FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended September 27, 1997
Commission File Number 1-11681
FOOTSTAR, INC.
(Exact Name of Registrant as specified in its charter)
Delaware 22-3439443
(State or other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
933 MacArthur Boulevard, Mahwah, New Jersey 07430
(Address of principal executive offices) (Zip Code)
(201) 934-2000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes _X_ No ___
Number of shares outstanding of the issuer's Common Stock:
Class Outstanding as of October 16, 1997
----- ----------------------------------
Common Stock, $.01 par value 28,311,441
1
<PAGE>
INDEX
Part I. - Financial Information Page No.
--------
Consolidated Condensed Statements of Operations -
Three and Nine Months Ended September 27, 1997 and
September 28, 1996 3
Consolidated Condensed Balance Sheets -
September 27, 1997 and December 28, 1996 4
Consolidated Condensed Statements of Cash Flows -
For Nine Months Ended September 27, 1997
and September 28, 1996 5
Notes to Consolidated Condensed Financial Statements 6 - 11
Management's Discussion and Analysis of
Financial Condition and Results of Operations 12 - 17
Review by Independent Auditors 18
Exhibit 1 - Independent Auditors' Review Report 19
Part II. - Other Information
Item 6 - Exhibits and Reports on Form 8-K 20
2
<PAGE>
FOOTSTAR, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
($ in millions, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------- --------------------------
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $464.0 $432.7 $1,266.9 $1,188.6
Cost of sales 321.9 297.6 881.8 821.8
------ ------ -------- --------
Gross profit 142.1 135.1 385.1 366.8
Store operating, selling, general and
administrative expenses 96.5 92.8 277.1 263.4
Depreciation and amortization 8.1 6.7 23.5 18.3
------ ------ -------- --------
Operating profit 37.5 35.6 84.5 85.1
Interest (expense) income, net (0.2) 4.7 1.4 14.0
------ ------ -------- --------
Income from continuing operations before income
taxes and minority interests 37.3 40.3 85.9 99.1
Provision for income taxes 12.3 13.7 28.3 32.5
------ ------ -------- --------
Income from continuing operations before
minority interests 25.0 26.6 57.6 66.6
Minority interests in net income 6.2 7.6 18.7 19.3
------ ------ -------- --------
Income from continuing operations 18.8 19.0 38.9 47.3
Income (loss) from discontinued operations, net
of income tax benefit of $30.3 -- -- -- (52.8)
------ ------ -------- --------
Net income (loss) $ 18.8 $ 19.0 $ 38.9 $ (5.5)
====== ====== ======== ========
Weighted average shares outstanding
(in millions) 28.5 29.8
====== ========
Earnings per share $ 0.66 $ 1.30
====== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
<PAGE>
FOOTSTAR, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED BALANCE SHEETS
($ in millions, except for share data)
September 27, December 28,
1997 1996
(Unaudited) (Audited)
----------- ---------
ASSETS
Current Assets:
Cash and cash equivalents $ 36.9 $164.6
Accounts receivable, net 48.7 77.7
Inventories 353.9 281.9
Prepaid expenses and other
current assets 51.9 59.9
------ ------
Total current assets 491.4 584.1
Property and equipment, net 218.8 197.0
Deferred charges and other
non-current assets 43.6 47.6
------ ------
Total assets $753.8 $828.7
====== ======
LIABILITIES and SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 93.2 $ 79.8
Accrued expenses 165.7 215.6
Income taxes payable 23.2 29.3
------ ------
Total current liabilities 282.1 324.7
Other long-term liabilities 50.6 55.2
Minority interests in subsidiaries 47.9 65.0
------ ------
Total liabilities 380.6 444.6
------ ------
Shareholders' equity:
Common stock $.0l par value: 100,000,000
shares authorized, 30,546,841
and 30,533,883 shares
issued and outstanding 0.3 0.3
Additional paid-in capital 331.2 327.2
Treasury stock: 2,235,400 shares
and 0 shares at cost (52.8) --
Unearned compensation (3.8) (3.4)
Equity adjustment from foreign currency
translation (0.5) (0.4)
Retained earnings 98.8 60.4
------ ------
Total shareholders' equity 373.2 384.1
------ ------
Total liabilities and shareholders' equity $753.8 $828.7
====== ======
See accompanying notes to consolidated condensed financial statements.
4
<PAGE>
FOOTSTAR, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
($ in millions)
Nine Months Ended
-----------------
Sept. 27, Sept. 28,
1997 1996
--------- ---------
Net cash provided by operating activities $9.2 $61.7
----- -----
Cash flows (used in) investing activities:
Additions to property and equipment (49.7) (36.6)
Proceeds from the sale or disposal of property
and equipment -- 3.4
----- -----
Net cash used in investing activities (49.7) (33.2)
----- -----
Cash flows (used in) provided by financing
activities:
Dividends paid to minority interests (35.9) (63.8)
Decrease in due from parent and other divisions -- 33.2
Treasury stock acquired (52.8) --
Other 1.5 --
----- -----
Net cash used in financing
activities (87.2) (30.6)
----- -----
Net decrease in cash and cash equivalents (127.7) (2.1)
Cash and cash equivalents at beginning of period 164.6 26.3
----- -----
Cash and cash equivalents at end of period $36.9 $24.2
===== =====
See accompanying notes to consolidated condensed financial statements.
5
<PAGE>
FOOTSTAR, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
($ in millions, except per share data)
1. Basis of Presentation
Footstar, Inc. (the "Company") became and independent company after the Board of
Directors of Melville Corporation ("Melville") approved the spin-off of its
footwear operations. The spin-off was completed with the distribution (the
"Distribution") on October 12, 1996 to the Melville shareholders of Record on
October 2, 1996 of all the shares of the Company.
In the opinion of the Company, the accompanying unaudited consolidated condensed
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position of the
Company as of September 27, 1997 and the results of operations for the three and
nine-month periods ended September 27, 1997 and September 28, 1996 and cash
flows for the nine months ended September 27, 1997 and September 28, 1996. 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 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. Because
of the seasonality of the specialty retailing business, operating results of the
Company on a quarterly basis may not be indicative of operating results for the
full year. The consolidated condensed financial statements of the Company should
be read in conjunction with the financial statements of the Company included in
the Company's 1996 Annual Report on Form 10-K. Certain reclassifications have
been made to the consolidated financial statements to conform to the 1997
presentations.
The Board of Directors of the Company approved on December 5, 1996 a change to a
fiscal year ending on the Saturday closest to December 31 from a calendar year.
Fiscal 1996 ended on December 28, 1996 and fiscal 1997 will end January 3, 1998
and will be a 53-week year.
2. Earnings per Share
Earnings per share information has been omitted from the accompanying
consolidated statements of operation for the three and nine months ended
September 28, 1996, since the Company was not a separate entity with its own
capital structure until October 12, 1996. See Note 4 with respect to pro forma
earnings per share. Earnings per share are calculated by dividing net income
(loss) by the weighted average shares outstanding, which includes common stock
equivalents.
In March 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings Per Share," which established new standards for computing and
presenting earnings per share. SFAS No. 128 will be effective for interim and
annual financial statements for periods ending after December 15, 1997. The
Company believes that the adoption of SFAS No. 128 will not have a material
impact on the Company's reported earnings per share. The table that follows
shows pro forma earnings per share calculated in accordance with SFAS No. 128.
6
<PAGE>
FOOTSTAR, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
($ in millions, except per share data)
2. Earnings per Share (Continued)
Pro forma
----------------------------------------
Three Months Ended Nine Months Ended
September 27, 1997 September 27, 1997
------------------ ------------------
Basic EPS Computation
Numerator:
Net Income $18.8 $38.9
========== ==========
Denominator:
Average common shares
outstanding 28,384,855 29,751,521
========== ==========
Basic EPS $0.66 $1.31
========== ==========
Diluted EPS computation
Numerator:
Net Income $18.8 $38.9
========== ==========
Denominator:
Average common shares
outstanding 28,384,855 29,751,521
Dilutive effect of
stock options 91,710 78,946
---------- ----------
Total shares 28,476,565 29,830,467
========== ==========
Diluted EPS $0.66 $1.30
========== ==========
3. Supplemental Cash Flow Information
Nine Months Ended
-------------------------------------
Sept. 27, 1997 Sept. 28, 1996
---------------- ---------------
Cash paid for income taxes $10.8 $15.1
Cash paid for interest $ 1.5 $ 0.4
7
<PAGE>
FOOTSTAR, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
($ in millions, except per share data)
4. Pro Forma Statements of Operations
The following tables represent a comparison of the Company's actual results for
the three and nine month periods ended September 27, 1997 and pro forma
consolidated condensed statements of operations for the three and nine-month
periods ended September 28, 1996. Pro forma results assume that the Distribution
and related transactions and events occurred as of the beginning of 1996. Pro
forma financial information is presented for informational purposes only and may
not reflect the future results of the Company or what the results would have
been had the Company been operated as a separate company.
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------------------
Sept. 27,
1997 September 28, 1996
------------ --------------------------------------------------
Actual Pro forma Adjustment Historical
------------ ---------- ---------- ------------
<S> <C> <C> <C> <C>
Net sales $464.0 $432.7 $ -- $432.7
Cost of sales 321.9 297.6 -- 297.6
------ ------ ----- ------
Gross profit 142.1 135.1 -- 135.1
Store operating, selling, general and
administrative expenses 96.5 94.4 1.6(1) 92.8
Depreciation and amortization 8.1 6.7 6.7
------ ------ ----- ------
Operating profit 37.5 34.0 (1.6) 35.6
Interest (expense) income, net (0.2) 0.0 (4.7)(2) 4.7
------ ------ ----- ------
Income from continuing operations before
income taxes and minority interests 37.3 34.0 (6.3) 40.3
Provision for income taxes 12.3 11.2 (2.5)(3) 13.7
------ ------ ----- ------
Income from continuing operations before
minority interests 25.0 22.8 (3.8) 26.6
Minority interests in net income 6.2 7.6 -- 7.6
------ ------ ----- ------
Income from continuing operations $ 18.8 $ 15.2 $(3.8) $ 19.0
====== ====== ===== ======
Weighted average shares outstanding
(in millions)(4) 28.5 30.6
====== ======
Earnings per share $ 0.66 $ 0.49
====== ======
</TABLE>
8
<PAGE>
FOOTSTAR, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
($ in millions, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------------------
Sept. 27,
1997 September 28, 1996
------------ --------------------------------------------------
Actual Pro forma Adjustment Historical
------------ ---------- ---------- ------------
<S> <C> <C> <C> <C>
Net sales $1,266.9 $1,188.6 $ -- $1,188.6
Cost of sales 881.8 821.8 -- 821.8
-------- -------- ------ --------
Gross profit 385.1 366.8 -- 366.8
Store operating, selling, general and
administrative expenses 277.1 271.3 7.9(1) 263.4
Depreciation and amortization 23.5 18.3 -- 18.3
-------- -------- ------ --------
Operating profit 84.5 77.2 (7.9) 85.1
Interest (expense) income, net 1.4 0.0 (14.0)(2) 14.0
-------- -------- ------ --------
Income from continuing operations before
income taxes and minority interests 85.9 77.2 (21.9) 99.1
Provision for income taxes 28.3 24.0 (8.5)(3) 32.5
-------- -------- ------ --------
Income from continuing operations before
minority interests 57.6 53.2 (13.4) 66.6
Minority interests in net income 18.7 19.3 -- 19.3
-------- -------- ------ --------
Income from continuing operations $ 38.9 $ 33.9 $(13.4) $ 47.3
======== ======== ====== ========
Weighted average shares outstanding
(in millions)(4) 29.8 30.6
======== ========
Earnings per share $ 1.30 $ 1.10
======== ========
</TABLE>
The pro forma results have been derived from the historical financial results
and principally reflect the following:
(1) To record the elimination of Melville expense allocations and the net
increase in overhead. This increae consists of the following:
September 28, 1996
--------------------------------
Three Months Nine Months
------------ -----------
Elimination of Melville expense
allocations $(1.4) $(4.1)
Stand-alone overhead costs 3.0 12.0
----- -----
Net increase 1.6 7.9
===== =====
The Melville expense allocations consist
of the following:
Cost of Employee Stock Ownership Plan $ 0.9 $ 2.6
Corporate administrative costs 0.5 1.5
----- -----
$ 1.4 $ 4.1
===== =====
9
<PAGE>
FOOTSTAR, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
($ in millions, except per share data)
The stand-alone overhead costs relate primarily to incremental salary and
related costs of corporate management, financing fees and other costs associated
with being a stand-alone public company.
(2) To eliminate net interest income relating to intercompany balances. The net
interest income on the intercompany account balance was calculated on a daily
basis utilizing the Treasury Repurchase Agreement rate for overnight
investments.
(3) To record the net change in the provision for income taxes to reflect the
pro forma adjustments. The effective tax rate utilized was 39%, which
approximates the Company's blended statutory rate.
(4) The weighted average number of common shares outstanding reflects (i) the
Distribution ratio times (ii) the number of shares of Melville Common Stock
outstanding as of August 31, 1996 plus shares of deferred stock and stock units
to be granted as of the Distribution pursuant to the Company's 1996 Incentive
Compensation Plan and 1996 Non-Employee Director Stock Plan.
10
<PAGE>
FOOTSTAR, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
($ in millions, except per share data)
5. Purchase of Treasury Stock
In May of 1997, the Company announced that its Board of Directors had authorized
a stock repurchase program of up to 10% of its common shares outstanding, or
approximately 3,050,000 shares, in the open market during 1997. As of September
27, 1997, the Company had purchased 2,235,400 shares of its stock in the open
market at an average price of $23.60 per share for an aggregate purchase amount
of $52.8 million. The treasury shares may be issued upon the exercise of
employee stock options or for other corporate purposes.
11
<PAGE>
FOOTSTAR, INC. AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Condensed
Consolidated Financial Statements of the Company and notes thereto appearing
elsewhere in this report.
General
Footstar, Inc. (the "Company") became an independent company after the Board of
Directors of Melville Corporation ("Melville") approved the spin-off of its
footwear operations. The spin-off was completed with the distribution (the
"Distribution") on October 12, 1996 to the Melville shareholders of record on
October 2, 1996 of all the shares of the Company.
Prior to the Distribution, Meldisco, Footaction and Thom McAn were operated as
part of Melville. The historical financial information presented herein reflects
periods during which the Company did not operate as a separate company, and
accordingly, certain assumptions were made in preparing such financial
information. Such information, therefore, may not necessarily reflect the
results of operations or the financial condition of the Company which would have
resulted had the Company been a stand-alone public company during the reporting
periods, and are not necessarily indicative of the Company's future operating
results or financial condition. On June 3, 1996, Melville announced the
discontinuance of the Thom McAn segment. Accordingly, the results of operations
for the Thom McAn segment have been classified as discontinued operations for
all periods presented. In connection with the discontinuation of Thom McAn, the
Company recorded a pre-tax charge of approximately $85.0 million in the first
quarter of 1996. The charge primarily related to operating losses to be incurred
during the wind-down period, lease settlement costs, asset write-offs and
severance costs.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------------ -------------------------------------
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
($ in millions) 1997 1996 1997 1996
--------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Company:
Net Sales $464.0 $432.7 $1,266.9 $1,188.6
Net sales % change from prior year 7.2% 4.9% 6.6% 2.5%
Same store sales % change 0.6% 3.4% 0.9% 2.2%
Meldisco:
Net Sales $293.2 $285.4 $834.1 $820.9
Net sales % change from prior year 2.7% (1.5%) 1.6% (4.4%)
Same store sales % change 3.1% (1.7%) 1.6% (3.5%)
% of consolidated net sales 63.2% 66.0% 65.8% 69.1%
Footaction:
Net Sales $170.8 $147.3 $432.8 $367.7
Net sales % change from prior year 16.0% 20.0% 17.7% 22.1%
Same store sales % change (4.6%) 15.9% (0.9%) 18.7%
% of consolidated net sales 36.8% 34.0% 34.2% 30.9%
</TABLE>
12
<PAGE>
FOOTSTAR, INC. AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net sales for the third quarter ended September 27, 1997, were $464.0 million,
an increase of 7.2% from net sales of $432.7 million for the third quarter of
1996 with a same store sales increase of 0.6%. Meldisco posted a same store
sales increase of 3.1%. The back-to-school selling season was strong, fueled by
successful promotional activity, the continued solid performance of our women's
Cobbie Cuddlers line introduced in 1996, and increased sales in the newly
remodeled Big Kmart stores. Footaction posted a same store sales decline of 4.6%
due to weak demand for athletic footwear and apparel, particularly in the
basketball and cross training categories.
Net sales for the nine months ended September 27, 1997 were $1,266.9 million, an
increase of 6.6% from net sales of $1,188.6 million for the 1996 comparable
period. Same store sales for the nine months increased by 0.9%. For the nine
month period, Footaction posted an 17.7% sales increase over the prior year
driven by a solid merchandise assortment, a 35.8% increase in square footage and
a 0.9% decrease in comparable store sales. Meldisco showed a 1.6% sales increase
and a 1.6% gain in same store sales over last year's comparable nine-month
period.
Cost of Sales and Expenses
<TABLE>
<CAPTION>
Three Months Ended Pro Forma
--------------------------------- ----------
Sept. 27, Sept. 28, Sept. 28,
(As a percent of net sales) 1997 1996 1996
---------- ------------- ----------
<S> <C> <C> <C>
Cost of sales 69.4% 68.8% 68.8%
Store operating, selling, general and
administrative expenses* 20.8% 21.4% 21.8%
Depreciation and amortization 1.7% 1.5% 1.5%
<CAPTION>
Nine Months Ended Pro Forma
--------------------------------- ----------
Sept. 27, Sept. 28, Sept. 28,
(As a percent of net sales) 1997 1996 1996
---------- ------------- ----------
<S> <C> <C> <C>
Cost of sales 69.6% 69.1% 69.1%
Store operating, selling, general and
administrative expenses* 21.9% 22.2% 22.8%
Depreciation and amortization 1.9% 1.5% 1.5%
</TABLE>
- ----------
* Includes allocations from Melville for 1996.
13
<PAGE>
FOOTSTAR, INC. AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cost of Sales
Cost of sales for the third quarter and first nine months of 1997 increased 60
and 50 basis points respectively, from the corresponding prior-year periods.
Both divisions experienced lower gross margins in 1997. The contributing factors
were higher delivery costs due to increased shipping volumes at both divisions,
higher markdowns driven by increased promotional activity at Meldisco, and
higher occupancy costs at Footaction, due to lower sales productivity.
Store Operating, Selling, General and Administrative Expenses
Store operating, selling, general and administrative expenses were 60 basis
points lower in the third quarter of 1997 as compared to the same period for the
prior year. Administrative costs were lower from the outsourcing of information
systems and reduced payroll costs. Stricter expense control contributed to the
lower percentages in 1997 compared to 1996.
Store operating, selling, general and administrative expenses were 30 basis
points lower in the first nine months of 1997 as compared to the same period for
the prior year. Lower administrative costs resulted from outsourcing of
information systems and other costs savings initiatives implemented by the
Company including contract renegotiations and staff reorganizations. This was
partially offset by the cost incurred relating to the addition of functional
areas required to support a stand-alone public company.
On a pro forma basis, store operating, selling, general and administrative
expenses as a percentage of sales for the third quarter and nine months ended
September 27, 1997 were 100 basis points and 90 basis points, respectively,
below the comparable periods of 1996. This is due to lower administrative costs
resulting from outsourcing of information systems and other costs savings
initiatives implemented by the Company including contract renegotiations and
staff reorganizations. The costs incurred to support the Company as a stand
alone public company are lower than projected due to open positions as well as
tight expense control.
14
<PAGE>
FOOTSTAR, INC. AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operating Profit
<TABLE>
<CAPTION>
Three Months Ended Pro Forma
------------------------------------------------------------- --------------------------------
($ in millions) September 27, 1997 September 28, 1996 September 28, 1996
------------------------- ---------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
Meldisco $21.3 7.3% $20.3 7.1% $20.3 7.1%
Footaction 18.2 10.7% 16.8 11.4% 16.8 11.4%
General Corporate
Expenses (2.0) -- (1.5) -- (3.1) --
----- --- ----- --- ----- ---
Total $37.5 8.1% $35.6 8.2% $34.0 7.9%
===== === ===== === ===== ===
<CAPTION>
Nine Months Ended Pro Forma
------------------------------------------------------------- --------------------------------
($ in millions) September 27, 1997 September 28, 1996 September 28, 1996
------------------------- ---------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
Meldisco $56.2 6.7% $56.7 6.9% $56.7 6.9%
Footaction 34.6 8.0% 29.9 8.1% 29.9 8.1%
General Corporate
Expenses (6.3) -- (1.5) -- (9.4) --
----- --- ----- --- ----- ---
Total $84.5 6.7% $85.1 7.2% $77.2 6.5%
===== === ===== === ===== ===
</TABLE>
Operating profit for the third quarter ended September 27, 1997 increased from
both the historical and pro forma third quarter totals for 1996. This increase
can be attributed to higher sales and tighter controls of administrative
expenses offset in part by increased promotional activity which lowered the
gross profit margin.
Operating profit for the nine months ended September 27, 1997 decreased from the
historical nine months of 1996, due primarily to the additional costs incurred
in 1997 for functional areas required to support a stand-alone public company,
offset in part by increased sales and the ability to leverage fixed costs.
Operating profit for the nine months ended September 27, 1997 increased when
compared to pro forma 1996, due to increased sales, the leveraging of fixed
store operating costs and lower administrative costs related to the stand-alone
operation of the Company.
15
<PAGE>
FOOTSTAR, INC. AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Financial Condition
At September 27, 1997, the Company's cash balance was $36.9 million. This
includes $29.0 million in short-term investments with maturities of less than
three months. Current assets at September 27, 1997 were lower as compared to
December 28, 1996 partially due to the decrease in cash attributable to the
repurchase of $52.8 million of the Company's common stock, capital expenditures,
payments relating to the discontinuance of Thom McAn and other working capital
requirements, including the minority interest dividend payment. The decrease in
current liabilities at September 27, 1997 compared to December 28, 1996 was due
to the reduction of income taxes payable and accrued expenses partially offset
by the increase in accounts payable associated with the increase in inventory
and float from the Company's new funds transfer program.
Effective March 1, 1997, the Company established the funds transfer program
whereby payment for merchandise can be effected by wire transfer of funds closer
to the time of the Company's actual receipt of goods rather than through letters
of credit.
During the third quarter of 1997, the Company renegotiated its existing credit
facility to lower pricing and gain other flexibilities. The renegotiated credit
facility (the "Credit Facility"), which has been filed as an exhibit to this
report, provides for $300 million in unsecured revolving credit. As of September
27, 1997, there were no direct borrowings or letters of credit outstanding under
the Credit Facility. Interest on all borrowings is determined based upon several
alternative rates set forth in the Credit Facility.
The Company's Credit Facility contains various operating covenants which, among
other things, impose certain limitations on the Company's ability to incur
liens, incur indebtedness, merge, consolidate or declare and make dividend
payments. Under the Credit Facility, the Company is required to comply with
financial covenants relating to ratios of cash flow and fixed charge coverage.
The Credit Facility may be prepaid or retired by the Company without penalty
prior to the maturity date of September 18, 2000. The Company was in compliance
with its loan covenants as of September 27, 1997.
The Company's businesses are seasonal in nature. Peak selling periods coincide
with Christmas, the Easter holiday and the back-to-school selling seasons.
Working capital requirements vary with seasonal business volume and inventory
buildups occurring prior to the peak periods. The Company currently believes
that its current cash, together with cash generated from operations and the
Credit Facility, for the foreseable future will be adequate to fund its
operating expenses, working capital needs, capital expenditures and the cash
needs associated with the discontinuance of Thom McAn.
Capital expenditures for the nine months ended September 27, 1997 were $49.7
million and were in line with the Company's planned expenditures for the nine
month period. These expenditures relate primarily to the opening, remodeling,
relocation or expansion of Footaction stores and the investments in strategic
management information systems.
The Company expects that it will retain most of its available funds for
operation and expansion of its business, and does not anticipate paying any cash
dividends to shareholders in the foreseeable future.
16
<PAGE>
FOOTSTAR, INC. AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Under its arrangement with Kmart, the Company distributes annually to Kmart, a
portion of profits representing Kmart's minority interest in the Meldisco
subsidiaries which are partially owned by Kmart. In March 1997, $35.9 million in
dividends were paid to Kmart representing minority interest for fiscal year
1996.
Forward-Looking Statements
This Report on Form 10-Q and the documents incorporated by reference contain
statements which constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements appear in a
number of places in this Report as well as any of the documents incorporated by
reference and can be identified by the use of forward-looking terminology such
as "believe," "expect," "estimate," "plans," "may," "will," "should" or
"anticipates" or similar statements or the negative thereof or other variations
thereof. Such forward-looking statements include, without limitation, statements
made as to cost savings, the impact of the discontinuation of Thom McAn,
improvements in infrastructure, distribution and replenishment systems and
operating efficiencies, business strategy, sales and earnings growth, future
cash and capital resource needs, and expansion plans and projections. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements to
be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Consequently, all of
the forward-looking statements made herein are qualified by these cautionary
statements, and there can be no assurance that the actual results, performance
or achievement will be realized. The information contained in this Report and
any documents incorporated by reference as well as information contained under
the caption "Rick Factors" in the Form 10/A filed by the Company on September
26, 1996 with the Securities and Exchange Commission, as well as other filings
made by the Company with the Commission, identify important factors that could
cause such results, performance or achievements not to be realized, and such
factors should be considered. The Company assumes no duty to update any such
forward-looking statements.
17
<PAGE>
REVIEW BY INDEPENDENT AUDITORS
The September 27, 1997 and September 28, 1996 consolidated condensed financial
statements included in this filing on Form 10-Q have been reviewed by KPMG Peat
Marwick LLP, independent auditors in accordance with established professional
standards and procedures for such a limited review.
The report of KPMG Peat Marwick LLP, commenting on their review, is included
herein as Part I - Exhibit 1.
18
<PAGE>
Part 1 - Exhibit 1
Independent Auditors' Review Report
The Board of Directors and Shareholders
Footstar, Inc.
We have reviewed the consolidated condensed balance sheet of Footstar, Inc. and
subsidiary companies as of September 27, 1997 and the related consolidated
condensed statements of operations for the three and nine-month periods ended
September 27, 1997 and September 28, 1996, respectively and the consolidated
cash flows for the nine-month periods ended September 27, 1997 and September 28,
1996, respectively. These consolidated condensed financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated condensed financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Footstar, Inc. and subsidiary
companies as of December 28, 1996 and the related consolidated statements of
operations, shareholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated February 12, 1997, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying consolidated condensed balance
sheet as of December 28, 1996, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
/S/KPMG Peat Marwick LLP
New York, New York
October 16, 1997
19
<PAGE>
Part II. - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
a) EXHIBIT INDEX
Exhibit
10.6 Credit Agreement, dated as of September 18, 1997, among the banks
listed therein, the Bank of New York, as Issuing Bank, Morgan
Guaranty Trust Company of New York, as Administrative Agent and
Swingline Lender, and the Registrant.
11 Earnings Per Share
15 Accountants' Acknowledgment
27 Financial Data Schedule
b) Reports on Form 8-K - None
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FOOTSTAR, INC.
--------------
(REGISTRANT)
By: /S/CARLOS E. ALBERINI
---------------------------
Carlos E. Alberini
Senior Vice President and
Chief Financial Officer
Date: November 10, 1997
20
EXHIBIT 10.6
CONFORMED COPY
CREDIT AGREEMENT
AGREEMENT dated as of September 18, 1997 among
FOOTSTAR, INC., the BANKS listed on the signature pages
hereof, THE BANK OF NEW YORK, as Issuing Bank, and MORGAN
GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent
and Swingline Lender.
The parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. The following terms, as used herein, have
the following meanings:
"Absolute Rate Auction" means a solicitation of Money Market Quotes
setting forth Money Market Absolute Rates pursuant to Section 2.03.
"Adjusted CD Rate" has the meaning set forth in Section 2.08(b).
"Administrative Questionnaire" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Agent and submitted to
the Agent (with a copy to the Company) duly completed by such Bank.
"Affiliate" means any Person directly or indirectly controlling,
controlled by or under common control with the Company. As used in this
definition, the term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Agent" means Morgan Guaranty Trust Company of New York in its
capacity as administrative agent for the Banks hereunder, and its successors in
such capacity.
"Alternative Currency" means any currency other than Dollars which is
freely transferable and convertible into Dollars.
"Applicable Lending Office" means, with respect to any Bank, (i) in
the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of
its Euro-Currency Loans, its Euro-Currency Lending Office and (iii) in the case
of its Money Market Loans, its Money Market Lending Office.
"Applicable Percentage" of any Bank means the percentage of the
aggregate Commitments represented by such Bank's Commitment.
"Assessment Rate" has the meaning set forth in Section 2.08(b).
<PAGE>
2
"Assignee" has the meaning set forth in Section 9.06(c).
"Bank" means each bank listed on the signature pages hereof, each
Assignee which becomes a Bank pursuant to Section 9.06(c), and their respective
successors. References herein to a Bank or Banks may include the Issuing Banks
or the Swingline Lender or both as the context requires.
"Base Rate" means, for any day, a rate per annum equal to the higher
of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the
Federal Funds Rate for such day.
"Base Rate Loan" means at any time a Committed Loan outstanding
hereunder which bears interest at such time at a rate based on the Base Rate
pursuant to a Notice of Committed Borrowing or Notice of Interest Rate Election
or pursuant to Article VIII.
"Benefit Arrangement" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"Borrower" means the Company or any Eligible Subsidiary, as the
context may require, and their respective successors, and "Borrowers" means all
of the foregoing.
"Borrowing" has the meaning set forth in Section 1.03.
"Calculation Period" means a period of four consecutive fiscal
quarters of the Company for which financial statements have been delivered to
the Agent pursuant to Section 5.01(a) or (b).
"Capital Expenditures" means, for any period, the additions to
property, plant and equipment of the Company and its Consolidated Subsidiaries
for such period, as the same are (or would be) set forth, in accordance with
generally accepted accounting principles, in a consolidated statement of cash
flows of the Company for such period; provided that Capital Expenditures shall
(a) exclude any additions to property, plant and equipment (i) to the extent
paid for with proceeds of insurance received in respect of any casualty, (ii) to
the extent that the consideration therefor consisted of assets other than cash,
cash equivalents or obligations to pay cash or cash equivalents, (iii) to the
extent paid for with proceeds from the sale or other disposition of property,
plant and equipment used for the same or similar purposes as such additions and
(iv) to the extent paid for with the proceeds from the sale or other disposition
of the facilities of the Company and Thom McAn located at Morrow, Georgia,
Tifton, Georgia, Huntington, Indiana, Brockton, Massachusetts, Worcester,
Massachusetts, Clinton, New Jersey and Aulander, North Carolina, and (b) include
additions to property, plant and equipment financed by incurring Debt (including
without limitation capital leases).
"CD Base Rate" has the meaning set forth in Section 2.08(b).
"CD Loan" means at any time a Committed Loan outstanding hereunder
which bears interest at such time at a rate based on the Adjusted CD Rate
pursuant to a Notice of Committed Borrowing or Notice of Interest Rate Election.
<PAGE>
3
"CD Margin" has the meaning set forth in Section 2.08(b).
"CD Reference Banks" means The Bank of New York, The First National
Bank of Boston and Morgan Guaranty Trust Company of New York.
A "Change of Control" shall be deemed to have occurred if after the
Effective Date (i) any person or group (within the meaning of Rule 13d-5 of the
Securities and Exchange Commission as in effect on the date hereof) shall become
the beneficial owner (within the meaning of Rule 13d-3 of such Commission as in
effect on the date hereof) of voting securities (including any options, rights
or warrants to purchase, and any securities convertible into or exchangeable
for, voting securities) of the Company representing 25% or more of the voting
power represented by all outstanding securities of the Company; or (ii) a
majority of the seats (other than vacant seats) on the board of directors of the
Company shall at any time be occupied by persons who were neither (a) nominated
by the management of the Company, nor (b) appointed by directors so nominated.
"Commitment" means, with respect to each Bank, the amount set forth
opposite the name of such Bank on the signature pages hereof (or, in the case of
an Assignee, in its Assignment and Assumption Agreement), as such amount may be
reduced from time to time pursuant to Section 2.10 and adjusted to reflect
assignments pursuant to Section 9.06(c).
"Committed Borrowing" means a Borrowing consisting of Committed Loans;
provided that if the Loans constituting any such Borrowing or Borrowings (or
portions thereof) are combined or subdivided pursuant to a Notice of Interest
Rate Election, the term "Committed Borrowing" shall refer to all of the
Committed Loans to a single Borrower of the same Type and having the same
Interest Period that result from such combination or subdivision as the case may
be.
"Committed Exposure" means, with respect to any Bank at any time, the
sum of the aggregate principal amount of such Bank's Committed Loans outstanding
at such time and its Letter of Credit Exposure and Swingline Exposure at such
time.
"Committed Loan" means a loan made by a Bank pursuant to Section 2.01;
provided that, if any such loan or loans (or portions thereof) are combined or
subdivided pursuant to a Notice of Interest Rate Election, the term "Committed
Loan" shall refer to the combined principal amount resulting from such
combination or to each of the separate principal amounts resulting from such
subdivision, as the case may be.
"Company" means Footstar, Inc., a Delaware corporation, and its
successors.
"Consolidated Adjusted Income" means, with respect to the Company and
its Consolidated Subsidiaries for any period, the consolidated income from
continuing operations before minority interests of the Company and its
Consolidated Subsidiaries for such period, adjusted to deduct any extraordinary
losses (other than non-cash losses), and to add any extraordinary gains (other
than non-cash gains), deducted or added in determining Consolidated Net Income
for such period.
<PAGE>
4
"Consolidated EBITDAR" means, with respect to the Company and its
Consolidated Subsidiaries for any period, the sum (without duplication) of (a)
Consolidated Adjusted Income for such period, (b) interest expenses deducted in
determining Consolidated Adjusted Income for such period, (c) Federal, state and
local income taxes (or other taxes in the nature of income taxes) deducted in
determining Consolidated Adjusted Income for such period, (d) depreciation and
amortization deducted in determining Consolidated Adjusted Income for such
period, and (e) rental expenses deducted in determining Consolidated Adjusted
Income for such period. For purposes of Section 6.03, the Consolidated EBITDAR
of a Subsidiary shall be determined based on the foregoing, but only with
respect to such Subsidiary and its consolidated subsidiaries.
"Consolidated Net Income" means, for any period, the consolidated net
income (or loss) of the Company and its Consolidated Subsidiaries for such
period, after minority interests.
"Consolidated Net Interest Expense" means with respect to the Company
and the Consolidated Subsidiaries, for any period, (a) interest expense deducted
in determining Consolidated Adjusted Income for such period (excluding any
portion of interest expense representing amortization of financing costs paid in
a previous period), minus (b) interest income included in determining
Consolidated Adjusted Income for such period (excluding any portion of interest
income representing accruals of amounts received in a previous period).
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the Company in
its consolidated financial statements if such statements were prepared as of
such date.
"Consolidated Tangible Net Worth" means at any date the consolidated
stockholders' equity of the Company (adjusted to eliminate the effect on such
stockholders' equity of the Excluded Charges) less its consolidated Intangible
Assets, all determined as of such date. For the purposes of this definition
"Intangible Assets" means the amount (to the extent reflected in determining
such stockholders' equity) of (i) all write-ups (other than write-ups of assets
of a going concern business made within twelve months after the acquisition of
such business) subsequent to the Effective Date in the book value of any asset
owned by the Company or a Consolidated Subsidiary, (ii) all Investments in
unconsolidated Subsidiaries and all equity investments in Persons which are not
Subsidiaries, and (iii) all unamortized debt discount and expense, unamortized
deferred charges, goodwill, purchase price premium, patents, trademarks, service
marks, trade names, copyrights, organization or developmental expenses and other
intangible assets.
"Consolidated Total Debt" means at any date the sum of (i) the Debt of
the Company and its Consolidated Subsidiaries, determined on a consolidated
basis at such date, plus (ii) an amount equal to six times the minimum rental
expense in respect of operating leases of the Company and its Consolidated
Subsidiaries for the fiscal year ended on such date (or, if such date is not the
last day of a fiscal year, then for the most recent fiscal year ended prior to
such date), plus, without duplication, (iii) an amount equal to six times the
minimum rental expense in respect of operating leases of any Person other than
the Company or a Consolidated Subsidiary, for the same fiscal year used for
purposes of clause (ii) above, to the extent such rentals were Guaranteed or
assumed by
<PAGE>
5
the Company or a Consolidated Subsidiary, or in respect of which the Company or
any Consolidated Subsidiary was contingently or otherwise liable.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee which are capitalized in
accordance with generally accepted accounting principles, (v) all Debt secured
by a Lien on any asset of such Person, whether or not such Debt is otherwise an
obligation of such Person, and (vi) all Debt of others Guaranteed by such
Person.
"Debt Coverage Ratio" means, at any time, the ratio of (i)
Consolidated Total Debt at such time to (ii) Consolidated EBITDAR for the most
recent Calculation Period.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Distribution Agreement" means the Distribution Agreement dated as of
September 24, 1996, among Melville, Footaction Center, Inc., and the Company,
relating to the distribution by Melville to the holders of its common stock of
the Company's common stock.
"Documentary Letter of Credit Fee Rate" has the meaning set forth in
Section 2.17(f).
"Dollar Amount" means (i) in relation to any Money Market Borrowing
denominated in an Alternative Currency, the amount designated by the applicable
Borrower as the Dollar amount of such Money Market Borrowing in the related
Notice of Money Market Borrowing, subject to Section 2.03(h) and (ii) in
relation to any Letter of Credit that provides for payment of any drawing
thereunder in an Alternative Currency, the amount determined as provided in
Section 2.17(l).
"Dollars" and the sign "$" mean lawful money of the United States of
America.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or required
by law to close.
"Domestic Lending Office" means, as to each Bank, its office located
at its address set forth in its Administrative Questionnaire (or identified in
its Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic Lending Office by
notice to the Company and the Agent; provided that any Bank may so designate
separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and
its CD Loans, on the other hand, in which case all references herein to the
Domestic Lending Office of such Bank shall be deemed to refer to either or both
of such offices, as the context may require.
<PAGE>
6
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has meaning set forth in Section
2.08(b).
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 3.01.
"Election to Participate" means an Election to Participate
substantially in the form of Exhibit H hereto.
"Election to Terminate" means an Election to Terminate substantially
in the form of Exhibit I hereto.
"Eligible Subsidiary" means any Wholly-Owned Consolidated Subsidiary
(or, with the consent of the Required Banks, any other Subsidiary) as to which
an Election to Participate shall have been delivered to the Agent and as to
which an Election to Terminate shall not have been delivered to the Agent.
"Environmental Laws" means any and all Federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements with
Governmental Authorities or other governmental restrictions binding upon the
Company or any of the Subsidiaries, as applicable, relating to the environment
or to emissions, discharges or releases of pollutants, contaminants, petroleum
or petroleum products, chemicals or industrial, toxic or hazardous substances or
wastes into the environment including, without limitation, ambient air, surface
water, ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, petroleum or petroleum products, chemicals
or industrial, toxic or hazardous substances or wastes or the clean-up or other
remediation thereof.
"Equivalent Amount" means, in connection with the determination of the
amount of a Money Market Loan to be made in any Alternative Currency in relation
to the Dollar Amount of such Loan, the amount of such Alternative Currency
converted from such Dollar Amount at the spot buying rate of the Bank that is to
make such Loan (based on the London interbank market rate then prevailing) for
Dollars against such Alternative Currency as of approximately 9:00 A.M. (New
York City time) three Euro-Currency Business Days before such date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Company, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Company or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"Euro-Currency Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
Dollar deposits) in London, and, where funds are to be paid or made available in
an Alternative
<PAGE>
7
Currency, on which commercial banks are open for domestic and international
business (including dealings in deposits in such Alternative Currency) in both
London and the place where such funds are paid or made available.
"Euro-Currency Lending Office" means, as to each Bank, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Currency Lending Office) or such other office, branch or affiliate of such
Bank as it may hereafter designate as its Euro-Currency Lending Office by notice
to the Company and the Agent.
"Euro-Currency Loan" means at any time a Committed Loan outstanding
hereunder which bears interest at such time at a rate based on the London
Interbank Offered Rate pursuant to a Notice of Committed Borrowing or Notice of
Interest Rate Election.
"Euro-Currency Margin" has the meaning set forth in Section 2.08(c).
"Euro-Currency Reference Banks" means the principal London offices of
The Bank of New York, The First National Bank of Boston and Morgan Guaranty
Trust Company of New York.
"Euro-Currency Reserve Percentage" means, for any day, that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Currency Loans is determined or any category of extensions of credit or
other assets which includes loans by a non-United States office of any Bank to
United States residents).
"Event of Default" has the meaning set forth in Section 6.01.
"Excluded Charges" means after tax, non recurring charges of the
Company and its Consolidated Subsidiaries during the fiscal year ending December
31, 1996, not exceeding $53,000,000 on a consolidated basis.
"Exempt Subsidiary" means (i) any Wholly-Owned Consolidated
Subsidiary, (ii) any other Subsidiary that is a Subsidiary as of the Effective
Date and (iii) any Subsidiary which is a Meldisco Corporation (as defined in the
Kmart Agreement) and all the capital stock of which is owned, directly or
indirectly, by the Company and Kmart Corporation.
"Existing Credit Agreement" means the Credit Agreement dated as of
August 13, 1996, as amended, among the Company, the banks listed on the
signature pages thereof, The Bank of New York, as Issuing Bank, and Morgan
Guaranty Trust Company of New York, as Administrative Agent and Swingline
Lender.
"Facility Fee Rate" has the meaning set forth in Section 2.09(a).
<PAGE>
8
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to Morgan Guaranty Trust Company of New
York on such day on such transactions as determined by the Agent.
"Financing Transactions" means the execution and delivery of the Loan
Documents and the performance of the transactions contemplated by the Loan
Documents, including the borrowing of the Loans and the issuance of Letters of
Credit.
"Fixed Charge Coverage Ratio" means, for any period, the ratio of (i)
Consolidated EBITDAR for such period minus Capital Expenditures (giving effect
to proviso (a)(iv) of the definition thereof only to the extent the proceeds
resulting therefrom are not included in Consolidated EBITDAR) for such period,
to (ii) the sum of Consolidated Net Interest Expense for such period and minimum
rental expense deducted in determining Consolidated Net Income for such period.
"Fixed Rate Loans" means Euro-Currency Loans or CD Loans or Money
Market Loans (excluding Money Market LIBOR Loans bearing interest at the Base
Rate for the reason stated in Section 8.01) or any combination of the foregoing.
"Foreign Borrower" means an Eligible Subsidiary organized under the
laws of a jurisdiction outside the United States.
"Governmental Authority" means any federal, state, local or foreign
government or political subdivision or any court or governmental agency,
authority, instrumentality or regulatory body.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee of such Debt or other obligation of the payment thereof
or to protect such obligee against loss in respect thereof (in whole or in
part), provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Guarantee Agreement" means a Guarantee Agreement among the Agent and
the Guarantors substantially in the form of Exhibit E.
<PAGE>
9
"Guarantor" means each Person that is or becomes party to the
Guarantee Agreement as a Guarantor and their respective successors.
"Index Debt" means (a) senior, unsecured, long-term indebtedness of
the Company for borrowed money that is not guaranteed by any other Person or
subject to any other credit enhancement or (b) the Loans under this Agreement.
"Initial Guarantors" means the Company, Melville Foreign, Inc.,
Footaction Center, Inc., Footstar Corporation, Miles Shoes Meldisco Lakewood
Colorado, Inc., Rosedale Open Country, Inc., Mall of America Fan Club, Inc.,
Meldisco H.C., Inc. and Footstar Center, Inc.
"Interest Period" means: (1) with respect to each Euro-Currency Loan,
the period commencing on the date specified in the applicable Notice of
Borrowing or Notice of Interest Rate Election and ending one, two, three or six
months thereafter, as the applicable Borrower may elect in such Notice of
Borrowing or Notice of Interest Rate Election; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Currency Business Day shall be extended to the next succeeding
Euro-Currency Business Day unless such Euro-Currency Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Currency Business Day;
(b) any Interest Period which begins on the last Euro-Currency
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 (c) below, end on the last
Euro-Currency Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(2) with respect to each CD Loan, the period commencing on the date
specified in the applicable Notice of Borrowing or Notice of Interest Rate
Election and ending 30, 60, 90 or 180 days thereafter, as the applicable
Borrower may elect in such Notice of Borrowing or Notice of Interest Rate
Election; provided that:
(a) subject to clause (b) below, any Interest Period which would
otherwise end on a day which is not a Euro-Currency Business Day shall be
extended to the next succeeding Euro-Currency Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(3) with respect to each Base Rate Borrowing, the period commencing on
the date of such Borrowing and ending 30 days thereafter; provided that:
(a) subject to clause (b) below, any Interest Period which would
otherwise end on a day which is not a Euro-Currency Business Day shall be
extended to the next succeeding Euro-Currency Business Day; and
<PAGE>
10
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(4) with respect to each Money Market LIBOR Loan, the period
commencing on the date of Borrowing specified in the applicable Money Market
Quote Request and ending such whole number of months thereafter as the
applicable Borrower may elect in accordance with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Currency Business Day shall be extended to the next succeeding
Euro-Currency Business Day unless such Euro-Currency Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Currency Business Day;
(b) any Interest Period which begins on the last Euro-Currency
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 (c) below, end on the last
Euro-Currency Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(5) with respect to each Money Market Absolute Rate Loan, the period
commencing on the date of Borrowing specified in the applicable Money Market
Quote Request and ending such number of days thereafter (but not less than 6
days) as the applicable Borrower may elect in accordance with Section 2.03;
provided that:
(a) subject to clause (b) below, any Interest Period which would
otherwise end on a day which is not a Euro-Currency Business Day shall be
extended to the next succeeding Euro-Currency Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(6) with respect to each Swingline Loan, the period commencing on the
date of such Loan and ending such number of days thereafter (but not exceeding
14 days) as the applicable Borrower may elect in accordance with Section 2.04;
provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Currency Business Day shall be extended to the next succeeding
Euro-Currency Business Day; and
(b) any Interest Period which would otherwise and after the
Termination Date shall end on the Termination Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Investment" means any investment in any Person, whether by means of
share purchase, capital contribution, loan, time deposit or otherwise.
<PAGE>
11
"Issuing Bank" means (i) The Bank of New York and (ii) any other Bank
that shall enter into an Issuing Bank Agreement as provided in Section 2.17(m),
in each case in their respective capacities as the issuers of Letters of Credit,
and their respective successors in such capacity.
"Issuing Bank Agreement" has the meaning set forth in Section 2.17(m).
"Kmart Agreement" means the Master Agreement dated as of June 9, 1995,
between Kmart Corporation, Kmart Properties, Inc. and the Company (as successor
to Melville), as amended by the Agreement dated as of March 25, 1996, among
Kmart Corporation, Melville, Kmart Properties, Inc. and the Company.
"Letter of Credit" means any letter of credit issued pursuant to
Section 2.17. Each letter of credit that is, as of the Effective Date, a "Letter
of Credit" as defined in, and is outstanding under, the Existing Credit
Agreement shall be deemed for all purposes of the Loan Documents to have been
issued and outstanding pursuant to Section 2.17 on the Effective Date and to
constitute a Letter of Credit.
"Letter of Credit Disbursement" means a payment or disbursement made
by an Issuing Bank pursuant to a Letter of Credit.
"Letter of Credit Exposure" means at any time the sum of (i) the
aggregate undrawn amount of all outstanding Letters of Credit plus (ii) the
aggregate amount of all Letter of Credit Disbursements not yet reimbursed by the
Borrowers as provided in Section 2.17. The Letter of Credit Exposure shall be
expressed in Dollars, determined as provided in Section 2.17(l) in the case of
any amount thereof denominated in an Alternative Currency. The Letter of Credit
Exposure of any Bank at any time shall mean its Applicable Percentage of the
aggregate Letter of Credit Exposure at such time.
"Level I Pricing Period" means (a) if the Company has not exercised
the Ratings Election, any period during which the Company's Fixed Charge
Coverage Ratio for the most recent Calculation Period is 2.75 or greater or (b)
if the Company has exercised the Ratings Election, any period during which the
Company's Index Debt is rated BBB or better by S&P or Baa2 or better by Moody's.
Any such period referred to in clause (a) above shall commence on (and include)
the date of delivery to the Agent of financial statements demonstrating that
such period has commenced and shall terminate on (and exclude) the date of
delivery to the Agent of financial statements demonstrating that such period has
terminated. Any such period referred to in clause (b) above shall be determined
as provided in Section 2.20.
"Level II Pricing Period" means (a) if the Company has not exercised
the Ratings Election, any period during which the Company's Fixed Charge
Coverage Ratio for the most recent Calculation Period is 2.30 or greater but
less than 2.75 or (b) if the Company has exercised the Ratings Election, any
period during which the Company's Index Debt is rated BBB- by S&P or Baa3 by
Moody's. Any such period referred to in clause (a) above shall commence on (and
include) the date of delivery to the Agent of financial statements demonstrating
that such period has commenced and shall terminate on (and exclude) the date of
delivery to the Agent of financial statements demonstrating that such period has
terminated. Any such period referred to in clause (b) above shall be determined
as provided in Section 2.20.
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12
"Level III Pricing Period" means (a) if the Company has not exercised
the Ratings Election, any period during which the Company's Fixed Charge
Coverage Ratio for the most recent Calculation Period is 2.15 or greater but
less than 2.30 or (b) if the Company has exercised the Ratings Election, any
period during which the Company's Index Debt is rated BB+ by S&P or Ba1 by
Moody's. Any such period referred to in clause (a) above shall commence on (and
include) the date of delivery to the Agent of financial statements demonstrating
that such period has commenced and shall terminate on (and exclude) the date of
delivery to the Agent of financial statements demonstrating that such period has
terminated. Any such period referred to in clause (b) above shall be determined
as provided in Section 2.20.
"Level IV Pricing Period" means any period that is not a Level I
Pricing Period, a Level II Pricing Period or a Level III Pricing Period.
"LIBOR Auction" means a solicitation of Money Market Quotes setting
forth Money Market Margins based on the London Interbank Offered Rate pursuant
to Section 2.03.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of a security interest,
in respect of such asset. For the purposes of this Agreement, the Company or any
Subsidiary shall be deemed to own subject to a Lien any asset which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such asset.
"Loan" means a Domestic Loan, a Euro-Currency Loan, a Swingline Loan
or a Money Market Loan and "Loans" means any combination of the foregoing.
"Loan Documents" means this Agreement, the Guarantee Agreement, the
Notes, any Election to Participate and any Issuing Bank Agreement.
"London Interbank Offered Rate" has the meaning set forth in Section
2.08(c).
"Margin Stock" has the meaning given to such term under Regulation U.
"Material Adverse Effect" means (i) a materially adverse effect on the
business, operations or financial condition of the Company and its Consolidated
Subsidiaries considered as a whole, (ii) material impairment of the ability of
the Company or any Subsidiary to perform any of its obligations under any Loan
Document to which it is or will be a party, or (iii) material impairment of the
rights of or benefits available to the Agent or the Banks under any Loan
Document.
"Material Debt" means Debt (other than the Notes) of the Company
and/or one or more of its Subsidiaries, arising in one or more related or
unrelated transactions, in an aggregate principal amount equal to or exceeding
$25,000,000.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $25,000,000.
<PAGE>
13
"Material Subsidiary" means a Subsidiary of the Company that, as of
the time of determination of whether such Subsidiary is a "Material Subsidiary",
accounted on a consolidated basis for 10% or more of the total sales of the
Company and its Consolidated Subsidiaries for the most recent Calculation Period
or accounted on a consolidated basis for 10% or more of the total assets of the
Company and its Consolidated Subsidiaries as of the most recent date for which a
consolidated balance sheet of the Company has been delivered to the Agent
pursuant to Section 5.01(a) or (b).
"Melville" means Melville Corporation, a New York corporation, and its
successors.
"Money Market Absolute Rate" has the meaning set forth in Section
2.03(d).
"Money Market Absolute Rate Loan" means a loan made or to be made by a
Bank pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Bank, its Domestic
Lending Office or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Money Market Lending Office by notice to the Company
and the Agent; provided that any Bank may from time to time by notice to the
Company and the Agent designate separate Money Market Lending Offices for its
Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate
Loans, on the other hand, in which case all references herein to the Money
Market Lending Office of such Bank shall be deemed to refer to either or both of
such offices, as the context may require.
"Money Market LIBOR Loan" means a loan made or to be made by a Bank
pursuant to a LIBOR Auction (including such a loan bearing interest at the Base
Rate for the reason stated in Section 8.01).
"Money Market Loan" means a Money Market LIBOR Loan or a Money Market
Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section 2.03(d).
"Money Market Quote" means an offer by a Bank to make a Money Market
Loan in accordance with Section 2.03.
"Money Market Quote Request" means a request by a Borrower to the
Banks to make Money Market Loans in accordance with Section 2.03(b).
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group during
such five year period.
<PAGE>
14
"Note" means a promissory note of a Borrower substantially in the form
of Exhibit A hereto, evidencing the obligation of such Borrower to repay Loans
made to it, and "Notes" means any or all of such promissory notes issued
hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing (as
defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in
Section 2.03(f)).
"Notice of Interest Rate Election" has the meaning set forth in
Section 2.07.
"Obligations" has the meaning set forth in the Guarantee Agreement.
"Parent" means, with respect to any Bank, any Person controlling such
Bank.
"Participant" has the meaning set forth in Section 9.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
Governmental Authority.
"Plan" means at any time an employee pension benefit plan (other than
a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"Pricing Period" means a Level I Pricing Period, a Level II Pricing
Period, a Level III Pricing Period, or a Level IV Pricing Period.
"Prime Rate" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.
"Ratings Election" has the meaning set forth in Section 2.20.
"Reference Banks" means the CD Reference Banks or the Euro-Currency
Reference Banks, as the context may require, and "Reference Bank" means any one
of such Reference Banks.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Required Banks" means at any time Banks having at least 51% of the
aggregate amount of the Commitments or, if the Commitments shall have been
terminated,
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15
Banks with Committed Exposure and Money Market Loans aggregating at least 51% of
the sum of the Committed Exposure and the aggregate unpaid principal amount of
the Money Market Loans at such time.
"Restricted Payment" means (i) any dividend or other distribution on
any shares of the capital stock of the Company or any Subsidiary (except
dividends payable solely in shares of its capital stock) or (ii) any payment on
account of the purchase, redemption, retirement or acquisition of (a) any shares
of the capital stock of the Company or any Subsidiary or (b) any option, warrant
or other right to acquire shares of the capital stock of the Company or any
Subsidiary.
"Revolving Credit Period" means the period from and including the
Effective Date to but excluding the Termination Date.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.
"Sale and Lease-Back Transaction" means any arrangement, entered into
by the Company or a Subsidiary, directly or indirectly, with any Person whereby
it shall sell or transfer any asset, real or personal, whether now owned or
hereafter acquired, and thereafter rent or lease such asset.
"Spin-Off Documents" means (i) the Distribution Agreement, Tax
Agreement and (ii) any other contracts and agreements between the Company or any
Subsidiary, on the one hand, and Melville or any subsidiary thereof (other than
the Company and its Subsidiaries), on the other hand, in effect on the effective
date of the Existing Credit Agreement (other than any such contracts and
agreements relating solely to the purchase or sale of inventory or services in
the ordinary course of business on terms no less favorable to the Company and
its Subsidiaries than they would obtain in a comparable arm's length
transaction).
"Stand-by Letter of Credit Fee Rate" has the meaning set forth in
Section 2.17(f).
"Subsidiary" means any corporation or other entity now existing or
hereafter formed 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.
"Swingline Exposure" means at any time the aggregate principal amount
of all Swingline Loans outstanding at such time. The Swingline Exposure of any
Bank at any time shall mean its Applicable Percentage of the Swingline Exposure
at such time.
"Swingline Lender" means Morgan Guaranty Trust Company of New York, in
its capacity as lender of Swingline Loans hereunder, and its successors in such
capacity.
"Swingline Loan" means a loan made by the Swingline Lender pursuant to
Section 2.04.
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16
"Tax Agreement" means the Tax Disaffiliation Agreement dated October
12, 1996, between Melville and the Company.
"Temporary Cash Investment" means any Investment in (i) direct
obligations of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof, (ii) commercial paper
rated at least A-1 by S&P, and P-1 by Moody's, (iii) money market preferred
securities that mature within 49 days and that are rated at least AA by S&P and
Aa by Moody's, (vi) time deposits with any bank or trust company located in the
Cayman Islands, the Bahamas or Nassau that mature within 14 days, in an
aggregate amount at any one time not to exceed $20,000,000, (v) adjustable rate
industrial revenue bonds that mature within 91 days and the credit enhancement
for which is provided by a financial institution whose long term debt is rated
at least AA by S&P and Aa by Moody's, (vi) time deposits with, including
certificates of deposit issued by, any office located in the United States of
any bank or trust company which is organized under the laws of the United States
or any state thereof and has capital, surplus and undivided profits aggregating
at least $500,000,000 or (vii) repurchase agreements with respect to securities
described in clause (i) above entered into with an office of a bank or trust
company meeting the criteria specified in clause (vi) above; provided in each
case that, unless otherwise specifically provided, such Investment matures
within one year from the date of acquisition thereof by the Company or a
Subsidiary or, in the case of Section 2.17(k), the Agent.
"Termination Date" means the third anniversary of the Effective Date,
or, if such day is not a Euro-Currency Business Day, the next succeeding
Euro-Currency Business Day, unless such Euro-Currency Business Day falls in
another calendar month, in which case the Termination Date shall be the next
preceding Euro-Currency Business Day.
"Total Commitments" means at any time the sum of the Banks'
Commitments at such time.
"Type" has the meaning set forth in Section 1.03.
"Unfunded Liabilities" means, with respect to any Plan at any time,
the amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"United States" means the United States of America, including the
States and the District of Columbia, but excluding its territories and
possessions.
"Wholly-Owned Consolidated Subsidiary" means any Consolidated
Subsidiary all of the shares of capital stock or other ownership interests of
which (except directors' qualifying shares) are at the time directly or
indirectly owned by the Company.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be
<PAGE>
17
delivered hereunder shall be prepared in accordance with United States generally
accepted accounting principles as in effect from time to time, applied on a
basis consistent (except for changes concurred in by the Company's independent
public accountants) with the most recent audited consolidated financial
statements of the Company and its Consolidated Subsidiaries delivered to the
Banks; provided that, if the Company notifies the Agent that the Company wishes
to amend the calculation of the Company's Fixed Charge Coverage Ratio for
purposes of determining Pricing Periods or to amend any covenant in Article V,
in either case to eliminate the effect of any change in generally accepted
accounting principles on the operation of such calculation or covenant (or if
the Agent notifies the Company that the Required Banks wish to amend any such
calculation or covenant for such purpose), then such calculation or the
Company's compliance with such covenant, as the case may be, shall be determined
on the basis of generally accepted accounting principles in effect immediately
before the relevant change in generally accepted accounting principles became
effective, until either such notice is withdrawn or such calculation or covenant
is amended in a manner satisfactory to the Company and the Required Banks.
SECTION 1.03. Types of Borrowings. Borrowings and Loans hereunder are
distinguished by "Type". The Type of a Loan refers to whether such Loan is a
Base Rate Loan, a CD Loan, a Euro-Currency Loan, a Swingline Loan, a Money
Market LIBOR Loan, or a Money Market Absolute Rate Loan. The term "Borrowing"
denotes the aggregation of Loans of one or more Banks to be made to a single
Borrower pursuant to Article II on a single date and for a single Interest
Period. Borrowings are classified for purposes of this Agreement either by
reference to the pricing of Loans comprising such Borrowing (e.g., a
"Euro-Currency Borrowing" is a Borrowing comprised of Euro-Currency Loans) or by
reference to the provisions of Article II under which participation therein is
determined (i.e., a "Committed Borrowing" is a Borrowing under Section 2.01 in
which all Banks participate in proportion to their Commitments, a "Money Market
Borrowing" is a Borrowing under Section 2.03 in which the Bank participants are
determined on the basis of their bids and a Swingline Borrowing is a Borrowing
of a Swingline Loan).
ARTICLE II
The Credits
SECTION 2.01. Commitments to Lend. (a) Committed Loans. During the
Revolving Credit Period each Bank severally agrees, on the terms and conditions
set forth in this Agreement, to lend to the Company or any Eligible Subsidiary
from time to time amounts that will not result in (i) such Bank's Committed
Exposure at any time exceeding its Commitment or (ii) the sum of the Letter of
Credit Exposure and the aggregate principal amount of all outstanding Loans at
any time exceeding the Total Commitments. Within the foregoing limits, a
Borrower may borrow under this subsection, repay, or to the extent permitted by
Section 2.12, prepay Committed Loans and reborrow at any time during the
Revolving Credit Period under this subsection (a). All Committed Loans shall be
made in Dollars.
(b) Borrowings Ratable. Each Borrowing under this Section 2.01 shall
be made from the Banks ratably in proportion to their respective Commitments.
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SECTION 2.02. Notice of Committed Borrowings. A Borrower shall give
the Agent notice (a "Notice of Committed Borrowing") not later than 11:00 A.M.
(New York City time) on the date (a) of any Base Rate Borrowing, (b) two
Domestic Business Days before any CD Borrowing, and (c) three Euro-Currency
Business Days before any Euro-Currency Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic Business Day
in the case of a Domestic Borrowing or a Euro-Currency Business Day in the
case of a Euro-Currency Borrowing;
(ii) the aggregate amount of such Borrowing, which shall be $5,000,000
or a larger multiple of $1,000,000 (except that any Committed Borrowing may
be in an aggregate amount equal to the excess of the Total Commitments over
the sum of the aggregate principal amount of all outstanding Loans and the
Letter of Credit Exposure);
(iii) whether the Loans comprising such Borrowing are to be Base Rate
Loans, CD Loans or Euro-Currency Loans; and
(iv) in the case of a CD Borrowing or Euro-Currency Borrowing, the
duration of the Interest Period applicable thereto, subject to the
provisions of the definition of Interest Period.
SECTION 2.03. Money Market Borrowings.
(a) The Money Market Option. In addition to Committed Borrowings
pursuant to Section 2.01, any Borrower may, as set forth in this Section,
request the Banks from time to time during the Revolving Credit Period to make
offers to make Money Market Loans to such Borrower. The Banks may, but shall
have no obligation to, make such offers and the Borrower may, but shall have no
obligation to, accept any such offers in the manner set forth in this Section.
(b) Money Market Quote Request. When a Borrower wishes to request
offers to make Money Market Loans under this Section, it shall transmit to the
Agent by telex or facsimile transmission a Money Market Quote Request
substantially in the form of Exhibit B hereto so as to be received no later than
11:00 A.M. (New York City time) (x) four Euro-Currency Business Days prior to
the date of Borrowing proposed therein, in the case of a LIBOR Auction for Money
Market Loans to be made in Dollars, (y) one Domestic Business Day prior to the
date of Borrowing proposed therein, in the case of an Absolute Rate Auction for
Money Market Loans to be made in Dollars or (z) six Euro-Currency Business Days
prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction
or Absolute Rate Auction for Money Market Loans to be made in an Alternative
Currency in accordance with subsection (h) of this Section (or, in any case,
such other time or date as the Company and the Agent shall have mutually agreed
upon and shall have notified to the Banks not later than the date of the Money
Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for
which such change is to be effective) specifying:
(i) the proposed date of Borrowing, which shall be a Euro-Currency
Business Day in the case of a LIBOR Auction or a Domestic Business Day in
the case of an Absolute Rate Auction (unless such Absolute Rate
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19
Auction relates to Money Market Loans to be made in an Alternative
Currency, in which case a Euro-Currency Business Day),
(ii) the aggregate amount of such Borrowing (expressed in Dollars),
which shall be $5,000,000 or a larger multiple of $1,000,000,
(iii) the currency in which the proposed Borrowing is to be made,
which shall be Dollars or, subject to subsection (h) of this Section, an
Alternative Currency,
(iv) the duration of the Interest Period applicable thereto, subject
to the provisions of the definition of Interest Period, and
(v) whether the Money Market Quotes requested are to set forth a Money
Market Margin or a Money Market Absolute Rate.
A Borrower may request offers to make Money Market Loans for more than one
Interest Period in a single Money Market Quote Request.
(c) Invitation for Money Market Quotes. Promptly upon receipt of a
Money Market Quote Request, the Agent shall send to the Banks by telex or
facsimile transmission an Invitation for Money Market Quotes substantially in
the form of Exhibit C hereto, which shall constitute an invitation by the
applicable Borrower to each Bank to submit Money Market Quotes offering to make
the Money Market Loans to which such Money Market Quote Request relates in
accordance with this Section.
(d) Submission and Contents of Money Market Quotes. (i) Each Bank may
submit a Money Market Quote containing an offer or offers to make Money Market
Loans in response to any Invitation for Money Market Quotes. Each Money Market
Quote must comply with the requirements of this subsection (d) and must be
submitted to the Agent by telex or facsimile transmission at its offices
specified in or pursuant to Section 9.01 not later than (x) 10:00 A.M. (New York
City time) on the third Euro-Currency Business Day prior to the proposed date of
Borrowing, in the case of a LIBOR Auction for Money Market Loans to be made in
Dollars, (y) 10:00 A.M. (New York City time) on the proposed date of Borrowing,
in the case of an Absolute Rate Auction for Money Market Loans to be made in
Dollars or (z) 10:00 A.M. (New York City time) on the fifth Euro-Currency
Business Day prior to the proposed date of Borrowing, in the case of a LIBOR
Auction or Absolute Rate Auction for Money Market Loans to be made in an
Alternative Currency (or, in any case, such other time or date as the Company
and the Agent shall have mutually agreed and shall have notified to the Banks
not later than the date of the Money Market Quote Request for the first LIBOR
Auction or Absolute Rate Auction for which such change is to be effective);
provided that Money Market Quotes submitted by the Agent (or any affiliate of
the Agent) in the capacity of a Bank may be submitted, and may only be
submitted, if the Agent or such affiliate notifies the applicable Borrower of
the terms of the offer or offers contained therein not later than fifteen
minutes prior to the latest time that Money Market Quotes may be submitted by
other Banks as provided above. Subject to Articles III and VI, any Money Market
Quote so made shall be irrevocable except with the written consent of the Agent
given on the instructions of the applicable Borrower.
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(ii) Each Money Market Quote shall be in substantially the form of
Exhibit D hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan for which each such
offer is being made (expressed in Dollars), which principal amount (x) may
be greater than or less than the Commitment of the quoting Bank, (y) must
be $1,000,000 or a larger multiple thereof and (z) may not exceed the
principal amount of Money Market Loans for which offers were requested,
(C) the currency of the Money Market Loan for which each such offer is
being made,
(D) in the case of a LIBOR Auction, the margin above or below the
applicable London Interbank Offered Rate (the "Money Market Margin")
offered for each such Money Market Loan, expressed as a percentage (rounded
to the nearest 1/10,000th of 1%) to be added to or subtracted from such
base rate,
(E) in the case of an Absolute Rate Auction, the rate of interest per
annum (rounded to the nearest 1/10,000th of 1%) (the "Money Market Absolute
Rate") offered for each such Money Market Loan, and
(F) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the quoting
Bank with respect to each Interest Period specified in the related Invitation
for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit D hereto or does
not specify all of the information required by subsection (d)(ii);
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those set forth in the
applicable Invitation for Money Market Quotes; or
(D) arrives after the time set forth in subsection (d)(i).
(e) Notice to Borrower. The Agent shall promptly notify the applicable
Borrower of the terms (x) of any Money Market Quote submitted by a Bank that is
in accordance with subsection (d) and (y) of any Money Market Quote that amends,
modifies or is otherwise inconsistent with a previous Money Market Quote
submitted by such Bank with respect to the same Money Market Quote Request. Any
such subsequent Money Market Quote shall be disregarded by the Agent unless such
subsequent Money Market Quote is submitted solely to correct a manifest error in
such former Money Market Quote.
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The Agent's notice to the applicable Borrower shall specify (A) the aggregate
principal amount of Money Market Loans for which offers have been received for
each Interest Period specified in the related Money Market Quote Request, (B)
the respective principal amounts and Money Market Margins or Money Market
Absolute Rates, as the case may be, so offered and (C) if applicable,
limitations on the aggregate principal amount of Money Market Loans for which
offers in any single Money Market Quote for any Interest Period may be accepted.
(f) Acceptance and Notice by Borrower. Not later than 11:00 A.M. (New
York City time) on (x) the third Euro-Currency Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction for Money Market
Loans to be made in Dollars, (y) the proposed date of Borrowing, in the case of
an Absolute Rate Auction for Money Market Loans to be made in Dollars or (z) the
fifth Euro-Currency Business Day prior to the proposed date of Borrowing, in the
case of a LIBOR Auction or Absolute Rate Auction for Money Market Loans to be
made in an Alternative Currency (or, in any case, such other time or date as the
Company and the Agent shall have mutually agreed upon and shall have notified to
the Banks not later than the date of the Money Market Quote Request for the
first LIBOR Auction or Absolute Rate Auction for which such change is to be
effective), the applicable Borrower shall notify the Agent of its acceptance or
non-acceptance of the offers so notified to it pursuant to subsection (e). In
the case of acceptance, such notice (a "Notice of Money Market Borrowing") shall
specify the aggregate principal amount of offers for each Interest Period that
are accepted, expressed in Dollars. The applicable Borrower may accept any Money
Market Quote for any Interest Period in whole or in part; provided that:
(i) the aggregate principal amount of each Money Market Borrowing may
not exceed the applicable amount set forth in, and the currency thereof
must be the currency set forth in, the related Money Market Quote Request,
(ii) the principal amount of each Money Market Borrowing must be
$5,000,000 or a larger multiple of $1,000,000,
(iii) acceptance of offers may only be made on the basis of ascending
Money Market Margins or Money Market Absolute Rates, as the case may be,
and
(iv) a Borrower may not accept any offer that is described in
subsection (d)(iii) or that otherwise fails to comply with the requirements
of this Agreement.
(g) Allocation by Agent. If offers are made by two or more Banks with
the same Money Market Margins or Money Market Absolute Rates, as the case may
be, for a greater aggregate principal amount than the amount in respect of which
such offers are accepted for the related Interest Period, the principal amount
of Money Market Loans in respect of which such offers are accepted shall be
allocated by the Agent among such Banks as nearly as possible (in multiples of
such number, not greater than $1,000,000, as the Agent may deem appropriate) in
proportion to the aggregate principal amounts of such offers. Determinations by
the Agent of the pro rata amounts of Money Market Loans shall be conclusive in
the absence of manifest error.
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22
(h) Money Market Loans in an Alternative Currency. Any Borrower may
request Money Market Loans in an Alternative Currency subject to the terms and
conditions of this subsection (h), in addition to the other conditions
applicable to such Loans hereunder. Any request for Money Market Loans in an
Alternative Currency shall be subject to the following conditions:
(i) after giving effect to any Money Market Borrowing in an
Alternative Currency, the aggregate Dollar Amount of all outstanding Money
Market Loans and Letter of Credit Exposure denominated in Alternative
Currencies shall not exceed $50,000,000, and
(ii) if there shall occur at or prior to 10:00 A.M. (New York City
time) on the date of any Money Market Borrowing to be denominated in an
Alternative Currency any change in national or international financial,
political or economic conditions or currency exchange rates or exchange
controls which would, in the reasonable opinion of any Bank that shall have
offered to make any Money Market Loan in connection with such Borrowing,
make it impracticable for such Bank's Loan to be denominated in such
Alternative Currency, then such Bank may by prompt notice to the applicable
Borrower and the Agent withdraw its offer to make such Loan.
Any Money Market Loan which is to be made in an Alternative Currency
in accordance with this subsection (h) shall be advanced in the Equivalent
Amount of the Dollar Amount thereof and shall be repaid or prepaid in such
Alternative Currency in the amount borrowed. Interest payable on any Loan
denominated in an Alternative Currency shall be paid in such Alternative
Currency.
For purposes of determining whether the aggregate principal amount of
Loans outstanding hereunder exceeds any applicable limitation expressed in
Dollars, each Money Market Loan denominated in an Alternative Currency shall be
deemed to be in a principal amount equal to the Dollar Amount thereof. The
Dollar Amount of any Money Market Loan with an Interest Period exceeding six
months in duration shall be adjusted on each date that would have been the last
day of an Interest Period for such Loan if such Loan had successive Interest
Periods of six months duration. Each such adjustment shall be made by the Bank
holding such Loan by determining the amount in Dollars that would be required in
order to result in an Equivalent Amount in the applicable Alternative Currency
equal to the principal amount of the applicable Loan outstanding on the date of
the adjustment, and the amount in Dollars so determined shall be the Dollar
Amount of such Loan unless and until another adjustment is required hereby. Each
Bank that makes a Money Market Loan denominated in an Alternative Currency
agrees to determine any such adjustments if and when required to be made
pursuant to this paragraph and to notify the Company and the Agent of each such
adjustment promptly upon making such determination.
SECTION 2.04. Swingline Loans. (a) During the Revolving Credit Period
the Swingline Lender agrees, on the terms and conditions set forth in this
Agreement, to lend to any Borrower from time to time amounts that will not
result in (i) the aggregate principal amount of outstanding Swingline Loans at
any time exceeding $50,000,000, or (ii) the sum of the Letter of Credit Exposure
and the aggregate principal amount of all outstanding Loans at any time
exceeding the Total Commitments. All Swingline Loans shall be made in Dollars.
<PAGE>
23
(b) In order to request a Swingline Loan, a Borrower shall notify the
Agent of such request not later than 1:00 P.M. (New York City time) on the day
of a proposed Swingline Loan, specifying the proposed date (which shall be a
Domestic Business Day) and amount of the requested Swingline Loan (which shall
be $1,000,000 or a larger multiple of $500,000) and the duration of the Interest
Period applicable thereto, subject to the definition of Interest Period. The
Agent will promptly advise the Swingline Lender of any such notice received from
a Borrower. The Swingline Lender shall make each Swingline Loan available to the
applicable Borrower by means of a credit to the general deposit account of the
Company with the Swingline Lender by 2:00 P.M. (New York City time) on the
requested date of such Swingline Loan (and if the applicable Borrower is an
Eligible Subsidiary, the Company shall make such funds available to such
Borrower).
(c) The Swingline Lender may by written notice given to the Banks not
later than 10:00 A.M., New York City time, on any Domestic Business Day require
the Banks to acquire participations on such Business Day in all or a portion of
the Swingline Loans outstanding. Such notice shall specify the aggregate amount
of Swingline Loans in which the Banks will acquire participations. In
furtherance of the foregoing, each Bank hereby absolutely and unconditionally
agrees, upon receipt of notice as provided above, to pay to the Agent, for the
account of the Swingline Lender, such Bank's Applicable Percentage of such
Swingline Loan or Loans. Each Bank acknowledges and agrees that its obligation
to acquire participations in Swingline Loans pursuant to this paragraph is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including the occurrence and continuance of a Default or reduction
or termination of the Commitments, and that each such payment shall be made
without any offset, abatement, withholding or reduction whatsoever; provided,
however, that a Bank shall not be required to acquire a participation in a
Swingline Loan pursuant to this paragraph if (i) a Default shall have occurred
and was continuing at the time such Swingline Loan was made and (ii) such Bank
shall have notified the Swingline Lender in writing, not less than one Domestic
Business Day before such Swingline Loan was made, that such Default has occurred
and that such Bank will not participate in any Swingline Loans made while such
Default is continuing. Each Bank shall comply with its obligation under this
paragraph by wire transfer of immediately available funds, in the same manner as
provided in Section 2.05 with respect to Loans made by such Bank (and Section
2.05 shall apply, mutatis mutandis, to the payment obligations of the Banks).
The Agent shall notify the Company of any participations in any Swingline Loan
acquired pursuant to this paragraph. Any amounts received by the Swingline
Lender from any Borrower (or other party on behalf of any Borrower) in respect
of a Swingline Loan after receipt by the Swingline Lender of the proceeds of a
sale of participations therein shall be promptly remitted to the Agent; any such
amounts received by the Agent shall be promptly remitted by the Agent to the
Banks that shall have made their payments pursuant to this paragraph and to the
Swingline Lender, as their interests may appear. The purchase of participations
in a Swingline Loan pursuant to this paragraph shall not relieve the applicable
Borrower of any default in the payment thereof.
SECTION 2.05. Notice to Banks; Funding of Loans. (a) Upon receipt of a
Notice of Borrowing, the Agent shall promptly notify each Bank of the contents
thereof and of such Bank's share (if any) of such Borrowing and such Notice of
Borrowing shall not thereafter be revocable by the applicable Borrower.
<PAGE>
24
(b) Not later than 12:00 Noon (New York City time) on the date of each
Borrowing, each Bank participating therein shall make available its share of
such Borrowing, in Federal or other funds immediately available in New York
City, to the Agent at its address specified in or pursuant to Section 9.01 or,
subject to the provisions of Section 2.03(h), if such Borrowing is to be made in
an Alternative Currency, make available the Equivalent Amount of such
Alternative Currency on that day (in such funds as may then be customary for the
settlement of international transactions in the Alternative Currency) to the
account of the Agent at such place as shall have been notified by the Agent to
the Banks by not less than five Domestic Business Days' notice. Unless the Agent
determines that any applicable condition specified in Article III has not been
satisfied, the Agent will make the funds so received from the Banks available to
the Company at the Agent's aforesaid address (and if the applicable Borrower is
an Eligible Subsidiary, the Company shall make such funds available to such
Borrower).
(c) If an Issuing Bank has not received from the relevant Borrower a
payment required by Section 2.17(g) to be made to such Issuing Bank by 1:00 P.M.
(New York City time) on the date on which such payment is due, as provided in
Section 2.17(g), such Issuing Bank shall promptly notify the Agent thereof (and,
if the unreimbursed Letter of Credit Disbursement was made in an Alternative
Currency, the Dollar Amount thereof) and, promptly following receipt of such
notice, the Agent will notify each Bank of the Letter of Credit Disbursement and
such Bank's Applicable Percentage of such Letter of Credit Disbursement. Not
later than 4:00 P.M. (New York City time) on such date, each Bank shall make
available such Bank's Applicable Percentage of such Letter of Credit
Disbursement (in Dollars, in the amount determined as provided in Section
2.17(l) if such Letter of Credit Disbursement was made in an Alternative
Currency), in Federal or other funds immediately available in New York City, to
the Agent at its address specified in or pursuant to Section 9.01, and the Agent
will promptly make such funds available to such Issuing Bank. Thereafter, any
payments made by the applicable Borrower in respect of such Letter of Credit
Disbursement shall be paid to the Agent in Dollars (and such Issuing Bank shall
promptly remit such payments to the Agent if received by such Issuing Bank) and
the Agent will promptly remit to each Bank that shall have made such funds
available its Applicable Percentage of any amounts subsequently received by the
Agent from such Issuing Bank or the applicable Borrower in respect of such
Letter of Credit Disbursement (excluding interest for the account of such
Issuing Bank for the period prior to the date that such Bank shall have made
such funds available).
(d) If any Bank (including the Swingline Lender) makes a new Loan to a
Borrower hereunder on a day on which such Borrower is to repay all or any part
of an outstanding Loan denominated in the same currency from such Bank, such
Bank shall apply the proceeds of its new Loan to make such repayment and only an
amount equal to the difference (if any) between the amount being borrowed and
the amount being repaid shall be made available by such Bank to the Agent as
provided in subsection (c) of this Section, or remitted by such Borrower to the
Agent as provided in Section 2.13, as the case may be.
(e) Unless the Agent shall have received notice from a Bank prior to
the date of any Borrowing, or prior to the time of any required payment by such
Bank in respect of a Letter of Credit Disbursement, that such Bank will not make
available to the Agent such Bank's share of such Borrowing or payment, the Agent
may assume that such Bank has made such share available to the Agent on the date
of such Borrowing or
<PAGE>
25
payment in accordance with subsection (b) or (c), as applicable, of this Section
2.05 and the Agent may, in reliance upon such assumption, make available to the
applicable Borrower or the applicable Issuing Bank, as the case may be, on such
date a corresponding amount. If and to the extent that such Bank shall not have
so made such share available to the Agent, such Bank and such Borrower severally
agree to repay to the Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such amount is made
available by the Agent until the date such amount is repaid to the Agent, at (i)
in the case of a Borrower, a rate per annum equal to the higher of the Federal
Funds Rate and the interest rate applicable thereto pursuant to Section 2.08 or
Section 2.17(g), as applicable, and (ii) in the case of such Bank, the Federal
Funds Rate. In the case of a Borrowing, if such Bank shall repay to the Agent
such corresponding amount, such amount so repaid shall constitute such Bank's
Loan included in such Borrowing for purposes of this Agreement.
SECTION 2.06. Notes. (a) The Loans of each Bank to each Borrower shall
be evidenced by a single Note of such Borrower payable to the order of such Bank
for the account of its Applicable Lending Office.
(b) Each Bank may, by notice to a Borrower and the Agent, request that
its Loans to such Borrower of a particular Type be evidenced by a separate Note
of such Borrower. Each such Note shall be in substantially the form of Exhibit A
hereto with appropriate modifications to reflect the fact that it evidences
solely Loans of the relevant Type. Each reference in this Agreement to the
"Note" of such Bank shall be deemed to refer to and include any or all of such
Notes, as the context may require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.01(b) or
3.03(a), the Agent shall forward such Note to such Bank. Each Bank shall record
the date, amount, Type and maturity of each Loan made by it to each Borrower and
the date and amount of each payment of principal made by such Borrower with
respect thereto and, in the case of Money Market Loans denominated in an
Alternative Currency, the currency, amount and Dollar Amount of such Loans, and
may, in connection with any transfer of any of its Notes, endorse on the
schedule forming a part thereof appropriate notations to evidence the foregoing
information with respect to each such Loan of such Borrower then outstanding;
provided that (and each Borrower understands and agrees that) the failure of any
Bank to make any such recordation or endorsement shall not affect the
obligations of any Borrower hereunder or under the Notes. Each Bank is hereby
irrevocably authorized by each Borrower so to endorse its Note and to attach to
and make a part of its Note a continuation of any such schedule as and when
required.
SECTION 2.07. Interest Rate Elections. (a) The initial Type of Loans
comprising each Committed Borrowing, and the duration of the initial Interest
Period applicable thereto if they are initially CD Loans or Euro-Currency Loans,
shall be as specified in the applicable Notice of Borrowing. Thereafter, the
relevant Borrower may from time to time elect to change or continue the Type of,
or the duration of the Interest Period applicable to, the Loans included in any
Committed Borrowing (excluding overdue Loans and subject in each case to the
provisions of the definition of Interest Period and Article VIII), as follows:
(i) if such Loans are Base Rate Loans, such Borrower may elect to
designate such Loans as CD Loans or Euro-Currency Loans, may elect to
continue such Loans as Base Rate Loans for an additional Interest Period,
or may elect to
<PAGE>
26
designate such Loans as any combination of Base Rate Loans, CD Loans and
Euro-Currency Loans;
(ii) if such Loans are CD Loans, such Borrower may elect to designate
such Loans as Base Rate Loans or Euro-Currency Loans, may elect to continue
such Loans as CD Loans for an additional Interest Period, or may elect to
designate such Loans as any combination of Base Rate Loans, CD Loans and
Euro-Currency Loans; and
(iii) if such Loans are Euro-Currency Loans, such Borrower may elect
to designate such Loans as Base Rate Loans or CD Loans, may elect to
continue such Loans as Euro-Currency Loans for an additional Interest
Period, or may elect to designate such Loans as any combination of Base
Rate Loans, CD Loans and Euro-Currency Loans.
Notwithstanding the foregoing, no Borrower may elect an Interest Period for CD
Loans or Euro-Currency Loans unless the aggregate outstanding principal amount
of CD Loans or Euro-Currency Loans (including any such CD Loans or Euro-Currency
Loans made pursuant to Section 2.01 on the date that such Interest Period is to
begin) to which such Interest Period will apply is $5,000,000 or any larger
multiple of $1,000,000.
(b) Any election permitted by subsection (a) of this Section may
become effective on any Euro-Currency Business Day specified by the applicable
Borrower (the "Election Date"); provided that, with respect to any outstanding
CD Loan or Euro-Currency Loan, the applicable Borrower may not specify an
Election Date that is other than the last day of the Interest Period therefor.
Each such election shall be made by the applicable Borrower by delivering a
notice (a "Notice of Interest Rate Election") to the Agent not later than 11:00
A.M. (New York City time) on (x) the Election Date, if all the resulting Loans
will be Base Rate Loans, (y) the date two Domestic Business Days before the
Election Date, if the resulting Loans will include CD Loans but not
Euro-Currency Loans, and (z) the date three Euro-Currency Business Days before
the Election Date, if the resulting Loans will include Euro-Currency Loans. Each
Notice of Interest Rate Election shall specify with respect to the outstanding
Loans to which such notice applies:
(i) the Election Date;
(ii) if the Type of Loan is to be changed, the new Type of Loan and,
if such new Type is a CD Loan or Euro-Currency Loan, the duration of the
new Interest Period applicable thereto;
(iii) if such Loans are CD Loans or Euro-Currency Loans and the Type
of such Loans is to be continued for an additional or different Interest
Period, the duration of such additional or different Interest Period; and
(iv) if such Loans are to be designated as a combination of Base Rate
Loans, CD Loans or Euro-Currency Loans, the information specified in
clauses (i) through (iii) above as to each resulting Borrowing and the
aggregate amount of each such Borrowing.
<PAGE>
27
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period and the last
sentence of subsection (a) of this Section.
(c) Upon receipt of a Notice of Interest Rate Election, the Agent
shall promptly notify each Bank of the contents thereof and of such Bank's share
of such Borrowing and such notice shall not thereafter be revocable by the
applicable Borrower.
(d) If a Borrower (i) fails to deliver a timely Notice of Interest
Rate Election to the Agent electing to continue or change the Type of, or the
duration of the Interest Period applicable to, the Loans included in any
Committed Borrowing as provided in this Section and (ii) has not theretofore
delivered a notice of prepayment relating to such Committed Loans, then such
Borrower shall be deemed to have given the Agent a Notice of Interest Rate
Election electing to change the Type of such Loans to (or continue the Type
thereof as) Base Rate Loans, with an Interest Period commencing on the last day
of the then current Interest Period.
SECTION 2.08. Interest Rates. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the date
such Loan is made until it becomes due or is converted to a Loan of another
Type, at a rate per annum equal to the Base Rate for such day. Such interest
shall be payable for each Interest Period on the last day thereof and, with
respect to the principal amount of any Base Rate Loan converted to a CD Loan or
a Euro-Currency Loan, on the date such Base Rate Loan is so converted. Any
overdue principal of or interest on any Base Rate Loan shall bear interest,
payable on demand, for each day until paid at a rate per annum equal to the sum
of 2% plus the rate otherwise applicable to such Base Rate Loan for such day.
(b) Each CD Loan shall bear interest on the outstanding principal
amount thereof, for each day during each Interest Period applicable thereto, at
a rate per annum equal to the sum of the CD Margin for such day plus the
Adjusted CD Rate applicable to such Interest Period; provided that if any CD
Loan or any portion thereof shall, as a result of clause (2)(b) of the
definition of Interest Period, have an Interest Period of less than 30 days,
such portion shall bear interest during such Interest Period at the rate
applicable to Base Rate Loans during such period. Such interest shall be payable
for each Interest Period on the last day thereof and, if such Interest Period is
longer than 90 days, at intervals of 90 days after the first day thereof. Any
overdue principal of or interest on any CD Loan shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to the sum of 2% plus
the higher of (i) the sum of the applicable CD Margin for such day plus the
Adjusted CD Rate applicable to such Loan on the date such payment was due and
(ii) the rate applicable to Base Rate Loans for such day.
"CD Margin" applicable to any CD Loan outstanding on any day means:
(i) if such day falls within a Level I Pricing Period, then 0.375%;
(ii) if such day falls within a Level II Pricing Period, then 0.475%;
(iii) if such day falls within a Level III Pricing Period, then
0.550%; or
(iv) if such day falls within a Level IV Pricing Period, then 0.700%.
<PAGE>
28
The "Adjusted CD Rate" applicable to any Interest Period means a rate
per annum determined pursuant to the following formula:
[ CDBR ] *
ACDR = [ --------] +AR
[1.00 - DRP]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
The "CD Base Rate" applicable to any Interest Period is the rate of
interest determined by the Agent to be the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid
at 10:00 A.M. (New York City time) (or as soon thereafter as practicable) on the
first day of such Interest Period by two or more New York certificate of deposit
dealers of recognized standing for the purchase at face value from each CD
Reference Bank of its certificates of deposit in an amount comparable to the
unpaid principal amount of the CD Loan of such CD Reference Bank to which such
Interest Period applies and having a maturity comparable to such Interest
Period.
"Domestic Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including without limitation any
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of new non-personal time deposits in dollars in New York City having a
maturity comparable to the related Interest Period and in an amount of $100,000
or more. The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Domestic Reserve Percentage.
"Assessment Rate" means for any day the annual assessment rate in
effect on such day which is payable by a member of the Bank Insurance Fund
classified as adequately capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. ss. 327.3(d) (or any successor provision) to the Federal Deposit
Insurance Corporation (or any successor) for such Corporation's (or such
successor's) insuring time deposits at offices of such institution in the United
States. The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Assessment Rate.
(c) Each Euro-Currency Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Currency Margin for
such day plus the London Interbank Offered Rate applicable to such Interest
Period. Such interest shall be
- --------
* The amount in brackets being rounded upwards, if necessary, to the next higher
1/100 of 1%.
<PAGE>
29
payable for each Interest Period on the last day thereof and, if such Interest
Period is longer than three months, at intervals of three months after the first
day thereof.
"Euro-Currency Margin" applicable to any Euro-Currency Loan
outstanding on any day means:
(i) if such day falls within a Level I Pricing Period, then 0.250%;
(ii) if such day falls within a Level II Pricing Period, then 0.350%;
(iii) if such day falls within a Level III Pricing Period, then
0.425%; or
(iv) if such day falls within a Level IV Pricing Period, then 0.575%.
The "London Interbank Offered Rate" applicable to any Interest Period
means the average (rounded upwards, if necessary, to the next higher 1/16 of 1%)
of the respective rates per annum at which deposits in Dollars or, in the case
of any Money Market LIBOR Loan denominated in an Alternative Currency, the
relevant Alternative Currency are offered to each of the Euro-Currency Reference
Banks in the London interbank market at approximately 11:00 A.M. (London time)
two Euro-Currency Business Days before the first day of such Interest Period in
an amount approximately equal to the principal amount of the Euro-Currency Loan
of such Euro-Currency Reference Bank to which such Interest Period is to apply
(or, in the case of any Money Market LIBOR Loan, the principal amount of the
Euro-Currency Loan that would be made by such Euro-Currency Reference Bank if
the relevant Money Market Borrowing had been made as a Committed Borrowing) and
for a period of time comparable to such Interest Period.
(d) Any overdue principal of or interest on any Euro-Currency Loan
shall bear interest, payable on demand, for each day from and including the date
payment thereof was due to but excluding the date of actual payment, at a rate
per annum equal to the sum of 2% plus the higher of (i) the sum of the
Euro-Currency Margin for such day plus the London Interbank Offered Rate
applicable to such Loan on the date such payment was due and (ii) the
Euro-Currency Margin for such day plus the average (rounded upwards, if
necessary, to the next higher 1/16 of 1%) of the respective rates per annum at
which one-day (or, if such amount due remains unpaid more than three
Euro-Currency Business Days, then for such other period of time not longer than
three months as the Agent may select) deposits in Dollars or in the relevant
Alternative Currency in an amount approximately equal to such overdue payment
due to each of the Euro-Currency Reference Banks are offered to such
Euro-Currency Reference Bank in the London interbank market for the applicable
period determined as provided above (or, if the circumstances described in
clause (a) or (b) of Section 8.01 shall exist, at a rate per annum equal to the
sum of 2% plus the rate applicable to Base Rate Loans for such day).
(e) Subject to Section 8.01, each Money Market LIBOR Loan shall bear
interest on the outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the sum of the London Interbank
Offered Rate for such Interest Period (determined in accordance with Section
2.08(c) as if each Reference Bank were to participate in the related Money
Market LIBOR Borrowing ratably in proportion to its Commitment) plus (or minus)
the Money Market Margin quoted by the Bank making such Loan in accordance with
Section 2.03. Each Money Market Absolute
<PAGE>
30
Rate Loan shall bear interest on the outstanding principal amount thereof, for
the Interest Period applicable thereto, at a rate per annum equal to the Money
Market Absolute Rate quoted by the Bank making such Loan in accordance with
Section 2.03. Such interest shall be payable for each Interest Period on the
last day thereof and, if such Interest Period is longer than three months, at
intervals of three months after the first day thereof. Any overdue principal of
or interest on any Money Market Loan shall bear interest, payable on demand, for
each day until paid at a rate per annum equal to the sum of 2% plus the Base
Rate for such day.
(f) Each Swingline Loan shall bear interest on the outstanding
principal amount thereof, for each day during the Interest Period applicable
thereto, at such rate per annum as shall be agreed to in writing by the
applicable Borrower and the Swingline Lender with respect to such Swingline Loan
or, if no such agreement shall be made, at a rate per annum equal to the Base
Rate for such day. Such interest shall be payable for each Interest Period on
the last day thereof. Any overdue principal of or interest on any Swingline Loan
shall bear interest, payable on demand, for each day until paid at a rate per
annum equal to the sum of 2% plus the higher of (i) the rate of interest
applicable to such Swingline Loan prior to default and (ii) the Base Rate for
such day.
(g) The Agent shall determine each interest rate applicable to the
Loans hereunder; provided, that the CD Margin and Euro-Currency Margin shall be
determined by reference to the Level II Pricing Period for the period from the
Effective Date through the date that financial statements are first required to
be delivered pursuant to Section 5.01 (a) or (b) (whether or not so delivered).
The Agent shall give prompt notice to the applicable Borrower and the Banks of
each rate of interest so determined, and its determination thereof shall be
conclusive in the absence of manifest error.
(h) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Agent as contemplated by this Section. If any Reference Bank
does not furnish a timely quotation, the Agent shall determine the relevant
interest rate on the basis of the quotation or quotations furnished by the
remaining Reference Bank(s) or, if none of such quotations is available on a
timely basis, the provisions of Section 8.01 shall apply.
SECTION 2.09. Fees. (a) Facility Fee. The Company shall pay to the
Agent for the account of the Banks ratably a facility fee at the applicable per
annum Facility Fee Rate. Such facility fee shall accrue (i) from and including
the Effective Date to but excluding the date on which the Commitments expire or
terminate, on the daily actual amount of the Total Commitments (whether used or
unused) and (ii) from and including the date on which the Commitments expire or
terminate to but excluding the date on which there ceases to be any Committed
Exposure, on the daily average aggregate amount of the total Committed Exposure
of the Banks.
"Facility Fee Rate" applicable on any day means:
(i) if such day falls within a Level I Pricing Period, then 0.125%;
(ii) if such day falls within a Level II Pricing Period, then 0.150%;
(iii) if such day falls within a Level III Pricing Period, then
0.200%; or
(iv) if such day falls within a Level IV Pricing Period, then 0.300%.
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(b) Payments. Accrued fees under this Section shall be payable
quarterly in arrears on (i) the last day of March, June, September and December
in each year, commencing on the first such date that occurs on or after the
Effective Date, (ii) the date on which the Commitments expire or terminate and
(iii) if any Committed Exposure remains after the date on which the Commitments
expire or terminate, the date on which there ceases to be any Committed
Exposure. The Agent shall determine the amount of accrued fees payable hereunder
on each payment date and notify the Company thereof; provided, that the Facility
Fee Rate shall be determined by reference to the Level II Pricing Period for the
period from the Effective Date through the date that financial statements are
first required to be delivered pursuant to Section 5.01 (a) or (b) (whether or
not so delivered).
SECTION 2.10. Termination or Reduction of Commitments. (a) During the
Revolving Credit Period, the Company may, upon at least three Domestic Business
Days' notice to the Agent, terminate at any time, or proportionately reduce from
time to time by an aggregate amount of $10,000,000 or any larger multiple of
$1,000,000, the aggregate amount of the Commitments in excess of the sum of the
Letter of Credit Exposure and the aggregate outstanding principal amount of the
Loans.
(b) The Commitments shall terminate on the Termination Date.
SECTION 2.11. Maturity of Loans. (a) The Committed Loans of each Bank
shall mature, and the principal amount thereof shall be due and payable,
together with accrued interest thereon, on the Termination Date.
(b) Each Money Market Loan and Swingline Loan shall mature, and the
principal amount thereof shall be due and payable, together with accrued
interest thereon, on the last day of the Interest Period applicable to such
Loan.
SECTION 2.12. Prepayments. (a) Subject to subsection (d) of this
Section and Section 2.14, a Borrower may, upon at least one Domestic Business
Day's notice (or, in the case of a Committed Borrowing of Fixed Rate Loans, two
Domestic Business Days' notice) to the Agent, prepay any Committed Borrowing (or
any Money Market Borrowing bearing interest at the Base Rate pursuant to Section
8.01) of such Borrower in whole at any time, or from time to time in part in
amounts aggregating $5,000,000 or any larger multiple of $1,000,000, by paying
the principal amount to be prepaid together with accrued interest thereon to the
date of prepayment. Each such optional prepayment shall be applied to prepay
ratably the Loans of the several Banks included in such Borrowing.
(b) A Borrower may, upon notice to the Agent prior to 12:00 Noon (New
York City time) on the date of prepayment (which shall be a Domestic Business
Day), prepay any Swingline Loan of such Borrower in whole at any time, or from
time to time in part in amounts aggregating $1,000,000 or any multiple of
$500,000 in excess thereof, by paying the principal amount to be prepaid
together with accrued interest thereon to the date of prepayment.
(c) If at any time, as a result of an adjustment to the Dollar Amount
of any outstanding Money Market Loan or Letter of Credit Exposure denominated in
an Alternative Currency or otherwise, the sum of the Letter of Credit Exposure
and the aggregate principal amount of all outstanding Loans exceeds the Total
Commitments, then
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32
the Borrowers shall prepay Swingline Loans or Committed Loans in a principal
amount sufficient to eliminate such excess. If such prepayments shall not be
sufficient to eliminate any such excess, then Section 2.17(k) shall apply.
(d) No Borrower may prepay all or any portion of the principal amount
of any Money Market Loan (other than a Money Market Loan bearing interest at the
Base Rate pursuant to Section 8.01) without the prior written consent of the
Bank holding such Money Market Loan.
(e) Upon receipt of a notice of prepayment pursuant to this Section,
the Agent shall promptly notify each Bank (or, in the case of a Swingline Loan,
the Swingline Lender) of the contents thereof and of such Bank's ratable share
of such prepayment and such notice shall not thereafter be revocable by the
applicable Borrower.
SECTION 2.13. General Provisions as to Payments. (a) Except as
otherwise expressly provided herein, all payments to be made by any Borrower
hereunder or under the Notes in Dollars shall be made not later than 1:00 P.M.
(New York City time) on the date when due, in Federal or other funds immediately
available in New York City, to the Agent at its address referred to in Section
9.01. The Agent will promptly distribute to each Bank its ratable share of each
such payment received by the Agent for the account of the Banks.
(b) All payments to be made by any Borrower hereunder or under the
Notes in an Alternative Currency pursuant to Section 2.03(h) or 2.17(l) shall be
made in such Alternative Currency in such funds as may then be customary for the
settlement of international transactions in such Alternative Currency for the
account of the Agent (or, in the case of payments to an Issuing Bank pursuant to
Section 2.17(l), for the account of an Issuing Bank), at such time and at such
place as shall have been notified by the Agent (or, in the case of such payments
to an Issuing Bank, by such Issuing Bank) to such Borrower and the applicable
Banks by not less than four Euro-Currency Business Days' notice. The Agent will
promptly cause any such payments for the account of any Bank to be distributed
to the Bank entitled thereto in like funds.
(c) Whenever any payment of principal of, or interest on, the Domestic
Loans or any Money Market Absolute Rate Loans denominated in Dollars or of fees
shall be due on a day which is not a Domestic Business Day, the date for payment
thereof shall be extended to the next succeeding Domestic Business Day. Whenever
any payment of principal of, or interest on, the Euro-Currency Loans or any
Money Market Absolute Rate Loans denominated in an Alternative Currency or Money
Market LIBOR Loans shall be due on a day which is not a Euro-Currency Business
day, the date for payment thereof shall be extended to the next succeeding
Euro-Currency Business Day, unless such Euro-Currency Business Day falls in
another calendar month, in which case the date for payment thereof shall be the
next preceding Euro-Currency Business Day. If the date for any payment of
principal is extended by operation of law or otherwise, interest thereon shall
be payable for such extended time.
(d) Unless the Agent shall have received notice from the relevant
Borrower prior to the date on which any payment is due to the Banks hereunder
that such Borrower will not make such payment in full, the Agent may assume that
such Borrower has made such payment in full to the Agent on such date and the
Agent may, in reliance upon such assumption, cause to be distributed to each
Bank on such due date an amount
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33
equal to the amount then due such Bank. If and to the extent that such Borrower
shall not have so made such payment, each Bank shall repay to the Agent
forthwith on demand such amount distributed to such Bank, together with interest
thereon, for each day from the date such amount is distributed to such Bank
until the date such Bank repays such amount to the Agent, at the Federal Funds
Rate.
(e) All payments hereunder shall be made in Dollars except as
expressly provided in Sections 2.03(h) and 2.17(l).
SECTION 2.14. Funding Losses. If any Borrower makes any payment of
principal with respect to any Fixed Rate Loan (pursuant to Article II, VI or
VIII or otherwise) on any day other than the last day of the Interest Period
applicable thereto, or the end of an applicable period fixed pursuant to Section
2.08(d), or if any Borrower fails to borrow any Fixed Rate Loans (excluding a
failure to borrow in a specified Alternative Currency due to the occurrence of
any change in conditions described in Section 2.03(h)) after notice has been
given to any Bank in accordance with Section 2.05(a) or to change or continue
the Type of, or the duration of the Interest Period applicable to, any Fixed
Rate Loans after notice has been given to any Bank in accordance with Section
2.07(c), such Borrower shall reimburse each Bank within 15 days after demand for
any resulting loss or expense incurred by it (or by an existing or prospective
Participant in the related Loan) including (without limitation) any loss
incurred in obtaining, liquidating or employing deposits from third parties, but
excluding loss of margin for the period after any such payment or failure to
borrow; provided that such Bank shall have delivered to the applicable Borrower
a certificate as to the amount of such loss or expense, which certificate shall
be conclusive in the absence of manifest error. For purposes of this Section,
any Swingline Loan bearing interest at a fixed rate shall be deemed to be a
Fixed Rate Loan.
SECTION 2.15. Computation of Interest and Fees. Interest based on the
Prime Rate hereunder shall be computed on the basis of a year of 365 days (or
366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest and
fees shall be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but excluding the last
day).
SECTION 2.16. Judgment Currency. If for the purposes of obtaining
judgment in any court it is necessary to convert a sum due from any Borrower
hereunder or under any of the Notes in the currency expressed to be payable
herein or under the Notes (the "specified currency") into another currency, the
parties hereto agree, to the fullest extent that they may effectively do so,
that the rate of exchange used shall be that at which in accordance with normal
banking procedures the Agent could purchase the specified currency with such
other currency at the Agent's New York office on the Euro-Currency Business Day
preceding that on which final judgment is given. The obligations of each
Borrower in respect of any sum due to any Bank or the Agent hereunder or under
any Note shall, notwithstanding any judgment in a currency other than the
specified currency, be discharged only to the extent that on the Euro-Currency
Business Day following receipt by such Bank or the Agent (as the case may be) of
any sum adjudged to be so due in such other currency such Bank or the Agent (as
the case may be) may in accordance with normal banking procedures purchase the
specified currency with such other currency; if the amount of the specified
currency so purchased is less than the sum originally due to such Bank or the
Agent, as the case may be, in the specified currency, the
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34
Borrower that is liable for the relevant payment agrees, to the fullest extent
that it may effectively do so, as a separate obligation and notwithstanding any
such judgment, to indemnify such Bank or the Agent, as the case may be, against
such loss, and if the amount of the specified currency so purchased exceeds (a)
the sum originally due to any Bank or the Agent, as the case may be, in the
specified currency and (b) any amounts shared with other Banks as a result of
allocations of such excess as a disproportionate payment to such Bank under
Section 9.04, such Bank or the Agent, as the case may be, agrees to remit such
excess to such Borrower.
SECTION 2.17. Letters of Credit. (a) Any Borrower may request the
issuance of Letters of Credit by any Issuing Bank, in a form reasonably
acceptable to the Agent and such Issuing Bank, appropriately completed, for the
account of such Borrower, at any time and from time to time during the Revolving
Credit Period; provided that any Letter of Credit shall be issued only if, and
each request by any Borrower for the issuance of any Letter of Credit shall be
deemed a representation and warranty of the Company and such Borrower that,
immediately following the issuance of any such Letter of Credit, (i) the sum of
the Letter of Credit Exposure and the aggregate principal amount of all
outstanding Loans shall not exceed the Total Commitments and (ii) if such Letter
of Credit provides for the payment of drawings in an Alternative Currency, the
aggregate Dollar Amount of all outstanding Money Market Loans and Letter of
Credit Exposure denominated in Alternative Currencies shall not exceed
$50,000,000.
(b) Each Letter of Credit shall provide for payment of all drawings
thereunder in Dollars or, subject to Section 2.17(l), an Alternative Currency.
(c) Each issuance of any Letter of Credit shall be made on such prior
notice from the applicable Borrower to the applicable Issuing Bank as shall be
acceptable to such Issuing Bank specifying the date of issuance, the date on
which such Letter of Credit is to expire (which shall not be later than the
earlier of (i) the date that is one Domestic Business Day prior to the
Termination Date, and (ii) subject to renewal, the date one year after the date
of such Letter of Credit), or, if such Letter of Credit is issued to a
beneficiary outside the United States, the date that is five Domestic Business
Days prior to the Termination Date), the amount and currency of such Letter of
Credit, the name and address of the beneficiary of such Letter of Credit,
whether such Letter of Credit is a documentary or stand-by Letter of Credit, the
purpose of such Letter of Credit, and such other information as may be necessary
or desirable to complete such Letter of Credit. Each Issuing Bank will give the
Agent prompt notice of the issuance and amount of each Letter of Credit issued
by it, the currency thereof (and, if such currency is an Alternative Currency,
the Dollar Amount thereof) and the expiration of such Letter of Credit. Each
Issuing Bank will give the Agent and the Company (i) daily notice of the
aggregate amount available to be drawn under all outstanding Letters of Credit
issued by it, (ii) a quarterly summary indicating, on a daily basis during such
quarter, the issuance of any Letter of Credit issued by it and the amount
thereof, the expiration of any such Letter of Credit and any payment on drafts
presented under such Letters of Credit and (iii) in the case of Letters of
Credit denominated in an Alternative Currency, periodic notice of the Dollar
Amount thereof as contemplated by Section 2.17(l).
(d) Each Issuing Bank that issues a Letter of Credit, by the issuance
of such Letter of Credit and without any further action on the part of such
Issuing Bank or the Banks in respect thereof, hereby grants to each Bank, and
each Bank hereby acquires from such Issuing Bank, a participation in such Letter
of Credit equal to such Bank's
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35
Applicable Percentage of the aggregate amount available to be drawn under such
Letter of Credit, effective upon the issuance of such Letter of Credit. In
consideration and in furtherance of the foregoing, each Bank hereby absolutely
and unconditionally agrees to pay to the Agent, on behalf of such Issuing Bank,
in accordance with Section 2.05(c) and, if applicable subsection (l) of this
Section, such Bank's Applicable Percentage of each Letter of Credit Disbursement
made by such Issuing Bank and not reimbursed by the relevant Borrower when due
in accordance with subsection (g) of this Section; provided that the Banks shall
not be obligated to make any such payment with respect to any wrongful Letter of
Credit Disbursement made as a result of the gross negligence or wilful
misconduct of such Issuing Bank.
(e) Each Bank acknowledges and agrees that its obligation to acquire
participations pursuant to subsection (d) above in respect of Letters of Credit
is absolute and unconditional and shall not be affected by any circumstance
whatsoever, including the occurrence and continuance of a Default, and that each
such payment shall be made without any offset, abatement, withholding or
reduction whatsoever (subject only to the proviso in subsection (d) above).
(f) During the Revolving Credit Period, the Company shall pay (i) to
the Agent for each day from and including the Effective Date to but excluding
the last day of the Revolving Credit Period for the account of the Banks ratably
(A) a fee at the per annum Stand-by Letter of Credit Fee Rate for such day on
the aggregate undrawn amount at the end of such day of outstanding Letters of
Credit that are in the nature of stand-by Letters of Credit and (B) a fee at the
per annum Documentary Letter of Credit Fee Rate for such day on the aggregate
undrawn amount at the end of such day of all other outstanding Letters of Credit
and (ii) to each Issuing Bank for each day from and including the Effective Date
to but excluding the last day of the Revolving Credit Period, for the account of
such Issuing Bank, a fronting fee equal to an amount to be mutually agreed upon
by the Company and such Issuing Bank. Accrued fees under this subsection shall
be calculated by the Agent (in the case of fees payable pursuant to clause (i)
above) or the applicable Issuing Bank (in the case of fees payable to it
pursuant to clause (ii) above) and shall be payable quarterly on the last day of
March, June, September and December in each year (commencing on the last day of
September, 1996) and on the Termination Date (or any earlier date on which the
Commitments are terminated); provided, that the Stand-by Letter of Credit Fee
Rate and the Documentary Letter of Credit Fee Rate shall be determined by
reference to the Level II Pricing Period for the period from the Effective Date
through the date that financial statements are first required to be delivered
pursuant to Section 5.01(a) or (b)(whether or not so delivered). The Agent (in
the case of fees payable pursuant to clause (i) above) or the applicable Issuing
Bank (in the case of fees payable to it pursuant to clause (ii) above) will
notify the Company of the amount of accrued fees payable hereunder on each
payment date. In addition to the foregoing, the relevant Borrower shall pay
directly to each Issuing Bank, for its account, such Issuing Bank's customary
processing and documentation fees in connection with the issuance or amendment
of or payment on any Letter of Credit, payable within 15 days after demand
therefor by such Issuing Bank.
"Stand-by Letter of Credit Fee Rate" as of any day means (i) if such
day falls within a Level I Pricing Period, 0.250%; (ii) if such day falls within
a Level II Pricing Period, 0.350%; (iii) if such day falls within a Level III
Pricing Period, 0.425%; or (iv) if such day falls within a Level IV Pricing
Period, 0.575%.
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36
"Documentary Letter of Credit Fee Rate" as of any day means (i) if
such day falls within a Level I Pricing Period, 0.150%; (ii) if such day falls
within a Level II Pricing Period, 0.250%; (iii) if such day falls within a Level
III Pricing Period, 0.300%; or (iv) if such day falls within a Level IV Pricing
Period, 0.350%.
(g) If an Issuing Bank shall pay any draft presented under a Letter of
Credit, the applicable Borrower shall pay directly to such Issuing Bank an
amount equal to the amount of such draft before 2:00 P.M. (New York City time),
on the day on which such Issuing Bank shall have notified the Company (as
provided in subsection (j) below) that payment of such draft will be made;
provided that, if the Company shall not have received notice of such draft
before 10:00 A.M. (New York City time) on the date that payment of such draft is
made, then such payment may be made by such Borrower to such Issuing Bank on the
Domestic Business Day immediately following the date of receipt by the Company
of notice of such draft, together with interest (at a rate per annum equal to
the sum of the Euro-Currency Margin at the time plus the rate determined by such
Issuing Bank to be equal to the rate per annum at which deposits in the same
currency as such draft are then being offered to such Issuing Bank in the London
interbank market for a period of one month) on the amount of such draft from and
including the date such draft was paid by such Issuing Bank to but excluding
such next Domestic Business Day. If any Borrower shall fail to pay any amount
required to be paid by it under this subsection when due, such unpaid amount
shall bear interest, for each day from and including the due date to but
excluding the date of payment, at a rate per annum equal to the interest rate
applicable to overdue Base Rate Loans.
(h) Each Borrower's obligation to reimburse Letter of Credit
Disbursements as provided in subsection (g) above shall be absolute,
unconditional and irrevocable and shall be performed strictly in accordance with
the terms of this Agreement under any and all circumstances whatsoever, and
irrespective of:
(i) any lack of validity or enforceability of any Letter of Credit or
any Loan Document;
(ii) the existence of any claim, setoff, defense or other right which
any Borrower, any Subsidiary or any other Person may at any time have
against the beneficiary under any Letter of Credit, any Issuing Bank, the
Agent or any Bank or any other Person in connection with this Agreement,
any other Loan Document or any other related or unrelated agreement or
transaction;
(iii) any draft or other document presented under a 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) payment by any Issuing Bank under a Letter of Credit against
presentation of a draft or other document which does not comply with the
terms of such Letter of Credit, subject to subsection (i) below; and
(v) any other act or omission or delay of any kind or any other
circumstance or event whatsoever, whether or not similar to any of the
foregoing and whether or not foreseeable, that might, but for the
provisions of this subsection (h), constitute a legal or equitable
discharge of any Borrower's obligations hereunder.
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37
(i) None of the Banks (including any Issuing Bank) nor the Agent nor
any of their officers or directors or employees or agents shall be liable or
responsible by reason of or in connection with (and the Company shall indemnify
and hold harmless each of the Banks, the Issuing Banks, the Agent and their
officers, directors, employees and agents from and against any and all
liabilities, losses, damages, costs and expenses, including, without limitation,
reasonable fees and disbursements of counsel, arising by reason of or in
connection with) the execution and delivery or transfer of or payment or failure
to pay under any Letter of Credit, including without limitation any of the
circum stances enumerated in subsection (h) above, as well as (i) any error,
omission, interruption or delay in transmission or delivery of any messages, by
mail, cable, telegraph, telex or otherwise, (ii) any error in interpretation of
technical terms, (iii) any loss or delay in the transmission of any document
required in order to make a drawing under a Letter of Credit, or (iv) any
consequences arising from causes beyond the control of any Issuing Bank,
including without limitation any government acts, or any other circumstances
whatsoever in making or failing to make payment under any Letter of Credit;
provided that the Company shall not be required to indemnify any Issuing Bank
for any claims, damages, losses, liabilities, costs or expenses, and a Borrower
shall have a claim for direct (but not consequential) damage suffered by it, to
the extent found by a court of competent jurisdiction to have been caused by (x)
the wilful misconduct or gross negligence of an Issuing Bank in determining
whether a request presented under any Letter of Credit issued by it complied
with the terms of such Letter of Credit or (y) an Issuing Bank's failure to pay
under any Letter of Credit issued by it after the presentation to it of a
request strictly complying with the terms and conditions of such Letter of
Credit. Nothing in this subsection (i) is intended to limit the obligations of
any Borrower under any other provision of this Agreement. To the extent the
Company does not indemnify an Issuing Bank as required by this subsection, the
Banks agree to do so ratably in accordance with their Commitments. It is
expressly understood and agreed that, for purposes of determining whether a
wrongful payment under a Letter of Credit resulted from an Issuing Bank's gross
negligence or wilful misconduct, such Issuing Bank may accept documents that
appear on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary and, in
making any payment under any Letter of Credit (A) an Issuing Bank's exclusive
reliance on the documents presented to it under such Letter of Credit as to any
and all matters set forth therein, including reliance on the amount of any draft
presented under such Letter of Credit, whether or not the amount due to the
beneficiary thereunder equals the amount of such draft and whether or not any
document presented pursuant to such Letter of Credit proves to be insufficient
in any material respect, if such document on its face appears to be in order,
and whether or not any other statement or any other document presented pursuant
to such Letter of Credit proves to be forged or invalid or any statement therein
proves to be inaccurate or untrue in any respect whatsoever and (B) any
noncompliance in any immaterial respect of the documents presented under such
Letter of Credit with the terms thereof shall, in each case, be deemed not to
constitute wilful misconduct or gross negligence of such Issuing Bank.
(j) Each Issuing Bank shall, promptly following its receipt thereof,
examine all documents purporting to represent a demand for payment under a
Letter of Credit issued by it. Such Issuing Bank shall as promptly as possible
give telephonic notification, confirmed by telex or telecopy, to the Agent, the
Company and the applicable Borrower of such demand for payment and whether such
Issuing Bank has made or will make a Letter of Credit Disbursement thereunder,
provided that the failure to give such notice shall not relieve any Borrower of
its obligation to reimburse any such Letter of
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Credit Disbursement in accordance with this Section. The Agent shall promptly
give each Bank notice thereof.
(k) If at any time, as a result of an adjustment to the Dollar Amount
of any outstanding Letter of Credit Exposure or Money Market Loan denominated in
an Alternative Currency or otherwise, after giving effect to any prepayment of
Loans required to be made pursuant to Section 2.12(c), the sum of the Letter of
Credit Exposure and the aggregate principal amount of all outstanding Loans
exceeds the Total Commitments, then the Company shall provide cash collateral in
respect of the Letter of Credit Exposure as provided below in an amount equal to
such excess; provided that, solely for purposes of determining whether the
Company is in compliance with the foregoing requirements of this subsection (k),
the Total Commitments shall be deemed to be increased by the amount of any cash
collateral then held by the Agent pursuant to this subsection (k). In the event
that the Company is required pursuant to the terms of this Agreement to provide
cash collateral in respect of the Letter of Credit Exposure, the Company shall
deposit in an account with the Agent, for the benefit of the Banks (including
the Issuing Banks), an amount in cash equal to (x) in the case of a deposit
required pursuant to the first sentence of this subsection (k), the amount
specified therein, or (y) in the case of a deposit required as a result of an
Event of Default, the entire Letter of Credit Exposure. Such deposit shall be
held by the Agent as collateral for the payment and performance of the
Obligations. The Agent shall have exclusive dominion and control, including the
exclusive right of withdrawal, over such account. Other than any interest earned
on the investment of such deposits in Temporary Cash Investments, which
investments shall be made at the option and sole but reasonable discretion of
the Agent, such deposits shall not bear interest. Interest or profits, if any,
on such investments shall accumulate in such account. Moneys in such account
shall automatically be applied by the Agent to reimburse the Issuing Banks for
Letter of Credit Disbursements and, if the maturity of the Loans has been
accelerated, to satisfy the Obligations. If the Company is required to provide
an amount of cash collateral hereunder pursuant to the first sentence of this
subsection (k), the Agent shall return such amount (to the extent not applied as
aforesaid) to the Company, from time to time, to the extent that doing so would
not give rise to an obligation on the part of the Company to provide additional
cash collateral pursuant to such sentence. If the Company is required to provide
an amount of cash collateral hereunder as a result of an Event of Default, such
amount (to the extent not applied as aforesaid) shall be returned to the Company
within three Domestic Business days after all Events of Default have been cured
or waived, and if prior to such return the amount of the Letter of Credit
Exposure is reduced, any excess of the amount deposited (to the extent not
applied as aforesaid and disregarding interest or profits on investments) over
the reduced amount of the Letter of Credit Exposure shall be returned to the
Company promptly after such reduction gives rise to such excess. Notwithstanding
the foregoing, if any Obligation payable by any Borrower hereunder is due and
payable but remains unpaid at the time that the Agent would otherwise be
required to return any amount of cash collateral to the Company hereunder, the
Agent may retain such cash collateral and apply the amounts retained to the
payment of such unpaid Obligation.
(l) Any Borrower may request the issuance of a Letter of Credit
providing for the payment of drawings in an Alternative Currency subject to the
terms and conditions of this subsection (l), in addition to the other conditions
applicable to the issuance of Letters of Credit hereunder. The issuance of any
such Letter of Credit shall be
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subject to the approval of the Issuing Bank that is requested to issue such
Letter of Credit. If any such Letter of Credit is issued, the following
provisions shall apply:
(i) For purposes of determining the Letter of Credit Exposure and for
purposes of calculating fees payable under Section 2.17(f), the amount of
such Letter of Credit and of any unreimbursed Letter of Credit
Disbursements in respect thereof shall be deemed to be, as of any date of
determination, the Dollar Amount thereof at such date. The initial Dollar
Amount of any such Letter of Credit shall be determined by the Issuing Bank
that shall have issued such Letter of Credit on the date of issuance
thereof and adjusted from time to time thereafter as provided below. The
Dollar Amount of each such Letter of Credit outstanding shall be adjusted
by the Issuing Bank that shall have issued such Letter of Credit on the
15th day and the last day of each calendar month (or, if any such day is
not a Euro-Currency Business Day, on the next succeeding day that is a
Euro-Currency Business Day). If a Letter of Credit Disbursement is made
under any such Letter of Credit, the Dollar Amount of such Letter of Credit
Disbursement shall be determined by the Issuing Bank that shall have issued
such Letter of Credit on the date that such Letter of Credit Disbursement
is made. Each Issuing Bank shall make each such determination to be made by
it by calculating the amount in Dollars that would be required in order for
such Issuing Bank to purchase an amount of the applicable Alternative
Currency equal to the amount of the relevant Letter of Credit or
unreimbursed Letter of Credit Disbursement, as the case may be, on the date
of determination at such Issuing Bank's spot buying rate for Dollars
against such Alternative Currency as of approximately 9:00 a.m. (New York
City time) on such date of determination. Each Issuing Bank shall notify
the Agent and the Company promptly of each such Dollar Amount determined by
it, on the date that such determination is required to be made.
(ii) Subject to paragraph (iv) below, the obligation of the applicable
Borrower to reimburse any Issuing Bank for any Letter of Credit
Disbursement under any such Letter of Credit, and to pay interest thereon,
shall be payable only in the Alternative Currency in which such Letter of
Credit Disbursement is made, and shall not be discharged by paying an
amount in Dollars or any other currency; provided that an Issuing Bank may
agree, in its sole discretion, to accept reimbursement in another currency,
but any such agreement shall not affect the obligations of the Banks or the
relevant Borrower under paragraphs (iii) and (iv) below if such
reimbursement is not actually made to such Issuing Bank when due.
(iii) The obligations of each Bank under Sections 2.05(c) and 2.17(d)
to pay its Applicable Percentage of any unreimbursed Letter of Credit
Disbursement under any such Letter of Credit shall be payable only in
Dollars and shall be in an amount equal to such Applicable Percentage of
the Dollar Amount of such unreimbursed Letter of Credit Disbursement
determined as provided in clause (i) above. Under no circumstances shall
the provisions hereof permitting the issuance of Letters of Credit in an
Alternative Currency be construed, by implication or otherwise, as imposing
any obligation upon any Bank to make any Loan or other payment under any
Loan Document, or to accept any payment from the Borrowers in respect of
any Obligations, in any currency other than Dollars, it being understood
that the parties intend all Obligations to be denominated and payable
<PAGE>
40
only in Dollars except as expressly provided in paragraph (ii) above and in
Section 2.03(h).
(iv) If and to the extent that any Bank pays its Applicable Percentage
of any unreimbursed Letter of Credit Disbursement under any such Letter of
Credit, then, notwithstanding paragraph (ii) above, the obligation of the
applicable Borrower to reimburse the portion of such Letter of Credit
Disbursement funded by such Bank shall be converted to, and shall be
payable only in, Dollars (in an amount equal to the Dollar amount funded by
such Bank as provided above) and shall not be discharged by paying an
amount in any other currency. Interest accrued on such unreimbursed Letter
of Credit Disbursement to and excluding the date of such payment by such
Bank shall be for the account of the applicable Issuing Bank and be payable
in the applicable Alternative Currency, but interest thereafter shall
accrue on the Dollar amount owed to such Bank and shall be payable in
Dollars.
(m) The Company, the Agent and any Bank that is willing to be an
Issuing Bank hereunder may agree that such Bank shall be an Issuing Bank by the
execution and delivery of an agreement substantially in the form of Exhibit K
(an "Issuing Bank Agreement"). The Agent shall notify the Banks of the identity
of any Issuing Bank appointed pursuant to this subsection (m). The Company also
may terminate the status of any Issuing Bank as an Issuing Bank hereunder at any
time by at least three Domestic Business Days' prior notice to such Issuing Bank
and the Agent, and the Agent shall thereupon notify the Banks of such
termination; provided that such termination shall operate only to relieve such
Issuing Bank of its obligation to issue Letters of Credit hereunder and shall
not affect such Issuing Bank's status as an Issuing Bank or its rights and
obligations hereunder with respect to any Letters of Credit previously issued by
it.
SECTION 2.18. Regulation D Compensation. For each day for which a Bank
is required to maintain reserves in respect of either (a) "Eurocurrency
Liabilities" (as defined in all regulations of the Board of Governors of the
Federal Reserve System) or (b) any other category of liabilities which includes
deposits by reference to which the interest rate on Euro-Currency Loans is
determined or any category of extensions of credit or other assets which
includes loans by a non-United States office of any Bank to United States
residents, such Bank may require any Borrower to pay, contemporaneously with
each payment of interest on the Euro-Currency Loans by such Borrower, additional
interest on the related Euro-Currency Loans of such Bank at a rate per annum
determined by such Bank up to but not exceeding the excess of (i) (A) the
applicable London Interbank Offered Rate divided by (B) one minus the
Euro-Currency Reserve Percentage over (ii) the applicable London Interbank
Offered Rate. Any Bank wishing to require payment of such additional interest
(x) shall so notify the relevant Borrower and the Agent, in which case such
additional interest on the Euro-Currency Loans of such Bank shall be payable to
such Bank at the place indicated in such notice commencing five Euro-Currency
Business Days after the giving of such notice and (y) shall notify the Borrower
at least five Euro-Currency Business Days prior to each date on which interest
is payable on the Euro-Currency Loans of the amount then due to such Bank under
this Section.
SECTION 2.19. Eligible Subsidiaries. The Company may from time to time
cause any Wholly-Owned Consolidated Subsidiary (or, with the consent of the
Required Banks, any other Subsidiary) to become eligible to borrow under
Sections 2.01, 2.03 and 2.04 or to have Letters of Credit issued for its account
under Section 2.17 by
<PAGE>
41
delivering to the Agent an Election to Participate with respect to such
Subsidiary. The eligibility of any such Subsidiary to borrow or to have Letters
of Credit issued for its account under said Sections shall terminate when the
Agent receives a Notice of Termination with respect to such Subsidiary. Each
Election to Participate delivered to the Agent shall be duly executed on behalf
of the relevant Subsidiary and the Company, and each Election to Terminate
delivered to the Agent shall be duly executed on behalf of the Company, in such
number of copies as the Agent may request. The delivery of an Election to
Terminate shall not affect any obligation of the relevant Subsidiary theretofore
incurred. The Agent shall promptly give notice to the Banks and the Issuing Bank
of its receipt of any Election to Participate or Election to Terminate.
SECTION 2.20. Ratings Election. (a) The Company may at any time during
the term of this Agreement elect that Pricing Periods shall be determined based
upon the ratings of its Index Debt (any such election, the "Ratings Election").
In order to make the Ratings Election, the Company shall obtain ratings of its
Index Debt from each of Moody's and S&P and deliver written notice of such
election to the Agent, specifying the effective date of such election (which
shall be at least 5 Domestic Business Days after the date such notice is
delivered to the Agent) and accompanied by evidence of the ratings of Moody's
and S&P then applicable to its Index Debt. The Ratings Election shall be
irrevocable. After making the Ratings Election, the Company shall maintain
ratings of its Index Debt by each of Moody's and S&P (other than under the
circumstances described in clause (iv) of subsection (b) below) and shall notify
the Agent of any change in the rating of its Index Debt by Moody's or S&P. The
Agent shall notify the Banks of the Ratings Election and of any such notice
regarding a change in ratings promptly following receipt thereof.
(b) If the ratings election is exercised, then, for purposes of
determining Pricing Periods, (i) if either Moody's or S&P shall not have in
effect a rating for the Index Debt (other than by reason of the circumstances
referred to in clause (iv) or (v) below), then such rating agency shall be
deemed to have established a rating that would (absent a rating from the other
rating agency) result in a Level IV Pricing Period; (ii) if the separate ratings
established (or deemed established) by Moody's and S&P for the Index Debt would
result in different Pricing Periods, then the Pricing Period shall be determined
based upon the higher of the two ratings unless one of the two ratings would
result in a Pricing Period that is more than one level removed from the Pricing
Period that would be determined by reference to the other rating, in which case
the Pricing Period shall be the Pricing Period next above (i.e., resulting in
lower interest rates) that of the lower (i.e., resulting in higher interest
rates) of the two Pricing Periods determined by reference to the two ratings;
(iii) if the rating established (or deemed established) by Moody's or S&P for
the Index Debt shall be changed (other than as a result of a change in the
ratings system of Moody's or S&P), then the change in Pricing Periods resulting
from such change in ratings shall be effective as of the date on which such
change is first announced by the applicable rating agency; (iv) if the ratings
system of Moody's or S&P shall change, or if such rating agency shall cease to
be in the business of rating corporate debt obligations, the Pricing Periods
shall be determined by reference to the rating of Index Debt established (or
deemed established) by the other rating agency alone (or, if this clause (iv)
shall apply to both such rating agencies, then the Pricing Periods shall be
determined by reference to the Company's Fixed Charge Coverage Ratio as though
the Ratings Election had not been made), unless and until the Company and the
Required Banks agree to the contrary; and (v) if both Moody's and S&P shall not
have in effect a rating for the Index Debt (due to the Index Debt no longer
existing or otherwise), then the Pricing Periods shall be determined by
reference to
<PAGE>
42
the Company's Fixed Charge Coverage Ratio as though the Ratings Election had not
been made.
ARTICLE III
Conditions
SECTION 3.01. Effectiveness. The obligation of the Banks to make Loans
and of the Issuing Banks to issue Letters of Credit under this Agreement shall
become effective on the date that each of the following conditions shall have
been satisfied (or waived in accordance with Section 9.05):
(a) receipt by the Agent of counterparts hereof signed by each of the
parties hereto (or, in the case of any party as to which an executed
counterpart shall not have been received, receipt by the Agent in form
satisfactory to it of telegraphic, telex or other written confirmation from
such party of execution of a counterpart hereof by such party);
(b) receipt by the Agent for the account of each Bank of a duly
executed Note of the Company dated on or before the Effective Date
complying with the provisions of Section 2.06;
(c) receipt by the Agent of counterparts of the Guarantee Agreement,
duly executed by the Initial Guarantors;
(d) receipt by the Agent of a certificate signed by the chief
financial officer, treasurer or controller of the Company, dated the
Effective Date, to the effect that (i) no Default has occurred and is
continuing as of the Effective Date, and (ii) the representations and
warranties of the Company set forth in Article IV hereof are true in all
material respects on, and as of, the Effective Date;
(e) receipt by the Agent of all fees and other compensation payable to
the Agent and the Banks on or prior to the Effective Date pursuant to their
agreements with the Company, including reimbursement of all reasonable
out-of-pocket expenses of the Agent payable by the Company in accordance
with this Agreement for which invoices have been presented;
(f) receipt by the Agent of (i) an opinion of Marc G. Schuback, Esq.,
counsel for the Company, substantially in the form of Exhibit F-1 hereto,
and (ii) an opinion of Pitney, Hardin, Kipp & Szuch, counsel for the
Company, substantially in the form of Exhibit F-2 hereto, and in each case
covering such additional matters relating to the Financing Transactions as
the Required Banks may reasonably request;
(g) receipt by the Agent of an opinion of Cravath, Swaine & Moore,
special counsel for the Agent, substantially in the form of Exhibit G
hereto and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request;
<PAGE>
43
(h) receipt by the Agent of all documents and certificates it may
reasonably request relating to the existence of the Company and the Initial
Guarantors, the corporate authority for and the validity of this Agreement
and the other Loan Documents, the accuracy of the representations and
warranties contained in this Agreement and the other Loan Documents on the
Effective Date, the Financing Transactions and any other matters relevant
hereto or thereto, all in form and substance satisfactory to the Agent; and
(i) the Existing Credit Agreement and all commitments thereunder shall
have been terminated, all amounts outstanding or accrued thereunder shall
have been paid in full and the Agent shall have received evidence
reasonably satisfactory to it of such termination and payment;
provided that this Agreement shall not become effective or be binding on any
party hereto unless all of the foregoing conditions are satisfied not later than
October 31, 1997. The Agent shall promptly notify the Company and the Banks of
the Effective Date, and such notice shall be conclusive and binding on all
parties hereto.
SECTION 3.02. Each Credit Event. The obligation of any Bank to make a
Loan on the occasion of any Borrowing and of any Issuing Bank to issue any
Letter of Credit is subject to the satisfaction of the following conditions:
(a) receipt by the Agent of a Notice of Borrowing as required by
Section 2.02 or 2.03, receipt by the Swingline Lender of a notice
requesting a Swingline Loan as required by Section 2.04 or receipt by the
applicable Issuing Bank of a notice requesting issuance of a Letter of
Credit as required by Section 2.17(c), as applicable;
(b) the fact that, immediately after such Borrowing or the issuance of
such Letter of Credit, the sum of the aggregate principal amount of all
outstanding Loans and the Letter of Credit Exposure shall not exceed the
Total Commitments;
(c) the fact that, immediately before and after such Borrowing or the
issuance of such Letter of Credit, no Default shall have occurred and be
continuing; and
(d) the fact that the representations and warranties of the Company
(and, if other than the Company, the relevant Borrower) contained in this
Agreement and the other Loan Documents shall be true on and as of the date
of such Borrowing or issuance of such Letter of Credit.
Each Borrowing hereunder and the issuance of each Letter of Credit hereunder
shall be deemed to be a representation and warranty by the Company and the
relevant Borrower on the date of such Borrowing or issuance as to the facts
specified in clauses (b), (c) and (d) of this Section.
SECTION 3.03. Borrowings by Eligible Subsidiaries; Letters of Credit
for Eligible Subsidiaries. The obligation of any Bank to make a Loan to any
Eligible
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44
Subsidiary and of any Issuing Bank to issue any Letter of Credit for the account
of any Eligible Subsidiary are subject to the satisfaction of the following
further conditions:
(a) in the case of a Loan, receipt by the Agent for the account of
such Bank of a duly executed Note of such Eligible Subsidiary, dated on or
before the date of the first Loan to such Subsidiary and complying with the
provisions of Section 2.06;
(b) receipt by the Agent of one or more opinions of counsel for such
Eligible Subsidiary reasonably acceptable to the Agent, which taken
together cover the matters set forth in Exhibit J hereto; and
(c) receipt by the Agent of all documents which it may reasonably
request relating to the existence of such Eligible Subsidiary, the
corporate authority for and the validity of the Election to Participate of
such Eligible Subsidiary, this Agreement and the Notes of such Eligible
Subsidiary, and any other matters relevant thereto, all in form and
substance reasonably satisfactory to the Agent.
ARTICLE IV
Representations and Warranties
The Company represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by each of the Borrowers
and the Guarantors of each Loan Document to which it is or is to be a party and
the Financing Transactions are within its corporate powers, have been duly
authorized by all necessary corporate action, require no action by or in respect
of, or filing with, any Governmental Authority or official thereof (other than
such as have been duly taken or made) and do not contravene, or constitute a
default under, any provision of applicable law or regulation or of the
certificate of incorporation or by-laws of any Borrower or any Guarantor or of
any indenture, agreement, judgment, injunction, order, decree or other
instrument binding upon any Borrower or any Guarantor or result in the creation
or imposition of any Lien on any asset of the Company or any Subsidiary, except
for any contraventions or defaults under such indentures, agreements, judgments,
injunctions, orders, decrees or other instruments or the creation or imposition
of any such Liens that, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect.
SECTION 4.03. Binding Effect. This Agreement constitutes a valid and
binding agreement of each of the Borrowers, and the other Loan Documents to
which any Borrower or any of the Guarantors is a party, when executed and
delivered in accordance with this Agreement, will constitute valid and binding
agreements and obligations of each of the Borrowers and the Guarantors that is a
party thereto, in each case enforceable in
<PAGE>
45
accordance with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally and equitable principles of
general applicability.
SECTION 4.04. Financial Information. (a) The consolidated balance
sheet of the Company as of December 28, 1996 and the related consolidated
statements of operations, shareholders' equity and cash flows for the fiscal
year then ended, reported on by KPMG Peat Marwick LLP, a copy of which has been
delivered to each of the Banks, fairly present in all material respects, in
conformity with generally accepted accounting principles, the financial position
of the Company as of such date and its results of operations and cash flows for
such fiscal year.
(b) The unaudited consolidated condensed balance sheet of the Company
as of June 28, 1997, and the related consolidated condensed statements of
operations and cash flows for the fiscal period then ended, a copy of which has
been delivered to each of the Banks, fairly present in all material respects, in
conformity with generally accepted accounting principles applied on a basis
consistent with the financial statements referred to in subsection (a) of this
Section, the financial position of the Company as of such date and its results
of operations and cash flows for such fiscal period (subject to normal year-end
adjustments).
(c) Since June 28, 1997, there has been no material adverse change in
the business, operations or financial condition of the Company and its
Consolidated Subsidiaries, considered as a whole.
SECTION 4.05. Litigation. There is no (i) injunction, stay, decree or
order of any Governmental Authority or (ii) action, suit or proceeding pending
against, or to the knowledge of the Company threatened against or affecting, the
Company or any Subsidiary before any Governmental Authority or official thereof
in which there is a reasonable probability of an adverse decision which would
reasonably be expected to have a Material Adverse Effect or which in any manner
draws into question the validity of this Agreement or any other Loan Document.
SECTION 4.06. Compliance with ERISA. Except to the extent that all
such failures to fulfill any such obligations or comply with any such provisions
would not reasonably be expected to have a Material Adverse Effect, each member
of the ERISA Group has fulfilled its obligations under the minimum funding
standards of ERISA and the Internal Revenue Code with respect to each Plan and
is in compliance in all material respects with the presently applicable
provisions of ERISA and the Internal Revenue Code with respect to each Plan.
Except to the extent that all such waivers, failures and liabilities would not
reasonably be expected to have a Material Adverse Effect, no member of the ERISA
Group has (i) sought a waiver of the minimum funding standard under Section 412
of the Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could result in the imposition of a Lien or the posting of
a bond or other security under ERISA or the Internal Revenue Code or (iii)
incurred any liability under Title IV of ERISA other than a liability to the
PBGC for premiums under Section 4007 of ERISA.
SECTION 4.07. Environmental Matters. The Company and its Subsidiaries
have complied in all respects with all Federal, state, local and other statutes,
ordinances, orders, judgments, rulings and regulations relating to environmental
pollution
<PAGE>
46
or to environmental regulation or control, except to the extent failure to so
comply would not reasonably be expected to have a Material Adverse Effect.
Neither the Company nor any Subsidiary has received notice of any failure so to
comply which alone or together with any other such failure would reasonably be
expected to result in a Material Adverse Effect. The facilities of the Company
and its Subsidiaries do not manage or handle any hazardous wastes, hazardous
substances, hazardous materials, toxic substances or toxic pollutants, as those
terms are used in the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response Compensation and Liability Act, the Superfund Amendments
and Reauthorization Act of 1986, the Hazardous Materials Transportation Act, the
Toxic Substance Control Act, the Clean Air Act or the Clean Water Act, in
violation thereof or in violation of any regulations promulgated pursuant
thereto or of any other applicable law where such violation would reasonably be
expected to result, individually or together with other violations, in a
Material Adverse Effect.
SECTION 4.08. Taxes. (a) The Company and its Subsidiaries have filed
or there has otherwise been filed all United States Federal income tax returns
and all other material tax returns which are required to be filed by them and
have paid or there has otherwise been paid all taxes shown to be due on such
returns or pursuant to any assessment received the Company or any Subsidiary,
except where the same is being or will be contested in good faith by appropriate
proceedings. The charges, accruals and reserves on the books of the Company and
the Subsidiaries in respect of taxes or other governmental charges are, in the
opinion of the Company, adequate.
(b) Except as disclosed in its Election to Participate, there are no
Taxes or Other Taxes (as defined in Section 8.04(a)) imposed on (by withholding
or otherwise) any payment to be made by any Eligible Subsidiary pursuant hereto
or on its Notes, or is imposed on or by virtue of the execution, delivery or
enforcement of its Election to Participate or of its Notes.
SECTION 4.09. Subsidiaries. Each of the Eligible Subsidiaries and the
Guarantors is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and, to the extent
that the failure to do so would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, has all corporate
powers and all governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted. Each of the Company's other
corporate Subsidiaries is a corporation duly incorporated, validly existing and
in good standing under the laws of its jurisdiction of incorporation, and has
all corporate powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted, except to the
extent that all failures to comply with the foregoing would not reasonably be
expected to have, in the aggregate, a Material Adverse Effect. Each Eligible
Subsidiary is a Wholly-Owned Consolidated Subsidiary (unless otherwise approved
by the Required Banks). As of the Effective Date there are not any Material
Subsidiaries that are not Initial Guarantors.
SECTION 4.10. Not an Investment Company. Neither any Borrower nor any
Guarantor is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
SECTION 4.11. Full Disclosure. All information heretofore furnished in
writing by the Company or any Subsidiary to the Agent or any Bank for purposes
of or in connection with this Agreement, any other Loan Document or the
Financing Transactions
<PAGE>
47
was, and all such information hereafter furnished in writing by the Company or
any Subsidiary to the Agent or any Bank will be, in each case considered as a
whole, true and accurate in all material respects on the date as of which such
information is stated or certified. The Company has disclosed to the Banks in
writing any and all facts which materially and adversely affect or may affect
(to the extent that the Company can now reasonably foresee), the business,
operations or financial condition of the Company and its Consolidated
Subsidiaries, considered as a whole, or the ability of the Company to perform
its obligations hereunder or under any other Loan Document.
SECTION 4.12. Compliance with Laws and Agreements. Neither the Company
nor any Subsidiary is in violation of any law, rule or regulation, or in default
with respect to any judgment, writ, injunction or decree applicable to it of any
Governmental Authority, where such violation or default (individually or in the
aggregate) would reasonably be expected to result in a Material Adverse Effect.
Neither the Company nor any Subsidiary is in default in any manner under any
provision of any indenture or other agreement or instrument evidencing Debt, or
any other agreement or instrument to which it is a party or by which it or any
of its properties or assets are or may be bound, where such default
(individually or in the aggregate) would reasonably be expected to result in a
Material Adverse Effect.
SECTION 4.13. Governmental Approvals. As of the Effective Date, all
material consents and approvals of, and material filings and registrations with,
and all other material actions in respect of, all Governmental Authorities or
any other Person required in order to consummate the Financing Transactions
shall have been obtained, given, filed or taken and shall be in full force and
effect.
ARTICLE V
Covenants
The Company agrees that, so long as any Bank has any Commitment or any
Loan or Letter of Credit Disbursement or accrued interest thereon remains unpaid
or any Letter of Credit remains outstanding:
SECTION 5.01. Information. The Company will deliver to each of the
Banks (directly or through the Agent):
(a) as soon as available and in any event within 90 days after the end
of each fiscal year of the Company, a consolidated balance sheet of the
Company and its Consolidated Subsidiaries as of the end of such fiscal year
and the related consolidated statements of operations, stockholders' equity
and cash flows for such fiscal year, setting forth in each case in
comparative form the figures for the previous fiscal year, all reported on
by KPMG Peat Marwick LLP or other independent public accountants of
nationally recognized standing;
(b) as soon as available and in any event within 45 days after the end
of each of the first three quarters of each fiscal year of the Company, a
consolidated balance sheet of the Company and its Consolidated Subsidiaries
as of the end of such quarter and the related consolidated statements of
operations, stockholders' equity and cash flows for such quarter and for
the portion of the Company's fiscal
<PAGE>
48
year ended at the end of such quarter, setting forth in each case in
comparative form the figures for the corresponding quarter and the
corresponding portion of the Company's previous fiscal year, all certified
(subject to normal year-end adjustments) as to fairness of presentation,
generally accepted accounting principles and consistency by the chief
financial officer or chief accounting officer of the Company;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the
chief financial officer or the chief accounting officer of the Company (i)
setting forth in reasonable detail the calculations required to establish
whether the Company was in compliance with the requirements of Sections
5.09, 5.10, 5.11, 5.16, 5.17 and 5.18 of this Agreement on the date of such
financial statements, (ii) setting forth in reasonable detail the
calculations required to establish the Company's Fixed Charge Coverage
Ratio for the Calculation Period ended on the date of the most recent
balance sheet included in such financial statements, (iii) stating whether
any Default exists hereunder on the date of such certificate and, if any
Default then exists, setting forth the details thereof and the action which
the Company is taking or proposes to take with respect thereto, (iv)
stating whether, since the date of the most recent financial statements
previously delivered pursuant to this Section, there has been any material
change in the generally accepted accounting principles applied in the
preparation of such statements, and, if so, describing such change and (v)
stating whether there is any Material Subsidiary that is not a Guarantor;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements as to (i)
whether anything has come to their attention to cause them to believe that
any Default existed on the date of such statements and (ii) confirming the
calculations set forth in the officer's certificate delivered
simultaneously therewith pursuant to clause (c) above; provided that the
foregoing shall not be construed to require that such accountants conduct
any investigation outside the regular course of their audit;
(e) within five days after the chief executive officer, president or
any financial officer of the Company obtains knowledge of any Default, if
such Default is then continuing, a certificate of the chief financial
officer or the chief accounting officer of the Company setting forth the
details thereof and the action which the Company is taking or proposes to
take with respect thereto;
(f) promptly upon the mailing thereof to the shareholders of the
Company generally, copies of all financial statements, reports and proxy
statements so mailed;
(g) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements
on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or
their equivalents) which the Company shall have filed with the Securities
and Exchange Commission;
(h) if and when any member of the ERISA Group (i) gives or is required
to give notice to the PBGC of any "reportable event" (as defined in Section
4043 of ERISA) with respect to any Plan which might constitute grounds for
a termination
<PAGE>
49
of such Plan under Title IV of ERISA, or knows that the plan administrator
of any Plan has given or is required to give notice of any such reportable
event, a copy of the notice of such reportable event given or required to
be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice that any
Multiemployer Plan is in reorganization, is insolvent or has been
terminated, a copy of such notice; (iii) receives notice from the PBGC
under Title IV of ERISA of an intent to terminate, impose liability (other
than for premiums under Section 4007 of ERISA) in respect of, or appoint a
trustee to administer any Plan, a copy of such notice; (iv) applies for a
waiver of the minimum funding standard under Section 412 of the Internal
Revenue Code, a copy of such application; (v) gives notice of intent to
terminate any Plan under Section 4041(c) of ERISA, a copy of such notice
and other information filed with the PBGC; (vi) gives notice of withdrawal
from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or
(vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement or makes any
amendment to any Plan or Benefit Arrangement which has resulted or could
reasonably be expected to result in the imposition of a Lien or the posting
of a bond or other security, a certificate of the chief financial officer
or the chief accounting officer of the Company setting forth details as to
such occurrence and action, if any, which the Company or applicable member
of the ERISA Group is required or proposes to take; and
(i) from time to time such additional information regarding the
financial position or business of the Company and the Subsidiaries as the
Agent, at the request of any Bank, may reasonably request.
SECTION 5.02. Payment of Obligations. The Company will pay and
discharge, and will cause each of its Subsidiaries to pay and discharge, at or
before maturity, all their respective material obligations and liabilities,
including, without limitation, tax liabilities, except where the same may be
contested in good faith by appropriate proceedings, and will maintain, and will
cause each Subsidiary to maintain, in accordance with generally accepted
accounting principles, appropriate reserves for the accrual of any of the same.
SECTION 5.03. Maintenance of Property; Insurance. (a) The Company will
keep, and will cause each of its Subsidiaries to keep, all property necessary in
its business in good working order and condition, ordinary wear and tear
excepted.
(b) The Company will maintain, and will cause each of its Subsidiaries
to maintain, insurance in such amounts and against such risks as is customary
for companies in the same or similar businesses, in each case with financially
sound and reputable insurers.
SECTION 5.04. Conduct of Business and Maintenance of Existence. The
Company will continue, and will cause each of its Subsidiaries to continue, to
engage in business of the same general type as now conducted by the Company and
its Subsidiaries, and will preserve, renew and keep in full force and effect,
and will cause each of its Subsidiaries to preserve, renew and keep in full
force and effect, their respective corporate existence and their respective
rights, privileges and franchises necessary or desirable in the normal conduct
of business; provided that nothing in this Section 5.04 shall prohibit (i) any
merger of any Subsidiary of the Company permitted by Section 5.11(a) or (ii) the
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termination of the corporate existence of any Subsidiary if the Company in good
faith determines that such termination is in the best interest of the Company
and is not materially disadvantageous to the Banks.
SECTION 5.05. Compliance with Laws. The Company will comply, and cause
each of its Subsidiaries to comply, in all material respects with all applicable
laws, ordinances, rules, regulations, and requirements of any Governmental
Authority (including, without limitation, Environmental Laws and ERISA and the
rules and regulations thereunder) except where the necessity of compliance
therewith is contested in good faith by appropriate proceedings.
SECTION 5.06. Inspection of Property, Books and Records. The Company
will keep, and will cause each of its Subsidiaries to keep, proper books of
record and account in which full, true and correct entries shall be made of all
dealings and transactions in relation to its business and activities. The
Company will permit, and will cause each of its Subsidiaries to permit,
representatives of any Bank at such Bank's expense to visit and inspect any of
their respective properties, to examine and make abstracts from any of their
respective books and records and to discuss their respective affairs, finances
and accounts with their respective officers and independent public accountants
as often as may reasonably be desired; provided that the exercise by any Bank of
its rights under this sentence shall require reasonable prior notice to the
Company and shall be conducted during normal business hours in a reasonable
manner so as not to disrupt the normal conduct of the Company's business.
SECTION 5.07. Additional Guarantors. If at any time after the
Effective Date any Subsidiary (other than (a) a Guarantor or (b) any Subsidiary
organized outside the United States that does not Guarantee any Indebtedness of
the Company) is or becomes a Material Subsidiary, the Company, within 45 days of
such Subsidiary becoming a Material Subsidiary, will cause such Subsidiary to
become a Guarantor pursuant to the Guarantee Agreement.
SECTION 5.08. Amendment of Certain Documents. The Company will not
permit any amendment or modification to be made to, or any waiver of its rights
or the rights of any Subsidiary under, any Spin-Off Document or the Kmart
Agreement unless such amendment, modification or waiver does not materially
adversely affect the Company or the Banks, as determined in good faith by the
Company.
SECTION 5.09. Investments. Neither the Company nor any of its
Subsidiaries will make or acquire any Investment in any Person other than:
(a) Investments by the Company and its Subsidiaries in the Company and
its Subsidiaries;
(b) Temporary Cash Investments;
(c) loans made by the Meldisco Corporations (as defined in the Kmart
Agreement) to Kmart Corporation, in an aggregate amount up to 49% of the
cash balances of the Meldisco Corporations exceeding $1,000,000 as required
by the Kmart Agreement;
(d) Investments that constitute acquisitions; and
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51
(e) any Investment by the Company not otherwise permitted by the
foregoing clauses of this Section if, immediately after such Investment is
made or acquired, the aggregate net book value of all Investments permitted
by this clause (e) does not exceed 10% of the Company's Consolidated
Tangible Net Worth.
SECTION 5.10 Negative Pledge. Neither the Company nor any of its
Subsidiaries will create, assume or suffer to exist any Lien on any asset now
owned or hereafter acquired by it, except the following:
(a) Liens existing on the date of this Agreement identified on
Schedule 5.10 securing the obligations identified on such Schedule;
(b) any Lien existing on any asset of any corporation at the time such
corporation becomes a Subsidiary and not created in contemplation of such
event;
(c) any Lien on any asset securing Debt incurred or assumed for the
purpose of financing all or any part of the cost of acquiring such asset;
provided that such Lien attaches to such asset concurrently with or within
180 days after the acquisition thereof;
(d) any Lien on any asset of any corporation existing at the time such
corporation is merged or consolidated with or into the Company or a
Subsidiary and not created in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition thereof by
the Company or a Subsidiary and not created in contemplation of such
acquisition;
(f) any Lien on real property, improvements thereto or equipment
securing Debt otherwise not prohibited under this Agreement (including any
Lien on any such asset sold and thereafter rented or leased pursuant to a
Sale and Lease-Back Transaction which results in a capitalized lease in
accordance with generally accepted accounting principles);
(g) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section; provided that such Debt is not increased (except
for the capitalization of interest) and is not secured by any additional
assets;
(h) Liens for taxes not delinquent or being contested in good faith
and by appropriate proceedings;
(i) deposits or pledges to secure obligations under workers'
compensation, social security or similar laws, or under unemployment
insurance;
(j) mechanics', workers', materialmen's, warehousemen's, lessor's or
other like Liens arising in the ordinary course of business with respect to
obligations which are not due or which are being contested in good faith;
(k) Liens arising in the ordinary course of its business which (i) do
not secure Debt or any monetary obligation and (ii) do not in the aggregate
materially
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52
detract from the value of its assets or materially impair the use thereof
in the operation of its business; and
(l) Liens not otherwise permitted by the foregoing clauses of this
Section securing Debt or other monetary obligations of the Company or any
Subsidiary in an aggregate principal amount at any time outstanding not to
exceed 10% of the Company's Consolidated Tangible Net Worth.
SECTION 5.11. Consolidations, Mergers and Sales of Assets. (a) Neither
the Company nor any of its Subsidiaries will consolidate or merge with or into
any other Person, except that if, after giving effect thereto, no Default shall
have occurred and be continuing, (i) any Subsidiary of the Company may be merged
into the Company if the Company is the surviving corporation and (ii) any
Subsidiary of the Company may merge with any other corporation (other than the
Company) if the surviving corporation is a Subsidiary.
(b) Neither the Company nor any of its Subsidiaries will sell, lease
or otherwise transfer any asset, except (i) sales or other dispositions of the
facilities of the Company or Thom McAn located at Morrow, Georgia, Tifton,
Georgia, Brockton, Massachusetts, Worcester, Massachusetts and Aulander, North
Carolina, (ii) in the ordinary course of business, (iii) transfers made as
Investments permitted by Section 5.09 or Restricted Payments permitted by
Section 5.15, (iv) pursuant to Sale and Lease-Back Transactions and (v) other
transfers provided that the aggregate fair market value of all assets
transferred in reliance upon this clause (v) shall not exceed during any period
of four consecutive fiscal quarters ending on (or about) June 30 of any year, an
amount equal to the sum of (1) 15% of the Company's Consolidated Tangible Net
Worth as of the beginning of such fiscal period plus (2) in the case of periods
beginning after the end of the fiscal quarter ending on (or about) June 30,
1998, the lesser of (x) 15% of the Company's Consolidated Tangible Net Worth as
of the beginning of the immediately preceding period for which compliance with
this clause (v) was required, and (y) the excess, if any, of the maximum
aggregate fair market value of assets that would have been permitted to have
been transferred in reliance upon this clause (v) during such immediately
preceding period over the aggregate fair market value of all assets transferred
in reliance upon this clause (v) during such immediately preceding period.
SECTION 5.12. Use of Proceeds and Letters of Credit. The proceeds of
the Loans will be used for general corporate purposes of the Company and its
Subsidiaries. Letters of Credit will be issued only as (a) documentary Letters
of Credit used only to support obligations of the Company and its Subsidiaries
related to the purchase of inventory in the ordinary course of business or (b)
standby Letters of Credit used to support other obligations of the Company and
its Subsidiaries. None of such proceeds of the Loans will be used, directly or
indirectly, for the purpose, whether immediate, incidental or ultimate, of
buying or carrying any Margin Stock.
SECTION 5.13. Transactions with Affiliates. The Company will not, nor
will it permit any of its Subsidiaries to, directly or indirectly, enter into
any transaction, including any purchase, sale, lease or exchange of property or
rendering of services, with or for the benefit of any Affiliate, other than (a)
any such transaction expressly permitted by this Agreement (including any
Investment in an Affiliate expressly permitted under Section 5.09), (b)
performance of the Spin-Off Documents, (c) any such transactions where each of
the parties thereto is either the Company or a Subsidiary or (d) any
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53
transaction entered into by the Company or any Subsidiary which is (i) otherwise
permitted under this Agreement, (ii) in the ordinary course of business of such
entity's business and (iii) upon fair and reasonable terms no less favorable to
such entity than it would obtain in a comparable arm's-length transaction with a
Person not an Affiliate.
SECTION 5.14. Restrictions Affecting Subsidiaries. The Company will
not create, incur, permit or suffer to exist any agreement or other arrangement
that prohibits, restricts or imposes any condition upon the ability or right of
any Subsidiary to pay dividends or other distributions with respect to any
shares of its capital stock or to make or repay loans or advances to the Company
or any other Subsidiary; provided that (a) the foregoing shall not apply to
restrictions or conditions imposed by law, (b) the foregoing shall not apply to
restrictions and conditions existing on the Effective Date that are identified
in Schedule 5.14 and (c) the foregoing shall not apply to normal financial
covenants entered into by a Subsidiary in connection with the incurrence of Debt
of such Subsidiary otherwise permitted under this Agreement provided that such
financial covenants, at the time entered into, could not reasonably be expected
to impair any Subsidiary's ability to pay normal dividends in the amounts and at
the times that the Company would have expected such Subsidiary to be able to pay
in the ordinary course.
SECTION 5.15. Restricted Payments. Neither the Company nor any of its
Subsidiaries will declare or make, or agree to declare or make, any Restricted
Payment, other than (a) Restricted Payments made solely to the Company or a
Subsidiary, (b) Restricted Payments made by any Subsidiary ratably with respect
to shares of its capital stock, (c) Restricted Payments made prior to January 1,
1998, for general corporate purposes, provided that the aggregate amount of
Restricted Payments made pursuant to this clause (c) during the period from and
including the Effective Date to and excluding January 1, 1998, plus the
aggregate amount of Restricted Payments (other than those permitted by clause
(a) or (b) above) made prior to the Effective Date during the term of the
Existing Credit Agreement, shall not exceed $85,000,000, and (d) Restricted
Payments made on and after January 1, 1998, for general corporate purposes that
shall not in the aggregate exceed $110,000,000 during the remaining term of this
Agreement.
SECTION 5.16. Subsidiary Debt. The Company will not permit any
Subsidiary to create, assume or otherwise be or become liable with respect to
any Debt, except:
(a) Debt of the Eligible Subsidiaries in respect of their Loans;
(b) Debt of the Guarantors in respect of the Guarantees under the
Guarantee Agreement;
(c) Debt owed by any Subsidiary to the Company or to another
Subsidiary;
(d) Debt incurred pursuant to Sale and Lease-Back Transactions
permitted by Section 5.11(b);
(e) Debt of a Subsidiary secured by such Subsidiary's real estate,
improvements thereto and equipment as permitted by Section 5.10(f);
provided that the principal amount of any Debt incurred pursuant to this
clause (e) may not exceed the fair market value of such Subsidiary's
percentage ownership interest in
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54
the real estate, improvements thereto or equipment securing such Debt as
determined by an independent third party appraiser acceptable to the Agent;
and
(f) Debt of Subsidiaries not otherwise permitted by the foregoing
clauses of this Section in an aggregate principal amount at any time
outstanding not to exceed 15% of the Company's Consolidated Tangible Net
Worth.
SECTION 5.17. Debt Coverage Ratio. The Debt Coverage Ratio will not
exceed 2.75 to 1.0 at any time.
SECTION 5.18. Fixed Charge Coverage Ratio. The Fixed Charge Coverage
Ratio will not be less than (a) 2.0 to 1.0 for any Calculation Period ending
during the period from and including the Effective Date to and including
December 31, 1999, or (b) 2.25 to 1.0 for any Calculation Period ending after
December 31, 1999.
ARTICLE VI
Defaults
SECTION 6.01. Events of Default. If one or more of the following
events ("Events of Default") shall have occurred and be continuing:
(a) (i) any Borrower shall fail to pay when due any principal on any
Loan or any reimbursement obligation in respect of a Letter of Credit
Disbursement or (ii) any Borrower shall fail to pay interest on any Loan,
any fees or any other amount payable hereunder or under any other Loan
Document within five days of the time such amount is due;
(b) the Company shall fail to observe or perform any covenant
contained in Section 5.01(e) or any of Sections 5.08 to 5.18, inclusive;
(c) any Borrower shall fail to observe or perform any covenant or
agreement contained in any Loan Document (other than those covered by
clause (a) or (b) above) for 30 days after written notice thereof has been
given to the Company by the Agent at the request of any Bank;
(d) any representation, warranty, certification or statement made by
any Borrower in this Agreement or any other Loan Document or in any
certificate, financial statement or other document delivered pursuant to
this Agreement or any other Loan Document shall prove to have been
incorrect in any material respect when made (or deemed made);
(e) the Company or any Subsidiary shall fail to make any payment in
respect of any Material Debt when due or within any applicable grace
period;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt or enables (or, with the
giving of notice or lapse of time or both, would enable) the holder of such
Debt or any Person acting on such holder's behalf to accelerate the
maturity thereof or, under circumstances in
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55
the nature of a default, to require the prepayment or repurchase thereof
prior to the maturity thereof;
(g) the Company or, subject to Section 6.03, any Subsidiary shall
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it, or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become due, or
shall take any corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced against
the Company or, subject to Section 6.03, any Subsidiary seeking
liquidation, reorganization or other relief with respect to it or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 days; or an order for relief
shall be entered against the Company or, subject to Section 6.03, any
Subsidiary under the federal bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an amount
or amounts aggregating in excess of $20,000,000 which it shall have become
liable to pay under Title IV of ERISA; or notice of intent to terminate a
Material Plan shall be filed under Title IV of ERISA by any member of the
ERISA Group, any plan administrator or any combination of the foregoing; or
the PBGC shall institute proceedings under Title IV of ERISA to terminate,
to impose liability (other than for premiums under Section 4007 of ERISA)
in respect of, or to cause a trustee to be appointed to administer any
Material Plan; or a condition shall exist by reason of which the PBGC would
be entitled to obtain a decree adjudicating that any Material Plan must be
terminated; or there shall occur a complete or partial withdrawal from, or
a default, within the meaning of Section 4219(c)(5) of ERISA, with respect
to, one or more Multiemployer Plans which could cause one or more members
of the ERISA Group to incur a current payment obligation in excess of
$20,000,000;
(j) one or more judgments or orders for the payment of money in an
aggregate amount in excess of $20,000,000 shall be rendered against the
Company or, subject to Section 6.03, any Subsidiary or a combination
thereof and shall continue unsatisfied and unstayed for a period of 30
days, or any action shall be legally taken by a judgment creditor to levy
upon assets or properties of the Company or, subject to Section 6.03, any
Subsidiary to enforce any such judgment;
(k) a Change of Control shall occur; or
(l) the Guarantee of any Guarantor under the Guarantee Agreement shall
cease to be, or shall be asserted by such Guarantor not to be, a valid and
binding
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56
obligation of such Guarantor, except as expressly contemplated by the
Guarantee Agreement;
then, and in every such event, the Agent shall (i) if requested by Banks having
more than 50% in aggregate amount of the Commitments, by notice to the Company
terminate the Commitments and they shall thereupon terminate, (ii) if requested
by Banks holding Notes evidencing more than 50% in aggregate principal amount of
the Loans, by notice to the Company declare the Notes of all Borrowers (together
with accrued interest thereon) to be, and the Notes (together with accrued
interest thereon) shall thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by each Borrower, (iii) if requested by Banks having more than 50%
of the Letter of Credit Exposure, require cash collateral as contemplated by
Section 2.17(k) in an amount not exceeding the Letter of Credit Exposure or (iv)
any combination of the foregoing; provided that in the case of any of the Events
of Default specified in clause (g) or (h) above with respect to the Company,
without any notice to any Borrower or any other act by the Agent or the Banks,
(i) the Commitments shall thereupon terminate, (ii) the Notes of all Borrowers
(together with accrued interest thereon) shall become immediately due and
payable without presentment, demand, protest or other notice of any kind, all of
which are hereby waived by each Borrower and (iii) the Company shall be required
to provide, immediately, cash collateral as contemplated by Section 2.17(k) in
an amount equal to the Letter of Credit Exposure; and provided further that if
any Event of Default specified in clause (g) or (h) above occurs with respect to
any Eligible Subsidiary, then, without any notice to such Eligible Subsidiary or
any other act by the Agent or the Banks, (i) the eligibility of such Eligible
Subsidiary to borrow or to have Letters of Credit issued for its account
hereunder shall thereupon terminate, (ii) the Notes of such Eligible Subsidiary
(together with accrued interest thereon) shall become immediately due and
payable without presentment, demand, protest or other notice of any kind, all of
which are hereby waived by each Eligible Subsidiary and (iii) the Company shall
be required to provide, immediately, cash collateral as contemplated by Section
2.17(k) in an amount equal to the Letter of Credit Exposure with respect to all
Letters of Credit issued for the account of such Eligible Subsidiary.
SECTION 6.02. Default. The Agent shall give notice to the Company
under Section 6.01(c) promptly upon being requested to do so by any Bank and
shall thereupon notify all the Banks thereof.
SECTION 6.03. Exclusion of Immaterial Subsidiaries. Solely for
purposes of determining whether a Default has occurred under clause (g), (h) or
(j) of Section 6.01, any reference in any such clause to any "Subsidiary" shall
be deemed not to include any Subsidiary affected by any event or circumstance
referred to in any such clause that (a) is not an Eligible Subsidiary or a
Guarantor, (b) is not a Material Subsidiary (determined for this purpose as
though each reference to "10%" in the definition of Material Subsidiary were a
reference to "5%") and (c) did not, for the most recent Calculation Period, have
Consolidated EBITDAR in an amount exceeding 5% of the Company's Consolidated
EBITDAR for such period; provided that (i) if it is necessary to exclude more
than one Subsidiary from clause (g), (h) or (j) of Section 6.01 pursuant to this
Section in order to avoid a Default thereunder, all excluded Subsidiaries shall
be considered to be a single consolidated Subsidiary for purposes of determining
whether the conditions specified in clauses (b) and (c) above are satisfied and
(ii) a Subsidiary shall not be excluded from clauses (g), (h) and (j) of Section
6.01 if such Subsidiary holds rights under any long-term contracts for the
purchase of inventory accounting for more than 5%
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57
of the total inventory purchased by the Company and its Subsidiaries during the
most recent Calculation Period.
ARTICLE VII
The Agent
SECTION 7.01. Appointment and Authorization. Each Bank irrevocably
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under this Agreement and the other Loan Documents as are
delegated to the Agent by the terms hereof or thereof, together with all such
powers as are reasonably incidental thereto.
SECTION 7.02. Agent and Affiliates. Morgan Guaranty Trust Company of
New York shall have the same rights and powers under this Agreement as any other
Bank and may exercise or refrain from exercising the same as though it were not
the Agent, and Morgan Guaranty Trust Company of New York and its affiliates may
accept deposits from, lend money to, and generally engage in any kind of
business with the Company or any Subsidiary or Affiliate of the Company as if it
were not the Agent hereunder.
SECTION 7.03. Action by Agent. The obligations of the Agent under this
Agreement or any other Loan Documents are only those expressly set forth herein
or therein. Without limiting the generality of the foregoing, the Agent shall
not be required to take any action with respect to any Default, except as
expressly provided in Article VI.
SECTION 7.04. Consultation with Experts. The Agent may consult with
legal counsel (who may be counsel for the Company), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
SECTION 7.05. Liability of Agent. Neither the Agent nor any of its
directors, officers, agents, or employees shall be liable for any action taken
or not taken by it in connection herewith (i) with the consent or at the request
of the Required Banks or (ii) in the absence of its own gross negligence or
willful misconduct. Neither the Agent nor any of its directors, officers, agents
or employees shall be responsible for or have any duty to ascertain, inquire
into or verify (i) any statement, warranty or representation made in connection
with this Agreement or any other Loan Document or any borrowing hereunder; (ii)
the performance or observance of any of the covenants or agreements of the
Company or the Eligible Subsidiaries; (iii) the satisfaction of any condition
specified in Article III, except receipt of items required to be delivered to
the Agent; or (iv) the validity, effectiveness or genuineness of this Agreement,
the other Loan Documents or any other instrument or writing furnished in
connection herewith or therewith. The Agent shall not incur any liability by
acting in reliance upon any notice, consent, certificate, statement, or other
writing (which may be a bank wire, telex or similar writing) believed by it in
good faith to be genuine or to be signed by the proper party or parties.
SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance
with its Commitment, indemnify the Agent (to the extent not reimbursed by the
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Borrowers) against any cost, expense (including counsel fees and disbursements),
claim, demand, action, loss or liability (except such as result from the Agent's
gross negligence or willful misconduct) that the Agent may suffer or incur in
connection with this Agreement or any other Loan Document or any action taken or
omitted by the Agent hereunder or thereunder. If a Bank makes any
indemnification payment to the Agent pursuant to this Section and thereafter the
Agent receives payment from any Borrower in respect of the same indemnified
amount, the Agent shall reimburse such Bank to the extent of its ratable share
of such payment received by the Agent.
SECTION 7.07. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under this Agreement.
SECTION 7.08. Successor Agent. The Agent may resign at any time by
giving at least 15 days prior written notice thereof to the Banks and the
Company. Upon any such resignation, the Required Banks shall have the right to
appoint a successor Agent approved by the Company (such approval not to be
unreasonably withheld); provided that no approval of the Company shall be
necessary if an Event of Default has occurred and is continuing. If no successor
Agent shall have been so appointed by the Required Banks and, if required,
approved by the Company and shall have accepted such appointment, within 30 days
after the retiring Agent gives notice of resignation, then the retiring Agent
may, on behalf of the Banks, appoint a successor Agent, which shall be a
commercial bank organized or licensed under the laws of the United States of
America or of any State thereof and having a combined capital and surplus of at
least $50,000,000. Upon the acceptance of its appointment as Agent by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations. After any retiring
Agent's resignation hereunder as Agent, the provisions of this Article shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent.
SECTION 7.09. Agent's Fees. The Company shall pay to the Agent for its
own account fees in the amounts and at the times previously agreed upon between
the Company and the Agent.
SECTION 7.10. Sub-Agents; Issuing Banks; Swingline Lender. The Agent
may perform any of its obligations and exercise any of its rights under the Loan
Documents by or through sub-agents. The provisions of this Article VII shall
inure to the benefit of any sub-agent of the Agent, each Issuing Bank and the
Swingline Lender in the same manner and to the same extent as they inure to the
benefit of the Agent.
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ARTICLE VIII
Change in Circumstances
SECTION 8.01. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period for any Fixed
Rate Borrowing:
(a) the Agent is advised by the Reference Banks that deposits in the
applicable currency (in the applicable amounts) are not being offered to
the Reference Banks in the relevant market for such Interest Period; or
(b) Banks having 50% or more of the aggregate amount of the
Commitments advise the Agent that the Adjusted CD Rate or the London
Interbank Offered Rate, as the case may be, as determined by the Agent will
not adequately and fairly reflect the cost to such Banks of funding their
CD Loans or Euro-Currency Loans, as the case may be, for such Interest
Period,
the Agent shall forthwith give notice thereof to the Company and the Banks,
whereupon until the Agent notifies the Company that the circumstances giving
rise to such suspen sion no longer exist, (i) the obligations of the Banks to
make CD Loans or Euro-Currency Loans, as the case may be, or to convert
outstanding Committed Loans into CD Loans or Euro-Currency Loans, as the case
may be, shall be suspended, (ii) each outstanding Committed Loan shall be
converted into a Base Rate Loan on the last day of the then current Interest
Period applicable thereto, and (iii) unless the applicable Borrower notifies the
Agent at least two Domestic Business Days before the date of any Fixed Rate
Borrowing for which a Notice of Borrowing has previously been given that it
elects not to borrow on such date, (x) if such Borrowing is a CD Borrowing or a
Euro-Currency Borrowing, as the case may be, such Borrowing shall instead be
made as a Base Rate Borrowing and (y) if such Borrowing is a Money Market LIBOR
Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall bear
interest for each day from and including the first day to but excluding the last
day of the Interest Period applicable thereto at the Base Rate for such day.
SECTION 8.02. Illegality. If, on or after the date of this Agreement,
the adoption of any applicable law, rule or regulation, or any change therein,
or any change 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 Bank (or its
Euro-Currency Lending Office) with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency shall make it unlawful or impossible for any Bank (or its Euro-Currency
Lending Office) to make, maintain or fund its Euro-Currency Loans and such Bank
shall so notify the Agent, the Agent shall forthwith give notice thereof to the
other Banks and the Company, whereupon until such Bank notifies the Company and
the Agent that the circumstances giving rise to such suspension no longer exist,
the obligation of such Bank to make Euro-Currency Loans to any Borrower shall be
suspended. Before giving any notice to the Agent pursuant to this Section, such
Bank shall designate a different Euro-Currency Lending Office if such
designation will avoid the need for giving such notice and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank
shall determine that it may not lawfully continue to maintain and fund any of
its outstanding Euro-Currency Loans to any Borrower to maturity and shall so
specify in such notice, such Borrower shall immediately prepay in full the then
outstanding
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principal amount of each such Euro-Currency Loan, together with accrued interest
thereon. Concurrently with prepaying each such Euro-Currency Loan, such Borrower
shall borrow a Base Rate Loan in an equal principal amount from such Bank (on
which interest and principal shall be payable contemporaneously with the related
Euro-Currency Loans of the other Banks), and such Bank shall make such a Base
Rate Loan.
SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after
(x) the date hereof, in the case of any Committed Loan or any obligation to make
Committed Loans, or (y) the date of any related Money Market Quote, in the case
of any Money Market Loan, the adoption of any applicable law, rule or
regulation, or any change in any applicable law, rule or regulation, or any
change 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 Bank (or its Applicable Lending
Office) with any request or directive (whether or not having the force of law)
of any such governmental authority, central bank or comparable agency shall
impose, modify or deem applicable any reserve, special deposit, insurance
assessment or similar requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve System, but
excluding (i) with respect to any Euro-Currency Loan, any such requirement with
respect to which such Bank is entitled to compensation during the relevant
Interest Period under Section 2.18 and (ii) with respect to any CD Loan, any
such requirement reflected in the applicable Domestic Reserve Percentage or
Assessment Rate) against assets of, deposits with or for the account of, or
credit extended by, any Bank (or its Applicable Lending Office) or shall impose
on any Bank (or its Applicable Lending Office) or on the United States market
for certificates of deposit or the London interbank market any other condition
affecting its Fixed Rate Loans or its obligation to make such Fixed Rate Loans
and the result of any of the foregoing is to increase the cost to such Bank (or
its Applicable Lending Office) of making or maintaining any Fixed Rate Loan to
any Borrower, or to reduce the amount of any sum received or receivable by such
Bank (or its Applicable Lending Office) under this Agreement or under its Notes
with respect thereto, by an amount reasonably deemed by such Bank to be
material, then, within 15 days after demand by such Bank setting forth the
circumstances giving rise to such demand and a calculation of the amount or
amounts demanded (with a copy to the Agent), such Borrower shall pay to such
Bank such additional amount or amounts as will compensate such Bank for such
increased cost or reduction.
(b) If any Bank shall have determined that, after the date hereof, the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on capital of such Bank (or its Parent) as a
consequence of such Bank's obligations hereunder to a level below that which
such Bank (or its Parent) could have achieved but for such adoption, change,
request or directive (taking into consideration its policies with respect to
capital adequacy) by an amount deemed by such Bank to be material, then from
time to time, within 15 days after demand by such Bank (with a copy to the
Agent), the Company shall pay to such Bank such additional amount or amounts as
will compensate such Bank (or its Parent) for such reduction.
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(c) Each Bank will promptly notify the Company and the Agent of any
event of which it has knowledge, occurring after the date hereof, which will
entitle such Bank to compensation pursuant to this Section and will designate a
different Applicable Lending Office if such designation will avoid the need for,
or reduce the amount of, such compensation and will not, in the judgment of such
Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank
claiming compensation under this Section and setting forth the additional amount
or amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods.
(d) Failure or delay on the part of a Bank or an Issuing Bank to
demand compensation pursuant to this Section shall not constitute a waiver of
such Bank's or such Issuing Bank's, as the case may be, right to demand such
compensation; provided that the Company shall not be required to compensate a
Bank or an Issuing Bank pursuant to this Section for any increased costs or
reduced returns incurred more than 270 days prior to the date such Bank or such
Issuing Bank, as the case may be, notifies the Company thereof and of such
Bank's or such Issuing Bank's intention to claim compensation therefor; provided
further that, if the change in law or in the application of law giving rise to
such increased costs or reduced returns is retroactive, than the 270-day period
referred to above shall be extended to include the period of retroactive effect
thereof.
(e) The provisions of this Section also shall inure to the benefit of
each Issuing Bank in its capacity as such.
SECTION 8.04. Taxes. (a) For purposes of this Section 8.04(a), the
following terms have the following meanings:
"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings with respect to any payment by
any Borrower pursuant to this Agreement or under any Note, and all
liabilities with respect thereto, including any taxes, duties, levies,
imposts, deductions, charges or withholdings with respect to any payment by
a Borrower other than the Company that would not have been imposed on a
payment by the Company, but excluding (i) in the case of each Bank, each
Issuing Bank and the Agent, taxes imposed on its income, and franchise or
similar taxes imposed on it, by a jurisdiction under the laws of which such
Bank, such Issuing Bank or the Agent (as the case may be), is organized or
in which its principal executive office is located or, in the case of each
Bank, in which its Applicable Lending Office is located, (ii) in the case
of each Bank, each Issuing Bank and the Agent, taxes imposed solely by
reason of such Bank, such Issuing Bank or the Agent (as the case may be)
doing business in the jurisdiction imposing such tax, other than as a
result of this Agreement or any Note or any transaction contemplated hereby
(including the negotiation of any of the foregoing) and (iii) in the case
of each Bank, any withholding tax imposed on such payments but only at a
rate equal to the United States withholding tax that such Bank is (or would
be) subject to on such payments by the Company at the time such Bank first
becomes a party to this Agreement.
"Other Taxes" means any present or future stamp or documentary taxes
and any other excise or property taxes, or similar charges or levies, which
arise from any payment made pursuant to this Agreement or under any Notes
or from
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the execution or delivery of, or otherwise with respect to, this Agreement
or any Note.
(b) Any and all payments by any Borrower to or for the account of any
Bank, any Issuing Bank or the Agent hereunder or under any Note shall be made
without deduction for any Taxes or Other Taxes; provided that, if such Borrower
shall be required by law to deduct any Taxes or Other Taxes from any such
payments, (i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section) such Bank, such Issuing Bank or the Agent (as
the case may be) receives an amount equal to the sum it would have received had
no such deductions been made, (ii) such Borrower shall make such deductions,
(iii) such Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law and (iv) such
Borrower shall furnish to the Agent, at its address referred to in Section 9.01,
the original or a certified copy of a receipt evidencing payment thereof.
(c) Each Borrower agrees to indemnify each Bank, each Issuing Bank and
the Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted on amounts payable
under this Section) paid by such Bank, such Issuing Bank or the Agent (as the
case may be) and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto. This indemnification shall be paid
within 15 days after such Bank, such Issuing Bank or the Agent (as the case may
be) makes demand therefor. After any Bank, any Issuing Bank or the Agent (as the
case may be) learns of the imposition of Taxes or Other Taxes, such Bank,
Issuing Bank and the Agent (as the case may be) will act in good faith promptly
to notify the relevant Borrower of its obligations hereunder.
(d) Each Bank organized under the laws of a jurisdiction outside the
United States (or, in the case of a Foreign Borrower, outside such Foreign
Borrower's jurisdiction of organization), on or prior to the date of its
execution and delivery of this Agreement in the case of each Bank listed on the
signature pages hereof and on or prior to the date on which it becomes a Bank in
the case of each other Bank, and from time to time thereafter if requested in
writing by the Company or the relevant Borrower (but only so long as such Bank
remains lawfully able to do so), shall provide the Company or the relevant
Borrower and the Agent with the appropriate form or forms (including any forms
required to replace forms previously provided because of a change in a Bank's
place of organization, principal office or Applicable Lending Office, or in the
event that any forms are no longer valid because of their expiration or a change
in law or regulations, other appropriate evidence of exemption or reduction as
reasonably requested by the relevant Borrower), certifying that such Bank is
entitled to benefits under an income tax treaty to which the United States (or,
in the case of a Foreign Borrower, such Foreign Borrower's jurisdiction of
organization) is a party which exempts the Bank from withholding tax imposed by
the United States (or in the case of a Foreign Borrower, such Foreign Borrower's
jurisdiction of organization) or reduces the rate of withholding tax (if any) on
payments of interest for the account of such Bank or certifying that the income
receivable pursuant to this Agreement is otherwise not subject to such
withholding tax; provided that no Bank shall be required to provide any form or
forms required by this paragraph for or on account of a Foreign Borrower unless
and until the Company supplies the relevant form or forms to such Bank and
requests that such Bank complete and sign such form or forms.
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(e) For any period with respect to which a Bank has failed to provide
the Company or the Agent with the appropriate form as required by Section
8.04(d) (unless such failure is due to (i) a change in treaty, law or regulation
occurring subsequent to the date on which such form originally was required to
be provided or (ii) in the case of a form for or on account of a Foreign
Borrower, the failure of the Company to request such form in accordance with the
proviso to Section 8.04(d)), such Bank shall not be entitled to indemnification
under Section 8.04(b) or (c) with respect to the withholding taxes that would
not have been imposed if such form had been provided; provided that if a Bank,
which is otherwise exempt from or subject to a reduced rate of withholding tax,
becomes subject to Taxes because of its failure to deliver a form required
hereunder, the relevant Borrower shall take such steps as such Bank shall
reasonably request to assist such Bank to recover such Taxes.
(f) If any Borrower is required to pay additional amounts to or for
the account of any Bank pursuant to this Section, then such Bank will change the
jurisdiction of its Applicable Lending Office if such change (i) will eliminate
or reduce any such additional payment which may thereafter accrue and (ii) in
the judgment of such Bank, is not otherwise disadvantageous to such Bank.
(g) If a Bank, an Issuing Bank or the Agent shall receive a refund
(including any offset or credit) from a taxation authority (as a result of any
error in the imposition of Taxes or Other Taxes by such taxation authority) of
any Taxes or Other Taxes paid by any Borrower pursuant to Section 8.04(b) or
(c), such Bank, Issuing Bank or the Agent (as the case may be) shall promptly
pay to the relevant Borrower the amount so received, with interest received from
the taxation authority with respect to such refund.
SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate
Loans. If (i) the obligation of any Bank to make CD Loans or Euro-Currency Loans
to any Borrower has been suspended pursuant to Section 8.02 or (ii) any Bank has
demanded compensation from the Company or any other Borrower under Section 8.03
or 8.04 with respect to its CD Loans or Euro-Currency Loans and the Company
shall, by at least five Euro-Currency Business Days' prior notice to such Bank
through the Agent, have elected that the provisions of this Section shall apply
to such Bank, then, unless and until such Bank notifies the Company that the
circumstances giving rise to such suspension or demand for compensation no
longer apply:
(a) all Loans which would otherwise be made by such Bank as CD Loans
or Euro-Currency Loans shall be made instead as Base Rate Loans (on which
interest and principal shall be payable contemporaneously with the related
Fixed Rate Loans of the other Banks), and
(b) after each of its CD Loans or Euro-Currency Loans has been repaid,
all payments of principal which would otherwise be applied to repay such
Fixed Rate Loans shall be applied to repay its Base Rate Loans instead.
SECTION 8.06. Other Costs. If the cost to any Bank or any Issuing Bank
of making or maintaining any Loan to, or issuing or participating in any Letter
of Credit for the account of, an Eligible Subsidiary is increased, or the amount
of any sum received or receivable by any Bank (or its Applicable Lending Office)
or any Issuing Bank is reduced by an amount deemed by such Bank or such Issuing
Bank to be material, by reason of the fact that such Eligible Subsidiary is
incorporated in, or conducts business in,
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a jurisdiction outside the United States, such Eligible Subsidiary shall
indemnify such Bank for such increased cost or reduction within 15 days after
demand by such Bank setting forth the circumstances giving rise to such demand
and the calculation of the amount or amounts demanded (with a copy to the
Company and the Agent). A certificate of such Bank claiming compensation under
this Section and setting forth the additional amount or amounts to be paid to it
hereunder shall be conclusive in the absence of manifest error.
SECTION 8.07. Substitution of Bank. If (i) the obligation of any Bank
to make or maintain Euro-Currency Loans has been suspended pursuant to Section
8.02 or (ii) any Bank has demanded compensation under Section 8.03 or is
receiving increased payments or indemnification payments under Section 8.04 or
8.06, the Company shall have the right to seek a bank or banks ("Substitute
Banks"), which may be one or more of the Banks or one or more other banks
satisfactory to the Agent, to purchase all (but not less than all) the Notes and
the participations in the Letter of Credit Exposure of such Bank (the "Affected
Bank") and, if the Company locates a Substitute Bank, the Affected Bank shall,
upon payment to it of the purchase price agreed between it and the Substitute
Bank (or, failing such agreement, a purchase price in the amount of the
outstanding principal amount of its Loans and accrued interest thereon to the
date of payment plus the Affected Bank's Applicable Percentage of all
unreimbursed Letter of Credit Disbursements) plus any amount (other than
principal and interest) then due to it or accrued for its account hereunder,
assign all its rights and obligations under this Agreement and the Notes to the
Substitute Bank, and the Substitute Bank shall assume such rights and
obligations, whereupon the Substitute Bank shall be a Bank party to this
Agreement and shall have all the rights and obligations of a Bank. Any
assignment by an Affected Bank pursuant to this Section shall be treated as a
prepayment of the Affected Bank's Fixed Rate Loans for purposes of Section 2.14.
ARTICLE IX
Miscellaneous
SECTION 9.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex,
facsimile transmission or similar writing) and shall be given to such party: (x)
in the case of any Borrower, any Issuing Bank, the Swingline Lender or the
Agent, at its address or its telecopy or telex number set forth on the signature
pages hereof (or, in the case of an Eligible Subsidiary, in its Election to
Participate or, in the case of any Issuing Bank, in its Issuing Bank Agreement),
(y) in the case of any Bank, at its address or its telecopy or telex number set
forth in its Administrative Questionnaire, or (z) in the case of any party, such
other address or other telecopy or telex number as such party may hereafter
specify for the purpose by notice to the Agent and the Company. Each such
notice, request or other communication shall be effective (i) if given by
telecopy or telex, when such telecopy or telex is transmitted to the telecopy or
telex number specified in this Section and the appropriate confirmation of
receipt or answerback is received, (ii) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (iii) if given by any other means, when delivered at
the address specified in this Section; provided that notices to the Agent under
Article II or Article VIII shall not be effective until received.
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SECTION 9.02. No Waivers. No failure or delay by the Agent, any
Issuing Bank or any Bank in exercising any right, power or privilege hereunder
or under any other Loan Document 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.
SECTION 9.03. Expenses; Indemnification. (a) The Company shall pay (i)
all reasonable out-of-pocket expenses of the Agent and (in the case of expenses
relating to any Letter of Credit) each Issuing Bank, including fees and
disbursements of special counsel for the Agent, in connection with the
preparation and administration of this Agreement and the other Loan Documents,
any waiver or consent hereunder or thereunder or any amendment hereof or thereof
or any Default or alleged Default hereunder and (ii) if an Event of Default
occurs, all reasonable out-of-pocket expenses incurred by the Agent, each
Issuing Bank and each Bank, including reasonable fees and disbursements of
counsel, in connection with such Event of Default and collection, bankruptcy,
insolvency and other enforcement proceedings resulting therefrom.
(b) The Company agrees to indemnify the Agent, each Issuing Bank and
each Bank, their respective affiliates and the respective directors, officers,
agents and employees of the foregoing (each an "Indemnitee") and hold each such
Indemnitee harmless from and against any and all liabilities, losses, damages,
costs and expenses of any kind (including any of the foregoing with respect to
Environmental Laws applicable to the Company or any Subsidiary), including,
without limitation, the reasonable fees and disbursements of counsel, which may
be actually incurred by such Indemnitee in connection with any investigative,
administrative or judicial proceeding (whether or not such Indemnitee shall be
designated a party thereto) brought or threatened relating to or arising out of
the Loan Documents or any actual or proposed use of proceeds of Loans or Letters
of Credit hereunder; provided that no Indemnitee shall have the right to be
indemnified hereunder for its own gross negligence or willful misconduct as
determined by a court of competent jurisdiction.
SECTION 9.04. Sharing of Setoffs. Each Bank agrees that if it shall,
by exercising any right of setoff or counterclaim or otherwise, receive payment
of a proportion of the aggregate amount of its claims in respect of Letter of
Credit Disbursements and principal and interest due with respect to any Note
held by it which is greater than the proportion received by any other Bank in
respect of the aggregate amount of claims in respect of Letter of Credit
Disbursements and principal and interest due with respect to any Note held by
such other Bank, the Bank receiving such proportionately greater payment shall
purchase such participations in the claims in respect of Letter of Credit
Disbursements and Notes held by the other Banks, and such other adjustments
shall be made, as may be required so that all such payments of claims in respect
of Letter of Credit Disbursements and of principal and interest with respect to
the Notes held by the Banks shall be shared by the Banks pro rata; provided that
nothing in this Section shall impair the right of any Bank to exercise any right
of setoff or counterclaim it may have and to apply the amount subject to such
exercise to the payment of indebtedness of a Borrower other than its
indebtedness under the Loan Documents. Each Borrower agrees, to the fullest
extent it may effectively do so under applicable law, that any holder of a
participation in a claim in respect of a Letter of Credit Disbursement or in a
Note, whether or not acquired pursuant to the foregoing arrangements, may
exercise rights of setoff or
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counterclaim and other rights with respect to such participation as fully as if
such holder of a participation were a direct creditor of the Borrower in the
amount of such participation.
SECTION 9.05. Amendments and Waivers. Any provision of this Agreement
or any other Loan Document may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by, or approved in writing by,
the Company and the Required Banks (and, if the rights or duties of the Agent,
any Issuing Bank or the Swingline Lender are affected thereby, by the Agent or
such Issuing Bank or the Swingline Lender, as the case may be); provided that no
such amendment or waiver shall, unless signed by, or approved in writing by, all
the Banks, (i) increase or decrease the Commitment of any Bank (except for a
ratable decrease in the Commitments of all Banks) or subject any Bank to any
additional obligation, (ii) reduce the principal of or rate of interest on any
Loan or any claim for reimbursement of a Letter of Credit Disbursement or any
fees hereunder, (iii) postpone the date fixed for any payment of principal of or
interest on any Loan or for any reimbursement of a Letter of Credit Disbursement
or for payment of any fees hereunder or for any reduction or termination of any
Commitment, (iv) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Notes, or the number of Banks, which shall be
required for the Banks or any of them to take any action under this Section or
any other provision of this Agreement, (v) change the ratable treatment of the
Banks under any provision of this Agreement that provides for such ratable
treatment, or (vi) release any Guarantor from its Guarantee under the Guarantee
Agreement, except as contemplated by Section 7 of the Guarantee Agreement and
except that a Guarantor that is a Subsidiary but is not a Material Subsidiary at
the time of the proposed release may be released from its Guarantee under the
Guarantee Agreement with the written consent or approval of the Required Banks.
SECTION 9.06. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto,
and their respective successors and assigns, except that no Borrower may assign
or otherwise transfer any of its rights under this Agreement without the prior
written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment or
any or all of its Loans or its participations in Letters of Credit. In the event
of any such grant by a Bank of a participating interest to a Participant,
whether or not upon notice to the Borrowers and the Agent, such Bank shall
remain responsible for the performance of its obligations hereunder, and the
Borrowers and the Agent shall continue to deal solely and directly with such
Bank in connection with such Bank's rights and obligations under this Agreement.
Any agreement pursuant to which any Bank may grant such a participating interest
shall provide that such Bank shall retain the sole right and responsibility to
enforce the obligations of each Borrower hereunder including, without
limitation, the right to approve any amendment, modification or waiver of any
provision of this Agreement or any other Loan Document; provided that such
participation agreement may provide that such Bank will not agree to any
modification, amendment or waiver described in clause (i), (ii), (iii) or (iv)
(but, in the case of clause (iv), only to the extent such modification,
amendment or waiver would affect any requirement of approval by all Banks of the
matters referred to in such clauses (i), (ii) and (iii)) of Section 9.05 without
the consent of the Participant. The Borrowers agree that each Participant shall,
to the extent provided in its participation agreement, be entitled to the
benefits of Article VIII with respect to its
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participating interest. An assignment or other transfer which is not permitted
by subsection (c) or (d) below shall be given effect for purposes of this
Agreement only to the extent of a participating interest granted in accordance
with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part of all, of its
rights and obliga tions under this Agreement and the Notes, and such Assignee
shall assume such rights and obligations, pursuant to an instrument executed by
such Assignee and such transferor Bank, with (and subject to) the subscribed
consent of the Company, the Agent, each Issuing Bank and the Swingline Lender
(which, in the case of the Agent, each Issuing Bank and the Swingline Lender,
consents shall not be unreasonably withheld or delayed); provided that if an
Assignee is another Bank or an affiliate of any Bank, no such consent shall be
required; and provided further that each assignment shall be in a minimum amount
of $5,000,000 or, if less, the balance of the transferor Bank's Commitment. Upon
execution and delivery of such instrument (including by the Company, the Agent,
each Issuing Bank and the Swingline Lender, if their consent is required as
provided above) and payment by such Assignee to such transferor Bank of an
amount equal to the purchase price agreed between such transferor Bank and such
Assignee, such Assignee shall be a Bank party to this Agreement and shall have
all the rights and obligations of a Bank with a Commitment as set forth in such
instrument of assumption, and the transferor Bank shall be released from its
obligations hereunder to a corresponding extent, and no further consent or
action by any party shall be required. Upon the consummation of any assignment
pursuant to this subsection (c), the transferor Bank, the Agent and the
Borrowers shall make appropriate arrangements so that, if required, a new Note
for each Borrower is issued to the Assignee. In connection with any such
assignment, the transferor Bank shall pay to the Agent an administrative fee for
processing such assignment in the amount of $2,500. If the Assignee is not
incorporated under the laws of the United States of America or a state thereof,
it shall, prior to the first date on which interest or fees are payable
hereunder for its account, deliver to the Company and the Agent certification as
to exemption from deduction or withholding of any United States federal income
taxes in accordance with Section 8.04.
(d) Any Bank may at any time assign all or any portion of its rights
under this Agreement and its Note to a Federal Reserve Bank. No such assignment
shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights
shall be entitled to receive any greater payment under Section 8.03 or 8.04 than
such Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Company's prior written
consent or by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring
such Bank to designate a different Applicable Lending Office under certain
circumstances or at a time when the circumstances giving rise to such greater
payment did not exist.
SECTION 9.07. Collateral. Each of the Banks represents to the Agent
and each of the other Banks that it in good faith is not relying upon any Margin
Stock as collateral in the extension or maintenance of the credit provided for
in this Agreement.
SECTION 9.08. Governing Law; Submission to Jurisdiction. This
Agreement and each Note shall be governed by and construed in accordance with
the laws of the State of New York. Each Borrower hereby submits to the
nonexclusive jurisdiction
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of the United States District Court for the Southern District of New York and of
any New York State court sitting in New York City for purposes of all legal
proceedings arising out of or relating to this Agreement or the transactions
contemplated hereby. Each Borrower 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 proceeding brought in such a court and any claim that
any such proceeding brought in such a court has been brought in an inconvenient
forum.
SECTION 9.09. Counterparts; Integration. 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 the same instrument.
This Agreement constitutes the entire agreement and understanding among the
parties hereto and supersedes any and all prior agreements and understandings,
oral or written, relating to the subject matter hereof.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWERS, THE AGENT,
THE ISSUING BANKS AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 9.11. Confidentiality. Each of the Agent, the Issuing Banks
and the Banks agrees to maintain the confidentiality of the Information (as
defined below), except that Information may be disclosed (a) to its and its
Affiliates' directors, officers, employees and agents, including accountants,
legal counsel and other advisors (it being understood that the Persons to whom
such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to the
extent requested by any regulatory authority, (c) to the extent otherwise
required by applicable laws and regulations or by any subpoena or similar legal
process, (d) to any other party to this Agreement, (e) in connection with the
exercise of any remedies hereunder or any suit, action or proceeding relating to
this Agreement or the enforcement of rights hereunder, (f) subject to an
agreement containing provisions substantially the same as those of this Section,
to any Assignee of or Participant in, or any prospective Assignee of or
Participant in, any of its rights or obligations under this Agreement, (g) with
the consent of the Company or (h) to the extent such Information (i) becomes
publicly available other than as a result of a breach of this Section or (ii)
becomes available to the Agent, any Issuing Bank or any Bank on a
nonconfidential basis from a source other than the Company or any Subsidiary.
For the purposes of this Section, "Information" means all information received
in writing from the Company or any Subsidiary relating to the Company or any
Subsidiary or their businesses, other than any such information that is
available to the Agent, any Issuing Bank or any Bank on a nonconfidential basis
prior to disclosure by the Company or any Subsidiary; provided that, in the case
of non-financial information received from the Company or any Subsidiary after
the date hereof, such information is clearly identified at the time of delivery
as confidential. Any Person required to maintain the confidentiality of
Information as provided in this Section shall be considered to have complied
with its obligation to do so if such Person
<PAGE>
69
has exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.
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.
FOOTSTAR, INC.,
by
/s/ Carlos Alberni
----------------------------------
Name: Carlos Alberini
Title: Senior Vice President and
Chief Financial Officer
933 MacArthur Boulevard
Mahwah, NJ 07430
Attention of: Carlos Alberini
Telecopy number: (201) 934-6761
Commitments
- -----------
$14,000,000 THE ASAHI BANK, LTD.,
by
/s/ Douglas Price
----------------------------------
Name: Douglas Price
Title: Senior Vice President
$21,000,000 BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION,
by
/s/ Jody Pritchard
----------------------------------
Name: Jody Pritchard
Title: Assistant Vice President
$30,000,000 BANKBOSTON, N.A.,
by
/s/ Nancy E. Fuller
----------------------------------
Name: Nancy E. Fuller
Title: Director
<PAGE>
70
$30,000,000 THE BANK OF NEW YORK,
by
/s/ Howard F. Bascom, Jr.
----------------------------------
Name: Howard F. Bascom, Jr.
Title: Vice President
Address for Issuing Agent:
One Wall Street
New York, NY 10286
Attention of: Howard F. Bascom
Telecopy number: (212) 635-1481
$21,000,000 CIBC, INC.,
by
/s/ Paul T. LaHiff, Jr.
----------------------------------
Name: Paul T. LaHiff, Jr.
Tile: as Agent
$21,000,000 CORESTATES BANK, N.A.,
by
/s/ Thomas J. McDonnell
----------------------------------
Name: Thomas J. McDonnell
Title: Vice President
$21,000,000 CREDIT LYONNAIS NEW YORK BRANCH,
by
/s/ Scott R. Chappelka
----------------------------------
Name: Scott R. Chappelka
Title: Vice President
$14,000,000 CREDIT SUISSE FIRST BOSTON,
by
/s/ Kristin Lepri
----------------------------------
Name: Kristin Lepri
Title: Associate
by
/s/ Chris T. Horgan
----------------------------------
Name: Chris T. Horgan
Title: Vice President
<PAGE>
71
$21,000,000 FLEET NATIONAL BANK,
by
/s/ Thomas J. Bullard
----------------------------------
Name: Thomas J. Bullard
Title: Vice President
$5,000,000 HOKURIKU BANK, LTD.,
by
/s/ Eisho Kitano
----------------------------------
Name: Eisho Kitano
Title: Deputy General Manager
$32,000,000 MORGAN GUARANTY TRUST COMPANY OF
NEW YORK,
by
/s/ Deborah A. Brodheim
----------------------------------
Name: Deborah A. Brodheim
Title: Vice President
Address for Administrative Agent
and Swingline Lender:
60 Wall Street
New York, NY 10260
Attention of: Deborah A. Brodheim
Telecopy number: (212) 648-5018
$14,000,000 NATIONAL AUSTRALIA BANK LIMITED,
by
/s/ Susan R. Julien
----------------------------------
Name: Susan R. Julien
Title: Vice President
<PAGE>
72
$14,000,000 PNC BANK, NATIONAL ASSOCIATION,
by
/s/ Michael Richards
----------------------------------
Name: Michael Richards
Title: Vice President
$14,000,000 THE SAKURA BANK, LIMITED,
by
/s/ Yasumasa Kikuchi
----------------------------------
Name: Yasumasa Kikuchi
Title: Senior Vice President
$14,000,000 STANDARD CHARTERED BANK,
by
/s/ Kristina McDavid
----------------------------------
Name: Kristina McDavid
Title: Vice President
by
/s/ Leonardo A. Tee
----------------------------------
Name: Leonardo A. Tee
Title: Vice President
$14,000,000 UNION BANK OF CALIFORNIA, N.A.,
by
/s/ Dana C. Fenwick
----------------------------------
Name: Dana C. Fenwick
Title: Vice President
- ------------
Total Commitments
$300,000,000
============
Exhibit 11
FOOTSTAR, INC. AND SUBSIDIARY COMPANIES
COMPUTATION OF EARNINGS PER COMMON SHARE
PRIMARY AND FULLY DILUTED
($ in millions, except per share data)
Three Months Nine Months
Ended Ended
September 27, September 27,
1997 1997
------------- -------------
Primary earnings per share:
Net income $18.8 $38.9
========== ==========
Average common shares
outstanding 28,384,855 29,751,521
Dilutive effect of
outstanding options 91,710 78,946
---------- ----------
28,476,565 29,830,467
========== ==========
Earnings per common
share--primary $0.66 $1.30
========== ==========
Fully diluted earnings
per share:
Net income $18.8 $38.9
========== ==========
Average common shares
outstanding 28,384,855 29,751,521
Dilutive effect of
outstanding options 105,205 105,205
---------- ----------
28,490,060 29,856,726
========== ==========
Earnings per common
share--fully diluted $0.66 $1.30
========== ==========
Exhibit 15
Accountants' Acknowledgment
Footstar, Inc.
Mahwah, New Jersey
Board of Directors:
Re: Registration Statements Numbers 33-20731 and 33-30011 on Form S-8
With respect to the subject registration statements, we acknowledge our
awareness of the use therein of our report dated October 16, 1997 related to our
review of interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not
considered a part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the meaning
of sections 7 and 11 of the Act.
/s/KPMG Peat Marwick LLP
New York, New York
November 10, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 3-MOS
<FISCAL-YEAR-END> SEP-27-1997 SEP-27-1997
<PERIOD-END> JAN-03-1998 JAN-03-1998
<CASH> 36,900 36,900
<SECURITIES> 0 0
<RECEIVABLES> 49,100 49,100
<ALLOWANCES> 400 400
<INVENTORY> 353,900 353,900
<CURRENT-ASSETS> 491,400 491,400
<PP&E> 295,900 295,900
<DEPRECIATION> 77,100 77,100
<TOTAL-ASSETS> 753,800 753,800
<CURRENT-LIABILITIES> 282,100 282,100
<BONDS> 0 0
300 300
0 0
<COMMON> 0 0
<OTHER-SE> 372,900 372,900
<TOTAL-LIABILITY-AND-EQUITY> 753,800 753,800
<SALES> 1,266,900 464,000
<TOTAL-REVENUES> 1,266,900 464,000
<CGS> 881,800 321,900
<TOTAL-COSTS> 881,800 321,900
<OTHER-EXPENSES> 300,600 104,600
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (1,400) 200
<INCOME-PRETAX> 85,900 37,300
<INCOME-TAX> 28,300 12,300
<INCOME-CONTINUING> 57,600 25,000
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 38,900 18,800
<EPS-PRIMARY> 1.30 .66
<EPS-DILUTED> 1.30 .66
</TABLE>
