case any provision in or obligation under this Agreement or the
Notes shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
10.13 Obligations Several; Independent Nature of Lenders' Rights.
----------------------------------------------------------
The obligations of Lenders hereunder are several and no Lender shall
be responsible for the obligations or Commitments of any other Lender hereunder.
Nothing contained herein or in any other Loan Document, and no action taken by
Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a
partnership, an association, a joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement and it shall not be necessary for any other
Lender to be joined as an additional party in any proceeding for such purpose.
10.14 Headings.
--------
Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
10.15 Applicable Law.
--------------
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES.
10.16 Successors and Assigns.
----------------------
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of Lenders (it being understood that
Lenders' rights of assignment are subject to subsection 10.1). Neither any
Credit Agreement Party's rights or obligations hereunder nor any
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interest therein may be assigned or delegated by such Credit Agreement Party
without the prior written consent of all Lenders.
10.17 Consent to Jurisdiction and Service of Process.
----------------------------------------------
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY CREDIT AGREEMENT PARTY
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY
OBLIGATIONS THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING
AND DELIVERING THIS AGREEMENT, EACH CREDIT AGREEMENT PARTY, FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO SUCH CREDIT AGREEMENT PARTY AT ITS ADDRESSES PROVIDED IN
ACCORDANCE WITH SUBSECTION 10.8;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH CREDIT AGREEMENT PARTY
IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST COMPANY IN
THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 10.17 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR
OTHERWISE.
10.18 Waiver of Jury Trial.
--------------------
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE
LENDER/ BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this
waiver is
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intended to be all-encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including
contract claims, tort claims, breach of duty claims and all other common law and
statutory claims. Each party hereto acknowledges that this waiver is a material
inducement to enter into a business relationship, that each has already relied
on this waiver in entering into this Agreement, and that each will continue to
rely on this waiver in their related future dealings. Each party hereto further
warrants and represents that it has reviewed this waiver with its legal counsel
and that it knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN
WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION 10.18 AND EXECUTED BY EACH OF
THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS
MADE HEREUNDER. In the event of litigation, this Agreement may be filed as a
written consent to a trial by the court.
10.19 Confidentiality.
---------------
Each Lender shall hold all non-public information obtained pursuant to
the requirements of this Agreement in accordance with such Lender's customary
procedures for handling confidential information of this nature and in
accordance with prudent lending or investing practices, it being understood and
agreed by each Credit Agreement Party that in any event a Lender may make
disclosures to Affiliates of such Lender or disclosures reasonably required by
any bona fide assignee, transferee or participant in connection with the
contemplated assignment or transfer by such Lender of any Loans or any
participations therein or by any direct or indirect contractual counterparties
(or the professional advisors thereto) in swap agreements (provided that such
--------
swap counterparties and advisors are advised of and agree to be bound by the
provisions of this subsection 10.19) or disclosures required or requested by any
governmental agency or representative thereof or by the NAIC or pursuant to
legal process; provided that, unless specifically prohibited by applicable law
--------
or court order, each Lender shall notify Holdings of any request by any
governmental agency or representative thereof (other than any such request in
connection with any examination of the financial condition of such Lender by
such governmental agency) for disclosure of any such non-public information
prior to disclosure of such information; and provided further that in no event
----------------
shall any Lender be obligated or required to return any materials furnished by
Holdings or any of its Subsidiaries.
10.20 Counterparts; Effectiveness.
----------------------------------
This Agreement and any amendments, waivers, consents or supplements
hereto or in connection herewith may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This Agreement shall become effective upon the execution of a
counterpart hereof by each of the
-172-
parties hereto and receipt by Holdings, each Borrower and Administrative Agent
of written or telephonic notification of such execution and authorization of
delivery thereof.
[Remainder of page intentionally left blank]
-173-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
TISM, INC.
By: /s/ Harry J. Silverman
------------------------------------
Name: Harry J. Silverman
Title: Vice President
Notice Address:
30 Frank Lloyd Wright Drive
P.O. Box 997
Ann Arbor, MI 48106
Attention: Steven Benrubi
----------------
Telephone: (734) 930-3205
Facsimile: (734) 913-0377
with a copy to:
Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Attention: Andrew Balson
----------------
Telephone: (617) 572-3000
Facsimile: (617) 572-3274
DOMINO'S, INC.
By: /s/ Harry J. Silverman
------------------------------------
Name: Harry J. Silverman
Title: Vice President
Notice Address:
30 Frank Lloyd Wright Drive
P.O. Box 997
Ann Arbor, MI 48106
Attention: Steven Benrubi
----------------
Telephone: (734) 930-3205
Facsimile: (734) 913-0377
with a copy to:
Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Attention: Andrew Balson
---------------
Telephone: (617) 572-3000
Facsimile: (617) 572-3274
BLUEFENCE, INC.
By: /s/ Harry J. Silverman
------------------------------------
Name: Harry J. Silverman
Title: President
Notice Address:
30 Frank Lloyd Wright Drive
P.O. Box 997
Ann Arbor, MI 48106
Attention: Steven Benrubi
----------------
Telephone: (734) 930-3205
Facsimile: (734) 913-0377
with a copy to:
Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Attention: Andrew Balson
---------------
Telephone: (617) 572-3000
Facsimile: (617) 572-3274
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
individually and as Administrative Agent
By: /s/ Colleen Galle
------------------------------------
Name: Colleen Galle
Title:
Notice Address:
Morgan Guaranty of New York
60 Wall Street
New York, New York 10260
Attention: ____________
Telephone: (212) 648-____
Facsimile: (212) 648-____
with a copy to:
Morgan Guaranty of New York
c/o J.P. Morgan Services Inc.
500 Stanton Christiana Road
Newark, DE 19713
Attention: ____________
Telephone: (302) 634-____
Facsimile: (302) 634-____
J.P. MORGAN SECURITIES INC., as Arranger
By:_____________________________
Name:
Title:
Notice Address:
J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Attention: ____________
Telephone: (212) 648-____
Facsimile: (212) 648-____
with a copy to:
J.P. Morgan Securities Inc.
c/o J.P. Morgan Services Inc.
500 Stanton Christiana Road
Newark, DE 19713
Attention: ____________
Telephone: (302) 634-____
Facsimile: (302) 634-____
COMERICA BANK, individually and as Documentation
Agent
By:_____________________________
Name:
Title:
Notice Address:
NBD BANK, individually and as Syndication Agent
By:_____________________________
Name:
Title:
Notice Address:
NBD BANK
By: /s/ Thomas A. Gamm
--------------------------------
Name: Thomas A. Gamm
Title: Vice President
ARCHIMEDES FUNDING, L.L.C.
By: ING CAPITAL ADVISORS, INC., as
COLLATERAL MANAGER
By: /s/ Michael D. Hatley
-----------------------------------------
Name: MICHAEL D. HATLEY
Title: SENIOR VICE PRESIDENT
ARCHIMEDES FUNDING II, LTD. By: ING
CAPITAL ADVISORS, INC., as
COLLATERAL MANAGER
By: /s/ Michael D. Hatley
-----------------------------------------
Name: MICHAEL D. HATLEY
Title: SENIOR VICE PRESIDENT
THE BANK OF NEW YORK
By: /s/ William Barnum
------------------------------
Name: William Barnum
Title: Vice President
COMERICA BANK
By: /s/ David C. Bird
-----------------------------
Name: David C. Bird
Title:Vice President
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE
By: /s/ Brian O'Leary
----------------------------------
Name: Brian O'Leary
TItle: Vice President
By: /s/ Sean Mounier
---------------------------------
Name: Sean Mounier
Title: First Vice President
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ SIGNATURE ILLEGIBLE
------------------------------
Name:
Title:
FLEET NATIONAL BANK
By: /s/ SIGNATURE ILLEGIBLE
------------------------------
Name: ILLEGIBLE
Title: Vice President
KZH ING-1 LLC
By: /s/ Virginia Conway
------------------------------
Name: Virginia Conway
Title: Authorized Agent
KZH ING-2 LLC
By: /s/ Virginia Conway
------------------------------
Name: Virginia Conway
Title: Authorized Agent
KZH ING-3 LLC
By: /s/ Virginia Conway
------------------------------
Name: Virginia Conway
Title: Authorized Agent
KZH CNC LLC
By: /s/ Virginia Conway
------------------------------
Name: Virginia Conway
Title: Authorized Agent
MICHIGAN NATIONAL BANK
By: /s/ Mark S. Aben
----------------------------
Name: Mark S. Aben
Title: Senior Relationship Manager
OSPREY INVESTMENTS PORTFOLIO
By: CITIBANK, N.A. as MANAGER
By: /s/ Hans L. Christensen
-------------------------------
Name: Hans L. Christensen
Title: Vice President
WELLS FARGO N.A.
By: /s/ Jennifer Wang
---------------------------
Name: Jennifer Wang
Title: Authorized Vice President
VAN KAMPEN SENIOR
FLOATING RATE FUND
By: /s/ Jeffrey W. Maillet
-------------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President & Director
VAN KAMPEN
PRIME RATE INCOME TRUST
By: /s/ Jeffrey W. Mallet
-------------------------------
Name: Jeffrey W. Mallet
Title: Senior Vice President & Director
VAN KAMPEN
SENIOR INCOME TRUST
(FKA Van Kampen American
Capital Senior Income Trust)
By: /s/ Jeffrey W. Maillet
-------------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President & Director
Exhibit 10.16
BORROWER PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of December 21, 1998 (as same may be
further amended, amended and restated, modified or supplemented from time to
time, this "Agreement"), made by DOMINO'S, INC., a Delaware corporation
("Company") and BLUEFENCE, INC., a Michigan corporation ("Subsidiary Borrower"
and, together with Company, each a "Pledgor" and collectively "Pledgors"), and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK ("Morgan Guaranty"), not in its
individual capacity but solely as Collateral Agent (including any successor
collateral agent, the "Pledgee") for the benefit of (x) the Lenders, the
Syndication Agent, the Documentation Agent and the Administrative Agent under,
and any other lenders from time to time party to, the Credit Agreement
hereinafter referred to (such Lenders, the Syndication Agent, the Documentation
Agent, the Administrative Agent, the Pledgee and other lenders, if any, are
hereinafter called the "Bank Creditors") and (y) if Morgan Guaranty, in its
individual capacity, any Lender or any Affiliate of a Lender enters into one or
more Hedging Agreements with, or guaranteed by, any of the Pledgors, Morgan
Guaranty, any such Lender or Lenders or a syndicate of financial institutions
organized by Morgan Guaranty or an affiliate of Morgan Guaranty (even if Morgan
Guaranty or the respective Lender subsequently ceases to be a Lender under the
Credit Agreement for any reason) so long as any such Lender or Affiliate
participates in the extension of such Hedging Agreements and their subsequent
assigns, if any (collectively, the "Hedging Exchangers", and the Hedging
Exchangers together with the Bank Creditors, are hereinafter called the "Secured
Parties"). Except as otherwise defined herein, terms used herein and defined in
the Credit Agreement shall be used herein as so defined.
W I T N E S S E T H:
-------------------
WHEREAS, TISM, Inc., a Michigan corporation ("Holdings"), each
Pledgor, the financial institutions from time to time party thereto (the
"Lenders"), Morgan Guaranty, as Administrative Agent (in its capacity as
Administrative Agent, being herein referred to as the "Administrative Agent"),
NDB Bank, as Syndication Agent, and Comerica Bank, as Documentation Agent, have
entered into a Credit Agreement, dated as of December 21, 1998, providing for
the making of Loans to the Pledgors and the issuance of, and participation in,
Letters of Credit as contemplated therein (as used herein, the term "Credit
Agreement" means the Credit Agreement described above in this paragraph, as the
same may be amended, modified or supplemented from time to time, and including
any successor agreement extending the maturity of, or restructuring (including,
but not limited to, the inclusion of additional borrowers thereunder that are
Subsidiaries of the Pledgors and whose obligations are guaranteed by the
Guarantors thereunder or any increase in the amount borrowed) of all or any
portion of the Indebtedness under such agreement or any successor agreements);
WHEREAS, the Pledgors may from time to time be party to one or more
Hedging Agreements with the Hedging Exchangers;
WHEREAS, it is a condition precedent to the making of Loans to the
Pledgors and the issuance of, and participation in, Letters of Credit for the
joint and several account of the
Pledgors under the Credit Agreement that each Pledgor shall have executed and
delivered to the Pledgee this Agreement; and
WHEREAS, each Pledgor will obtain benefits from the incurrence of
Loans by the Pledgors and the issuance of Letters of Credit for the joint and
several account of the Pledgors under the Credit Agreement and the Pledgors'
entering into Hedging Agreements and, accordingly, desires to execute this
Agreement in order to satisfy the conditions precedent described in the
preceding paragraph and to induce the Lenders to make Loans to the Pledgors and
to issue Letters of Credit for the joint and several account of the Pledgors,
and to induce the Hedging Exchangers to enter into Hedging Agreements with the
Pledgors;
NOW, THEREFORE, in consideration of the benefits accruing to each
Pledgor, the receipt and sufficiency of which are hereby acknowledged, each
Pledgor hereby makes the following representations and warranties to the Pledgee
and hereby covenants and agrees with the Pledgee as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is made by each Pledgor
------------------------
for the benefit of the Secured Parties to secure:
(i) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations, liabilities and
indebtedness (including, without limitation, indemnities, Fees and interest
thereon) of such Pledgor owing to the Bank Creditors, whether now existing
or hereafter incurred under, arising out of, or in connection with the
Credit Agreement and the other Loan Documents to which such Pledgor is a
party and the due performance and compliance by such Pledgor with all of
the terms, conditions and agreements contained in the Credit Agreement and
such other Loan Documents (all such obligations, liabilities and
indebtedness under this clause (i) being herein collectively called the
"Credit Agreement Obligations");
(ii) the full and prompt payment when due (whether at stated maturity,
by acceleration or otherwise) of all obligations, liabilities and
indebtedness (including, without limitation, indemnities, fees and interest
thereon) of such Pledgor owing to the Hedging Exchangers, now existing or
hereafter incurred under, arising out of or in connection with any Hedging
Agreement, whether such Hedging Agreement is now in existence or
hereinafter arising, and the due performance and compliance with the terms,
conditions and agreements of each such Hedging Agreement by such Pledgor
and the due performance and compliance by such Pledgor with all of the
terms, conditions and agreements contained in each such Hedging Agreement
(all such obligations, liabilities and indebtedness under this clause (ii)
being herein collectively called the "Hedging Obligations");
(iii) any and all sums advanced by the Pledgee in order to preserve
the Collateral (as hereinafter defined) and/or preserve its security
interest therein;
(iv) in the event of any proceeding for the collection of the
Obligations (as defined below) or the enforcement of this Agreement, after
an Event of Default (such
-2-
term, as used in this Agreement, shall mean (i) at any time prior to the
repayment in full of all Credit Agreement Obligations and the termination
of all Commitments, any Event of Default under, and as defined in, the
Credit Agreement and (ii) at any time after the repayment in full of all
Credit Agreement Obligations and the termination of all Commitments, any
payment default under any Hedging Agreement and shall in any event include,
without limitation, any payment default (after the expiration of any
applicable grace period) on any of the Obligations (as defined below))
shall have occurred and be continuing, the reasonable expenses of retaking,
holding, preparing for sale or lease, selling or otherwise disposing of or
realizing on the Collateral, or of any exercise by the Pledgee of its
rights hereunder, together with reasonable attorneys' fees and court costs;
and
(v) all amounts paid by any Indemnitee to which such Indemnitee has
the right to reimbursement under Section 11 of this Agreement.
all such obligations, liabilities, indebtedness, sums and expenses set forth in
clauses (i) through (v) of this Section 1 being collectively called the
"Obligations", it being acknowledged and agreed that the "Obligations" shall
include extensions of credit of the types described above, whether outstanding
on the date of this Agreement or extended from time to time after the date of
this Agreement.
2. DEFINITIONS; ANNEXES. (a) Unless otherwise defined herein, all
---------------------
capitalized terms used herein and defined in the Credit Agreement shall be used
herein as therein defined. Reference to singular terms shall include the plural
and vice versa.
(b) The following capitalized terms used herein shall have the
definitions specified below:
"Administrative Agent" has the meaning set forth in the recitals
--------------------
hereto.
"Adverse Claim" has the meaning given such term in Section 8-102(a)(1)
-------------
of the UCC.
"Agreement" has the meaning set forth in the first paragraph hereof.
---------
"Bank Creditors" has the meaning set forth in the first paragraph
--------------
hereof.
"Certificated Security" has the meaning given such term in Section 8-
---------------------
102(a)(4) of the UCC.
"Chattel Paper" has the meaning given such term in the UCC.
-------------
"Clearing Corporation" has the meaning given such term in Section 8-
--------------------
102(a)(5) of the UCC.
"Collateral" has the meaning set forth in Section 3.1 hereof.
----------
-3-
"Collateral Accounts" means any and all accounts established and
-------------------
maintained by the Pledgee in the name of any Pledgor to which Collateral may be
credited.
"Credit Agreement" has the meaning set forth in the Recitals hereto.
----------------
"Credit Agreement Obligations" has the meaning set forth in Section 1
----------------------------
hereof.
"Domestic Corporation" has the meaning set forth in the definition of
--------------------
"Stock."
"Event of Default" has the meaning set forth in Section 1 hereof.
----------------
"Excluded Foreign Entity" means any corporation, partnership (general
-----------------------
or limited), limited liability or other business entity (x) that is organized
under the laws of any country, state or province other than the United States,
Canada, Bermuda or any state, province or territory thereof and (y) the book
value of the gross assets of which do not exceed $1,000,000.
"Financial Asset" has the meaning given such term in Section 8-
---------------
102(a)(9) of the UCC.
"Foreign Corporation" has the meaning set forth in the definition of
-------------------
"Stock."
"Hedging Agreements" has the meaning set forth in the first paragraph
------------------
hereof.
"Hedging Exchangers" has the meaning set forth in the first paragraph
------------------
hereof.
"Hedging Obligations" has the meaning set forth in Section 1 hereof.
-------------------
"Indemnitees" has the meaning set forth in Section 11 hereof.
-----------
"Instrument" has the meaning given such term in Section 9-105(1)(i) of
----------
the UCC.
"Investment Property" has the meaning given such term in Section 9-
-------------------
115(f) of the UCC.
"Lenders" has the meaning set forth in the Recitals hereto.
-------
"Limited Liability Company Assets" means all assets, whether tangible
--------------------------------
or intangible and whether real, personal or mixed (including, without
limitation, all limited liability company capital and interest in other limited
liability companies), at any time owned or represented by any Limited Liability
Company Interest.
"Limited Liability Company Interests" means the entire limited
-----------------------------------
liability company membership interest at any time owned by any Pledgor in any
limited liability company.
"Non-Voting Stock" means all capital stock which is not Voting Stock.
----------------
"Notes" means (x) all intercompany notes at any time issued to each
-----
Pledgor and (y) all other promissory notes from time to time issued to, or held
by, each Pledgor.
"Obligations" has the meaning set forth in Section 1 hereof.
-----------
-4-
"Partnership Assets" means all assets, whether tangible or intangible
------------------
and whether real, personal or mixed (including, without limitation, all
partnership capital and interest in other partnerships), at any time owned or
represented by any Partnership Interest.
"Partnership Interest" means the entire general partnership interest
--------------------
or limited partnership interest at any time owned by any Pledgor in any general
partnership or limited partnership (other than Excluded Foreign Entity).
"Pledged Notes" has the meaning set forth in Section 3.5 hereof.
-------------
"Pledgee" has the meaning set forth in the first paragraph hereof.
-------
"Pledgor" has the meaning set forth in the first paragraph hereof.
-------
"Proceeds" has the meaning given such term in Section 9-306(l) of the
--------
UCC.
"Requisite Lenders" has the meaning given such term in the Credit
-----------------
Agreement.
"Secured Parties" has the meaning set forth in the first paragraph
---------------
hereof.
"Secured Debt Agreements" has the meaning set forth in Section 5
-----------------------
hereof.
"Securities Account" has the meaning given such term in Section 8-
------------------
501(a) of the UCC.
"Securities Act" means the Securities Act of 1933, as amended, as in
--------------
effect from time to time.
"Security" and "Securities" has the meaning given such term in Section
-------- ----------
8-102(a)(15) of the UCC and shall in any event include all Stock and Notes (to
the extent same constitute "Securities" under Section 8-102(a)(15)) but exclude
Securities issued by Excluded Foreign Entities.
"Security Entitlement" has the meaning given such term in Section 8-
--------------------
102(a)(17) of the UCC.
"Stock" means (x) with respect to corporations incorporated under the
-----
laws of the United States or any State or territory thereof (each a "Domestic
Corporation"), all of the issued and outstanding shares of capital stock of any
corporation at any time owned by any Pledgor of any Domestic Corporation and (y)
with respect to corporations not Domestic Corporations or Excluded Foreign
Entities (each a "Foreign Corporation"), all of the issued and outstanding
shares of capital stock at any time owned by any Pledgor of any Foreign
Corporation.
"Termination Date" has the meaning set forth in Section 19 hereof.
----------------
"UCC" means the Uniform Commercial Code as in effect in the State of
---
New York from time to time; provided that all references herein to specific
--------
sections or subsections of the UCC are references to such sections or
subsections, as the case may be, of the Uniform Commercial Code as in effect in
the State of New York on the date hereof.
-5-
"Uncertificated Security" has the meaning given such term in Section
-----------------------
8-102(a)(18) of the UCC.
"Voting Stock" means all classes of capital stock of any Foreign
------------
Corporation entitled to vote.
3. PLEDGE OF SECURITY INTEREST, ETC.
---------------------------------
3.1 Pledge. To secure the Obligations now or hereafter owed or to be
------
performed by such Pledgor, each Pledgor does hereby grant, pledge and assign to
the Pledgee for the benefit of the Secured Parties, and does hereby create a
continuing security interest (subject to those Liens permitted to exist with
respect to the Collateral pursuant to the terms of all Secured Debt Agreements
then in effect) in favor of the Pledgee for the benefit of the Secured Parties
in, all of the right, title and interest in and to the following, whether now
existing or hereafter from time to time acquired (collectively, the
"Collateral"):
(a) each of the Collateral Accounts (to the extent a security interest
therein is not created pursuant to the Borrower Security Agreement),
including any and all assets of whatever type or kind deposited by such
Pledgor in such Collateral Account, whether now owned or hereafter
acquired, existing or arising, including, without limitation, all Financial
Assets, Investment Property, moneys, checks, drafts, Instruments,
Securities or interests therein of any type or nature deposited or required
by the Credit Agreement or any other Secured Debt Agreement to be deposited
in such Collateral Account, and all investments and all certificates and
other Instruments (including depository receipts, if any) from time to time
representing or evidencing the same, and all dividends, interest,
distributions, cash and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or
all of the foregoing;
(b) all Securities of such Pledgor from time to time;
(c) all Limited Liability Company Interests of such Pledgor from time
to time and all of its right, title and interest in each limited liability
company to which each such interest relates, whether now existing or
hereafter acquired, including, without limitation:
(A) all its capital therein and its interest in all profits,
losses, Limited Liability Company Assets and other distributions to
which such Pledgor shall at any time be entitled in respect of such
Limited Liability Company Interests;
(B) all other payments due or to become due to such Pledgor in
respect of Limited Liability Company Interests, whether under any
limited liability company agreement or otherwise, whether as
contractual obligations, damages, insurance proceeds or otherwise;
(C) all of its claims, rights, powers, privileges, authority,
options, security interests, liens and remedies, if any, under any
limited liability company agreement or operating agreement, or at law
or otherwise in respect of such Limited Liability Company Interests;
-6-
(D) all present and future claims, if any, of such Pledgor
against any such limited liability company for moneys loaned or
advanced, for services rendered or otherwise;
(E) all of such Pledgor's rights under any limited liability
company agreement or operating agreement or at law to exercise and
enforce every right, power, remedy, authority, option and privilege of
such Pledgor relating to such Limited Liability Company Interests,
including any power to terminate, cancel or modify any limited
liability company agreement or operating agreement, to execute any
instruments and to take any and all other action on behalf of and in
the name of any of such Pledgor in respect of such Limited Liability
Company Interests and any such limited liability company, to make
determinations, to exercise any election (including, but not limited
to, election of remedies) or option or to give or receive any notice,
consent, amendment, waiver or approval, together with full power and
authority to demand, receive, enforce, collect or receipt for any of
the foregoing or for any Limited Liability Company Asset, to enforce
or execute any checks, or other instruments or orders, to file any
claims and to take any action in connection with any of the foregoing;
and
(F) all other property hereafter delivered in substitution for or
in addition to any of the foregoing, all certificates and instruments
representing or evidencing such other property and all cash,
securities, interest, dividends, rights and other property at any time
and from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all thereof;
(d) all Partnership Interests of such Pledgor from time to time and
all of its right, title and interest in each partnership to which each such
interest relates, whether now existing or hereafter acquired, including,
without limitation:
(A) all its capital therein and its interest in all profits,
losses, Partnership Assets and other distributions to which such
Pledgor shall at any time be entitled in respect of such Partnership
Interests;
(B) all other payments due or to become due to such Pledgor in
respect of Partnership Interests, whether under any partnership
agreement or otherwise, whether as contractual obligations, damages,
insurance proceeds or otherwise;
(C) all of its claims, rights, powers, privileges, authority,
options, security interests, liens and remedies, if any, under any
partnership agreement or operating agreement, or at law or otherwise
in respect of such Partnership Interests;
(D) all present and future claims, if any, of such Pledgor
against any such partnership for moneys loaned or advanced, for
services rendered or otherwise;
-7-
(E) all of such Pledgor's rights under any partnership agreement
or operating agreement or at law to exercise and enforce every right,
power, remedy, authority, option and privilege of such Pledgor
relating to such Partnership Interests, including any power to
terminate, cancel or modify any partnership agreement or operating
agreement, to execute any instruments and to take any and all other
action on behalf of and in the name of any of such Pledgor in respect
of such Partnership Interests and any such partnership, to make
determinations, to exercise any election (including, but not limited
to, election of remedies) or option or to give or receive any notice,
consent, amendment, waiver or approval, together with full power and
authority to demand, receive, enforce, collect or receipt for any of
the foregoing or for any Partnership Asset, to enforce or execute any
checks, or other instruments or orders, to file any claims and to take
any action in connection with any of the foregoing (with all of the
foregoing rights only to be exercisable upon the occurrence and during
the continuation of an Event of Default); and
(F) all other property hereafter delivered in substitution for or
in addition to any of the foregoing, all certificates and instruments
representing or evidencing such other property and all cash,
securities, interest, dividends, rights and other property at any time
and from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all thereof;
(e) all Security Entitlements of such Pledgor from time to time in any
and all of the foregoing;
(f) all Financial Assets and Investment Property of such Pledgor from
time to time; and
(g) all Proceeds of any and all of the foregoing;
provided that (x) except to the extent provided by subsection 6.11 of
--------
the Credit Agreement, no Pledgor shall be required at any time to pledge
hereunder more than 65% of the Voting Stock of any Foreign Corporation and (y)
each Pledgor shall be required to pledge hereunder 100% of any Non-Voting Stock
at any time and from time to time acquired by such Pledgor of any Foreign
Corporation.
3.2 Procedures. (a) To the extent that any Pledgor at any time or
----------
from time to time owns, acquires or obtains any right, title or interest in any
Collateral, such Collateral shall automatically (and without the taking of any
action by the respective Pledgor) be pledged pursuant to Section 3.1 of this
Agreement and, in addition thereto, such Pledgor shall (to the extent provided
below) take the following actions as set forth below (as promptly as practicable
and, in any event, within 10 days after it obtains such Collateral) for the
benefit of the Pledgee and the Secured Parties:
(i) with respect to a Certificated Security (other than a Certificated
Security credited on the books of a Clearing Corporation), the respective
Pledgor shall physically
-8-
deliver such Certificated Security to the Pledgee, endorsed to the Pledgee
or endorsed in blank;
(ii) with respect to an Uncertificated Security (other than an
Uncertificated Security credited on the books of a Clearing Corporation),
the respective Pledgor shall cause the issuer of such Uncertificated
Security to duly authorize and execute, and deliver to the Pledgee, an
agreement for the benefit of the Pledgee and the other Secured Parties
substantially in the form of Annex G hereto (appropriately completed to the
satisfaction of the Pledgee and with such modifications, if any, as shall
be satisfactory to the Pledgee) pursuant to which such issuer agrees to
comply with any and all instructions originated by the Pledgee without
further consent by the registered owner and not to comply with instructions
regarding such Uncertificated Security (and any Partnership Interests and
Limited Liability Company Interests issued by such issuer) originated by
any other Person other than a court of competent jurisdiction; provided
--------
that Pledgee hereby agrees that it will not provide any instructions to any
such issuer unless and until an Event of Default has occurred and is
continuing.
(iii) with respect to a Certificated Security, Uncertificated
Security, Partnership Interest or Limited Liability Company Interest
credited on the books of a Clearing Corporation (including a Federal
Reserve Bank, Participants Trust Company or The Depository Trust Company),
the respective Pledgor shall promptly notify the Pledgee thereof and shall
promptly take all actions required (i) to comply with the applicable rules
of such Clearing Corporation and (ii) to perfect the security interest of
the Pledgee under applicable law (including, in any event, under Sections
9-115 (4)(a) and (b), 9-115 (1)(e) and 8-106 (d) of the UCC). Each Pledgor
further agrees to take such actions as the Pledgee deems necessary or
desirable to effect the foregoing;
(iv) with respect to a Partnership Interest or a Limited Liability
Company Interest (other than a Partnership Interest or Limited Liability
Interest credited on the books of a Clearing Corporation), (1) if such
Partnership Interest or Limited Liability Company Interest is represented
by a certificate, the procedure set forth in Section 3.2(a)(i), and (2) if
such Partnership Interest or Limited Liability Company Interest is not
represented by a certificate, the procedure set forth in Section
3.2(a)(ii);
(v) with respect to any Note (other than, to the extent no Event of
Default has occurred and is continuing, a Note that constitutes Chattel
Paper), physical delivery of such Note to the Pledgee, endorsed to the
Pledgee or endorsed in blank; and
(vi) after an Event of Default has occurred and is continuing, with
respect to cash, to the extent not otherwise provided in the Borrower
Security Agreement, (i) establishment by the Pledgee of a cash account in
the name of such Pledgor over which the Pledgee shall have exclusive and
absolute control and dominion (and no withdrawals or transfers may be made
therefrom by any Person except with the prior written consent of the
Pledgee) and (ii) deposit of such cash in such cash account.
-9-
(b) In addition to the actions required to be taken pursuant to
proceeding Section 3.2(a), each Pledgor shall take the following additional
actions with respect to the Securities and Collateral (as defined below):
(i) with respect to all Collateral of such Pledgor whereby or with
respect to which the Pledgee may obtain "control" thereof within the
meaning of Section 8-106 of the UCC (or under any provision of the UCC as
same may be amended or supplemented from time to time, or under the laws of
any relevant State other than the State of New York), the respective
Pledgor shall take all actions as may be requested from time to time by the
Pledgee so that "control" of such Collateral is obtained and at all times
held by the Pledgee; and
(ii) each Pledgor shall from time to time cause appropriate financing
statements (on Form UCC-1 or other appropriate form) under the Uniform
Commercial Code as in effect in the various relevant States, on form
covering all Collateral hereunder (with the form of such financing
statements to be satisfactory to the Pledgee), to be filed in the relevant
filing offices so that at all times the Pledgee has a security interest in
all Investment Property and other Collateral which is perfected by the
filing of such financing statements (in each case to the maximum extent
perfection by filing may be obtained under the laws of the relevant States,
including, without limitation, Section 9-115(4)(b) of the UCC).
3.3 Subsequently Acquired Collateral. If any Pledgor shall acquire
--------------------------------
(by purchase, stock dividend or otherwise) any additional Collateral at any time
or from time to time after the date hereof, such Collateral shall automatically
(and without any further action being required to be taken) be subject to the
pledge and security interests created pursuant to Section 3.1 and, furthermore,
such Pledgor will promptly thereafter take (or cause to be taken) all action
with respect to such Collateral in accordance with the procedures set forth in
Section 3.2, and will promptly thereafter deliver to the Pledgee (i) a
certificate executed by a principal executive officer of such Pledgor describing
such Collateral and certifying that the same has been duly pledged in favor of
the Pledgee (for the benefit of the Secured Parties) hereunder and (ii)
supplements to Annexes A through F hereto as are necessary to cause such annexes
to be complete and accurate at such time. Without limiting the foregoing, each
Pledgor shall be required to pledge hereunder any shares of stock at any time
and from time to time after the date hereof acquired by such Pledgor of any
Foreign Corporation, provided that (x) except to the extent provided by
--------
subsection 6.11 of the Credit Agreement, no Pledgor shall be required at any
time to pledge hereunder more than 65% of the Voting Stock of any Foreign
Corporation and (y) each Pledgor shall be required to pledge hereunder 100% of
any Non-Voting Stock at any time and from time to time acquired by such Pledgor
of any Foreign Corporation.
3.4 Transfer Taxes. Each pledge of Collateral under Section 3.1 or
--------------
Section 3.3 shall be accompanied by any transfer tax stamps required in
connection with the pledge of such Collateral.
3.5 Definition of Pledged Notes. All Notes at any time pledged or
---------------------------
required to be pledged hereunder are hereinafter called the "Pledged Notes".
-10-
3.6 Certain Representations and Warranties Regarding the Collateral.
---------------------------------------------------------------
Each Pledgor represents and warrants that on the date hereof (i) each Subsidiary
of such Pledgor, and the direct ownership thereof, is listed in Annex A hereto;
(ii) the Stock held by such Pledgor consists of the number and type of shares of
the stock of the corporations as described in Annex B hereto; (iii) such Stock
constitutes that percentage of the issued and outstanding capital stock of the
issuing corporation as is set forth in Annex B hereto; (iv) the Notes held by
such Pledgor consist of the promissory notes described in Annex C hereto where
such Pledgor is listed as the lender; (v) the Limited Liability Company
Interests held by such Pledgor consist of the number and type of interests of
the Persons described in Annex D hereto; (vi) each such Limited Liability
Company Interest constitutes that percentage of the issued and outstanding
equity interest of the issuing Person as set forth in Annex D hereto; (vii) the
Partnership Interests held by such Pledgor consist of the number and type of
interests of the Persons described in Annex E hereto; (viii) each such
Partnership Interest constitutes that percentage or portion of the entire
partnership interest of the Partnership as set forth in Annex E hereto; (ix) the
Pledgor has complied with the respective procedure set forth in Section 3.2(a)
with respect to each item of Collateral described in Annexes A through E hereto;
and (x) on the date hereof, such Pledgor owns no other Securities, Limited
Liability Company Interests or Partnership Interests.
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee shall
---------------------------------------------
have the right to appoint one or more sub-agents for the purpose of retaining
physical possession of the Collateral, which may be held (in the discretion of
the Pledgee) in the name of the relevant Pledgor, endorsed or assigned in blank
or in favor of the Pledgee or any nominee or nominees of the Pledgee or a sub-
agent appointed by the Pledgee.
5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until there
---------------------------------------
shall have occurred and be continuing an Event of Default, each Pledgor shall be
entitled to exercise all voting rights attaching to any and all Collateral owned
by it, and to give consents, waivers or ratifications in respect thereof
provided that no vote shall be cast or any consent, waiver or ratification given
- --------
or any action taken which would violate, result in breach of any covenant
contained in, or be inconsistent with, any of the terms of this Agreement, the
Credit Agreement, any other Loan Document or any Hedging Agreement
(collectively, the "Secured Debt Agreements"), or which would have the effect of
impairing the value of the Collateral or any part thereof or the position or
interests of the Pledgee or any other Secured Creditor therein. All such rights
of a Pledgor to vote and to give consents, waivers and ratifications shall cease
in case an Event of Default (or a Default under Section 8.6 or 8.7 of the Credit
Agreement) shall occur and be continuing and Section 7 hereof shall become
applicable.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless and until an Event of
---------------------------------
Default shall have occurred and be continuing, all cash dividends, cash
distributions, cash Proceeds and other cash amounts payable in respect of the
Collateral shall be paid to the respective Pledgor. Subject to Section 3.2
hereof, the Pledgee shall be entitled to receive directly, and to retain as part
of the Collateral:
(i) all other or additional stock, notes, limited liability company
interests, partnership interests, instruments or other securities or
property (including, but not limited
-11-
to, cash dividends other than as set forth above) paid or distributed by
way of dividend or otherwise in respect of the Collateral;
(ii) all other or additional stock, notes, limited liability company
interests, partnership interests, instruments or other securities or
property (including, but not limited to, cash) paid or distributed in
respect of the Collateral by way of stock-split, spin-off, split-up,
reclassification, combination of shares or similar rearrangement; and
(iii) all other or additional stock, notes, limited liability company
interests, partnership interests, instruments or other securities or
property (including, but not limited to, cash) which may be paid in respect
of the Collateral by reason of any consolidation, merger, exchange of
stock, conveyance of assets, liquidation or similar corporate
reorganization.
Nothing contained in this Section 6 shall limit or restrict in any way the
Pledgee's right to receive the proceeds of the Collateral in any form in
accordance with Section 3 of this Agreement. All dividends, distributions or
other payments which are received by the respective Pledgor contrary to the
provisions of this Section 6 or Section 7 shall be received for the benefit of
the Pledgee, shall be segregated from other property or funds of such Pledgor
and shall be forthwith paid over to the Pledgee as Collateral in the same form
as so received (with any necessary endorsement).
7. REMEDIES IN CASE OF AN EVENT OF DEFAULT. In case an Event of
---------------------------------------
Default shall have occurred and be continuing, the Pledgee shall be entitled to
exercise all of the rights, powers and remedies (whether vested in it by this
Agreement or by any other Secured Debt Agreement or by law) for the protection
and enforcement of its rights in respect of the Collateral, including, without
limitation, all the rights and remedies of a secured party upon default under
the Uniform Commercial Code of the State of New York, and the Pledgee shall be
entitled, without limitation, to exercise any or all of the following rights,
which each Pledgor hereby agrees to be commercially reasonable:
(i) to receive all amounts payable in respect of the Collateral
otherwise payable under Section 6 to such Pledgor;
(ii) to transfer all or any part of the Collateral into the Pledgee's
name or the name of its nominee or nominees;
(iii) to accelerate any Pledged Note which may be accelerated in
accordance with its terms, and take any other lawful action to collect upon
any Pledged Note (including, without limitation, to make any demand for
payment thereon);
(iv) to vote all or any part of the Collateral (whether or not
transferred into the name of the Pledgee) and give all consents, waivers
and ratifications in respect of the Collateral and otherwise act with
respect thereto as though it were the outright owner thereof (each Pledgor
hereby irrevocably constituting and appointing the Pledgee the proxy and
attorney-in-fact of such Pledgor, with full power of substitution to do
so);
-12-
(v) at any time or from time to time to sell, assign and deliver, or
grant options to purchase, all or any part of the Collateral, or any
interest therein, at any public or private sale, without demand of
performance, advertisement or notice of intention to sell or of the time or
place of sale or adjournment thereof or to redeem or otherwise (all of
which are hereby waived by each Pledgor), for cash, on credit or for other
property, for immediate or future delivery without any assumption of credit
risk, and for such price or prices and on such terms as the Pledgee in its
absolute discretion may determine; provided that at least 10 days' notice
--------
of the time and place of any such sale shall be given to such Pledgor. The
Pledgee shall not be obligated to make such sale of Collateral regardless
of whether any such notice of sale has theretofore been given. Each
purchaser at any such sale shall hold the property so sold absolutely free
from any claim or right on the part of each Pledgor, and each Pledgor
hereby waives and releases to the fullest extent permitted by law any right
or equity of redemption with respect to the Collateral, whether before or
after sale hereunder, all rights, if any, of marshalling the Collateral and
any other security for the Obligations or otherwise, and all rights, if
any, of stay and/or appraisal which it now has or may at any time in the
future have under rule of law or statute now existing or hereafter enacted.
At any such sale, unless prohibited by applicable law, the Pledgee on
behalf of all Secured Parties (or certain of them) may bid for and purchase
(by bidding in Obligations or otherwise) all or any part of the Collateral
so sold free from any such right or equity of redemption. Neither the
Pledgee nor any other Secured Party shall be liable for failure to collect
or realize upon any or all of the Collateral or for any delay in so doing
nor shall any of them be under any obligation to take any action whatsoever
with regard thereto; and
(vi) to set-off any and all Collateral against any and all
Obligations, and to withdraw any and all cash or other Collateral from any
and all Collateral Accounts and to apply such cash and other Collateral to
the payment of any and all Obligations;
provided that, upon the occurrence of a Default under Section 8.6 or 8.7 of the
- -------- ----
Credit Agreement, the Pledgee may exercise the rights specified in clause (i)
above.
8. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of the
--------------------------
Pledgee provided for in this Agreement or any other Secured Debt Agreement, or
now or hereafter existing at law or in equity or by statute shall be cumulative
and concurrent and shall be in addition to every other such right, power or
remedy. The exercise or beginning of the exercise by the Pledgee or any other
Secured Party of any one or more of the rights, powers or remedies provided for
in this Agreement or any other Secured Debt Agreement or now or hereafter
existing at law or in equity or by statute or otherwise shall not preclude the
simultaneous or later exercise by the Pledgee or any other Secured Party of all
such other rights, powers or remedies, and no failure or delay on the part of
the Pledgee or any other Secured Party to exercise any such right, power or
remedy shall operate as a waiver thereof. Unless otherwise required by the Loan
Documents, no notice to or demand on any Pledgor in any case shall entitle such
Pledgor to any other or further notice or demand in similar other circumstances
or constitute a waiver of any of the rights of the Pledgee or any other Secured
Party to any other or further action in any circumstances without demand or
notice. The Secured Parties agree that this Agreement may be enforced only by
the action of the Pledgee, acting upon the instructions of the Requisite Lenders
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(or, after the date on which all Credit Agreement Obligations have been paid in
full, the holders of at least a majority of the Hedging Obligations) and that no
other Secured Party shall have any right individually to seek to enforce or to
enforce this Agreement or to realize upon the security to be granted hereby, it
being understood and agreed that such rights and remedies may be exercised by
the Pledgee or the holders of at least a majority of the Hedging Obligations, as
the case may be, for the benefit of the Secured Parties upon the terms of this
Agreement and the other Loan Documents.
9. APPLICATION OF PROCEEDS. (a) All moneys collected by the Pledgee
-----------------------
upon any sale or other disposition of the Collateral pursuant to the terms of
this Agreement, together with all other moneys received by the Pledgee
hereunder, shall be applied to the payment of the Obligations in the manner
provided in subsection 2.4D of the Credit Agreement.
(b) It is understood and agreed that the Pledgors shall remain
jointly and severally liable to the extent of any deficiency between the amount
of proceeds of the Collateral hereunder and the aggregate amount of the
Obligations.
10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the
------------------------
Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), the receipt of the Pledgee or the
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold, and such purchaser or purchasers shall not
be obligated to see to the application of any part of the purchase money paid
over to the Pledgee or such officer or be answerable in any way for the
misapplication or non-application thereof.
11. INDEMNITY. Each Pledgor jointly and severally agrees (i) to
---------
indemnify and hold harmless the Pledgee, each other Secured Party and their
respective successors, assigns, employees, agents and servants (individually an
"Indemnitee", and collectively, the "Indemnitees") from and against any and all
claims, demands, losses, judgments and liabilities (including liabilities for
penalties) of whatsoever kind or nature, and (ii) to reimburse each Indemnitee
for all reasonable costs and expenses, including reasonable attorneys' fees, in
each case arising out of or resulting from this Agreement or the exercise by any
Indemnitee of any right or remedy granted to it hereunder or under any other
Secured Debt Agreement (but excluding any claims, demands, losses, judgments and
liabilities (including liabilities for penalties) or expenses of whatsoever kind
or nature to the extent incurred or arising by reason of gross negligence or
willful misconduct of such Indemnitee). In no event shall any Indemnitee
hereunder be liable, in the absence of gross negligence or willful misconduct on
its part, for any matter or thing in connection with this Agreement other than
to account for monies or other property actually received by it in accordance
with the terms hereof. If and to the extent that the obligations of any Pledgor
under this Section 11 are unenforceable for any reason, each Pledgor hereby
agrees to make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law. The indemnity obligations
of each Pledgor contained in this Section 11 shall continue in full force and
effect notwithstanding the full payment of all the Notes issued under the Credit
Agreement, the termination of all Hedging Agreements and Letters of Credit, and
the payment of all other Obligations and notwithstanding the discharge thereof.
-14-
12. FURTHER ASSURANCES; POWER OF ATTORNEY. (a) Each Pledgor agrees
-------------------------------------
that it will join with the Pledgee in executing and, at such Pledgor's own
expense, file and re-file under the Uniform Commercial Code such financing
statements, continuation statements and other documents in such offices as the
Pledgee (acting on its own or on the instructions of the Requisite Lenders) may
reasonably deem necessary or appropriate and wherever required or permitted by
law in order to perfect and preserve the Pledgee's security interest in the
Collateral hereunder and hereby authorizes the Pledgee to file financing
statements and amendments thereto relative to all or any part of the Collateral
without the signature of such Pledgor where permitted by law, and agrees to do
such further acts and things and to execute and deliver to the Pledgee such
additional conveyances, assignments, agreements and instruments as the Pledgee
may reasonably require or deem advisable to carry into effect the purposes of
this Agreement or to further assure and confirm unto the Pledgee its rights,
powers and remedies hereunder or thereunder.
(b) Each Pledgor hereby appoints the Pledgee such Pledgor's attorney-
in-fact, with full authority in the place and stead of such Pledgor and in the
name of such Pledgor or otherwise, from time to time after the occurrence and
during the continuance of an Event of Default, in the Pledgee's discretion to
take any action and to execute any instrument which the Pledgee may deem
necessary or advisable to accomplish the purposes of this Agreement.
13. THE PLEDGEE AS COLLATERAL AGENT. The Pledgee will hold in
-------------------------------
accordance with this Agreement all items of the Collateral at any time received
under this Agreement. It is expressly understood and agreed that the
obligations of the Pledgee as holder of the Collateral and interests therein and
with respect to the disposition thereof, and otherwise under this Agreement, are
only those expressly set forth in the UCC and this Agreement. The Pledgee shall
act hereunder on the terms and conditions set forth herein and in Section 9 of
the Credit Agreement.
14. TRANSFER BY THE PLEDGORS. No Pledgor will sell or otherwise
------------------------
dispose of, grant any option with respect to, or mortgage, pledge or otherwise
encumber any of the Collateral or any interest therein (except in accordance
with the terms of this Agreement and the Loan Documents).
15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGORS. (a)
---------------------------------------------------------
Each Pledgor represents, warrants and covenants that:
(i) it is the legal, beneficial and record owner of, and has good and
marketable title to, all Collateral consisting of one or more Securities
and that it has sufficient interest in all Collateral in which a security
interest is purported to be created hereunder for such security interest to
attach (subject, in each case, to no pledge, lien, mortgage, hypothecation,
security interest, charge, option, Adverse Claim or other encumbrance
whatsoever, except the liens and security interests created by this
Agreement or permitted under the Credit Agreement);
(ii) it has full power, authority and legal right to pledge all the
Collateral pledged by it pursuant to this Agreement;
-15-
(iii) this Agreement has been duly authorized, executed and delivered
by such Pledgor and constitutes a legal, valid and binding obligation of
such Pledgor enforceable against such Pledgor in accordance with its terms,
except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws generally affecting creditors' rights and by equitable
principles (regardless of whether enforcement is sought in equity or at
law);
(iv) except to the extent already obtained or made, no consent of any
other party (including, without limitation, any stockholder or creditor of
such Pledgor or any of its Subsidiaries) and no consent, license, permit,
approval or authorization of, exemption by, notice or report to, or
registration, filing or declaration with, any governmental authority is
required to be obtained by such Pledgor in connection with (a) the
execution, delivery or performance of this Agreement, (b) the validity or
enforceability of this Agreement (except as set forth in clause (iii)
above), (c) the perfection or enforceability of the Pledgee's security
interest in the Collateral or (d) except for compliance with or as may be
required by applicable securities laws, the exercise by the Pledgee of any
of its rights or remedies provided herein;
(v) the execution, delivery and performance of this Agreement will
not violate any provision of any applicable law or regulation or of any
order, judgment, writ, award or decree of any court, arbitrator or
governmental authority, domestic or foreign, applicable to such Pledgor, or
of the certificate of incorporation, operating agreement, limited liability
company agreement or by-laws of such Pledgor or of any securities issued by
such Pledgor or any of its Subsidiaries, or of any mortgage, deed of trust,
indenture, lease, loan agreement, credit agreement or other contract,
agreement or instrument or undertaking to which such Pledgor or any of its
Subsidiaries is a party or which purports to be binding upon such Pledgor
or any of its Subsidiaries or upon any of their respective assets and will
not result in the creation or imposition of (or the obligation to create or
impose) any lien or encumbrance on any of the assets of such Pledgor or any
of its Subsidiaries except as contemplated by this Agreement (other than
the Liens created by the Collateral Documents);
(vi) the pledge, collateral assignment and delivery to the Pledgee of
the Collateral consisting of certificated securities pursuant to this
Agreement creates a valid and perfected First Priority security interest in
such Securities, and the proceeds thereof, subject to no prior Lien or
encumbrance or to any agreement purporting to grant to any third party a
Lien or encumbrance on the property or assets of such Pledgor which would
include the Securities (other than Permitted Encumbrances) and the Pledgee
is entitled to all the rights, priorities and benefits afforded by the UCC
or other relevant law as enacted in any relevant jurisdiction to perfect
security interests in respect of such Collateral; and
(vii) "control" (as defined in Section 8-106 of the UCC) has been
obtained by the Pledgee over all Collateral consisting of Securities
(including Notes which are Securities) with respect to which such "control"
may be obtained pursuant to Section 8-106 of the UCC.
-16-
(b) Each Pledgor covenants and agrees that it will defend the
Pledgee's right, title and security interest in and to the Securities and the
proceeds thereof against the claims and demands of all persons whomsoever; and
each Pledgor covenants and agrees that it will have like title to and right to
pledge any other property at any time hereafter pledged to the Pledgee as
Collateral hereunder and will likewise defend the right thereto and security
interest therein of the Pledgee and the other Secured Parties.
(c) Each Pledgor covenants and agrees that it will take no action
which would violate any of the terms of any Secured Debt Agreement.
16. CHIEF EXECUTIVE OFFICE; RECORDS. The chief executive office of
-------------------------------
each Pledgor is located at the address specified in Annex F hereto. Each
Pledgor will not move its chief executive office except to such new location as
such Pledgor may establish in accordance with the last sentence of this Section
16. The originals of all documents in the possession of such Pledgor evidencing
all Collateral, including but not limited to all Limited Liability Company
Interests and Partnership Interests, and the only original books of account and
records of such Pledgor relating thereto are, and will continue to be, kept at
such chief executive office at the location specified in Annex F hereto, or at
such new locations as such Pledgor may establish in accordance with the last
sentence of this Section 16. All Limited Liability Company Interests and
Partnership Interests are, and will continue to be, maintained at, and
controlled and directed (including, without limitation, for general accounting
purposes) from, such chief executive office location specified in Annex F
hereto, or such new locations as the respective Pledgor may establish in
accordance with the last sentence of this Section 16. No Pledgor shall
establish a new location for such offices until (i) it shall have given to the
Collateral Agent not less than 30 days' prior written notice of its intention so
to do, clearly describing such new location and providing such other information
in connection therewith as the Collateral Agent may reasonably request and (ii)
with respect to such new location, it shall have taken all action, satisfactory
to the Collateral Agent, to maintain the security interest of the Collateral
Agent in the Collateral intended to be granted hereby at all times fully
perfected and in full force and effect. Promptly after establishing a new
location for such offices in accordance with the immediately preceding sentence,
the respective Pledgor shall deliver to the Pledgee a supplement to Annex F
hereto so as to cause such Annex F hereto to be complete and accurate.
17. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of each
------------------------------------
Pledgor under this Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by, any circumstance or
occurrence whatsoever (other than termination of this Agreement pursuant to
Section 19 hereof), including, without limitation:
(i) any renewal, extension, amendment or modification of, or addition
or supplement to or deletion from any Secured Debt Agreement (other than
this Agreement in accordance with its terms), or any other instrument or
agreement referred to therein, or any assignment or transfer of any
thereof;
-17-
(ii) any waiver, consent, extension, indulgence or other action or
inaction under or in respect of any such agreement or instrument or this
Agreement (other than a waiver, consent or extension with respect to this
Agreement in accordance with its terms);
(iii) any furnishing of any additional security to the Pledgee or its
assignee or any acceptance thereof or any release of any security by the
Pledgee or its assignee;
(iv) any limitation on any party's liability or obligations under
any such instrument or agreement or any invalidity or unenforceability, in
whole or in part, of any such instrument or agreement or any term thereof;
or
(v) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceeding relating to
any Pledgor or any Subsidiary of any Pledgor, or any action taken with
respect to this Agreement by any trustee or receiver, or by any court, in
any such proceeding, whether or not such Pledgor shall have notice or
knowledge of any of the foregoing.
18. SALE OF COLLATERAL WITHOUT REGISTRATION. If at any time when the
----------------------------------------
Pledgee shall determine to exercise its right to sell all or any part of the
Collateral consisting of Securities, Limited Liability Company Interests or
Partnership Interests pursuant to Section 7, and such Collateral or the part
thereof to be sold shall not, for any reason whatsoever, be effectively
registered under the Securities Act of 1933, as then in effect, the Pledgee may,
in its sole and absolute discretion, sell such Collateral or part thereof by
private sale in such manner and under such circumstances as the Pledgee may deem
necessary or advisable in order that such sale may legally be effected without
such registration. Without limiting the generality of the foregoing, in any such
event the Pledgee, in its sole and absolute discretion: (i) may proceed to make
such private sale notwithstanding that a registration statement for the purpose
of registering such Collateral or part thereof shall have been filed under such
Securities Act; (ii) may approach and negotiate with a single possible purchaser
to effect such sale; and (iii) may restrict such sale to a purchaser who will
represent and agree that such purchaser is purchasing for its own account, for
investment, and not with a view to the distribution or sale of such Collateral
or part thereof. In the event of any such sale, the Pledgee shall incur no
responsibility or liability for selling all or any part of the Collateral at a
price which the Pledgee, in its sole and absolute discretion, may in good faith
deem reasonable under the circumstances, notwithstanding the possibility that a
substantially higher price might be realized if the sale were deferred until the
registration as aforesaid.
19. TERMINATION; RELEASE. (a) On the Termination Date (as defined
--------------------
below), this Agreement shall terminate (provided that all indemnities set forth
herein including, without limitation, in Section 11 hereof shall survive any
such termination) and the Pledgee, at the request and expense of the respective
Pledgor, will execute and deliver to such Pledgor a proper instrument or
instruments acknowledging the satisfaction and termination of this Agreement
(including, without limitation, UCC termination statements and instruments of
satisfaction, discharge and/or reconveyance), and will duly assign, transfer and
deliver to such Pledgor (without recourse and without any representation or
warranty) such of the Collateral as may be in the possession of the Pledgee and
as has not theretofore been sold or otherwise applied or released pursuant to
this Agreement, together with any moneys at the time held by the Pledgee or
-18-
any of its sub-agents hereunder and, with respect to any Collateral consisting
of an Uncertificated Security (other than an Uncertificated Security credited on
the books of a Clearing Corporation), a Partnership Interest or a Limited
Liability Company Interest, a termination of the agreement relating thereto
executed and delivered by the issuer of such Uncertificated Security pursuant to
Section 3.2(a)(ii) or by the respective partnership or limited liability company
pursuant to Section 3.2(a)(iv). As used in this Agreement, "Termination Date"
shall mean the date upon which the Total Commitments and all Hedging Agreements
have been terminated, no Letter of Credit or Note is outstanding (and all Loans
have been paid in full), all Letters of Credit have been terminated, and all
other Obligations then due and payable have been paid in full.
(b) In the event that any part of the Collateral is sold or otherwise
disposed of in connection with a sale or disposition permitted by Section 7.7 of
the Credit Agreement or is otherwise released at the direction of the Requisite
Lenders (or all of the Lenders to the extent required by subsection 10.6 of the
Credit Agreement) and the proceeds of such sale or sales or from such release
are applied in accordance with the terms of the Credit Agreement to the extent
required to be so applied, the Pledgee, at the request and expense of the
respective Pledgor will duly assign, transfer and deliver to such Pledgor
(without recourse and without any representation or warranty) such of the
Collateral as is then being (or has been) so sold or released and as may be in
possession of the Pledgee and has not theretofore been released pursuant to this
Agreement.
(c) At any time that any Pledgor desires that Collateral be released
as provided in the foregoing Section 19(a) or (b), it shall deliver to the
Pledgee a certificate signed by a principal executive officer of such Pledgor
stating that the release of the respective Collateral is permitted pursuant to
Section 19(a) or (b). If reasonably requested by the Pledgee (although the
Pledgee shall have no obligation to make any such request), the relevant Pledgor
shall furnish appropriate legal opinions (from counsel reasonably acceptable to
the Pledgee) to the effect set forth in the immediately preceding sentence. The
Pledgee shall have no liability whatsoever to any Secured Party as the result of
any release of Collateral by it as permitted by this Section 19.
20. NOTICES, ETC. All notices and other communications hereunder
-------------
shall be in writing and shall be delivered or mailed by first class mail,
postage prepaid, addressed:
(i) if to any Pledgor, at its address set forth opposite its
signature below;
(ii) if to the Pledgee, at:
J.P. Morgan Services, Inc.
500 Stanton Christiana Road
Newark, Delaware
Attention: Nicole Pedicone
Tel: (302) 634-1912
Fax: (302) 634-4300
(iii) if to any Lender (other than the Pledgee), at such address as
such Lender shall have specified in the Credit Agreement;
-19-
(iv) if to any Hedging Exchanger, at such address as such Hedging
Exchanger shall have specified in writing to Holdings and the Pledgee;
or at such address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
21. PLEDGEE NOT A PARTNER OR LIMITED LIABILITY COMPANY MEMBER. (a)
---------------------------------------------------------
Nothing herein shall be construed to make the Pledgee or any other Secured Party
liable as a member of any limited liability company or partnership and neither
the Pledgee nor any other Secured Party by virtue of this Agreement or otherwise
(except as referred to in the following sentence) shall have any of the duties,
obligations or liabilities of a member of any limited liability company or
partnership. The parties hereto expressly agree that, unless the Pledgee shall
become the absolute owner of Collateral consisting of a Limited Liability
Company Interest or Partnership Interest pursuant hereto, this Agreement shall
not be construed as creating a partnership or joint venture among the Pledgee,
any other Secured Party and/or any Pledgor.
(b) Except as provided in the last sentence of paragraph (a) of this
Section 21, the Pledgee, by accepting this Agreement, did not intend to become a
member of any limited liability company or partnership or otherwise be deemed to
be a co-venturer with respect to any Pledgor or any limited liability company or
partnership either before or after an Event of Default shall have occurred. The
Pledgee shall have only those powers set forth herein and the Secured Parties
shall assume none of the duties, obligations or liabilities of a member of any
limited liability company or partnership or any Pledgor except as provided in
the last sentence of paragraph (a) of this Section 21.
(c) The Pledgee and the other Secured Parties shall not be obligated
to perform or discharge any obligation of any Pledgor as a result of the pledge
hereby effected.
(d) The acceptance by the Pledgee of this Agreement, with all the
rights, powers, privileges and authority so created, shall not at any time or in
any event obligate the Pledgee or any other Secured Party to appear in or defend
any action or proceeding relating to the Collateral to which it is not a party,
or to take any action hereunder or thereunder, or to expend any money or incur
any expenses or perform or discharge any obligation, duty or liability under the
Collateral.
22. WAIVER; AMENDMENT. Except as contemplated in Section 25 hereof,
-----------------
none of the terms and conditions of this Agreement may be changed, waived,
discharged or terminated in any manner whatsoever unless such change, waiver,
discharge or termination is in writing duly signed by each Pledgor to be bound
thereby and the Collateral Agent (with the consent of the Requisite Lenders or,
to the extent required by subsection 10.6 of the Credit Agreement, all of the
Lenders), provided, however, that no such change, waiver, modification or
-------- -------
variance shall be made to Section 11 hereof or this Section 22 without the
consent of each Secured Party adversely affected thereby, provided further that
----------------
any change, waiver, modification or variance affecting the rights and benefits
of a single Class (as defined below) of Secured Parties (and not all Secured
Parties in a like or similar manner) shall require the written consent of the
Requisite Creditors of such Class of Secured Parties. For the purpose of this
Agreement, the term "Class" shall mean each class of
-20-
Secured Parties, i.e., whether (x) the Bank Creditors as holders of the Credit
Agreement Obligations, (y) the Hedging Exchangers as holders of the Hedging
Obligations. For the purpose of this Agreement, the term "Requisite Creditors"
of any Class shall mean each of (x) with respect to each of the Credit Agreement
Obligations, the Requisite Lenders and (y) with respect to the Hedging
Obligations, the holders of more than 50% of all obligations outstanding from
time to time under the Hedging Agreements.
23. MISCELLANEOUS. This Agreement shall create a continuing security
-------------
interest in the Collateral and shall (i) remain in full force and effect,
subject to release and/or termination as set forth in Section 19, (ii) be
binding upon each Pledgor, its successors and assigns; provided, however, that
-------- -------
no Pledgor shall assign any of its rights or obligations hereunder without the
prior written consent of the Pledgee (with the prior written consent of the
Requisite Lenders or to the extent required by subsection 10.6 of the Credit
Agreement, all of the Lenders), and (iii) inure, together with the rights and
remedies of the Pledgee hereunder, to the benefit of the Pledgee, the other
Secured Parties and their respective successors, transferees and assigns. THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION, SECTION 5-
1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE CODE PROVIDES THAT
THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN
RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF NEW YORK. The headings of the several sections and
subsections in this Agreement are for purposes of reference only and shall not
limit or define the meaning hereof. 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. In the event that any provision of
this Agreement shall prove to be invalid or unenforceable, such provision shall
be deemed to be severable from the other provisions of this Agreement which
shall remain binding on all parties hereto.
24. WAIVER OF JURY TRIAL. EACH PLEDGOR AND COLLATERAL AGENT HEREBY
--------------------
AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is
intended to be all-encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including,
without limitation, contract claims, tort claims, breach of duty claims, and all
other common law and statutory claims. The Pledgors and Collateral Agent each
acknowledge that this waiver is a material inducement for the Pledgors and
Collateral Agent to enter into a business relationship, that each Pledgor and
Collateral Agent have already relied on this waiver in entering into this
Agreement and that each will continue to rely on this waiver in their related
future dealings. Each Pledgor and Collateral Agent further warrant and
represent that each has reviewed this waiver with its legal counsel, and that
each knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING
-21-
(OTHER THAN BY A MUTUAL WRIITEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 25
AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
In the event of litigation, this Agreement may be filed as a written consent to
a trial by the court.
25. ADDITIONAL PLEDGORS. It is understood and agreed that any
-------------------
Subsidiary of Holdings that is required to execute a counterpart of this
Agreement after the date hereof pursuant to the Credit Agreement shall
automatically become a Pledgor hereunder by executing a counterpart hereof and
delivering the same to the Pledgee.
26. RECOURSE. This Agreement is made with full recourse to the
--------
Pledgors and pursuant to and upon all the representations, warranties, covenants
and agreements on the part of the Pledgors contained herein and in the other
Secured Debt Agreements and otherwise in writing in connection herewith or
therewith.
27. LIMITED OBLIGATIONS. It is the desire and intent of each Pledgor
-------------------
and the Secured Parties that this Agreement shall be enforced against each
Pledgor to the fullest extent permissible under the laws and public policies
applied in each jurisdiction in which enforcement is sought. Notwithstanding
anything to the contrary contained herein, in furtherance of the foregoing, it
is noted that the obligations of each Pledgor have been limited as provided in
the Subsidiary Guaranty.
28. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
----------------------------------------------
PROCEEDINGS BROUGHT AGAINST ANY PLEDGOR ARISING OUT OF OR RELATING TO THIS
AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL
COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY
EXECUTING AND DELIVERING THIS AGREEMENT, EACH PLEDGOR, FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NON-EXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANT DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO SUCH PLEDGOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION
20;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH PLEDGOR IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT;
(V) AGREES THAT COLLATERAL AGENT RETAINS THE RIGHT TO SERVE PROCESS
IN ANY OTHER MATTER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST SUCH
PLEDGOR IN THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SECTION 27 RELATING TO THE
JURISDICTION AND VENUE SHALL BE BINDING AND
-22-
ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS
LAW SECTION 5-1402 OR OTHERWISE.
29. ADMINISTRATIVE AGENT AS COLLATERAL AGENT. Administrative agent
----------------------------------------
has been appointed to act as Collateral Agent hereunder by Lenders and, by their
acceptance of the benefits hereof, Hedging Exchangers. Collateral Agent shall
at all times be the same Person that is appointed Administrative Agent under the
Credit Agreement. Written notice of resignation by Administrative Agent
pursuant to subsection 9.5 of the Credit Agreement shall also constitute notice
of resignation as Collateral Agent under this Agreement; removal of
Administrative Agent pursuant to subsection 9.5 of the Credit Agreement shall
also constitute removal as Collateral Agent under this Agreement; and
appointment of a successor Administrative Agent pursuant to subsection 9.5 of
the Credit Agreement shall also constitute appointment of a successor Collateral
Agent under this Agreement. Upon the acceptance of any appointment as
Administrative Agent under subsection 9.5 of the Credit Agreement by a successor
Administrative Agent, that successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Collateral Agent under this Agreement, shall promptly
(i) transfer to such successor Collateral Agent all sums, securities and other
items of Collateral held hereunder, together with all records and other
documents necessary or appropriate in connection with the performance of the
duties of the successor Collateral Agent under this Agreement, and (ii) execute
and deliver to such successor Collateral Agent such amendments to financing
statements, and take such other actions, as may be necessary or appropriate in
connection with the assignment to such successor Collateral Agent of the
security interests created hereunder, whereupon such retiring or removed
Collateral Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring or removed Administrative Agent's resignation or
removal hereunder as Collateral Agent, the provisions of this Agreement shall
inure to its benefit as to any actions taken or omitted to be taken by it under
this Agreement while it was Collateral Agent hereunder.
[Remainder of page intentionally left blank]
-23-
IN WITNESS WHEREOF, each Pledgor and the Pledgee have caused this Agreement
to be executed by their duly elected officers duly authorized as of the date
first written above.
DOMINO'S, INC.
as a Pledgor
By: /s/ Harry Silverman
Name: Harry Silverman
Title: Vice President
BLUEFENCE, INC.
By: /s/ Harry Silverman
Name: Harry Silverman
Title: President
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Collateral Agent
By: /s/ Colleen Galle
--------------------
Name: Colleen Galle
Title: Vice President
ANNEX A
-------
LIST OF SUBSIDIARIES
--------------------
I. [NAME OF SUBSIDIARY]
[LIST SUBSIDIARIES OF DOMINO'S, INC.]
II. [NAME OF SUBSIDIARY]
[LIST SUBSIDIARIES OF ABOVE BLUEFENCE]
ANNEX B
-------
LIST OF STOCK
-------------
I. DOMINO'S, INC.
Name of
Issuing Type of Number of Certificate Percentage Sub-clause of Section
Corporation Shares Shares No. Owned 3.2(a) of Pledge Agreement
----------- -------- ------------ ------------- ----------- --------------------------
[TO BE PROVIDED BY DOMINO'S, INC.]
II. BLUEFENCE, INC.
Name of
Issuing Type of Number of Certificate Percentage Sub-clause of Section
Corporation Shares Shares No. Owned 3.2(a) of Pledge Agreement
----------- -------- ------------ ------------- ----------- --------------------------
[TO BE PROVIDED BY BLUEFENCE, INC]
ANNEX C
-------
LIST OF NOTES
-------------
I. DOMINO'S, INC.
Sub-clause of Section 3.2(a)
Amount Maturity Date Obligor of Pledge Agreement
- ------------------------ ------------------------- -------------------------- --------------------------------
[TO BE PROVIDED BY DOMINO'S, INC.]
II. BLUEFENCE, INC.
Sub-clause of Section 3.2(a)
Amount Maturity Date Obligor of Pledge Agreement
- ------------------------ ------------------------- -------------------------- --------------------------------
[TO BE PROVIDED BY BLUEFENCE, INC.]
ANNEX D
-------
LIST OF LIMITED LIABILITY COMPANY INTERESTS
-------------------------------------------
I. DOMINO'S, INC.
Name of Issuing Type of Sub-clause of Section 3.2(a)
Corporation Interest Certificate No. Percentage Owned of Pledge Agreement
- --------------------- ---------------- --------------------- ---------------------- ------------------------------
[TO BE PROVIDED BY DOMINO'S, INC.]
II. BLUEFENCE, INC.
Name of Issuing Type of Sub-clause of Section 3.2(a)
Corporation Interest Certificate No. Percentage Owned of Pledge Agreement
- --------------------- ---------------- --------------------- ---------------------- ------------------------------
[TO BE PROVIDED BY BLUEFENCE, INC.]
ANNEX E
-------
LIST OF PARTNERSHIP INTERESTS
-----------------------------
I. DOMINO'S, INC.
Name of Type of Sub-clause of Section 3.2(a)
Partnership Interest Percentage Owned of Pledge Agreement
- ---------------------------- ------------------------ ----------------------- ----------------------------------
[TO BE PROVIDED BY DOMINO'S, INC.]
II. BLUEFENCE, INC.
Name of Type of Sub-clause of Section 3.2(a)
Partnership Interest Percentage Owned of Pledge Agreement
- ---------------------------- ------------------------ ----------------------- ----------------------------------
[TO BE PROVIDED BY BLUEFENCE, INC.]
ANNEX F
-------
LIST OF CHIEF EXECUTIVE OFFICES
-------------------------------
I. DOMINO'S, INC.
II. BLUEFENCE, INC.
ANNEX G
-------
Form of Agreement Regarding Uncertificated Securities, Limited Liability
------------------------------------------------------------------------
Company Interests and Partnership Interests
-------------------------------------------
AGREEMENT (as amended, modified or supplemented from time to time,
this "Agreement"), dated as of _________ __, _____, among each of the
undersigned pledgors (each a "Pledgor" and, collectively, the "Pledgors"),
__________, not in its individual capacity but solely as Collateral Agent (the
"Pledgee"), and __________, as the issuer of the Uncertificated Securities,
Limited Liability Company Interests and/or Partnership Interests (each as
defined below) (the "Issuer").
W I T N E S S E T H :
--------------------
WHEREAS, each Pledgor and the Pledgee are entering into a Borrower
Pledge Agreement, dated as of December 21, 1998 (as amended, amended and
restated, modified or supplemented from time to time, the "Pledge Agreement"),
under which, among other things, in order to secure the payment of the
Obligations (as defined in the Pledge Agreement), each Pledgor will pledge to
the Pledgee for the benefit of the Secured Parties (as defined in the Pledge
Agreement), and grant a security interest in favor of the Pledgee for the
benefit of the Secured Parties in, all of the right, title and interest of such
Pledgor in and to any and all (1) "uncertificated securities" (as defined in
Section 8-102(a)(18) of the Uniform Commercial Code, as adopted in the State of
New York) ("Uncertificated Securities"), (2) Partnership Interests (as defined
in the Pledge Agreement) and (3) Limited Liability Company Interests (as defined
in the Pledge Agreement), in each case issued from time to time by the Issuer,
whether now existing or hereafter from time to time acquired by such Pledgor
(with all of such Uncertificated Securities, Partnership Interests and Limited
Liability Company Interests being herein collectively called the "Issuer Pledged
Interests"); and
WHEREAS, each Pledgor desires the Issuer to enter into this Agreement
in order to perfect the security interest of the Pledgee under the Pledge
Agreement in the Issuer Pledged Interests, to vest in the Pledgee control of the
Issuer Pledge Interests and to provide for the rights of the parties under this
Agreement;
NOW THEREFORE, in consideration of the premises and the mutual
promises and agreements contained herein, and for other valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Each Pledgor hereby irrevocably authorizes and directs the Issuer,
and the Issuer hereby agrees, to comply with any and all instructions and orders
originated by the Pledgee (and its successors and assigns) regarding any and all
of the Issuer Pledged Interests without the further consent by the registered
owner (including the respective Pledgor), and not to comply with any
instructions or orders regarding any or all of the Issuer Pledged Interests
originated by
any person or entity other than the Pledgee (and its successors and assigns) or
a court of competent jurisdiction.
2. The Issuer hereby certifies that (i) no notice of any security
interest, lien or other encumbrance or claim affecting the Issuer Pledged
Interests (other than the security interest of the Pledgee) has been received by
it, and (ii) the security interest of the Pledgee in the Issuer Pledged
Interests has been registered in the books and records of the Issuer.
3. The Issuer hereby represents and warrants that (i) the pledge by
the Pledgors of, and the granting by the Pledgors of a security interest in, the
Issuer Pledged Interests to the Pledgee, for the benefit of the Secured Parties,
does not violate the charter, by-laws, partnership agreement, membership
agreement or any other agreement governing the Issuer or the Issuer Pledged
Interests, and (ii) the Issuer Pledged Interests are fully paid and
nonassessable.
4. All notices, statements of accounts, reports, prospectuses,
financial statements and other communications to be sent to any Pledgor by the
Issuer in respect of the Issuer will also be sent to the Pledgee at the
following address:
J.P. Morgan Services, Inc.
500 Stanton Christiana Road
Newark, Delaware
Attention: Nicole Pedicone
Tel: (302) 634-1912
Fax: (302) 634-4300
5. Until the Pledgee shall have delivered written notice to the
Issuer that all of the Obligations have been paid in full and this Agreement is
terminated, the Issuer will send any and all redemptions, distributions,
interest or other payments in respect of the Issuer Pledged Interests from the
Issuer for the account of the Pledgor only by wire transfers to the following
address:
_____________________
_____________________
_____________________
_____________________
[Account Information]
ABA No.: ____________________
Account in the Name of: ___________
Account No.: ____________________
6. Except as expressly provided otherwise in Sections 4 and 5, all
notices, instructions, orders and communications hereunder shall be sent or
delivered by mail, telex, telecopy or overnight courier service and all such
notices and communications shall, when mailed, telexed, telecopied or sent by
overnight courier, be effective when deposited in the mails or delivered to the
overnight courier, prepaid and properly addressed for delivery on such or the
next Business Day, or sent by telex or telecopier, except that notices and
communications to the
Pledgee shall not be effective until received by the Pledgee. All notices and
other communications shall be in writing and addressed as follows:
(a) if to any Pledgor, at:
(b) if to the Pledgee, at:
J.P. Morgan Services, Inc.
500 Stanton Christiana Road
Newark, Delaware
Attention: Nicole Pedicone
Tel: (302) 634-1912
Fax: (302) 634-4300
(c) if to the Issuer, at:
_______________________
_______________________
_______________________
Attention: ______________
Telephone No.:___________
Telecopier No.:___________
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder. As used in this
Section 6, "Business Day" means any day other than a Saturday, Sunday, or other
day in which banks in New York are authorized to remain closed.
7. This Agreement shall be binding upon the successors and assigns of
each Pledgor and the Issuer and shall inure to the benefit of and be enforceable
by the Pledgee and its successors and assigns. This Agreement may be executed
in any number of counterparts, each of which shall be an original, but all of
which shall constitute one instrument. In the event that any provision of this
Agreement shall prove to be invalid or unenforceable, such provision shall be
deemed to be severable from the other provisions of this Agreement which shall
remain binding on all parties hereto. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
except in writing signed by the Pledgee, the Issuer and any Pledgor which at
such time owns any Issuer Pledged Interests.
8. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without regard to its principles of
conflict of laws.
IN WITNESS WHEREOF, each Pledgor, the Pledgee and the Issuer have
caused this Agreement to be executed by their duly elected officers duly
authorized as of the date first above written.
[_____________________________________________],
as a Pledgor
By_____________________________
Name:
Title:
[_____________________________________________],
as a Pledgor
By____________________________________________
Name:
Title:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
not in its individual capacity but solely as
Collateral Agent and Pledgee
By____________________________________________
Name:
Title:
[_____________________________________________],
the Issuer
By____________________________________________
Name:
Title:
Exhibit 10.17
SUBSIDIARY PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of December 21, 1998 (as same may be
further amended, amended and restated, modified or supplemented from time to
time, this "Agreement"), made by the Subsidiary Guarantors (as defined in the
Credit Agreement referred to below) and each other Subsidiary of the Borrowers
that is required to execute a counterpart hereof pursuant to Section 25 of this
Agreement (the "Pledgors", and each, a "Pledgor"), and MORGAN GUARANTY TRUST
COMPANY OF NEW YORK ("Morgan Guaranty"), not in its individual capacity but
solely as Collateral Agent (including any successor collateral agent, the
"pledgee") for the benefit of (x) the Lenders, the Syndication Agent, the
Documentation Agent and the Administrative Agent under, and any other lenders
from time to time party to, the Credit Agreement hereinafter referred to (such
Lenders, the Syndication Agent, the Documentation Agent, the Administrative
Agent, the Pledgee and other lenders, if any, are hereinafter called the "Bank
Creditors") and (y) if Morgan Guaranty, in its individual capacity, any Lender
or any Affiliate of a Lender enters into one or more Hedging Agreements with, or
guaranteed by, any of the Pledgors, Morgan Guaranty, any such Lender or Lenders
or a syndicate of financial institutions organized by Morgan Guaranty or an
affiliate of Morgan Guaranty (even if Morgan Guaranty or the respective Lender
subsequently ceases to be a Lender under the Credit Agreement for any reason) so
long as any such Lender or Affiliate participates in the extension of such
Hedging Agreements and their subsequent assigns, if any (collectively, the
"Hedging Exchangers", and the Hedging Exchangers together with the Bank
Creditors, are hereinafter called the "Secured Parties"). Except as otherwise
defined herein, terms used herein and defined in the Credit Agreement shall be
used herein as so defined.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, TISM, Inc., a Michigan corporation ("Holdings"), Domino's,
Inc., a Delaware corporation ("Company"), Bluefence, Inc., a Michigan
corporation ("Subsidiary Borrower" and, together with Company, each a "Borrower"
and collectively the "Borrowers"), the financial institutions from time to time
party thereto (the "Lenders"), Morgan Guaranty, as Administrative Agent (in its
capacity as Administrative Agent, being herein referred to as the
"Administrative Agent"), NDB Bank, as Syndication Agent, and Comerica Bank, as
Documentation Agent, have entered into a Credit Agreement, dated as of December
21, 1998, providing for the making of Loans to the Borrowers and the issuance
of, and participation in, Letters of Credit as contemplated therein (as used
herein, the term "Credit Agreement" means the Credit Agreement described above
in this paragraph, as the same may be amended, modified or supplemented from
time to time, and including any successor agreement extending the maturity of,
or restructuring (including, but not limited to, the inclusion of additional
borrowers thereunder that are Subsidiaries of the Borrowers and whose
obligations are guaranteed by the Guarantors thereunder or any increase in the
amount borrowed) of all or any portion of the Indebtedness under such agreement
or any successor agreements);
WHEREAS, the Borrowers may from time to time be party to one or more
Hedging Agreements with the Hedging Exchangers;
WHEREAS, pursuant to a Subsidiary Guaranty, dated as of December 21,
1998 (as amended, modified or supplemented from time to time, the "Subsidiary
Guaranty"), each Pledgor has jointly and severally guaranteed to the Secured
Parties the payment when due of all obligations and liabilities of the Borrowers
under or with respect to the Loan Documents and the Hedging Agreements;
WHEREAS, it is a condition precedent to the making of Loans to the
Borrowers and the issuance of, and participation in, Letters of Credit for the
joint and several account of the Borrowers under the Credit Agreement that each
Pledgor shall have executed and delivered to the Pledgee this Agreement; and
WHEREAS, each Pledgor will obtain benefits from the incurrence of
Loans by the Borrowers and the issuance of Letters of Credit for the joint and
several account of the Borrowers under the Credit Agreement and the Borrowers'
entering into Hedging Agreements and, accordingly, desires to execute this
Agreement in order to satisfy the conditions precedent described in the
preceding paragraph and to induce the Lenders to make Loans to the Borrowers and
to issue Letters of Credit for the joint and several account of the Borrowers,
and to induce the Hedging Exchangers to enter into Hedging Agreements with the
Borrowers;
NOW, THEREFORE, in consideration of the benefits accruing to each
Pledgor, the receipt and sufficiency of which are hereby acknowledged, each
Pledgor hereby makes the following representations and warranties to the Pledgee
and hereby covenants and agrees with the Pledgee as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is made by each Pledgor
------------------------
for the benefit of the Secured Parties to secure:
(i) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations, liabilities and
indebtedness (including, without limitation, indemnities, Fees and interest
thereon) of such Pledgor owing to the Bank Creditors, whether now existing
or hereafter incurred under, arising out of, or in connection with the
Credit Agreement and the other Loan Documents to which such Pledgor is a
party (including all such obligations, liabilities and indebtedness under
the Subsidiary Guaranty) and the due performance and compliance by such
Pledgor with all of the terms, conditions and agreements contained in the
Credit Agreement and such other Loan Documents (all such obligations,
liabilities and indebtedness under this clause (i), except to the extent
guaranteeing obligations of the Borrowers under Hedging Agreements, being
herein collectively called the "Credit Agreement Obligations");
(ii) the full and prompt payment when due (whether at stated maturity,
by acceleration or otherwise) of all obligations, liabilities and
indebtedness (including, without limitation, indemnities, fees and interest
thereon) of such Pledgor owing to the Hedging Exchangers, now existing or
hereafter incurred under, arising out of or in connection with any Hedging
Agreement, whether such Hedging Agreement is now in existence or
hereinafter arising, and the due performance and compliance with the terms,
conditions and agreements of each such Hedging Agreement by such Pledgor
including, all
-2-
obligations, liabilities and indebtedness under the Subsidiary Guaranty, in
each case, in respect of the Hedging Agreements, and the due performance
and compliance by such Pledgor with all of the terms, conditions and
agreements contained in each such Hedging Agreement (all such obligations,
liabilities and indebtedness under this clause (ii) being herein
collectively called the "Hedging Obligations");
(iii) any and all sums advanced by the Pledgee in order to preserve
the Collateral (as hereinafter defined) and/or preserve its security
interest therein;
(iv) in the event of any proceeding for the collection of the
Obligations (as defined below) or the enforcement of this Agreement, after
an Event of Default (such term, as used in this Agreement, shall mean (i)
at any time prior to the repayment in full of all Credit Agreement
Obligations and the termination of all Commitments, any Event of Default
under, and as defined in, the Credit Agreement and (ii) at any time after
the repayment in full of all Credit Agreement Obligations and the
termination of all Commitments, any payment default under any Hedging
Agreement and shall in any event include, without limitation, any payment
default (after the expiration of any applicable grace period) on any of the
Obligations (as defined below)) shall have occurred and be continuing, the
reasonable expenses of retaking, holding, preparing for sale or lease,
selling or otherwise disposing of or realizing on the Collateral, or of any
exercise by the Pledgee of its rights hereunder, together with reasonable
attorneys' fees and court costs; and
(v) all amounts paid by any Indemnitee to which such Indemnitee has
the right to reimbursement under Section 11 of this Agreement.
all such obligations, liabilities, indebtedness, sums and expenses set forth in
clauses (i) through (v) of this Section 1 being collectively called the
"Obligations", it being acknowledged and agreed that the "Obligations" shall
include extensions of credit of the types described above, whether outstanding
on the date of this Agreement or extended from time to time after the date of
this Agreement.
2. DEFINITIONS; ANNEXES. (a) Unless otherwise defined herein, all
---------------------
capitalized terms used herein and defined in the Credit Agreement shall be used
herein as therein defined. Reference to singular terms shall include the plural
and vice versa.
(b) The following capitalized terms used herein shall have the
definitions specified below:
"Administrative Agent" has the meaning set forth in the recitals
--------------------
hereto.
"Adverse Claim" has the meaning given such term in Section 8-102(a)(1)
-------------
of the UCC.
"Agreement" has the meaning set forth in the first paragraph hereof.
---------
"Bank Creditors" has the meaning set forth in the first paragraph
--------------
hereof.
-3-
"Certificated Security" has the meaning given such term in Section 8-
---------------------
102(a)(4) of the UCC.
"Chattel Paper" has the meaning given such term in the UCC.
-------------
"Clearing Corporation" has the meaning given such term in Section 8-
--------------------
102(a)(5) of the UCC.
"Collateral" has the meaning set forth in Section 3.1 hereof.
----------
"Collateral Accounts" means any and all accounts established and
-------------------
maintained by the Pledgee in the name of any Pledgor to which Collateral may be
credited.
"Credit Agreement" has the meaning set forth in the Recitals hereto.
----------------
"Credit Agreement Obligations" has the meaning set forth in Section 1
----------------------------
hereof.
"Domestic Corporation" has the meaning set forth in the definition of
--------------------
"Stock."
"Event of Default" has the meaning set forth in Section 1 hereof.
----------------
"Excluded Foreign Entity" means any corporation, partnership (general
-----------------------
or limited), limited liability company or other business entity (x) that is
organized under the laws of any country, state or province other than the United
States, Canada, Bermuda or any state, province or territory thereof and (y) the
book value of the gross assets of which do not exceed $1,000,000.
"Financial Asset" has the meaning given such term in Section 8-
---------------
102(a)(9) of the UCC.
"Foreign Corporation" has the meaning set forth in the definition of
-------------------
"Stock."
"Hedging Agreements" has the meaning set forth in the first paragraph
------------------
hereof.
"Hedging Exchangers" has the meaning set forth in the first paragraph
------------------
hereof.
"Hedging Obligations" has the meaning set forth in Section 1 hereof.
-------------------
"Indemnitees" has the meaning set forth in Section 11 hereof.
-----------
"Instrument" has the meaning given such term in Section 9-105(1)(i) of
----------
the UCC.
"Investment Property" has the meaning given such term in Section 9-
-------------------
115(f) of the UCC.
"Lenders" has the meaning set forth in the Recitals hereto.
-------
"Limited Liability Company Assets" means all assets, whether tangible
--------------------------------
or intangible and whether real, personal or mixed (including, without
limitation, all limited liability company capital and interest in other limited
liability companies), at any time owned or represented by any Limited Liability
Company Interest.
"Limited Liability Company Interests" means the entire limited
-----------------------------------
liability company membership interest at any time owned by any Pledgor in any
limited liability company (other than an Excluded Foreign Entity).
-4-
"Non-Voting Stock" means all capital stock which is not Voting Stock.
----------------
"Notes" means (x) all intercompany notes at any time issued to each
-----
Pledgor and (y) all other promissory notes from time to time issued to, or held
by, each Pledgor.
"Obligations" has the meaning set forth in Section 1 hereof.
-----------
"Partnership Assets" means all assets, whether tangible or intangible
------------------
and whether real, personal or mixed (including, without limitation, all
partnership capital and interest in other partnerships), at any time owned or
represented by any Partnership Interest.
"Partnership Interest" means the entire general partnership interest
--------------------
or limited partnership interest at any time owned by any Pledgor in any general
partnership or limited partnership (other than an Excluded Foreign Entity).
"Pledged Notes" has the meaning set forth in Section 3.5 hereof.
-------------
"Pledgee" has the meaning set forth in the first paragraph hereof.
-------
"Pledgor" has the meaning set forth in the first paragraph hereof.
-------
"Proceeds" has the meaning given such term in Section 9-306(l) of the
--------
UCC.
"Requisite Lenders" has the meaning given such term in the Credit
-----------------
Agreement.
"Secured Parties" has the meaning set forth in the first paragraph
---------------
hereof.
"Secured Debt Agreements" has the meaning set forth in Section 5
-----------------------
hereof.
"Securities Account" has the meaning given such term in Section 8-
------------------
501(a) of the UCC.
"Securities Act" means the Securities Act of 1933, as amended, as in
--------------
effect from time to time.
"Security" and "Securities" has the meaning given such term in Section
-------- ----------
8-102(a)(15) of the UCC and shall in any event include all Stock and Notes (to
the extent same constitute "Securities" under Section 8-102(a)(15)) but exclude
Securities issued by Excluded Foreign Entities.
"Security Entitlement" has the meaning given such term in Section 8-
--------------------
102(a)(17) of the UCC.
"Stock" means (x) with respect to corporations incorporated under the
-----
laws of the United States or any State or territory thereof (each a "Domestic
Corporation"), all of the issued and outstanding shares of capital stock of any
corporation at any time owned by any Pledgor of any Domestic Corporation and (y)
with respect to corporations not Domestic Corporations or Excluded Foreign
Entities (each a "Foreign Corporation"), all of the issued and outstanding
shares of capital stock at any time owned by any Pledgor of any Foreign
Corporation.
-5-
"Termination Date" has the meaning set forth in Section 19 hereof.
----------------
"UCC" means the Uniform Commercial Code as in effect in the State of
---
New York from time to time; provided that all references herein to specific
--------
sections or subsections of the UCC are references to such sections or
subsections, as the case may be, of the Uniform Commercial Code as in effect in
the State of New York on the date hereof.
"Uncertificated Security" has the meaning given such term in Section
-----------------------
8-102(a)(18) of the UCC.
"Voting Stock" means all classes of capital stock of any Foreign
------------
Corporation entitled to vote.
3. PLEDGE OF SECURITY INTEREST, ETC.
---------------------------------
3.1 Pledge. To secure the Obligations now or hereafter owed or to be
------
performed by such Pledgor, each Pledgor does hereby grant, pledge and assign to
the Pledgee for the benefit of the Secured Parties, and does hereby create a
continuing security interest (subject to those Liens permitted to exist with
respect to the Collateral pursuant to the terms of all Secured Debt Agreements
then in effect) in favor of the Pledgee for the benefit of the Secured Parties
in, all of the right, title and interest in and to the following, whether now
existing or hereafter from time to time acquired (collectively, the
"Collateral"):
(a) each of the Collateral Accounts (to the extent a security interest
therein is not created pursuant to the Subsidiary Security Agreement),
including any and all assets of whatever type or kind deposited by such
Pledgor in such Collateral Account, whether now owned or hereafter
acquired, existing or arising, including, without limitation, all Financial
Assets, Investment Property, moneys, checks, drafts, Instruments,
Securities or interests therein of any type or nature deposited or required
by the Credit Agreement or any other Secured Debt Agreement to be deposited
in such Collateral Account, and all investments and all certificates and
other Instruments (including depository receipts, if any) from time to time
representing or evidencing the same, and all dividends, interest,
distributions, cash and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or
all of the foregoing;
(b) all Securities of such Pledgor from time to time;
(c) all Limited Liability Company Interests of such Pledgor from time
to time and all of its right, title and interest in each limited liability
company to which each such interest relates, whether now existing or
hereafter acquired, including, without limitation:
(A) all its capital therein and its interest in all profits,
losses, Limited Liability Company Assets and other distributions to
which such Pledgor shall at any time be entitled in respect of such
Limited Liability Company Interests;
(B) all other payments due or to become due to such Pledgor in
respect of Limited Liability Company Interests, whether under any
limited liability
-6-
company agreement or otherwise, whether as contractual obligations,
damages, insurance proceeds or otherwise;
(C) all of its claims, rights, powers, privileges, authority,
options, security interests, liens and remedies, if any, under any
limited liability company agreement or operating agreement, or at law
or otherwise in respect of such Limited Liability Company Interests;
(D) all present and future claims, if any, of such Pledgor
against any such limited liability company for moneys loaned or
advanced, for services rendered or otherwise;
(E) all of such Pledgor's rights under any limited liability
company agreement or operating agreement or at law to exercise and
enforce every right, power, remedy, authority, option and privilege of
such Pledgor relating to such Limited Liability Company Interests,
including any power to terminate, cancel or modify any limited
liability company agreement or operating agreement, to execute any
instruments and to take any and all other action on behalf of and in
the name of any of such Pledgor in respect of such Limited Liability
Company Interests and any such limited liability company, to make
determinations, to exercise any election (including, but not limited
to, election of remedies) or option or to give or receive any notice,
consent, amendment, waiver or approval, together with full power and
authority to demand, receive, enforce, collect or receipt for any of
the foregoing or for any Limited Liability Company Asset, to enforce
or execute any checks, or other instruments or orders, to file any
claims and to take any action in connection with any of the foregoing;
and
(F) all other property hereafter delivered in substitution for or
in addition to any of the foregoing, all certificates and instruments
representing or evidencing such other property and all cash,
securities, interest, dividends, rights and other property at any time
and from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all thereof;
(d) all Partnership Interests of such Pledgor from time to time and
all of its right, title and interest in each partnership to which each such
interest relates, whether now existing or hereafter acquired, including,
without limitation:
(A) all its capital therein and its interest in all profits,
losses, Partnership Assets and other distributions to which such
Pledgor shall at any time be entitled in respect of such Partnership
Interests;
(B) all other payments due or to become due to such Pledgor in
respect of Partnership Interests, whether under any partnership
agreement or otherwise, whether as contractual obligations, damages,
insurance proceeds or otherwise;
-7-
(C) all of its claims, rights, powers, privileges, authority,
options, security interests, liens and remedies, if any, under any
partnership agreement or operating agreement, or at law or otherwise
in respect of such Partnership Interests;
(D) all present and future claims, if any, of such Pledgor
against any such partnership for moneys loaned or advanced, for
services rendered or otherwise;
(E) all of such Pledgor's rights under any partnership agreement
or operating agreement or at law to exercise and enforce every right,
power, remedy, authority, option and privilege of such Pledgor
relating to such Partnership Interests, including any power to
terminate, cancel or modify any partnership agreement or operating
agreement, to execute any instruments and to take any and all other
action on behalf of and in the name of any of such Pledgor in respect
of such Partnership Interests and any such partnership, to make
determinations, to exercise any election (including, but not limited
to, election of remedies) or option or to give or receive any notice,
consent, amendment, waiver or approval, together with full power and
authority to demand, receive, enforce, collect or receipt for any of
the foregoing or for any Partnership Asset, to enforce or execute any
checks, or other instruments or orders, to file any claims and to take
any action in connection with any of the foregoing (with all of the
foregoing rights only to be exercisable upon the occurrence and during
the continuation of an Event of Default); and
(F) all other property hereafter delivered in substitution for or
in addition to any of the foregoing, all certificates and instruments
representing or evidencing such other property and all cash,
securities, interest, dividends, rights and other property at any time
and from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all thereof;
(e) all Security Entitlements of such Pledgor from time to time in
any and all of the foregoing;
(f) all Financial Assets and Investment Property of such Pledgor from
time to time; and
(g) all Proceeds of any and all of the foregoing;
provided that (x) except to the extent provided by subsection 6.11 of the Credit
- --------
Agreement, no Pledgor (to the extent that it is a Domestic Subsidiary of a
Borrower) shall be required at any time to pledge hereunder more than 65% of the
Voting Stock of any Foreign Corporation and (y) each Pledgor shall be required
to pledge hereunder 100% of any Non-Voting Stock at any time and from time to
time acquired by such Pledgor of any Foreign Corporation.
-8-
3.2 Procedures. (a) To the extent that any Pledgor at any time or
----------
from time to time owns, acquires or obtains any right, title or interest in any
Collateral, such Collateral shall automatically (and without the taking of any
action by the respective Pledgor) be pledged pursuant to Section 3.1 of this
Agreement and, in addition thereto, such Pledgor shall (to the extent provided
below) take the following actions as set forth below (as promptly as practicable
and, in any event, within 10 days after it obtains such Collateral) for the
benefit of the Pledgee and the Secured Parties:
(i) with respect to a Certificated Security (other than a
Certificated Security credited on the books of a Clearing Corporation), the
respective Pledgor shall physically deliver such Certificated Security to
the Pledgee, endorsed to the Pledgee or endorsed in blank;
(ii) with respect to an Uncertificated Security (other than an
Uncertificated Security credited on the books of a Clearing Corporation),
the respective Pledgor shall cause the issuer of such Uncertificated
Security to duly authorize and execute, and deliver to the Pledgee, an
agreement for the benefit of the Pledgee and the other Secured Parties
substantially in the form of Annex G hereto (appropriately completed to the
satisfaction of the Pledgee and with such modifications, if any, as shall
be satisfactory to the Pledgee) pursuant to which such issuer agrees to
comply with any and all instructions originated by the Pledgee without
further consent by the registered owner and not to comply with instructions
regarding such Uncertificated Security (and any Partnership Interests and
Limited Liability Company Interests issued by such issuer) originated by
any other Person other than a court of competent jurisdiction; provided
--------
that Pledgee hereby agrees that it will not provide any instructions to any
such issuer unless and until an Event of Default has occurred and is
continuing.
(iii) with respect to a Certificated Security, Uncertificated
Security, Partnership Interest or Limited Liability Company Interest
credited on the books of a Clearing Corporation (including a Federal
Reserve Bank, Participants Trust Company or The Depository Trust Company),
the respective Pledgor shall promptly notify the Pledgee thereof and shall
promptly take all actions required (i) to comply with the applicable rules
of such Clearing Corporation and (ii) to perfect the security interest of
the Pledgee under applicable law (including, in any event, under Sections
9-115 (4)(a) and (b), 9-115 (1)(e) and 8-106 (d) of the UCC). Each Pledgor
further agrees to take such actions as the Pledgee deems necessary or
desirable to effect the foregoing;
(iv) with respect to a Partnership Interest or a Limited Liability
Company Interest (other than a Partnership Interest or Limited Liability
Interest credited on the books of a Clearing Corporation), (1) if such
Partnership Interest or Limited Liability Company Interest is represented
by a certificate, the procedure set forth in Section 3.2(a)(i), and (2) if
such Partnership Interest or Limited Liability Company Interest is not
represented by a certificate, the procedure set forth in Section
3.2(a)(ii);
-9-
(v) with respect to any Note (other than, to the extent no Event of
Default has occurred and is continuing, a Note that constitutes Chattel
Paper), physical delivery of such Note to the Pledgee, endorsed to the
Pledgee or endorsed in blank; and
(vi) after an Event of Default has occurred and is continuing, with
respect to cash, to the extent not otherwise provided in the Subsidiary
Security Agreement, (i) establishment by the Pledgee of a cash account in
the name of such Pledgor over which the Pledgee shall have exclusive and
absolute control and dominion (and no withdrawals or transfers may be made
therefrom by any Person except with the prior written consent of the
Pledgee) and (ii) deposit of such cash in such cash account.
(b) In addition to the actions required to be taken pursuant to
proceeding Section 3.2(a), each Pledgor shall take the following additional
actions with respect to the Securities and Collateral (as defined below):
(i) with respect to all Collateral of such Pledgor whereby or with
respect to which the Pledgee may obtain "control" thereof within the
meaning of Section 8-106 of the UCC (or under any provision of the UCC as
same may be amended or supplemented from time to time, or under the laws of
any relevant State other than the State of New York), the respective
Pledgor shall take all actions as may be requested from time to time by the
Pledgee so that "control" of such Collateral is obtained and at all times
held by the Pledgee; and
(ii) each Pledgor shall from time to time cause appropriate financing
statements (on Form UCC-1 or other appropriate form) under the Uniform
Commercial Code as in effect in the various relevant States, on form
covering all Collateral hereunder (with the form of such financing
statements to be satisfactory to the Pledgee), to be filed in the relevant
filing offices so that at all times the Pledgee has a security interest in
all Investment Property and other Collateral which is perfected by the
filing of such financing statements (in each case to the maximum extent
perfection by filing may be obtained under the laws of the relevant States,
including, without limitation, Section 9-115(4)(b) of the UCC).
3.3 Subsequently Acquired Collateral. If any Pledgor shall acquire
--------------------------------
(by purchase, stock dividend or otherwise) any additional Collateral at any time
or from time to time after the date hereof, such Collateral shall automatically
(and without any further action being required to be taken) be subject to the
pledge and security interests created pursuant to Section 3.1 and, furthermore,
such Pledgor will promptly thereafter take (or cause to be taken) all action
with respect to such Collateral in accordance with the procedures set forth in
Section 3.2, and will promptly thereafter deliver to the Pledgee (i) a
certificate executed by a principal executive officer of such Pledgor describing
such Collateral and certifying that the same has been duly pledged in favor of
the Pledgee (for the benefit of the Secured Parties) hereunder and (ii)
supplements to Annexes A through F hereto as are necessary to cause such annexes
to be complete and accurate at such time. Without limiting the foregoing, each
Pledgor shall be required to pledge hereunder any shares of stock at any time
and from time to time after the date hereof acquired by such Pledgor of any
Foreign Corporation, provided that (x) except to the extent provided by
--------
-10-
subsection 6.11 of the Credit Agreement, no Pledgor (to the extent that it is a
Domestic Subsidiary of a Borrower) shall be required at any time to pledge
hereunder more than 65% of the Voting Stock of any Foreign Corporation and (y)
each Pledgor shall be required to pledge hereunder 100% of any Non-Voting Stock
at any time and from time to time acquired by such Pledgor of any Foreign
Corporation.
3.4 Transfer Taxes. Each pledge of Collateral under Section 3.1 or
--------------
Section 3.3 shall be accompanied by any transfer tax stamps required in
connection with the pledge of such Collateral.
3.5 Definition of Pledged Notes. All Notes at any time pledged or
---------------------------
required to be pledged hereunder are hereinafter called the "Pledged Notes".
3.6 Certain Representations and Warranties Regarding the Collateral.
---------------------------------------------------------------
Each Pledgor represents and warrants that on the date hereof (i) each Subsidiary
of such Pledgor, and the direct ownership thereof, is listed in Annex A hereto;
(ii) the Stock held by such Pledgor consists of the number and type of shares of
the stock of the corporations as described in Annex B hereto; (iii) such Stock
constitutes that percentage of the issued and outstanding capital stock of the
issuing corporation as is set forth in Annex B hereto; (iv) the Notes held by
such Pledgor consist of the promissory notes described in Annex C hereto where
such Pledgor is listed as the lender; (v) the Limited Liability Company
Interests held by such Pledgor consist of the number and type of interests of
the Persons described in Annex D hereto; (vi) each such Limited Liability
Company Interest constitutes that percentage of the issued and outstanding
equity interest of the issuing Person as set forth in Annex D hereto; (vii) the
Partnership Interests held by such Pledgor consist of the number and type of
interests of the Persons described in Annex E hereto; (viii) each such
Partnership Interest constitutes that percentage or portion of the entire
partnership interest of the Partnership as set forth in Annex E hereto; (ix) the
Pledgor has complied with the respective procedure set forth in Section 3.2(a)
with respect to each item of Collateral described in Annexes A through E hereto;
and (x) on the date hereof, such Pledgor owns no other Securities, Limited
Liability Company Interests or Partnership Interests.
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee shall
---------------------------------------------
have the right to appoint one or more sub-agents for the purpose of retaining
physical possession of the Collateral, which may be held (in the discretion of
the Pledgee) in the name of the relevant Pledgor, endorsed or assigned in blank
or in favor of the Pledgee or any nominee or nominees of the Pledgee or a sub-
agent appointed by the Pledgee.
5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until there
---------------------------------------
shall have occurred and be continuing an Event of Default, each Pledgor shall be
entitled to exercise all voting rights attaching to any and all Collateral owned
by it, and to give consents, waivers or ratifications in respect thereof
provided that no vote shall be cast or any consent, waiver or ratification given
- --------
or any action taken which would violate, result in breach of any covenant
contained in, or be inconsistent with, any of the terms of this Agreement, the
Credit Agreement, any other Loan Document or any Hedging Agreement
(collectively, the "Secured Debt Agreements"), or which would have the effect of
impairing the value of the Collateral or any part thereof or the position or
interests of the Pledgee or any other Secured Creditor therein. All
-11-
such rights of a Pledgor to vote and to give consents, waivers and ratifications
shall cease in case an Event of Default (or a Default under Section 8.6 or 8.7
of the Credit Agreement) shall occur and be continuing and Section 7 hereof
shall become applicable.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless and until an Event of
---------------------------------
Default shall have occurred and be continuing, all cash dividends, cash
distributions, cash Proceeds and other cash amounts payable in respect of the
Collateral shall be paid to the respective Pledgor. Subject to Section 3.2
hereof, the Pledgee shall be entitled to receive directly, and to retain as part
of the Collateral:
(i) all other or additional stock, notes, limited liability company
interests, partnership interests, instruments or other securities or
property (including, but not limited to, cash dividends other than as set
forth above) paid or distributed by way of dividend or otherwise in respect
of the Collateral;
(ii) all other or additional stock, notes, limited liability company
interests, partnership interests, instruments or other securities or
property (including, but not limited to, cash) paid or distributed in
respect of the Collateral by way of stock-split, spin-off, split-up,
reclassification, combination of shares or similar rearrangement; and
(iii) all other or additional stock, notes, limited liability company
interests, partnership interests, instruments or other securities or
property (including, but not limited to, cash) which may be paid in respect
of the Collateral by reason of any consolidation, merger, exchange of
stock, conveyance of assets, liquidation or similar corporate
reorganization.
Nothing contained in this Section 6 shall limit or restrict in any way the
Pledgee's right to receive the proceeds of the Collateral in any form in
accordance with Section 3 of this Agreement. All dividends, distributions or
other payments which are received by the respective Pledgor contrary to the
provisions of this Section 6 or Section 7 shall be received for the benefit of
the Pledgee, shall be segregated from other property or funds of such Pledgor
and shall be forthwith paid over to the Pledgee as Collateral in the same form
as so received (with any necessary endorsement).
7. REMEDIES IN CASE OF AN EVENT OF DEFAULT. In case an Event of
---------------------------------------
Default shall have occurred and be continuing, the Pledgee shall be entitled to
exercise all of the rights, powers and remedies (whether vested in it by this
Agreement or by any other Secured Debt Agreement or by law) for the protection
and enforcement of its rights in respect of the Collateral, including, without
limitation, all the rights and remedies of a secured party upon default under
the Uniform Commercial Code of the State of New York, and the Pledgee shall be
entitled, without limitation, to exercise any or all of the following rights,
which each Pledgor hereby agrees to be commercially reasonable:
(i) to receive all amounts payable in respect of the Collateral
otherwise payable under Section 6 to such Pledgor;
-12-
(ii) to transfer all or any part of the Collateral into the Pledgee's
name or the name of its nominee or nominees;
(iii) to accelerate any Pledged Note which may be accelerated in
accordance with its terms, and take any other lawful action to collect upon
any Pledged Note (including, without limitation, to make any demand for
payment thereon);
(iv) to vote all or any part of the Collateral (whether or not
transferred into the name of the Pledgee) and give all consents, waivers
and ratifications in respect of the Collateral and otherwise act with
respect thereto as though it were the outright owner thereof (each Pledgor
hereby irrevocably constituting and appointing the Pledgee the proxy and
attorney-in-fact of such Pledgor, with full power of substitution to do
so);
(v) at any time or from time to time to sell, assign and deliver, or
grant options to purchase, all or any part of the Collateral, or any
interest therein, at any public or private sale, without demand of
performance, advertisement or notice of intention to sell or of the time or
place of sale or adjournment thereof or to redeem or otherwise (all of
which are hereby waived by each Pledgor), for cash, on credit or for other
property, for immediate or future delivery without any assumption of credit
risk, and for such price or prices and on such terms as the Pledgee in its
absolute discretion may determine; provided that at least 10 days' notice
--------
of the time and place of any such sale shall be given to such Pledgor. The
Pledgee shall not be obligated to make such sale of Collateral regardless
of whether any such notice of sale has theretofore been given. Each
purchaser at any such sale shall hold the property so sold absolutely free
from any claim or right on the part of each Pledgor, and each Pledgor
hereby waives and releases to the fullest extent permitted by law any right
or equity of redemption with respect to the Collateral, whether before or
after sale hereunder, all rights, if any, of marshalling the Collateral and
any other security for the Obligations or otherwise, and all rights, if
any, of stay and/or appraisal which it now has or may at any time in the
future have under rule of law or statute now existing or hereafter enacted.
At any such sale, unless prohibited by applicable law, the Pledgee on
behalf of all Secured Parties (or certain of them) may bid for and purchase
(by bidding in Obligations or otherwise) all or any part of the Collateral
so sold free from any such right or equity of redemption. Neither the
Pledgee nor any other Secured Party shall be liable for failure to collect
or realize upon any or all of the Collateral or for any delay in so doing
nor shall any of them be under any obligation to take any action whatsoever
with regard thereto; and
(vi) to set-off any and all Collateral against any and all
Obligations, and to withdraw any and all cash or other Collateral from any
and all Collateral Accounts and to apply such cash and other Collateral to
the payment of any and all Obligations;
provided that, upon the occurrence of a Default under Section 8.6 or 8.7 of the
- -------- ----
Credit Agreement, the Pledgee may exercise the rights specified in clause (i)
above.
8. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of the
--------------------------
Pledgee provided for in this Agreement or any other Secured Debt Agreement, or
now or
-13-
hereafter existing at law or in equity or by statute shall be cumulative and
concurrent and shall be in addition to every other such right, power or remedy.
The exercise or beginning of the exercise by the Pledgee or any other Secured
Party of any one or more of the rights, powers or remedies provided for in this
Agreement or any other Secured Debt Agreement or now or hereafter existing at
law or in equity or by statute or otherwise shall not preclude the simultaneous
or later exercise by the Pledgee or any other Secured Party of all such other
rights, powers or remedies, and no failure or delay on the part of the Pledgee
or any other Secured Party to exercise any such right, power or remedy shall
operate as a waiver thereof. Unless otherwise required by the Loan Documents, no
notice to or demand on any Pledgor in any case shall entitle such Pledgor to any
other or further notice or demand in similar other circumstances or constitute a
waiver of any of the rights of the Pledgee or any other Secured Party to any
other or further action in any circumstances without demand or notice. The
Secured Parties agree that this Agreement may be enforced only by the action of
the Pledgee, acting upon the instructions of the Requisite Lenders (or, after
the date on which all Credit Agreement Obligations have been paid in full, the
holders of at least a majority of the Hedging Obligations) and that no other
Secured Party shall have any right individually to seek to enforce or to enforce
this Agreement or to realize upon the security to be granted hereby, it being
understood and agreed that such rights and remedies may be exercised by the
Pledgee or the holders of at least a majority of the Hedging Obligations, as the
case may be, for the benefit of the Secured Parties upon the terms of this
Agreement and the other Loan Documents.
9. APPLICATION OF PROCEEDS. (a) All moneys collected by the Pledgee
-----------------------
upon any sale or other disposition of the Collateral pursuant to the terms of
this Agreement, together with all other moneys received by the Pledgee
hereunder, shall be applied to the payment of the Obligations in the manner
provided in subsection 2.4D of the Credit Agreement.
(b) It is understood and agreed that the Pledgors shall remain
jointly and severally liable to the extent of any deficiency between the amount
of proceeds of the Collateral hereunder and the aggregate amount of the
Obligations.
10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the
------------------------
Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), the receipt of the Pledgee or the
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold, and such purchaser or purchasers shall not
be obligated to see to the application of any part of the purchase money paid
over to the Pledgee or such officer or be answerable in any way for the
misapplication or nonapplication thereof.
11. INDEMNITY. Each Pledgor jointly and severally agrees (i) to
---------
indemnify and hold harmless the Pledgee, each other Secured Party and their
respective successors, assigns, employees, agents and servants (individually an
"Indemnitee", and collectively, the "Indemnitees") from and against any and all
claims, demands, losses, judgments and liabilities (including liabilities for
penalties) of whatsoever kind or nature, and (ii) to reimburse each Indemnitee
for all reasonable costs and expenses, including reasonable attorneys' fees, in
each case arising out of or resulting from this Agreement or the exercise by any
Indemnitee of any right or remedy granted to it hereunder or under any other
Secured Debt Agreement (but excluding any claims, demands,
-14-
losses, judgments and liabilities (including liabilities for penalties) or
expenses of whatsoever kind or nature to the extent incurred or arising by
reason of gross negligence or willful misconduct of such Indemnitee). In no
event shall any Indemnitee hereunder be liable, in the absence of gross
negligence or willful misconduct on its part, for any matter or thing in
connection with this Agreement other than to account for monies or other
property actually received by it in accordance with the terms hereof. If and to
the extent that the obligations of any Pledgor under this Section 11 are
unenforceable for any reason, each Pledgor hereby agrees to make the maximum
contribution to the payment and satisfaction of such obligations which is
permissible under applicable law. The indemnity obligations of each Pledgor
contained in this Section 11 shall continue in full force and effect
notwithstanding the full payment of all the Notes issued under the Credit
Agreement, the termination of all Hedging Agreements and Letters of Credit, and
the payment of all other Obligations and notwithstanding the discharge thereof.
12. FURTHER ASSURANCES; POWER OF ATTORNEY. (a) Each Pledgor agrees
-------------------------------------
that it will join with the Pledgee in executing and, at such Pledgor's own
expense, file and refile under the Uniform Commercial Code such financing
statements, continuation statements and other documents in such offices as the
Pledgee (acting on its own or on the instructions of the Requisite Lenders) may
reasonably deem necessary or appropriate and wherever required or permitted by
law in order to perfect and preserve the Pledgee's security interest in the
Collateral hereunder and hereby authorizes the Pledgee to file financing
statements and amendments thereto relative to all or any part of the Collateral
without the signature of such Pledgor where permitted by law, and agrees to do
such further acts and things and to execute and deliver to the Pledgee such
additional conveyances, assignments, agreements and instruments as the Pledgee
may reasonably require or deem advisable to carry into effect the purposes of
this Agreement or to further assure and confirm unto the Pledgee its rights,
powers and remedies hereunder or thereunder.
(b) Each Pledgor hereby appoints the Pledgee such Pledgor's attorney-
in-fact, with full authority in the place and stead of such Pledgor and in the
name of such Pledgor or otherwise, from time to time after the occurrence and
during the continuance of an Event of Default, in the Pledgee's discretion to
take any action and to execute any instrument which the Pledgee may deem
necessary or advisable to accomplish the purposes of this Agreement.
13. THE PLEDGEE AS COLLATERAL AGENT. The Pledgee will hold in
-------------------------------
accordance with this Agreement all items of the Collateral at any time received
under this Agreement. It is expressly understood and agreed that the
obligations of the Pledgee as holder of the Collateral and interests therein and
with respect to the disposition thereof, and otherwise under this Agreement, are
only those expressly set forth in the UCC and this Agreement. The Pledgee shall
act hereunder on the terms and conditions set forth herein and in Section 9 of
the Credit Agreement.
14. TRANSFER BY THE PLEDGORS. No Pledgor will sell or otherwise
------------------------
dispose of, grant any option with respect to, or mortgage, pledge or otherwise
encumber any of the Collateral or any interest therein (except in accordance
with the terms of this Agreement and the Loan Documents).
-15-
15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGORS. (a)
---------------------------------------------------------
Each Pledgor represents, warrants and covenants that:
(i) it is the legal, beneficial and record owner of, and has good
and marketable title to, all Collateral consisting of one or more
Securities and that it has sufficient interest in all Collateral in which a
security interest is purported to be created hereunder for such security
interest to attach (subject, in each case, to no pledge, lien, mortgage,
hypothecation, security interest, charge, option, Adverse Claim or other
encumbrance whatsoever, except the liens and security interests created by
this Agreement or permitted under the Credit Agreement);
(ii) it has full power, authority and legal right to pledge all the
Collateral pledged by it pursuant to this Agreement;
(iii) this Agreement has been duly authorized, executed and delivered
by such Pledgor and constitutes a legal, valid and binding obligation of
such Pledgor enforceable against such Pledgor in accordance with its terms,
except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws generally affecting creditors' rights and by equitable
principles (regardless of whether enforcement is sought in equity or at
law);
(iv) except to the extent already obtained or made, no consent of any
other party (including, without limitation, any stockholder or creditor of
such Pledgor or any of its Subsidiaries) and no consent, license, permit,
approval or authorization of, exemption by, notice or report to, or
registration, filing or declaration with, any governmental authority is
required to be obtained by such Pledgor in connection with (a) the
execution, delivery or performance of this Agreement, (b) the validity or
enforceability of this Agreement (except as set forth in clause (iii)
above), (c) the perfection or enforceability of the Pledgee's security
interest in the Collateral or (d) except for compliance with or as may be
required by applicable securities laws, the exercise by the Pledgee of any
of its rights or remedies provided herein;
(v) the execution, delivery and performance of this Agreement will
not violate any provision of any applicable law or regulation or of any
order, judgment, writ, award or decree of any court, arbitrator or
governmental authority, domestic or foreign, applicable to such Pledgor, or
of the certificate of incorporation, operating agreement, limited liability
company agreement or by-laws of such Pledgor or of any securities issued by
such Pledgor or any of its Subsidiaries, or of any mortgage, deed of trust,
indenture, lease, loan agreement, credit agreement or other contract,
agreement or instrument or undertaking to which such Pledgor or any of its
Subsidiaries is a party or which purports to be binding upon such Pledgor
or any of its Subsidiaries or upon any of their respective assets and will
not result in the creation or imposition of (or the obligation to create or
impose) any lien or encumbrance on any of the assets of such Pledgor or any
of its Subsidiaries except as contemplated by this Agreement (other than
the Liens created by the Collateral Documents);
-16-
(vi) the pledge, collateral assignment and delivery to the Pledgee of
the Collateral consisting of certificated securities pursuant to this
Agreement creates a valid and perfected First Priority security interest in
such Securities, and the proceeds thereof, subject to no prior Lien or
encumbrance or to any agreement purporting to grant to any third party a
Lien or encumbrance on the property or assets of such Pledgor which would
include the Securities (other than Permitted Encumbrances) and the Pledgee
is entitled to all the rights, priorities and benefits afforded by the UCC
or other relevant law as enacted in any relevant jurisdiction to perfect
security interests in respect of such Collateral; and
(vii) "control" (as defined in Section 8-106 of the UCC) has been
obtained by the Pledgee over all Collateral consisting of Securities
(including Notes which are Securities) with respect to which such "control"
may be obtained pursuant to Section 8-106 of the UCC.
(b) Each Pledgor covenants and agrees that it will defend the
Pledgee's right, title and security interest in and to the Securities and the
proceeds thereof against the claims and demands of all persons whomsoever; and
each Pledgor covenants and agrees that it will have like title to and right to
pledge any other property at any time hereafter pledged to the Pledgee as
Collateral hereunder and will likewise defend the right thereto and security
interest therein of the Pledgee and the other Secured Parties.
(c) Each Pledgor covenants and agrees that it will take no action
which would violate any of the terms of any Secured Debt Agreement.
16. CHIEF EXECUTIVE OFFICE; RECORDS. The chief executive office of
-------------------------------
each Pledgor is located at the address specified in Annex F hereto. Each
Pledgor will not move its chief executive office except to such new location as
such Pledgor may establish in accordance with the last sentence of this Section
16. The originals of all documents in the possession of such Pledgor evidencing
all Collateral, including but not limited to all Limited Liability Company
Interests and Partnership Interests, and the only original books of account and
records of such Pledgor relating thereto are, and will continue to be, kept at
such chief executive office at the location specified in Annex F hereto, or at
such new locations as such Pledgor may establish in accordance with the last
sentence of this Section 16. All Limited Liability Company Interests and
Partnership Interests are, and will continue to be, maintained at, and
controlled and directed (including, without limitation, for general accounting
purposes) from, such chief executive office location specified in Annex F
hereto, or such new locations as the respective Pledgor may establish in
accordance with the last sentence of this Section 16. No Pledgor shall
establish a new location for such offices until (i) it shall have given to the
Collateral Agent not less than 30 days' prior written notice of its intention so
to do, clearly describing such new location and providing such other information
in connection therewith as the Collateral Agent may reasonably request and (ii)
with respect to such new location, it shall have taken all action, satisfactory
to the Collateral Agent, to maintain the security interest of the Collateral
Agent in the Collateral intended to be granted hereby at all times fully
perfected and in full force and effect. Promptly after establishing a new
location for such offices in accordance with the immediately preceding sentence,
the respective Pledgor shall deliver to the Pledgee a supplement to Annex F
hereto so as to cause such Annex F hereto to be complete and accurate.
-17-
17. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of each
------------------------------------
Pledgor under this Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by, any circumstance or
occurrence whatsoever (other than termination of this Agreement pursuant to
Section 19 hereof), including, without limitation:
(i) any renewal, extension, amendment or modification of, or
addition or supplement to or deletion from any Secured Debt Agreement
(other than this Agreement in accordance with its terms), or any other
instrument or agreement referred to therein, or any assignment or transfer
of any thereof;
(ii) any waiver, consent, extension, indulgence or other action or
inaction under or in respect of any such agreement or instrument or this
Agreement (other than a waiver, consent or extension with respect to this
Agreement in accordance with its terms);
(iii) any furnishing of any additional security to the Pledgee or its
assignee or any acceptance thereof or any release of any security by the
Pledgee or its assignee;
(iv) any limitation on any party's liability or obligations under
any such instrument or agreement or any invalidity or unenforceability, in
whole or in part, of any such instrument or agreement or any term thereof;
or
(v) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceeding relating to
any Pledgor or any Subsidiary of any Pledgor, or any action taken with
respect to this Agreement by any trustee or receiver, or by any court, in
any such proceeding, whether or not such Pledgor shall have notice or
knowledge of any of the foregoing.
18. SALE OF COLLATERAL WITHOUT REGISTRATION. If at any time when the
----------------------------------------
Pledgee shall determine to exercise its right to sell all or any part of the
Collateral consisting of Securities, Limited Liability Company Interests or
Partnership Interests pursuant to Section 7, and such Collateral or the part
thereof to be sold shall not, for any reason whatsoever, be effectively
registered under the Securities Act of 1933, as then in effect, the Pledgee may,
in its sole and absolute discretion, sell such Collateral or part thereof by
private sale in such manner and under such circumstances as the Pledgee may deem
necessary or advisable in order that such sale may legally be effected without
such registration. Without limiting the generality of the foregoing, in any such
event the Pledgee, in its sole and absolute discretion: (i) may proceed to make
such private sale notwithstanding that a registration statement for the purpose
of registering such Collateral or part thereof shall have been filed under such
Securities Act; (ii) may approach and negotiate with a single possible purchaser
to effect such sale; and (iii) may restrict such sale to a purchaser who will
represent and agree that such purchaser is purchasing for its own account, for
investment, and not with a view to the distribution or sale of such Collateral
or part thereof. In the event of any such sale, the Pledgee shall incur no
responsibility or liability for selling all or any part of the Collateral at a
price which the Pledgee, in its sole and absolute discretion, may in good faith
deem reasonable under the circumstances, notwithstanding the possibility that a
substantially higher price might be realized if the sale were deferred until the
registration as aforesaid.
-18-
19. TERMINATION; RELEASE. (a) On the Termination Date (as defined
--------------------
below), this Agreement shall terminate (provided that all indemnities set forth
herein including, without limitation, in Section 11 hereof shall survive any
such termination) and the Pledgee, at the request and expense of the respective
Pledgor, will execute and deliver to such Pledgor a proper instrument or
instruments acknowledging the satisfaction and termination of this Agreement
(including, without limitation, UCC termination statements and instruments of
satisfaction, discharge and/or reconveyance), and will duly assign, transfer and
deliver to such Pledgor (without recourse and without any representation or
warranty) such of the Collateral as may be in the possession of the Pledgee and
as has not theretofore been sold or otherwise applied or released pursuant to
this Agreement, together with any moneys at the time held by the Pledgee or any
of its sub-agents hereunder and, with respect to any Collateral consisting of an
Uncertificated Security (other than an Uncertificated Security credited on the
books of a Clearing Corporation), a Partnership Interest or a Limited Liability
Company Interest, a termination of the agreement relating thereto executed and
delivered by the issuer of such Uncertificated Security pursuant to Section
3.2(a)(ii) or by the respective partnership or limited liability company
pursuant to Section 3.2(a)(iv). As used in this Agreement, "Termination Date"
shall mean the date upon which the Total Commitments and all Hedging Agreements
have been terminated, no Letter of Credit or Note is outstanding (and all Loans
have been paid in full), all Letters of Credit have been terminated, and all
other Obligations then due and payable have been paid in full.
(b) In the event that any part of the Collateral is sold or otherwise
disposed of in connection with a sale or disposition permitted by Section 7.7 of
the Credit Agreement or is otherwise released at the direction of the Requisite
Lenders (or all of the Lenders to the extent required by subsection 10.6 of the
Credit Agreement) and the proceeds of such sale or sales or from such release
are applied in accordance with the terms of the Credit Agreement to the extent
required to be so applied, the Pledgee, at the request and expense of the
respective Pledgor will duly assign, transfer and deliver to such Pledgor
(without recourse and without any representation or warranty) such of the
Collateral as is then being (or has been) so sold or released and as may be in
possession of the Pledgee and has not theretofore been released pursuant to this
Agreement.
(c) At any time that any Pledgor desires that Collateral be released
as provided in the foregoing Section 19(a) or (b), it shall deliver to the
Pledgee a certificate signed by a principal executive officer of such Pledgor
stating that the release of the respective Collateral is permitted pursuant to
Section 19(a) or (b). If reasonably requested by the Pledgee (although the
Pledgee shall have no obligation to make any such request), the relevant Pledgor
shall furnish appropriate legal opinions (from counsel reasonably acceptable to
the Pledgee) to the effect set forth in the immediately preceding sentence. The
Pledgee shall have no liability whatsoever to any Secured Party as the result of
any release of Collateral by it as permitted by this Section 19.
20. NOTICES, ETC. All notices and other communications hereunder
-------------
shall be in writing and shall be delivered or mailed by first class mail,
postage prepaid, addressed:
(i) if to any Pledgor, at its address set forth opposite its
signature below;
-19-
(ii) if to the Pledgee, at:
J.P. Morgan Services, Inc.
500 Stanton Christiana Road
Newark, Delaware
Attention: Nicole Pedicone
Tel: (302) 634-1912
Fax: (302) 634-4300
(iii) if to any Lender (other than the Pledgee), at such address as
such Lender shall have specified in the Credit Agreement;
(iv) if to any Hedging Exchanger, at such address as such Hedging
Exchanger shall have specified in writing to Holdings and the Pledgee;
or at such address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
21. PLEDGEE NOT A PARTNER OR LIMITED LIABILITY COMPANY MEMBER. (a)
---------------------------------------------------------
Nothing herein shall be construed to make the Pledgee or any other Secured Party
liable as a member of any limited liability company or partnership and neither
the Pledgee nor any other Secured Party by virtue of this Agreement or otherwise
(except as referred to in the following sentence) shall have any of the duties,
obligations or liabilities of a member of any limited liability company or
partnership. The parties hereto expressly agree that, unless the Pledgee shall
become the absolute owner of Collateral consisting of a Limited Liability
Company Interest or Partnership Interest pursuant hereto, this Agreement shall
not be construed as creating a partnership or joint venture among the Pledgee,
any other Secured Party and/or any Pledgor.
(b) Except as provided in the last sentence of paragraph (a) of this
Section 21, the Pledgee, by accepting this Agreement, did not intend to become a
member of any limited liability company or partnership or otherwise be deemed to
be a co-venturer with respect to any Pledgor or any limited liability company or
partnership either before or after an Event of Default shall have occurred. The
Pledgee shall have only those powers set forth herein and the Secured Parties
shall assume none of the duties, obligations or liabilities of a member of any
limited liability company or partnership or any Pledgor except as provided in
the last sentence of paragraph (a) of this Section 21.
(c) The Pledgee and the other Secured Parties shall not be obligated
to perform or discharge any obligation of any Pledgor as a result of the pledge
hereby effected.
(d) The acceptance by the Pledgee of this Agreement, with all the
rights, powers, privileges and authority so created, shall not at any time or in
any event obligate the Pledgee or any other Secured Party to appear in or defend
any action or proceeding relating to the Collateral to which it is not a party,
or to take any action hereunder or thereunder, or to expend any money or incur
any expenses or perform or discharge any obligation, duty or liability under the
Collateral.
-20-
22. WAIVER; AMENDMENT. Except as contemplated in Section 25 hereof,
-----------------
none of the terms and conditions of this Agreement may be changed, waived,
discharged or terminated in any manner whatsoever unless such change, waiver,
discharge or termination is in writing duly signed by each Pledgor to be bound
thereby and the Collateral Agent (with the consent of the Requisite Lenders or,
to the extent required by subsection 10.6 of the Credit Agreement, all of the
Lenders), provided, however, that no such change, waiver, modification or
-------- -------
variance shall be made to Section 11 hereof or this Section 22 without the
consent of each Secured Party adversely affected thereby, provided further that
----------------
any change, waiver, modification or variance affecting the rights and benefits
of a single Class (as defined below) of Secured Parties (and not all Secured
Parties in a like or similar manner) shall require the written consent of the
Requisite Creditors of such Class of Secured Parties. For the purpose of this
Agreement, the term "Class" shall mean each class of Secured Parties, i.e.,
whether (x) the Bank Creditors as holders of the Credit Agreement Obligations,
(y) the Hedging Exchangers as holders of the Hedging Obligations. For the
purpose of this Agreement, the term "Requisite Creditors" of any Class shall
mean each of (x) with respect to each of the Credit Agreement Obligations, the
Requisite Lenders and (y) with respect to the Hedging Obligations, the holders
of more than 50% of all obligations outstanding from time to time under the
Hedging Agreements.
23. MISCELLANEOUS. This Agreement shall create a continuing security
-------------
interest in the Collateral and shall (i) remain in full force and effect,
subject to release and/or termination as set forth in Section 19, (ii) be
binding upon each Pledgor, its successors and assigns; provided, however, that
-------- -------
no Pledgor shall assign any of its rights or obligations hereunder without the
prior written consent of the Pledgee (with the prior written consent of the
Requisite Lenders or to the extent required by subsection 10.6 of the Credit
Agreement, all of the Lenders), and (iii) inure, together with the rights and
remedies of the Pledgee hereunder, to the benefit of the Pledgee, the other
Secured Parties and their respective successors, transferees and assigns. THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION, SECTION 5-
1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE CODE PROVIDES THAT
THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN
RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF NEW YORK. The headings of the several sections and
subsections in this Agreement are for purposes of reference only and shall not
limit or define the meaning hereof. 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. In the event that any provision of
this Agreement shall prove to be invalid or unenforceable, such provision shall
be deemed to be severable from the other provisions of this Agreement which
shall remain binding on all parties hereto.
24. WAIVER OF JURY TRIAL. EACH PLEDGOR AND COLLATERAL AGENT HEREBY
--------------------
AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT
-21-
OF THIS AGREEMENT. The scope of this waiver is intended to be all-encompassing
of any and all disputes that may be filed in any court and that relate to the
subject matter of this transaction, including, without limitation, contract
claims, tort claims, breach of duty claims, and all other common law and
statutory claims. The Pledgors and Collateral Agent each acknowledge that this
waiver is a material inducement for the Pledgors and Collateral Agent to enter
into a business relationship, that each Pledgor and Collateral Agent have
already relied on this waiver in entering into this Agreement and that each will
continue to rely on this waiver in their related future dealings. Each Pledgor
and Collateral Agent further warrant and represent that each has reviewed this
waiver with its legal counsel, and that each knowingly and voluntarily waives
its jury trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING
(OTHER THAN BY A MUTUAL WRIITEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 25
AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
In the event of litigation, this Agreement may be filed as a written consent to
a trial by the court.
25. ADDITIONAL PLEDGORS. It is understood and agreed that any
-------------------
Subsidiary of Holdings that is required to execute a counterpart of this
Agreement after the date hereof pursuant to the Credit Agreement shall
automatically become a Pledgor hereunder by executing a counterpart hereof and
delivering the same to the Pledgee.
26. RECOURSE. This Agreement is made with full recourse to the
--------
Pledgors and pursuant to and upon all the representations, warranties, covenants
and agreements on the part of the Pledgors contained herein and in the other
Secured Debt Agreements and otherwise in writing in connection herewith or
therewith.
27. LIMITED OBLIGATIONS. It is the desire and intent of each Pledgor
-------------------
and the Secured Parties that this Agreement shall be enforced against each
Pledgor to the fullest extent permissible under the laws and public policies
applied in each jurisdiction in which enforcement is sought. Notwithstanding
anything to the contrary contained herein, in furtherance of the foregoing, it
is noted that the obligations of each Pledgor have been limited as provided in
the Subsidiary Guaranty.
28. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
----------------------------------------------
PROCEEDINGS BROUGHT AGAINST ANY PLEDGOR ARISING OUT OF OR RELATING TO THIS
AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL
COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY
EXECUTING AND DELIVERING THIS AGREEMENT, EACH PLEDGOR, FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NON-EXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANT DEFENSE OF FORUM NON CONVENIENS;
-22-
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO SUCH PLEDGOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION
20;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH PLEDGOR IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT;
(V) AGREES THAT COLLATERAL AGENT RETAINS THE RIGHT TO SERVE PROCESS
IN ANY OTHER MATTER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST SUCH
PLEDGOR IN THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SECTION 27 RELATING TO THE
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT
PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.
29. ADMINISTRATIVE AGENT AS COLLATERAL AGENT. Administrative agent
----------------------------------------
has been appointed to act as Collateral Agent hereunder by Lenders and, by their
acceptance of the benefits hereof, Hedging Exchangers. Collateral Agent shall
at all times be the same Person that is appointed Administrative Agent under the
Credit Agreement. Written notice of resignation by Administrative Agent
pursuant to subsection 9.5 of the Credit Agreement shall also constitute notice
of resignation as Collateral Agent under this Agreement; removal of
Administrative Agent pursuant to subsection 9.5 of the Credit Agreement shall
also constitute removal as Collateral Agent under this Agreement; and
appointment of a successor Administrative Agent pursuant to subsection 9.5 of
the Credit Agreement shall also constitute appointment of a successor Collateral
Agent under this Agreement. Upon the acceptance of any appointment as
Administrative Agent under subsection 9.5 of the Credit Agreement by a successor
Administrative Agent, that successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Collateral Agent under this Agreement, shall promptly
(i) transfer to such successor Collateral Agent all sums, securities and other
items of Collateral held hereunder, together with all records and other
documents necessary or appropriate in connection with the performance of the
duties of the successor Collateral Agent under this Agreement, and (ii) execute
and deliver to such successor Collateral Agent such amendments to financing
statements, and take such other actions, as may be necessary or appropriate in
connection with the assignment to such successor Collateral Agent of the
security interests created hereunder, whereupon such retiring or removed
Collateral Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring or removed Administrative Agent's resignation or
removal hereunder as Collateral Agent, the provisions of this Agreement shall
inure to its benefit as to any actions taken or omitted to be taken by it under
this Agreement while it was Collateral Agent hereunder.
[Remainder of page intentionally left blank]
-23-
IN WITNESS WHEREOF, each Pledgor and the Pledgee have caused this
Agreement to be executed by their duly elected officers duly authorized as of
the date first written above.
DOMINO'S PIZZA, INC.
By: /s/ Harry Silverman
-----------------------------------
Name: Harry Silverman
Title: Vice President
DOMINO'S PIZZA INTERNATIONAL, INC.
By: /s/ Harry Silverman
------------------------------------
Name: Harry Silverman
Title: Vice President
METRO DETROIT PIZZA, INC.
By: /s/ Harry Silverman
------------------------------------
Name: Harry Silverman
Title: Vice President
DOMINO'S PIZZA SALES INTERNATIONAL, INC.
By: /s/ Harry Silverman
-------------------------------------
Name: Harry Silverman
Title: Vice President
PIZZA INTERNATIONAL PAYROLL SERVICES,
INC.
By: /s/ Harry Silverman
----------------------------------------------
Name: Harry Silverman
Title: Vice President
Notice Address
30 Frank Lloyd Wright Drive
P.O. Box 997
Ann Arbor, MI 48106
Attention: Steve Benrubi
Telephone: (734) 930-3205
Facsimile: (734) 913-0377
DOMINO'S PIZZA GOVERNMENT SERVICES DIVISION, INC.
By: /s/ Harry Silverman
-----------------------------------------------
Name: Harry Silverman
Title: Vice President
STOREFINDER, INC.
By: /s/ Harry Silverman
----------------------------------------------
Name: Harry Silverman
Title: Vice President
Notice Address:
30 Frank Lloyd Wright Drive
P.O. Box 997
Ann Arbor, MI 48106
Attention: Steve Benrubi
Telephone: (734) 930-3205
Facsimile: (734) 913-0377
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Collateral Agent
By: /s/ Colleen Galle
--------------------
Name: Colleen Galle
Title: Vice President
Notice Address:
J.P. Morgan Securities, Inc.
60 Wall Street
New York, New York
Attention: Kelly Moy
Telephone: (212) 648-7795
Facsimile: (212) 648-5556
ANNEX A
-------
LIST OF SUBSIDIARIES
--------------------
I. [NAME OF SUBSIDIARY]
[LIST SUBSIDIARIES OF ABOVE SUBSIDIARY]
II. [NAME OF SUBSIDIARY]
[LIST SUBSIDIARIES OF ABOVE SUBSIDIARY II]
ANNEX B
-------
LIST OF STOCK
-------------
I. [NAME OF SUBSIDIARY]
Name of Type of Number of Certificate Percentage Sub-clause of
Issuing Shares Shares No. Owned of Section 3.2(a)
Corporation Pledge Agreement
----------- ------ --------- ----------- ---------- -----------------
[TO BE PROVIDED BY THE PLEDGORS]
II. [NAME OF SUBSIDIARY]
Name of Type of Number of Certificate Percentage Sub-clause of
Issuing Shares Shares No. Owned Section 3.2(a)
Corporation of Pledge Agreement
----------- ------- --------- ----------- --------- -------------------
[TO BE PROVIDED BY THE PLEDGORS]
III. [NAME OF SUBSIDIARY]
Name of
Issuing Type of Number of Certificate Percentage Sub-clause of
Corporation Shares Shares No. Owned Section 3.2(a)
of Pledge Agreement
----------- ------- --------- ----------- ---------- -------------------
[TO BE PROVIDED BY THE PLEDGORS]
IV. [NAME OF SUBSIDIARY]
Name of Sub-clause of
Issuing Type of Number of Certificate Percentage Section 3.2(a)
Corporation Shares Shares No. Owned of Pledge Agreement
----------- ------- --------- ----------- ---------- -------------------
[TO BE PROVIDED BY THE PLEDGORS]
ANNEX C
-------
LIST OF NOTES
-------------
I. [NAME OF SUBSIDIARY]
Sub-clause of Section 3.2(a)
Amount Maturity Date Obligor of Pledge Agreement
------ ------------- ------- -------------------------------
[TO BE PROVIDED BY THE PLEDGORS]
II. [NAME OF SUBSIDIARY]
Sub-clause of Section 3.2(a)
Amount Maturity Date Obligor of Pledge Agreement
------ ------------- ------- -------------------------------
[TO BE PROVIDED BY THE PLEDGORS]
III. [NAME OF SUBSIDIARY]
Sub-clause of Section 3.2(a)
Amount Maturity Date Obligor of Pledge Agreement
------ ------------- ------- -------------------------------
[TO BE PROVIDED BY THE PLEDGORS]
IV. [NAME OF SUBSIDIARY]
Sub-clause of Section 3.2(a)
Amount Maturity Date Obligor of Pledge Agreement
------ ------------- ------- -------------------------------
[TO BE PROVIDED BY THE PLEDGORS]
ANNEX D
-------
LIST OF LIMITED LIABILITY COMPANY INTERESTS
-------------------------------------------
I. [NAME OF SUBSIDIARY]
Name of Issuing Type of Certificate Percentage Sub-clause of Section 3.2(a)
Corporation Interest No. Owned of Pledge Agreement
--------------- -------- ----------- ---------- ----------------------------
[TO BE PROVIDED BY THE PLEDGORS]
II. [NAME OF SUBSIDIARY]
Name of Issuing Type of Certificate Percentage Sub-clause of Section 3.2(a)
Corporation Interest No. Owned of Pledge Agreement
--------------- -------- ----------- ---------- ----------------------------
[TO BE PROVIDED BY THE PLEDGORS]
III. [NAME OF SUBSIDIARY]
Name of Issuing Type of Certificate Percentage Sub-clause of Section 3.2(a)
Corporation Interest No. Owned of Pledge Agreement
- --------------- -------- ----------- ---------- ----------------------------
[TO BE PROVIDED BY THE PLEDGORS]
IV. [NAME OF SUBSIDIARY]
Name of Issuing Type of Certificate Percentage Sub-clause of Section 3.2(a)
Corporation Interest No. Owned of Pledge Agreement
- --------------- -------- ----------- ---------- ----------------------------
[TO BE PROVIDED BY THE PLEDGORS]
ANNEX E
-------
LIST OF PARTNERSHIP INTERESTS
-----------------------------
I. [NAME OF SUBSIDIARY]
Name of Type of Sub-clause of Section 3.2(a)
Partnership Interest Percentage Owned of Pledge Agreement
- ----------- -------- ---------------- -----------------------------
[TO BE PROVIDED BY THE PLEDGORS]
II. [NAME OF SUBSIDIARY]
Name of Type of Sub-clause of Section 3.2(a)
Partnership Interest Percentage Owned of Pledge Agreement
- ----------- -------- ---------------- -----------------------------
[TO BE PROVIDED BY THE PLEDGORS]
III. [NAME OF SUBSIDIARY]
Name of Type of Sub-clause of Section 3.2(a)
Partnership Interest Percentage Owned of Pledge Agreement
- ----------- -------- ---------------- -----------------------------
[TO BE PROVIDED BY THE PLEDGORS]
IV. [NAME OF SUBSIDIARY]
Name of Type of Sub-clause of Section 3.2(a)
Partnership Interest Percentage Owned of Pledge Agreement
- ----------- -------- ---------------- -----------------------------
[TO BE PROVIDED BY THE PLEDGORS]
ANNEX F
-------
LIST OF CHIEF EXECUTIVE OFFICES
-------------------------------
I. [NAME OF SUBSIDIARY]
II. [NAME OF SUBSIDIARY]
ANNEX G
-------
Form of Agreement Regarding Uncertificated Securities, Limited Liability
------------------------------------------------------------------------
Company Interests and Partnership Interests
-------------------------------------------
AGREEMENT (as amended, modified or supplemented from time to time,
this "Agreement"), dated as of _________ __, _____, among each of the
undersigned pledgors (each a "Pledgor" and, collectively, the "Pledgors"),
__________, not in its individual capacity but solely as Collateral Agent (the
"Pledgee"), and __________, as the issuer of the Uncertificated Securities,
Limited Liability Company Interests and/or Partnership Interests (each as
defined below) (the "Issuer").
W I T N E S S E T H :
--------------------
WHEREAS, each Pledgor and the Pledgee are entering into a Subsidiary
Pledge Agreement, dated as of December 21, 1998 (as amended, amended and
restated, modified or supplemented from time to time, the "Pledge Agreement"),
under which, among other things, in order to secure the payment of the
Obligations (as defined in the Pledge Agreement), each Pledgor will pledge to
the Pledgee for the benefit of the Secured Parties (as defined in the Pledge
Agreement), and grant a security interest in favor of the Pledgee for the
benefit of the Secured Parties in, all of the right, title and interest of such
Pledgor in and to any and all (1) "uncertificated securities" (as defined in
Section 8-102(a)(18) of the Uniform Commercial Code, as adopted in the State of
New York) ("Uncertificated Securities"), (2) Partnership Interests (as defined
in the Pledge Agreement) and (3) Limited Liability Company Interests (as defined
in the Pledge Agreement), in each case issued from time to time by the Issuer,
whether now existing or hereafter from time to time acquired by such Pledgor
(with all of such Uncertificated Securities, Partnership Interests and Limited
Liability Company Interests being herein collectively called the "Issuer Pledged
Interests"); and
WHEREAS, each Pledgor desires the Issuer to enter into this Agreement
in order to perfect the security interest of the Pledgee under the Pledge
Agreement in the Issuer Pledged Interests, to vest in the Pledgee control of the
Issuer Pledge Interests and to provide for the rights of the parties under this
Agreement;
NOW THEREFORE, in consideration of the premises and the mutual
promises and agreements contained herein, and for other valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Each Pledgor hereby irrevocably authorizes and directs the Issuer,
and the Issuer hereby agrees, to comply with any and all instructions and orders
originated by the Pledgee (and its successors and assigns) regarding any and all
of the Issuer Pledged Interests without the further consent by the registered
owner (including the respective Pledgor), and not to comply with any
instructions or orders regarding any or all of the Issuer Pledged Interests
originated by
any person or entity other than the Pledgee (and its successors and assigns) or
a court of competent jurisdiction.
2. The Issuer hereby certifies that (i) no notice of any security
interest, lien or other encumbrance or claim affecting the Issuer Pledged
Interests (other than the security interest of the Pledgee) has been received by
it, and (ii) the security interest of the Pledgee in the Issuer Pledged
Interests has been registered in the books and records of the Issuer.
3. The Issuer hereby represents and warrants that (i) the pledge by
the Pledgors of, and the granting by the Pledgors of a security interest in, the
Issuer Pledged Interests to the Pledgee, for the benefit of the Secured Parties,
does not violate the charter, by-laws, partnership agreement, membership
agreement or any other agreement governing the Issuer or the Issuer Pledged
Interests, and (ii) the Issuer Pledged Interests are fully paid and
nonassessable.
4. All notices, statements of accounts, reports, prospectuses,
financial statements and other communications to be sent to any Pledgor by the
Issuer in respect of the Issuer will also be sent to the Pledgee at the
following address:
J.P. Morgan Services, Inc.
500 Stanton Christiana Road
Newark, Delaware
Attention: Nicole Pedicone
Tel: (302) 634-1912
Fax: (302) 634-4300
5. Until the Pledgee shall have delivered written notice to the
Issuer that all of the Obligations have been paid in full and this Agreement is
terminated, the Issuer will send any and all redemptions, distributions,
interest or other payments in respect of the Issuer Pledged Interests from the
Issuer for the account of the Pledgor only by wire transfers to the following
address:
_____________________
_____________________
_____________________
_____________________
[Account Information]
ABA No.: ____________________
Account in the Name of: ___________
Account No.: ____________________
6. Except as expressly provided otherwise in Sections 4 and 5, all
notices, instructions, orders and communications hereunder shall be sent or
delivered by mail, telex, telecopy or overnight courier service and all such
notices and communications shall, when mailed, telexed, telecopied or sent by
overnight courier, be effective when deposited in the mails or delivered to the
overnight courier, prepaid and properly addressed for delivery on such or the
next Business Day, or sent by telex or telecopier, except that notices and
communications to the
Pledgee shall not be effective until received by the Pledgee. All notices and
other communications shall be in writing and addressed as follows:
(a) if to any Pledgor, at:
(b) if to the Pledgee, at:
J.P. Morgan Services, Inc.
500 Stanton Christiana Road
Newark, Delaware
Attention: Nicole Pedicone
Tel: (302) 634-1912
Fax: (302) 634-4300
(c) if to the Issuer, at:
_______________________
_______________________
_______________________
Attention: ______________
Telephone No.:___________
Telecopier No.:___________
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder. As used in this
Section 6, "Business Day" means any day other than a Saturday, Sunday, or other
day in which banks in New York are authorized to remain closed.
7. This Agreement shall be binding upon the successors and assigns of
each Pledgor and the Issuer and shall inure to the benefit of and be enforceable
by the Pledgee and its successors and assigns. This Agreement may be executed
in any number of counterparts, each of which shall be an original, but all of
which shall constitute one instrument. In the event that any provision of this
Agreement shall prove to be invalid or unenforceable, such provision shall be
deemed to be severable from the other provisions of this Agreement which shall
remain binding on all parties hereto. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
except in writing signed by the Pledgee, the Issuer and any Pledgor which at
such time owns any Issuer Pledged Interests.
8. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without regard to its principles of
conflict of laws.
IN WITNESS WHEREOF, each Pledgor, the Pledgee and the Issuer have
caused this Agreement to be executed by their duly elected officers duly
authorized as of the date first above written.
[_______________________________________________],
as a Pledgor
By_____________________________
Name:
Title:
[_______________________________________________],
as a Pledgor
By_____________________________
Name:
Title:
[_______________________________________________],
as a Pledgor
By_____________________________
Name:
Title:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
not in its individual capacity but solely as
Collateral Agent and Pledgee
By_____________________________
Name:
Title:
[_______________________________________________],
the Issuer
By_____________________________
Name:
Title:
Exhibit 10.18
BORROWER SECURITY AGREEMENT
This BORROWER SECURITY AGREEMENT (this "Agreement") is dated as of
December 21, 1998 and entered into by and among DOMINO'S, INC., a Delaware
corporation ("Company"), BLUEFENCE, INC., a Michigan corporation ("Subsidiary
Borrower" and together with Company, each, a "Grantor" and, collectively,
"Grantors"), and MORGAN GUARANTEE TRUST COMPANY OF NEW YORK, as Collateral Agent
for and representative of (in such capacity herein called "Collateral Agent")
the Secured Parties (as hereinafter defined) and any Hedging Exchangers (as
hereinafter defined).
RECITALS
A. Grantors, TISM, INC., a Michigan corporation ("Holdings"), JP
MORGAN SECURITIES INC., as arranger, the financial institutions from time to
time party thereto (each individually referred to therein as a "Lender" and
collectively as "Lenders"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK ("Morgan
Guaranty"), as administrative agent for Lenders (in such capacity,
"Administrative Agent"), NBD BANK, as syndication agent (in such capacity,
"Syndication Agent"), and COMERICA BANK (in such capacity, "Documentation
Agent"), have entered into a Credit Agreement dated as of December 21, 1998
(said Credit Agreement, as it may hereafter be amended, restated, supplemented
or otherwise modified from time to time, being the "Credit Agreement") pursuant
to which Lenders have made certain commitments, subject to the terms and
conditions set forth in the Credit Agreement, to extend certain credit
facilities to Grantors; with Lenders, Administrative Agent, Syndication Agent
and Documentation Agent each being herein called a "Secured Party" and,
collectively, the "Secured Parties."
B. Grantors may from time to time enter, or may from time to time
have entered, into one or more Hedging Agreements (collectively, the "Lender
Hedging Agreements") with one or more Lenders or their Affiliates (collectively,
"Hedging Exchangers") in accordance with the terms of the Credit Agreement, and
it is desired that the obligations of each Grantor under the Lender Hedging
Agreements, including, without limitation, the joint and several obligations of
Grantors to make payments, if any, thereunder in the event of early termination
thereof, together with all obligations of Grantors under the Credit Agreement
and any other Loan Documents (as hereinafter defined), be secured hereunder.
C. It is a condition precedent to the initial extensions of credit by
Secured Parties under the Credit Agreement that each Grantor shall have granted
the security interests and undertaken the obligations contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and to induce (i)
Administrative Agent and Lenders to enter into the Credit Agreement, (ii)
Lenders to make their respective loans to, and issue Letters of Credit for the
joint and several account of, Grantors and (iii) to induce Hedging Exchangers to
enter into the Lender Hedging Agreements and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, each
Grantor hereby agrees with the Collateral Agent as follows:
SECTION 1. Defined Terms.
-------------
(a) Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings given to such terms in the
Credit Agreement;
(b) The following terms shall have the following meanings:
"Accounts" has the meaning assigned to that term in Section 2 of this
Agreement.
"Agreement" means this Borrower Security Agreement dated as of
December 21, 1998, as it may be amended, supplemented or otherwise modified from
time to time.
"Assigned Agreement" has the meaning assigned to that term in Section
2 of this Agreement.
"Collateral" has the meaning assigned to that term in Section 2 of
this Agreement.
"Collateral Account Agreement" means the Collateral Account
Agreement, dated as of December 21, 1998, by and between Grantors and Collateral
Agent.
"Collateral Accounts" shall mean "Collateral Accounts" as defined in
the Collateral Account Agreement.
"Commitments" means the "Commitments" as defined in the Credit
Agreement.
"Credit Agreement" has the meaning assigned to that term in the
recitals to this Agreement.
"Equipment" has the meaning assigned to that term in Section 2 of
this Agreement.
"Event of Default" (i) prior to the payment in full of all Credit
Agreement Obligations and the termination of all Commitments, any "Event of
Default" as defined in the Credit Agreement and (ii) after the payment in full
of all Credit Agreement Obligations and the termination of all Commitments, a
payment default under any Lender Hedging Agreement.
"Grantor" has the meaning assigned to that term in the introduction
of this Agreement.
"Hedging Exchangers" has the meaning assigned to that term in the
recitals to this Agreement.
"Inventory" has the meaning assigned to that term in Section 2 of
this Agreement.
"Lender Hedging Agreement" has the meaning assigned to that term in
the recitals to this Agreement.
"Loan" means any "Loan" as defined in the Credit Agreement, and
"Loans" means all such Loans collectively.
-2-
"Loan Document" means any "Loan Document" as defined in the Credit
Agreement, and "Loan Documents" means all such Loan Documents collectively.
"Negotiable Document of Title" has the meaning assigned to that term
in Section 2 of this Agreement.
"Potential Event of Default" means any "Potential Event of Default"
as defined in the Credit Agreement.
"Related Contracts" has the meaning assigned to that term in Section
2 of this Agreement.
"Requisite Lenders" means "Requisite Lenders" as defined in the
Credit Agreement.
"Requisite Obligees" has the meaning assigned to that term in Section
23 of this Agreement.
"Secured Obligations" has the meaning assigned to that term in
Section 2 of this Agreement.
"Secured Parties" has the meaning assigned to that term in the
recitals to this Agreement.
SECTION 2. Grant of Security.
-----------------
Each Grantor hereby assigns to Collateral Agent and hereby grants to
Collateral Agent, a security interest in, all of such Grantor's right, title and
interest in and to the following, in each case whether now or hereafter existing
or in which such Grantor now has or hereafter acquires an interest and wherever
the same may be located (the "Collateral"):
(a) all equipment in all of its forms, all parts thereof and all
accessions thereto (any and all such equipment, parts and accessions being
the "Equipment");
(b) all inventory in all of its forms (including, but not limited to,
(1) all goods held by such Grantor for sale or lease or to be furnished
under contracts of service or so leased or furnished, (ii) all raw
materials, work in process, finished goods, and materials used or consumed
in the manufacture, packing, shipping, advertising, selling, leasing,
furnishing or production of such inventory or otherwise used or consumed in
such Grantor's business, (iii) all goods in which such Grantor has an
interest in mass or a joint or other interest or right of any kind, and
(iv) all goods which are returned to or repossessed by such Grantor) and
all accessions thereto and products thereof (all such inventory, accessions
and products being the "Inventory") and all negotiable and non-negotiable
documents of title (including, without limitation, warehouse receipts, dock
receipts and bills of lading) issued by any Person covering any Inventory
(any such negotiable document of title being a "Negotiable Document of
Title");
-3-
(c) all accounts, contract rights, chattel paper, documents,
instruments, general intangibles and other rights and obligations of any
kind and all rights in, to and under all security agreements, leases and
other contracts securing or otherwise relating to any such accounts,
contract rights, chattel paper, documents, instruments, general intangibles
or other obligations (any and all such accounts, contract rights, chattel
paper, documents, instruments, general intangibles and other obligations
being the "Accounts", and any and all such security agreements, leases and
other contracts being the "Related Contracts");
(d) all agreements and contracts to which such Grantor is a party as
of the date hereof or becomes a party after the date hereof, as each such
agreement may be amended, supplemented or otherwise modified from time to
time (said agreements, as so amended, supplemented or otherwise modified,
being referred to herein individually as an "Assigned Agreement" and
collectively as the "Assigned Agreements"), including (i) all rights of
such Grantor to receive moneys due or to become due under or pursuant to
the Assigned Agreements, (ii) all rights of such Grantor to receive
proceeds of any insurance, indemnity, warranty or guaranty with respect to
the Assigned Agreements, (iii) all claims of such Grantor for damages
arising out of any breach of or default under the Assigned Agreements, and
(iv) all rights of such Grantor to terminate, amend, supplement, modify or
exercise rights or options under the Assigned Agreements, to perform
thereunder and to compel performance and otherwise exercise all remedies
thereunder;
(e) all deposit accounts, including, without limitation, all deposit
accounts maintained with Collateral Agent;
(f) all trade secrets, licenses, copyrights, registrations and
franchise rights, and all goodwill associated with any of the foregoing;
(g) to the extent not included in any other paragraph of this Section
2, all other general intangibles (including, without limitation, tax
refunds, rights to payment or performance, choses in action and judgments
taken on any rights or claims included in the Collateral);
(h) all plant fixtures, business fixtures and other fixtures and
storage and office facilities, and all accessions thereto and products
thereof;
(i) all books, records, ledger cards, files, correspondence, computer
programs, tapes, disks and related data processing software that at any
time evidence or contain information relating to any of the Collateral or
are otherwise necessary or helpful in the collection thereof or realization
thereupon; and
(j) all proceeds, products, rents and profits of or from any and all
of the foregoing Collateral and, to the extent not otherwise included, all
payments under insurance (whether or not Collateral Agent is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of loss
or damage to or otherwise with respect to any of the foregoing Collateral.
For purposes of this Agreement, the term "proceeds" includes
-4-
whatever is receivable or received when Collateral or proceeds are sold,
exchanged, collected or otherwise disposed of, whether such disposition is
voluntary or involuntary.
Notwithstanding anything herein to the contrary, in no event shall
the Collateral include, and each Grantor shall not be deemed to have granted a
security interest in, any of such Grantor's rights or interests in any license,
contract or agreement to which such Grantor is a party or any of its rights or
interests thereunder to the extent, but only to the extent, that such a grant
would, under the terms of such license, contract or agreement or otherwise,
result in a breach of the terms of, or constitute a default under any license,
contract or agreement to which such Grantor is a party (other than to the extent
that any such term would be rendered ineffective pursuant to Section 9-318(4) of
the Uniform Commercial Code of any relevant jurisdiction or any other applicable
law (including the Bankruptcy Code) or principles of equity); provided, that
--------
immediately upon the ineffectiveness, lapse or termination of any such
provision, the Collateral shall include, and such Grantor shall be deemed to
have granted a security interest in, all such rights and interests as if such
provision had never been in effect.
SECTION 3. Security for Obligations.
------------------------
This Agreement secures, and the Collateral is collateral security
for, the prompt payment or performance in full when due, whether at stated
maturity, by required prepayment, declaration, acceleration, demand or otherwise
(including the payment of amounts that would become due but for the operation of
the automatic stay under Section 362(a) of the Bankruptcy Code, 1 U.S.C. (S)
362(a)), of all obligations and liabilities of every nature, of Grantors now or
hereafter existing under or arising out of or in connection with the Credit
Agreement and any other Loan Documents and the Lender Hedging Agreements and all
extensions or renewals thereof, whether for principal, interest (including,
without limitation, interest that, but for the filing of a petition in
bankruptcy with respect to any Grantor, would accrue on such obligations whether
or not a claim is allowed against such Grantor for such interest in the related
bankruptcy proceeding), reimbursement of amounts drawn under Letters of Credit,
payments for early termination of Lender Hedging Agreements, fees, expenses,
indemnities or otherwise, whether voluntary or involuntary, direct or indirect,
absolute or contingent, liquidated or unliquidated, whether or not jointly owed
with others, and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such obligations
or liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Collateral Agent or any Secured
Party or Interest Rate Exchanger as a preference, fraudulent transfer or
otherwise and all obligations of every nature of Grantors now or hereafter
existing under this Agreement (all such obligations of Grantors being the
"Secured Obligations").
SECTION 4. Grantors Remain Liable.
----------------------
Anything contained herein to the contrary notwithstanding, (a) each
Grantor shall remain liable under any contracts and agreements included in the
Collateral, to the extent set forth therein, to perform all of its duties and
obligations thereunder to the same extent as if this Agreement had not been
executed, (b) the exercise by Collateral Agent of any of its rights hereunder
shall not release Grantors from any of their joint and several duties or
obligations under the contracts and agreements included in the Collateral, and
(c) Collateral Agent shall not have
-5-
any obligation or liability under any contracts and agreements included in the
Collateral by reason of this Agreement, nor shall Collateral Agent be obligated
to perform any of the obligations or duties of any Grantor thereunder or to take
any action to collect or enforce any claim for payment assigned hereunder.
SECTION 5. Representations and Warranties. Each Grantor represents and
------------------------------
warrants as follows:
(a) Ownership of Collateral. Except for the security interest created
-----------------------
by this Agreement, such Grantor owns the Collateral free and clear of any
Lien, except for Liens permitted by the Credit Agreement.
(b) Location of Equipment and Inventory. All of the Equipment and
-----------------------------------
Inventory of such Grantor is, as of the date hereof, located at the places
specified in Schedule 5(b) annexed hereto.
-------------
(c) Negotiable Documents of Title. No Negotiable Documents of Title
-----------------------------
are outstanding with respect to any of the Inventory (other than in respect
of (i) Inventory with an aggregate value not in excess of $1,000,000 or
(ii) Inventory which, in the ordinary course of business, is in transit
either (A) from a supplier to such Grantor, (B) between the locations
specified in Schedule 5(b) hereto, or (C) to customers of such Grantor).
-------------
(d) Office Locations: Other Names. The chief place of business, the
-----------------------------
chief executive office and the office where such Grantor keeps its records
regarding the Accounts and all originals of all chattel paper that evidence
Accounts is, and has been for the four month period preceding the date
hereof, located at the places indicated on Schedule 5d. Such Grantor has
-----------
not in the past done, and does not now do, business under any other name
(including any trade-name or fictitious business name) except for those
names set forth on Schedule 5d.
-----------
SECTION 6. Further Assurances.
------------------
(a) Each Grantor agrees that from time to time, at the expense of
Grantors, such Grantor will promptly execute and deliver all further instruments
and documents, and take all further action, that Collateral Agent may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable Collateral Agent to exercise and
enforce its rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, each Grantor will: (i) upon
the reasonable request of the Collateral Agent, mark conspicuously each item of
chattel paper included in the Accounts, each Related Contract and, at the
reasonable request of Collateral Agent, each of its records pertaining to the
Collateral, with a legend, in form and substance reasonably satisfactory to
Collateral Agent, indicating that such Collateral is subject to the security
interest granted hereby, (ii) at the reasonable request of Collateral Agent,
deliver and pledge to Collateral Agent hereunder all promissory notes and other
instruments (excluding checks) and all original counterparts of chattel paper
constituting Collateral, duly indorsed and accompanied by duly executed
instruments of transfer or assignment, all in form and substance reasonably
satisfactory to Collateral Agent, (iii) execute and file such financing or
continuation statements, or amendments thereto, and such
-6-
other instruments or notices, as Collateral Agent may reasonably request, in
order to perfect and preserve the security interests granted or purported to be
granted hereby, (iv) upon the reasonable request of the Collateral Agent, after
the acquisition by such Grantor of any item of Equipment which is covered by a
certificate of title under a statute of any jurisdiction under the law of which
indication of a security interest on such certificate is required as a condition
of perfection thereof, upon the reasonable request of Collateral Agent, execute
and file with the registrar of motor vehicles or other appropriate authority in
such jurisdiction an application or other document requesting the notation or
other indication of the security interest created hereunder on such certificate
of title, (v) upon the reasonable request of Collateral Agent, deliver to
Collateral Agent copies of all such applications or other documents filed during
such calendar quarter and copies of all such certificates of title issued during
such calendar quarter indicating the security interest created hereunder in the
items of Equipment covered thereby, and (vi) at Collateral Agent's reasonable
request, appear in and defend any action or proceeding that may affect such
Grantor's title to or Collateral Agent's security interest in all or any part of
the Collateral.
(b) Each Grantor hereby authorizes Collateral Agent to file one or
more financing or continuation statements, and amendments thereto, relative to
all or any part of the Collateral without the signature of such Grantor to the
extent permitted by applicable law. Each Grantor agrees that a carbon,
photographic or other reproduction of this Agreement or of a financing statement
signed by such Grantor shall be sufficient as a financing statement and may be
filed as a financing statement in any and all jurisdictions.
SECTION 7. Certain Covenants of Grantors. Each Grantor shall:
-----------------------------
(a) notify Collateral Agent of any change in such Grantor's name,
identity or corporate structure within 30 days of such change.
(b) give Collateral Agent 30 days' written notice following any
change in such Grantor's chief place of business, chief executive office or
residence or the office where such Grantor keeps its records regarding the
Accounts and all originals of all chattel paper that evidence Accounts;
(c) pay promptly when due all property and other taxes, assessments
and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Collateral, except
to the extent the validity thereof is being contested in good faith.
SECTION 8. Special Covenants With Respect to Equipment and Inventory. Each
---------------------------------------------------------
Grantor shall:
(a) keep the Equipment and Inventory at the places therefor specified
on Schedule 5(b) annexed hereto or, upon 30 days' written notice to
-------------
Collateral Agent following any change in location, at such other places in
jurisdictions where all action that Collateral Agent may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby, or to enable Collateral Agent to exercise
and enforce its rights and remedies hereunder, with respect to such
Equipment and
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Inventory shall have been taken, provided that such Grantor may keep
--------
Equipment and Inventory at new corporate stores without giving such notice
so long as the aggregate fair market value of all Equipment and Inventory
with respect to which such notice has not been provided to the Collateral
Agent does not exceed $1,000,000 in the aggregate for Holdings and its
Subsidiaries (other than Foreign Subsidiaries) taken as a whole;
(b) cause the Equipment to be maintained and preserved as provided
in subsection 6.4 of the Credit Agreement;
(c) keep correct and accurate records of the Inventory, itemizing
and describing the kind, type and quantity of Inventory, such Grantor's
cost therefor and (where applicable) the current list prices for the
Inventory;
(d) if any Inventory is in possession or control of any of such
Grantor's agents or processors, upon the occurrence of an Event of Default,
instruct such agent or processor to hold all such Inventory for the account
of Collateral Agent and subject to the instructions of Collateral Agent;
and
(e) promptly upon the issuance and delivery to such Grantor of any
Negotiable Document of Title (other than any one or more Negotiable
Documents of Title covering (i) Inventory with an aggregate value not in
excess of $ 1,000,000 or (ii) Inventory which, in the ordinary course of
business, is in transit either (A) from a supplier to such Grantor, (B)
between the locations specified in Schedule 5(b) hereto, or (C) to
-------------
customers of such Grantor), deliver such Negotiable Document of Title to
Collateral Agent.
SECTION 9. Insurance.
---------
Each Grantor shall, at its own expense, maintain insurance with
respect to the Equipment and Inventory in accordance with the terms of the
Credit Agreement.
SECTION 10. Special Covenants with respect to Accounts and Related Contracts.
----------------------------------------------------------------
(a) Each Grantor shall keep its chief place of business and chief
executive office and the office where it keeps its records concerning the
Accounts and Related Contracts, and all originals of all chattel paper that
evidence Accounts, at the location therefor specified in Section 5 or, upon 30
days' written notice to Collateral Agent following any change in location, at
such other location in a jurisdiction where all action that Collateral Agent may
request, in order to perfect and protect any security interest granted or
purported to be granted hereby, or to enable Collateral Agent to exercise and
enforce its rights and remedies hereunder, with respect to such Accounts and
Related Contracts shall have been taken. Promptly upon the reasonable request
of Collateral Agent, Grantors shall deliver to Collateral Agent complete and
correct copies of each Related Contract.
(b) Grantors shall maintain (i) complete records of each Account,
including records of all payments received, credits granted and merchandise
returned, and (ii) all documentation relating thereto in accordance with prudent
business practices.
-8-
(c) Except as otherwise provided in this subsection (c), each
Grantor shall continue to collect, at its own expense, all amounts due or to
become due to such Grantor under the Accounts and Related Contracts. In
connection with such collections, such Grantor shall take such action as Grantor
or Collateral Agent may deem necessary or advisable to enforce collection of
amounts due or to become due under the Accounts; provided, however, that
-------- -------
Collateral Agent shall have the right at any time, upon the occurrence and
during the continuation of an Event of Default and upon written notice to such
Grantor of its intention to do so, to notify the account debtors or obligors
under any Accounts of the assignment of such Accounts to Collateral Agent and to
direct such account debtors or obligors to make payment of all amounts due or to
become due to such Grantor thereunder directly to Collateral Agent, to notify
each Person maintaining a lockbox or similar arrangement to which account
debtors or obligors under any Accounts have been directed to make payment to
remit all amounts representing collections on checks and other payment items
from time to time sent to or deposited in such lockbox or other arrangement
directly to Collateral Agent and, upon such notification and at the expense of
Grantors, to enforce collection of any such Accounts and to adjust, settle or
compromise the amount or payment thereof, in the same manner and to the same
extent as such Grantor might have done. After receipt by a Grantor of the notice
from Collateral Agent referred to in the proviso to the preceding sentence, (i)
-------
any payments of Accounts, received by such Grantor shall be forthwith (and in
any event within two Business Days) deposited by such Grantor in the exact form
received, duly indorsed by such Grantor to the Collateral Agent if required, in
a Collateral Account maintained under the sole dominion and control of the
Collateral Agent, subject to withdrawal by the Collateral Agent for the account
of the Secured Parties only as provided in Section 21, (ii) until so turned over
in accordance with the preceding subsection (i), all amounts and proceeds
(including checks and other instruments) received by such Grantor in respect of
the Accounts and the Related Contracts shall be received for the benefit of
Collateral Agent hereunder and shall not be segregated from other funds of such
Grantor and (iii) such Grantor shall not adjust, settle or compromise the amount
or payment of any Account, or release wholly or partly any account debtor or
obligor thereof, or allow any credit or discount thereon other than in the
ordinary course of business consistent with past practices.
SECTION 11. Deposit Accounts.
----------------
Upon the occurrence and during the continuation of an Event of
Default, Collateral Agent may exercise dominion and control over, and refuse to
permit further withdrawals (whether of money, securities, instruments or other
property) from any deposit accounts maintained with Collateral Agent
constituting part of the Collateral.
SECTION 12. License of Copyrights, etc.
--------------------------
Each Grantor hereby assigns, transfers and conveys to Collateral
Agent, effective upon the occurrence and during the continuance of any Event of
Default, the nonexclusive right and license to use all copyrights or technical
processes owned or used by such Grantor that relate to the Collateral and any
other collateral granted by such Grantor as security for the Secured
Obligations, together with any goodwill associated therewith, all to the extent
necessary to enable Collateral Agent to use, possess and realize on the
Collateral and to enable any successor or assign to enjoy the benefits of the
Collateral. This right and license shall inure to the benefit of all
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successors, assigns and transferees of Collateral Agent and its successors,
assigns and transferees, whether by voluntary conveyance, operation of law,
assignment, transfer, foreclosure, deed in lieu of foreclosure or otherwise.
Such right and license is granted free of charge, without requirement that any
monetary payment whatsoever be made to any Grantor.
SECTION 13. Transfers and Other Liens. No Grantor shall at any time during the
-------------------------
term of this Agreement:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except as permitted by the Credit
Agreement; or
(b) except for the security interest created by this Agreement and
Liens permitted by the Credit Agreement, create or suffer to exist any Lien
upon or with respect to any of the Collateral to secure the indebtedness or
other obligations of any Person.
SECTION 14. Collateral Agent Appointed Attorney-in-Fact. Each Grantor hereby
-------------------------------------------
irrevocably appoints Collateral Agent as such Grantor's attorney-in-fact, with
full authority in the place and stead of such Grantor and in the name of such
Grantor, Collateral Agent or otherwise, from time to time, upon the occurrence
and during the continuance of an Event of Default, in Collateral Agent's
reasonable discretion to take any action and to execute any instrument that
Collateral Agent may reasonably deem necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation:
(a) to obtain and adjust insurance required to be maintained by such
Grantor or paid to Collateral Agent pursuant to Section 9;
(b) to ask for, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under or
in respect of any of the Collateral;
(c) to receive, indorse and collect any drafts or other instruments,
documents and chattel paper in connection with clauses (a) and (b) above;
(d) to file any claims or take any action or institute any
proceedings that Collateral Agent may reasonably deem necessary or
desirable for the collection of any of the Collateral or otherwise to
enforce the rights of Collateral Agent with respect to any of the
Collateral;
(e) to pay or discharge taxes or Liens (other than Liens permitted
under this Agreement or the Credit Agreement) levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by Collateral
Agent in its reasonable discretion, any such payments made by Collateral
Agent to become obligations of such Grantor to Collateral Agent, due and
payable immediately without demand;
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(f) to sign and indorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with Accounts and
other documents relating to the Collateral; and
(g) upon the occurrence and during the continuation of an Event of
Default, generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and
completely as though Collateral Agent were the absolute owner thereof for
all purposes, and to do, at Collateral Agent's option and Grantors'
expense, at any time or from time to time, all acts and things that
Collateral Agent reasonably deems necessary to protect, preserve or realize
upon the Collateral and Collateral Agent's security interest therein in
order to effect the intent of this Agreement, all as fully and effectively
as any Grantor might do.
SECTION 15. Collateral Agent May Perform.
----------------------------
If any Grantor fails to perform any agreement contained herein,
Collateral Agent may itself perform, or cause performance of, such agreement,
and the reasonable expenses of Collateral Agent incurred in connection therewith
shall be payable by Grantors under Section 16.
SECTION 16. Indemnity and Expenses.
----------------------
(a) Grantors jointly and severally agree to indemnify Collateral
Agent, each Secured Party and each Interest Rate Exchanger from and against any
and all claims, losses and liabilities in any way relating to, growing out of or
resulting from this Agreement and the transactions contemplated hereby
(including, without limitation, enforcement of this Agreement), except to the
extent such claims, losses or liabilities result from Collateral Agent's or such
Secured Party's or Interest Rate Exchanger's gross negligence or willful
misconduct.
(b) Grantors jointly and severally agree to pay to Collateral Agent
promptly following written demand the amount of any and all reasonable costs and
reasonable expenses, including the reasonable fees and expenses of its counsel
and of any experts and agents, that Collateral Agent may incur in connection
with (i) the administration of this Agreement, (ii) the custody, preservation,
use or operation of, or the sale of, collection from, or other realization upon,
any of the Collateral, (iii) the exercise or enforcement of any of the rights of
Collateral Agent hereunder, or (iv) the failure by any Grantor to perform or
observe any of the provisions hereof.
(c) The obligations of each Grantor in this Section 16 shall survive
the termination of this Agreement and the discharge of such Grantor's other
obligations under this Agreement, the Lender Hedging Agreements, the Credit
Agreements and any other Loan Documents.
SECTION 17. Standard of Care.
----------------
The powers conferred on Collateral Agent hereunder are solely to
protect its interest in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the exercise of reasonable care in the
custody of any Collateral in its possession and
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the accounting for moneys actually received by it hereunder, Collateral Agent
shall have no duty as to any Collateral or as to the taking of any necessary
steps to preserve rights against prior parties or any other rights pertaining to
any Collateral. Collateral Agent shall be deemed to have exercised reasonable
care in the custody and preservation of Collateral in its possession if such
Collateral is accorded treatment substantially equal to that which Collateral
Agent accords its own property.
SECTION 18. Remedies.
--------
If any Event of Default shall have occurred and be continuing,
Collateral Agent may exercise in respect of the Collateral, in addition to all
other rights and remedies provided for herein or otherwise available to it, all
the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in any relevant jurisdiction (the "Code") (whether
or not the Code applies to the affected Collateral), and also may (a) enter onto
the property where any Collateral is located and take possession thereof with or
without judicial process, (b) prior to the disposition of the Collateral, store,
process, repair or recondition the Collateral or otherwise prepare the
Collateral for disposition in any manner to the extent Collateral Agent deems
appropriate, (b) take possession of any Grantor's premises or place custodians
in exclusive control thereof, remain on such premises and use the same and any
of such Grantor's equipment for the purpose of completing any work in process,
taking any actions described in the preceding clause (b) and collecting any
Secured Obligation, and (d) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any of Collateral Agent's offices or elsewhere, for cash, on credit or for
future delivery, at such time or times and at such price or prices and upon such
other terms as Collateral Agent may deem commercially reasonable. Collateral
Agent or any Secured Party or Interest Rate Exchanger may be the purchaser of
any or all of the Collateral at any such sale and Collateral Agent, as agent for
and representative of Secured Parties and Hedging Exchangers (but not any
Secured Party or Secured Parties or Interest Rate Exchanger or Hedging
Exchangers in its or their respective individual capacities unless Requisite
Obligees shall otherwise agree in writing), shall be entitled, for the purpose
of bidding and making settlement or payment of the purchase price for all or any
portion of the Collateral sold at any such public sale, to use and apply any of
the Secured Obligations as a credit on account of the purchase price for any
Collateral payable by Collateral Agent at such sale. Each purchaser at any such
sale shall hold the property sold absolutely free from any claim or right on the
part of any Grantor, and each Grantor hereby waives (to the extent permitted by
applicable law) all rights of redemption, stay and/or appraisal which it now has
or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Each Grantor agrees that, to the extent notice
of sale shall be required by law, at least ten days' notice to such Grantor of
the time and place of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification. Collateral Agent shall
not be obligated to make any sale of Collateral regardless of notice of sale
having been given. Collateral Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned. Each Grantor hereby waives any claims against Collateral Agent
arising by reason of the fact that the price at which any Collateral may have
been sold at such a private sale was less than the price which might have been
obtained at a public sale, even if Collateral Agent accepts the first offer
received and does not offer such Collateral to more than
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one offeree. If the proceeds of any sale or other disposition of the Collateral
are insufficient to pay all the Secured Obligations, Grantors shall be jointly
and severally liable for the deficiency and the reasonable fees of any attorneys
employed by Collateral Agent to collect such deficiency.
SECTION 19. Proceeds to be Turned Over to Collateral Agent.
----------------------------------------------
In addition to the rights of the Collateral Agent and the Secured
Parties specified in Section 10 with respect to payments of Accounts, if an
Event of Default shall occur and be continuing, upon request of the Collateral
Agent, all proceeds received by the applicable Grantor consisting of cash,
checks and other near-cash items shall be held by such Grantor in trust for the
Collateral Agent and the Secured Parties, segregated from other funds of such
Grantor, and shall, forthwith upon receipt by such Grantor, be turned over to
the Collateral Agent in the exact form received by such Grantor (duly indorsed
by such Grantor to the Collateral Agent, if required) and held by the Collateral
Agent in a Collateral Account maintained under the Collateral Account Agreement.
All proceeds while held by the Collateral Agent in a Collateral Account (or by
Grantors for the Collateral Agent and the Secured Parties) shall continue to be
held as collateral security for all the Obligations and shall not constitute
payment thereof until applied as provided in Section 20.
SECTION 20. Application of Proceeds.
-----------------------
Except as expressly provided elsewhere in this Agreement, all
proceeds held in any Collateral Account and all other proceeds received by
Collateral Agent in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral shall be applied as provided
in subsection 2.4D of the Credit Agreement.
SECTION 21. Continuing Security Interest; Transfer of Loans.
-----------------------------------------------
This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until the payment in
full of the Secured Obligations (other than inchoate indemnification obligations
with respect to claims, losses or liabilities which have not yet arisen and are
not yet due and payable), the cancellation or termination of the Commitments and
the cancellation or expiration of all outstanding Letters of Credit, (b) be
binding upon each Grantor, its successors and assigns, and (c) inure, together
with the rights and remedies of Collateral Agent hereunder, to the benefit of
Collateral Agent and its successors, transferees and assigns. Without limiting
the generality of the foregoing clause (c), but subject to the provisions of
subsection 10.1 of the Credit Agreement, any Secured Party may assign or
otherwise transfer any Loans held by it to any other Person, and such other
Person shall thereupon become vested with all the benefits in respect thereof
granted to Secured Parties herein or otherwise. Upon the payment in full of all
Secured Obligations (other than inchoate indemnification obligations with
respect to claims, losses or liabilities which have not yet arisen and are not
yet due and payable), the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, the security
interest granted hereby shall terminate and all rights to the Collateral shall
revert to the applicable Grantors. Upon any such termination Collateral Agent
will, at the joint and several expense of Grantors, execute and deliver to the
applicable Grantors such documents as Grantors shall reasonably request to
evidence such termination.
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SECTION 22. Administrative Agent as Collateral Agent.
----------------------------------------
(a) Administrative Agent has been appointed to act as Collateral
Agent hereunder by Lenders and, by their acceptance of the benefits hereof,
Hedging Exchangers. Collateral Agent shall be obligated, and shall have the
right hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including,
without limitation, the release or substitution of Collateral), solely in
accordance with this Agreement and the Credit Agreement; provided that
--------
Collateral Agent shall exercise, or refrain from exercising, any remedies
provided for in Section 18 in accordance with the instructions of (i) Requisite
Lenders or (ii) after payment in full of all Credit Agreement Obligations under
the Credit Agreements and any other Loan Documents, the holders of a majority of
the aggregate notional amount (or, with respect to any Lender Hedging Agreement
that has been terminated in accordance with its terms, the amount then due and
payable (exclusive of expenses and similar payments but including any early
termination payments then due) under such Lender Hedging Agreement) under all
Lender Hedging Agreements (Requisite Lenders or, if applicable, such holders
being referred to herein as "Requisite Obligees"). In furtherance of the
foregoing provisions of this Section 22(a), each Interest Rate Exchanger, by its
acceptance of the benefits hereof, agrees that it shall have no right
individually to realize upon any of the Collateral hereunder, it being
understood and agreed by such Interest Rate Exchanger that all rights and
remedies hereunder may be exercised solely by Collateral Agent for the benefit
of Secured Parties and Hedging Exchangers in accordance with the terms of this
Section 22(a).
(b) Collateral Agent shall at all times be the same Person that is
appointed Administrative Agent under the Credit Agreement. The Collateral Agent
may resign and a successor Collateral Agent may be appointed in the manner
provided in the Collateral Account Agreement. Written notice of resignation by
Administrative Agent pursuant to subsection 9.5 of the Credit Agreement shall
also constitute notice of resignation as Collateral Agent under this Agreement;
removal of Administrative Agent pursuant to subsection 9.5 of the Credit
Agreement shall also constitute removal as Collateral Agent under this
Agreement; and appointment of a successor Administrative Agent pursuant to
subsection 9.5 of the Credit Agreement shall also constitute appointment of a
successor Collateral Agent under this Agreement and the retiring or removed
Collateral Agent under this Agreement shall promptly (i) transfer to such
successor Collateral Agent all sums, securities and other items of Collateral
held hereunder, together with all records and other documents necessary or
appropriate in connection with the performance of the duties of the successor
Collateral Agent under this Agreement, and (ii) execute and deliver to such
successor Collateral Agent such amendments to financing statements, and take
such other actions, as may be necessary or appropriate in connection with the
assignment to such successor Collateral Agent of the security interests created
hereunder, whereupon such retiring or removed Collateral Agent shall be
discharged from its duties and obligations under this Agreement. After any
retiring or removed Collateral Agent's resignation or removal hereunder as
Collateral Agent, the provisions of this Agreement shall inure to its benefit as
to any actions taken or omitted to be taken by it under this Agreement while it
was Collateral Agent hereunder.
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SECTION 23. Amendments; Etc.
---------------
No amendment, modification, termination or waiver of any provision
of this Agreement, and no consent to any departure by any Grantor therefrom,
shall in any event be effective unless the same shall be in writing and signed
by Collateral Agent and, in the case of any such amendment or modification, by
Grantors. Any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it was given.
SECTION 24. Notices.
-------
Any notice or other communication herein required or permitted to be
given shall be in writing and may be personally served, telexed or sent by
telefacsimile or United States mail or courier service and shall be deemed to
have been given when delivered in person or by courier service, upon receipt of
telefacsimile or telex (with received answerback), or three Business Days after
depositing it in the United States mail with postage prepaid and properly
addressed; provided that notices to Collateral Agent and any Grantor shall not
--------
be effective until received. For the purposes hereof, the address of each party
hereto shall be as provided in subsection 10.8 of the Credit Agreement or as set
forth under such party's name on the signature pages hereof or such other
address as shall be designated by such party in a written notice delivered to
the other parties hereto.
SECTION 25. Failure or Indulgence Not Waiver; Remedies Cumulative.
-----------------------------------------------------
No failure or delay on the part of Collateral Agent in the exercise
of any power, right or privilege hereunder shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude any other or further exercise thereof or of any other power, right or
privilege. All rights and remedies existing under this Agreement are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
SECTION 26. Severability.
------------
In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 27. Headings.
--------
Section and subsection headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
SECTION 28. Governing Law; Terms.
--------------------
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED
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AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK
(INCLUDING, WITHOUT LIMITATION, SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF
THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT
TO THE EXTENT THAT THE CODE PROVIDES THAT THE PERFECTION OF THE SECURITY
INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
NEW YORK. Unless otherwise defined herein or in the Credit Agreement, terms used
in Articles 8 and 9 of the Uniform Commercial Code in the State of New York are
used herein as therein defined.
SECTION 29. Counterparts.
------------
This Agreement may be executed in one or more counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, Pledgors and Collateral Agent have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
DOMINO'S, INC.
By: /s/ Harry Silverman
----------------------------
Name: Harry Silverman
Title: Vice President
BLUEFENCE, INC.
By: /s/ Harry Silverman
----------------------------
Name: Harry Silverman
Title: President
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Collateral Agent
By: /s/ Colleen Galle
----------------------------
Name: Colleen Galle
Title: Vice President
SCHEDULE 5(B)
TO BORROWER SECURITY AGREEMENT
Locations of Equipment:
Locations of Inventory:
SCHEDULE 5(D)
TO BORROWER SECURITY AGREEMENT
Office Locations, Other Names
Exhibit 10.19
SUBSIDIARY SECURITY AGREEMENT
This SUBSIDIARY SECURITY AGREEMENT (this "Agreement") is dated as of
December 21, 1998 and entered into by and among THE UNDERSIGNED DIRECT AND
INDIRECT SUBSIDIARIES (each of such undersigned Subsidiaries being a "Grantor"
and collectively, "Grantors"; provided that after the Closing Date, "Grantors"
--------
shall be deemed to include any Additional Grantors (as hereinafter defined)), of
DOMINO'S, INC., a Delaware corporation ("Company") and BLUEFENCE, INC., a
Michigan corporation ("Subsidiary Borrower") (together with Company, each, a
"Borrower" and, collectively, "Borrowers"), and MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Collateral Agent for and representative of (in such capacity herein
called "Collateral Agent") the Secured Parties (as hereinafter defined) and any
Hedging Exchangers (as hereinafter defined).
RECITALS
A. Borrowers, TISM, INC., a Michigan corporation ("Holdings"), the
financial institutions from time to time party thereto (each individually
referred to therein as a "Lender" and collectively as "Lenders"), J.P. MORGAN
SECURITIES INC., as arranger, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
administrative agent for Lenders, NBD BANK, as syndication agent, and COMERICA
BANK, as documentation agent, have made certain commitments, subject to the
terms and conditions set forth in the Credit Agreement, to extend certain credit
facilities to Borrowers; with Lenders, Administrative Agent, Syndication Agent
and Documentation Agent each being herein called a "Secured Party" and
collectively the "Secured Parties."
B. Borrowers may from time to time enter, or may from time to time
have entered, into one or more Hedging Agreements (collectively, the "Lender
Hedging Agreements") with one or more Lenders or their Affiliates (in such
capacity, collectively, "Hedging Exchangers").
C. Grantors have executed and delivered that certain Subsidiary
Guaranty dated as of December 21, 1998 (said Subsidiary Guaranty, as it may
hereafter be amended, supplemented or otherwise modified from time to time,
being the "Guaranty") in favor of Collateral Agent for the benefit of Secured
Parties and any Hedging Exchangers, pursuant to which Grantors have guarantied
the prompt payment and performance when due of all obligations of Borrowers
under the Credit Agreement and any other Loan Documents and all obligations of
Borrowers under the Lender Hedging Agreements, including without limitation the
obligation of Borrowers to make payments, if any, thereunder in the event of
early termination thereof.
D. It is a condition precedent to the initial extensions of credit by
Secured Parties under the Credit Agreement that each Grantor shall have granted
the security interests and undertaken the obligations contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and to induce (i)
Administrative Agent and Lenders to enter into the Credit Agreement, (ii)
Lenders to make their
respective loans to, and issue Letters of Credit for the account of, Borrowers
and (iii) to induce Hedging Exchangers to enter into the Lender Hedging
Agreements and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, each Grantor hereby agrees with the
Collateral Agent as follows:
SECTION 1. Defined Terms. (a) Unless otherwise defined herein,
-------------
terms defined in the Credit Agreement and used herein shall have the meanings
given to such terms in the Credit Agreement;
(b) The following terms shall have the following meanings:
"Accounts" has the meaning assigned to that term in Section 2 of this
Agreement.
"Agreement" means this Subsidiary Security Agreement dated as of
December 21, 1998, as it may be amended, supplemented or otherwise modified from
time to time.
"Assigned Agreement" has the meaning assigned to that term in Section
2 of this Agreement.
"Collateral" has the meaning assigned to that term in Section 2 of
this Agreement.
"Collateral Account Agreement" means the Collateral Account Agreement,
dated as of December 21, 1998, by and between Borrowers and Collateral Agent.
"Collateral Accounts" shall mean "Collateral Accounts" as defined in
the Collateral Account Agreement.
"Commitments" means the "Commitments" as defined in the Credit
Agreement.
"Credit Agreement" has the meaning assigned to that term in the
recitals to this Agreement.
"Credit Agreement Obligations" shall mean the "Obligations" as defined
in the Credit Agreement.
"Equipment" has the meaning assigned to that term in Section 2 of this
Agreement.
"Event of Default" means (i) prior to the payment in full of all
Credit Agreement Obligations and the termination of all Commitments, any "Event
of Default" as defined in the Credit Agreement and (ii) after the payment in
full of all Credit Agreement Obligations and the termination of all Commitments,
any payment default under any Lender Hedging Agreement.
"Grantor" has the meaning assigned to that term in the introduction of
this Agreement.
"Hedging Exchangers" has the meaning assigned to that term in the
recitals to this Agreement.
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"Inventory" has the meaning assigned to that term in Section 2 of this
Agreement.
"Lender Hedging Agreement" has the meaning assigned to that term in
the recitals to this Agreement.
"Loan" means any "Loan" as defined in the Credit Agreement, and
"Loans" means all such Loans collectively.
"Loan Document" means any "Loan Document" as defined in the Credit
Agreement, and "Loan Documents" means all such Loan Documents collectively.
"Negotiable Document of Title" has the meaning assigned to that term
in Section 2 of this Agreement.
"Potential Event of Default" means any "Potential Event of Default" as
defined in the Credit Agreement.
"Related Contracts" has the meaning assigned to that term in Section 2
of this Agreement.
"Requisite Lenders" means "Requisite Lenders" as defined in the Credit
Agreement.
"Requisite Obligees" has the meaning assigned to that term in Section
23 of this Agreement.
"Secured Obligations" has the meaning assigned to that term in Section
2 of this Agreement.
"Secured Parties" has the meaning assigned to that term in the
recitals to this Agreement.
SECTION 2. Grant of Security. Each Grantor hereby assigns to
-----------------
Collateral Agent, and hereby grants to Collateral Agent a security interest in,
all of such Grantor's right, title and interest in and to the following, in each
case whether now or hereafter existing or in which such Grantor now has or
hereafter acquires an interest and wherever the same may be located (the
"Collateral"):
(a) all equipment in all of its forms, all parts thereof and all
accessions thereto (any and all such equipment, parts and accessions being
the "Equipment");
(b) all inventory in all of its forms (including, but not limited to,
(i) all goods held by such Grantor for sale or lease or to be furnished
under contracts of service or so leased or furnished, (ii) all raw
materials, work in process, finished goods, and materials used or consumed
in the manufacture, packing, shipping, advertising, selling, leasing,
furnishing or production of such inventory or otherwise used or consumed in
such Grantor's business, (iii) all goods in which such Grantor has an
interest in mass or a joint
-3-
or other interest or right of any kind, and (iv) all goods which are
returned to or repossessed by such Grantor) and all accessions thereto and
products thereof (all such inventory, accessions and products being the
"Inventory") and all negotiable and non-negotiable documents of title
(including, without limitation, warehouse receipts, dock receipts and bills
of lading) issued by any Person covering any Inventory (any such negotiable
document of title being a "Negotiable Document of Title");
(c) all accounts, contract rights, chattel paper, documents,
instruments, general intangibles and other rights and obligations of any
kind and all rights in, to and under all security agreements, leases and
other contracts securing or otherwise relating to any such accounts,
contract rights, chattel paper, documents, instruments, general intangibles
or other obligations (any and all such accounts, contract rights, chattel
paper, documents, instruments, general intangibles and other obligations
being the "Accounts", and any and all such security agreements, leases and
other contracts being the "Related Contracts");
(d) all agreements and contracts to which such Grantor is a party as
of the date hereof or becomes a party after the date hereof, as each such
agreement may be amended, supplemented or otherwise modified from time to
time (said agreements, as so amended, supplemented or otherwise modified,
being referred to herein individually as an "Assigned Agreement" and
collectively as the "Assigned Agreements"), including (i) all rights of
such Grantor to receive moneys due or to become due under or pursuant to
the Assigned Agreements, (ii) all rights of such Grantor to receive
proceeds of any insurance, indemnity, warranty or guaranty with respect to
the Assigned Agreements, (iii) all claims of such Grantor for damages
arising out of any breach of or default under the Assigned Agreements, and
(iv) all rights of such Grantor to terminate, amend, supplement, modify or
exercise rights or options under the Assigned Agreements, to perform
thereunder and to compel performance and otherwise exercise all remedies
thereunder;
(e) all deposit accounts, including, without limitation, all deposit
accounts maintained with Collateral Agent;
(f) all trade secrets, licenses, copyrights, registrations and
franchise rights, and all goodwill associated with any of the foregoing;
(g) to the extent not included in any other paragraph of this Section
2, all other general intangibles (including, without limitation, tax
refunds, rights to payment or performance, choses in action and judgments
taken on any rights or claims included in the Collateral);
(h) all plant fixtures, business fixtures and other fixtures and
storage and office facilities, and all accessions thereto and products
thereof;
(i) all books, records, ledger cards, files, correspondence, computer
programs, tapes, disks and related data processing software that at any
time evidence or contain information relating to any of the Collateral or
are otherwise necessary or helpful in the collection thereof or realization
thereupon; and
-4-
(j) all proceeds, products, rents and profits of or from any and all
of the foregoing Collateral and, to the extent not otherwise included, all
payments under insurance (whether or not Collateral Agent is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of loss
or damage to or otherwise with respect to any of the foregoing Collateral.
For purposes of this Agreement, the term "proceeds" includes whatever is
receivable or received when Collateral or proceeds are sold, exchanged,
collected or otherwise disposed of, whether such disposition is voluntary
or involuntary.
Notwithstanding anything herein to the contrary, in no event shall the
Collateral include, and each Grantor shall not be deemed to have granted a
security interest in, any of such Grantor's rights or interests in any license,
contract or agreement to which such Grantor is a party or any of its rights or
interests thereunder to the extent, but only to the extent, that such a grant
would, under the terms of such license, contract or agreement or otherwise,
result in a breach of the terms of, or constitute a default under any license,
contract or agreement to which such Grantor is a party (other than to the extent
that any such term would be rendered ineffective pursuant to Section 9-318(4) of
the Uniform Commercial Code of any relevant jurisdiction or any other applicable
law (including the Bankruptcy Code) or principles of equity); provided, that
--------
immediately upon the ineffectiveness, lapse or termination of any such
provision, the Collateral shall include, and each Grantor shall be deemed to
have granted a security interest in, all such rights and interests as if such
provision had never been in effect.
SECTION 3. Security for Obligations. This Agreement secures, and the
------------------------
Collateral is collateral security for, the prompt payment or performance in full
when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including the payment of amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. (S) 362(a)), of all obligations and liabilities
of every nature of Grantors now or hereafter existing under or arising out of or
in connection with the Guaranty and all extensions or renewals thereof, whether
for principal, interest (including, without limitation, interest that, but for
the filing of a petition in bankruptcy with respect to any Borrower, would
accrue on such obligations, whether or not a claim is allowed against such
Borrower for such interest in the related bankruptcy proceeding), reimbursement
of amounts drawn under Letters of Credit, payments for early termination of
Lender Hedging Agreements, fees, expenses, indemnities or otherwise, whether
voluntary or involuntary, direct or indirect, absolute or contingent, liquidated
or unliquidated, whether or not jointly owed with others, and whether or not
from time to time decreased or extinguished and later increased, created or
incurred, and all or any portion of such obligations or liabilities that are
paid, to the extent all or any part of such payment is avoided or recovered
directly or indirectly from Collateral Agent or any Secured Party or Hedging
Exchanger as a preference, fraudulent transfer or otherwise and all obligations
of every nature of Grantors now or hereafter existing under this Agreement (all
such obligations of Grantors being the "Secured Obligations").
SECTION 4. Grantors Remain Liable. Anything contained herein to the
----------------------
contrary notwithstanding, (a) each Grantor shall remain liable under any
contracts and agreements included in the Collateral, to the extent set forth
therein, to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by
Collateral Agent of any of its rights hereunder shall not release Grantors from
any of their joint
-5-
and several duties or obligations under the contracts and agreements included in
the Collateral, and (c) Collateral Agent shall not have any obligation or
liability under any contracts and agreements included in the Collateral by
reason of this Agreement, nor shall Collateral Agent be obligated to perform any
of the obligations or duties of any Grantor thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder.
SECTION 5. Representations and Warranties. Each Grantor represents
------------------------------
and warrants as follows:
(a) Ownership of Collateral. Except for the security interest created
-----------------------
by this Agreement, such Grantor owns the Collateral free and clear of any
Lien subject to liens permitted by the Credit Agreement.
(b) Location of Equipment and Inventory. All of the Equipment and
-----------------------------------
Inventory of such Grantor is, as of the date hereof, located at the places
specified in Schedule 5(b) annexed hereto.
-------------
(c) Negotiable Documents of Title. No Negotiable Documents of Title
-----------------------------
are outstanding with respect to any of the Inventory (other than in respect
of (i) Inventory with an aggregate value not in excess of $1,000,000 or
(ii) Inventory which, in the ordinary course of business, is in transit
either (A) from a supplier to such Grantor, (B) between the locations
specified in Schedule 5(b) hereto, or (C) to customers of such Grantor).
-------------
(d) Office Locations; Other Names. The chief place of business, the
-----------------------------
chief executive office and the office where such Grantor keeps its records
regarding the Accounts and all originals of all chattel paper that evidence
Accounts is, and has been for the four month period preceding the date
hereof, located at the offices set forth on Schedule 5(d) annexed hereto.
-------------
Such Grantor has not in the past done, and does not now do, business under
any other name (including any trade-name or fictitious business name)
except as set forth on Schedule 5(d) annexed hereto.
-------------
SECTION 6. Further Assurances; Additional Grantors. (a) Each
---------------------------------------
Grantor agrees that from time to time, at the expense of Grantors, such Grantor
will promptly execute and deliver all further instruments and documents, and
take all further action, that Collateral Agent may reasonably request, in order
to perfect and protect any security interest granted or purported to be granted
hereby or to enable Collateral Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, each Grantor will: (i) upon the reasonable request
of the Collateral Agent, mark conspicuously each item of chattel paper included
in the Accounts, each Related Contract and, at the reasonable request of
Collateral Agent, each of its records pertaining to the Collateral, with a
legend, in form and substance reasonably satisfactory to Collateral Agent,
indicating that such Collateral is subject to the security interest granted
hereby, (ii) at the reasonable request of Collateral Agent, deliver and pledge
to Collateral Agent hereunder all promissory notes and other instruments
(excluding checks) and all original counterparts of chattel paper constituting
Collateral, duly indorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to Collateral
Agent, (iii) execute and file such financing or continuation statements, or
-6-
amendments thereto, and such other instruments or notices, or as Collateral
Agent may reasonably request, in order to perfect and preserve the security
interests granted or purported to be granted hereby, (iv) upon the reasonable
request of the Collateral Agent, after the acquisition by such Grantor of any
item of Equipment which is covered by a certificate of title under a statute of
any jurisdiction under the law of which indication of a security interest on
such certificate is required as a condition of perfection thereof, upon the
reasonable request of Collateral Agent, execute and file with the registrar of
motor vehicles or other appropriate authority in such jurisdiction an
application or other document requesting the notation or other indication of the
security interest created hereunder on such certificate of title, (v) upon the
reasonable request of Collateral Agent, deliver to Collateral Agent copies of
all such applications or other documents filed during such calendar quarter and
copies of all such certificates of title issued during such calendar quarter
indicating the security interest created hereunder in the items of Equipment
covered thereby, and (vi) at Collateral Agent's reasonable request, appear in
and defend any action or proceeding that may affect such Grantor's title to or
Collateral Agent's security interest in all or any part of the Collateral.
(b) Each Grantor hereby authorizes Collateral Agent to file one or
more financing or continuation statements, and amendments thereto, relative to
all or any part of the Collateral without the signature of such Grantor to the
extent permitted by applicable law. Each Grantor agrees that a carbon,
photographic or other reproduction of this Agreement or of a financing statement
signed by such Grantor shall be sufficient as a financing statement and may be
filed as a financing statement in any and all jurisdictions.
(c) The initial Grantors hereunder shall be those Subsidiaries of
Borrowers as are signatories hereto on the date hereof. From time to time
subsequent to the date hereof, additional Subsidiaries of Borrowers may become
parties hereto, as additional Grantors (each an "Additional Grantor"), by
executing a counterpart of this Agreement substantially in the form of Schedule
--------
6(d) annexed hereto. Upon delivery of any such counterpart to the Collateral
- ----
Agent, notice of which is hereby waived by the Grantors, each Additional Grantor
shall be a Grantor and shall be as fully a party hereto as if such Additional
Grantor were an original signatory hereof. Each Grantor expressly agrees that
its obligations arising hereunder shall not be affected or diminished by the
addition or release of any other Grantor hereunder, nor by any election of
Collateral Agent not to cause any Subsidiary to become an Additional Grantor
hereunder. This Agreement shall be fully effective as to any Grantor that is or
becomes a party hereto regardless of whether any other Person becomes or fails
to become or ceases to be a Grantor hereunder. Each Additional Grantor shall
execute and file such financing statements and such other instruments or notices
or as Collateral Agent may reasonably request, in order to perfect the security
interests granted or purported to be granted hereunder.
SECTION 7. Certain Covenants of Grantors. Each Grantor shall:
-----------------------------
(a) notify Collateral Agent of any change in such Grantor's name,
identity or corporate structure within 30 days of such change;
(b) give Collateral Agent 30 days' written notice following any change
in such Grantor's chief place of business, chief executive office or
residence or the office where
-7-
such Grantor keeps its records regarding the Accounts and all originals of
all chattel paper that evidence Accounts;
(c) pay promptly when due all property and other taxes, assessments
and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Collateral, except
to the extent the validity thereof is being contested in good faith.
SECTION 8. Special Covenants With Respect to Equipment and Inventory.
---------------------------------------------------------
Each Grantor shall:
(a) keep the Equipment and Inventory at the places therefor specified
on Schedule 5(b) annexed hereto or, upon 30 days' written notice to
-------------
Collateral Agent following any change in location, at such other places in
jurisdictions where all action, or that Collateral Agent may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby, or to enable Collateral Agent to exercise
and enforce its rights and remedies hereunder, with respect to such
Equipment and Inventory shall have been taken, provided that such Grantor
--------
may keep Equipment and Inventory at new corporate stores without giving
such notice so long as the aggregate fair market value of all Equipment and
Inventory with respect to which such notice has not been provided to the
Collateral Agent does not exceed $1,000,000 in the aggregate for Holdings
and its Subsidiaries (other than Foreign Subsidiaries);
(b) cause the Equipment to be maintained and preserved as provided in
subsection 6.4 of the Credit Agreement;
(c) keep correct and accurate records of the Inventory, itemizing and
describing the kind, type and quantity of Inventory, such Grantor's cost
therefor and (where applicable) the current list prices for the Inventory;
(d) if any Inventory is in possession or control of any of such
Grantor's agents or processors, upon the occurrence of an Event of Default,
instruct such agent or processor to hold all such Inventory for the account
of Collateral Agent and subject to the instructions of Collateral Agent;
and
(e) promptly upon the issuance and delivery to such Grantor of any
Negotiable Document of Title (other than any one or more Negotiable
Documents of Title covering (i) Inventory with an aggregate value not in
excess of $1,000,000 or (ii) Inventory which, in the ordinary course of
business, is in transit either (A) from a supplier to such Grantor, (B)
between the locations specified in Schedule 5(b) hereto, or (C) to
-------------
customers of such Grantor), deliver such Negotiable Document of Title to
Collateral Agent.
SECTION 9. Special Covenants With Respect to Accounts and Related
------------------------------------------------------
Contracts. (a) Each Grantor shall keep its chief place of business and chief
- ---------
executive office and the office where it keeps its records concerning the
Accounts and Related Contracts, and all originals of all chattel paper that
evidence Accounts, at the location therefor specified in Section 5
-8-
or, upon 30 days' written notice to Collateral Agent following any change in
location, at such other location in a jurisdiction where all action that
Collateral Agent may request, in order to perfect and protect any security
interest granted or purported to be granted hereby, or to enable Collateral
Agent to exercise and enforce its rights and remedies hereunder, with respect to
such Accounts and Related Contracts shall have been taken. Promptly upon the
reasonable request of Collateral Agent, Grantors shall deliver to Collateral
Agent complete and correct copies of each Related Contract.
(b) Grantors shall maintain (i) complete records of each Account,
including records of all payments received, credits granted and merchandise
returned, and (ii) all documentation relating thereto in accordance with prudent
business practices.
(c) Except as otherwise provided in this subsection (c), each Grantor
shall continue to collect, at its own expense, all amounts due or to become due
to such Grantor under the Accounts and Related Contracts. In connection with
such collections, each Grantor shall take such action as such Grantor or
Collateral Agent may deem necessary or advisable to enforce collection of
amounts due or to become due under the Accounts; provided, however, that
-------- -------
Collateral Agent shall have the right at any time, upon the occurrence and
during the continuation of an Event of Default and upon written notice to such
Grantor of its intention to do so, to notify the account debtors or obligors
under any Accounts of the assignment of such Accounts to Collateral Agent and to
direct such account debtors or obligors to make payment of all amounts due or to
become due to such Grantor thereunder directly to Collateral Agent, to notify
each Person maintaining a lockbox or similar arrangement to which account
debtors or obligors under any Accounts have been directed to make payment to
remit all amounts representing collections on checks and other payment items
from time to time sent to or deposited in such lockbox or other arrangement
directly to Collateral Agent and, upon such notification and at the expense of
Grantors, to enforce collection of any such Accounts and to adjust, settle or
compromise the amount or payment thereof, in the same manner and to the same
extent as such Grantors might have done. After receipt by a Grantor of the
notice from Collateral Agent referred to in the proviso to the preceding
-------
sentence, (i) any payments of Accounts, received by such Grantor shall be
forthwith (and in any event within two Business Days) deposited by such Grantor
in the exact form received, duly indorsed by such Grantor to the Collateral
Agent if required, in a Collateral Account maintained under the sole dominion
and control of the Collateral Agent, subject to withdrawal by the Collateral
Agent for the account of the Secured Parties only as provided in subsection 19,
(ii) until so turned over in accordance with the proceeding subsection (i), all
amounts and proceeds (including checks and other instruments) received by such
Grantor in respect of the Accounts and the Related Contracts shall be received
for the benefit of Collateral Agent hereunder and shall be segregated from other
funds of such Grantor and (iii) such Grantor shall not adjust, settle or
compromise the amount or payment of any Account, or release wholly or partly any
account debtor or obligor thereof, or allow any credit or discount thereon other
than in the ordinary course of business consistent with past practices.
-9-
SECTION 10. Deposit Accounts. Upon the occurrence and during the
----------------
continuation of an Event of Default, Collateral Agent may exercise dominion and
control over, and refuse to permit further withdrawals (whether of money,
securities, instruments or other property) from any deposit accounts maintained
with Collateral Agent constituting part of the Collateral.
SECTION 11. License of Copyrights, etc. Each Grantor hereby assigns,
---------------------------
transfers and conveys to Collateral Agent, effective upon the occurrence and
during the continuance of any Event of Default, the nonexclusive right and
license to use all copyrights or technical processes owned or used by such
Grantor that relate to the Collateral and any other collateral granted by such
Grantor as security for the Secured Obligations, together with any goodwill
associated therewith, all to the extent necessary to enable Collateral Agent to
use, possess and realize on the Collateral and to enable any successor or assign
to enjoy the benefits of the Collateral. This right and license shall inure to
the benefit of all successors, assigns and transferees of Collateral Agent and
its successors, assigns and transferees, whether by voluntary conveyance,
operation of law, assignment, transfer, foreclosure, deed in lieu of foreclosure
or otherwise. Such right and license is granted free of charge, without
requirement that any monetary payment whatsoever be made to any Grantor.
SECTION 12. Transfers and Other Liens. No Grantor shall at any time
-------------------------
during the term of this Agreement:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except as permitted by the Credit
Agreement; or
(b) except for the security interest created by this Agreement and
Liens permitted by the Credit Agreement, create or suffer to exist any Lien
upon or with respect to any of the Collateral to secure the indebtedness or
other obligations of any Person.
SECTION 13. Collateral Agent Appointed Attorney-in-Fact. Each
-------------------------------------------
Grantor hereby irrevocably appoints Collateral Agent as such Grantor's attorney-
in-fact, with full authority in the place and stead of such Grantor and in the
name of such Grantor, Collateral Agent or otherwise, from time to time upon the
occurrence and during the continuance of an Event of Default in Collateral
Agent's reasonable discretion to take any action and to execute any instrument
that Collateral Agent may reasonably deem necessary or advisable to accomplish
the purposes of this Agreement, including, without limitation:
(a) to obtain and adjust insurance required to be maintained on the
Collateral or paid to Collateral Agent under the Credit Agreement;
(b) to ask for, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under or
in respect of any of the Collateral;
(c) to receive, indorse and collect any drafts or other instruments,
documents and chattel paper in connection with clauses (a) and (b) above;
-10-
(d) to file any claims or take any action or institute any proceedings
that Collateral Agent may reasonably deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
Collateral Agent with respect to any of the Collateral;
(e) to pay or discharge taxes or Liens (other than Liens permitted
under this Agreement or the Credit Agreement) levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by Collateral
Agent in its reasonable discretion, any such payments made by Collateral
Agent to become obligations of such Grantor to Collateral Agent, due and
payable immediately without demand;
(f) to sign and indorse any invoices, freight or express bills, bills
of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with Accounts and
other documents relating to the Collateral; and
(g) upon the occurrence and during the continuation of an Event of
Default, generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and
completely as though Collateral Agent were the absolute owner thereof for
all purposes, and to do, at Collateral Agent's option and Grantors'
expense, at any time or from time to time, all acts and things that
Collateral Agent reasonably deems necessary to protect, preserve or realize
upon the Collateral and Collateral Agent's security interest therein in
order to effect the intent of this Agreement, all as fully and effectively
as any Grantor might do.
SECTION 14. Collateral Agent May Perform. If any Grantor fails to
----------------------------
perform any agreement contained herein, Collateral Agent may itself perform, or
cause performance of, such agreement, and the reasonable expenses of Collateral
Agent incurred in connection therewith shall be payable by Grantors under
Section 19.
SECTION 15. Standard of Care. The powers conferred on Collateral
----------------
Agent hereunder are solely to protect its interest in the Collateral and shall
not impose any duty upon it to exercise any such powers. Except for the
exercise of reasonable care in the custody of any Collateral in its possession
and the accounting for moneys actually received by it hereunder, Collateral
Agent shall have no duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral. Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of Collateral in its
possession if such Collateral is accorded treatment substantially equal to that
which Collateral Agent accords its own property.
SECTION 16. Remedies. If any Event of Default shall have occurred
--------
and be continuing, Collateral Agent may exercise in respect of the Collateral,
in addition to all other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default under
the Uniform Commercial Code as in effect in any relevant jurisdiction (the
"Code") (whether or not the Code applies to the affected Collateral), and also
may (a) enter onto the property where any Collateral is located and take
possession thereof with or
-11-
without judicial process, (b) prior to the disposition of the Collateral, store,
process, repair or recondition the Collateral or otherwise prepare the
Collateral for disposition in any manner to the extent Collateral Agent deems
appropriate, (c) take possession of any or each Grantor's premises or place
custodians in exclusive control thereof, remain on such premises and use the
same and any of such Grantor's equipment for the purpose of completing any work
in process, taking any actions described in the preceding clause (b) and
collecting any Secured Obligation, and (d) without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at public
or private sale, at any of Collateral Agent's offices or elsewhere, for cash, on
credit or for future delivery, at such time or times and at such price or prices
and upon such other terms as Collateral Agent may deem commercially reasonable.
Collateral Agent or any Secured Party or Hedging Exchanger may be the purchaser
of any or all of the Collateral at any such sale and Collateral Agent, as agent
for and representative of Secured Parties and Hedging Exchangers (but not any
Secured Party or Secured Parties or Hedging Exchanger or Hedging Exchangers in
its or their respective individual capacities unless Requisite Obligees shall
otherwise agree in writing), shall be entitled, for the purpose of bidding and
making settlement or payment of the purchase price for all or any portion of the
Collateral sold at any such public sale, to use and apply any of the Secured
Obligations as a credit on account of the purchase price for any Collateral
payable by Collateral Agent at such sale. Each purchaser at any such sale shall
hold the property sold absolutely free from any claim or right on the part of
any Grantor, and each Grantor hereby waives (to the extent permitted by
applicable law) all rights of redemption, stay and/or appraisal which it now has
or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Each Grantor agrees that, to the extent notice of
sale shall be required by law, at least ten days' notice to such Grantor of the
time and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification. Collateral Agent shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. Collateral Agent may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. Each Grantor hereby waives any claims against Collateral Agent
arising by reason of the fact that the price at which any Collateral may have
been sold at such a private sale was less than the price which might have been
obtained at a public sale, even if Collateral Agent accepts the first offer
received and does not offer such Collateral to more than one offeree. If the
proceeds of any sale or other disposition of the Collateral are insufficient to
pay all the Secured Obligations, Grantors shall be jointly and severally liable
for the deficiency and the reasonable fees of any attorneys employed by
Collateral Agent to collect such deficiency.
SECTION 17. Proceeds To Be Turned Over to Collateral Agent. In
----------------------------------------------
addition to the rights of the Collateral Agent and the Secured Parties specified
in Section 9 with respect to payments of Accounts, if an Event of Default shall
occur and be continuing, upon request of the Collateral Agent, all proceeds
received by the applicable Grantor consisting of cash, checks and other near-
cash items shall be held by such Grantor in trust for the Collateral Agent and
the Secured Parties, segregated from other funds of such Grantor, and shall,
forthwith upon receipt by such Grantor, be turned over to the Collateral Agent
in the exact form received by such Grantor (duly indorsed by such Grantor to the
Collateral Agent, if required) and held by the Collateral Agent in a Collateral
Account maintained under the Collateral Account Agreement. All
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proceeds while held by the Collateral Agent in a Collateral Account (or by
Grantors for the Collateral Agent and the Secured Parties) shall continue to be
held as collateral security for all the Secured Obligations and shall not
constitute payment thereof until applied as provided in Section 18.
SECTION 18. Application of Proceeds. Except as expressly provided
-----------------------
elsewhere in this Agreement, all proceeds held in any Collateral Account and all
other proceeds received by Collateral Agent in respect of any sale of,
collection from, or other realization upon all or any part of the Collateral
shall be applied as provided in subsection 2.4D of the Credit Agreement.
SECTION 19. Indemnity and Expenses. (a) Grantors jointly and
----------------------
severally agree to indemnify Collateral Agent, each Secured Party and each
Hedging Exchanger from and against any and all claims, losses and liabilities in
any way relating to, growing out of or resulting from this Agreement and the
transactions contemplated hereby (including, without limitation, enforcement of
this Agreement), except to the extent such claims, losses or liabilities result
from Collateral Agent's or such Secured Party's or Hedging Exchanger's gross
negligence or willful misconduct.
(b) Grantors jointly and severally agree to pay to Collateral Agent,
promptly following written upon demand the amount of any and all reasonable
costs and reasonable expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, that Collateral Agent may incur in
connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of Collateral Agent hereunder, or (iv) the failure by any
Grantor to perform or observe any of the provisions hereof.
(c) The obligations of each Grantor in this Section 19 shall survive
the termination of this Agreement and the discharge of such Grantor's other
obligations under this Agreement, the Lender Hedging Agreements, the Credit
Agreement, and the other Loan Documents.
SECTION 20. Continuing Security Interest; Transfer of Loans. This
-----------------------------------------------
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the payment in full of the
Secured Obligations (other than inchoate indemnification obligations with
respect to claims, losses or liabilities which have not yet arisen and are not
yet due and payable), the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, (b) be binding
upon each Grantor, its successors and assigns, and (c) inure, together with the
rights and remedies of Collateral Agent hereunder, to the benefit of Collateral
Agent and its successors, transferees and assigns. Without limiting the
generality of the foregoing clause (c), but subject to the provisions of
subsection 10.1 of the Credit Agreement, any Secured Party may assign or
otherwise transfer any Loans held by it to any other Person, and such other
Person shall thereupon become vested with all the benefits in respect thereof
granted to Secured Parties herein or otherwise. Upon the payment in full of all
Secured Obligations (other than inchoate indemnification obligations with
respect to claims, losses or liabilities which have not yet arisen and are not
yet due and payable), the cancellation or
-13-
termination of the Commitments and the cancellation or expiration of all
outstanding Letters of Credit, the security interest granted hereby shall
terminate and all rights to the Collateral shall revert to the applicable
Grantors. Upon any such termination Collateral Agent will, at the joint and
several expense of Grantors, expense, execute and deliver to the applicable
Grantors such documents as Grantors shall reasonably request to evidence such
termination in accordance with the terms of the Collateral Account Agreement.
SECTION 21. Administrative Agent as Collateral Agent. (a)
----------------------------------------
Administrative Agent has been appointed to act as Collateral Agent hereunder by
Lenders and, by their acceptance of the benefits hereof, Hedging Exchangers.
Collateral Agent shall be obligated, and shall have the right hereunder, to make
demands, to give notices, to exercise or refrain from exercising any rights, and
to take or refrain from taking any action (including, without limitation, the
release or substitution of Collateral), solely in accordance with this Agreement
and the Credit Agreement; provided that Collateral Agent shall exercise, or
--------
refrain from exercising, any remedies provided for in Section 16 in accordance
with the instructions of (i) Requisite Lenders or (ii) after payment in full of
all Credit Agreement Obligations under the Credit Agreement and any other Loan
Documents, the holders of a majority of the aggregate notional amount (or, with
respect to any Lender Hedging Agreement that has been terminated in accordance
with its terms, the amount then due and payable (exclusive of expenses and
similar payments but including any early termination payments then due) under
such Lender Hedging Agreement) under all Lender Hedging Agreements (Requisite
Lenders or, if applicable, such holders being referred to herein as "Requisite
Obligees"). In furtherance of the foregoing provisions of this Section 21(a),
each Hedging Exchanger, by its acceptance of the benefits hereof, agrees that it
shall have no right individually to realize upon any of the Collateral
hereunder, it being understood and agreed by such Hedging Exchanger that all
rights and remedies hereunder may be exercised solely by Collateral Agent for
the benefit of Lenders and Hedging Exchangers in accordance with the terms of
this Section 21(a).
(b) Collateral Agent shall at all times be the same Person that is
appointed Administrative Agent under the Credit Agreement. The Collateral Agent
may resign and a successor Collateral Agent may be appointed in the manner
provided in the Collateral Account Agreement. Written notice of resignation by
Administrative Agent pursuant to subsection 9.5 of the Credit Agreement shall
also constitute notice of resignation as Secured Party under this Agreement;
removal of Administrative Agent pursuant to subsection 9.5 of the Credit
Agreement shall also constitute removal as Secured Party under this Agreement;
and appointment of a successor Administrative Agent pursuant to subsection 9.5
of the Credit Agreement shall also constitute appointment of a successor Secured
Party under this Agreement. Upon the acceptance of any appointment as
Administrative Agent under subsection 9.5 of the Credit Agreement by a successor
Administrative Agent, that successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Secured Party under this Agreement, and the retiring
or removed Collateral Agent under this Agreement shall promptly (i) transfer to
such successor Collateral Agent all sums, securities and other items of
Collateral held hereunder, together with all records and other documents
necessary or appropriate in connection with the performance of the duties of the
successor Collateral Agent under this Agreement, and (ii) execute and deliver to
such successor Collateral Agent such amendments to financing statements, and
take such other actions, as may be necessary or
-14-
appropriate in connection with the assignment to such successor Collateral Agent
of the security interests created hereunder, whereupon such retiring or removed
Collateral Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring or removed Collateral Agent's resignation or
removal hereunder as Collateral Agent, the provisions of this Agreement shall
inure to its benefit as to any actions taken or omitted to be taken by it under
this Agreement while it was Collateral Agent hereunder.
SECTION 22. Amendments; Etc. No amendment, modification, termination
----------------
or waiver of any provision of this Agreement, and no consent to any departure by
any Grantor therefrom, shall in any event be effective unless the same shall be
in writing and signed by Collateral Agent and, in the case of any such amendment
or modification, by Grantors; provided that any amendment hereto pursuant to
--------
Section 5(d) shall be effective upon execution by any Grantor and Grantors
hereby waive any requirement of notice or of consent to any such amendment.
SECTION 23. Notices. Any notice or other communication herein
-------
required or permitted to be given shall be in writing and may be personally
served, telexed or sent by telefacsimile or United States mail or courier
service and shall be deemed to have been given when delivered in person or by
courier service, upon receipt of telefacsimile or telex (with received
answerback), or three Business Days after depositing it in the United States
mail with postage prepaid and properly addressed; provided that notices to
--------
Collateral Agent and any Grantor shall not be effective until received. For the
purposes hereof, the address of each party hereto shall be as provided in
subsection 10.8 of the Credit Agreement, or as set forth under such party's name
on the signature pages hereof or such other address as shall be designated by
such party in a written notice delivered to the other parties hereto.
SECTION 24. Failure or Indulgence Not Waiver; Remedies Cumulative.
-----------------------------------------------------
No failure or delay on the part of Collateral Agent in the exercise of any
power, right or privilege hereunder shall impair such power, right or privilege
or be construed to be a waiver of any default or acquiescence therein, nor shall
any single or partial exercise of any such power, right or privilege preclude
any other or further exercise thereof or of any other power, right or privilege.
All rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 25. Severability. In case any provision in or obligation
------------
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 26. Headings. Section and subsection headings in this
--------
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 27. Governing Law; Terms. THIS AGREEMENT AND THE RIGHTS AND
--------------------
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING,
-15-
WITHOUT LIMITATION, SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE
OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE
EXTENT THAT THE CODE PROVIDES THAT THE PERFECTION OF THE SECURITY INTEREST
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless
otherwise defined herein or in the Credit Agreement, terms used in Articles 8
and 9 of the Uniform Commercial Code in the State of New York are used herein as
therein defined.
SECTION 28. Consent to Jurisdiction and Service of Process. ALL
----------------------------------------------
JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GRANTOR ARISING OUT OF OR RELATING TO
THIS AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY STATE OR
FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW
YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH GRANTOR, FOR ITSELF AND
IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO SUCH GRANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH
SECTION 23;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH GRANTOR IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT COLLATERAL AGENT RETAINS THE RIGHT TO SERVE PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST SUCH
GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SECTION 28 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR
OTHERWISE.
SECTION 29. Waiver of Jury Trial. EACH GRANTOR AND COLLATERAL AGENT
--------------------
HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
-16-
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT. The scope of this waiver is intended to be all-encompassing of any
and all disputes that may be filed in any court and that relate to the subject
matter of this transaction, including without limitation contract claims, tort
claims, breach of duty claims, and all other common law and statutory claims.
Grantors and Collateral Agent each acknowledge that this waiver is a material
inducement for Grantors and Collateral Agent to enter into a business
relationship, that each Grantor and Collateral Agent have already relied on this
waiver in entering into this Agreement and that each will continue to rely on
this waiver in their related future dealings. Each Grantor and Collateral Agent
further warrant and represent that each has reviewed this waiver with its legal
counsel, and that each knowingly and voluntarily waives its jury trial rights
following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING
THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL
WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 29 AND EXECUTED BY EACH OF
THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.
SECTION 30. Counterparts. This Agreement may be executed in one or
------------
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Remainder of page intentionally left blank]
-17-
IN WITNESS WHEREOF, Grantors and Collateral Agent have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
DOMINO'S PIZZA, INC.
By: /s/ Harry Silverman
---------------------------
Name: Harry Silverman
Title: Vice President
DOMINO'S PIZZA INTERNATIONAL, INC.
By: /s/ Harry Silverman
---------------------------
Name: Harry Silverman
Title: Vice President
METRO DETROIT PIZZA, INC.
By: /s/ Harry Silverman
---------------------------
Name: Harry Silverman
Title: Vice President
DOMINO'S PIZZA SALES
INTERNATIONAL, INC.
By: /s/ Harry Silverman
---------------------------
Name: Harry Silverman
Title: Vice President
DOMINO'S PIZZA GOVERNMENT
SERVICES DIVISION, INC.
By: /s/ Harry Silverman
---------------------------
Name: Harry Silverman
Title: Vice President
STOREFINDER, INC.
By: /s/ Harry Silverman
---------------------------
Name: Harry Silverman
Title: Vice President
Notice Address:
30 Frank Lloyd Wright Drive
P.O. Box 997
Ann Arbor, MI 48106
Attention: Steve Benrubi
Telephone: (734) 930-3205
Facsimile: (734) 913-0377
DOMINOS PIZZA INTERNATIONAL
PAYROLL SERVICES, INC.
By: /s/ Harry Silverman
-----------------------------
Name: Harry Silverman
Title: Vice President
Notice Address
30 Frank Lloyd Wright Drive
P.O. Box 997
Ann Arbor, MI 48106
Attention: Steve Benrubi
Telephone: (734) 930-3205
Facsimile: (734) 913-0377
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Collateral Agent
By: /s/ Colleen Galle
-------------------------
Name: Colleen Galle
Title: Vice President
Notice Address:
J.P. Morgan Securities, Inc.
60 Wall Street
New York, New York
Attention: Kelly Moy
Telephone: (212) 648-7795
Facsimile: (212) 648-5556
SCHEDULE 5(B)
TO SUBSIDIARY SECURITY AGREEMENT
LOCATIONS OF EQUIPMENT:
LOCATIONS OF INVENTORY:
SCHEDULE 5(D)
TO SUBSIDIARY SECURITY AGREEMENT
OFFICE LOCATIONS; OTHER NAMES
SCHEDULE 6(D)
TO SUBSIDIARY SECURITY AGREEMENT
[FORM OF COUNTERPART TO SUBSIDIARY SECURITY AGREEMENT]
This counterpart, dated __________, [199_][200_] is delivered pursuant
to Section 5(d) of that certain Subsidiary Security Agreement dated as of
December 21, 1998, among the Grantors party thereto from time to time, and
Morgan Guaranty Trust Company of New York, as Collateral Agent (the "SECURITY
AGREEMENT," capitalized terms defined therein being used herein as therein
defined). The undersigned hereby agrees (i) that this counterpart may be
attached to the Security Agreement, and (ii) that the undersigned will comply
with all the terms and conditions of the Pledge Agreement as if it were an
original signatory thereto.
[NAME OF ADDITIONAL
GRANTOR]
BY:_____________________
NAME:
TITLE:
Exhibit 10.20
COLLATERAL ACCOUNT AGREEMENT
This COLLATERAL ACCOUNT AGREEMENT (this "Agreement") is dated as of
December 21, 1998 and entered into by and between DOMINO'S, INC., a Delaware
corporation ("Company"), BLUEFENCE, INC., a Michigan corporation ("Subsidiary
Borrower," and together with Company, each a "Pledgor" and, collectively,
"Pledgors") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Collateral Agent
for and representative of (in such capacity herein called "Collateral Agent")
the financial institutions ("Lenders") from time to time party to the Credit
Agreement referred to below.
PRELIMINARY STATEMENTS
A. Pursuant to that certain Credit Agreement dated as of December 21,
1998 (said Credit Agreement, as it may hereafter be amended, supplemented or
otherwise modified from time to time, being the "Credit Agreement", the terms
defined therein and not otherwise defined herein being used herein as therein
defined) by and among Pledgors, TISM, INC., a Michigan corporation ("Holdings"),
Lenders, the financial institutions from time to time party thereto, J.P. MORGAN
SECURITIES INC., as arranger (in such capacity, "Arranger"), NBD BANK, as
syndication agent, and COMERICA BANK, as documentation agent, and Collateral
Agent, Lenders have made certain commitments, subject to the terms and
conditions set forth in the Credit Agreement, to extend certain credit
facilities to Pledgors.
B. It is a condition precedent to the initial extensions of credit by
Lenders under the Credit Agreement that Pledgors shall have granted the security
interests and undertaken the obligations contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to make Loans and issue Letters of Credit under the Credit
Agreement and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Pledgors hereby agree with Collateral
Agent as follows:
SECTION 1. Certain Definitions. The following terms used in this Agreement
-------------------
shall have the following meanings:
"Cash Equivalents" means, as at any date of determination, (i)
marketable securities (a) issued or directly and unconditionally guaranteed
as to interest and principal by the United States Government or (b) issued
by any agency of the United States the obligations of which are backed by
the full faith and credit of the United States, in each case maturing
within thirty (30) days from such date; (ii) marketable direct obligations
issued by any state of the United States of America or any political
subdivision of any such state or any public instrumentality thereof, in
each case maturing within thirty (30) days from such date and having, at
the time of acquisition thereof, the highest rating obtainable from either
Standard & Poor's Ratings Services, a division of McGraw-Hill, Inc. ("S&P")
or Moody's Investors Service, Inc. ("Moody's"); (iii) commercial paper
maturing no more than thirty (30) days from the date of creation thereof
and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing
within thirty (30) days from such date issued by any Lender or by any
commercial bank organized under the laws of the United States of America or
any state thereof or the District of Columbia that (a) is at least
"adequately capitalized'' (as defined in the regulations of its primary
Federal banking regulator) and (b) has Tier 1 capital (as defined in such
regulations) of not less than $100,000,000; and (v) shares of any money
market mutual fund that (a) has at least 95% of its assets invested
continuously in the types of investments referred to in clauses (i) and
(ii) above, (b) has net assets of not less than $500,000,000, and (c) has
the highest rating obtainable from either S&P or Moody's.
"Collateral" means (i) the Collateral Account and all amounts
from time to time on deposit therein, (ii) all Investments, including all
certificates and instruments from time to time representing or evidencing
such Investments and any account or accounts in which such Investments may
be held by, or in the name of, Collateral Agent for or on behalf of
Pledgors, (iii) all notes, certificates of deposit, checks and other
instruments and all deposits and uncertificated securities from time to
time hereafter transferred to or otherwise possessed by, or held in the
name of, Collateral Agent for or on behalf of Pledgors in substitution for
or in addition to any or all of the Collateral, (iv) all interest,
dividends, cash, instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or
all of the Collateral, and (v) to the extent not covered by clauses (i)
through (iv) above, all proceeds of any or all of the foregoing Collateral.
"Collateral Account" means the restricted deposit account
established and maintained by Collateral Agent pursuant to Section 2(a).
"Investments" means those investments, if any, made by Collateral
Agent pursuant to Section 5.
"Secured Obligations" means all obligations and liabilities of
every nature of Pledgors now or hereafter existing under or arising out of
or in connection with the Credit Agreement and the other Loan Documents and
all extensions or renewals thereof, whether for principal, interest
(including interest that, but for the filing of a petition in bankruptcy
with respect to any Pledgor, would accrue on such obligations),
reimbursement of amounts drawn under Letters of Credit, fees, expenses,
indemnities or otherwise, whether voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated, whether or
not jointly owed with others, and whether or not from time to time
decreased or extinguished and later increased, created or incurred, and all
or any portion of such obligations or liabilities that are paid, to the
extent all or any part of such payment is avoided or recovered directly or
indirectly from Collateral Agent or any Lender as a preference, fraudulent
transfer or otherwise, and all obligations of every nature of Pledgors now
or hereafter existing under this Agreement.
SECTION 2. Establishment and Operation of Collateral Account.
-------------------------------------------------
(a) Collateral Agent is hereby authorized to establish and maintain at
its custodian office at Bank if New York, 1 Wall Street, New York, New York
10286, as a blocked account in the name of Collateral Agent and under the sole
dominion and control of Collateral Agent, a restricted deposit account
designated as "MGT NY Special Loan Account # 190159."
(b) The Collateral Account shall be operated in accordance with the
terms of this Agreement.
(c) All amounts at any time held in the Collateral Account shall be
beneficially owned by Pledgors but shall be held in the name of Collateral Agent
hereunder, for the benefit of Lenders, as collateral security for the Secured
Obligations upon the terms and conditions set forth herein. Pledgors shall have
no right to withdraw, transfer or, except as expressly set forth herein,
otherwise receive any funds deposited into the Collateral Account.
(d) Anything contained herein to the contrary notwithstanding, the
Collateral Account shall be subject to such applicable laws, and such applicable
regulations of the Board of Governors of the Federal Reserve System and of any
other appropriate banking or governmental authority, as may now or hereafter be
in effect.
SECTION 3. Deposits of Cash Collateral.
---------------------------
(a) All deposits of funds in the Collateral Account shall be made by
wire transfer (or, if applicable, by intra-bank transfer from another account of
any Pledgor) of immediately available funds, in each case addressed as follows:
Name of Bank: Bank of New York
Account No.: GLA 111565
ABA No.: 021000018
FCC: MGT NY Special Loan Account # 190159
Reference: Domino's Pizza Collateral
Pledgors shall, promptly after initiating a transfer of funds to the Collateral
Account, give notice to Collateral Agent by telefacsimile of the date, amount
and method of delivery of such deposit.
(b) If an Event of Default has occurred and is continuing and, in
accordance with Section 8 of the Credit Agreement, Pledgors are required to pay
to Collateral Agent an amount (the "Aggregate Available Amount") equal to the
maximum amount that may at any time be drawn under all Letters of Credit then
outstanding under the Credit Agreement, Pledgors shall deliver funds in such an
amount for deposit in the Collateral Account in accordance with Section 3(a).
Upon any drawing under any outstanding Letter of Credit in respect of which
Pledgors have deposited in the Collateral Account any amounts described above,
Collateral Agent shall apply such amounts to reimburse the Issuing Lender for
the amount of such drawing. In the event the amount deposited in the Collateral
Account pursuant to this Section 3(b) exceeds the maximum amount available to be
drawn under all Letters of Credit, Collateral Agent shall apply such excess
amount then on deposit in the Collateral Account in accordance with subsection
2.4D of the Credit Agreement.
(c) So long as no Event of Default has occurred and is continuing, any
interest received in respect of Investments of any amounts deposited in the
Collateral Account pursuant to this Section shall be delivered by Collateral
Agent to Pledgors upon receipt of written request from Pledgors; provided,
--------
however, that Collateral Agent shall not deliver to any Pledgor any such
- -------
interest received in respect of Investments of any amounts deposited in the
Collateral Account pursuant to Section 3(b) unless all outstanding Secured
Obligations have been indefeasibly paid in full or cash collateralized pursuant
to the terms of this Agreement.
SECTION 4. Pledge of Security for Secured Obligations.
------------------------------------------
Pledgors hereby pledge and assign to Collateral Agent, and hereby
grant to Collateral Agent a security interest in, all of Pledgors' right, title
and interest in and to the Collateral as collateral security for the prompt
payment or performance in full when due, whether at stated maturity, by required
prepayment, declaration, acceleration, demand or otherwise (including the
payment of amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. (S)362(a)), of all
Secured Obligations.
SECTION 5. Investment of Amounts in Collateral Account; Interest.
-----------------------------------------------------
Cash held by Collateral Agent in the Collateral Account shall not be
invested or reinvested except as provided in this Section 5.
(a) So long as no Event of Default or Potential Event of Default shall
have occurred and be continuing, any funds on deposit in the Collateral Account
shall be invested by Collateral Agent in its own name, in accordance with and
upon receipt by Collateral Agent from time to time of written instructions from
Pledgors, in Cash Equivalents. Upon the occurrence and during the continuance
of an Event of Default or Potential Event of Default, Pledgors' right to
instruct Collateral Agent with respect to such investment or reinvestment shall
terminate without further notice to Pledgors.
(b) Collateral Agent is hereby authorized to sell, and shall sell, all
or any designated part of the securities constituting part of the Collateral (i)
so long as no Event of Default or Potential Event of Default shall have occurred
and be continuing, upon receipt of written instructions from any Pledgor or (ii)
in any event if such sale is necessary to permit Collateral Agent to perform its
duties hereunder. Collateral Agent shall have no responsibility for any loss
resulting from a fluctuation in interest rates or otherwise. Subject to the
provisions of Section 3(d), any interest received in respect of securities
constituting part of the Collateral and the net proceeds of the sale or payment
of any such securities shall be held in the Collateral Account by Collateral
Agent pending investment thereof pursuant to Section 5(a).
(c) The Collateral Account shall be subject to such applicable laws,
and such applicable regulations of the Board of Governors of the Federal Reserve
System and of any other appropriate banking or governmental authority, as may
now or hereafter be in effect.
SECTION 6. Representations and Warranties. Each Pledgor represents and
------------------------------
warrants as follows:
(a) Ownership of Collateral. Such Pledgor is (or at the time of
transfer thereof to Collateral Agent will be) the legal and beneficial
owner of the Collateral from time to time transferred by such Pledgor to
Collateral Agent , free and clear of any Lien except for the security
interest created by this Agreement and Permitted Encumbrances.
(b) Perfection. The pledge and assignment of the Collateral pursuant
to this Agreement creates a valid and perfected First Priority Lien in the
Collateral, securing the payment of the Secured Obligations.
(c) Other Information. All information heretofore, herein or
hereafter supplied to Collateral Agent by or on behalf of such Pledgor with
respect to the Collateral is accurate and complete in all respects.
SECTION 7. Further Assurances.
------------------
Pledgors agree that from time to time, at the joint and several
expense of Pledgors, Pledgors will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
desirable, or that Collateral Agent may request, in order to perfect and protect
any security interest granted or purported to be granted hereby or to enable
Collateral Agent to exercise and enforce its rights and remedies hereunder with
respect to any Collateral. Without limiting the generality of the foregoing,
Pledgors will: (a) execute and file such financing or continuation statements,
or amendments thereto, and such other instruments or notices, as may be
necessary or desirable, or as Collateral Agent may request, in order to perfect
and preserve the security interests granted or purported to be granted hereby
and (b) at Collateral Agent's request, appear in and defend any action or
proceeding that may affect any Pledgor's beneficial title to or Collateral
Agent's security interest in all or any part of the Collateral.
SECTION 8. Transfers and other Liens.
-------------------------
Each Pledgor agrees that it will not (a) sell, assign (by operation of
law or otherwise) or otherwise dispose of any of the Collateral or (b) create or
suffer to exist any Lien upon or with respect to any of the Collateral, except
for the security interest under this Agreement.
SECTION 9. Collateral Agent Appointed Attorney-in-Fact.
-------------------------------------------
Each Pledgor hereby irrevocably appoints Collateral Agent as such
Pledgor's attorney-in-fact, with full authority in the place and stead of such
Pledgor and in the name of such Pledgor, Collateral Agent or otherwise, from
time to time in Collateral Agent's discretion to take any action and to execute
any instrument that Collateral Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including to file one or more
financing or continuation statements, or amendments thereto, relative to all or
any part of the Collateral without the signature of such Pledgor.
SECTION 10. Collateral Agent Party May Perform.
---------------- -----------------
If any Pledgor fails to perform any agreement contained herein,
Collateral Agent may itself perform, or cause performance of, such agreement,
and the expenses of Collateral
Agent incurred in connection therewith shall be payable by Pledgors under
subsection 10.2 of the Credit Agreement.
SECTION 11. Standard of Care.
----------------
The powers conferred on Collateral Agent hereunder are solely to
protect its interest in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the exercise of reasonable care in the
custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, Collateral Agent shall have no duty as to any
Collateral, it being understood that Collateral Agent shall have no
responsibility for (a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
Collateral, whether or not Collateral Agent has or is deemed to have knowledge
of such matters, (b) taking any necessary steps (other than steps taken in
accordance with the standard of care set forth above to maintain possession of
the Collateral) to preserve rights against any parties with respect to any
Collateral, (c) taking any necessary steps to collect or realize upon the
Secured Obligations or any guarantee therefor, or any part thereof, or any of
the Collateral, (d) initiating any action to protect the Collateral against the
possibility of a decline in market value, (e) any loss resulting from
Investments made pursuant to Section 5, except for a loss resulting from
Collateral Agent's gross negligence, willful misconduct or bad faith in
complying with Section 5, or (f) determining (i) the correctness of any
statement or calculation made by Pledgors in any written instructions or (ii)
whether any deposit in the Collateral Account is proper. Collateral Agent shall
be deemed to have exercised reasonable care in the custody and preservation of
Collateral in its possession if such Collateral is accorded treatment
substantially equal to that which Collateral Agent accords its own property
consisting of negotiable securities.
SECTION 12. Remedies.
--------
Subject to the provisions of Section 3(b), Collateral Agent may
exercise in respect of the Collateral, in addition to all other rights and
remedies otherwise available to it, all the rights and remedies of a secured
party on default under the Uniform Commercial Code as in effect in any relevant
jurisdiction (the "Code") (whether or not the Code applies to the affected
Collateral).
SECTION 13. Continuing Security Interest; Transfer of Loans.
-----------------------------------------------
This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until the payment in
full of the Secured Obligations, the cancellation or termination of the
Commitments and the cancellation or expiration of all outstanding Letters of
Credit, (b) be binding upon each Pledgor, its successors and assigns, and (c)
inure, together with the rights and remedies of Collateral Agent hereunder, to
the benefit of Collateral Agent and its successors, transferees and assigns.
Without limiting the generality of the foregoing clause (c), but subject to the
provisions of subsection 10.1 of the Credit Agreement, any Lender may assign or
otherwise transfer any Loans held by it to any other Person, and such other
Person shall thereupon become vested with all the benefits in respect thereof
granted to Lenders herein or otherwise. Upon the payment in full of all Secured
Obligations, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, the
security interest granted hereby shall terminate and all rights to the
Collateral shall revert to the applicable Pledgor. Upon any such termination
Collateral Agent shall, at Pledgors' expense, execute and deliver to each
Pledgors such documents as such Pledgor shall reasonably request to evidence
such termination and such Pledgor shall be entitled to the return, upon its
request and at its expense, against receipt and without recourse to Collateral
Agent, of such of the Collateral as shall not have been otherwise applied
pursuant to the terms hereof.
SECTION 14. Administrative Agent as Collateral Agent.
----------------------------------------
(a) Collateral Agent has been appointed to act as Collateral Agent
hereunder by Lenders. Collateral Agent shall be obligated, and shall have the
right hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including
the release or substitution of Collateral), solely in accordance with this
Agreement and the Credit Agreement.
(b) Collateral Agent shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to subsection 9.5 of the Credit Agreement shall
also constitute notice of resignation as Collateral Agent under this Agreement;
removal of Administrative Agent pursuant to subsection 9.5 of the Credit
Agreement shall also constitute removal as Collateral Agent under this
Agreement; and appointment of a successor Administrative Agent pursuant to
subsection 9.5 of the Credit Agreement shall also constitute appointment of a
successor Collateral Agent under this Agreement. Upon the acceptance of any
appointment as Administrative Agent under subsection 9.5 of the Credit Agreement
by a successor Administrative Agent, that successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring or removed Collateral Agent under this Agreement, and
the retiring or removed Collateral Agent under this Agreement shall promptly (i)
transfer to such successor Collateral Agent all sums held by Collateral Agent
hereunder (which shall be deposited in a new Collateral Account established and
maintained by such successor Collateral Agent), together with all records and
other documents necessary or appropriate in connection with the performance of
the duties of the successor Collateral Agent under this Agreement, and (ii)
execute and deliver to such successor Collateral Agent such amendments to
financing statements, and take such other actions, as may be necessary or
appropriate in connection with the assignment to such successor Collateral Agent
of the security interests created hereunder, whereupon such retiring or removed
Collateral Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring or removed Administrative Agent's resignation or
removal hereunder as Collateral Agent, the provisions of this Agreement shall
inure to its benefit as to any actions taken or omitted to be taken by it under
this Agreement while it was Collateral Agent hereunder.
SECTION 15. Amendments; Etc.
---------------
No amendment, modification, termination or waiver of any provision of
this Agreement, and no consent to any departure by any Pledgor therefrom, shall
in any event be effective unless the same shall be in writing and signed by
Collateral Agent and, in the case of any such amendment or modification, by
Pledgors. Any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it was given.
SECTION 16. Notices.
-------
Any notice or other communication herein required or permitted to be
given shall be in writing and may be personally served or sent by telefacsimile
or United States mail or courier service and shall be deemed to have been given
when delivered in person or by courier service or upon receipt if sent by
telefacsimile or by the United States mail with postage prepaid and properly
addressed. For the purposes hereof, the address of each party hereto shall be
as provided in subsection 10.8 of the Credit Agreement.
SECTION 17. Failure or Indulgence Not Waiver; Remedies Cumulative.
-----------------------------------------------------
No failure or delay on the part of Collateral Agent in the exercise of
any power, right or privilege hereunder shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude any other or further exercise thereof or of any other power, right or
privilege. All rights and remedies existing under this Agreement are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
SECTION 18. Severability.
------------
In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 19. Headings.
--------
Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
SECTION 20. Governing Law; Terms.
--------------------
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE CODE PROVIDES THAT THE
PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT
OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF NEW YORK. Unless otherwise defined herein or in the Credit
Agreement, terms used in Articles 8 and 9 of the Uniform Commercial Code in the
State of New York are used herein as therein defined.
SECTION 21. Counterparts.
------------
This Agreement may be executed in one or more counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, Pledgors and Collateral Agent have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
DOMINO'S, INC.,
as Pledgor
By: /s/ Harry Silverman
-------------------------------
Name: Harry Silverman
Title: Vice President
BLUEFENCE, INC.,
as Pledgor
By: /s/ Harry Silverman
----------------------
Name: Harry Silverman
Title: President
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Collateral Agent
By: /s/ Colleen Galle
---------------------
Name: Colleen Galle
Title: Vice President
EXHIBIT 12.1
DOMINO'S, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Unaudited
Pro Forma
Year Ended
Fiscal Year January 3,
---------------------------------------------------------------
1994 1995 1996 1997 1998 1999
--------------------------------------------------------------------------
Earnings before income taxes and
extraordinary loss 9,510 37,244 50,611 61,471 63,948 3,079
Fixed charges:
Interest expense 16,405 13,586 6,618 4,190 7,151 72,569
Rentals:
1/3 of all Lease rentals 10,577 9,648 8,665 8,962 9,135 7,161
------ ------ ------ ------ ------ ------
Total fixed charges 26,982 23,234 15,283 13,152 16,286 79,730
------ ------ ------ ------ ------ ------
Earnings before income taxes and extraordinary
loss, interest and fixed charges 36,492 60,478 65,894 74,623 80,234 82,809
Ratio of earnings to fixed charges 1.4x 2.6x 4.3x 5.7x 4.9x 1.0x
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
and to all references to our Firm included in or made a part of this
registration statement.
Arthur Andersen LLP
Detroit, Michigan,
March 19, 1999.
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
__________
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305-(B) (2)
_________
IBJ WHITEHALL BANK & TRUST COMPANY
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
New York 13-5375195
(State of Incorporation (I.R.S. Employer
if not a U.S. national bank) Identification No.)
One State Street, New York, New York 10004
(Address of principal executive offices) (Zip code)
Terence Rawlins, Assistant Vice President
IBJ Whitehall Bank & Trust Company
One State Street
New York, New York 10004
(212) 858-2000
(Name, Address and Telephone Number of Agent for Service)
Domino's, Inc.
(Exact name of each registrant as specified in its charter)
Delaware 38-3025165
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30 Frank Lloyd Wright Drive
Ann Arbor, MI 48106
(Address of principal executive office) (Zip code)
Domino's Pizza, Inc.
(Exact name of each registrant as specified in its charter)
Michigan 38-1741243
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30 Frank Lloyd Wright Drive
Ann Arbor, MI 48106
(Address of principal executive office) (Zip code)
Domino's Franchise Holding Co.
(Exact name of each registrant as specified in its charter)
Michigan 38-3401169
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30 Frank Lloyd Wright Drive
Ann Arbor, MI 48106
(Address of principal executive office) (Zip code)
Metro Detroit Pizza, Inc.
(Exact name of each registrant as specified in its charter)
Michigan 38-3068735
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30 Frank Lloyd Wright Drive
Ann Arbor, MI 48106
(Address of principal executive office) (Zip code)
Domino's Pizza International, Inc.
(Exact name of each registrant as specified in its charter)
Delaware 52-1291464
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30 Frank Lloyd Wright Drive
Ann Arbor, MI 48106
(Address of principal executive office) (Zip code)
-2-
Domino's Pizza International Payroll Services, Inc.
(Exact name of each registrant as specified in its charter)
Florida 38-2978908
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30 Frank Lloyd Wright Drive
Ann Arbor, MI 48106
(Address of principal executive office) (Zip code)
Domino's Pizza - Government Services Division, Inc.
(Exact name of each registrant as specified in its charter)
Texas 38-3105323
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30 Frank Lloyd Wright Drive
Ann Arbor, MI 48106
(Address of principal executive office) (Zip code)
10-3/8% Senior Subordinated Notes due 2009
(Title of Indenture Securities)
-3-
Item 1. General information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department
Two Rector Street
New York, New York
Federal Deposit Insurance Corporation
Washington, D.C.
Federal Reserve Bank of New York
Second District
33 Liberty Street
New York, New York
(b) Whether it is authorized to exercise corporate trust powers.
Yes
Item 2. Affiliations with the Obligors.
If the obligors are an affiliate of the trustee, describe each such
affiliation.
The obligors are not an affiliate of the trustee.
-4-
Item 13. Defaults by the Obligors.
(a) State whether there is or has been a default with respect to the
securities under this indenture. Explain the nature of any such
default.
None
(b) If the trustee is a trustee under another indenture under which
any other securities, or certificates of interest or participation
in any other securities, of the obligors are outstanding, or is
trustee for more than one outstanding series of securities under
the indenture, state whether there has been a default under any
such indenture or series, identify the indenture or series
affected, and explain the nature of any such default.
None
Item 16. List of exhibits.
List below all exhibits filed as part of this statement of
eligibility.
*1. A copy of the Charter of IBJ Whitehall Bank & Trust Company as amended to
date. (See Exhibit 1A to Form T-1, Securities and Exchange Commission File
No. 22-18460 & 333-46849).
*2. A copy of the Certificate of Authority of the trustee to Commence Business
(Included in Exhibit 1 above).
*3. A copy of the Authorization of the trustee to exercise corporate trust
powers, as amended to date (See Exhibit 4 to Form T-1, Securities and
Exchange Commission File No. 22-19146).
*4. A copy of the existing By-Laws of the trustee, as amended to date (See
Exhibit 4 to Form T-1, Securities and Exchange Commission File No. 333-
46849).
5. Not Applicable
6. The consent of United States institutional trustee required by Section
321(b) of the Act.
-5-
7. A copy of the latest report of condition of the trustee published pursuant
to law or the requirements of its supervising or examining authority.
* The Exhibits thus designated are incorporated herein by reference as
exhibits hereto. Following the description of such Exhibits is a reference
to the copy of the Exhibit heretofore filed with the Securities and
Exchange Commission, to which there have been no amendments or changes.
NOTE
----
In answering any item in this Statement of Eligibility which relates to matters
peculiarly within the knowledge of the obligors and its directors or officers,
the trustee has relied upon information furnished to it by the obligors.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the trustee of
all facts on which to base responsive answers to Item 2, the answer to said Item
is based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an amendment to
this Form T-1.
Pursuant to General Instruction B, the trustee has responded to Items 1, 2 and
16 of this form since to the best knowledge of the trustee as indicated in Item
13, the obligors are not in default under any indenture under which the
applicant is trustee.
-6-
SIGNATURE
---------
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, IBJ Whitehall Bank & Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 1st day
of March, 1999.
IBJ WHITEHALL BANK & TRUST COMPANY
By: /s/Terence Rawlins
------------------------------
Terence Rawlins
Assistant Vice President
-7-
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the issue by Domino's, Inc., of it's 10
3/8% Senior Subordinated Notes due 2009, we hereby consent that reports of
examinations by Federal, State, Territorial, or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
IBJ WHITEHALL BANK & TRUST COMPANY
By: /s/Terence Rawlins
------------------------------
Terence Rawlins
Assistant Vice President
Dated: March 1, 1999
-8-
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ SCHRODER BANK & TRUST COMPANY
Of New York, New York
And Foreign and Domestic Subsidiaries
Report as of December 31, 1998
Dollar Amounts
in Thousands
------------
ASSETS
------
1. Cash and balance due from depository institutions:
a. Non-interest-bearing balances and currency and coin.......... $ 26,852
b. Interest-bearing balances.................................... $ 17,489
2. Securities:
a. Held-to-maturity securities.................................. $ 0
b. Available-for-sale securities................................ $ 207,069
3. Federal funds sold and securities purchased under
agreements to resell in domestic offices of the bank
and of its Edge and Agreement subsidiaries and in IBFs
Federal Funds sold and Securities purchased under
agreements to resell............................................... $ 80,389
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income..................... $2,033,599
b. LESS: Allowance for loan and lease losses.................... $ 62,853
c. LESS: Allocated transfer risk reserve........................ $ 0
d. Loans and leases, net of unearned income, allowance, and
reserve...................................................... $1,970,746
5. Trading assets held in trading accounts............................ $ 848
6. Premises and fixed assets (including capitalized leases)........... $ 1,583
7. Other real estate owned............................................ $ 0
8. Investments in unconsolidated subsidiaries and associated companies $ 0
9. Customers' liability to this bank on acceptances outstanding....... $ 340
10. Intangible assets.................................................. $ 11,840
11. Other assets....................................................... $ 66,691
12. TOTAL ASSETS....................................................... $2,383,847
-9-
LIABILITIES
-----------
13. Deposits:
a. In domestic offices............................................ $ 804,562
(1) Noninterest-bearing............................................ $ 168,822
(2) Interest-bearing............................................... $ 635,740
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs........................................................... $ 885,076
(1) Noninterest-bearing............................................ $ 16,554
(2) Interest-bearing............................................... $ 868,522
14. Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBFs:
Federal Funds purchased and Securities sold under
agreements to repurchase............................................. $ 225,000
15. a. Demand notes issued to the U.S. Treasury....................... $ 674
b. Trading Liabilities............................................ $ 560
16. Other borrowed money:
a. With a remaining maturity of one year or less.................. $ 38,002
b. With a remaining maturity of more than one year................ $ 1,375
c. With a remaining maturity of more than three years............. $ 1,550
17. Not applicable.
18. Bank's liability on acceptances executed and outstanding............. $ 340
19. Subordinated notes and debentures.................................... $ 100,000
20. Other liabilities.................................................... $ 74,502
21. TOTAL LIABILITIES.................................................... $2,131,641
22. Limited-life preferred stock and related surplus..................... $ N/A
-10-
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus........................ $ 0
24. Common stock......................................................... $ 28,958
25. Surplus (exclude all surplus related to preferred stock)............. $ 210,319
26. a. Undivided profits and capital reserves......................... $ 11,655
b. Net unrealized gains (losses) on available-for-sale
securities..................................................... $ 1,274
27. Cumulative foreign currency translation adjustments.................. $ 0
28. TOTAL EQUITY CAPITAL................................................. $ 252,206
29. TOTAL LIABILITIES AND EQUITY CAPITAL................................. $2,383,847
-11-
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5
1,000
YEAR YEAR
JAN-03-1999 DEC-28-1997
DEC-29-1997 DEC-30-1996
JAN-03-1999 DEC-28-1997
115 105
0 0
60,047 52,368
2,918 4,213
20,134 31,971
96,845 86,902
181,856 185,716
116,890 131,553
387,891 212,978
115,069 111,855
275,000 0
0 0
0 0
0 0
(483,775) 26,118
387,891 212,978
1,042,744 923,001
1,176,778 1,044,790
602,925 520,041
858,411 757,604
248,098 222,182
(3,212) 1,131
6,321 3,533
63,948 61,471
(12,928) 366
76,876 61,105
0 0
0 0
0 0
76,876 61,105
0 0
0 0
