<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 29, 1996
REGISTRATION NO. 333-4427
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CHADWICK'S OF BOSTON, LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 5961 06-1458458
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
35 UNITED DRIVE
WEST BRIDGEWATER, MASSACHUSETTS 02379
508-583-8110
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
PRINCIPAL EXECUTIVE OFFICES)
------------------------
DHANANJAYA K. RAO, PRESIDENT AND CHIEF EXECUTIVE OFFICER
CHADWICK'S OF BOSTON, LTD.
35 UNITED DRIVE
WEST BRIDGEWATER, MASSACHUSETTS 02379
508-583-8110
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C> <C>
CONSTANTINE ALEXANDER ARTHUR G. SILER ALLAN G. SPERLING
NUTTER, MCCLENNEN & FISH, LLP ROPES & GRAY CLEARY, GOTTLIEB, STEEN & HAMILTON
ONE INTERNATIONAL PLACE ONE INTERNATIONAL PLACE ONE LIBERTY PLAZA
BOSTON, MASSACHUSETTS 02110 BOSTON, MASSACHUSETTS 02110 NEW YORK, NEW YORK 10006
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC: As
soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / ________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
CHADWICK'S OF BOSTON, LTD.
------------------------
<TABLE>
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K
SHOWING THE LOCATION IN THE PROSPECTUS
OF THE INFORMATION REQUIRED BY PART I OF FORM S-1
<CAPTION>
REGISTRATION STATEMENT ITEM NUMBER AND CAPTION LOCATION OR CAPTION IN PROSPECTUS
- ------------------------------------------------- --------------------------------------------
<S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus..... Outside Front Cover Page of the Registration
Statement; Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus................................. Inside Front and Outside Back Cover Pages of
Prospectus
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges............... Prospectus Summary; Risk Factors; The
Company
4. Use of Proceeds............................. Use of Proceeds
5. Determination of Offering Price............. Outside Front Cover Page of Prospectus;
Underwriting
6. Dilution.................................... *
7. Selling Security Holders.................... Relationship with TJX; Ownership of
Securities
8. Plan of Distribution........................ Outside Front Cover Page of Prospectus;
Underwriting
9. Description of Securities to be
Registered................................. Outside Front Cover Page of Prospectus;
Prospectus Summary; Dividend Policy;
Description of Capital Stock
10. Interests of Named Experts and Counsel...... *
11. Information with Respect to the
Registrant................................. Outside Front Cover Page; Prospectus
Summary; Risk Factors; The Company;
Dividend Policy; Selected Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Relationship with
TJX; Ownership of Securities; Shares
Eligible for Future Sale; Description of
Capital Stock
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................. *
- ---------------
<FN>
* Omitted because inapplicable.
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
JULY 29, 1996
PROSPECTUS
9,260,000 SHARES
[LOGO]
COMMON STOCK
($.01 PAR VALUE)
All of the shares of common stock, $.01 par value per share (the "Common Stock")
of Chadwick's of Boston, Ltd. ("Chadwick's" or the "Company") being offered
hereby are being sold by The TJX Companies, Inc. ("TJX"). The Company will not
receive any of the proceeds from the sale of the shares of Common Stock offered
hereby.
Prior to this offering (the "Offering"), there has been no public market for the
Common Stock. It is currently anticipated that the initial public offering price
will be between $16.00 and $18.00 per share. See "Underwriting" for a discussion
of the factors to be considered in determining the initial public offering
price.
The Common Stock has been approved for listing on the New York Stock Exchange
(the "NYSE") under the symbol "CWK."
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN THE COMMON STOCK OFFERED
HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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<S> <C> <C> <C>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT TJX(1)
Per Share................ $ $ $
Total(2)................. $ $ $
- --------------------------------------------------------------------------------
- ----------
<FN>
(1) Before deducting expenses payable by TJX estimated to be $1,000,000.
(2) TJX has granted to the Underwriters a 30-day option to purchase up to an
aggregate of 1,389,000 additional shares of Common Stock at the Price to
Public, less Underwriting Discount, solely to cover over-allotments, if any.
If the Underwriters exercise such option in full, the total Price to Public,
Underwriting Discount and Proceeds to TJX will be $ , $ and
$ , respectively. See "Underwriting."
</TABLE>
The shares of Common Stock are offered subject to receipt and acceptance by the
Underwriters, to prior sale and to the Underwriters' right to reject any order
in whole or in part and to withdraw, cancel or modify the offer without notice.
It is expected that delivery of the Common Stock will be made at the office of
Salomon Brothers Inc, Seven World Trade Center, New York, New York or through
the facilities of The Depository Trust Company, on or about , 1996.
SALOMON BROTHERS INC GOLDMAN, SACHS & CO.
The date of this Prospectus is , 1996.
<PAGE> 4
[Montage of photographs depicting the Company's
principal facility in West Bridgewater, Massachusetts,
fashion models, associates and catalog layout]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
2
<PAGE> 5
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless otherwise indicated or the context
otherwise requires: (i) all references to a year in connection with statements
concerning the Company's financial or operating results means the Company's
fiscal year which ends on the last Saturday in January in the following calendar
year (e.g., "1995" means the fiscal year ended January 27, 1996); (ii) the
information contained in this Prospectus assumes that the Exchange Transaction
(as defined and described below under "Relationship with TJX") occurred prior to
all relevant periods presented herein; (iii) the information contained in this
Prospectus assumes no exercise of the Underwriters' over-allotment option; and
(iv) the "Company" or "Chadwick's" refers to Chadwick's of Boston, Ltd., its
subsidiary, Chadwick's, Inc. and its subsidiary, and "TJX" refers to The TJX
Companies, Inc. and its subsidiaries.
THE COMPANY
Chadwick's of Boston, Ltd. is the nation's first and largest catalog
retailer of off-price women's apparel and one of the largest participants in
women's apparel catalog retailing. The Company offers a broad selection of high
quality branded and private label apparel at prices typically 25% to 50% below
the regular prices of department and specialty retail stores. The Company
believes that it has developed a strong and unique franchise and a well
recognized brand name by consistently delivering exceptional value while
satisfying its customers' wardrobe needs for career, casual and social wear, all
in a broad selection of colors, styles and sizes. Chadwick's believes that its
success in executing this merchandising strategy is the result of its thorough
understanding of the Company's target customer, extensive off-price
merchandising experience, powerful catalog presentation, strong product
development and worldwide sourcing capabilities. As a result, Chadwick's has
increased sales at a compound annual growth rate of 28.0%, from $173.4 million
in 1991 to $465.6 million in 1995.
The Company believes that Chadwick's of Boston is one of the most well
recognized brand names in women's apparel catalog retailing, and that its
customer list is one of the largest and most valuable in the women's apparel
industry. Chadwick's has over 10 million names on its customer list, more than
six million of which are active customers, having made one or more purchases in
the preceding 18 months. Management believes that its brand name and customer
list provide the Company with distinct competitive advantages that can be
neither easily nor cost-effectively replicated.
The Company's target customers are middle to upper middle income women
between the ages of 25 and 55, who the Company believes represent approximately
one-third of the adult female population in the United States or approximately
33 million women. The overall women's apparel industry generated approximately
$81 billion in sales in 1995, of which catalog sales represented approximately
9.4% or $7.6 billion. While sales in the overall women's apparel industry grew
by approximately one percent from 1994 to 1995, catalog sales of women's apparel
grew by 6.1% during the same period. The Company believes that catalog sales of
women's apparel will continue to increase because the busy lifestyles of today's
women demand the convenience and time savings afforded by catalog shopping.
From 1987 through 1993, the Company's net sales grew at a compound annual
growth rate of 46.7%. By the fall of 1994, the Company's order fulfillment and
customer service operations were unable to keep pace with its rapid sales
growth, resulting in a decline in sales growth, an increase in operating
expenses and a substantial decline in profitability. In response, the Company
reorganized its management team in the first quarter of 1995. This new
management team implemented a series of initiatives to increase operational
efficiencies and improve customer service to levels necessary to support the
Company's strong and established merchandising organization. Catalog circulation
- --------------------------------------------------------------------------------
3
<PAGE> 6
was reduced and improvements were made in fulfillment center and telemarketing
operations, inventory management and coordination among all facets of the
business.
The Company's initiatives produced substantial and rapid improvement.
Between 1994 and 1995, the initial fulfillment rate (percentage of merchandise
available to be shipped at the time of order) increased from 57.1% to a Company
record of 72.3% and the final fulfillment rate (percentage of total merchandise
orders filled) increased from 86.5% to 90.5%. Over the same period, gross margin
increased from 37.2% to 40.1% and selling, general and administrative expenses
as a percentage of net sales declined from 35.9% to 34.4%. These initiatives,
together with an expansion of the Company's deferred billing program, increased
profits, sales and average order value. Income before extraordinary items grew
from $1.3 million in 1994 to $11.7 million in 1995, and, over the same time
period, average order value increased from $81 to $86 and net sales increased
7.6%, from $432.7 million to $465.6 million, despite a 16.6% reduction in
catalog circulation, from 235.0 million to 196.1 million. This strong
performance continued into the first quarter of 1996, as net income increased
from $2.1 million in the first quarter of 1995 to $6.7 million and net sales
increased 13.2%, to $132.0 million.
The Company believes that its new operational structure, combined with
strong customer acceptance of its value-oriented merchandise, provides a solid
foundation for future growth. The Company intends to capitalize on opportunities
to increase sales to both existing and new customers, continue improvements in
operating efficiencies and increase leveraging of operating expenses through the
following strategies:
EXPAND THE COMPANY'S CORE WOMEN'S APPAREL BUSINESS. The Company
believes it has a substantial opportunity to increase sales to
existing customers by capturing a greater share of their apparel
purchases. The Company plans to expand its offering of women's apparel
by increasing average page count in its existing catalogs by
approximately 20% over the next three years.
EXPAND THE COMPANY'S COMPLEMENTARY PRODUCT OFFERINGS. The Company
plans to build on its success in women's apparel by expanding its
offering of complementary products to existing and new customers.
These products, which have been tested and offered on a limited basis,
include men's apparel, children's apparel, women's special sizes,
accessories, gifts and cosmetics. Since the Company began offering
complementary products in 1992, sales of these products have grown to
represent 16.2% of total net sales in 1995. The Company believes that
a significant opportunity exists to further increase sales of these
products.
DEVELOP AND GROW NEW CATALOG CONCEPTS. The Company intends to offer
in separate and distinct catalogs complementary products and new
product concepts that have the potential for significant sales growth.
In May 1996, the Company mailed Bridgewater, its first new concept
catalog, which offers an assortment of classic fashions for men and
women. To date, customer response to Bridgewater has exceeded the
Company's expectations.
CONTINUE TO REFINE CATALOG MAILING SEGMENTATION TECHNIQUES. The
Company plans to further develop and refine its statistical models and
analyses to better target its catalog mailings and more profitably
capitalize on its current customer list of over 10 million names. By
refining its catalog mailing segmentation techniques, the Company
hopes to be able to increase its response rate and the dollar amount
of purchases for each catalog mailed.
EXPAND THE COMPANY'S CUSTOMER BASE. Chadwick's intends to grow its
customer base through its aggressive name acquisition program,
including the rental of customer lists and the implementation of
advertising campaigns specifically designed to add new customers.
4
<PAGE> 7
INCREASE THE COMPANY'S DEFERRED BILLING PROGRAM. The Company intends
to expand the use of its "buy now, pay later" deferred billing program
which it initiated in 1995. The Company believes that its deferred
billing program has contributed to an increase in average order value
and net sales.
CONTINUE TO IMPROVE ORDER FULFILLMENT OPERATIONS AND INVENTORY
MANAGEMENT. The Company plans to make additional improvements in the
areas of order fulfillment and inventory management. Chadwick's
believes continued opportunity exists to increase operating
efficiencies.
ENHANCE TELEMARKETING, CUSTOMER SERVICE AND MANAGEMENT INFORMATION
SYSTEMS. The Company intends to continue to upgrade its telemarketing
and management information systems that will enhance its ability to
increase sales, operating efficiency and overall customer service.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by TJX(1)....... 9,260,000 shares
Common Stock outstanding after the
Offering(2)........................ 15,178,847 shares
Use of Proceeds...................... The Company will not receive any of the proceeds from
the sale of the shares of Common Stock offered hereby.
All proceeds will be received by TJX.
Listing.............................. The Company's Common Stock has been approved for
listing on the NYSE.
NYSE Symbol.......................... CWK
</TABLE>
- ---------------
(1) Assumes the Underwriters' over-allotment option is not exercised.
(2) Exclusive of 850,000 shares that will be reserved for issuance upon exercise
of stock options and similar awards under the Company's 1996 Equity
Incentive Plan and the 1996 Stock Option Plan for Non-Employee Directors.
For a description of stock options to be issued contemporaneously with this
Offering, see "Executive Compensation -- Equity Incentive Plan."
RELATIONSHIP WITH TJX
The Chadwick's of Boston catalog was established by TJX in 1983. The
Company's assets are held by Chadwick's, Inc. which, prior to the Offering, has
been a wholly-owned subsidiary of TJX. In connection with the Offering, TJX will
exchange all of the outstanding shares of common stock of Chadwick's, Inc. for
15,178,847 shares of Common Stock of the Company (the "Exchange Transaction"),
9,260,000 shares of which are being offered hereby by TJX. Concurrently with the
closing of the Offering (the "Closing"), TJX will contribute $20.0 million to
the equity of the Company and the Company will repay to TJX the balance of
outstanding intercompany indebtedness over the equity contribution at such time,
which balance is currently estimated to be approximately $50 million (such
repayment, together with the related equity contribution, is hereinafter
referred to as the "Debt Repayment"). The Company expects to generate the funds
for the repayment of this indebtedness entirely from credit facilities which it
will establish prior to the Offering. See "Risk Factors -- Financing
Requirements" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."
Upon completion of the Offering, TJX will own approximately 39% of the
Company's outstanding Common Stock (approximately 30% if the Underwriters
exercise their over-allotment option in
5
<PAGE> 8
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full), and likely will be the Company's largest stockholder. As a result of its
ownership interest, TJX could have effective control of the vote on matters
submitted to stockholders following completion of the Offering, including the
election of directors and the approval of extraordinary corporate transactions.
TJX has advised the Company that it expects to reduce its ownership interest in
the Company over time, subject to prevailing market and other conditions. See
"Relationship with TJX." Currently, two of the four members of the Company's
Board of Directors (the "Board") are officers and directors of TJX. Either
simultaneously with the completion of the Offering or within six months
thereafter, the Company anticipates that the Board will be increased to seven
members through the addition of three persons who are neither affiliates of TJX
nor employees ("associates") or officers of the Company.
To the extent the Company has in the past had excess inventory which it
wished to liquidate in bulk, it has sold this inventory to TJX and others.
During 1994 and 1995, the Company liquidated approximately $14.4 million and
$10.6 million, respectively, of its total inventory liquidations through TJX,
representing in each year more than half of such liquidations. To continue and
formalize this mutually advantageous arrangement, the Company and TJX have
entered into an Inventory Purchase Agreement expiring on January 29, 2000. See
"Relationship with TJX -- Liquidation."
As part of their ongoing relationship following the Offering, TJX and the
Company will enter into a number of other agreements including a Services
Agreement and a Tax Sharing and Separation Agreement. See "Relationship with
TJX."
------------------------
Chadwick's[Registered Trademark] and Chadwick's of Boston, Ltd.[Registered
Trademark] are federally registered trademarks owned by the Company.
Bridgewater[Trademark] is a trademark owned by the Company.
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6
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SUMMARY FINANCIAL DATA
The following summary financial data is qualified by and should be read in
conjunction with the Company's Combined Financial Statements and Pro Forma
Combined Financial Statements and the notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere in this Prospectus.
<CAPTION>
PRO FORMA(1)
HISTORICAL ------------------
-------------------------------------------------------------------------- FISCAL THIRTEEN
THIRTEEN YEAR WEEKS
FISCAL YEAR ENDED WEEKS ENDED ENDED ENDED
---------------------------------------------------- ------------------- -------- --------
JAN. 25, JAN. 30, JAN. 29, JAN. 28, JAN. 27, APR. 29, APR. 27, JAN. 27, APR. 27,
1992 1993(2) 1994 1995 1996 1995 1996 1996 1996
-------- -------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, NET SALES PER CATALOG AND AVERAGE ORDER VALUE)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............. $173,374 $295,532 $424,276 $432,660 $465,598 $116,611 $131,996 $465,598 $131,996
-------- -------- -------- -------- -------- -------- -------- -------- --------
Gross profit........ 67,263 112,346 155,043 160,786 186,730 47,467 58,696 186,730 58,696
Selling, general and
administrative
expenses, including
catalog and order
processing costs.... 55,656 90,366 131,439 155,329 160,282 42,387 45,831 161,982 46,231
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income from
operations........ 11,607 21,980 23,604 5,457 26,448 5,080 12,865 24,748 12,465
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income before
extraordinary items
and cumulative
effect of accounting
changes............. $ 7,108 $ 13,184 $ 12,285 $ 1,262 $ 11,674 $ 2,116 $ 6,697 $ 11,332 $ 6,664
======== ======== ======== ======== ======== ======== ======== ======== ========
Net income(3)......... $ 7,108 $ 13,184 $ 12,665 $ 1,070 $ 8,336 $ 2,116 $ 6,697 $ 7,994 $ 6,664
======== ======== ======== ======== ======== ======== ======== ======== ========
PRO FORMA EARNINGS PER
COMMON SHARE:
Income before
extraordinary items
and cumulative
effect of accounting
changes............. $ .74 $ .44
======== ========
Net income............ $ .52 $ .44
======== ========
BALANCE SHEET DATA:
Total assets.......... $ 70,673 $121,094 $156,095 $177,625 $199,215 $210,540 $199,648 $186,401
Long-term debt(4)..... 7,580 22,152 52,154 47,391 70,769 81,712 60,277 30,000
Stockholder's
equity.............. 21,420 34,604 47,269 48,339 56,675 50,455 63,372 83,372
OTHER FINANCIAL AND
OPERATING DATA:
EBITDA(5)............. $ 13,580 $ 25,116 $ 28,109 $ 11,156 $ 33,160 $ 6,717 $ 14,524 $ 31,460 $ 14,124
Total catalog
circulation......... 78,555 123,064 213,168 234,973 196,073 64,150 48,487
Net sales per
catalog(6).......... $ 2.21 $ 2.40 $ 1.99 $ 1.84 $ 2.37 $ 1.82 $ 2.72
Average order
value(7)............ $ 84 $ 83 $ 81 $ 81 $ 86 $ 78 $ 94
<FN>
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(1) The pro forma financial data for the year ended January 27, 1996 and for the
thirteen weeks ended April 27, 1996, have been derived from, and should be
read in conjunction with the unaudited pro forma combined financial
statements of the Company and the notes thereto (including a description of
the assumptions used in the pro forma data) included elsewhere in this
Prospectus.
(2) 53 week period.
(3) Net income includes a credit of $380,000 for the cumulative effect of
accounting changes in the fiscal year ended January 29, 1994 and includes
extraordinary charges for the early retirement of debt of $192,000 in the
fiscal year ended January 28, 1995 and $3.3 million in the fiscal year ended
January 27, 1996.
(4) Includes loans and advances from TJX.
(5) Earnings before interest, taxes, depreciation and amortization.
(6) Net sales per catalog equals net sales divided by total catalog circulation.
(7) Average order value equals total value of orders received divided by the
number of orders received.
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</TABLE>
7
<PAGE> 10
RISK FACTORS
Before making an investment decision, prospective purchasers of the Common
Stock offered hereby should carefully consider the following factors, in
addition to the other information in this Prospectus.
ABSENCE OF HISTORY AS A STAND-ALONE COMPANY
Following the consummation of the Offering, the Company will no longer be a
subsidiary of TJX, and TJX will have no obligation to provide management,
financial or other assistance to the Company or any of its subsidiaries except
as described in "Relationship with TJX -- Services." In addition, the Company
has never operated as, and the Company's management team has never managed, a
stand-alone company. The inability of the Company to operate competitively or of
management to manage the Company effectively and efficiently as a stand-alone
company could have a material adverse effect on the Company's business,
financial condition and results of operations.
VOLATILITY OF CONSUMER PREFERENCES AND SPENDING PATTERNS
Apparel sales have historically been dependent, in part, upon discretionary
consumer spending which is affected by general economic conditions, consumer
confidence, availability of consumer credit and other factors beyond the control
of the Company. In addition, the Company's performance is subject to risks
associated with changing fashion and the Company's ability to deliver fashion
that is in demand. Although the Company believes that its strategy of offering a
broad range of merchandise limits the risk attendant to the volatility of
consumer preferences, there can be no assurance that this strategy will be
successful. Misjudgment by the Company as to fashion trends or consumer
preferences or a downturn in discretionary consumer spending could have a
material adverse effect on the Company's business, financial condition and
results of operations.
IMPACT OF INCREASES IN COSTS OF POSTAGE, PAPER AND PRINTING
Postal rates and paper and printing costs affect the cost of the Company's
order fulfillment and catalog and promotional mailings. The Company relies
heavily on discounts from the basic United States Postal Service ("USPS") rate
structure, such as discounts for bulk mailings and pre-sorting by zip code and
carrier routes. Like others in the catalog industry, the Company passes on a
significant portion of its shipping and handling expenses directly to the
customer, but it does not directly pass on the costs of preparing and mailing
catalogs and other promotional materials. The Company historically has not
entered into long-term contracts for its paper purchases. Consequently, there
can be no assurance that the Company will not be subject to an increase in paper
costs. For instance, from January 1993 through December 1995, the price of paper
available to the Company increased approximately 75%, resulting in higher
catalog production costs and contributing to the Company's decision to reduce
catalog circulation in 1995. In addition, although the Company currently has
contracts for the printing of its catalogs, these contracts typically have
three-year terms, and offer no assurance that the Company's printing costs will
not increase upon renegotiation of these contracts. Significant increases in
postal rates or paper or printing costs could have a material adverse effect on
the Company's business, financial condition and results of operations,
particularly to the extent that the Company is unable to pass on such increases
directly to customers or to offset such increases by either raising prices or
reducing other costs. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for the effect of increases in paper and
postage costs.
DEPENDENCE ON KEY PERSONNEL
The Company's continued success will depend to a significant extent upon
the efforts and abilities of Dhananjaya K. Rao, the Company's President and
Chief Executive Officer, and Carol Meyrowitz, the Company's Executive Vice
President -- Merchandising. The loss of the services of Mr. Rao or Ms. Meyrowitz
could have a material adverse effect on the Company's business, financial
condition and results of operations.
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FINANCING REQUIREMENTS
As a subsidiary of TJX, the Company has benefitted from its ability to
finance its operations and growth through funding provided by TJX. Following the
Offering, the Company's capital needs will be provided through internally
generated funds and bank credit facilities. The Company has received a
commitment from two banks to provide the Company with a three-year credit
facility composed of a $30 million term loan and a revolving line of credit of
up to $120 million, of which up to $50 million may be used for letters of
credit. The closing of the Offering is conditioned upon the closing and funding
of the credit facility. The closing of the credit facility, in turn, is
conditioned upon the banks' receipt of satisfactory evidence that the Company's
deferred billing receivables can be sold in a securitization arrangement
providing at least $30 million of financing. In addition, the terms of the
credit facility loan agreement will require the Company to enter into such a
securitization arrangement acceptable to such banks within 90 days after the
closing of the credit facility. The Company has signed an engagement letter with
a financial institution contemplating a three-year revolving deferred billing
receivables purchase facility. The facility initially will be funded in the
amount of $50 million. There can be no assurance that the Company will be
successful in closing the deferred billing receivables purchase facility when
required by the credit facility. The Company will be subject to compliance with
various loan covenants under the credit and receivables purchase facilities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." To the extent that internally
generated funds and funds available under any credit facilities obtained by the
Company are insufficient for its needs, the Company will have to seek additional
financing through public or private equity or debt financings. There can be no
assurance, however, that any such additional financing will be available on
acceptable terms, if at all. If adequate funds through the proposed credit
facilities or otherwise are not available for any reason, the Company's
business, financial condition and results of operations would be materially
adversely affected.
RELATIONSHIP WITH TJX; POTENTIAL CONFLICTS OF INTEREST
Upon completion of the Offering, TJX will own approximately 39% of the
Company's outstanding Common Stock (approximately 30% if the Underwriters
exercise their over-allotment option in full), and likely will be the Company's
largest stockholder. As a result of its ownership interest, TJX could have
effective control of the vote on matters submitted to stockholders following
completion of the Offering, including the approval of extraordinary corporate
transactions and the election of directors. Currently, two of the four members
of the Company's Board of Directors are officers and directors of TJX, which may
permit TJX to exert additional influence over the Company. Either simultaneously
with the completion of the Offering or within six months thereafter, the Company
anticipates that the Board will be increased to seven members through the
addition of three persons who are neither affiliates of TJX nor associates or
officers of the Company. See "Relationship with TJX." The inability of the
Company to operate free from the influences of TJX could have a material adverse
effect on the Company's business, financial condition and results of operations.
The executive officers of TJX who serve as directors of the Company may
have conflicts of interest in addressing business opportunities and strategies
with respect to which the Company's and TJX's interests differ. Neither the
Company nor TJX has adopted any formal procedures designed to assure that such
conflicts of interest will not occur or to resolve any such conflicts.
The Company and TJX currently intend to continue their past practice of
having the Company sell excess inventory to TJX, among others. The Company and
TJX have entered into an Inventory Purchase Agreement expiring on January 29,
2000. See "Relationship with TJX -- Liquidation." The Company believes that the
Inventory Purchase Agreement will allow the Company and TJX to maintain their
mutually advantageous inventory liquidation relationship. If the terms of the
agreement do not continue to be advantageous to the Company during the term of
the agreement or if the liquidation arrangements were not to be continued upon
their expiration, there could be a material adverse effect on the Company's
business, financial condition and results of operations.
9
<PAGE> 12
DEPENDENCE ON SUPPLIERS; FOREIGN SOURCING
The Company's broad range of merchandise requires that it maintain
relationships with many manufacturing sources and suppliers. Although the
Company believes that it has established strong relationships with its principal
manufacturing sources, the Company does not have long-term contracts. The
inability of the Company to source quality goods in a timely fashion at
favorable prices could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Purchasing;
Suppliers."
In 1995, approximately 34% of the Company's merchandise was directly
imported. Approximately 10% of all merchandise purchased was directly imported
from China. In addition, many of the Company's domestic vendors import a
substantial portion of their merchandise from abroad. Many of the Company's
imports are subject to existing or potential duties, tariffs or quotas that may
limit the quantity of certain types of goods that may be imported into the
United States. The Company competes with other companies for production
facilities and production capacity. The Company's business is also subject to a
variety of other risks associated with doing business abroad, such as political
instability, currency and exchange risks and other local issues. The Company's
future performance will be subject to such risks, which are beyond its control,
and there can be no assurance that the occurrence of any destabilizing event
abroad would not have a material adverse effect on the Company's business,
financial condition and results of operations.
RISK OF DISASTER
The Company conducts its operations primarily from a single facility in
West Bridgewater, Massachusetts. If a disaster (such as a fire or hurricane)
were to destroy or significantly damage the facility, the Company would have to
obtain alternative facilities from which to conduct its operations and replenish
its inventory, all of which would result in increased operating costs and
significant delays in fulfillment of customer orders. While the Company intends
to maintain business interruption insurance, any such increased costs or delays
could have a material adverse effect on the Company's business, financial
condition and results of operations.
COMPETITION
All aspects of the retail apparel industry are highly competitive. The
Company competes with all retail sellers of apparel, including T.J. Maxx and
Marshalls. The Company competes primarily with other catalog retailers,
department stores and specialty retailers, many of which have greater financial
resources than the Company. While the Company is currently the nation's largest
catalog retailer of off-price women's apparel, there can be no assurance that
other retailers of apparel will not decide in the future to enter the Company's
market. If the Company is unable to continue to compete effectively in the
women's apparel and other markets, the Company's business, financial condition
and results of operations would be materially adversely affected. See
"Business -- Competition."
RISKS RELATED TO UNIONIZED EMPLOYEES
At April 27, 1996, the Company had 2,452 associates, of whom approximately
992 were members of a labor union. If unionized associates were to engage in a
strike or other work stoppage or if additional associates were to become
unionized, the Company could experience a significant disruption of operations
and higher labor costs, all of which could have a material adverse effect on the
Company's business, financial condition and results of operations.
NO CASH DIVIDENDS ON COMMON STOCK
The Company anticipates that for the foreseeable future all earnings, if
any, will be retained for the operation and expansion of its business.
Accordingly, the Company does not currently anticipate paying any cash dividends
on its Common Stock. See "Dividend Policy."
10
<PAGE> 13
NO PRIOR PUBLIC MARKET; DETERMINATION OF OFFERING PRICE; MARKET VOLATILITY
Prior to this Offering, there has been no public market for the Company's
Common Stock. The Company has been approved to list the shares of Common Stock
on the NYSE, but there can be no assurance that following the Offering an active
public trading market will develop or be sustained or that shares of the Common
Stock will be resold at or above the initial public offering price. The initial
public offering price of the Common Stock was determined by negotiations among
the Company, TJX and the Representatives of the Underwriters based on several
factors and does not necessarily bear any relationship to the Company's asset
value, net worth or other established criteria of value. Accordingly, such price
should not be considered an indication of the Company's actual value. See
"Underwriting." Additionally, the market price of the Common Stock may be
subject to significant fluctuations and may trade below the initial public
offering price in response to changes in the general condition of the economy or
the retail and catalog industries or other factors beyond the control of the
Company. The Company's quarterly results of operations may also fluctuate
significantly as a result of several factors, including the timing of catalog
mailings and changes in the selection of merchandise offered and sold. Any
public market that may develop for the Company's Common Stock may be materially
adversely affected by any such stock price or operational fluctuations.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, TJX will own approximately 39% of the
Company's outstanding Common Stock (approximately 30% if the Underwriters
exercise their over-allotment option in full). In connection with the Offering,
the Company and TJX will enter into an agreement that will provide TJX with
certain rights to have the shares of Common Stock owned by it after the Offering
registered by the Company under the Securities Act of 1933, as amended (the
"Securities Act"), in order to permit the public sale of such shares. See
"Relationship with TJX -- Registration Rights Agreement." In addition, subject
to the restrictions described below and applicable law, TJX will be free to sell
any and all of the shares of Common Stock it owns after completion of the
Offering. TJX has advised the Company that it expects to reduce its ownership
interest in the Company over time, subject to prevailing market and other
conditions. TJX has agreed, however, not to offer, sell or contract to sell or
otherwise dispose of, directly or indirectly, or announce the offering of, or
exercise any registration rights with respect to, or register, cause to be
registered or announce the registration or intended registration of, any shares
of Common Stock or any stock option or other security convertible into or
exchangeable for, any shares of Common Stock for a period of 180 days from the
date of the Underwriting Agreement relating to the Offering without the prior
written consent of the Representatives of the Underwriters except for (a) in the
case of the Company, Common Stock issued pursuant to any employee or director
plan described herein and (b) in the case of directors and executive officers,
the exercise of stock options pursuant to benefit plans described herein and
shares of Common Stock disposed of as bona fide gifts. See "Underwriting." No
prediction can be made as to the effect, if any, that future sales of Common
Stock, or the availability of Common Stock for future sales, will have on the
market price of the Common Stock prevailing from time to time. Sales of
substantial amounts of Common Stock or the perception that sales could occur
could adversely affect prevailing market prices for the Common Stock. See
"Shares Eligible For Future Sale" and "Underwriting."
CERTAIN ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Certificate of Incorporation and By-laws
and Delaware law could, together or separately, discourage potential acquisition
proposals, delay or prevent a change in control of the Company or limit the
price that certain investors might be willing to pay in the future for shares of
the Common Stock. Certain of those provisions provide for a classified Board of
Directors, the issuance, without further stockholder approval, of preferred
stock with rights and privileges that could be senior to the Common Stock, no
right of the stockholders to call a special meeting of stockholders,
restrictions on the ability of stockholders to nominate directors and submit
proposals to be considered at stockholders' meetings and a supermajority voting
requirement in connection with stockholders' proposed amendments to the By-laws.
The Company also is subject to Section 203 of the Delaware General Corporation
Law (the "DGCL") which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any of a broad range of business combinations with
any "interested stockholder" for a period of three years following the date that
such stockholder became an interested stockholder. See "Description of Capital
Stock."
11
<PAGE> 14
THE COMPANY
Chadwick's of Boston, Ltd. is the nation's first and largest catalog
retailer of off-price women's apparel and one of the largest participants in
women's apparel catalog retailing. The Company offers a broad selection of high
quality branded and private label apparel at prices typically 25% to 50% below
the regular prices of department and specialty retail stores. The Company
believes that it has developed a strong and unique franchise and a well
recognized brand name by consistently delivering exceptional value while
satisfying its customers' wardrobe needs for career, casual and social wear, all
in a broad selection of colors, styles and sizes. Chadwick's believes that its
success in executing this merchandising strategy is the result of its thorough
understanding of the Company's target customer, extensive off-price
merchandising experience, powerful catalog presentation, strong product
development and worldwide sourcing capabilities. As a result, Chadwick's has
increased sales at a compound annual growth rate of 28.0%, from $173.4 million
in 1991 to $465.6 million in 1995.
The Company believes that Chadwick's of Boston is one of the most well
recognized brand names in women's apparel catalog retailing, and that its
customer list is one of the largest and most valuable in the women's apparel
industry. Chadwick's has over 10 million names on its customer list, more than
six million of which are active customers, having made one or more purchases in
the preceding 18 months. Management believes that its brand name and customer
list provide the Company with distinct competitive advantages that can be
neither easily nor cost-effectively replicated.
The Company's target customers are middle to upper middle income women
between the ages of 25 and 55, who the Company believes represent approximately
one-third of the adult female population in the United States or approximately
33 million women. The overall women's apparel industry generated approximately
$81 billion in sales in 1995, of which catalog sales represented approximately
9.4% or $7.6 billion. While sales in the overall women's apparel industry grew
by approximately one percent from 1994 to 1995, catalog sales of women's apparel
grew by 6.1% during the same period. The Company believes that catalog sales of
women's apparel will continue to increase because the busy lifestyles of today's
women demand the convenience and time savings afforded by catalog shopping.
The Chadwick's of Boston catalog was established by TJX in 1983. The
Company was organized under Delaware law on May 16, 1996 for the purpose of
facilitating the Exchange Transaction in connection with the Offering. The
Company's principal executive offices are located at 35 United Drive, West
Bridgewater, Massachusetts 02379 and its telephone number is (508) 583-8110.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of shares of
Common Stock offered hereby. All proceeds will be received by TJX.
DIVIDEND POLICY
The Company plans to retain any future earnings for expansion of its
business and, accordingly, the Company does not anticipate paying cash dividends
in the foreseeable future. Payment of dividends is within the discretion of the
Company's Board of Directors and will depend, among other factors, upon the
Company's earnings, financial condition and capital requirements.
12
<PAGE> 15
CAPITALIZATION
<TABLE>
The following table sets forth the capitalization of the Company as of
April 27, 1996 on a historical basis and on a pro forma basis, giving effect to
the Debt Repayment. This table should be read in conjunction with "Selected
Financial Data," the Combined Financial Statements, the Pro Forma Combined
Financial Statements and notes thereto included elsewhere in this Prospectus.
<CAPTION>
APRIL 27, 1996
-------------------------
HISTORICAL PRO FORMA
---------- ------------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt...................................................... -- --
Long-term debt:
Loans and advances from TJX(1)..................................... $ 60,277 --
Term loan.......................................................... -- 30,000
Stockholder's equity:
Preferred Stock, $.01 par value, authorized 5,000,000 shares, no
shares outstanding.............................................. -- --
Common Stock, $.01 par value, authorized 35,000,000 shares, issued
and outstanding 15,178,847 shares............................... 152 152
Additional paid-in capital......................................... -- 20,000
Retained earnings.................................................. 63,220 63,220
--------- --------
Total stockholder's equity........................................... 63,372 83,372
--------- --------
Total capitalization....................................... $ 123,649 $113,372
========= ========
<FN>
- ---------------
(1) Assumes $15,322,000 is repaid with the proceeds from the sale of deferred
billing receivables.
</TABLE>
13
<PAGE> 16
SELECTED FINANCIAL DATA
The selected financial data set forth below for each of the fiscal years in
the five-year period ended January 27, 1996, is derived from the Combined
Financial Statements of the Company. The information related to the income
statement data for the years ended January 29, 1994, January 28, 1995, and
January 27, 1996, and the balance sheet data as of January 28, 1995 and January
27, 1996, are derived from audited Combined Financial Statements of the Company.
The income statement data for the thirteen weeks ended April 29, 1995 and April
27, 1996, and for the years ended January 25, 1992 and January 30, 1993, and the
balance sheet data as of January 25, 1992, January 30, 1993, January 29, 1994,
April 29, 1995 and April 27, 1996, is derived from unaudited Combined Financial
Statements of the Company. In the opinion of the Company's management, all
adjustments (all of which were normal recurring adjustments) necessary for a
fair presentation of the financial position and results of operations have been
included in the aforementioned unaudited Combined Financial Statements. The
results of operations for the thirteen weeks ended April 27, 1996, are not
necessarily indicative of the results of operations expected for the entire
fiscal year.
The pro forma financial data for the year ended January 27, 1996 and as of
and for the thirteen weeks ended April 27, 1996, have been derived from and
should be read in conjunction with the unaudited Pro Forma Combined Financial
Statements of the Company and the notes thereto (including a description of the
assumptions used in the pro forma data) included elsewhere in this Prospectus.
14
<PAGE> 17
<TABLE>
SELECTED FINANCIAL DATA
<CAPTION>
PRO FORMA
HISTORICAL -------------------
-------------------------------------------------------------------------- FISCAL THIRTEEN
THIRTEEN YEAR WEEKS
FISCAL YEAR ENDED WEEKS ENDED ENDED ENDED
---------------------------------------------------- ------------------- -------- --------
JAN. 25, JAN. 30, JAN. 29, JAN. 28, JAN. 27, APR. 29, APR. 27, JAN. 27, APR. 27,
1992 1993(1) 1994 1995 1996 1995 1996 1996 1996
-------- -------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, NET SALES PER CATALOG AND AVERAGE ORDER VALUE)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.................... $173,374 $295,532 $424,276 $432,660 $465,598 $116,611 $131,996 $465,598 $131,996
-------- -------- -------- -------- -------- -------- -------- -------- --------
Cost of sales, including
buying and order
fulfillment costs.......... 106,111 183,186 269,233 271,874 278,868 69,144 73,300 278,868 73,300
-------- -------- -------- -------- -------- -------- -------- -------- --------
Gross profit............... 67,263 112,346 155,043 160,786 186,730 47,467 58,696 186,730 58,696
Selling, general and
administrative expenses,
including catalog and order
processing costs........... 55,656 90,366 131,439 155,329 160,282 42,387 45,831 161,982 46,231
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income from operations..... 11,607 21,980 23,604 5,457 26,448 5,080 12,865 24,748 12,465
Interest expense (income),
net........................ (213) (33) 3,378 3,940 6,920 1,542 1,404 5,800 1,060
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income before income taxes,
extraordinary items and
cumulative effect of
accounting changes......... 11,820 22,013 20,226 1,517 19,528 3,538 11,461 18,948 11,405
Provision for income taxes... 4,712 8,829 7,941 255 7,854 1,422 4,764 7,616 4,741
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income before extraordinary
items and cumulative effect
of accounting changes...... $ 7,108 $ 13,184 $ 12,285 $ 1,262 $ 11,674 $ 2,116 $ 6,697 $ 11,332 $ 6,664
======== ======== ======== ======== ======== ======== ======== ======== ========
Net income(2)................ $ 7,108 $ 13,184 $ 12,665 $ 1,070 $ 8,336 $ 2,116 $ 6,697 $ 7,994 $ 6,664
======== ======== ======== ======== ======== ======== ======== ======== ========
PRO FORMA EARNINGS PER COMMON
SHARE:
Income before extraordinary
items and cumulative effect
of accounting changes...... $ .74 $ .44
======== ========
Net income................... $ .52 $ .44
======== ========
BALANCE SHEET DATA:
Working capital.............. $ 9,228 $ 20,777 $ 52,368 $ 44,409 $ 77,843 $ 81,187 $ 75,140 $ 62,788
Total assets................. 70,673 121,094 156,095 177,625 199,215 210,540 199,648 186,401
Long-term debt(3)............ 7,580 22,152 52,154 47,391 70,769 81,712 60,277 30,000
Stockholder's equity......... 21,420 34,604 47,269 48,339 56,675 50,455 63,372 83,372
OTHER FINANCIAL AND OPERATING
DATA:
EBITDA(4).................... $ 13,580 $ 25,116 $ 28,109 $ 11,156 $ 33,160 $ 6,717 $ 14,524 $ 31,460 $ 14,124
Total catalog circulation.... 78,555 123,064 213,168 234,973 196,073 64,150 48,487
Net sales per catalog(5)..... $ 2.21 $ 2.40 $ 1.99 $ 1.84 $ 2.37 $ 1.82 $ 2.72
Average order value(6)....... $ 84 $ 83 $ 81 $ 81 $ 86 $ 78 $ 94
<FN>
- ---------------
(1) 53 week period.
(2) Net income includes a credit of $380,000 for the cumulative effect of
accounting changes in the fiscal year ended January 29, 1994 and includes
extraordinary charges for the early retirement of debt of $192,000 in the
fiscal year ended January 28, 1995 and $3.3 million in the fiscal year ended
January 27, 1996.
(3) Includes loans and advances from TJX.
(4) Earnings before interest, taxes, depreciation and amortization.
(5) Net sales per catalog equals net sales divided by total catalog circulation.
(6) Average order value equals total value of orders received divided by the
number of orders received.
</TABLE>
15
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Unless otherwise indicated or the context otherwise requires in this
section, each reference to a year is to the Company's fiscal year which ends on
the last Saturday in January in the following calendar year (e.g., "1995" means
the fiscal year ended January 27, 1996). The following discussion and analysis
should be read in conjunction with "Selected Financial Data" and the Combined
Financial Statements and related notes thereto which appear elsewhere in this
Prospectus.
OVERVIEW
From 1987 through 1993, the Company's net sales grew at a compound annual
growth rate of 46.7%. By the fall of 1994, the Company's order fulfillment and
customer service operations were unable to keep pace with its rapid sales
growth, resulting in a decline in sales growth, an increase in operating
expenses and a substantial decline in profitability. In response, the Company
reorganized its management team in the first quarter of 1995. This new
management team implemented a series of initiatives to increase operational
efficiencies and improve customer service to levels necessary to support the
Company's strong and established merchandising organization. Catalog circulation
was reduced, the deferred billing program was expanded, and improvements were
made in fulfillment center and telemarketing operations, inventory management
and coordination among all facets of the business.
RESULTS OF OPERATIONS
The following table is derived from the Company's statements of income for
the periods indicated and expresses the results of operations in such periods as
a percentage of net sales:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THIRTEEN WEEKS ENDED
---------------------------------- ---------------------
JAN. 29, JAN. 28, JAN. 27, APR. 29, APR. 27,
1994 1995 1996 1995 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales, including buying and order
fulfillment costs......................... 63.5 62.8 59.9 59.3 55.5
----- ----- ----- ----- -----
Gross margin...................... 36.5 37.2 40.1 40.7 44.5
Selling, general and administrative
expenses, including catalog and order
processing costs.......................... 31.0 35.9 34.4 36.3 34.7
----- ----- ----- ----- -----
Income from operations............ 5.6 1.3 5.7 4.4 9.7
Interest expense, net....................... 0.8 0.9 1.5 1.3 1.1
Income before income taxes, extraordinary
items and cumulative effect of accounting
changes................................... 4.8% 0.4% 4.2% 3.0% 8.7%
===== ===== ===== ===== =====
</TABLE>
A comparison of the results of operations for the most recent quarter and
for the past three years follows.
THIRTEEN WEEKS ENDED APRIL 27, 1996 COMPARED WITH THIRTEEN WEEKS ENDED APRIL 29,
1995
Net sales for the first quarter ended April 27, 1996 increased 13.2% to
$132.0 million from $116.6 million in the prior year, despite a 24.4% decrease
in catalog circulation for the same period from 64.2 million catalogs to 48.5
million catalogs. The Company experienced a significant increase in average
order value compared to the same period in 1995 and continued to maintain the
strong fulfillment rates achieved in 1995. The improvements in operations and
inventory management beginning in the second quarter of 1995 as well as the
expansion of the deferred billing program during 1995 contributed to the
increase in average order value and net sales in the first quarter of 1996
compared to the first quarter of 1995.
16
<PAGE> 19
Cost of sales, including buying and order fulfillment costs, as a
percentage of net sales was 55.5% in the quarter ended April 27, 1996 versus
59.3% in the quarter ended April 29, 1995. The improvement reflects an increase
in merchandise margin and a reduction in fulfillment center labor and shipping
costs as a percentage of net sales. Results for the quarter ended April 29, 1995
did not reflect the benefit of operating efficiencies initiated during that
year.
Selling, general and administrative expenses, including catalog and order
processing costs, as a percentage of net sales were 34.7% for the quarter ended
April 27, 1996 versus 36.3% in the comparable period for the prior year. This
improvement is primarily due to increased sales productivity per catalog.
Net income was $6.7 million for the quarter ended April 27, 1996 compared
to $2.1 million in the comparable period for the prior year.
1995 COMPARED WITH 1994 AND 1994 COMPARED WITH 1993
Net sales for 1995 totalled $465.6 million on circulation of 196.1 million
catalogs versus net sales of $432.7 million on circulation of 235.0 million
catalogs in 1994. The increase in net sales of 7.6%, despite a decrease in
circulation of 16.6%, is attributable to a number of factors, including
improvements in inventory management and order fulfillment, which allowed the
Company to satisfy and ship customer orders on a more timely and efficient
basis, expansion of the Company's deferred billing program and improvement in
overall levels of customer service. The increase in the Company's average order
value to $86 in 1995 from $81 in 1994 and the increase in net sales per catalog
to $2.37 in 1995 from $1.84 in 1994 are primarily attributable to the
aforementioned factors coupled with decreased catalog circulation.
Net sales of $432.7 million in 1994 increased 2.0% over net sales of $424.3
million in 1993 while circulation increased 10.2% to 235.0 million catalogs from
213.2 million catalogs in 1993. The most significant issue impacting lackluster
sales in 1994 was the Company's poor performance in fulfilling customer orders,
resulting in customer dissatisfaction and loss of sales. This operational
problem, along with higher catalog circulation to prospective customers in 1994,
were factors contributing to the decrease in the net sales per catalog to $1.84
in 1994 from $1.99 in 1993.
Cost of sales, including buying and order fulfillment costs, as a
percentage of net sales was 59.9%, 62.8% and 63.5% in 1995, 1994 and 1993,
respectively. The improvement in the ratio in 1995 from 1994 reflects an
increase in shipping and handling income, less excess inventory to liquidate and
improved fulfillment center labor productivity. The improvement in this ratio in
1994 from 1993 is primarily due to savings in shipping costs.
Selling, general and administrative expenses, including catalog and order
processing costs, as a percentage of net sales were 34.4%, 35.9% and 31.0% in
1995, 1994 and 1993, respectively. These expenses as a percentage of net sales
decreased in 1995 as a result of improved sales productivity per catalog and
reduced catalog production costs, partially offset by increases in order
processing expenses. Catalog production costs decreased due to lower
circulation, which was partially offset by increases in paper and postage costs.
Total selling, general and administrative expenses as a percentage of net sales
increased in 1994 as a result of higher catalog production costs due to a 10.2%
increase in catalog circulation coupled with increased paper costs. These cost
increases were accompanied by a decrease in catalog productivity and an increase
in order processing costs, while the Company's ability to fulfill customer
orders declined.
Interest expense was $6.9 million, $3.9 million and $3.4 million in 1995,
1994 and 1993, respectively. The increase in interest expense in 1995 is due to
increased short-term borrowings from TJX and higher short-term interest rates.
The increased borrowings during 1995 are primarily the result of additional
working capital requirements associated with expansion of the Company's deferred
billing program.
17
<PAGE> 20
The Company's effective income tax rate was 40.2%, 16.8% and 39.3% in 1995,
1994 and 1993, respectively. The low level of pretax income in 1994 along with
certain tax benefits in that year resulted in a lower effective income tax rate.
The difference between the federal statutory income tax rate and the effective
income tax rate is primarily attributable to the effective state income tax
rate.
The Company recorded an extraordinary charge for the early retirement of
debt in both 1995 and 1994. The after-tax extraordinary charge of $3.3 million
in 1995 was due to the early prepayment of a $45.0 million loan secured by a
mortgage on the Company's offices and fulfillment center. The charge of $192,000
in 1994 was incurred when the Company retired its outstanding $5.4 million
mortgage, in connection with the $45.0 million financing described above. Net
income in 1993 was impacted by the cumulative effect of accounting changes for
postretirement medical costs and for accounting for income taxes, resulting in
an increase in net income of $380,000. After giving effect to these items, the
Company's net income was $8.3 million, $1.1 million and $12.7 million in 1995,
1994 and 1993, respectively.
QUARTERLY RESULTS
<TABLE>
The following table presents unaudited quarterly financial information for
the two fiscal years ended January 28, 1995 and January 27, 1996. This
information has been prepared by the Company on a basis consistent with the
Company's audited financial statements and includes all adjustments (consisting
only of normal recurring adjustments) which management considers necessary for a
fair presentation of the results for such periods.
<CAPTION>
FISCAL YEAR ENDED JANUARY 28, 1995 BY QUARTER
----------------------------------------------
FIRST SECOND THIRD FOURTH
-------- ------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales.................................... $108,832 $85,391 $120,953 $117,484
Gross profit................................. 43,643 30,851 50,590 35,702
% of net sales.......................... 40.1% 36.1% 41.8% 30.4%
Income (loss) from operations................ 857 4,027 3,690 (3,117)
% of net sales.......................... 0.8% 4.7% 3.1% (2.7%)
Net income (loss)(1)......................... (114) 1,979 1,472 (2,075)
% of net sales.......................... (0.1%) 2.3% 1.2% (1.8%)
<CAPTION>
FISCAL YEAR ENDED JANUARY 27, 1996 BY QUARTER
----------------------------------------------
FIRST SECOND THIRD FOURTH
-------- ------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales.................................... $116,611 $87,602 $151,458 $109,927
Gross profit................................. 47,467 31,647 65,071 42,545
% of net sales.......................... 40.7% 36.1% 43.0% 38.7%
Income (loss) from operations................ 5,080 (1,237) 13,727 8,878
% of net sales.......................... 4.4% (1.4%) 9.1% 8.1%
Net income (loss)(1)......................... 2,116 (1,719) 6,994 4,283
% of net sales.......................... 1.8% (2.0%) 4.6% 3.9%
<FN>
- ---------------
(1) Excludes fourth quarter extraordinary charges of $192,000 and $3.3 million
in years 1994 and 1995, respectively.
</TABLE>
The Company is not dependent on the year-end holiday season for a
disproportionate share of its business. The Company's sales and operating
results are more influenced throughout the year by the timing of the mailing of
its catalogs and by its merchandising strategies than by seasonal fluctuations.
Sales in the second quarter of both 1994 and 1995 and operating results in the
second quarter of 1995 were lower due to the timing of catalog mailings.
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<PAGE> 21
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital needs have been for working capital to
support its growth, including the expansion of its deferred billing program, and
for costs associated with expanding its fulfillment center. Cash flows from
operating activities reflect increased deferred billing receivables as of
January 27, 1996 and April 27, 1996 and higher prepaid catalog costs as of
January 27, 1996 due to the timing of mailing certain catalogs.
The Company's investing activities have consisted primarily of property
additions, which totalled $6.3 million in 1995 and $10.6 million in 1994.
Capital expenditures in 1994 included the cost of completing an expansion of the
Company's fulfillment center to its current capacity, which the Company believes
is adequate for the next several years. In addition, the Company made capital
expenditures to upgrade fulfillment center equipment and management information
systems equipment and related software. Capital expenditures for 1996 are
expected to approximate $8 million, with more than half planned to be dedicated
to the Company's new telemarketing and customer service system.
During 1994, the Company borrowed $45.0 million secured by a mortgage on
its offices and fulfillment center, to reduce advances from TJX and to repay a
$5.4 million mortgage assumed in the initial purchase of the mortgaged property.
This financing was guaranteed by TJX and, in connection with TJX's purchase of
Marshalls in 1995, the Company prepaid the $45.0 million loan and incurred an
after-tax extraordinary charge of $3.3 million. Proceeds to pay off this
mortgage were provided by intercompany borrowings from TJX.
The Company's borrowings from TJX are composed of long-term and short-term
borrowings. Historically, the long-term component was established at the
beginning of each year and generally represented the intercompany balance as of
the beginning of the year. The monthly change in the intercompany balance from
the long-term balance represents either short-term funds invested with TJX or
short-term borrowings from TJX. The Company is credited interest income or
charged interest expense at rates that approximate TJX's short-term investment
or borrowing rate. During the past three years, the maximum amounts the Company
has borrowed from TJX (based on month-end borrowing levels) were $118.4 million,
$65.3 million and $82.9 million in 1995, 1994 and 1993, respectively.
The Company currently is negotiating several agreements to deal with its
financing needs after the Offering of its Common Stock. The Company has received
a commitment from The First National Bank of Boston and The First National Bank
of Chicago, as agents for a syndicate of banks, to provide the Company with a
three-year credit facility composed of a $30 million term loan and a revolving
line of credit of up to $120 million, of which up to $50 million may be used for
letters of credit. The proposed Revolving Credit and Term Loan Agreement with
the banks is expected to contain provisions restricting indebtedness, liens,
investments, distributions, mergers, disposition of assets and transactions with
affiliates; and to impose financial covenants and reporting requirements. The
closing of the Offering is conditioned upon the closing and funding of the
credit facility under the Revolving Credit and Term Loan Agreement. The closing
of the credit facility, in turn, is conditioned upon the receipt by the agents
of satisfactory evidence that the Company's deferred billing receivables can be
sold in a securitization arrangement providing at least $30 million of
financing. The Revolving Credit and Term Loan Agreement will require the Company
to enter into such a securitization arrangement acceptable to such banks within
90 days after closing on the Agreement. The Company has signed an engagement
letter with PNC Securities Corp. contemplating a three-year revolving deferred
billing receivables purchase facility which will provide financing to the
Company initially in the amount of up to $50 million. Under the receivables
purchase facility, an affiliate of PNC Securities Corp. will purchase at a
discount an undivided interest in the Company's deferred billing receivables to
be charged on customers' credit cards. The receivables purchase facility will be
subject to early termination upon the occurrence of certain events, including
the Company's failure to meet certain ratios with respect to the quality of the
deferred billing
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<PAGE> 22
receivables, such as dilution, chargeback and customer payment default ratios,
and default under any agreement between the Company and a credit card company,
as well as usual grounds for termination, including breach of the facility
agreements.
Concurrently with the closing of the Offering, TJX will contribute $20
million to the equity of the Company and the Company will repay to TJX from the
proceeds of loans under the Revolving Credit and Term Loan Agreement the balance
of the intercompany indebtedness over such equity contribution at such time,
which balance is currently estimated to be approximately $50 million. Once these
arrangements are in place, TJX does not intend to lend to the Company, and the
Company does not intend to borrow from TJX. The Company believes that the
proposed credit facilities, along with the Company's internally generated cash
flow, will be adequate to meet the currently anticipated capital needs of the
Company. See "Risk Factors--Financing Requirements."
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<PAGE> 23
BUSINESS
GENERAL
Chadwick's of Boston, Ltd. is the nation's first and largest catalog
retailer of off-price women's apparel and one of the largest participants in
women's apparel catalog retailing. The Company offers a broad selection of high
quality branded and private label apparel at prices typically 25% to 50% below
the regular prices of department and specialty retail stores. The Company
believes that it has developed a strong and unique franchise and a well
recognized brand name by consistently delivering exceptional value while
satisfying its customers' wardrobe needs for career, casual and social wear, all
in a broad selection of colors, styles and sizes. Chadwick's believes that its
success in executing this merchandising strategy is the result of its thorough
understanding of the Company's target customer, extensive off-price
merchandising experience, powerful catalog presentation, strong product
development and worldwide sourcing capabilities. As a result, Chadwick's has
increased sales at a compound annual growth rate of 28.0%, from $173.4 million
in 1991 to $465.6 million in 1995.
The Company believes that Chadwick's of Boston is one of the most well
recognized brand names in women's apparel catalog retailing, and that its
customer list is one of the largest and most valuable in the women's apparel
industry. Chadwick's has over 10 million names on its customer list, more than
six million of which are active customers, having made one or more purchases in
the preceding 18 months. Management believes that its brand name and customer
list provide the Company with distinct competitive advantages that can be
neither easily nor cost-effectively replicated.
The Company's target customers are middle to upper middle income women
between the ages of 25 and 55, who the Company believes represent approximately
one-third of the adult female population in the United States or approximately
33 million women. The overall women's apparel industry generated approximately
$81 billion in sales in 1995, of which catalog sales represented approximately
9.4% or $7.6 billion. While sales in the overall women's apparel industry grew
by approximately one percent from 1994 to 1995, catalog sales of women's apparel
grew by 6.1% during the same period. The Company believes that catalog sales of
women's apparel will continue to increase because the busy lifestyles of today's
women demand the convenience and time savings afforded by catalog shopping.
From 1987 through 1993, the Company's net sales grew at a compound annual
growth rate of 46.7%. By the fall of 1994, the Company's order fulfillment and
customer service operations were unable to keep pace with its rapid sales
growth, resulting in a decline in sales growth, an increase in operating
expenses and a substantial decline in profitability. In response, the Company
reorganized its management team in the first quarter of 1995 by accepting the
resignations of and replacing certain officers of the Company. The reorganized
management team implemented a series of initiatives to increase operational
efficiencies and improve customer service to levels necessary to support the
Company's strong and established merchandising organization. Catalog circulation
was reduced and improvements were made in fulfillment center and telemarketing
operations, inventory management and coordination among all facets of the
business.
The Company's initiatives produced substantial and rapid improvement.
Between 1994 and 1995, the initial fulfillment rate (percentage of merchandise
available to be shipped at the time of order) increased from 57.1% to a Company
record of 72.3% and the final fulfillment rate (percentage of total merchandise
orders filled) increased from 86.5% to 90.5%. Over the same period, gross margin
increased from 37.2% to 40.1% and selling, general and administrative expenses
as a percentage of net sales declined from 35.9% to 34.4%. These initiatives,
together with an expansion of the Company's deferred billing program, increased
profits, sales and average order value. Income before extraordinary items grew
from $1.3 million in 1994 to $11.7 million in 1995, and, over the same time
period, average order value increased from $81 to $86 and net sales increased
7.6%, from $432.7 million to $465.6 million, despite a 16.6% reduction in
catalog circulation, from 235.0
21
<PAGE> 24
million to 196.1 million. This strong performance continued into the first
quarter of 1996, as net income increased from $2.1 million in the first quarter
of 1995 to $6.7 million and net sales increased 13.2%, to $132.0 million.
BUSINESS STRATEGIES
The Company believes that its new operational structure, combined with
strong customer acceptance of its value-oriented merchandise, provides a solid
foundation for future growth. The Company intends to capitalize on opportunities
to increase sales to both existing and new customers, continue improvements in
operating efficiencies and increase leveraging of operating expenses through the
following strategies:
Expand the Company's Core Women's Apparel Business. Chadwick's ability to
consistently deliver high quality merchandise at every day low prices has
created a large base of value-conscious customers. Chadwick's has successfully
increased sales and profitability by expanding the number of styles offered in
its catalog and increasing the assortment of sizes and colors offered with
respect to many items. The Company believes it has a substantial opportunity to
increase sales to existing customers by capturing a greater share of their
apparel purchases. The Company plans to expand its offering of women's apparel
by increasing average page count in its existing catalogs by approximately 20%
over the next three years. The Company anticipates that such expansion will
result in a comparable increase in catalog production costs and have a favorable
impact on sales.
Expand the Company's Complementary Product Offerings. The Company
continually identifies and tests new product categories that are natural
extensions of the Company's existing core women's apparel business. To date, the
Company has tested or offered on a limited basis men's apparel, children's
apparel, women's special sizes, accessories, gifts and cosmetics in certain of
its catalogs. Since the Company began offering complementary products in 1992,
sales of these products have grown to represent 16.2% of total net sales in
1995. Chadwick's believes that a significant opportunity exists to further
increase sales to its core customer base as well as to attract new customers by
expanding these additional product offerings in its existing catalogs.
Develop and Grow New Catalog Concepts. The Company intends to offer in
separate and distinct catalogs complementary products and new product concepts
that have the potential for significant sales growth. In May 1996, the Company
mailed Bridgewater, its first new concept catalog, which offers an assortment of
classic fashions for men and women. To date, customer response to Bridgewater
has exceeded the Company's expectations.
Continue to Refine Catalog Mailing Segmentation Techniques. The Company
plans to further develop and refine its statistical models and analyses to
better target its catalog mailings and more profitably capitalize on its current
customer list of over 10 million names. The Company continually evaluates its
catalog presentation in order to provide the best formats for certain groups of
customers. By refining its catalog mailing segmentation techniques, the Company
hopes to be able to increase its response rate and the dollar amount of
purchases for each catalog mailed.
Expand the Company's Customer Base. The women's retail catalog apparel
market generated approximately $7.6 billion in sales in 1995. The Company
believes that approximately one-third of the adult female population of the
United States or 33 million women meet the Company's target customer profile. As
a result, the Company believes there is opportunity to grow its customer base
and thereby increase sales. The Company intends to achieve such growth by
continuing its aggressive name acquisition program, including the rental of
customer lists and the implementation of advertising campaigns specifically
designed to add new customers.
Increase the Company's Deferred Billing Program. The Company initiated a
deferred billing program in 1995 under which a customer purchases merchandise on
credit but the purchase is not billed to the customer's credit card until a date
90 to 120 days after the catalog is mailed. The Company believes that this "buy
now, pay later" program has contributed to an increase in average order value
and net sales, and intends to expand the use of the program to more of its
catalogs.
22
<PAGE> 25
Continue to Improve Order Fulfillment Operations and Inventory
Management. The Company continually evaluates and improves its order
fulfillment operations and inventory management procedures in order to increase
operating efficiencies. As a result of these efforts to date, the Company has
increased its initial and final fulfillment rates and decreased the number of
customer service calls received, the return rate, the average number of days
from order to delivery and fulfillment center expenses (as an absolute number
and as a percentage of sales). Notwithstanding these accomplishments, the
Company believes that there is room for continued improvement in these
operations and intends to pursue such improvements.
Enhance Telemarketing, Customer Service and Management Information
Systems. The Company intends to continue to upgrade its telemarketing and
management information systems in order to enhance its ability to increase
sales, operating efficiency and overall customer service. The Company is
developing a new order taking and customer service system that is designed to
aid telemarketing and customer service representatives by providing them with
on-line catalog information and data on customer orders and past purchases. This
additional information is expected to increase the ability of the Company's
sales representatives to personalize transactions, market additional products
that complement the purchases being made by the customer and recommend
alternatives for items that are back ordered or sold out. The Company believes
the new system will lead to increased productivity by utilizing "universal
agents" to receive both telephone orders and customer service calls. The Company
also continually evaluates its operations to determine ways in which it can
better serve the customer by, among other things, reducing the time it takes to
place and deliver orders. In addition, the Company plans to continue investing
in and enhancing its management information systems in order to improve
efficiencies in the areas of inventory management, fulfillment center
operations, returns processing and finance.
INDUSTRY OVERVIEW
The retail catalog apparel market is estimated to be approximately $11.5
billion, with the retail catalog markets for women's apparel and men's apparel
accounting for approximately $7.6 billion and $3.2 billion of that total,
respectively. Based upon industry sources, from 1994 to 1995, catalog sales of
women's apparel grew 6.1%, as compared to the growth rate of approximately one
percent in the overall women's apparel industry for the comparable period. The
Company believes that retail catalog sales of women's apparel will continue to
increase because the busy lifestyles of today's women demand the convenience and
time savings afforded by catalog shopping. Despite the difficult United States
apparel market over the past few years, Chadwick's has continued to grow its
sales. Based upon its continued strength, the Company believes that it is well
positioned to capitalize on future opportunities for growth.
MERCHANDISING
Since its inception, Chadwick's merchandising strategy has been to deliver
exceptional value to the middle to upper middle income American woman. The
Company offers a broad selection of high quality branded and private label
apparel at prices typically 25% to 50% below the regular prices of department
and specialty retail stores. The Company offers every day low prices and
publishes only two end-of-season clearance catalogs per year.
The Company believes that it has developed a strong and unique franchise
and a well recognized brand name by consistently delivering exceptional value to
its customers through high quality, low prices and broad selection. Chadwick's
believes that its success in executing its merchandising strategy is the result
of its thorough understanding of the Company's target customer, extensive
off-price merchandising experience, powerful catalog presentation, strong
product development and worldwide sourcing capabilities. Chadwick's also
believes that it is distinct in its ability to offer value across its
merchandise lines, which feature a wide array of colors and styles designed to
satisfy its customers' wardrobe needs for career, casual and social wear. The
Company continuously offers merchandise which includes both basic styles and
current fashion. A benefit of Chadwick's merchandising strategy is Chadwick's
ability to shift the mix of its merchan-
23
<PAGE> 26
dise offerings as consumer demand shifts. In general, the Company plans to
increase sales in its core business by offering an expanded selection of women's
apparel through increased page count in its existing catalogs.
The Company continually identifies and tests new product categories that
are natural extensions of the Company's existing core women's apparel business.
To date, the Company has tested or offered on a limited basis men's apparel,
children's apparel, women's special sizes, accessories, gifts and cosmetics in
certain of its catalogs. Since the Company began offering complementary products
in 1992, sales of these products have grown to represent 16.2% of total net
sales in 1995. Chadwick's believes that a significant opportunity exists to
further increase sales to its core customer base as well as to attract new
customers by expanding these additional product offerings in its existing
catalogs. In May 1996, the Company mailed Bridgewater, its first new concept
catalog, which offers an assortment of classic fashions for men and women. To
date, customer response to Bridgewater has exceeded the Company's expectations.
The Company's success in implementing its merchandising strategy is in
large part due to the Company's team approach to merchandising, catalog design
and inventory management. The key members of the Company's merchandising team
have been with the Company for an average of eight years. The Company believes
that its merchandising team's collective experience and negotiating skills,
coupled with the team's knowledge of apparel markets and the Company's target
customer, allows the Company to consistently deliver high value merchandise in
up-to-date basics and current fashion. In an effort to keep the merchandise
offered in the Chadwick's catalog exciting and to seek out the best quality
merchandise, members of the merchandising team travel both abroad and across the
United States several times each year. The Company's merchandising team
continues to identify new fashion trends and new markets and to develop new
products and product classifications to meet customers' needs.
MARKETING
An important element of the Company's marketing strategy is the improved
segmentation of its existing customer files. The Company currently uses customer
file segmentation analyses, based on customers' purchasing histories and other
customer information, to design catalog circulation strategies that increase
customer response rates. As a result, the Company is able to successfully tailor
its catalogs to customer needs by sending different versions of catalogs to
different segments of the customer list. The Company intends to invest in
database and segmentation software to allow it to more efficiently access its
significant customer data bases and to improve its ability to conduct these
analyses.
Chadwick's believes that circulation planning based on more sophisticated
statistical circulation models will increase the effectiveness of catalog
mailings and maximize the productivity of its customer lists. As a result, the
Company is testing increasingly sophisticated statistical circulation planning
models to improve its ability to predict customer purchase behavior based on a
wide range of variables. The Company plans to use these analyses to enhance its
circulation efficiencies.
The Company's catalog is the result of the collaborative effort of its
merchandising, marketing and catalog production teams and outside agencies.
Members of Chadwick's merchandising team select the styles that are to be
included in the catalog and work with outside agencies to select appropriate
fashion models and photo shoot locations. Members of the catalog production team
then work with the outside agencies to determine the ideal size and layout for
each catalog. The Company places great emphasis on page layout because it
believes that appropriate page presentation of its merchandise stimulates
demand. The Company closely manages the catalog production process to control
costs and simultaneously maintain attractive and effective catalog presentation.
The Company has contracts with two printers which cover its production
requirements and afford some protection against certain cost increases.
24
<PAGE> 27
The Company utilizes a catalog mailing strategy which is built around the
key apparel selling seasons: spring, summer, fall, winter and Christmas. Each
season has a large mailing followed by a series of smaller mailings in order to
capture incremental sales from the Company's more active customers.
Additionally, the Company mails two end-of-season clearance catalogs, one each
for winter and summer.
Chadwick's customer name acquisition programs are designed to attract new
customers in a cost effective manner. The Company utilizes various sources to
acquire new names, including list rentals, magazine solicitations, promotional
inserts, friends' name cards inserted in mailed catalogs, direct sell campaigns
and reactivation of previous Chadwick's customers.
The Company views the use of credit as an important marketing tool. The
vast majority of the Company's 1995 sales were charged on customers' major
credit cards. In 1995, the Company began offering its customers a deferred
billing program under which a customer purchases merchandise on credit but the
purchase is not billed to the customer's credit card until a date 90 to 120 days
after the catalog is mailed. The Company assumes the risk that after the
deferral period, the purchase cannot be charged to the customer's credit card.
The Company's deferred billing credit losses have been insignificant to date,
due, in part, to the Company's deferred billing procedures that are designed to
limit credit losses. Chadwick's intends to expand the use of this "buy now, pay
later" program. The Company also is investigating other credit marketing
programs as a further method of increasing sales.
CUSTOMER SERVICE AND TELEMARKETING
Providing superior service to customers is a key element of the Company's
strategy. The Company maintains a toll-free telephone service for orders and
other customer needs, emphasizes customer service and friendliness in training
for its telephone sales representatives, and unconditionally guarantees its
merchandise at any time. The Company's return policy provides that if a customer
is not satisfied with a purchase for any reason, the merchandise can be returned
to the Company for a refund or exchange.
The Company's telemarketing facilities are open 24 hours a day, seven days
a week, and have an aggregate of approximately 800 telemarketing and customer
service representatives. In 1995, Chadwick's telemarketing facilities handled
over 11 million calls. The number of representatives staffing these calls varies
greatly during the hours of each day of each selling season, based on
anticipated call volume. During peak and off hours, the Company also uses
outside service providers to satisfy its telemarketing and customer service
requirements. The Company continues to evaluate the manner in which it receives
and services calls to determine the most efficient manner in which to service
its customers.
The Company is developing a new order taking and customer service system
that is designed to aid telemarketing and customer service representatives by
providing them with on-line catalog information and data on customer orders and
past purchases. This additional information is expected to increase the ability
of the Company's sales representatives to personalize transactions, market
additional products that complement the purchases being made by the customer and
recommend alternatives for items that are back ordered or sold out. The Company
believes the new system will lead to increased productivity by utilizing
"universal agents" to receive both telephone orders and customer service calls.
The Company also expects that such a system will permit the Company to process
orders more efficiently by improving communication between the Company's
telemarketing center and fulfillment center.
FULFILLMENT AND DELIVERY
Through its fulfillment and delivery operations, the Company seeks to
provide excellent customer service within a low cost structure.
The Company's commitment to customer service is supported by its
fulfillment and telemarketing centers, located in approximately 700,000 square
feet of space in West Bridgewater, Massachu-
25
<PAGE> 28
setts. Designed to process and ship customer orders rapidly and in a cost
effective manner, the fulfillment center uses high speed conveyor belts, bar
code scanning and a sophisticated tilt tray sorter. The facility processed over
11 million shipments in 1995, with in-stock items generally being shipped to
customers within 48 hours of their placement. The Company's fulfillment center
has the capacity to process approximately 40% more sales before any capital
expansion of the center will be required.
The Company attempts to minimize order delivery costs without sacrificing
expedient delivery to customers through careful management of its shipping
techniques. The Company's sorting system segregates packages by zip code and
automatically calculates the weight of each parcel to be shipped. The majority
of the Company's packages are shipped through the USPS.
INVENTORY MANAGEMENT
The Company's inventory management strategy is designed to maintain
inventory levels that provide optimum in-stock positions, while maximizing
inventory turnover rates and minimizing the amount of unsold merchandise at the
end of each season. Chadwick's maintains higher inventory levels for basic
apparel items which are not generally fashion sensitive. Inventory levels for
items with greater fashion risk are maintained at lower levels, with the goal of
selling all such merchandise prior to the end of a season. The Company
historically has been successful in selling its overstock through its
twice-yearly, end-of-season clearance catalogs, through its retail outlet stores
located in Nashua, New Hampshire and Brockton, Massachusetts, and to TJX and
other third parties. During 1995, the Company liquidated approximately $10.6
million of its total inventory liquidations through TJX. See "Relationship with
TJX -- Liquidation."
In order to sustain operating profit and customer service, the Company
carefully balances its inventory to minimize overstock, out-of-stock and back
order inventory conditions, all of which are common in catalog retailing.
Because out-of-stock and back order conditions cannot be eliminated, when these
conditions occur, the Company experiences some order cancellations. Initial
fulfillment increased from 57.1% to 72.3% between 1994 and 1995, and final
fulfillment increased from 86.5% to 90.5% during the same period. See "Business
- -- General."
PURCHASING; SUPPLIERS
The Company conducts its purchasing operations through its office in West
Bridgewater, Massachusetts. The Company's merchandising staff actively monitors
the fashion markets and offering of other catalogs and retail stores in an
effort to ensure that the Company's merchandise offering is competitive in
fashion and price. To improve purchasing efficiency, the Company also relies on
pre-mailing surveys to gauge customer demand for its product offerings.
The Company believes that it has been successful in establishing and
maintaining strong relationships with its suppliers both domestically and
internationally. The Company believes that its purchasing power results in lower
product prices than can be obtained by the Company's lower-volume competitors.
In addition, because of the large number of suppliers and the large volume of
the Company's purchases, the Company is able both to secure alternative sources
for its products and to maintain supply relationships on favorable terms. In
order to maintain flexibility, the Company does not enter into long-term
contracts with its suppliers. In 1995, approximately 34% of the Company's
merchandise was directly imported. Approximately 10% of all merchandise
purchased was directly imported from China. In addition, many of the Company's
domestic vendors import a substantial portion of their merchandise from abroad.
See "Risk Factors -- Dependence on Suppliers; Foreign Sourcing."
COMPETITION
All aspects of the retail apparel industry are highly competitive. The
Company competes with all retail sellers of apparel, including T.J. Maxx and
Marshalls. The Company competes primarily with
26
<PAGE> 29
catalog retailers, department stores and specialty retailers, many of which have
greater financial resources than the Company. In the overall women's apparel
market, competing retail catalogs generally include Spiegel, J.C. Penney, Lands'
End, Victoria's Secret and Newport News. The Company does not believe that it
has any significant competition in the off-price segment of the women's apparel
catalog retail market. However, there can be no assurance that other retailers
of apparel will not decide in the future to enter the Company's market.
Chadwick's competes on the basis of its extensive merchandise selection,
price, product quality and customer service. The Company believes that its
extensive customer list and its reputation for providing quality merchandise at
prices lower than its competitors have enabled it to become the largest catalog
retailer of off-price women's apparel. See "Risk Factors -- Competition."
TRADEMARKS, TRADE NAMES AND LICENSES
The Company is the owner of a number of trademarks and trade names,
including Chadwick's, Chadwick's of Boston, Ltd. and Bridgewater. The Company
also licenses certain other marks from TJX and third parties. While certain of
these licensed names are important to the Company's business, management does
not believe that the loss of any of the licensed marks would have a materially
adverse effect upon the Company's business, financial condition and results of
operations. See "Relationship with TJX -- Trademark Licenses."
EMPLOYEES
As of April 27, 1996, the Company had 2,452 associates, of whom 313 were
full-time salaried associates, 1,388 were full-time hourly associates and 751
were part-time hourly associates. Approximately 992 of the Company's associates
are covered under one of TJX's collective bargaining agreements with the Union
of Needletrades, Industrial and Textile Employees. This agreement expires on
December 31, 1997, and it is expected that the Company will commence
negotiations for a new contract at an appropriate time. The Company considers
its labor relations and overall employee relations to be good.
PROPERTIES
The Company's principal executive offices, telemarketing center, warehouse
and fulfillment center are located in the Company-owned facility in West
Bridgewater, Massachusetts containing approximately 580,000 square feet of
space. The Company leases a 126,000 square foot facility in West Bridgewater,
Massachusetts for returns processing and a customer service center. The Company
also leases from TJX approximately 11,000 square feet and 12,500 square feet of
retail space for its outlet stores in Brockton, Massachusetts and Nashua, New
Hampshire, respectively. See "Relationship with TJX -- Leases." The Company
believes that its existing facilities are adequate to meet its current needs,
and will provide capacity sufficient to handle its anticipated growth for the
next several years.
REGULATORY MATTERS
Chadwick's business, and the catalog industry in general, is subject to
regulation by a variety of state and federal laws relating to, among other
things, advertising, imports and sales taxes. The Federal Trade Commission
regulates the Company's advertising and trade practices and the Consumer Product
Safety Commission has issued regulations governing the safety of the products
the Company sells in its catalogs. The Company also is subject to Department of
Treasury customs regulations with respect to goods that it directly imports,
including customs duties, quotas and other import restrictions. United States
customs duties currently are between 6% and 21% (with an average rate of 12%) of
appraised value on certain imported items of inventory. During 1995,
approximately 34% of Chadwick's inventory was directly imported. See "Risk
Factors -- Dependence on Suppliers; Foreign Sourcing."
27
<PAGE> 30
Under current law, catalog retailers are permitted to make sales in states
where they do not have a physical presence without collecting sales tax.
Congress, however, has the power to change these laws. The Company believes that
it collects sales tax in all jurisdictions in which it is currently required to
do so.
LEGAL PROCEEDINGS
The Company is a party to litigation in the ordinary course of business.
The Company does not believe that unfavorable outcomes in such litigation would
have a material adverse effect on its business, financial condition and results
of operations.
28
<PAGE> 31
RELATIONSHIP WITH TJX
The Company's assets are held by Chadwick's, Inc., which prior to the
Offering has been a wholly-owned subsidiary of TJX. In connection with the
Offering, TJX will exchange all of the outstanding shares of common stock of
Chadwick's, Inc. for 15,178,847 shares of Common Stock of the Company pursuant
to the terms of the Transfer Agreement among TJX, Chadwick's, Inc. and the
Company (the "Transfer Agreement").
Upon completion of the Offering, TJX will own approximately 39% of the
Company's outstanding Common Stock (approximately 30% if the Underwriters
exercise their over-allotment option in full), and likely will be the Company's
largest stockholder. As a result of its ownership interest, TJX could have
effective control of the vote on matters submitted to stockholders following
completion of the Offering, including the election of directors and the approval
of extraordinary corporate transactions. TJX has advised the Company that it
expects to reduce its ownership interest in the Company over time, subject to
prevailing market and other conditions. Currently, two of the four members of
the Company's Board of Directors are officers and directors of TJX. Either
simultaneously with the completion of the Offering or within six months
thereafter, the Company anticipates that the Board will be increased to seven
members through the addition of three persons who are neither affiliates of TJX
nor associates or officers of the Company.
Historically, the Company's external financing requirements were provided
by TJX. During 1995, the maximum amount the Company borrowed from TJX on a
short-term basis (based on month end borrowing levels) was $116.0 million. The
average interest rate on such borrowings was approximately 7%. Following the
Offering, TJX will have no obligation, and has no intention, to provide any
additional funding or to take any steps to assist the Company to obtain funding.
The Company's future capital requirements will be funded through internally
generated funds, its credit facilities and, to the extent necessary and
feasible, the incurrence of other indebtedness and the sale of equity
securities.
The discussion below includes summaries of the material provisions of the
Transfer Agreement and certain other agreements affecting the relationship
between the Company and TJX (collectively, the "Transactional Documents"). These
summaries do not purport to be complete. Reference is made to the complete
provisions of, and such summaries are qualified in their entirety by reference
to, such Transactional Documents, forms of which are filed as Exhibits to the
Registration Statement of which this Prospectus is a part.
TRANSFER AGREEMENT
Acquisition of Chadwick's, Inc. and Repayment of Indebtedness to TJX. The
Transfer Agreement provides that: (i) in connection with the Offering TJX will
exchange its shares of Chadwick's, Inc. for 15,178,847 shares of Common Stock of
the Company; and (ii) immediately prior to the Closing TJX will contribute $20.0
million to the equity of the Company and the Company will repay to TJX the
balance of outstanding intercompany indebtedness over such equity contribution
at such time, which balance is currently estimated to be approximately $50
million. The Company expects to generate the funds for repayment of this
indebtedness entirely from credit facilities which it will establish prior to
the Offering. The amount of the $20 million capital contribution was agreed to
by TJX and the Company after consideration of the general capital requirements
of the Company.
Employee Benefit Plans. The Transfer Agreement contains a number of
provisions pertaining to employee benefit plan matters. Effective as of the
Closing, the Company will establish employee benefit plans substantially similar
to certain plans currently maintained by TJX for associates of the Company,
including the plans described under "Executive Compensation," and, in general,
associates of the Company will cease to participate in the TJX plans. The
Company is not obligated by the Transfer Agreement to duplicate all plans
currently maintained by TJX for Company associates. Pursuant to the Transfer
Agreement, the Company will establish a 401(k) savings program and a pension
program, and assets and liabilities relating to Company associates in the TJX
401(k)
29
<PAGE> 32
savings and profit sharing program and the TJX tax-qualified pension plan will
be transferred to corresponding Company-sponsored plans as soon as practicable
after the Closing. In the case of medical and dental benefits, the TJX plans
will remain liable for claims in respect of covered services rendered to Company
associates prior to the Closing, but only if the claims for reimbursable
expenses are submitted for payment to the TJX plan administrator within one year
from the Closing. The Company generally agrees to assume, and to hold TJX
harmless against, all other pre-Closing liabilities with respect to Company
associates under the TJX plans. To the extent TJX makes premium or similar plan
payments and contributions to or on behalf of Company plans in respect of
periods of coverage commencing on or after the Closing, the Company will
reimburse TJX for those payments. In addition, the Transfer Agreement contains
provisions for the issuance of replacement stock options by the Company to
persons who are Company associates on the Closing with respect to the then
unvested component of their TJX stock options, subject to such persons'
surrender of their corresponding unvested TJX stock options. See "Executive
Compensation -- Equity Incentive Plan."
Insurance Claims. The Transfer Agreement contains provisions dealing with
the post-Closing settlement of insured claims with respect to claims under
certain insurance policies maintained by TJX for Chadwick's. The Transfer
Agreement requires that Chadwick's reimburse TJX for the actual costs incurred
by TJX in respect of such claims over a 10-year period following the Closing.
The Company and TJX have agreed to cooperate with respect to all aspects of
administering such insured claims.
Indemnification. The Transfer Agreement provides that TJX will indemnify
the Company for liabilities relating to certain obligations that TJX agreed to
assume with respect to employee benefits and insurance matters pursuant to the
Transfer Agreement, as well as for any breach of any representation, warranty,
covenant or agreement contained in any Transactional Document. Similarly, the
Company agrees to indemnify TJX for liabilities that it agreed to assume with
respect to employee benefits and insurance matters pursuant to the Transfer
Agreement, as well as for any breach of any representation, warranty, covenant
or agreement contained in any Transactional Document. The Transfer Agreement
requires TJX to transfer to Chadwick's certain original corporate records
relating to Chadwick's and give Chadwick's access to other records relating to
it. In addition, the Transfer Agreement requires TJX and Chadwick's to
coordinate the timing of the preparation and public release of financial
statements and permits Chadwick's and TJX each to use certain customer lists
previously provided by the other.
SERVICES
Historical Services. In the past, TJX provided certain services,
consisting primarily of data and payroll processing, to the Company. The Company
paid $4.4 million in 1995 for such services. The Company also participated in
numerous benefit plans and insurance plans of TJX and was charged its share of
the costs incurred in connection with these plans. Additionally, in 1995, the
Company paid $461,000 to TJX for administrative support, including financial,
treasury, general legal, tax, audit and human resources.
Services Agreement. Immediately prior to the Offering, TJX and the Company
will enter into a Services Agreement (the "Services Agreement") pursuant to
which TJX will provide following the Offering certain services to the Company,
including data processing, employee benefits administration, insurance claims
management, tax reporting, internal audit, treasury management, investor
relations and other administrative services. Such services generally will be
provided at rates equal to TJX's cost of providing these services. The initial
term for the principal services other than data processing expires at or before
the end of the current fiscal year. The initial term for data processing
services extends through January 30, 1999. Extensions of services may only be
made upon the mutual agreement of the Company and TJX as to the renewal term and
the fees to be charged during such renewal term, except for the Company's right
to continue the term of data processing services for up to one year. In order to
extend the provision of data processing services beyond the
30
<PAGE> 33
initial term for such services, the Company must request such an extension by
July 1, 1997. TJX is required to use commercially reasonable efforts to perform
the services on a timely basis and the Company is required to use commercially
reasonable efforts to cooperate with TJX in connection with the provision of
services.
TAX SHARING AND SEPARATION AGREEMENT
In connection with the Offering, the Company, Chadwick's, Inc. and TJX will
enter into a Tax Sharing and Separation Agreement (the "Tax Allocation
Agreement"). Pursuant to the Transfer Agreement and Tax Allocation Agreement,
the net current and deferred income tax obligations of the Company will be
included as a part of the settlement of all other intercompany indebtedness and
the Company will not retain any Federal, state or local income tax liability for
pre-Closing tax periods. Accordingly, TJX will be responsible for all federal,
state and local income taxes with respect to the Company for all periods ending
on or prior to the date of consummation of the Offering and for audit
adjustments to such taxes. The Company will be responsible for all other taxes
owing with respect to the Company. The Company and TJX will make an election
under Section 338(h)(10) of the Code to treat the Exchange Transactions as a
taxable asset purchase with the effect that the tax basis of the Company's
assets will be increased to the deemed purchase price of the assets, and TJX
will report as taxable income or gain the amount of the increase. Although TJX's
continuing ownership interest in the Company will prevent the Company from
amortizing that portion of the basis increase allocable to goodwill or going
concern value, it is expected that the amortizable or depreciable portion of the
additional basis will result in increased income tax deductions and,
accordingly, reduced income taxes payable by the Company. Pursuant to the Tax
Allocation Agreement, the Company will pay to TJX on a dollar-for-dollar basis
any cash tax benefits actually received by the Company, as realized on a
quarterly basis, calculated by comparing the Company's actual taxes to the taxes
that would have been owed by the Company had the increase in basis not occurred
in connection with the Exchange Transaction. In the event any deductions
reflected in a tax benefit payment to TJX are successfully challenged by any
taxing authority, TJX will reimburse the Company for the loss of the tax benefit
and any related interest or penalties imposed upon the Company. Subject to the
next sentence, the tax benefit payments to TJX should have no material adverse
effect on the Company's earnings or cash flow, which should be substantially the
same as they would have been in the absence of the Tax Allocation Agreement and
such election. In the event of certain changes in control of the Company or
certain business combinations or other acquisitions involving the Company, the
tax benefit calculation thereafter will be made without giving effect to any
items of income, expense, loss, deduction or credit for businesses other than
the historic businesses of the Company immediately prior to such event if such
calculation would produce a greater payment to TJX. The Tax Allocation Agreement
provides that the Company will not enter into any transaction a significant
purpose of which is to reduce the amount payable by the Company to TJX under the
Tax Allocation Agreement.
REGISTRATION RIGHTS AGREEMENT
In connection with the Offering, the Company and TJX will enter into a
Registration Rights Agreement (the "Registration Rights Agreement"), which
provides that at any time on or after the date which is six months following the
Closing, TJX will be able to require the Company at the Company's expense except
for underwriting discounts and commissions and fees and expenses of TJX's
separate counsel and accountants, if any, to file up to two registration
statements registering its Common Stock, subject to a right in the Company to
defer such registration if the registration will interfere with a planned
transaction or for certain other reasons. The Registration Rights Agreement also
will entitle TJX, at any time on and after the date which is six months
following the Offering, to include shares of Common Stock owned by TJX in any
public offering of shares of Common Stock by the Company (other than in
connection with certain types of offerings and subject to certain limitations on
the number of shares included in such registration, as determined by the
underwriters of such offering, if any).
31
<PAGE> 34
TRADEMARK LICENSES
In connection with the Exchange Transaction, on a royalty-free basis, TJX
will license to Chadwick's certain trademark rights and intends to transfer to
Chadwick's certain trademark license rights. The terms of such licenses vary
from periods of one to five years.
LEASES
TJX currently subleases property in Brockton, Massachusetts and Nashua, New
Hampshire to the Company subject to TJX's master leases for such locations with
West Plaza Limited Partnership and 231 Realty Associates, respectively. See
"Business -- Properties." In 1995, Chadwick's paid TJX $75,007 under the
Brockton sublease and $64,106 under the Nashua sublease. Chadwick's also paid
TJX $99,695 during 1995 with respect to its use of certain office space in New
York City.
LIQUIDATION
To the extent the Company has had excess inventory in the past which it
wished to liquidate in bulk, it has sold this inventory to TJX and others. The
Company received approximately $14.4 million and $10.6 million in 1994 and 1995,
respectively, from inventory transactions with TJX, and approximately $7.5
million and $9.6 million during those years from inventory transactions with
third parties. All transactions with TJX were effected on an arm's-length basis.
In connection with the Offering, TJX and the Company will enter into an
Inventory Purchase Agreement expiring January 29, 2000, pursuant to which TJX
will be required to offer to purchase inventory with an original retail value of
at least $25 million in the remainder of 1996 and $50 million in each subsequent
year of the agreement, at a price which will produce for TJX for each category
of merchandise a profit upon resale no less than the T.J. Maxx/Marshalls' gross
profit percentage to sales averages for the comparable category of merchandise
for the comparable season one year earlier. If Chadwick's elects not to sell
merchandise at the price offered by TJX, the $25 million or $50 million
commitment level will be reduced for the remainder of the applicable year by the
retail price of such merchandise.
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<PAGE> 35
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is information as of June 28, 1996 regarding individuals
who serve or have agreed to serve as directors and executive officers of the
Company. Officers are appointed by, and serve at the discretion of, the Board of
Directors.
<TABLE>
<CAPTION>
POSITIONS WITH DIRECTOR
NAME AGE THE COMPANY TERM EXPIRING
---- --- -------------- -------------
<S> <C> <C> <C>
Bernard Cammarata(1)(2)........... 56 Chairman 1997
Richard G. Lesser(1)(2)........... 61 Director 1998
Dhananjaya K. Rao................. 47 President and Chief 1999
Executive Officer and
Director
Carol Meyrowitz................... 42 Executive Vice 1999
President -- Merchandising
and Director
John W. Tynan..................... 53 Chief Financial Officer,
through the Closing
Lawrence G. Kinney................ 46 Senior Vice President
and Chief Financial
Officer, commencing
after the Closing
<FN>
- ---------------
(1) Member of Audit Committee
(2) Member of Executive Compensation Committee
</TABLE>
BUSINESS EXPERIENCE OF DIRECTORS AND EXECUTIVE OFFICERS
BERNARD CAMMARATA has been a director of the Company since May 1996. He has
been President and Chief Executive Officer of TJX since 1989 and Chairman of the
T. J. Maxx and Marshalls Division of TJX ("The Marmaxx Group") since 1995. He
was Chairman of the T. J. Maxx Division of TJX from 1986 to 1995 and was
Executive Vice President of TJX from 1986 to 1989, President, Chief Executive
Officer and a director of the former TJX subsidiary of TJX from 1987 to 1989,
and President of TJX's T. J. Maxx Division from 1976 to 1986. Mr. Cammarata is a
director of TJX.
RICHARD G. LESSER has been a director of the Company since May 1996. He has
been Executive Vice President of TJX since 1991, Chief Operating Officer of TJX
since 1994 and President of The Marmaxx Group since 1995. Mr. Lesser was Senior
Vice President of TJX from 1989 to 1991, President of the T. J. Maxx Division of
TJX from 1986 to 1994, Senior Executive Vice President -- Merchandising and
Distribution of the T. J. Maxx Division in 1986, Executive Vice President --
General Merchandise Manager of the T. J. Maxx Division from 1984 to 1986, and
Senior Vice President -- General Merchandise Manager of the T. J. Maxx Division
from 1981 to 1984. Mr. Lesser is a director of Reebok International Ltd., a
worldwide manufacturer and distributor of athletic footwear and apparel, and
TJX.
DHANANJAYA K. RAO has been President and Chief Executive Officer and a
director of the Company since May 1996. He also has been Senior Vice President,
Operations and Marketing of Chadwick's, Inc. since January 1995. Previously, Mr.
Rao worked at the T.J. Maxx Division of TJX from 1978 until 1995. His management
positions during such time included Senior Vice President of Distribution and
Financial Planning and Analysis from November 1994 to January 1995, Senior Vice
President of Distribution, Merchandise Planning and Inventory Management from
1991 to 1994,
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<PAGE> 36
Senior Vice President and Director of Distribution from 1989 to 1991 and Vice
President and Director of Distribution from 1981 to 1989.
CAROL MEYROWITZ has been Executive Vice President -- Merchandising and a
director of the Company since May 1996. She also has been Senior Vice President
and General Merchandise Manager of Chadwick's, Inc. since March 1991.
Previously, Ms. Meyrowitz was General Merchandise Manager at Chadwick's, Inc.
from March 1990 to March 1991, and Vice President and Senior Merchandise Manager
from January 1989 to March 1990. Prior to that time, Ms. Meyrowitz was Vice
President and Divisional Merchandise Manager of the Hit or Miss Division of TJX
from 1986 to 1989, and she was a Buyer at the Hit or Miss Division from 1983 to
1986.
JOHN W. TYNAN has been Chief Financial Officer of the Company since May
1996. He also has been Senior Vice President of Finance, MIS and Administrative
Services of Chadwick's, Inc. since February 1996. Previously, Mr. Tynan was Vice
President of Finance of Chadwick's, Inc. from August 1995 to February 1996.
Prior to that time, Mr. Tynan was Executive Vice President and a director of The
Store 24 Companies, Inc. ("Store 24") from October 1989 to 1995, Chief Financial
Officer of Store 24 from 1984 to 1989, and Controller of Child World, Inc. from
1980 to 1984. Commencing immediately after the Closing, Mr. Tynan will serve as
Controller of the Company.
LAWRENCE G. KINNEY will serve as the Senior Vice President and Chief
Financial Officer of the Company commencing immediately after the Closing. Mr.
Kinney served as Senior Vice President and Chief Financial Officer of Buster
Brown Apparel, Inc., a manufacturer and retailer of branded children's apparel,
from May 1993 until May 1996. Prior to that time, Mr. Kinney was Treasurer of
Genesco, Inc., a manufacturer, retailer and wholesaler of footwear and clothing,
from August 1985 to April 1993.
BOARD OF DIRECTORS
Director Compensation
Non-employee directors, except for Messrs. Cammarata and Lesser, will be
paid an annual retainer of $20,000, fees of $1,250 for each Board meeting and
$750 for each Committee meeting attended. In addition, the Chairperson of the
Audit Committee and the Chairperson of the Executive Compensation Committee will
be paid $2,500 per annum for their services as such. Directors may participate
in the Company's General Deferred Compensation Plan.
The Company expects to adopt the 1996 Stock Option Plan for Non-Employee
Directors (the "Non-Employee Director Plan"), pursuant to which directors who
are not present or former employees of the Company receive options to purchase
shares of Common Stock (Mr. Cammarata and Mr. Lesser will be ineligible to
receive options under the Non-Employee Director Plan). The Non-Employee Director
Plan will become effective upon the Closing. Pursuant to the Non-Employee
Director Plan, each individual who becomes an eligible director before the first
annual meeting of stockholders of the Company shall receive on the date such
individual becomes an eligible director an option to purchase 3,000 shares of
Common Stock. Thereafter, on the date of each annual meeting of stockholders of
the Company, beginning with the first such meeting following the Closing, each
continuing eligible director shall receive an option to purchase 1,500 shares of
Common Stock and each newly-elected eligible director (other than an eligible
director referred to in the preceding sentence) shall receive an option to
purchase 3,000 shares of Common Stock. A total of 50,000 shares of Common Stock
will be reserved for issuance under the plan, subject to adjustment for stock
splits and similar events. The Non-Employee Director Plan will expire after the
grants made at the annual meeting in 2006, but options then outstanding will
continue in effect according to their terms.
The exercise price of the options is the fair market value of the Common
Stock on the date of grant. Each option is non-transferable except upon death,
expires 10 years after the date of grant and becomes fully exercisable one year
after the date of grant. If the director dies or otherwise ceases to be a
director prior to the date the option became exercisable, that option will
immediately expire. Any vested options will remain exercisable for a period of
three years following retirement
34
<PAGE> 37
after attaining age 65 with at least 10 years of service as a director or after
attaining age 70, 71 or 72 with 9, 8 or 7 years of service, respectively, or
following death or disability or three months following other termination of the
individual's status as a director, but in no event beyond the tenth anniversary
of the date of grant. Upon a merger in which the Company does not survive or a
sale of substantially all of the stock of the Company or a sale of all or
substantially all of the Company's assets, or a dissolution or liquidation of
the Company, all options not at the time exercisable will become immediately
exercisable and will terminate upon the consummation of the transaction.
For federal income tax purposes, options granted under the Non-Employee
Director Plan will be treated as non-statutory options. For a description of
certain federal income tax consequences associated with non-statutory options,
see below, "Executive Compensation -- Equity Incentive Plan."
Committees of the Board of Directors
The Company's Board of Directors has established an Audit Committee and an
Executive Compensation Committee.
The Audit Committee will review with management, the internal audit group
and the independent accountants the Company's financial statements, the
accounting principles applied in their preparation, the scope of the audit, any
comments made by the independent accountants upon the financial condition of the
Company and the accounting controls and procedures, and such other matters as
the Committee deems appropriate. The Committee will review with management such
matters relating to compliance with corporate policies as the Committee deems
appropriate.
The Executive Compensation Committee ("ECC") will review salary policies
and compensation of officers and other members of management, approve
compensation plans and compensation of certain officers and other members of
management, and administer certain of the Company's incentive plans. The ECC
also will have responsibility for consideration of the qualifications of and
recommendations to the Board of Directors of nominees to fill Board vacancies
and will consider nominees recommended by stockholders if such recommendations
are in writing and timely filed with the Secretary of the Company.
35
<PAGE> 38
EXECUTIVE COMPENSATION
The Company's executive officers have participated in TJX's employee
benefit plans. In general, such participation will terminate upon the Closing.
Information contained in the following four tables relates to compensation paid
to the Chief Executive Officer and the other highly compensated executive
officer of the Company for services rendered to the Company when it was a
wholly-owned subsidiary of TJX. Information concerning options and restricted
stock in the tables that follow relate only to TJX's equity incentive plans and
TJX's common stock.
SUMMARY COMPENSATION TABLE
The following table provides information concerning compensation for the
Company's named executive officers for services to the Company for the fiscal
year ended January 27, 1996.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------------------
AWARDS GRANTED PAYOUTS
ANNUAL COMPENSATION ----------------------- ---------
------------------------------------- RESTRICTED LONG TERM
OTHER STOCK SECURITIES INCENTIVE
NAME AND ANNUAL AWARDS UNDERLYING PLAN ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) ($)(2) OPTIONS PAYOUTS COMPENSATION(3)
- ------------------- ------ --------- --------- --------------- ---------- ---------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dhananjaya K. Rao.. 1995 $165,000 $ 82,500 $4,824 -- 4,000 $18,242(4) $2,944
President and Chief
Executive
Officer(5)
Carol Meyrowitz.... 1995 $228,077 $114,038 $4,824 $64,375 3,000 -- $3,300
Executive Vice
President --
Merchandising(5)
<FN>
- ---------------
(1) Other Annual Compensation includes tax reimbursements associated with car
allowances.
(2) The aggregate number and value (based on $18.875, the closing price of TJX
common stock on the NYSE on January 26, 1996) of shares of restricted stock
held by Ms. Meyrowitz is 5,000 shares and $94,375, respectively. Such shares
will vest immediately prior to the Closing. Upon the Closing Ms. Meyrowitz
will also be paid approximately $16,000 by TJX as a tax equalization payment
in respect of the tax liability that will arise upon the vesting of her
restricted stock.
(3) All other compensation includes (a) 1995 Company contributions to the TJX
General Savings/ Profit Sharing Plan of $1,875 for each of Mr. Rao and Ms.
Meyrowitz, and (b) amounts paid by TJX with respect to executive life
insurance in the amounts of $1,069 for Mr. Rao and $1,425 for Ms. Meyrowitz.
(4) The payouts under TJX's Long Range Management Incentive Plan relate to the
performance portions of the 1993 to 1995 award period with respect to the
performance of another division of TJX for which Mr. Rao also performed
services during that period.
(5) Mr. Rao and Ms. Meyrowitz assumed their respective posts in May 1996.
</TABLE>
36
<PAGE> 39
TJX OPTION GRANTS IN LAST FISCAL YEAR
The following table reports TJX stock option grants awarded between January
28, 1995 and January 27, 1996 to the Company's named executive officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------------- ANNUAL RATES OF
NUMBER % OF TOTAL STOCK PRICE
OF SECURITIES OPTIONS GRANTED APPRECIATION FOR
UNDERLYING TO TJX EXERCISE OR OPTION TERM(2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION --------------------
NAME GRANTED(1) FISCAL YEAR (PER SHARE)(1) DATE 5% 10%
- ---- ------------- --------------- -------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Dhananjaya K. Rao.... 4,000 0.7% $12.875 9/06/05 $32,388 $82,077
Carol Meyrowitz...... 3,000 0.5% $12.875 9/06/05 $24,291 $61,558
<FN>
- ---------------
(1) All options were granted with an exercise price equal to the closing price
of TJX common stock on the NYSE on the day of grant. Options vest in equal
annual installments over three years.
(2) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates required by the Securities and Exchange Commission (the
"Commission"), and therefore are not intended to forecast possible future
appreciation of TJX's stock price at the end of 10 years.
</TABLE>
AGGREGATED TJX OPTION EXERCISES IN LAST FISCAL YEAR
AND TJX OPTION VALUES
The following table sets forth information with respect to 1995 option
exercises and year-end option values for the Company's named executive officers.
<TABLE>
<CAPTION>
UNEXERCISED OPTIONS VALUE OF UNEXERCISED
AT FISCAL-YEAR-END IN-THE-MONEY OPTIONS AT
-------------------------- FISCAL-YEAR-END(1)
SHARES ACQUIRED ON VALUE EXERCISABLE UNEXERCISABLE --------------------------
NAME EXERCISE (NUMBER) REALIZED ($) # OF SHARES # OF SHARES EXERCISABLE UNEXERCISABLE
- ---- ------------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dhananjaya K. Rao....... -- -- 13,680 6,820 $37,625 $24,000
Carol Meyrowitz......... 5,175 28,178 9,290 5,660 $ 2,728 $18,000
<FN>
- ---------------
(1) The value of unexercised options is the closing price of TJX's common stock
on the NYSE on January 26, 1996 ($18.875), multiplied by the number of
shares underlying the option, less the aggregate exercise price of the
option.
</TABLE>
TJX LONG-TERM INCENTIVE PLAN -- PERFORMANCE AWARDS IN LAST FISCAL YEAR
The following table describes the portion of awards granted to executive
officers under the TJX Long Range Management Incentive Plan ("TJX LRMIP") during
1995 which were subject to performance goals(1).
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
PERFORMANCE UNDER NON-STOCK PRICE-BASED PLAN
PERIOD ---------------------------------
UNTIL THRESHOLD TARGET MAXIMUM
NAME PAYOUT ($) ($) ($)
- ---- ----------- --------- ------- -------
<S> <C> <C> <C> <C>
Dhananjaya K. Rao........................... 1995-1997 -- $60,000 $60,000
Carol Meyrowitz............................. 1995-1997 -- $50,000 $50,000
<FN>
- ---------------
(1) The TJX LRMIP operates on the basis of three-year periods. For each period,
the TJX Executive Compensation Committee sets target awards and performance
goals. Performance goals (tied to pre-tax income) are based on company-wide
goals for corporate officers and on divisional goals for divisional
officers, such as Mr. Rao and Ms. Meyrowitz. If three year targets are met
or partially met, up to 100% of the target award will be paid. Awards earned
under the TJX LRMIP are paid in cash.
</TABLE>
37
<PAGE> 40
AGREEMENTS WITH KEY EXECUTIVE OFFICERS
The Company intends to enter into agreements with Mr. Rao and Ms. Meyrowitz
pursuant to which they would receive varying amounts of severance (up to a
maximum of three years' but at least 12 months' base salary), continuation of
medical and life insurance benefits for the same period and prorated benefits
under the Company's Management Incentive Plan (see below) in the event their
employment is terminated by the Company other than for cause (as defined) or by
the individual upon a reduction in cash compensation, a diminution of
responsibilities or a relocation of more than 40 miles. If the individual's
employment is terminated by him or her other than in these circumstances or by
the Company for cause, for a period of at least one year, he or she may not work
for a catalog business dealing primarily in off-price apparel or for TJX or any
of its subsidiaries. During this period, the individual may neither employ nor
solicit the employment of any employee of the Company.
In the event that, within 24 months following a change of control (as
defined), the individual's employment is terminated by the Company other than
for cause or by the individual under certain circumstances (including, but not
limited to, a reduction in compensation, a diminution in responsibilities, a
relocation of more than 40 miles or an exercise by an individual of a limited
voluntary right to terminate), the agreements would provide for an alternative
severance arrangement equal to two years' pay, enhanced retirement benefits, two
years' continued health, life and disability insurance benefits and two years'
continuation of any automobile use or automobile allowances then in effect. In
addition, the agreements would provide that all outstanding stock options will
vest and prorated benefits under the Company's Management Incentive Plan and
Long Range Management Incentive Plan (see below) would be accelerated and paid.
There is no non-competition covenant in the event an individual's employment
terminates within 24 months following a change of control, but the prohibition
against employment or solicitation of employment of Company employees would
apply.
RETIREMENT PLANS
<TABLE>
The Company will provide a tax-qualified Retirement Plan for all eligible
employees and a non tax-qualified Supplemental Executive Retirement Plan
("SERP") for certain key employees, including the named executive officers. The
Retirement Plan will credit prior service with the Company or TJX and will
succeed to an appropriate portion of the assets and liabilities of TJX's
tax-qualified retirement plan. SERP will also credit prior service with the
Company and TJX. The following table shows the estimated annual benefit payable
on a straight life annuity basis at normal retirement (age 65) for all employees
eligible for SERP benefits. Benefits payable under SERP are calculated by
deducting the following: benefits received under the Company's Retirement Plan;
primary Social Security benefits; and benefits associated with the employer
contribution under the Company's savings/profit sharing program.
<CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFITS
FOR YEARS OF SERVICE INDICATED(1)
AVERAGE --------------------------------------
ANNUAL EARNINGS(2) 10 YEARS 15 YEARS 20 YEARS OR MORE
------------------ -------- -------- ----------------
<S> <C> <C> <C>
$ 100,000.................................... $ 25,000 $ 37,500 $ 50,000
150,000.................................... 37,500 56,250 75,000
200,000.................................... 50,000 75,000 100,000
300,000.................................... 75,000 112,500 150,000
400,000.................................... 100,000 150,000 200,000
500,000.................................... 125,000 187,500 250,000
600,000.................................... 150,000 225,000 300,000
800,000.................................... 200,000 300,000 400,000
1,000,000.................................... 250,000 375,000 500,000
- ---------------
<FN>
(1) As of January 27, 1996, the years of service for the following executive
officers under SERP are as follows: Dhananjaya K. Rao, 20; Carol Meyrowitz,
12.5.
(2) Average Annual Earnings includes salary and short term bonuses and is based
on an average of the highest compensation during any five of the last ten
years of employment.
</TABLE>
38
<PAGE> 41
MANAGEMENT INCENTIVE PLAN
The Company's Board of Directors expects to adopt the Management Incentive
Plan ("MIP"). MIP is intended to provide key officers and associates with cash
incentive opportunities based on annual performance goals. MIP will be
administered by the ECC, which has full authority to grant awards, including
selecting the relevant performance criteria thereunder, adjusting performance
goals or award amounts in certain circumstances and amending the terms of the
plan. At the beginning of each fiscal year, the ECC will determine a range of
performance goals from minimum to target to maximum, and determine for each
participant the relative weights of these performance goals and the award
amounts payable upon attainment of the goals. Subject to selection by the ECC,
officers and associates who are key to the annual growth and profitability of
the Company are eligible to participate in MIP. A total of approximately 100
associates are expected initially to participate in MIP. For the Company's
fiscal year ending in 1997, in the case of Company associates currently holding
awards under the TJX Management Incentive Plan, award levels and goals under the
Company's MIP are expected to be the same as those established under the TJX
plan.
LONG RANGE MANAGEMENT INCENTIVE PLAN
The Company's Board of Directors expects to adopt the Long Range Management
Incentive Plan ("LRMIP"). The LRMIP will be administered by the ECC, which has
full authority to grant awards, including selecting the relevant performance
criteria thereunder, to adjust performance criteria or awards in certain
circumstances and to amend the terms of the plan. Awards under LRMIP are
generally made annually for each successive rolling three-year cycle. At the
time of award, the ECC determines a range of performance goals for the
three-year award cycle, from minimum to target to maximum, and for each
participant determines the relative weightings of these performance goals and
the award amounts payable upon attainment of the goals. Subject to selection by
the ECC, officers and associates who are key to the Company's profitable growth
are eligible to participate in LRMIP. A total of approximately 15 officers and
associates are expected to participate initially in LRMIP. For award cycles
ending in 1997, 1998 and 1999, in the case of Company associates currently
holding awards under the TJX LRMIP, award levels and goals under the Company's
LRMIP are expected to be the same as those established under the TJX plan.
DEFERRED COMPENSATION PLAN
The Company's Board of Directors expects to adopt the General Deferred
Compensation Plan (the "Deferred Compensation Plan") to provide directors and
certain select management or highly compensated associates of the Company,
including the named executive officers, an opportunity to defer future
remuneration on a non-qualified basis. In general, under the terms of the
Deferred Compensation Plan participants are permitted to defer future
remuneration through periodic elections that specify the amount to be deferred,
the period of deferral, and the form in which deferred amounts will be paid.
Deferrals are credited to the account of the participant on the books of the
Company and adjusted for notional interest at a rate specified under the
Deferred Compensation Plan. Moneys are not set aside in trust, however, and a
participant's rights to benefits under the Deferred Compensation Plan, prior to
payment, remain those of an unsecured general creditor of the Company. Payments
under the Deferred Compensation Plan will be accelerated upon a change of
control (as defined).
EQUITY INCENTIVE PLAN
Terms of Equity Incentive Plan
The Company's 1996 Equity Incentive Plan (the "Equity Incentive Plan" or
the "Plan") is expected to be adopted by the Board of Directors prior to the
Closing and approved by TJX, the sole stockholder of the Company having voting
power at the time of adoption. The Plan permits the granting of stock options,
stock appreciation rights (SARs), restricted stock, unrestricted stock, and
other stock-based awards, including loans and cash payments intended to
facilitate exercise or pay taxes.
39
<PAGE> 42
General. The Plan will be administered by a Committee (which initially
will be the ECC) (the "Committee") which must consist of no fewer than the
minimum number of "disinterested persons" required from time to time under Rule
16b-3 under the Securities Exchange Act of 1934 (the "Exchange Act"), who shall
be appointed by the Board of Directors. The Committee will have full power to
select, from among the associates eligible for awards, the individuals to whom
awards will be granted, to make any combination of awards to any participants
and to determine the specific terms of each grant, subject to the provisions of
the Plan.
Subject to adjustment for stock splits and similar events, a total of
800,000 shares of Common Stock may be issued under the Plan. Stock options
granted under the Plan in replacement of certain unvested TJX stock options (see
below) are included in and subject to this limit. Awards and shares which are
forfeited, reacquired by the Company or satisfied by a cash payment or otherwise
without the issuance of Common Stock are not counted toward this limitation. The
limitation on shares that may be issued under the Plan applies only to shares
that have become free of any restrictions under the Plan. Shares delivered under
awards in substitution for awards held by employees of companies or businesses
acquired by the Company or its subsidiaries are in addition to the maximum
number of shares authorized under the Plan to the extent that the substitute
awards: (i) are granted to persons whose relationship to the Company does not
make (and is not expected to make) them subject to Section 16(b) of the Exchange
Act; and (ii) are granted in substitution for awards issued under a plan
approved, to the extent then required under Rule 16b-3, by the stockholders of
the predecessor entity. The Plan also limits to 100,000 the number of shares of
stock as to which stock options, other than Company stock options issued in
replacement of certain TJX stock options (see below), may be granted to any
individual in any year. A similar limit applies to the grant of SARs. Any
repricing of a stock option or SAR is treated as an additional grant for
purposes of this limit.
Persons eligible to participate in the Plan are those full- or part-time
officers and other key associates of the Company or its subsidiaries who are
responsible for or contribute to the management, growth or profitability of the
business of the Company, as selected from time to time by the Committee. Persons
who are not employees of the Company or a parent or subsidiary (as those terms
are used in Section 422 of the Internal Revenue Code (the "Code")) are not
eligible to receive grants of incentive options, as defined below. The Plan
limits the terms of awards to 10 years and prohibits the granting of awards more
than 10 years after the effective date of the Plan.
Stock Options. The Plan permits the granting of non-transferable stock
options that qualify as incentive stock options ("incentive options") under
Section 422(b) of the Code and stock options that do not so qualify
("non-statutory options"). The exercise price of each option is determined by
the Committee but in the case of an incentive option may not be less than 100%
of the fair market value (110% in the case of a person holding 10% or more of
the outstanding voting power of all classes of stock of the Company or any
subsidiary or parent corporation (a "10 percent stockholder")) of the shares on
the date of grant, and in the case of non-statutory options may not be less than
85% of the fair market value of the shares on the date of grant. Notwithstanding
the foregoing, the Committee may award non-statutory options at less than 85%
(but not less than 50%) of fair market value on the date of grant, provided that
the number of all such options, combined with the number of shares of Restricted
Stock (as defined below) granted with restrictive periods of less than three
years, shall not exceed five percent of the shares of Common Stock reserved for
issuance under the Plan at the time. "Fair market value" as used in this
paragraph is defined to be the last sale price at which Common Stock is traded
on such date as reflected in the NYSE Composite Transactions Index or, where
applicable, the value of a share of Common Stock as determined by the Committee
in accordance with the applicable provisions of the Code.
The term of each option is fixed by the Committee but may not exceed 10
years from the date of grant (five years in the case of an incentive option
granted to a 10 percent stockholder). The Committee determines at what time or
times each option may be exercised, and the Committee may accelerate the
exercisability of options. In the event of termination of employment by reason
of normal retirement, disability or death, an option may thereafter be exercised
(to the extent it was
40
<PAGE> 43
then exercisable) for a period of three years, or such shorter period as may be
specified by the Committee at the time of grant, subject to the stated term of
the option. In the event of termination of employment for any reason other than
normal retirement, disability or death, an option may thereafter be exercised,
to the extent then exercisable, for three months (or such longer period of up to
three years as the Committee determines at or after the grant date) following
termination, subject to the stated term of the option. However, options cease to
be exercisable upon termination for Cause (as defined in the Plan).
The exercise price of options granted under the Plan must be paid in full
by certified or bank check or other instrument acceptable to the Committee or,
if the Committee so determines, by delivery of shares of unrestricted Common
Stock, valued at their fair market value on the exercise date. The Plan
authorizes the Committee to permit "pyramiding," which involves the exercise of
an option in successive stages using as the payment at each stage shares which
have been acquired under the option in preceding stages.
Stock Appreciation Rights. The Plan also provides for the granting of SARs
which entitle the holder to receive upon exercise an amount in cash or stock
that is equal to or less than the appreciation in the fair market value of the
Common Stock between the date of grant (or measured from the exercise price of
the related stock option, if the SAR is granted in tandem with a stock option)
and the date of exercise, except that in the case of SARs granted to persons
subject to Section 16(b) of the Exchange Act and exercised during certain window
periods prescribed by Rule 16b-3 promulgated under the Exchange Act, the
Committee may establish a different measure of value not in excess of the
highest reported closing price of the Common Stock during such period. In
general, SARs granted in tandem with a stock option are exercisable at the same
time or times and to the same extent as the related stock option. To the extent
a tandem SAR is exercised, the applicable portion of the related stock option is
surrendered, and vice versa. Even where a stock option is not accompanied by an
SAR, the Committee may, if the person exercising the option so requests, cancel
the option in lieu of exercise and pay the holder of the option an amount equal
to the excess of the fair market value of the Common Stock subject to the option
over the exercise price.
Restricted Stock and Unrestricted Stock. The Committee may award shares of
Common Stock subject to such conditions and restrictions as the Committee may
determine ("Restricted Stock"), provided that the duration of overall
restrictions on vesting may not be less than three years (subject to the
Committee's ability to grant limited amounts of Restricted Stock with
restrictions of lesser duration, as described above). The Committee will
determine the purchase price, if any, of shares of Restricted Stock issued under
the Plan.
The Committee may at any time waive such restrictions, including through
accelerated vesting. Shares of Restricted Stock are non-transferable and if a
participant who holds shares of Restricted Stock terminates employment for any
reason (including death) prior to the lapse or waiver of the restrictions, the
Company may require the forfeiture or repurchase of the shares in exchange for
the amount, if any, which the participant paid for them. A holder of Restricted
Stock has all rights of a stockholder with respect to such stock, subject only
to conditions and restrictions generally applicable to Restricted Stock or
specifically set forth in the Restricted Stock award agreement. If so provided
by the Committee, stock options and SARs may be settled with shares of
Restricted Stock.
The Committee may grant shares (at such purchase price, if any, as the
Committee may determine) which are free from any restrictions under the Plan
("Unrestricted Stock").
Deferred Stock. The Committee may also grant awards entitling the holder
to acquire shares of Common Stock in the future without payment. Holders of
deferred stock awards are not treated as stockholders except as to shares
actually received, but the Committee may provide for payments in lieu of
dividends. Rights to receive Common Stock in the future under a deferred stock
award may be conditioned on the satisfaction of performance conditions. The
Committee may accelerate a deferred stock award or waive conditions at any time.
Except as otherwise determined by the
41
<PAGE> 44
Committee, a participant's rights in a deferred stock award terminate upon
termination of employment. If so provided by the Committee, stock options and
SARs may be settled with deferred stock.
Performance Units. The Committee may also award performance units under
the Plan. Performance units entitle the recipient to cash or shares of Common
Stock, or a combination of cash or Common Stock, upon the attainment of
specified performance goals, and may be granted alone or in connection with
other awards. The holder of a performance unit has the rights of a stockholder
only as to shares of Common Stock actually received under the award. Except as
otherwise determined by the Committee, a participant's rights in a performance
unit award terminate upon termination of employment. The Committee may
accelerate payment under a performance unit award or waive conditions at any
time.
Other Awards. The Plan also provides for the grant of other Common
Stock-based awards. These may include securities (including preferred stock of
the Company) convertible into or exchangeable for Common Stock on such
conditions as the Committee may determine. In general, the Committee will
determine the terms of other Common Stock-based awards. The Committee may also
make loans or cash grants to participants in connection with any award under the
Plan to assist in the payment of the exercise price (if any) and the federal
income taxes associated with the grant, vesting or exercise of the award.
Adjustments. The Committee is required to make appropriate adjustments in
connection with outstanding awards to reflect stock dividends, stock splits and
similar events. In the event of a merger, liquidation or similar event, the
Committee in its discretion may provide for substitution or adjustments or may
accelerate or, upon payment or other consideration for the vested portion of any
awards as the Committee deems equitable in the circumstances, terminate such
awards (subject to the provisions described under "Change of Control" below).
Amendment and Termination. The Board of Directors may at any time amend or
discontinue the Plan and the Committee may at any time amend or cancel awards
(or provide substitute awards at the same or reduced exercise or purchase
prices, including lower-priced awards upon the termination of any then
outstanding awards) for the purpose of satisfying changes in the law or for any
other lawful purpose. However, no such action may adversely affect any rights
under outstanding awards without the holder's consent. Moreover, any amendment
that would cause the Plan to fail to satisfy any then applicable incentive stock
option rules under the Code or any stockholder approval requirements of Rule
16b-3 under the Exchange Act, as such Rule is in effect at the time of such
amendment, shall be ineffective unless approved by the stockholders.
Change of Control. The Plan provides that, in the event of a Change of
Control of the Company, unless otherwise expressly provided at the time of
grant, all stock options will become immediately exercisable. Restrictions and
conditions on Restricted Stock awards, including conditions on the vesting of
shares, will automatically be deemed satisfied only to the extent that the
Committee may determine (whether at or after the time of grant). In addition, at
any time prior to or after a Change of Control, the Committee may accelerate
awards and waive conditions and restrictions on any awards to the extent it may
determine to be appropriate.
Certain Federal Income Tax Consequences
The following discussion is a summary of certain federal income tax
consequences associated with stock option awards under the Plan. It does not
purport to summarize the tax consequences associated with other awards, nor does
it deal with other federal, state, or non-U.S. tax consequences.
Incentive Options. The grant of an incentive option does not produce
taxable income to the optionee or a deduction to the Company. If an incentive
option is exercised while the optionee is employed or within three months
following the termination of employment (twelve months in the case of
termination of employment because of permanent disability), or after the
optionee's death if
42
<PAGE> 45
death occurs during the foregoing periods, exercise of the option will in
general also not produce taxable ordinary income to the optionee or a deduction
to the Company. For alternative minimum tax purposes, however, such exercise
will increase the optionee's "alternative minimum taxable income" and may result
in a liability to pay the alternative minimum tax.
If an incentive option is exercised other than as described above, the tax
consequences will be the same as those described below for non-statutory
options. Also, incentive options will be treated as non-statutory options to the
extent they first become exercisable by an individual in any calendar year for
stock having a fair market value (determined at time of grant) in excess of
$100,000.
If stock acquired upon the exercise of an incentive option is not disposed
of by the participant within two years from the date the option is granted or
within one year after the date the option is exercised, any gain or loss
recognized upon a later disposition of the stock will be capital gain or loss.
If these one-year and two-year holding period requirements are not satisfied,
the participant will realize ordinary income at the time of disposition of the
stock. (A disposition giving rise to such ordinary income is referred to as a
"disqualifying disposition.") Upon a disqualifying disposition, in general, a
participant will realize ordinary income equal to the excess of the fair market
value of the stock on the date of exercise over the exercise price and the
Company will be entitled to an equivalent deduction provided it satisfies
certain reporting requirements. Different rules may apply if the stock received
upon exercise was then subject to a substantial risk of forfeiture. Any
additional gain recognized in the disposition will be a capital gain for which
no deduction will be available. If the disqualifying disposition is a sale or
exchange with respect to which loss (if sustained) would be recognized, then the
amount of ordinary income realized upon the disqualifying disposition (and the
amount of the Company's deduction) will not exceed the excess of the amount
realized on such sale or exchange over the adjusted basis of the stock.
If a participant exercises an incentive option in whole or in part by
surrendering previously acquired stock, no gain or loss is recognized on the
exchange of the previously-acquired shares unless the exchange results in a
disqualifying disposition of the shares surrendered. Such a disqualifying
disposition may result in the realization of ordinary income.
Non-statutory Options. The grant of a non-statutory option does not
produce taxable income to the optionee or a deduction to the Company. A
participant exercising a non-statutory option realizes ordinary income in the
amount of the difference between the exercise price and the then market value of
the shares, and the Company is entitled to a corresponding deduction (provided
it satisfies applicable reporting requirements). If the stock acquired upon
exercise is subject to a substantial risk of forfeiture, the recognition of
income and the related deduction, as well as the measurement thereof, will be
deferred until the risk of forfeiture lapses, unless the participant properly
files an election with the Internal Revenue Service under Section 83(b) of the
Code.
If a participant exercises a non-statutory option by surrendering
previously-acquired stock, no gain or loss is recognized on the exchange for an
equivalent number of new shares. The participant will realize ordinary income,
and the Company will be entitled to a corresponding deduction, provided it
satisfies applicable reporting requirements, in general equal to the fair market
value of any new shares received in excess of the number of previously-acquired
shares surrendered in the exchange, subject to the special rules described above
applicable to stock that is subject to a substantial risk of forfeiture.
Miscellaneous. The Code imposes a 20% additional tax and denies a
deduction with respect to certain payments in the nature of compensation that
are contingent upon a corporate change in ownership or control. In general and
subject to a number of exceptions, where such payments equal or exceed three
times an individual's average annual taxable compensation from the corporation
for the five years preceding the change in control, all such payments to the
individual in excess of one times the five-year average are subject to the
additional tax and deduction-disallowance penalty. Accelerated vesting of stock
options granted under the Plan, if occurring in connection with a change in
ownership or control of the Company, could result in amounts that would be
treated as
43
<PAGE> 46
payments taken into account for purposes of these limits. The Code also denies a
deduction for remuneration paid to certain executive officers of a public
corporation to the extent such remuneration exceeds $1 million in any year.
There are a number of exemptions under the $1 million deduction limitation rule,
including an exemption for certain performance-based compensation. It is
expected that stock options awarded under the Plan should qualify for the
performance-based exemption, provided the specific requirements of that Section
are satisfied with respect to the particular award.
Certain Replacement Awards to be Issued Under the Equity Incentive
Plan. As of June 25, 1996, persons who will be employees of the Company as of
the Closing held options to purchase an aggregate of 86,435 shares of TJX common
stock under TJX's 1986 Stock Incentive Plan, 28,065 of which shares relate to
options which were vested. Under such plan, outstanding options will terminate
in accordance with their terms following the Closing. In connection with the
Offering, the Company will issue options to purchase shares of Common Stock
under the Equity Incentive Plan in replacement of outstanding TJX options which
are unvested as of the Closing, subject to the termination or relinquishment of
such TJX options. The exercise price and number of replacement options will vary
depending upon the exercise price of the corresponding TJX options. Replacement
options granted under the Equity Incentive Plan will be subject to the same
vesting schedule as the corresponding replaced TJX awards and will otherwise be
subject to the terms of the Equity Incentive Plan.
Certain Option Grants. In connection with the Closing, Mr. Rao and Ms.
Meyrowitz will each receive grants of options under the Equity Incentive Plan to
purchase 50,000 and 40,000 shares of Common Stock, respectively. Such options
will be exercisable at the Offering price and vest with respect to one-third of
the option shares upon each of the first three anniversaries of the date of
grant.
INDEMNIFICATION AGREEMENTS
Prior to the completion of the Offering, the Company will enter into
indemnification agreements with each of its directors and executive officers
indemnifying them against expenses, settlements, judgments and fines incurred in
connection with any threatened, pending or completed action, suit, arbitration
or proceeding, where the individual's involvement is by reason of the fact that
he or she is or was a director or officer or served at the Company's request as
a director of another organization (except that indemnification is not provided
against judgments and fines in a derivative suit unless permitted by Delaware
law). An individual may not be indemnified if he or she is found not to have
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Company, except to the extent Delaware
law shall permit broader contractual indemnification. The indemnification
agreements provide procedures, presumptions and remedies designed to
substantially strengthen the indemnity rights beyond those provided by the
Company's Certificate of Incorporation and by Delaware law.
44
<PAGE> 47
<TABLE>
OWNERSHIP OF SECURITIES
The following tables set forth certain information as of June 25, 1996
regarding (a) the beneficial ownership of the Company's Common Stock: (i)
immediately prior to the Offering, giving effect to the transactions
contemplated by the Transfer Agreement; and (ii) as adjusted to reflect the sale
of the shares of Common Stock pursuant to the Offering, and (b) the beneficial
ownership of TJX common stock, for each beneficial owner of more than 5% of the
Company's Common Stock, each director of the Company, each named executive
officer of the Company and all directors and executive officers as a group. The
table assumes an Offering price of $17.00 per share of the Company's Common
Stock (the mid-point of the range of the estimated Offering price) and a price
of $32.25 per share for TJX common stock for purposes of adjustments to be made.
<CAPTION>
COMPANY SHARES COMPANY SHARES TJX SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED BENEFICIALLY
PRIOR TO OFFERING AFTER THE OFFERING(1) OWNED(2)
NAME OF BENEFICIAL ---------------------- ------------------------ -------------------
OWNER(3) NUMBER PERCENT NUMBER PERCENT NUMBER PERCENT
- ----------------------- ----------- ------- --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
The TJX Companies,
Inc.................. 15,178,847 100% 5,918,847 39%(4) N/A N/A
770 Cochituate Road
Framingham,
Massachusetts 01701
Bernard Cammarata...... -- -- -- -- 384,970 *
Richard G. Lesser...... -- -- -- -- 97,670 *
Dhananjaya K. Rao...... -- -- -- -- 8,498 *
Carol Meyrowitz(5)..... -- -- -- -- 5,775 *
All executive officers
and directors as a
group (5 persons).... -- -- -- -- 497,413 *
<FN>
- ---------------
* Less than 1%
(1) Includes options to purchase shares of Common Stock that are currently
exercisable or may be exercisable within 60 days of June 25, 1996 for Mr.
Rao (0) and Ms. Meyrowitz (0).
(2) Includes options to purchase shares of TJX common stock that are currently
exercisable or may be exercisable within 60 days of June 25, 1996 for
Messrs. Cammarata (336,300), Lesser (97,670) and Rao (7,680).
(3) Beneficial ownership as reported in the above table has been determined in
accordance with Rule 13d-3 under the Exchange Act.
(4) Assuming the Underwriters' over-allotment option is not exercised.
(5) Includes 775 shares held by John deBairos, as to which Ms. Meyrowitz
disclaims beneficial ownership. Also includes 5,000 shares of restricted
stock, the restrictions on which will lapse immediately prior to the
Closing.
</TABLE>
45
<PAGE> 48
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 15,178,847 shares of
Common Stock issued and outstanding. Of the outstanding shares, 9,260,000 shares
sold pursuant to the Offering (or 10,649,000 shares, assuming the Underwriters'
over-allotment option is exercised in full) will be freely tradeable without
restriction under the Securities Act, except for any shares purchased by an
"affiliate" (as that term is defined under the rules and regulations of the
Securities Act) of the Company. Sales of shares by affiliates of the Company
will be subject to the resale limitations of Rule 144 of the Securities Act. The
remaining 5,918,847 shares (4,529,847 shares if the Underwriters' over-allotment
option is exercised in full) outstanding upon completion of the Offering, all of
which will be owned by TJX, will be "restricted" securities within the meaning
of Rule 144 and will not be able to be sold unless registered under the
Securities Act or sold pursuant to an applicable exemption from registration,
such as Rule 144.
Under Rule 144 as currently in effect, for so long as TJX remains an
affiliate of the Company, it is entitled to sell within any three-month period a
number of shares of Common Stock that does not exceed the greater of 1% of the
then outstanding shares of Common Stock of the Company or the average weekly
trading volume of the Common Stock during the four calendar weeks preceding such
sale. Sales under Rule 144 are subject to certain restrictions relating to
manner of sale, notice and the availability of current public information about
the Company. A person who is not an affiliate of the Company at any time during
the three months preceding a sale, and who has beneficially owned restricted
shares for at least three years (including the holding period of any prior owner
other than an affiliate), would be entitled to sell such shares without regard
to the volume limitations, manner of sale provisions or notice or current public
information requirements of Rule 144.
The Company, its directors and executive officers, and TJX have each agreed
with the Underwriters not to offer, sell, contract to sell or otherwise dispose
of, directly or indirectly, or announce the offering of, or exercise any
registration rights with respect to, or register, cause to be registered or
announce the registration or intended registration of, any shares of Common
Stock or any stock option or other security convertible into, or exchangeable
for, any shares of Common Stock for a period of 180 days from the date of the
Underwriting Agreement without the prior written consent of the Representatives
(as hereafter defined), except for (a) in the case of the Company, Common Stock
issued pursuant to any employee or director benefit plan described herein and
(b) in the case of directors and executive officers, the exercise of stock
options pursuant to benefit plans described herein and shares of Common Stock
disposed of as bona fide gifts.
In connection with the Offering, the Company and TJX will enter into a
Registration Rights Agreement whereby TJX will have certain demand and
incidental registration rights. For a more complete description of the
Registration Rights Agreement, see "Relationship with TJX -- Registration Rights
Agreement."
An additional 50,000 shares of Common Stock will be reserved for issuance
under the Company's Non-Employee Director Plan and 800,000 shares will be
reserved for issuance under the Company's Equity Incentive Plan. The Company
presently intends to file registration statements under the Securities Act to
register Common Stock to be issued pursuant to exercise of options granted or to
be granted under the Company's Non-Employee Director Plan and Equity Incentive
Plan. Common Stock issued after the effective date of such registration
statements upon exercise of outstanding vested options granted pursuant to the
Non-Employee Director Plan and Equity Incentive Plan, other than Common Stock
issued to affiliates of the Company, would be available for immediate resale in
the open market.
Prior to the Offering, there has been no public market for the Common Stock
of the Company, and no predictions can be made of the effect, if any, that the
availability of shares for sale or the actual sale of shares will have on market
prices prevailing from time to time.
46
<PAGE> 49
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 35,000,000 shares of
Common Stock, $.01 par value per share, and 5,000,000 shares of Preferred Stock,
$.01 par value per share ("Preferred Stock"). The following summary description
of the Common Stock and the Preferred Stock is qualified in its entirety by
reference to the Company's Certificate of Incorporation included as an exhibit
to the Registration Statement of which this Prospectus forms a part.
COMMON STOCK
Upon completion of the Exchange Transaction, there will be 15,178,847
shares of Common Stock outstanding. A total of 850,000 shares of Common Stock
will be reserved for issuance under the Non-Employee Director Plan and the
Equity Incentive Plan. Holders of Common Stock are entitled to one vote for each
share held of record on all matters to be submitted to a vote of the
stockholders, and do not have cumulative voting rights. Subject to preferences
that may be applicable to any outstanding shares of Preferred Stock, holders of
Common Stock are entitled to receive ratably such dividends, if any, as may be
declared from time to time by the Board of Directors of the Company out of funds
legally available therefor. See "Dividend Policy." Upon the completion of the
Exchange Transaction, all shares of Common Stock will be validly issued, fully
paid and nonassessable and the holders thereof will have no preferences or
conversion, exchange or pre-emptive rights. In the event of any liquidation,
dissolution or winding-up of the affairs of the Company, holders of Common Stock
will be entitled to share ratably in the assets of the Company remaining after
payment or provision for payment of all of the Company's debts and obligations
and liquidation payments to holders of outstanding shares of Preferred Stock, if
any.
PREFERRED STOCK
The Preferred Stock, if issued, would have priority over the Common Stock
with respect to dividends and to other distributions, including the distribution
of assets upon liquidation. The Preferred Stock may be issued in one or more
series without further stockholder authorization, and the Board of Directors is
authorized to fix and determine the terms, limitations and relative rights and
preferences of the Preferred Stock, to establish series of Preferred Stock and
to fix and determine the variations as among series. The Preferred Stock, if
issued, may be subject to repurchase or redemption by the Company. The Board of
Directors, without approval of the holders of the Common Stock, can issue
Preferred Stock with voting and conversion rights (including multiple voting
rights) which could adversely affect the rights of holders of Common Stock. In
addition to having a preference with respect to dividends or liquidation
proceeds, the Preferred Stock, if issued, may be entitled to the allocation of
capital gains from the sale of the Company's assets. Although the Company has no
present plans to issue any shares of Preferred Stock following the closing of
the Offering, the issuance of shares of Preferred Stock, or the issuance of
rights to purchase such shares, may have the effect of delaying, deferring or
preventing a change in control of the Company or an unsolicited acquisition
proposal.
CLASSIFIED BOARD OF DIRECTORS
The Certificate of Incorporation and By-laws of the Company provide for the
Board of Directors to be divided into three classes of directors, as nearly
equal in number as is reasonably possible, serving staggered terms so that
directors' initial terms will expire either at the 1997, 1998 or 1999 annual
meeting of the stockholders. Starting with the 1997 annual meeting of the
stockholders, one class of directors will be elected each year for a three-year
term. See "Management."
The Company believes that a classified Board of Directors will help to
assure the continuity and stability of the Board of Directors and the Company's
business strategies and policies as determined by the Board of Directors, since
a majority of the directors at any given time will have had prior experience as
directors of the Company. The Company believes that such continuity and
47
<PAGE> 50
stability, in turn, will permit the Board of Directors to more effectively
represent the interests of its stockholders.
With a classified Board of Directors, at least two annual meetings of
stockholders, instead of one, generally will be required to effect a change in
the majority of the Board of Directors. As a result, a provision relating to a
classified Board of Directors may discourage proxy contests for the election of
directors or purchases of a substantial block of the Common Stock because the
provision could operate to prevent a rapid change in control of the Board of
Directors. The classification provision also could have the effect of
discouraging a third party from making a tender offer or otherwise attempting to
obtain control of the Company. Under the Company's By-laws a director may be
removed by the stockholders of the corporation only for cause.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER PROPOSALS AND STOCKHOLDER NOMINATIONS
OF DIRECTORS
The By-laws establish an advance notice procedure with regard to the
nomination by the stockholders of the Company of candidates for election as
directors (the "Nomination Procedure") and with regard to other matters to be
brought by stockholders before a meeting of stockholders of the Company (the
"Business Procedure").
The Nomination Procedure requires that a stockholder give written notice,
delivered to or mailed and received at the principal executive offices of the
corporation not less than 60 days nor more than 90 days prior to the meeting, in
proper form, of a planned nomination for the Board of Directors to the Secretary
of the Company. Detailed requirements as to the form and timing of that notice
are specified in the By-laws. If the President determines that a person was not
nominated in accordance with the Nomination Procedure, such person will not be
eligible for election as a director.
Under the Business Procedure, a stockholder seeking to have any business
conducted at an annual meeting must give written notice, delivered to or mailed
and received at the principal executive offices of the corporation not less than
60 days nor more than 90 days prior to the meeting, in proper form, to the
Secretary of the Company. Detailed requirements as to the form and timing of
that notice are specified in the By-laws. If the President determines that the
other business was not properly brought before such meeting in accordance with
the Business Procedure, such business will not be conducted at such meeting.
Although the By-laws do not give the Board of Directors any power to
approve or disapprove stockholder nominations for the election of directors or
of any other business desired by stockholders to be conducted at an annual or
any other meeting, the By-laws: (i) may have the effect of precluding a
nomination for the election of directors or precluding the conduct of business
at a particular annual meeting if the proper procedures are not followed; or
(ii) may discourage or deter a third party from conducting a solicitation of
proxies to elect its own slate of directors or otherwise attempting to obtain
control of the Company, even if the conduct of such solicitation or such attempt
might be beneficial to the Company and its stockholders.
OTHER PROVISIONS
Special Meetings of the Stockholders of the Company. The Company's By-laws
provide that a special meeting of the stockholders of the Company may be called
only by the President, or by order of the Board of Directors. That provision
prevents stockholders from calling a special meeting of stockholders and
potentially limits the stockholders' ability to offer proposals to the annual
meetings of stockholders, if no special meetings are otherwise called by the
President or the Board.
Amendment of the By-laws. The Company's Certificate of Incorporation
provides that the By-laws only may be amended by the Board of Directors or by a
vote of at least 75% of the outstanding shares of the Company's stock entitled
to vote in the election of directors.
48
<PAGE> 51
No Action by Written Consent. The Company's Certificate of Incorporation
does not permit the Company's stockholders to act by written consent. As a
result, any action to be taken by the Company's stockholders must be taken at a
duly called meeting of the stockholders.
DELAWARE ANTI-TAKEOVER STATUTE
The Company is subject to Section 203 of the DGCL which, with certain
exceptions, prohibits a Delaware corporation from engaging in any of a broad
range of business combinations with any "interested stockholder" for a period of
three years following the date that such stockholder became an interested
stockholder, unless: (i) prior to such date, the Board of Directors of the
corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder; (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of shares
outstanding those shares owned (a) by persons who are directors and officers and
(b) by employee stock plans in which employee participants do not have the right
to determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer; or (iii) on or after such date, the
business combination is approved by the Board of Directors and authorized at an
annual or special meeting of stockholders by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder. An "interested stockholder" is defined as any person that is (a)
the owner of 15% or more of the outstanding voting stock of the corporation or
(b) an affiliate or associate of the corporation and was the owner of 15% or
more of the outstanding voting stock of the corporation at any time within the
three-year period immediately prior to the date on which it is sought to be
determined whether such person is an interested stockholder.
NEW YORK STOCK EXCHANGE LISTING
The Company has received approval to list its Common Stock on the NYSE
under the symbol CWK.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is The Bank of New
York.
49
<PAGE> 52
UNDERWRITING
<TABLE>
Upon the terms and subject to the conditions set forth in the Underwriting
Agreement, the Company and TJX have agreed that TJX will sell to each of the
Underwriters named below (the "Underwriters"), for whom Salomon Brothers Inc and
Goldman, Sachs & Co. are acting as the Representatives (the "Representatives"),
and each of such Underwriters have severally agreed to purchase from TJX, the
respective number of shares set forth opposite its name below:
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- ------------ ----------
<S> <C>
Salomon Brothers Inc.............................................................
Goldman, Sachs & Co. ............................................................
---------
Total.................................................................. 9,260,000
=========
</TABLE>
In the Underwriting Agreement, the several Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all the
shares of Common Stock offered hereby (other than those subject to the
over-allotment option described below) if any such shares are purchased. In the
event of a default by an Underwriter, the Underwriting Agreement provides that,
in certain circumstances, the purchase commitments of the non-defaulting
Underwriters may be increased or the Underwriting Agreement may be terminated.
The Representatives have advised the Company and TJX that the several
Underwriters propose initially to offer the shares of Common Stock to the public
at the price to public set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not in excess of $ per
share. The Underwriters may allow and such dealers may reallow a concession not
in excess of $ per share to other dealers. After the initial public
offering, the price to public and such concessions may be changed.
TJX has granted the Underwriters an option, exercisable within 30 days of
the date of this Prospectus, to purchase up to 1,389,000 additional shares of
Common Stock from TJX at the same price per share as the initial 9,260,000
shares of Common Stock to be purchased by the Underwriters. The Underwriters may
exercise such option only to cover over-allotments, if any, incurred in
connection with the Offering. To the extent the Underwriters exercise such
option, each Underwriter will have a firm commitment, subject to certain
conditions, to purchase the same proportion of such additional shares of Common
Stock as the number of shares of Common Stock to be purchased and offered by
such Underwriter in the table above bears to the total number of shares of
Common Stock initially offered by the Underwriters hereby.
Of the Common Stock offered hereby, up to shares may be directed to,
and may be purchased by, employees of the Company and TJX and certain other
persons, subject to certain restrictions of the National Association of
Securities Dealers, Inc. Any of such shares not purchased by such persons will
be offered by the Underwriters to the public on the same basis as the other
shares offered hereby.
The Underwriting Agreement provides that the Company and TJX will indemnify
the several Underwriters, and any person who controls any Underwriter, against
liabilities under the Securities Act or any other law or regulation, common law
or otherwise, with respect to certain untrue statements contained in or
omissions from the Prospectus or the Registration Statement of which it is a
part, or any amendment thereof or supplement thereto, or contribute to payments
the Underwriters may be required to make in respect thereof.
The Company, its directors and executive officers, and TJX have each agreed
with the Underwriters not to offer, sell or contract to sell or otherwise
dispose of, directly or indirectly, or
50
<PAGE> 53
announce the offering of, or exercise any registration rights with respect to,
or register, cause to be registered or announce the registration or intended
registration of, any shares of Common Stock or any stock option or other
security convertible into, or exchangeable for, any shares of Common Stock for a
period of 180 days from the date of the Underwriting Agreement without the prior
written consent of the Representatives except for (a) in the case of the
Company, Common Stock issued pursuant to any employee or director benefit plan
described herein and (b) in the case of directors and executive officers, the
exercise of stock options pursuant to benefit plans described herein and shares
of Common Stock disposed of as bona fide gifts.
The Underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
Prior to this Offering, there has been no public market for the Common
Stock. Accordingly, the initial public offering price for the Common Stock will
be determined by negotiations among the Company, TJX and the Representatives.
Among the factors to be considered in determining the initial public offering
price will be the Company's record of operations, its current financial
condition, its future prospects, the market for its products, the experience of
management, the economic conditions of the Company's industry in general, the
general condition of the equity securities market, the demand for similar
securities of companies considered comparable to the Company and other relevant
factors. There can be no assurance, however, that the prices at which the Common
Stock will sell in the public market after this Offering will not be lower than
the price at which the shares of Common Stock are sold by the Underwriters.
LEGAL MATTERS
The legality of the shares of Common Stock offered hereby will be passed
upon for the Company by Nutter, McClennen & Fish, LLP, Boston, Massachusetts.
Certain legal matters in connection with the sale of the Common Stock offered
hereby will be passed upon for TJX by Ropes & Gray, Boston, Massachusetts, and
for the Underwriters by Cleary, Gottlieb, Steen & Hamilton, New York, New York.
EXPERTS
The combined balance sheets as of January 28, 1995 and January 27, 1996 and
the combined statements of income, stockholder's equity and cash flow for the
years ended January 29, 1994, January 28, 1995 and January 27, 1996, included in
this Prospectus, have been included herein in reliance on the report of Coopers
& Lybrand L.L.P., independent accountants, given on the authority of that firm
as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement under the Securities Act of
1933, as amended, with respect to the Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in that
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and its Common Stock, reference is
hereby made to such Registration Statement, exhibits and schedules. Statements
contained in this Prospectus as to the contents of any contract or any other
document are not necessarily complete and in each instance reference is made to
the copy of such contract or document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects to such
reference. The Registration Statement, including the exhibits and schedules
thereto, can be inspected and copied at the Commission's Public Reference Room,
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and
at the following Regional Offices of the Commission: Chicago Regional Office,
Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661
and New York
51
<PAGE> 54
Regional Office, Seven World Trade Center, 13th Floor, New York, New York 10048.
Copies of such material can also be obtained at prescribed rates by mail from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission maintains a Web site (http://www.sec.gov)
that contains reports, proxy and information statements and other information
regarding registrants that submit electronic filings to the Commission.
The Company will register its Common Stock under the Exchange Act and, in
accordance with the Exchange Act, thereafter will be required to file reports,
proxy statements and other information with the Commission. Such reports, proxy
statements and information may be inspected and copied at the public reference
facilities maintained by the Commission referenced above. The Company intends to
furnish holders of Common Stock with annual reports that include audited annual
consolidated financial statements and a report thereon by its independent
certified public accountants and quarterly reports containing unaudited
consolidated financial information for each of the first three quarters of each
fiscal year. As long as the Common Stock is listed on the New York Stock
Exchange, such reports, proxy statements and information also can be inspected
at the offices of the New York Stock Exchange, 20 Broad Street, New York, New
York 10005.
52
<PAGE> 55
CHADWICK'S OF BOSTON, LTD.
INDEX TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Historical Combined Financial Statements............................................. F-2
Report of Independent Accountants.................................................. F-2
Combined Statements of Income for the fiscal years ended January 29, 1994, January
28, 1995 and January 27, 1996; and the thirteen weeks ended April 29, 1995 and
April 27, 1996 (Unaudited)...................................................... F-3
Combined Balance Sheets as of January 28, 1995 and January 27, 1996; and April 27,
1996 (Unaudited)................................................................ F-4
Combined Statements of Cash Flows for the fiscal years ended January 29, 1994,
January 28, 1995 and January 27, 1996; and the thirteen weeks ended April 29,
1995 and April 27, 1996 (Unaudited)............................................. F-5
Combined Statements of Stockholder's Equity for the fiscal years ended January 29,
1994, January 28, 1995 and January 27, 1996; and the thirteen weeks ended April
27, 1996 (Unaudited)............................................................ F-6
Notes to Combined Financial Statements............................................. F-7
Pro Forma Combined Financial Statements (Unaudited).................................. F-14
Pro Forma Combined Statement of Income for the fiscal year ended January 27,
1996............................................................................ F-15
Pro Forma Combined Statement of Income for the thirteen weeks ended April 27,
1996............................................................................ F-16
Pro Forma Condensed Combined Balance Sheet as of April 27, 1996.................... F-17
Notes to Pro Forma Combined Financial Statements................................... F-18
</TABLE>
F-1
<PAGE> 56
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Chadwick's of Boston, Ltd.:
We have audited the accompanying combined balance sheets of Chadwick's of
Boston, Ltd. and subsidiaries as of January 28, 1995 and January 27, 1996 and
the related combined statements of income, stockholder's equity, and cash flows
for each of the three fiscal years in the period ended January 27, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of Chadwick's of Boston,
Ltd. and subsidiaries as of January 28, 1995 and January 27, 1996 and the
combined results of their operations and their cash flows for each of the three
fiscal years in the period ended January 27, 1996 in conformity with generally
accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
May 14, 1996, except for
Note I for which the
date is June 25, 1996.
F-2
<PAGE> 57
CHADWICK'S OF BOSTON, LTD.
<TABLE>
COMBINED STATEMENTS OF INCOME
(IN THOUSANDS)
<CAPTION>
FISCAL YEAR ENDED THIRTEEN WEEKS ENDED
------------------------------------------- --------------------------
JANUARY 29, JANUARY 28, JANUARY 27, APRIL 29, APRIL 27,
1994 1995 1996 1995 1996
----------- ----------- ----------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales..................... $424,276 $432,660 $465,598 $116,611 $131,996
-------- -------- -------- -------- --------
Cost of sales, including
buying and order fulfillment
costs....................... 269,233 271,874 278,868 69,144 73,300
-------- -------- -------- -------- --------
Gross profit............. 155,043 160,786 186,730 47,467 58,696
Selling, general and
administrative expenses,
including catalog and order
processing costs............ 131,439 155,329 160,282 42,387 45,831
-------- -------- -------- -------- --------
Income from operations... 23,604 5,457 26,448 5,080 12,865
Interest expense, net......... 3,378 3,940 6,920 1,542 1,404
-------- -------- -------- -------- --------
Income before income taxes,
extraordinary items and
cumulative effect of
accounting changes.......... 20,226 1,517 19,528 3,538 11,461
Provision for income taxes.... 7,941 255 7,854 1,422 4,764
-------- -------- -------- -------- --------
Income before extraordinary
items and cumulative effect
of accounting changes....... 12,285 1,262 11,674 2,116 6,697
Extraordinary charge, net of
income taxes................ -- (192) (3,338) -- --
Cumulative effect of
accounting changes, net of
income taxes................ 380 -- -- -- --
-------- -------- -------- -------- --------
Net income.................... $ 12,665 $ 1,070 $ 8,336 $ 2,116 $ 6,697
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 58
CHADWICK'S OF BOSTON, LTD.
<TABLE>
COMBINED BALANCE SHEETS
(IN THOUSANDS)
<CAPTION>
JANUARY 28, JANUARY 27, APRIL 27,
1995 1996 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents............................ $ 1,420 $ 1,406 $ 953
Accounts receivable, net of allowance for doubtful
accounts of $479, $2,582 and $3,516,
respectively...................................... 10,056 41,444 63,006
Current deferred taxes and income taxes
recoverable....................................... 9,534 2,624 1,872
Merchandise inventories.............................. 93,993 82,612 69,022
Prepaid expenses, including catalog costs............ 9,499 18,829 13,674
-------- -------- --------
Total Current Assets......................... 124,502 146,915 148,527
-------- -------- --------
Property at Cost:
Land and buildings................................... 29,586 30,563 30,759
Leasehold improvements............................... 4,232 5,873 6,008
Furniture, fixtures and equipment.................... 38,193 41,458 41,605
-------- -------- --------
72,011 77,894 78,372
Less accumulated depreciation and amortization....... 18,888 25,594 27,251
-------- -------- --------
53,123 52,300 51,121
-------- -------- --------
Total Assets........................................... $177,625 $199,215 $199,648
======== ======== ========
Current Liabilities:
Accounts payable..................................... $ 41,961 $ 36,889 $ 34,005
Accrued expenses and other current liabilities....... 38,132 32,183 39,382
-------- -------- --------
Total Current Liabilities.................... 80,093 69,072 73,387
Long-term debt......................................... 45,000 -- --
Loans and advances from TJX............................ 2,391 70,769 60,277
Deferred income taxes.................................. 1,802 2,699 2,612
Commitments (see Note B)
Stockholder's Equity (see Note H)
Common stock, par value $.01, authorized 35,000,000
shares, issued and outstanding 15,178,847 shares..... 152 152 152
Additional paid-in capital........................... -- -- --
Retained earnings.................................... 48,187 56,523 63,220
-------- -------- --------
Total Stockholder's Equity................... 48,339 56,675 63,372
-------- -------- --------
Total Liabilities and Stockholder's Equity............. $177,625 $199,215 $199,648
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 59
CHADWICK'S OF BOSTON, LTD.
<TABLE>
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<CAPTION>
FISCAL YEAR ENDED THIRTEEN WEEKS ENDED
------------------------------------------------- ---------------------------
JANUARY 29, JANUARY 28, JANUARY 27, APRIL 29, APRIL 27,
1994 1995 1996 1995 1996
------------- ------------- ------------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.......................... $ 12,665 $ 1,070 $ 8,336 $ 2,116 $ 6,697
Adjustments to reconcile net income
to net cash provided from
operating activities:
Extraordinary charge.............. -- 192 3,338 -- --
Depreciation and amortization..... 4,505 5,699 6,712 1,637 1,659
Other............................. (380) -- 297 225 9
Changes in assets and liabilities:
(Increase) in accounts
receivable................... (2) (4,645) (31,388) (32,850) (21,562)
(Increase) decrease in federal
and state income taxes
recoverable and current
deferred income taxes........ (3,206) (3,310) 9,258 4,810 752
(Increase) decrease in
merchandise inventories...... (14,995) (7,187) 11,381 2,397 13,590
(Increase) decrease in prepaid
expenses..................... (4,020) (1,159) (9,330) (5,921) 5,155
Increase (decrease) in accounts
payable...................... (10,407) 13,503 (5,072) 1,377 (2,884)
Increase (decrease) in accrued
expenses and other current
liabilities.................. 1,973 11,134 (5,949) (6,919) 7,200
Increase (decrease) in deferred
income taxes................. 1,133 621 897 102 (87)
-------- -------- -------- -------- --------
Net cash provided by (used in)
operating activities................ (12,734) 15,918 (11,520) (33,026) 10,529
-------- -------- -------- -------- --------
Cash flows from investing activities:
Property additions.................. (16,203) (10,586) (6,338) (1,623) (490)
-------- -------- -------- -------- --------
Net cash (used in) investing
activities.......................... (16,203) (10,586) (6,338) (1,623) (490)
-------- -------- -------- -------- --------
Cash flows from financing activities:
Proceeds from borrowings of long-
term debt......................... -- 45,000 -- -- --
Principal payments on long-term
debt.............................. (19) (32) -- -- --
Prepayment of long-term debt........ -- (5,774) (50,534) -- --
Increase (decrease) in borrowings
from TJX, net..................... 30,036 (44,317) 68,378 34,321 (10,492)
-------- -------- -------- -------- --------
Net cash provided by (used in)
financing activities................ 30,017 (5,123) 17,844 34,321 (10,492)
-------- -------- -------- -------- --------
Net increase (decrease) in cash and
cash equivalents.................... 1,080 209 (14) (328) (453)
Cash and cash equivalents at beginning
of year............................. 131 1,211 1,420 1,420 1,406
-------- -------- -------- -------- --------
Cash and cash equivalents at end of
period.............................. $ 1,211 $ 1,420 $ 1,406 $ 1,092 $ 953
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 60
CHADWICK'S OF BOSTON, LTD.
<TABLE>
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
(IN THOUSANDS)
<CAPTION>
COMMON
STOCK, ADDITIONAL
PAR VALUE PAID-IN RETAINED
$.01 CAPITAL EARNINGS TOTAL
------------ ---------- -------- --------
<S> <C> <C> <C> <C>
Balance, January 30, 1993................... $152 $-- $34,452 $34,604
Net income................................ -- -- 12,665 12,665
---- --- ------- -------
Balance, January 29, 1994................... 152 -- 47,117 47,269
Net income................................ -- -- 1,070 1,070
---- --- ------- -------
Balance, January 28, 1995................... 152 -- 48,187 48,339
Net income................................ -- -- 8,336 8,336
---- --- ------- -------
Balance, January 27, 1996................... 152 -- 56,523 56,675
Net income (Unaudited).................... -- -- 6,697 6,697
---- --- ------- -------
Balance, April 27, 1996 (Unaudited)......... $152 $-- $63,220 $63,372
==== === ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 61
CHADWICK'S OF BOSTON, LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS
SUMMARY OF ACCOUNTING POLICIES
BASIS OF PRESENTATION: Chadwick's, Inc., which holds the assets of the
Chadwick's of Boston catalog, is a wholly-owned subsidiary of The TJX Companies,
Inc. ("TJX"). Just prior to the planned stock offering (see Note I), TJX intends
to exchange its ownership in Chadwick's, Inc. for all of the outstanding shares
of Chadwick's of Boston, Ltd. (the "Company"). These combined financial
statements include the operating results of the Chadwick's of Boston catalog and
its related trademark subsidiary.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent 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.
DESCRIPTION OF BUSINESS: The Company is an off-price catalog operator
which sells primarily women's career, casual and social apparel through its
Chadwick's of Boston catalog.
FISCAL YEAR: The Company's fiscal year ends on the last Saturday in
January. The fiscal years ended January 29, 1994, January 28, 1995 and January
27, 1996 each included 52 weeks.
REVENUE RECOGNITION: The Company recognizes sales and the related cost of
sales at the time the merchandise is shipped to customers. The Company allows
for merchandise returns at the customer's discretion, and provides an allowance
for returns based on projected merchandise returns. The Company offers a
deferred billing program under which the Company does not charge the credit card
of a customer who requests the program and purchases merchandise on credit until
approximately 90 to 120 days after the mailing of the catalog from which the
merchandise is purchased. An allowance for doubtful accounts is established as
deferred billing sales are recorded based upon projected future credit losses.
MERCHANDISE LIQUIDATIONS: The Company writes down the value of merchandise
identified for liquidation to its net realizable value and reflects the
transaction net in cost of sales. The Company received $29.7 million, $21.9
million and $20.2 million, for the fiscal years ended January 1994, 1995 and
1996, respectively, with respect to liquidated merchandise.
CASH AND CASH EQUIVALENTS: The Company generally considers highly liquid
investments with a maturity of three months or less at time of purchase to be
cash equivalents. The Company's investments are primarily time deposits with
major banks. Fair value of cash equivalents approximates carrying value.
MERCHANDISE INVENTORIES: Inventories are stated at the lower of cost or
market. The Company primarily uses the retail method for valuing inventories on
the first-in first-out basis.
PREPAID CATALOG EXPENSES: Catalog costs are capitalized as incurred and
amortized over the period the catalog generates revenue which generally does not
exceed four months. Prepaid catalog expenses were $7.9 million and $16.7 million
as of January 28, 1995 and January 27, 1996, respectively.
DEPRECIATION AND AMORTIZATION: For financial reporting purposes, the
Company provides for depreciation and amortization of property principally by
the use of the straight-line method over the estimated useful lives of the
assets. Leasehold costs and improvements are generally amortized over the lease
term or their estimated useful life, whichever is shorter. Maintenance and
repairs are charged to expense as incurred. Upon retirement or sale, the cost of
disposed assets and the related depreciation are eliminated and any gain or loss
is included in net income.
NEW ACCOUNTING STANDARDS: During 1995, the Financial Accounting Standards
Board (FASB) issued FASB Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Assets to be Disposed of " and FASB Statement No. 123,
"Accounting for Stock Based Compensation." The Company will implement the new
standards in its fiscal year ending January 25, 1997 and
F-7
<PAGE> 62
CHADWICK'S OF BOSTON, LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
it expects that the impact of implementation will be immaterial. The Company
plans to adopt the disclosure only provisions of FASB Statement No. 123.
ACCOUNTING CHANGES: Effective January 31, 1993, TJX adopted Statement of
Financial Accounting Standards (SFAS) No. 106 "Employers' Accounting for
Postretirement Benefits Other Than Pensions." The Company recorded its share of
a one-time implementation charge of $79,000, net of taxes of $51,000, as a
cumulative effect of accounting change.
In addition, effective January 31, 1993, TJX also implemented Statement of
Financial Accounting Standards (SFAS) No. 109 "Accounting for Income Taxes." The
amount applicable to the Company resulted in an after-tax gain of $459,000 which
was also recorded as a cumulative effect of accounting change.
INTERIM FINANCIAL INFORMATION: The combined financial statements for the
thirteen weeks ended April 29, 1995 and April 27, 1996 are unaudited but include
all adjustments (consisting only of normal recurring adjustments) which are, in
the opinion of management, necessary for a fair presentation of the results for
the interim period.
A. RELATED PARTY TRANSACTIONS
TJX loans funds to the Company on an as needed basis. The Company pays
interest to TJX on its intercompany balance, net of its cash balance, on a
monthly basis. At the beginning of a fiscal year, the intercompany balance is
determined to be long-term and interest is charged on that balance at a rate
determined annually by TJX. The long-term intercompany balance was $16.7 million
for the fiscal year ended January 29, 1994, $46.7 million for the fiscal year
ended January 28, 1995 and $2.4 million for the fiscal year ended January 27,
1996. The long-term interest rate was 9.0%, 8.0% and 8.5%, in the fiscal years
ended January of 1994, 1995 and 1996, respectively.
In addition to the above, interest is charged or credited to the Company
each month on the difference between its long-term intercompany balance and the
intercompany balance, net of cash at the end of the month. Interest income on
this portion of the intercompany balance which represents funds invested with
TJX is credited at a rate which approximates TJX's short-term investment rate.
Interest expense on this portion of the intercompany balance which represents
borrowings from TJX is charged at a rate which approximates TJX's short-term
borrowing rate. During the past three years, the maximum amounts the Company has
borrowed from TJX on a short-term basis (based on month end borrowing levels)
were $66.2 million in the fiscal year ended January 29, 1994, $18.6 million in
the fiscal year ended January 28, 1995 and $116.0 million in the fiscal year
ended January 27, 1996. The average short-term interest rate on its borrowings
was approximately 4%, 5% and 7% in the fiscal years ended January of 1994, 1995
and 1996, respectively.
TJX provides certain services to the Company, primarily data processing and
payroll processing. The Company pays a charge which it believes approximates the
costs incurred by TJX. The Company paid $2.6 million, $3.3 million and $4.4
million in the fiscal years ended January of 1994, 1995 and 1996, respectively,
for these services. The Company also participates in numerous benefit plans and
insurance plans of TJX and is charged its share of the costs incurred in
connection with the plans.
Additionally, the Company pays a charge to TJX for administrative support,
including financial, treasury, general legal, tax, audit and human resources.
The Company pays an annual fee equal to 0.1% of its budgeted sales for these
services. The Company paid $409,000, $504,000 and $461,000 for the fiscal years
ended January of 1994, 1995 and 1996, respectively.
The Company also enters into several transactions with other operating
divisions of TJX. In the fiscal years ended January of 1994, 1995 and 1996, TJX
purchased liquidated merchandise from the
F-8
<PAGE> 63
CHADWICK'S OF BOSTON, LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Company of $24.2 million, $14.4 million, and $10.6 million, respectively.
Accounts receivable as of January 28, 1995 and January 27, 1996 includes $2.5
million and $1.2 million, respectively due from TJX with respect to liquidated
merchandise. Also, the Company leased certain buying, warehouse and distribution
space and two outlet locations from TJX for which the Company paid $206,000,
$251,000 and $289,000 in the fiscal years ended January of 1994, 1995 and 1996,
respectively.
B. COMMITMENTS AND CONTINGENCIES
The Company is committed for a limited number of leases, primarily for the
rental of real estate. The real estate leases range up to five years and have
variable renewal options. In addition, the Company is generally required to pay
insurance, real estate taxes and other operating expenses. The following is a
schedule of future minimum lease payments for the Company as of January 27,
1996:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED JANUARY, OPERATING LEASES
-------------------------------------------------------------------- ----------------
<S> <C>
1997................................................................ $ 497,000
1998................................................................ 523,000
1999................................................................ 135,000
2000................................................................ 66,000
2001................................................................ 66,000
Later years......................................................... 44,000
----------
Total minimum lease payments........................................ $1,331,000
==========
</TABLE>
Rental expense under operating leases amounted to $1,174,000, $996,000 and
$1,147,000 for the fiscal years ended January of 1994, 1995 and 1996,
respectively.
The Company had outstanding letters of credit in the amount of $19.1
million as of January 27, 1996. The letters of credit are issued for the
purchase of inventory.
C. INCOME TAXES
The Company is included in the consolidated federal income tax return of
TJX and, where applicable, is consolidated for state reporting purposes. The
current income tax provision charged to the Company by TJX is based on the cost
or benefits the Company provides in the consolidated tax returns. The deferred
tax provision is computed based upon the differences between the tax basis of
the Company's assets and liabilities and the reported amounts in the financial
statements. The Company believes the income tax provision is representative of
the Company's tax provision as if it was a stand-alone company.
The provision for income taxes includes the following:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY,
-------------------------------
1994 1995 1996
------ ----- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal............................................ $5,947 $ 336 $1,793
State.............................................. 1,959 (162) 542
Deferred:
Federal............................................ 41 62 4,212
State.............................................. (6) 19 1,307
----- ----- -----
Provision for income taxes........................... $7,941 $ 255 $7,854
===== ===== =====
</TABLE>
F-9
<PAGE> 64
CHADWICK'S OF BOSTON, LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has a net deferred tax (asset) liability as follows:
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 28, JANUARY 27,
1994 1995 1996
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred tax assets:
Inventory.................................... $ 3,712 $ 5,825 $ 3,371
Reserve for customer returns................. 3,622 3,419 3,632
All other.................................... 4,072 2,825 3,000
------ ------ ------
Total deferred tax assets...................... 11,406 12,069 10,003
------ ------ ------
Deferred tax liabilities:
Property and equipment....................... 2,419 3,071 3,074
Capitalized catalog costs.................... 3,434 3,091 6,924
Other........................................ 770 1,204 821
------ ------ ------
Total deferred tax liabilities................. 6,623 7,366 10,819
------ ------ ------
Net deferred tax (asset) liability............. $(4,783) $(4,703) $ 816
====== ====== ======
</TABLE>
The following is a reconciliation of the federal statutory income tax rate
to the effective income tax rate:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY,
--------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate.......................... 35% 35% 35%
Permanent differences, primarily charitable
contributions of inventory.......................... (2) (12) (1)
State income taxes, net of federal benefit............ 6 (6) 6
-- --
---
Effective income tax rate.................................. 39% 17% 40%
== === ==
</TABLE>
D. PENSION PLANS AND OTHER RETIREMENT BENEFITS
The Company participates in TJX's non-contributory defined benefit
retirement plan. The TJX plan covers the majority of full-time employees who
have attained 21 years of age and have completed one year of service. Benefits
are based on compensation earned in each year of service. TJX also has an
unfunded supplemental retirement plan which covers certain key employees of the
Company and provides additional retirement benefits based on average
compensation. Pension expenses paid by the Company to TJX amounted to $101,000,
$195,000 and $256,000 in the fiscal years ended January of 1994, 1995 and 1996,
respectively.
TJX does not segregate plan assets or liabilities by participating
subsidiary company, and as a result, the following tables reflect the periodic
pension cost and funded status of the TJX plan.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY
1994 1995 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost............................................ $ 3,375 $ 4,554 $ 3,920
Interest cost on projected benefit obligation........... 5,995 6,526 6,915
Actual return on assets................................. (12,188) 4,545 (15,215)
Net amortization and deferrals.......................... 5,760 (11,600) 9,384
-------- -------- --------
Net periodic pension cost............................... $ 2,942 $ 4,025 $ 5,004
======== ======== ========
</TABLE>
F-10
<PAGE> 65
CHADWICK'S OF BOSTON, LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
JANUARY 28, JANUARY 27,
1995 1996
----------- -----------
IN THOUSANDS
<S> <C> <C>
Accumulated benefit obligation, including vested benefits of $71,592
and $81,296....................................................... $ 77,256 $ 91,606
-------- --------
Projected benefit obligation........................................ 82,297 97,891
Plan assets at fair market value.................................... 66,454 71,792
-------- --------
Projected benefit obligation in excess of plan assets............... 15,843 26,099
Unrecognized net gain (loss) from past experience different from
that assumed and effects of changes in assumptions................ (1,897) (7,563)
Prior service cost not yet recognized in net periodic pension
cost.............................................................. (1,127) (1,035)
Unrecognized net asset (obligation) as of initial date of
application of SFAS No. 87........................................ (568) (745)
-------- --------
Accrued pension cost................................................ $ 12,251 $ 16,756
======== ========
Weighted average discount rate...................................... 8.25% 7.00%
Rate of increase on future compensation levels...................... 4.50% 4.00%
Expected long-term rate of return on assets......................... 9.50% 9.00%
</TABLE>
The Company also participates in TJX's 401(k) plans which match a portion
of employee contributions. The Company's match for employee contributions was
$158,000, $191,000 and $186,000 in the fiscal years ended January of 1994, 1995
and 1996, respectively.
The TJX postretirement benefit plan is unfunded and provides limited
postretirement medical and life insurance benefits to associates who participate
in TJX's retirement plan and who retire at age 55 or older with 10 years or more
of service. The postretirement expense paid by the Company was $28,000, $75,000
and $81,000 in the fiscal years ended January of 1994, 1995 and 1996,
respectively.
TJX does not segregate plan liabilities by participating subsidiary
company, and as a result, the following tables reflect the periodic
postretirement benefit cost and funded status of the TJX plan.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY
----------------------------
1994 1995 1996
------ ------ ------
IN THOUSANDS
<S> <C> <C> <C>
Service cost................................................... $ 476 $ 952 $ 757
Interest cost on accumulated benefit obligation................ 820 963 1,046
Net amortization............................................... -- 88 --
------- ------- -------
Net periodic postretirement benefit cost....................... $1,296 $2,003 $1,803
======== ======== ========
</TABLE>
F-11
<PAGE> 66
CHADWICK'S OF BOSTON, LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
JANUARY 28, JANUARY 27,
1995 1996
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement obligation:
Retired associates........................................ $ 6,394 $ 6,731
Fully eligible active associates.......................... 712 1,146
Other active associates................................... 5,168 7,861
------- -------
Accumulated postretirement obligations...................... 12,274 15,738
Unrecognized net gain (loss) due to change in assumptions... (149) (2,676)
------- -------
Accrued postretirement benefits............................. $12,125 $13,062
======= =======
Discount rate............................................... 8.25% 7.00%
Medical inflation rate...................................... 5.00% 5.00%
</TABLE>
E. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
The major components of accrued expenses and other current liabilities are
as follows:
<TABLE>
<CAPTION>
JANUARY 28, JANUARY 27,
1995 1996
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Employee compensation and benefits.......................... $ 2,314 $ 3,727
Reserve for customer returns................................ 8,266 8,780
Customer prepayments........................................ 13,495 8,372
All other................................................... 14,057 11,304
------ ------
Accrued expenses and other current liabilities.............. $38,132 $32,183
====== ======
</TABLE>
F. SUPPLEMENTAL CASH FLOW INFORMATION
The Company's cash payments for interest expense and income taxes are as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY,
---------------------------------
1994 1995 1996
------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash paid for:
Interest expense................................ $ 3,378 $3,657 $7,247
Income taxes.................................... 11,196 3,204 3,078
</TABLE>
G. DEBT
During the fiscal year ended January 28, 1995, the Company secured a
10-year $45 million real estate mortgage on its fulfillment center (guaranteed
by TJX), at 8.73% annual interest. The proceeds were used to prepay the $5.4
million outstanding mortgage on the facility, with the balance of the proceeds
used to repay advances from TJX. The early retirement of the $5.4 million
mortgage resulted in an after-tax extraordinary charge of $192,000 ($325,000
pre-tax) in the fiscal year ended January 28, 1995. In the fiscal year ended
January 27, 1996, the Company prepaid its $45 million real estate mortgage on
the fulfillment center in connection with TJX's purchase of Marshalls and
incurred an extraordinary after-tax charge of $3.3 million ($5.6 million
pre-tax) on the early retirement of this debt.
Information relating to the Company's borrowings from TJX is described in
Note A.
F-12
<PAGE> 67
CHADWICK'S OF BOSTON, LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
H. CAPITAL STOCK
The historical capitalization of the Company has been retroactively
restated to reflect the anticipated issuance of 15,178,847 shares of Common
Stock for all periods presented in order to reflect the equity of the Company on
an ongoing basis as a result of a planned initial public offering of Common
Stock (See Note I). The Company's authorized capital stock also includes
5,000,000 shares of Preferred Stock, $.01 par value per share.
I. SUBSEQUENT EVENTS
In May 1996 the Company filed a registration statement with the Securities
and Exchange Commission with respect to an initial public offering (the
"Offering") of its Common Stock. The Offering contemplates the sale by TJX of
approximately 61% of the outstanding Common Stock (approximately 70% if the
Underwriters exercise their over-allotment option in full) of the Company.
The Company has a commitment from two banks to provide to the Company a
three-year term loan for $30 million and a three-year revolving credit facility
of up to $120 million to meet its ongoing working capital needs. In addition,
the Company is also negotiating with a financial institution to sell certain
deferred billing receivables.
The Company intends to adopt a 1996 Equity Incentive Plan (the "1996
Plan"). This plan permits the granting of stock options, restricted stock,
unrestricted stock and other stock-based awards. The Company intends to reserve
800,000 shares of Common Stock for issuance under this plan. The Company also
intends to adopt a Non-Employee Director Plan and intends to reserve 50,000
shares of Common Stock for issuance under this plan.
Certain members of management also participate in the TJX stock option
plan. As of June 25, 1996, these individuals held a total of 86,435 options to
purchase TJX stock (of which 28,065 were exercisable). Upon completion of the
Offering, the Company intends to issue options of equal value under the 1996
Plan to replace unvested options held by management under the TJX stock option
plan.
F-13
<PAGE> 68
CHADWICK'S OF BOSTON, LTD.
PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
The following Unaudited Pro Forma Combined Financial Statements of
Chadwick's of Boston, Ltd. give effect to: (i) the contribution of $20 million
to the equity of Chadwick's, Inc., by TJX through forgiveness of intercompany
indebtedness and (ii) the repayment by Chadwick's, Inc. to TJX of the balance of
its outstanding intercompany indebtedness in excess of such equity contribution.
Proceeds for repayment of the intercompany indebtedness and subsequent
working capital needs will be funded by the Company's new financing
arrangements. The Company has received a commitment from two banks to provide
the Company with a three-year credit facility composed of a $30 million term
loan and a revolving line of credit of up to $120 million. The Company also has
signed an engagement letter with a financial institution contemplating a
three-year revolving deferred billing receivables purchase facility. The
facility initially will be funded in the amount of $50 million. The Pro Forma
Combined Financial Statements assume that the deferred billing facility is in
place. In addition, the repayment of the April 27, 1996 intercompany
indebtedness is assumed to be funded first by the $30 million term loan and then
by the sale of receivables under the deferred billing facility.
The Pro Forma Combined Financial Statements assume that these transactions
occurred at the beginning of the fiscal year ending January 27, 1996 for the Pro
Forma Combined Statements of Income and as of April 27, 1996 for the Pro Forma
Combined Balance Sheet. In the opinion of management of the Company, all
adjustments necessary to present fairly such Pro Forma Combined Financial
Statements have been made.
The Unaudited Pro Forma Combined Financial Statements should be read in
conjunction with the historical financial statements and the notes thereto
included elsewhere in this Prospectus. The Unaudited Pro Forma Combined
Statements of Income are not necessarily indicative of what actual results of
operation would have been had these transactions occurred at the beginning of
the respective periods nor do they purport to indicate the results of future
operations of the Company.
F-14
<PAGE> 69
CHADWICK'S OF BOSTON, LTD.
PRO FORMA COMBINED STATEMENT OF INCOME (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JANUARY 27, 1996
------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ------------ ---------
<S> <C> <C> <C>
Net sales.............................................. $ 465,598 $ 465,598
-------- --------
Cost of sales, including buying and order fulfillment
costs................................................ 278,868 278,868
-------- --------
Gross profit...................................... 186,730 186,730
Selling, general and administrative expenses, including
catalog and order processing costs................... 160,282 1,700(2) 161,982
-------- --------
Income from operations............................ 26,448 24,748
Interest expense, net.................................. 6,920 (1,120)(1) 5,800
-------- --------
Income before income taxes and extraordinary item...... 19,528 18,948
Provision for income taxes............................. 7,854 (238)(3) 7,616
-------- --------
Income before extraordinary item....................... 11,674 11,332
Extraordinary charge, net of income taxes.............. (3,338) (3,338)
-------- --------
Net income............................................. $ 8,336 $ 7,994
======== ========
Pro forma earnings per share amounts:
Income before extraordinary item.................. $.74
========
Net income........................................ $.52
========
</TABLE>
The accompanying notes are an integral part of the Unaudited Pro Forma Combined
Statement of Income.
F-15
<PAGE> 70
CHADWICK'S OF BOSTON, LTD.
PRO FORMA COMBINED STATEMENT OF INCOME (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
APRIL 27, 1996
------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ------------ ---------
<S> <C> <C> <C>
Net sales.............................................. $ 131,996 $ 131,996
-------- --------
Cost of sales, including buying and order fulfillment
costs................................................ 73,300 73,300
-------- --------
Gross profit...................................... 58,696 58,696
Selling, general and administrative expenses, including
catalog and order processing costs................... 45,831 400(2) 46,231
-------- --------
Income from operations............................ 12,865 12,465
Interest expense, net.................................. 1,404 (344)(1) 1,060
-------- --------
Income before income taxes............................. 11,461 11,405
Provision for income taxes............................. 4,764 (23)(3) 4,741
-------- --------
Net income............................................. $ 6,697 $ 6,664
======== ========
Pro forma net income per common share.................. $.44
========
</TABLE>
The accompanying notes are an integral part of the Unaudited Pro Forma Combined
Statement of Income.
F-16
<PAGE> 71
CHADWICK'S OF BOSTON, LTD.
PRO FORMA COMBINED CONDENSED BALANCE SHEET (UNAUDITED)
APRIL 27, 1996
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ------------- ---------
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents....................... $ 953 18,878(4) $ 19,831
Accounts receivable............................. 63,006 (34,200)(4) 28,806
Current deferred taxes.......................... 1,872 1,872
Merchandise inventories......................... 69,022 69,022
Prepaid expenses................................ 13,674 13,674
-------- --------
Total Current Assets.................... 148,527 133,205
Property, net of depreciation..................... 51,121 51,121
Other assets...................................... -- 2,075(3) 2,075
-------- --------
Total Assets...................................... $ 199,648 $ 186,401
======== ========
Current Liabilities:
Short-term debt................................. $ -- $ --
Accounts payable................................ 34,005 34,005
Accrued expenses and other current
liabilities.................................. 39,382 (2,970)(2) 36,412
-------- --------
Total Current Liabilities............... 73,387 70,417
Long-term debt.................................... -- 30,000(3) 30,000
( (20,000)(1)
Loan from TJX..................................... 60,277 ( 2,970(2) --
( (27,925)(3)
( (15,322)(4)
Deferred income taxes............................. 2,612 2,612
Stockholder's Equity:
Common stock, par value $.01, authorized
35,000,000 shares, issued and outstanding
15,178,847 shares............................... 152 152
Additional paid-in capital........................ -- 20,000(1) 20,000
Retained earnings................................. 63,220 63,220
-------- --------
Total Stockholder's Equity.............. 63,372 83,372
-------- --------
Total Liabilities and Stockholder's Equity........ $ 199,648 $ 186,401
======== ========
</TABLE>
The accompanying notes are an integral part of the Unaudited Pro Forma Combined
Condensed Balance Sheet.
F-17
<PAGE> 72
CHADWICK'S OF BOSTON, LTD.
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (UNAUDITED)
NOTES TO PRO FORMA COMBINED CONDENSED BALANCE SHEET
(1) To record TJX's contribution of $20 million to the equity of
Chadwick's, Inc. through the forgiveness of $20 million of
intercompany indebtedness.
(2) To record transfer to TJX of current income taxes payable through
the intercompany balance.
(3) To record borrowings under the $30 million three year term loan
and reflect payments of $2,075,000 for estimated deferred
financing fees on new banking agreements and of $27,925,000 as
partial repayment of the outstanding intercompany indebtedness.
(4) To record the sale of a portion of the Company's outstanding
deferred billing accounts receivable (limited to 60% of the
outstanding balance based on initial bank proposals) with
$15,322,000 of the proceeds used to repay the remaining balance of
the intercompany indebtedness and the remaining proceeds of
$18,878,000 added to cash.
NOTES TO PRO FORMA COMBINED STATEMENTS OF INCOME
(1) Adjustment to reflect interest expense and amortization of
deferred financing costs of $5,800,000 for the fiscal year ended
January 27, 1996 and $1,060,000 for the thirteen weeks ended April
27, 1996 in connection with the $30 million term loan and the $120
million revolving credit facility. Interest on these facilities is
expected to be LIBOR plus 1 1/2%, and is assumed to be 7 1/2% in
the Pro Forma Combined Statements of Income.
(2) Adjustment to selling, general and administrative expenses,
including catalog and order processing costs of $1,700,000 for the
fiscal year ended January 27, 1996 and $400,000 for the thirteen
weeks ended April 27, 1996 to record the estimated loss on the
sale of a portion of the Company's deferred billing receivables.
Loss on sale of the receivables is recorded at the time the
receivables are sold and, under current bank proposals, equals a
fee based on outstanding receivables sold times a LIBOR-based
index, assumed to be 6.5% for the Pro Forma Combined Statements of
Income.
(3) Adjustment to income tax provision for the estimated income tax
effect of the Pro Forma Adjustments at a marginal tax rate of 41%.
Pro Forma net income per common share is based on 15,178,847 shares of
common stock outstanding plus 29,274 shares for the assumed conversion, using
the treasury stock method, of outstanding stock options.
Management believes the Company's historical financial statements reflect
its historical costs of doing business. As a public entity the Company will
likely incur additional costs. Such additional costs, estimated to be
approximately $1.5 million on an annual basis and approximately $400,000 on a
quarterly basis, are not reflected in the Pro Forma Combined Statements of
Income.
F-18
<PAGE> 73
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, TJX OR ANY OF THE UNDERWRITERS. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATES AS OF WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH SOLICITATION.
-------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 8
The Company........................... 12
Use of Proceeds....................... 12
Dividend Policy....................... 12
Capitalization........................ 13
Selected Financial Data............... 14
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 16
Business.............................. 21
Relationship with TJX................. 29
Management............................ 33
Executive Compensation................ 36
Ownership of Securities............... 45
Shares Eligible For Future Sale....... 46
Description of Capital Stock.......... 47
Underwriting.......................... 50
Legal Matters......................... 51
Experts............................... 51
Available Information................. 51
Index to Combined Financial
Statements.......................... F-1
</TABLE>
-------------------
UNTIL , 1996 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS REQUIREMENT
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
9,260,000 SHARES
[CHADWICK'S LOGO]
COMMON STOCK
($.01 PAR VALUE)
SALOMON BROTHERS INC
GOLDMAN, SACHS & CO.
PROSPECTUS
DATED , 1996
<PAGE> 74
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
The estimated fees and expenses incurred by the Registrant and by TJX,
other than underwriting discounts and commissions, in connection with the
Offering will be borne by TJX and are estimated to be as follows:
<S> <C>
Securities and Exchange Commission registration fee............. $ 58,753
National Associates of Securities Dealers, Inc. filing fee...... 17,538
NYSE listing fee................................................ 86,401
Blue Sky fees and expenses...................................... 15,000
Accounting fees and expenses.................................... 250,000
Legal fees and expenses......................................... 300,000
Transfer agent fees and expenses................................ 10,000
Printing and engraving fees..................................... 210,000
Miscellaneous................................................... 52,308
----------
Total................................................. 1,000,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law, as amended, provides
that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Section 145 further provides that a corporation similarly may indemnify any such
person serving in any such capacity who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor, against expenses
(including attorneys' fees) actually and reasonably incurred in connection with
the defense or settlement of such action or suit if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the corporation and except that no indemnification shall be made in respect
of any claim, issue or matter as to which such person shall have been adjudged
to be liable to the corporation unless and only to the extent that the Delaware
Court of Chancery or such other court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnify for such expenses which the Court of Chancery
or such other court shall deem proper.
The Registrant has entered into indemnification agreements with each of its
directors and officers indemnifying them against expenses, settlements,
judgments and fines incurred in connection with any threatened, pending or
completed action, suit, arbitration or proceeding, where the individual's
involvement is by reason of the fact that such person is or was a director or
officer or served at the Company's request as a director of another organization
(except that indemnification is not provided against judgments and fines in a
derivative suit unless permitted by Delaware law).
II-1
<PAGE> 75
An individual may not be indemnified if such person is found not to have acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the Registrant, except to the extent Delaware
law permits broader contractual indemnification. These indemnification
agreements provide procedures, presumptions and remedies which substantially
strengthen the indemnification rights beyond those provided by the Registrant's
Certificate of Incorporation (the "Certificate") and by Delaware law.
The Certificate provides that each person who was or is made a party to, or
is involved in, any action, suit, proceeding or claim by reason of the fact that
he or she is or was a director, officer or employee of the Registrant (or is or
was serving at the request of the Registrant as a director, officer, trustee,
employee or agent of any other enterprise including service with respect to
employee benefit plans) shall be indemnified and held harmless by the
Registrant, to the full extent permitted by Delaware law, as in effect from time
to time, against all expenses (including attorneys' fees and expenses),
judgments, fines, penalties and amounts to be paid in settlement incurred by
such person in connection with the investigation, preparation to defend or
defense of such action, suit, proceeding or claim.
The rights to indemnification and the payment of expenses provided by the
Certificate do not apply to any action, suit, proceeding or claim initiated by
or on behalf of a person otherwise entitled to the benefit of such provisions.
Any person seeking indemnification under the Certificate shall be deemed to have
met the standard of conduct required for such indemnification unless the
contrary shall be established. Any repeal or modification of such
indemnification provisions shall not adversely affect any right or protection of
a director or officer with respect to any conduct of such director or officer
occurring prior to such repeal or modification.
Section 102(b)(7) of the Delaware General Corporation Law, as amended,
permits a corporation to include in its certificate of incorporation a provision
eliminating or limiting the personal liability of a director to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that such provision shall not eliminate or limit the
liability of a director (i) for any breach of the director's duty of loyalty to
the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under section 174 of the Delaware General Corporation Law (relating to
unlawful payment of dividend and unlawful stock purchase and redemption) or (iv)
for any transaction from which the director derived an improper personal
benefit. The Registrant has provided in the Certificate that its directors shall
be exculpated from liability as provided under Delaware law.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In connection with the Offering, the Company will issue 15,178,847 shares
of Common Stock to TJX in exchange for all outstanding shares of Chadwick's,
Inc. held by TJX in reliance upon the exception provided by Section 4(2) under
the Securities Act.
II-2
<PAGE> 76
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- -------- ----------- ----------
<S> <C> <C>
+1 -- Form of Underwriting Agreement....................................
*3.1 -- Certificate of Incorporation of the Company.......................
*3.2 -- By-Laws of the Company............................................
+4 -- Specimen Common Stock Certificate of the Company..................
*5 -- Opinion of Nutter, McClennen & Fish, LLP..........................
*10.1 -- Form of Change of Control and Severance Agreement.................
*10.2 -- Form of Management Incentive Plan.................................
*10.3 -- Form of Long Range Management Incentive Plan......................
*10.4 -- Form of 1996 Equity Incentive Plan................................
*10.5 -- Form of Supplemental Executive Retirement Plan....................
*10.6 -- Form of 1996 Stock Option Plan for Non-Employee Directors.........
*10.7 -- Form of General Deferred Compensation Plan........................
+10.8 -- Form of Transfer Agreement between the Company, Chadwick's, Inc.
and TJX...........................................................
+10.9 -- Form of Services Agreement between the Company and TJX............
+10.10 -- Form of Tax Sharing and Separation Agreement between the Company,
Chadwick's, Inc. and TJX..........................................
+10.11 -- Form of Registration Rights Agreement between the Company and TJX.
*10.12 -- Form of Inventory Purchase Agreement between the Company and TJX..
+10.13 -- Form of Assignment and License of Trademarks between Chadwick's,
Inc. and TJX......................................................
+10.14 -- Form of Trademark License Agreements between Chadwick's, Inc. and
TJX...............................................................
+10.15 -- Form of Revolving Credit and Term Loan Agreement among the
Company, Chadwick's, Inc., The First National Bank of Boston and
The First National Bank of Chicago (for themselves and as agents),
and First Chicago Capital Markets, Inc. (as agent)................
*10.16 -- Form of Indemnification Agreement.................................
*21 -- Subsidiaries of the Company.......................................
+23.1 -- Consent of Coopers & Lybrand L.L.P. ..............................
*23.2 -- Consent of Nutter, McClennen & Fish, LLP (contained in Exhibit 5).
*24 -- Power of Attorney.................................................
*27 -- Financial Data Schedule...........................................
- ---------------
<FN>
* Previously filed.
+ Filed herewith.
</TABLE>
II-3
<PAGE> 77
(B) FINANCIAL STATEMENT SCHEDULES
<TABLE>
The following financial schedules of the Company are filed herewith.
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants..................................... S-1
Schedule II -- Chadwick's of Boston, Ltd. -- Valuation and Qualifying
Accounts............................................................ S-2
</TABLE>
All other schedules are inapplicable or the information required is
included in the Company's Consolidated Financial Statements and the notes
thereto.
II-4
<PAGE> 78
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless, in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(b) The undersigned Registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
underwriters to permit prompt delivery to each purchaser.
(c) The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at this
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 79
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston, The Commonwealth
of Massachusetts, on this 29th day of July, 1996.
CHADWICK'S OF BOSTON, LTD.
By /s/ Dhananjaya K. Rao
--------------------------------------
Name: Dhananjaya K. Rao
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on July 29, 1996 by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Dhananjaya K. Rao President, Chief Executive July 29, 1996
- ----------------------------------- Officer and Director
Dhananjaya K. Rao
/s/ John W. Tynan* Chief Financial Officer and July 29, 1996
- ----------------------------------- Principal Accounting Officer
John W. Tynan
/s/ Carol Meyrowitz* Executive Vice President, July 29, 1996
- ----------------------------------- Merchandising and Director
Carol Meyrowitz
/s/ Bernard Cammarata* Chairman of the Board of July 29, 1996
- ----------------------------------- Directors
Bernard Cammarata
/s/ Richard G. Lesser* Director July 29, 1996
- -----------------------------------
Richard G. Lesser
*By: /s/ Dhananjaya K. Rao
- -----------------------------------
Dhananjaya K. Rao
Attorney-in-fact
</TABLE>
Powers of attorney have been filed
with this Registration Statement
II-6
<PAGE> 80
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Chadwick's of Boston, Ltd.:
In connection with our audits of the combined financial statements of
Chadwick's of Boston, Ltd. and subsidiaries as of January 28, 1995 and January
27, 1996, and for each of the three years in the period ended January 27, 1996,
which financial statements are included in the Prospectus, we have also audited
the financial statement schedule listed in Item 16 herein.
In our opinion, this financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, present fairly, in
all material respects, the information required to be included therein.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
May 14, 1996 except for
Note I for which the date
is June 25, 1996.
S-1
<PAGE> 81
CHADWICK'S OF BOSTON, LTD.
<TABLE>
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Fiscal Year ended January 27, 1996................. $ 479 $ 2,717 $ (614) $ 2,582
Fiscal Year ended January 28, 1995................. $ 0 $ 479 $ 0 $ 479
Fiscal Year ended January 29, 1994................. $ 0 $ 0 $ 0 $ 0
RESERVE FOR INVENTORY LIQUIDATIONS:
Fiscal Year ended January 27, 1996................. $14,945 $ 34,696 $ (39,978) $ 9,663
Fiscal Year ended January 28, 1995................. $12,148 $ 39,144 $ (36,347) $14,945
Fiscal Year ended January 29, 1994................. $ 7,624 $ 34,668 $ (30,144) $12,148
RESERVE FOR CUSTOMER RETURNS:
Fiscal Year ended January 27, 1996................. $ 8,266 $157,920 $(157,406) $ 8,780
Fiscal Year ended January 28, 1995................. $ 8,756 $210,779 $(211,269) $ 8,266
Fiscal Year ended January 29, 1994................. $ 9,116 $220,897 $(221,257) $ 8,756
</TABLE>
S-2
<PAGE> 82
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
------ ----------- ----
<S> <C> <C>
+1 -- Form of Underwriting Agreement........................................
*3.1 -- Certificate of Incorporation of the Company...........................
*3.2 -- By-Laws of the Company................................................
+4 -- Specimen Common Stock Certificate of the Company......................
*5 -- Opinion of Nutter, McClennen & Fish, LLP..............................
*10.1 -- Form of Change of Control and Severance Agreement.....................
*10.2 -- Form of Management Incentive Plan.....................................
*10.3 -- Form of Long Range Management Incentive Plan..........................
*10.4 -- Form of 1996 Equity Incentive Plan....................................
*10.5 -- Form of Supplemental Executive Retirement Plan........................
*10.6 -- Form of 1996 Stock Option Plan for Non-Employee Directors.............
*10.7 -- Form of General Deferred Compensation Plan............................
+10.8 -- Form of Transfer Agreement between the Company, Chadwick's, Inc. and
TJX...................................................................
+10.9 -- Form of Services Agreement between the Company and TJX................
+10.10 -- Form of Tax Sharing and Separation Agreement between the Company,
Chadwick's, Inc. and TJX..............................................
+10.11 -- Form of Registration Rights Agreement between the Company and TJX.....
*10.12 -- Form of Inventory Purchase Agreement between the Company and TJX......
+10.13 -- Form of Assignment and License of Trademarks between Chadwick's, Inc.
and TJX...............................................................
+10.14 -- Form of Trademark License Agreements between Chadwick's, Inc. and TJX.
+10.15 -- Form of Revolving Credit and Term Loan Agreement among the Company,
Chadwick's, Inc., The First National Bank of Boston and The First
National Bank of Chicago (for themselves and as agents), and First
Chicago Capital Markets, Inc. (as agent)..............................
*10.16 -- Form of Indemnification Agreement.....................................
*21 -- Subsidiaries of the Company...........................................
+23.1 -- Consent of Coopers & Lybrand L.L.P. ..................................
*23.2 -- Consent of Nutter, McClennen & Fish, LLP (contained in Exhibit 5).....
*24 -- Power of Attorney.....................................................
*27 -- Financial Data Schedule...............................................
- ---------------
<FN>
* Previously filed.
+ Filed herewith.
</TABLE>
<PAGE> 1
Exhibit 1
FORM OF UNDERWRITING AGREEMENT
Chadwick's of Boston, Ltd.
9,260,000 Shares1
Common Stock
($0.01 par value)
Underwriting Agreement
New York, New York
July ___, 1996
Salomon Brothers Inc
Goldman, Sachs & Co.
As Representatives of the several Underwriters,
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
The TJX Companies, Inc., a Delaware corporation (the "Selling
Stockholder"), proposes to sell to the underwriters named in Schedule I hereto
(the "Underwriters"), for whom you (the "Representatives") are acting as
representatives, 9,260,000 shares of Common Stock, $0.01 par value ("Common
Stock"), of Chadwick's of Boston, Ltd., a Delaware Corporation (the "Company"),
(said shares to be sold by the Selling Stockholder being hereinafter called the
"Underwritten Securities"). The Selling Stockholder also proposes to grant to
the Underwriters an option to purchase up to 1,389,000 additional shares of
Common Stock (the "Option Securities"; the Option Securities, together with the
Underwritten Securities, being hereinafter called the "Securities").
1. REPRESENTATIONS AND WARRANTIES. (a) The Company and the Selling
Stockholder jointly and severally represent and warrant to, and agree with, each
Underwriter as set forth below in this paragraph (a) of this Section 1. Certain
terms used in this Agreement are defined in paragraph (a)(iii) of this Section
1.
- -------------------
1 Plus an option to purchase from The TJX Companies, Inc. up to 1,389,000
additional shares to cover over-allotments.
<PAGE> 2
(i) The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement (file number 333-4427) on Form
S-1, including a related preliminary prospectus, for the registration under
the Securities Act of 1933, as amended (the "Securities Act") of the
offering and sale of the Securities. The Company may have filed one or more
amendments thereto, including the related preliminary prospectus, each of
which has previously been furnished to you. The Company will next file with
the Commission either (A) prior to effectiveness of such registration
statement, a further amendment to such registration statement (including
the form of final prospectus) or (B) after effectiveness of such
registration statement, a final prospectus in accordance with Rules 430A
and 424(b)(1) or (4). In the case of clause (B), the Company has included
in such registration statement, as amended at the Effective Date, all
information (other than Rule 430A Information) required by the Securities
Act and the rules thereunder to be included in the Prospectus with respect
to the Securities and the offering thereof. As filed, such amendment and
form of final prospectus, or such final prospectus, shall contain all Rule
430A Information, together with all other such required information, with
respect to the Securities and the offering thereof and, except to the
extent the Representatives shall agree in writing to a modification, shall
be in all substantive respects in the form furnished to you prior to the
Execution Time or, to the extent not completed at the Execution Time, shall
contain only such specific additional information and other changes (beyond
that contained in the latest Preliminary Prospectus) as the Company and the
Selling Stockholder have advised you, prior to the Execution Time, will be
included or made therein.
(ii) On the Effective Date, the Registration Statement did or will,
and when the Prospectus is first filed (if required) in accordance with
Rule 424(b) and on the Closing Date, the Prospectus (and any supplement
thereto) will, comply in all material respects with the applicable
requirements of the Securities Act and the rules thereunder; on the
Effective Date, the Registration Statement did not or will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading; and, on the Effective Date, the Prospectus, if not
filed pursuant to Rule 424(b), did not or will not, and on the date of any
filing pursuant to Rule 424(b) and on the Closing Date, the Prospectus
(together with any supplement thereto) will not, include any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; PROVIDED, HOWEVER, that the
Company and the Selling Stockholder make no representations or warranties
as to the information contained in or omitted from the Registration
Statement or the Prospectus (or any supplement thereto) in reliance upon
and in conformity with information furnished in writing to the Company by
or on behalf of any Underwriter through the Representatives specifically
for inclusion in the Registration Statement or the Prospectus (or any
supplement thereto).
(iii) The terms which follow, when used in this Agreement, shall have
the meanings indicated. The term "the Effective Date" shall mean each date
that the Registration Statement and any post-effective amendment or
amendments thereto
2
<PAGE> 3
became or become effective. "Execution Time" shall mean the date and time
that this Agreement is executed and delivered by the parties hereto.
"Preliminary Prospectus" shall mean any preliminary prospectus referred to
in paragraph (i) above and any preliminary prospectus included in the
Registration Statement at the Effective Date that omits Rule 430A
Information. "Prospectus" shall mean the prospectus relating to the
Securities that is first filed pursuant to Rule 424(b) after the Execution
Time or, if no filing pursuant to Rule 424(b) is required, shall mean the
form of final prospectus relating to the Securities included in the
Registration Statement at the Effective Date. "Registration Statement"
shall mean the registration statement referred to in paragraph (i) above,
including exhibits and financial statements, as amended at the Execution
Time (or, if not effective at the Execution Time, in the form in which it
shall become effective) and, in the event any post-effective amendment
thereto becomes effective prior to the Closing Date (as hereinafter
defined), shall also mean such registration statement as so amended. Such
term shall include any Rule 430A Information deemed to be included therein
at the Effective Date as provided by Rule 430A. "Rule 424", "Rule 430A" and
"Regulation S-K" refer to such rules or regulation under the Securities
Act. "Rule 430A Information" means information with respect to the
Securities and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A.
(iv) Each of the Company and Chadwick's, Inc., a Massachusetts
corporation and CDM Corp., a Nevada corporation (individually a
"Subsidiary" and collectively, the "Subsidiaries"), has been duly
incorporated, is validly existing as a corporation in good standing under
the laws of the jurisdiction in which it is chartered or organized, with
full corporate power and authority to own its properties and to conduct its
business as described in the Prospectus, and is duly qualified to do
business as a foreign corporation and is in good standing under the laws of
each jurisdiction which requires such qualification wherein it owns
material properties or conducts material business, except to the extent
that the failure to be so qualified or be in good standing would not have a
material adverse effect on the condition, financial or otherwise, or on the
earnings, business, operations or business prospects of the Company and the
Subsidiaries, taken as a whole.
(v) All the outstanding shares of capital stock of each of the
Subsidiaries have been duly and validly authorized and issued and are fully
paid and nonassessable, and, except as otherwise set forth in the
Prospectus, all outstanding shares of capital stock of each of the
Subsidiaries are owned by the Company either directly or through wholly
owned subsidiaries free and clear of any perfected security interest and
any other security interests, claims, liens or encumbrances.
(vi) The Company has the corporate power and authority to execute,
deliver and perform its obligations under this Agreement; and this
Agreement has been duly authorized, executed and delivered by the Company.
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(vii) The Company's authorized capitalization is as set forth under
the caption "Capitalization" in the Prospectus; all of the shares of Common
Stock (including the Securities to be sold by the Selling Stockholder) have
been duly and validly authorized, and, when issued and delivered to and
paid for by the Selling Stockholder pursuant to the Transfer Agreement of
even date herewith (the "Transfer Agreement") between the Selling
Stockholder, the Company and Chadwick's, Inc., will be fully paid and
nonassessable and conform to the description thereof contained in the
Prospectus.
(viii) The Securities have been duly listed and admitted for trading,
subject to evidence of satisfactory distribution, on the New York Stock
Exchange.
(ix) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by the Company
of the transactions contemplated in this Agreement and the Transaction
Agreements listed on Schedule II hereto (the "Transaction Agreements"),
except such as have been obtained under the Securities Act and such as may
be required under the blue sky or other securities laws of any jurisdiction
in connection with the purchase and distribution of the Securities by the
Underwriters and such other approvals as have been obtained.
(x) Neither the issue and sale of the Securities, nor the consummation
of any other of the transactions contemplated in this Agreement or in the
Transaction Agreements, nor the fulfillment of the terms hereof or thereof
will conflict with, result in a breach or violation of, or constitute a
default under any law or the charter or by-laws of the Company or the terms
of any indenture or other agreement or instrument to which the Company or
any of the Subsidiaries is a party or bound (except, as to transactions set
forth in the Transaction Agreements, where such breach, violation or
default would not have not have a material adverse effect on the condition,
financial or otherwise, or on the earnings, business, operations or
business prospects of the Company and the Subsidiaries, taken as a whole)
or any judgment, order or decree applicable to the Company or any of the
Subsidiaries of any court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over the Company or any
of the Subsidiaries.
(xi) Neither the Company nor any of the Subsidiaries is in violation
of its charter or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other instrument to
which the Company or any of the Subsidiaries is a party or by which it or
any of them may be bound, or to which any of the property or assets of the
Company or any of the Subsidiaries is subject, other than any such
violation or default that would not have a material adverse effect on the
condition, financial or otherwise, or on the earnings, business, operations
or business prospects of the Company and the Subsidiaries, taken as a
whole.
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(xii) Neither the Company nor any of the Subsidiaries has sustained
since the date of the latest audited financial statements included in the
Prospectus any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Prospectus; and, since
the respective dates as of which information is given in the Registration
Statement and the Prospectus, (a) there has not been any change in the
capital stock or long-term debt of the Company or any of the Subsidiaries
or any material adverse change, or any development that would reasonably be
expected to cause a prospective material adverse change, in or affecting
the condition, financial or otherwise, or on the earnings, business,
operations or business prospects of the Company and the Subsidiaries, taken
as a whole, otherwise than as set forth or contemplated in the Prospectus,
and (b) there has been no dividend or distribution of any kind declared,
paid or made by the Company on any class of its capital stock.
(xiii) There are no legal or governmental proceedings pending or, to
the knowledge of the Company, threatened to which the Company or any of the
Subsidiaries is a party or to which any of the properties of the Company or
any of the Subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus and are not so described or any
statutes, regulations, contracts or other documents that are required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not described or filed as
required.
(xiv) Each of the Company and the Subsidiaries has all necessary
consents, authorizations, approvals, orders, certificates and permits of
and from, and has made all declarations and filings with, all federal,
state, local and other governmental authorities, all self-regulatory
organizations and all courts and other tribunals, to own, lease, license
and use its properties and assets and to conduct its business in the manner
described in the Prospectus, except to the extent that the failure to
obtain or file would not have a material adverse effect on the condition,
financial or otherwise, or on the earnings, business, operations or
business prospects of the Company and the Subsidiaries, taken as a whole.
Except as set forth in the Prospectus, neither the Company nor any of the
Subsidiaries has received any notice that any federal or state authorities
intend to modify, suspend or revoke any such consents, authorizations,
approvals, orders, certificates or permits or that such authorities or any
other governmental agencies are conducting any material investigation of
the Company or any subsidiary or related parties other than in the ordinary
course of administrative review. The Company and the Subsidiaries own, or
are licensed or otherwise have sufficient right to use, all material
trademarks or trade names used in the conduct of their business as
described in the Prospectus. No material claims have been asserted against
the Company or any of the Subsidiaries by any person to the use of any
trademarks or trade names or challenging or questioning the validity or
effectiveness of any such trademark or trade name. To the knowledge of the
Company and the Selling Shareholder, the use, in connection with the
business and operations of the Company
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<PAGE> 6
and the Subsidiaries, of their trademarks and trade names does not infringe
on the rights of any person, other than infringements which, singly or in
the aggregate, would not have a material adverse effect on the condition,
financial or otherwise, or on the earnings, business, operations or
business prospects of the Company and the Subsidiaries, taken as a whole.
(xv) Each of the Company and the Subsidiaries has title in fee simple
to all real property and good and marketable title to all personal property
owned by them that is material to the business of the Company and the
Subsidiaries, taken as a whole, in each case free and clear of all liens,
charges, encumbrances or restrictions except such as (i) are referred to in
the Prospectus, (ii) do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made
of such property by the Company and the Subsidiaries, or (iii) were
incurred in the ordinary course of business and are not, singly or in the
aggregate, material to the condition, financial or otherwise, or on the
earnings, business, operations or business prospects of the Company and the
Subsidiaries, taken as a whole; and any real property and buildings held
under lease by the Company and the Subsidiaries are held by them under
valid, subsisting and enforceable leases (except as the enforceability
thereof may be limited by the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting the rights and remedies of creditors and the
effect of general principles of equity) with such exceptions as are not
material, singly or in the aggregate, and do not materially interfere with
the use made and proposed to be made of such property and buildings by the
Company and the Subsidiaries, in each case except as described in or
contemplated by the Prospectus.
(xvi) Coopers & Lybrand, who have certified certain financial
statements and supporting schedules of the Company, are independent public
accountants as required by the Securities Act and the rules and regulations
of the Commission thereunder.
(xvii) (A) The financial statements with respect to the Company (other
than the financial statements described in clause (B)) included in the
Registration Statement and the Prospectus present fairly the financial
position of the Company as at the respective dates indicated; all said
financial statements have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis; and the
supporting schedules included in the Registration Statement present fairly
the information required to be stated therein.
(B) The pro forma financial statements and other pro forma
financial information included in the Registration Statement and Prospectus
have been prepared in accordance with the Commission's rules and guidelines
with respect to pro forma financial statements and have been compiled on
the pro forma basis described therein; and, in the opinion of each of the
Company and Selling Stockholder, the assumptions used in the preparation
thereof are in all material respects reasonable and the adjustments used
therein are appropriate in all material respects to give effect to the
transaction or circumstances referred to therein.
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<PAGE> 7
(xviii) The Company and the Subsidiaries are (i) in compliance with
any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits,
licenses or other approvals required of them under applicable Environmental
Laws to conduct their respective businesses and (iii) are in compliance
with all terms and conditions of any such permit, licensor approval, except
where such noncompliance with Environmental Laws, failure to receive
required permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals would not,
singly or in the aggregate, have a material adverse effect on the
condition, financial or otherwise, or on the earnings, business, operations
or business prospects of the Company and the Subsidiaries, taken as a
whole.
(xix) No material labor dispute with the employees of the Company or
any of the Subsidiaries exists or, to the knowledge of the Company or
Selling Stockholder is imminent; and neither the Company nor the Selling
Stockholder is aware of any existing or imminent labor disturbance by the
employees of any of its principal suppliers, manufacturers or contractors
that might reasonably be expected to result in any material adverse effect
on the condition, financial or otherwise, or the earnings, business,
operations or business prospects of the Company and the Subsidiaries, taken
as a whole.
(xx) There are no holders of securities (debt or equity) of the
Company or any of the Subsidiaries, or holders of rights, options, or
warrants to obtain securities of the Company or any of the Subsidiaries,
other than the Selling Stockholder who have the right to have securities
held by them registered by the Company under the Securities Act in
connection with the offering of the Securities and there are no holders of
debt securities of the Company or any of the Subsidiaries, or holders of
rights, options or warrants to obtain debt securities of the Company or any
of the Subsidiaries, who have the right to have debt securities held by
them registered by the Company under the Securities Act.
(b) The Selling Stockholder represents and warrants to, and agrees
with, each Underwriter that:
(i) The Selling Stockholder has been duly incorporated, is validly
existing as a corporation in good standing under the laws of Delaware and
has the corporate power and authority to execute, deliver and perform its
obligations under this Agreement; and this Agreement has been duly
authorized, executed and delivered by the Selling Stockholder.
(ii) When the Securities are issued and delivered to, and paid for by,
the Selling Stockholder pursuant to the Transfer Agreement, the Selling
Stockholder will be the lawful owner of the Securities to be sold by the
Selling Stockholder hereunder and upon sale and delivery of, and payment
for, such Securities, as provided herein,
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<PAGE> 8
the Selling Stockholder will convey good and marketable title to such
Securities, free and clear of all liens, encumbrances, equities and claims
whatsoever.
(iii) The Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to or which has constituted or
which might reasonably be expected to cause or result, under the Securities
Exchange Act of 1934 (the "Exchange Act") or otherwise, in stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Securities and has not effected any sales of any of
securities of the Company which, if effected by the issuer, would be
required to be disclosed in response to Item 701 of Regulation S-K.
(iv) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by the Selling
Stockholder of the transactions contemplated in this Agreement and the
Transaction Agreements, except such as have been obtained under the
Securities Act and such as may be required under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the
Securities by the Underwriters and such other approvals as have been
obtained.
(v) Neither the sale of the Securities by such Selling Stockholder,
nor the consummation of any other of the transactions contemplated in this
Agreement or in the Transaction Agreements nor the fulfillment of the terms
hereof or thereof will conflict with, result in a breach or violation of,
or constitute a default under any law or the charter or by-laws of the
Selling Stockholder or the terms of any indenture or other agreement or
instrument to which the Selling Stockholder or any of its subsidiaries is a
party or bound, or any judgment, order or decree applicable to the Selling
Stockholder or any of its subsidiaries of any court, regulatory body,
administrative agency, governmental body or arbitrator having jurisdiction
over such Selling Stockholder or any of its subsidiaries.
(vi) Neither the issuance, sale or delivery of the Securities nor the
application of the proceeds thereof by the Selling Stockholder as set forth
in the Prospectus will violate Regulations G, T, U, or X of the Boards of
Governors of the Federal Reserve System or any other regulation of such
Board of Governors.
2. PURCHASE AND SALE. (a) Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Selling
Stockholder agrees to sell to each Underwriter, and each Underwriter agrees,
severally and not jointly, to purchase from the Selling Stockholder, at a
purchase price per share set forth in Schedule I hereto, the amount of the
Underwritten Securities set forth opposite such Underwriter's name in Schedule I
hereto.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Selling Stockholder hereby
grants an option to the several Underwriters to purchase, severally and not
jointly, up to an aggregate of 1,389,000 shares of the Option Securities at the
same purchase price per share as the Underwriters shall pay for the
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<PAGE> 9
Underwritten Securities. Said option may be exercised only to cover
over-allotments in the sale of the Underwritten Securities by the Underwriters.
Said option may be exercised in whole or in part at any time (but not more than
once) on or before the 30th day after the date of the Prospectus upon written or
telegraphic notice by the Representatives to the Selling Stockholder setting
forth the number of shares of the Option Securities as to which the several
Underwriters are exercising the option and the settlement date. Delivery of
certificates for the shares of Option Securities by the Selling Stockholder and
payment therefor to the Selling Stockholder, shall be made as provided in
Section 3 hereof. The number of shares of the Option Securities to be purchased
by each Underwriter shall be the same percentage of the total number of shares
of the Option Securities to be purchased by the several Underwriters as such
Underwriter is purchasing of the Underwritten Securities, subject to such
adjustments as you in your absolute discretion shall make to eliminate any
fractional shares.
3. DELIVERY AND PAYMENT. Delivery of and payment for the Underwritten
Securities and the Option Securities (if the option provided for in Section 2(b)
hereof shall have been exercised on or before the first business day prior to
the Closing Date) shall be made at 10:00 AM, New York City time, on July __,
1996, or such later date (not later than ____, 1996) as the Representatives
shall designate, which date and time may be postponed by agreement among the
Representatives and the Selling Stockholder or as provided in Section 9 hereof
(such date and time of delivery and payment for the Securities being herein
called the "Closing Date"). Delivery of the Securities shall be made to the
Representatives for the respective accounts of the several Underwriters against
payment by the several Underwriters through the Representatives of the purchase
price thereof to or upon the order of the Selling Stockholder by certified or
official bank check or checks or by wire transfer to an account designated in
writing by the Selling Stockholder, payable in same day funds. Delivery of the
Underwritten Securities and the Option Securities shall be made at such location
as the Representatives shall reasonably designate at least one business day in
advance of the Closing Date and payment for such Securities shall be made at the
office of Cleary, Gottlieb, Steen & Hamilton, One Liberty Plaza, New York, New
York 10006. Certificates for the Securities shall be registered in such names
and in such denominations as the Representatives may request not less than two
full business days in advance of the Closing Date.
The Company and the Selling Stockholder agree to have the Securities
available for inspection, checking and packaging by the Representatives in New
York, New York, not later than 3:00 PM on the business day prior to the Closing
Date.
The Selling Stockholder will pay all applicable state transfer taxes,
if any, involved in the transfer to the several Underwriters of the Securities
to be purchased by them from the Selling Stockholder and the respective
Underwriters will pay any additional stock transfer taxes involved in further
transfers.
If the option provided for in Section 2(b) hereof is exercised after
the first business day prior to the Closing Date, the Selling Stockholder will
deliver (at the expense of the Selling Stockholder) to the Representatives, care
of Salomon Brothers Inc, at Seven World Trade Center, New York, New York, on the
date specified by the Representatives (which shall
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<PAGE> 10
be within three business days after exercise of said option), certificates for
the Option Securities in such names and denominations as the Representatives
shall have requested against payment of the purchase price thereof to or upon
the order of the Selling Stockholder by certified or official bank check or
checks payable in same day funds. If settlement for the Option Securities occurs
after the Closing Date, the Selling Stockholder will deliver to the
Representatives on the settlement date for the Option Securities, and the
obligation of the Underwriters to purchase the Option Securities shall be
conditioned upon receipt of, supplemental opinions, certificates and letters
confirming as of such date the opinions, certificates and letters delivered on
the Closing Date pursuant to Section 6 hereof.
4. OFFERING BY UNDERWRITERS. It is understood that the several
Underwriters propose to offer the Securities for sale to the public as set forth
in the Prospectus.
5. AGREEMENTS. (a) The Company and the Selling Stockholder jointly and
severally agree with the several Underwriters that:
(i) The Company will use its best efforts to cause the Registration
Statement, if not effective at the Execution Time, and any amendment
thereof, to become effective. Prior to the termination of the offering of
the Securities, the Company will not file any amendment of the Registration
Statement or supplement to the Prospectus, unless a copy has been furnished
to you for your review prior to the filing; and the Company agrees that it
will not file any proposed amendment or supplement to which you reasonably
object. Subject to the foregoing sentence, if the Registration Statement
has become or becomes effective pursuant to Rule 430A, or filing of the
Prospectus is otherwise required under Rule 424(b), the Company will cause
the Prospectus, properly completed, and any supplement thereto to be filed
with the Commission pursuant to the applicable paragraph of Rule 424(b)
within the time period prescribed and will provide evidence satisfactory to
the Representatives of such timely filing. The Company will promptly advise
the Representatives (A) when the Registration Statement, if not effective
at the Execution Time, and any amendment thereto, shall have become
effective, (B) when the Prospectus, and any supplement thereto, shall have
been filed (if required) with the Commission pursuant to Rule 424(b), (C)
when, prior to termination of the offering of the Securities, any amendment
to the Registration Statement shall have been filed or become effective,
(D) of any request by the Commission for any amendment of the Registration
Statement or supplement to the Prospectus or for any additional
information, (E) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose and (F) of
the receipt by the Company of any notification with respect to the
suspension of the qualification of the Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose. The Company will use its best efforts to prevent the issuance of
any such stop order and, if issued, to obtain as soon as possible the
withdrawal thereof.
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(ii) If, at any time when a prospectus relating to the Securities is
required to be delivered under the Securities Act, any event occurs as a
result of which the Prospectus as then supplemented would include any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein in the light of the circumstances
under which they were made not misleading, or if it shall be necessary to
amend the Registration Statement or supplement the Prospectus to comply
with the Securities Act or the rules thereunder, the Company promptly will
(A) prepare and file with the Commission, subject to the second sentence of
paragraph (a)(i) of this Section 5, an amendment or supplement which will
correct such statement or omission or effect such compliance and (B) supply
any supplemented Prospectus to you in such quantities as you may reasonably
request.
(iii) As soon as practicable, the Company will make generally
available to its security holders and to the Representatives an earnings
statement or statements of the Company and the Subsidiaries which will
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
under the Securities Act.
(iv) The Company will furnish to the Representatives and counsel for
the Underwriters, without charge, signed copies of the Registration
Statement (including exhibits thereto) and to each other Underwriter a copy
of the Registration Statement (without exhibits thereto) and, so long as
delivery of a prospectus by an Underwriter or dealer may be required by the
Securities Act, as many copies of each Preliminary Prospectus and the
Prospectus and any supplement thereto as the Representatives may reasonably
request. The Selling Stockholder will pay the expenses of printing or other
production of all documents relating to the offering.
(v) The Company will arrange for the qualification of the Securities
for sale under the laws of such jurisdictions as the Representatives may
designate, and will maintain such qualifications in effect so long as
required for the distribution of the Securities; provided that in no event
shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action which
would subject itself to service of process in suits, other than those
arising out of the offering or sale of the Securities, or subject itself to
taxation, in any jurisdiction where it is not now so subject. The Selling
Stockholder will pay the fee of the National Association of Securities
Dealers, Inc., in connection with its review of the offering.
(vi) The Company will not, for a period of 180 days following the
Execution Time, without the prior written consent of the Representatives,
offer, sell, contract to sell, or otherwise dispose of, directly or
indirectly, or announce the offering of, or register, cause to be
registered or announce the registration or intended registration of any
shares of Common Stock (other than the Securities) or any stock option or
other security or agreement convertible into, or exchangeable for, shares
of Common Stock; PROVIDED, HOWEVER, that the Company may issue and sell
Common Stock pursuant to any employee or director equity incentive plan ,
stock ownership plan or dividend reinvestment plan of the Company in effect
at the Execution Time.
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(vii) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter
92-198, AN ACT RELATING TO DISCLOSURE OF DOING BUSINESS WITH CUBA, and the
Company further agrees that it will comply with all of the provisions of
such act until the completion of the offering contemplated by the
Prospectus.
(b) The Selling Stockholder agrees with the several Underwriters that
the Selling Stockholder will not, for a period of 180 days following the
Execution Time, without the prior written consent of the Representatives, offer,
sell, contract to sell, or otherwise dispose of, directly or indirectly, or
(except to the extent set forth in the Prospectus) announce the offering of, or
exercise any registration rights with respect to, or register, cause to be
registered or announce the registration or intended registration of any shares
of Common Stock (other than the Securities) beneficially owned by the Selling
Stockholder, or any stock option or other security beneficially owned by the
Selling Stockholder convertible into, or exchangeable for, any shares of Common
Stock.
6. CONDITIONS TO THE OBLIGATIONS OF THE UNDERWRITERS. The obligations
of the Underwriters to purchase the Underwritten Securities and the Option
Securities, as the case may be, shall be subject to the accuracy of the
representations and warranties on the part of the Company and the Selling
Stockholder contained herein as of the Execution Time, the Closing Date and any
settlement date pursuant to Section 3 hereof, to the accuracy of the statements
of the Company and the Selling Stockholder made in any certificates pursuant to
the provisions hereof, to the performance by the Company and the Selling
Stockholder of their respective obligations hereunder and to the following
additional conditions:
(a) If the Registration Statement has not become effective prior to
the Execution Time, unless the Representatives agree in writing to a later time,
the Registration Statement will become effective not later than (i) 6:00 PM, New
York City time, on the date of determination of the public offering price, if
such determination occurred at or prior to 3:00 PM, New York City time, on such
date or (ii) 12:00 Noon, New York City time, on the business day following the
day on which the public offering price was determined, if such determination
occurred after 3:00 PM, New York City time, on such date; if filing of the
Prospectus, or any supplement thereto, is required pursuant to Rule 424(b), the
Prospectus, and any such supplement, will be filed in the manner and within the
time period required by Rule 424(b); and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or threatened.
(b) The Company shall have furnished to the Representatives the
opinion of Nutter, McClennen & Fish, LLP, Boston, Massachusetts, counsel for the
Company, dated the Closing Date, to the effect that:
(i) each of the Company and the Subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing under
the laws of the jurisdiction in which it is chartered or organized, with
full corporate power and authority to own its properties and to conduct its
business as described in the Prospectus, and the Company
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<PAGE> 13
is duly qualified to do business as a foreign corporation and is in good
standing under the laws of the Commonwealth of Massachusetts, and
Chadwick's Inc. is duly qualified to do business as a foreign corporation
and is in good standing under the laws of the States of New York and New
Hampshire;
(ii) all the outstanding shares of capital stock of each of the
Subsidiaries have been duly and validly authorized and issued and are fully
paid and nonassessable, and, except as otherwise set forth in the
Prospectus, all outstanding shares of capital stock of each of the
Subsidiaries are owned by the Company either directly or through wholly
owned subsidiaries free and clear of any perfected security interest and,
to the knowledge of such counsel, after due inquiry, any other security
interests, claims, liens or encumbrances;
(iii) the Company's authorized equity capitalization is as set forth
in the Prospectus; the capital stock of the Company conforms to the
description thereof contained in the Prospectus; the outstanding shares of
Common Stock (including the Securities being sold hereunder by the Selling
Stockholder) have been duly and validly authorized and issued and are fully
paid and nonassessable; the Securities are duly listed and admitted for
trading, subject to evidence of satisfactory distribution, on the New York
Stock Exchange; the certificates for the Securities are in valid and
sufficient form; and the holders of outstanding shares of capital stock of
the Company are not entitled to preemptive or, to the knowledge of such
counsel, other rights to subscribe for the Securities;
(iv) to the knowledge of such counsel, there is no pending or
threatened action, suit or proceeding before any court or governmental
agency, authority or body or any arbitrator involving the Company or any of
the Subsidiaries of a character required to be disclosed in the
Registration Statement which is not adequately disclosed in the Prospectus,
and there is no franchise, contract or other document of a character
required to be described in the Registration Statement or Prospectus, or to
be filed as an exhibit, which is not described or filed as required; and
the statements in the Prospectus under the headings "Shares Eligible for
Future Sale" and "Description of the Capital Stock" fairly summarize the
matters therein described;
(v) the Registration Statement has become effective under the
Securities Act; any required filing of the Prospectus, and of any
supplements thereto, pursuant to Rule 424(b) has been made in the manner
and within the time period required by Rule 424(b); to the knowledge of
such counsel, no stop order suspending the effectiveness of the
Registration Statement has been issued, no proceedings for that purpose
have been instituted or threatened and the Registration Statement and the
Prospectus (other than the financial statements and schedules contained
therein as to which no opinion need be expressed) comply as to form in all
material respects with the applicable requirements of the Securities Act
and the rules thereunder;
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(vi) this Agreement has been duly authorized, executed and delivered
by the Company;
(vii) the Transfer Agreement has been duly authorized, executed and
delivered by the Company and constitutes a legal, valid, binding and
enforceable agreement of the Company enforceable against the Company in
accordance with its terms (subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally and to general
principles of equity);
(viii) no consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the
transactions contemplated in this Agreement or in the Transaction
Agreements, except such as have been obtained under the Securities Act and
such as may be required under the blue sky or other securities laws of any
jurisdiction in connection with the purchase and distribution of the
Securities by the Underwriters and such other approvals (specified in such
opinion) as have been obtained;
(ix) neither the issue and sale of the Securities, nor the
consummation of any of the transactions contemplated in this Agreement or
in the Transaction Agreements nor the fulfillment of the terms hereof or
thereof, will conflict with, result in a breach or violation of, or
constitute a default under any law or the charter or by-laws of the Company
or the terms of any indenture or other agreement or instrument known to
such counsel and to which the Company or any of the Subsidiaries is a party
or bound or any judgment, order or decree known to such counsel to be
applicable to the Company or any of the Subsidiaries of any court,
regulatory body, administrative agency, governmental body or arbitrator
having jurisdiction over the Company or any of the Subsidiaries;
(x) to the knowledge of such counsel, no holders of securities of the
Company other than the Selling Stockholder have rights to the registration
of such securities under the Registration Statement; and
(xi) the Company is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the
Commonwealth of Massachusetts, the United States or the corporate laws of the
State of Delaware, to the extent they deem proper and specified in such opinion,
upon the opinion of other counsel of good standing whom they believe to be
reliable and who are satisfactory to counsel for the Underwriters and (B) as to
matters of fact, to the extent they deem proper, on certificates of responsible
officers of the Company and public officials. References to the Prospectus in
this paragraph (b) include any supplements thereto at the Closing Date.
In addition to such opinion set forth above, such counsel shall state
that during the course of the preparation of the Registration Statement and the
Prospectus, no facts have
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<PAGE> 15
come to the attention of such counsel which has caused them to believe that the
Registration Statement, at the Effective Date, (except for the financial
statements and schedules contained therein as to which no opinion need be
expressed) contained any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus (except for the
financial statements and schedules contained therein as to which no opinion need
be expressed) includes any untrue statement of a material fact or omits to state
a material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. With respect to such
statement, counsel shall state that although such counsel did not undertake to
determine independently the accuracy, completeness and fairness of the
statements contained in the Registration Statement or the Prospectus and takes
no responsibility therefor (except to the extent set forth in clause (iv)
above), such counsel did participate in discussions and meetings with officers
and other representatives of the Company in connection with the preparation of
the Registration Statement and the Prospectus, and it is on the basis of the
foregoing (relying as to certain factual matters on the information provided to
such counsel and not on independent investigation) that such counsel is making
such statement.
(c) The Selling Stockholder shall have furnished to the
Representatives the opinion of Ropes & Gray, Boston, Massachusetts, counsel for
the Selling Stockholder, dated the Closing Date, to the effect that:
(i) this Agreement has been duly authorized, executed and delivered by
the Selling Stockholder
(ii) the Selling Stockholder has full corporate power and authority to
sell, transfer and deliver the Securities to the Underwriters in the manner
provided in this Agreement
(iii) upon registration of the Securities in the names of the
Underwriters in the stock records of the Company, and the issuance of new
certificates registered in the names of the Underwriters representing such
Securities, assuming the Underwriters purchased the Securities in good
faith and without notice of any adverse claim, within the meaning of
Section 8-302 of the Uniform Commercial Code of the State of New York, the
Underwriters will have acquired all rights of the Selling Stockholder in
the Securities free of any adverse claim (as defined in such section) and
the owner of the Securities, if other than such Selling Stockholder, will
be precluded from asserting against the Underwriters the ineffectiveness of
any unauthorized endorsement;
(iv) the Transfer Agreement has been duly authorized, executed and
delivered by the Selling Stockholder and is a legal, valid and binding
agreement of the Selling Stockholder enforceable against the Selling
Stockholder in accordance with its terms except as the enforceability
thereof (i) may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (ii) may be limited by equitable
principles of general applicability (regardless of whether such
enforceability is considered in a proceeding in equity or at law);
15
<PAGE> 16
(v) no consent, approval, authorization or order of any court or
governmental agency or body is required for the performance by the Selling
Stockholder of its obligations under the Underwriting Agreement or any of
the Transaction Agreements that has not been obtained, except such as may
be required under the blue sky laws of the various states in connection
with the offer and sale of the Securities by the Underwriters (as to which
state securities or Blue Sky laws such counsel need state no opinion) or in
connection with the review of the underwriting arrangements pursuant to the
rules of the National Association of Securities Dealers, Inc.; and
(vi) neither the sale of the Securities being sold by the Selling
Stockholder nor the execution and delivery by the Selling Stockholder of,
and the performance by the Selling Stockholder of its obligations under,
the Underwriting Agreement and the Transaction Agreements will violate any
provision of applicable law or conflict with, result in a breach or
violation of, or constitute a default under the charter or by-laws of the
Selling Stockholder or to the best of such counsel's knowledge the terms of
any agreement or other instrument and to which the Selling Stockholder or
any of its subsidiaries is a party or bound, or, to such counsel's
knowledge, after having made due inquiry of the Selling Stockholder but
without having investigated any governmental records or court documents,
any judgment, order or decree of any court, regulatory body, administrative
agency, governmental body or arbitrator having jurisdiction over the
Selling Stockholder or any of its subsidiaries.
Such opinion shall also state that such counsel has participated in
discussions with various representatives of the Selling Stockholder, the Company
and Coopers & Lybrand L.L.P., independent public accountants for the Company, in
certain of which your representatives and counsel also participated, at which
the business and affairs of the Company and the contents of the Registration
Statement, the Final Prospectus and any amendment thereof or supplement thereto
were discussed; that such counsel also has made inquiries of representatives of
the Company and its accountants as to whether there have been any material
changes in the affairs of the Company since the date that the Registration
Statement became effective; that there is no assurance that all material facts
as to the Company and its affairs were disclosed to such counsel or that their
familiarity with the Company is such that they have necessarily recognized the
materiality of such facts as were disclosed to them, and they have to a large
extent relied upon statements of representatives of the Company as to
materiality of the facts disclosed to them; and that such counsel is not passing
upon and does not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement or the Final
Prospectus.
Such opinion shall also state that based upon such counsel's
participation in the foregoing discussions, the foregoing inquiries and their
examination of the documents referred to above and such other documents as came
to their attention as a result of such discussions and inquiries (i) such
counsel is of the opinion that the Registration Statement and the Prospectus
(except for the financial statements and schedules included therein as to which
such counsel need express no opinion) comply as to form in all material respects
with the Securities
16
<PAGE> 17
Act and the applicable rules and regulations of the Commission thereunder; and
(ii) such counsel has no reason to believe that (except for the financial
statements and schedules included therein as to which such counsel need express
no opinion) the Registration Statement, when it became effective, contained any
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
or that (except for the financial statements and schedules included therein as
to which such counsel need express no opinion) the Prospectus includes any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the
Commonwealth of Massachusetts, the United States or the Delaware General
Corporation Law, to the extent they deem proper and specified in such opinion,
upon the opinion of other counsel of good standing whom they believe to be
reliable and who are satisfactory to counsel for the Underwriters, and (B) as to
matters of fact, to the extent they deem proper, on certificates of responsible
officers of the Selling Stockholder and of public officials.
(d) The Representatives shall have received from Cleary, Gottlieb,
Steen & Hamilton, counsel for the Underwriters, such opinion or opinions, dated
the Closing Date, with respect to the issuance and sale of the Securities, the
Registration Statement, the Prospectus (together with any supplement thereto)
and other related matters as the Representatives may reasonably require, and the
Company and the Selling Stockholder shall have furnished to such counsel such
documents as they request for the purpose of enabling them to pass upon such
matters.
(e) The Company shall have furnished to the Representatives a
certificate of the Company, signed on the Company's behalf by the Chairman of
the Board or the President and the principal financial or accounting officer of
the Company, dated the Closing Date, to the effect that the signers of such
certificate have carefully examined the Registration Statement, the Prospectus,
any supplements to the Prospectus and this Agreement and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects on and as of the
Closing Date with the same effect as if made on the Closing Date and the
Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
Closing Date;
(ii) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or, to the Company's knowledge, threatened; and
(iii) since the date of the most recent financial statements included
in the Prospectus (exclusive of any supplement thereto), there has been no
material adverse change in the condition (financial or other), earnings,
business, properties, operations or business prospects of the Company and
the Subsidiaries, taken as a whole, whether
17
<PAGE> 18
or not arising from transactions in the ordinary course of business, except
as set forth in or contemplated in the Prospectus (exclusive of any
supplement thereto).
(f) The Selling Stockholder shall have furnished to the
Representatives a certificate, signed by the Chairman of the Board or the
President and the principal financial or accounting officer of the Selling
Stockholder, dated the Closing Date, to the effect that the signers of such
certificate have carefully examined the Registration Statement, the Prospectus,
any supplement to the Prospectus and this Agreement and that the representations
and warranties of the Selling Stockholder in this Agreement are true and correct
in all material respects on and as of the Closing Date to the same effect as if
made on the Closing Date.
(g) At the Execution Time and at the Closing Date, Coopers & Lybrand
shall have furnished to the Representatives a letter or letters, dated
respectively as of the Execution Time and as of the Closing Date, in form and
substance satisfactory to the Representatives, with respect to the financial
statements and certain financial information contained in the Registration
Statement and the Prospectus and confirming that they are independent
accountants within the meaning of the Securities Act and the Exchange Act and
the respective applicable published rules and regulations thereunder.
(h) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Prospectus (exclusive of any supplement thereto),
there shall not have been (i) any change or decrease specified in the letter or
letters referred to in paragraph (h) of this Section 6 or (ii) any change, or
any development involving a prospective change, in or affecting the business or
properties of the Company and the Subsidiaries the effect of which, in any case
referred to in clause (i) or (ii) above, is, in the judgment of the
Representatives, so material and adverse as to make it impracticable or
inadvisable to proceed with the offering or delivery of the Securities as
contemplated by the Registration Statement (exclusive of any amendment thereof)
and the Prospectus (exclusive of any supplement thereto).
(i) At the Execution Time, the Company shall have furnished to the
Representatives a letter substantially in the form of Exhibit A hereto from each
executive officer and director of the Company addressed to the Representatives,
in which each such person agrees not to offer, sell, contract to sell, or
otherwise dispose of, directly or indirectly, or announce an offering of, or
exercise any registration rights with respect to, or register, cause to be
registered or announce the registration or intended registration of, any shares
of Common Stock beneficially owned by such person or any stock option or other
security beneficially owned by such person convertible into, or exchangeable
for, shares of Common Stock for a period of 180 days following the Execution
Time without the prior written consent of the Representatives, other than (i)
the exercise of stock options pursuant to benefit plans described in the
Prospectus and (ii) shares of Common Stock disposed of as bona fide gifts.
(j) The Selling Stockholder shall have made available to the
Representatives a copy of an opinion of Ropes & Gray, Boston, Massachusetts,
counsel for the Selling
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<PAGE> 19
Stockholder, addressed to the Selling Stockholder, relating to certain tax
aspects of the transaction contemplated by the Transfer Agreement.
(k) Prior to the Closing Date, the Company and the Selling Stockholder
shall have furnished to the Representatives such further information,
certificates and documents as the Representatives may reasonably request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Representatives and counsel for the Underwriters, this
Agreement and all obligations of the Underwriters hereunder may be canceled at,
or at any time prior to, the Closing Date by the Representatives. Notice of such
cancellation shall be given to the Company and the Selling Stockholder in
writing or by telephone or telegraph confirmed in writing.
7. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the sale of the
Securities provided for herein is not consummated because any condition to the
obligations of the Underwriters set forth in Section 6 hereof is not satisfied,
because of any termination pursuant to Section 10 hereof or because of any
refusal, inability or failure on the part of the Company or the Selling
Stockholder to perform any agreement herein or comply with any provision hereof
other than by reason of a default by any of the Underwriters, the Company and
the Selling Stockholder jointly and severally will reimburse the Underwriters
severally upon demand for all out-of-pocket expenses (including reasonable fees
and disbursements of counsel) that shall have been incurred by them in
connection with the proposed purchase and sale of the Securities. If the Company
is required to make any payments to the Underwriters under this Section 7
because of the Selling Stockholder's refusal, inability or failure to satisfy
any condition to the obligations of the Underwriters set forth in Section 6
hereof, the Selling Stockholder shall reimburse the Company on demand for all
amounts so paid.
8. INDEMNIFICATION AND CONTRIBUTION. (a) The Company and the Selling
Stockholder jointly and severally agree to indemnify and hold harmless each
Underwriter, the directors, officers, employees and agents of each Underwriter,
and each person who controls any Underwriter within the meaning of either the
Securities Act or the Exchange Act against any and all losses, claims, damages
or liabilities, joint or several, to which they or any of them may become
subject under the Securities Act, the Exchange Act or other Federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained in the registration statement for the registration of the
Securities as originally filed or in any amendment thereof, or in any
Preliminary Prospectus or the Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and agrees to reimburse
each such indemnified party, as incurred, for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such
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<PAGE> 20
loss, claim, damage, liability or action; provided, however, that the Company
and the Selling Stockholder will not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon
any such untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Underwriter through
the Representatives specifically for inclusion therein; and provided further
that the Company shall not be liable to any Underwriter and each person, if any,
who controls any Underwriter as aforesaid with respect to the Preliminary
Prospectus to the extent such loss, claim, damage or liability results from the
fact that such Underwriter sold Securities to a person who was not sent or
given, prior to or concurrently with written confirmation of such sale, a copy
of the Prospectus in each case where such delivery is required by the Securities
Act, if the Company has previously furnished copies thereof to such Underwriter
and the loss, claim, damage or liability of such Underwriter is caused by such
untrue statement or omission that was corrected in such Prospectus. This
indemnity agreement will be in addition to any liability which the Company or
the Selling Stockholder may otherwise have.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, each of its directors, each of its officers who signs the
Registration Statement, and each person who controls the Company within the
meaning of either the Securities Act or the Exchange Act, and the Selling
Stockholder, to the same extent as the foregoing indemnity to each Underwriter,
but only with reference to written information relating to such Underwriter
furnished to the Company by or on behalf of such Underwriter through the
Representatives specifically for inclusion in the documents referred to in the
foregoing indemnity. This indemnity agreement will be in addition to any
liability which any Underwriter may otherwise have. The Company and the Selling
Stockholder each acknowledge that the statements set forth in the last paragraph
of the cover page, the paragraph on the bottom of the inside front cover of the
Prospectus, and the first, third and eighth paragraphs under the heading
"Underwriting" in any Preliminary Prospectus and the Prospectus constitute the
only information furnished in writing by or on behalf of the several
Underwriters for inclusion in any Preliminary Prospectus or the Prospectus, and
you, as the Representatives, confirm that such statements are correct.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from any liability under paragraph (a) or (b) above unless
and to the extent it did not otherwise learn of such action and such failure
results in the loss by the indemnifying party of substantial rights or defenses
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above. The indemnifying party shall be entitled
to appoint counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set
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<PAGE> 21
forth below); PROVIDED, HOWEVER, that such counsel shall be satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel if (i) the use of counsel chosen by the indemnifying party
to represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment. It is understood
that the indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel with respect to matters of local
law or for the purpose of allowing pro hac vice appearance only) for all such
indemnified parties, and that all such fees and expenses shall be reimbursed as
they are incurred. In the case of any such separate firm for the Underwriters
and such control person of the Underwriters, such firm shall be designated in
writing by Salomon Brothers Inc. In the case of any such firm for the Company,
such firm shall be designated in writing by the Company. In the case of any such
firm for the Selling Stockholder, such firm shall be designated in writing by
the Selling Stockholder. An indemnifying party will not, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement, compromise or
consent includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Selling Stockholder,
jointly and severally, and the Underwriters agree to contribute to the aggregate
losses, claims, damages and liabilities (including legal or other expenses
reasonably incurred in connection with investigating or defending same)
(collectively "Losses") to which the Company, the Selling Stockholder and one or
more of the Underwriters may be subject in such proportion as is appropriate to
reflect the relative benefits received by the Company and the Selling
Stockholder on the one hand and by the Underwriters on the other from the
offering of the Securities; PROVIDED, HOWEVER, that in no case shall any
Underwriter (except as may be provided in any agreement among underwriters
relating to the
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<PAGE> 22
offering of the Securities) be responsible for any amount in excess of the
underwriting discount or commission applicable to the Securities purchased by
such Underwriter hereunder. If the allocation provided by the immediately
preceding sentence is unavailable for any reason, the Company and the Selling
Stockholder, jointly and severally, and the Underwriters shall contribute in
such proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of the Company and the Selling Stockholder on the one
hand and of the Underwriters on the other in connection with the statements or
omissions which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company and the Selling Stockholder
shall be deemed to be equal to the total net proceeds from the offering (before
deducting expenses), and benefits received by the Underwriters shall be deemed
to be equal to the total underwriting discounts and commissions, in each case as
set forth on the cover page of the Prospectus. Relative fault shall be
determined by reference to whether any alleged untrue statement or omission
relates to information provided by the Company, the Selling Stockholder or the
Underwriters. The Company, the Selling Stockholder and the Underwriters agree
that it would not be just and equitable if contribution were determined by pro
rata allocation or any other method of allocation which does not take account of
the equitable considerations referred to above. Notwithstanding the provisions
of this paragraph (d), no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person who controls an
Underwriter within the meaning of either the Securities Act or the Exchange Act
and each director, officer, employee and agent of an Underwriter shall have the
same rights to contribution as such Underwriter, and each person who controls
the Company within the meaning of either the Securities Act or the Exchange Act,
each officer of the Company who shall have signed the Registration Statement and
each director of the Company shall have the same rights to contribution as the
Company, subject in each case to the applicable terms and conditions of this
paragraph (d).
9. DEFAULT BY AN UNDERWRITER. If any one or more Underwriters shall
fail to purchase and pay for any of the Securities agreed to be purchased by
such Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the amount of Securities set
forth opposite their names in Schedule I hereto bears to the aggregate amount of
Securities set forth opposite the names of all the remaining Underwriters) the
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase; provided, however, that in the event that the aggregate amount of
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase shall exceed 10% of the aggregate amount of Securities set forth in
Schedule I hereto, the remaining Underwriters shall have the right to purchase
all, but shall not be under any obligation to purchase any, of the Securities,
and if such nondefaulting Underwriters do not purchase all the Securities, this
Agreement will terminate without liability to any nondefaulting Underwriter, the
Selling Stockholder or the Company. In the event of a default by any Underwriter
as set forth in this Section 9, the Closing Date shall be postponed for such
period, not exceeding seven days, as the Representatives shall determine in
order that the required changes in the Registration
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<PAGE> 23
Statement and the Prospectus or in any other documents or arrangements may be
effected. Nothing contained in this Agreement shall relieve any defaulting
Underwriter of its liability, if any, to the Company, the Selling Stockholder
and any nondefaulting Underwriter for damages occasioned by its default
hereunder.
10. TERMINATION. This Agreement shall be subject to termination in the
absolute discretion of the Representatives, by notice given to the Company prior
to delivery of and payment for the Securities, if prior to such time (i) trading
in the Company's or the Selling Stockholder's common stock shall have been
suspended by the Commission or trading in securities generally on the New York
Stock Exchange shall have been suspended or limited or minimum prices shall have
been established on such Exchange, (ii) a banking moratorium shall have been
declared by either Federal or New York State authorities or (iii) there shall
have occurred any outbreak or escalation of hostilities, declaration by the
United States of a national emergency or war or other calamity or crisis the
effect of which on financial markets is such as to make it, in the judgment of
the Representatives, impracticable or inadvisable to proceed with the offering
or delivery of the Securities as contemplated by the Prospectus (exclusive of
any supplement thereto).
11. REPRESENTATIONS AND INDEMNITIES TO SURVIVE. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers, of the Selling Stockholder and of the Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter,
the Selling Stockholder or the Company or any of the officers, directors or
controlling persons referred to in Section 8 hereof, and will survive delivery
of and payment for the Securities. The provisions of Sections 7 and 8 hereof
shall survive the termination or cancellation of this Agreement.
12. NOTICES. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the Representatives, will be mailed,
delivered, faxed or telegraphed and confirmed to them, care of Salomon Brothers
Inc, at Seven World Trade Center, New York, New York 10048; or, if sent to the
Company, will be mailed, delivered, faxed or telegraphed and confirmed to it at
35 United Drive, West Bridgewater, Massachusetts 02379, Attention: Dan Rao, with
a copy to Nutter, McClennen & Fish, LLP, One International Place, Boston, MA
02110-2699, Attention: Constantine Alexander, Esq., or, if sent to the Selling
Stockholder, will be mailed, delivered or telegraphed and confirmed to the
Selling Stockholder at 770 Cochituate Road, Framingham, Massachusetts, 01701,
Attention: General Counsel, with a copy to Ropes & Gray, One International
Place, Boston, Massachusetts, 02110, Attention: Arthur G. Siler, Esq.
13. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 8 hereof, and no
other person will have any right or obligation hereunder.
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<PAGE> 24
14. APPLICABLE LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
24
<PAGE> 25
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Company and the several Underwriters.
Very truly yours,
CHADWICK'S OF BOSTON, LTD.
By: ____________________________
Title:
THE TJX COMPANIES, INC.
By: ____________________________
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Salomon Brothers Inc
Goldman, Sachs & Co.
By: SALOMON BROTHERS INC
By: __________________________
Vice President
For themselves and the other
several Underwriters named in
Schedule I to the foregoing
Agreement.
25
<PAGE> 26
SCHEDULE I
----------
Number of Shares of
Underwritten Securities
Underwriter to be Purchased
- ----------- ---------------
Salomon Brothers Inc
Goldman, Sachs & Co.
[Name of Underwriter]
Total_________________________
_____
Purchase Price: $__.__ per share
<PAGE> 27
SCHEDULE II
-----------
List of Transaction Agreements
------------------------------
1. Transfer Agreement between Chadwick's of Boston, Ltd., Chadwick's Inc. and
The TJX Companies, Inc.
2. Services Agreement between Chadwick's of Boston, Ltd. and The TJX
Companies, Inc.
3. Tax Sharing and Separation Agreement between Chadwick's of Boston, Ltd.,
Chadwick's Inc. and The TJX Companies, Inc.
4. Registration Rights Agreement between Chadwick's of Boston, Ltd. and The
TJX Companies, Inc.
5. Inventory Purchase Agreement between Chadwick's Inc. and The TJX Companies,
Inc.
6. Revolving Credit and Term Loan Agreement among Chadwick's of Boston Ltd.,
Chadwick's Inc., The First National Bank of Boston and The First National
Bank of Chicago (for themselves and as agents) and First Chicago Capital
Markets, Inc. (as agent)
<PAGE> 28
EXHIBIT A
---------
[Letterhead of Executive Officer or Director of Chadwick's of Boston, Ltd.]
Chadwick's of Boston, Ltd. -- Initial Public Offering of Common Stock
---------------------------------------------------------------------
July, __ 1996
Salomon Brothers Inc
as Representative of the several Underwriters
Seven World Trade Center
New York, New York 10048
Dear Sirs:
This letter is being delivered to you in connection with the proposed
Underwriting Agreement (the "Underwriting Agreement"), between Chadwick's of
Boston, Ltd., a Delaware corporation (the "Company"), a certain Selling
Stockholder named therein and each of you as representatives of a group of
Underwriters named therein, relating to an underwritten public offering of
Common Stock, $0.01 par value ("Common Stock"), of the Company.
In order to induce you and the other Underwriters to enter into the
Underwriting Agreement, the undersigned agrees not to offer, sell, contract to
sell, or otherwise dispose of, directly or indirectly, or announce an offering
of, or exercise any registration rights with respect to, or register, cause to
be registered or announce the registration or intended registration of any
shares of Common Stock beneficially owned by the undersigned or any stock option
or other security beneficially owned by the undersigned convertible into, or
exchangeable for, any shares of Common Stock for a period of 180 days following
the day on which the Underwriting Agreement is executed without your prior
written consent, other than (i) the exercise of stock options pursuant to
benefit plans described in the Prospectus (as such term is defined in the
Underwriting Agreement) and (ii) shares of Common Stock disposed of as bona fide
gifts (provided, that the donee execute an agreement stating that the donee is
receiving and holding the shares subject to the provisions of this letter, and
there shall be no further transfer of such shares except in accordance with this
letter).
If for any reason the Underwriting Agreement shall be terminated
prior to the Closing Date (as defined in the Underwriting Agreement), the
agreement set forth above shall likewise be terminated.
Yours very truly,
[Signature of executive officer or director]
[Name and address of executive officer or director]
A-1
<PAGE> 1
EXHIBIT 4
---------
<TABLE>
<S> <C> <C> <C>
TEMPORARY CERTIFICATE - EXCHANGEABLE FOR DEFINITIVE ENGRAVED CERTIFICATE WHEN READY FOR DELIVERY
NUMBER CHADWICK'S OF BOSTON, SHARES
LTD. [LOGO]
CB
COMMON STOCK INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE COMMON STOCK
CUSIP 15734K 10 6
SEE REVERSE FOR CERTAIN DEFINITIONS
[Set Upsidedown on Page]
COUNTERSIGNED AND REGISTERED:
THE BANK OF NEW YORK
(NEW YORK)
TRANSFER AGENT
BY AND REGISTRAR
This is to certify that
AUTHORIZED SIGNATURE
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $.01 PAR VALUE EACH, OF
Chadwick's of Boston, Ltd., transferable on the books of the Corporation by the
holder hereof in person or by duly authorized attorney upon surrender of this
certificate properly endorsed. This certificate is not valid unless
countersigned by the Transfer Agent and registered by the Registrar.
WITNESS the facsimile signatures of its duly authorized officers.
Dated:
/s/ D.K. Rao [Corporate Seal] /s/ Carol Meyrowitz
President and Chief Executive Officer Executive Vice President-Merchandising
and Assistant Secretary
</TABLE>
<PAGE> 2
CHADWICK'S OF BOSTON, LTD.
THE CORPORATION IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OF STOCK AND MORE
THAN ONE SERIES OF ANY CLASS OF STOCK. THE CORPORATION WILL FURNISH WITHOUT
CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS, THE POWERS, DESIGNATIONS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF
EACH CLASS OF STOCK OR SERIES THEREOF AND THE QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- Custodian
______ _______
(Cust) (Minor)
TEN ENT -- as tenants by the under Uniform Gifts to
entireties Minors Act
_______
(State)
JT TEN -- as joint tenants with
right of survivorship and
not as tenants in
common
Additional abbreviations may also be used though not in the above list.
For value received, ______________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE)
_______________________________________________________________________________
_______________________________________________________________________________
__________________________________________________________ Shares of the Common
Stock represented by the within Certificate, and do hereby irrevocably
constitute and appoint ________________________________________________________
_______________________________________________________________________________
Attorney to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated,
_____________________
_______________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON
THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATIONS OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED:
_______________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED
BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN
ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEED MEDALLION PROGRAM),PURSUANT
TO S.E.C. RULE 17Ad-15.
<PAGE> 1
EXHIBIT 10.8
TRANSFER AGREEMENT
Dated as of July, 1996
AMONG
THE TJX COMPANIES, INC.,
CHADWICK'S OF BOSTON, LTD.
AND
CHADWICK'S INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. DEFINITIONS...................................................................... 1
2. TERMS OF PURCHASE AND SALE OF SHARES............................................. 4
2.1. Purchase and Sale of Shares............................................. 4
2.2. Closing................................................................. 5
3. RELATED TRANSACTIONS............................................................. 5
3.1. Elimination of Intercompany Accounts, etc............................... 5
3.2. Resignations............................................................ 6
4. CERTAIN BENEFIT PLAN MATTERS..................................................... 6
4.1. Certain Chadwick's Plans; Assumption of Obligations by Chadwick's....... 6
4.2. Certain Payments by TJX................................................. 7
4.3. Certain Medical Claims.................................................. 7
4.4. Certain Asset Transfers from TJX Plans to Chadwick's Plans, etc......... 7
4.4.1. Pension Plan.................................................... 7
4.4.2. Savings/Profit Sharing Plan..................................... 8
4.4.3. Executive Life Insurance Policies............................... 9
4.5. Stock Options; Certain Other Plans...................................... 9
4.5.1. Replacement Stock Options....................................... 9
4.5.2. Certain Valuations.............................................. 10
4.5.3. Miscellaneous................................................... 10
4.5.4. General Deferred Compensation Plan.............................. 10
4.5.5. SERP............................................................ 10
4.5.6. Retiree Medical................................................. 10
4.6. No Employment Obligation................................................ 10
5. INSURED CLAIMS................................................................... 11
5.1. Workers' Compensation, General Liability and Vehicle Liability Insured
Claims.................................................................. 11
5.2. Property and Similar Insurance.......................................... 12
5.3. Surety Bonds, etc....................................................... 12
5.4. Fiduciary Policies...................................................... 12
5.5. Claims Administration................................................... 13
5.6. Miscellaneous........................................................... 13
6. INDEMNIFICATION.................................................................. 13
6.1. Indemnification by TJX.................................................. 13
6.2. Indemnification by Chadwick's........................................... 14
6.3. Limitations on Indemnification Obligations.............................. 14
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C> <C>
6.4. Procedure for Indemnification........................................... 15
6.4.1. Third Party Claims; Notice...................................... 15
6.4.2. Defense of Third Party Claims................................... 15
6.4.3. Cooperation by Indemnitee....................................... 15
6.4.4. Limitation on Authority to Settle Claim......................... 16
6.4.5. Other Claims.................................................... 16
6.4.6. Subrogation to Rights of Indemnitee............................. 16
6.5. Remedies Cumulative..................................................... 16
6.6. Limitation on Indemnification and Remedies.............................. 16
7. ACCESS TO INFORMATION AND SERVICES............................................... 17
7.1. Provision of Corporate Records.......................................... 17
7.2. Access to Information................................................... 17
7.3. Production of Witnesses................................................. 18
7.4. Reimbursement........................................................... 18
7.5. Retention of Records.................................................... 18
7.6. Confidentiality......................................................... 18
7.7. Customer Lists.......................................................... 19
8. REPRESENTATIONS AND WARRANTIES OF CHADWICK'S..................................... 19
8.1. Organization, Standing and Power........................................ 19
8.2. Authority............................................................... 19
8.3. No Conflicts............................................................ 20
8.4. Capital Structure....................................................... 20
8.5. Title to Shares......................................................... 21
8.6. Consents and Approvals.................................................. 21
8.7. Formation............................................................... 21
8.8. Underwriting Agreement.................................................. 21
9. REPRESENTATIONS AND WARRANTIES OF TJX............................................ 21
9.1. Organization, Standing and Power of TJX................................. 21
9.2. Organization of Old Chadwick's.......................................... 22
9.3. Authority............................................................... 22
9.4. No Conflicts............................................................ 22
9.5. Capital Structure of Old Chadwick's..................................... 22
9.6. Title to Shares......................................................... 23
9.7. Consents and Approvals.................................................. 23
9.8. Old Chadwick's Subsidiaries............................................. 23
9.9. Underwriting Agreement.................................................. 24
10. CERTAIN COVENANTS OF THE PARTIES................................................. 24
10.1. Conduct of Business..................................................... 24
10.2. Fees and Expenses....................................................... 24
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
10.3. Tax Covenants.................................................. 25
10.4. Sale of Shares................................................. 25
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF CHADWICK'S................................ 25
11.1. Representations, Warranties and Covenants of TJX............... 25
11.2. No Governmental or Other Proceeding............................ 26
11.3. Other Agreements............................................... 26
11.4. Credit Agreement............................................... 26
12. CONDITIONS PRECEDENT TO OBLIGATIONS OF TJX....................................... 26
12.1. Warranties, Representations and Covenants of Chadwick's........ 26
12.2. No Governmental or Other Proceeding............................ 26
12.3. Other Agreements............................................... 27
13. CERTAIN INTERCOMPANY RELATIONSHIPS............................................... 27
13.1. Services Agreement............................................. 27
13.2. Payment Guarantee.............................................. 27
13.3. New York City Office........................................... 27
13.4. Other Agreements............................................... 27
14. DELIVERIES AT CLOSING............................................................ 27
14.1. Deliveries by Chadwick's....................................... 27
14.2. Deliveries by TJX.............................................. 28
15. TERMINATION PRIOR TO CLOSING..................................................... 28
16. MISCELLANEOUS.................................................................... 28
16.1. Severability................................................... 28
16.2. Successors and Assigns......................................... 28
16.3. Survival....................................................... 28
16.4. Notices........................................................ 28
16.5. Governing Law.................................................. 29
16.6. Descriptive Headings........................................... 29
16.7. Word Usage..................................................... 30
16.8. Counterparts; Modification..................................... 30
16.9. Entire Agreement............................................... 30
16.10. Further Assurances............................................. 30
16.11. Public Announcements........................................... 30
</TABLE>
-iii-
<PAGE> 5
EXHIBITS AND SCHEDULES
Exhibits
A - Form of Inventory Purchase Agreement
B - Form of Registration Rights Agreement
C - Form of Services Agreement
D - Form of Tax Allocation Agreement
E - Form of Trademark License and Assignment Agreements
F - Chadwick's Certificate of Incorporation
G - Chadwick's By-laws
H - Form of Underwriting Agreement
Schedules
1 - Insurance Policies
3.1 - Exceptions to Past Practices
4.1 - Benefit Plans
4.2 - Certain Benefit Plans
4.4.3 - Executive Life Insurance Policies
5.1(b) - Form of Statement Regarding Insured Claims
8.4 - Chadwick's Capital Structure
8.6 - Chadwick's Consents and Approvals
-iv-
<PAGE> 6
TRANSFER AGREEMENT
This TRANSFER AGREEMENT (the "Agreement"), dated as of July __, 1996,
is among Chadwick's of Boston, Ltd., a Delaware corporation ("Chadwick's"),
Chadwick's Inc., a Massachusetts corporation, and, as of the date hereof, a
wholly-owned direct subsidiary of TJX ("Old Chadwick's") and The TJX Companies,
Inc., a Delaware corporation ("TJX").
RECITALS
WHEREAS, TJX owns 1,000 shares of common stock, par value $1.00 per
share, of Old Chadwick's (the "Old Chadwick's Stock"), such stock being all of
the issued and outstanding capital stock of Old Chadwick's;
WHEREAS, TJX desires to transfer the Old Chadwick's Stock to Chadwick's
in exchange for the issuance by Chadwick's to TJX of 15,178,847 shares of common
stock, par value $0.01 per share, of Chadwick's (the "Common Stock") and
Chadwick's desires to issue the Common Stock to TJX in exchange for the Old
Chadwick's Stock (the "Exchange");
WHEREAS, following such issuance the issued and outstanding capital
stock of Chadwick's will consist of 15,178,847 shares of Common Stock, all of
which will be owned by TJX;
WHEREAS, approximately 61% of the shares of the Common Stock will be
offered by TJX for sale to the public (70% if the Underwriters exercise their
over-allotment option in full) (the "Offering") pursuant to the Underwriting
Agreement, as such term is defined in the Prospectus (as supplemented or amended
from time to time, the "Prospectus") constituting a part of the Registration
Statement No. 333-4427 on Form S-1 filed by Chadwick's with the Securities and
Exchange Commission on May 24, 1996 (as amended from time to time, the
"Registration Statement");
WHEREAS, TJX, Old Chadwick's and Chadwick's have determined that it is
necessary and desirable to set forth the principal corporate transactions
necessary or desirable to effect the Exchange and the Offering and to set forth
other agreements that will govern certain relationships and other matters among
TJX, Chadwick's and Old Chadwick's following the Exchange.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, covenants, representations and warranties contained herein, the
above parties hereby agree, subject to the terms and conditions hereinafter set
forth, as follows:
1. DEFINITIONS. As used in the Agreement, the terms defined below shall have the
respective meanings hereinafter specified;
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<PAGE> 7
1.1. "Actual Liability" is defined in Section 5.1(b).
1.2. "Action" means any action, suit, arbitration, inquiry, proceeding
or investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.
1.3. "Advance Amount" is defined in Section 3.1(a).
1.4. "Affiliate" shall have the meaning defined in Rule 12b-2
promulgated under the Exchange Act, as such Rule is in effect on the date
hereof.
1.5. "CDM" means CDM Corp., a Nevada corporation.
1.6. "Chadwick's" is defined in the introductory paragraph hereto.
1.7. "Chadwick's Employee" means any individual who, immediately prior
to the Closing, is employed by TJX or any of its Subsidiaries and who,
immediately after the Closing, is employed by Chadwick's or any Chadwick's
Subsidiary. Any employee whose last period of active service for TJX or any of
its Subsidiaries prior to the Closing was for Old Chadwick's and who,
immediately before the Closing, was on disability, workers' compensation,
medical or personal leave shall be treated for all purposes of this Agreement as
a Chadwick's Employee.
1.8. "Chadwick's Retirement Trust" is defined in Section 4.4.1.
1.9. "Closing" is defined in Section 2.2.
1.10. "Closing Balance Sheet" is defined in Section 3.1(a).
1.11. "Closing Date" is defined in Section 2.2.
1.12. "Closing Date Financial Certificate" is defined in Section
3.1(b).
1.13. "Common Stock" is defined in Recitals hereto.
1.14. "Estimated Payment" is defined in Section 3.1.
1.15. "Exchange" is defined in the Recitals hereto.
1.16. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
1.17. "Final Payment" is defined in Section 3.1.
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<PAGE> 8
1.18. "Information" is defined in Section 7.2.
1.19. "Insured Claims" means those losses, expenses or Liabilities
that, individually or in the aggregate, are covered within the terms and
conditions of any of the Policies, whether or not subject to deductibles,
co-insurance, collection, premium adjustments (including reserves),
retrospectively-rated premium adjustments or self-insured retentions, and
notwithstanding whether such Liabilities are within applicable Policy limits and
any losses, expenses or Liabilities under a self-insured program licensed by any
state.
1.20. "Inventory Purchase Agreement" means the Inventory Purchase
Agreement in substantially the form of Exhibit A hereto.
1.21. "Liabilities" means any and all debts, liabilities and
obligations, whenever arising (unless otherwise specified in this Agreement),
including all costs and expenses relating thereto, and including, without
limitation, those debts, liabilities and obligations arising under any law,
rule, regulation, Action, threatened Action, order or consent decree of any
governmental entity or any award of any arbitrator of any kind, and those
arising under any contract, commitment or undertaking.
1.22. "Offering" is defined in the Recitals hereto.
1.23. "Old Chadwick's" is defined in the introductory paragraph hereto.
1.24. "Old Chadwick's Stock" is defined in the Recitals hereto.
1.25. "Person" means any natural person or any corporation,
association, partnership, joint venture, company, limited liability company,
trust, organization, business or government or any governmental agency or
political subdivision thereof.
1.26. "Policies" means those insurance policies owned or maintained by
TJX and listed on Schedule 1 hereto as well as any self-insured program licensed
by any state and so listed.
1.27. "Prospectus" is defined in the Recitals hereto.
1.28. "Registration Rights Agreement" means the Registration Rights
Agreement in substantially the form of Exhibit B hereto.
1.29. "Registration Statement" is defined in the Recitals hereto.
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<PAGE> 9
1.30. "Services Agreement" means the Services Agreement in
substantially the form of Exhibit C hereto pursuant to which TJX will provide
various services to Chadwick's and Old Chadwick's following the Closing Date.
1.31. "Subsidiary" means with respect to any Person, any other Person
of which such Person shall at the time own, directly or indirectly through one
or more Subsidiaries, at least a majority of the outstanding capital stock (or
other shares of beneficial interest) entitled to vote generally, or shall hold
at least a majority of partnership or similar interests, or shall be a general
partner or a member-manager.
1.32. "Tax Allocation Agreement" means the Tax Sharing and Separation
Agreement dated as of July __, 1996 among TJX, Old Chadwick's and Chadwick's in
substantially the form attached as Exhibit D hereto.
1.33. "Third Party Claim" is defined in Section 6.4.1.
1.34. "TJX" is defined in the introductory paragraph hereto.
1.35. "TJX Retirement Trust" is defined in Section 4.4.1.
1.36. "Trademark Agreements" means the agreements pursuant to which TJX
will license Chadwick's to use and, in certain cases, assign to Chadwick's,
certain trademarks owned by TJX in substantially the form of Exhibit E hereto.
1.37. "Transaction Documents" means each of the agreements,
instruments, understandings, assignments or other arrangements entered into in
connection with the Offering or the Exchange, including, without limitation, the
Services Agreement, the Tax Allocation Agreement, the Trademark Agreements, the
Inventory Purchase Agreement and the Registration Rights Agreement.
1.38. "Underwriting Agreement" means the Underwriting Agreement among
TJX, Chadwick's and the Underwriters (as defined in the Registration Statement)
in substantially the form of Exhibit H hereto pursuant to which the Underwriters
purchase the Common Stock registered by the Registration Statement.
1.39. "Underwriting Date" is defined in Section 2.2
2. TERMS OF PURCHASE AND SALE OF SHARES.
2.1. Purchase and Sale of Shares. At the Closing, (a) Chadwick's shall
issue to TJX 15,178,847 shares of the Common Stock and (b) TJX shall sell,
assign, transfer and convey to Chadwick's the Old Chadwick's Stock, in each case
free and clear of all liens, encumbrances, restrictions and claims whatsoever.
-4-
<PAGE> 10
2.2. Closing. The issuance of the Common Stock in exchange for the Old
Chadwick's Stock contemplated by Section 2.1 (the "Closing") shall take place at
the offices of Ropes & Gray, One International Place, Boston, MA 02110, at 12:01
a.m. on the date that the transactions contemplated by the Underwriting
Agreement close, or such earlier date as TJX, Old Chadwick's and Chadwick's
shall mutually agree in writing (the "Closing Date"); provided, however, that
the Closing shall not occur earlier than one day after the date (the
"Underwriting Date") that TJX enters into the Underwriting Agreement.
3. RELATED TRANSACTIONS AND AGREEMENTS.
3.1. Elimination of Intercompany Accounts, etc. TJX and Chadwick's
hereby agree that, effective immediately prior to the Closing, an aggregate
amount of $20,000,000 of the intercompany loans and advances from TJX to Old
Chadwick's or CDM made on or prior to the Closing Date shall be considered to
have been contributed to the capital of Old Chadwick's and will be converted to
equity. On the Closing Date, Chadwick's shall pay to TJX the amount that
Chadwick's estimates in good faith, after consultation with TJX, to be the
excess of all intercompany loans and advances made by TJX to Old Chadwick's or
CDM outstanding immediately prior to the Closing over $20,000,000 (the
"Estimated Payment"). The Estimated Payment shall be subject to post-closing
adjustment as provided below. The Estimated Payment as so adjusted is herein
referred to as the "Final Payment."
(a) Within 30 days following the Closing, Chadwick's shall
cause to be prepared an unaudited consolidated balance sheet of Old
Chadwick's as of the time immediately prior to the Closing (the
"Closing Balance Sheet") in accordance with generally accepted
accounting principles applied consistently with the past practices
utilized by Old Chadwick's in the preparation of its financial
statements, except as noted in Schedule 3.1 hereto which Closing
Balance Sheet shall list the amount of all outstanding loans and
advances made by TJX to Old Chadwick's and CDM (the "Advance Amount").
TJX and its representatives shall be entitled at TJX's expense to
review the Closing Balance Sheet and supporting papers and shall be
permitted reasonable access to the premises, personnel and the books
and records of Chadwick's or its subsidiaries for purposes of such
review.
(b) If TJX disagrees with the Advance Amount on the Closing
Balance Sheet furnished in accordance with clause (a) of this Section,
TJX shall, within 30 days after receipt thereof, furnish to Chadwick's
a written statement of such disagreement and shall submit such
disagreement to an independent accounting firm of national standing
reasonably acceptable to Chadwick's which shall conduct certain agreed
upon procedures necessary to resolve the disagreement referred to it.
Such accounting firm shall complete its determination as promptly as
practicable following its selection, which determination shall be
binding and conclusive on all parties hereto.
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<PAGE> 11
(c) TJX, Chadwick's and Old Chadwick's agree that if the
Advance Amount, as finally determined, less $20,000,000 (i) exceeds the
Estimated Payment, then Chadwick's shall pay to TJX the amount of the
excess together with interest thereon at the 30-day LIBOR rate (as
published in The Wall Street Journal) plus 1.5%, calculated daily, from
the date of the Closing to the payment date; or (ii) is less than the
Estimated Payment, then TJX shall pay to Chadwick's the amount of the
difference; together with interest thereon at the 30-day LIBOR rate (as
published in The Wall Street Journal) plus 1.5%, calculated daily, from
the date of Closing to the payment date.
3.2. Resignations. Old Chadwick's shall use reasonable efforts to cause
all Old Chadwick's Employees to resign, effective not later than the Closing,
from all positions as officers of TJX or any TJX Subsidiary in which they serve.
TJX shall use reasonable efforts to cause all of its own and all of its
Subsidiaries' employees and directors to resign from all boards of directors or
similar governing bodies of Old Chadwick's or any Old Chadwick's Subsidiary on
which they serve, and from all positions as officers of Chadwick's or Old
Chadwick's or any Old Chadwick's Subsidiary in which they serve; except for
individuals who are employees of Old Chadwick's and not of TJX or any other TJX
Subsidiary and except that Bernard Cammarata and Richard Lesser will serve on
the Board of Directors of Chadwick's.
4. CERTAIN BENEFIT PLAN MATTERS.
4.1. Certain Chadwick's Plans; Assumption of Obligations by Chadwick's.
Chadwick's hereby agrees to establish as of the Closing employee benefit plans
having substantially the same terms and provisions as the TJX plans listed on
Schedule 4.1 hereto which, except as otherwise indicated on Schedule 4.1, are
the only material employee benefit plans applicable to Chadwick's Employees
immediately prior to the Closing. Except for Liabilities arising under such TJX
plans with respect to Chadwick's Employees in the period ending immediately
prior to the Closing which are retained or assumed by TJX pursuant to this
Section 4, Chadwick's hereby agrees to retain or assume under the applicable
Chadwick's plan with respect to each Chadwick's Employee all Liabilities under
the corresponding TJX plan; provided, however, that in no event shall Chadwick's
assume under any corresponding TJX plan any liability or obligation for (i) any
termination of such plan, (ii) any excise tax under Section 4971 through 4980B
of the Code, (iii) any failure to file timely any required returns or reports of
such plan, or (iv) any breach of fiduciary duty by a plan fiduciary with respect
to such plan. Chadwick's acknowledges and agrees that TJX is making no
representations or warranties hereunder or otherwise that the costs to
Chadwick's of providing benefits under such plans (including without limitation
costs consisting of premiums and other charges by third party service providers)
will be the same as the corresponding costs heretofore incurred by TJX. Nothing
in this Agreement shall be construed to prevent Chadwick's from altering or
discontinuing at any time any employee benefit plans established by it pursuant
to this Section 4.
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<PAGE> 12
4.2. Certain Payments by TJX. TJX hereby agrees to pay or cause to be
paid all insurance premiums or similar plan payments attributable to each
participant who will become a Chadwick's Employee for the period prior to the
Closing under each TJX plan listed on Schedule 4.2 hereto.
4.3. Certain Medical Claims. TJX hereby agrees to pay or cause to be
paid the following in respect of medical and dental benefits for Chadwick's
Employees for periods prior to the Closing: (i) all premiums or similar employer
payments that relate to periods of coverage ending prior to the Closing under
the insured group health plans of TJX providing such medical and dental
benefits; and (ii) reimbursement of all claims by Chadwick's Employees under the
self-insured group health plans of TJX providing such medical and dental
benefits for reimbursable expenses with respect to covered medical or dental
services rendered prior to the Closing, but only if such claims are properly
submitted within one year after the Closing.
4.4. Certain Asset Transfers from TJX Plans to Chadwick's Plans, etc.
4.4.1. Pension Plan. Pursuant to Section 4.1 hereof,
Chadwick's will establish a Retirement Plan, effective as of the
Closing, with terms and provisions substantially similar to those under
the TJX Retirement Plan but with such differences, reasonably agreeable
to TJX, as are necessary or advisable to reflect the fact that
Chadwick's following the Closing will not be a member of the TJX
controlled group (as determined under Section 414(b) and (c) of the
Code) and otherwise to reflect the transactions contemplated in, and
the terms of, this Agreement. Each Chadwick's Employee who is
participating in the TJX Retirement Plan immediately prior to the
Closing shall cease to participate in or accrue benefits under the TJX
Retirement Plan as of the Closing and shall become a participant in the
Chadwick's Retirement Plan as of the Closing. Chadwick's shall cause
the Chadwick's Retirement Plan to credit for all purposes each
Chadwick's Employee's service with TJX or any of its Subsidiaries (and
any compensation earned during such service) as if it were service with
and compensation from Chadwick's to the same extent as such service was
credited and such compensation taken into account under the TJX
Retirement Plan.
TJX will cause the trustee of the trust established under the
TJX Retirement Plan (the "TJX Retirement Trust") to transfer therefrom
to the trust established under the Chadwick's Retirement Plan (the
"Chadwick's Retirement Trust"), as soon as practicable (but in any
event within 180 days) after the Closing, all liabilities under the TJX
Retirement Trust for benefits accrued (whether vested or unvested) for
Chadwick's Employees and assets relating to such liabilities in an
amount equal to the minimum amount of assets required to be transferred
in order to satisfy, with respect to the transferee Chadwick's
Retirement Plan, the requirements of Section 414(l)(1) of the Internal
Revenue Code of 1986, as amended (the "Code"), assuming the application
of Treasury Regulation section 1.414(l)-1(n)(2). In determining the
amount of assets
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required to be transferred pursuant to the preceding sentence, the
parties hereto expressly acknowledge and agree that the value of the
accrued benefits of such Chadwick's Employees under the TJX Retirement
Plan shall be determined as of the actual transfer date using the
actuarial assumptions specified under section 417(e)(3) of the Code (as
amended by the Retirement Protection Act of 1994) for the month in
which the Closing occurs and assuming retirement at age 65 (or attained
age, if later).
TJX will amend the TJX Retirement Plan to the extent
necessary, or take other appropriate steps, to eliminate Old Chadwick's
as a participating employer therein and will issue all required
notifications to Chadwick's Employees who formerly participated in the
TJX Retirement Plan. TJX will provide Chadwick's on a timely basis
following the closing with all information to the extent reasonably
requested by Chadwick's necessary or appropriate for Chadwick's to
determine each Chadwick's Employee's service with TJX or any of its
Subsidiaries, any compensation earned during such service and any other
information relevant to the determination of benefits to which such
Chadwick's Employee was entitled under the TJX Retirement Plan as of
the Closing.
4.4.2. Savings/Profit Sharing Plans. Pursuant to Section 4.1
hereof, Chadwick's will establish one or more Savings/Profit Sharing
Plans (the "Chadwick's Savings Plan"), effective as of the Closing,
with terms and provisions substantially similar to the TJX
Savings/Profit Sharing Plan and General Savings/Profit Sharing Plan
(together, the "TJX Savings Plan") but with such differences,
reasonably agreeable to TJX, as are necessary or advisable to reflect
the fact that Chadwick's following the Closing will not be a member of
the TJX controlled group (as determined under Section 414(b) and (c) of
the Code) and otherwise to reflect the transactions contemplated in,
and the terms of, this Agreement. Each Chadwick's Employee who is
participating in the TJX Savings Plan immediately prior to the Closing
shall cease to participate in such plan as of the Closing and shall
become a participant in the Chadwick's Savings Plan as of the Closing.
Each Chadwick's Employee for whose benefit Basic Contributions are made
to the TJX Savings Plan for the calendar quarter in which the Closing
occurs and who is employed by Chadwick's or a Chadwick's Subsidiary at
the end of such calendar quarter or who prior thereto dies, retires (on
or after age 65) or leaves by reason of total disability, will, with
respect to pay periods ending on or before the Closing, have matching
contributions credited by TJX to his or her account under the TJX
Savings Plan with respect to such Basic Contributions. Chadwick's will
cause the Chadwick's Savings Plan to credit for all purposes each
Chadwick's Employee's service with TJX or any of its Subsidiaries as if
it were service with Chadwick's to the same extent as such service was
credited and such compensation taken into account under the TJX Savings
Plan.
TJX will cause the trustee of the trust established under the
TJX Savings Plan (the "TJX Savings Trust") to transfer to the trust
established under the Chadwick's
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<PAGE> 14
Savings Plan (the "Chadwick's Savings Trust"), as soon as practicable
after the end of the calendar quarter in which the Closing occurs but
in no event later than December 31, 1996, the assets allocable to the
individual account balances maintained for Chadwick's Employees under
the TJX Savings Plan determined as of the date of such transfer,
whether vested or unvested.
TJX will amend the TJX Savings Plan to the extent necessary,
or take other appropriate steps, to eliminate Old Chadwick's as a
participating employer therein, and will issue required notifications
to Chadwick's Employees who formerly participated in the TJX Savings
Plan. TJX will provide Chadwick's on a timely basis following the
closing with all information to the extent reasonably requested by
Chadwick's necessary or appropriate for Chadwick's to determine each
Chadwick's Employee's service with TJX or any of its Subsidiaries, any
compensation earned during such service and any other benefits to which
such Chadwick's Employee was entitled under the TJX Savings Plan as of
the Closing.
4.4.3. Executive Life Insurance Policies. TJX hereby agrees to
transfer to Chadwick's as of the Closing the life insurance policies
listed on Schedule 4.4.3 hereto. TJX will provide Chadwick's promptly
following the Closing with all information reasonably requested by
Chadwick's with respect to such policies, including, without limitation
information as to ownership, cash value, loan balances and premium
costs.
4.5. Stock Options; Certain Other Plans.
4.5.1. Replacement Stock Options. Promptly following the
Closing, TJX shall furnish to Chadwick's a list of each person who
became a Chadwick's Employee as of the Closing Date who holds options
to purchase shares of TJX Common Stock that were unvested as of the
Closing Date ("TJX Options"), the number of shares covered by each TJX
Option, the option exercise price under each TJX Option, the expiration
date of each TJX Option, and the vesting schedule for each TJX Option.
Chadwick's hereby agrees to issue to each such Chadwick's Employee a
Chadwick's option such that the difference between the aggregate
exercise price under such Chadwick's option for all shares of
Chadwick's Common Stock issuable thereunder and the fair market value
of the shares of Chadwick's Common Stock issuable thereunder equals, as
nearly as practicable, the difference between the aggregate exercise
price of the corresponding TJX Options (which must be surrendered to
TJX) and the aggregate fair market value of the TJX Common Stock
issuable upon exercise of such TJX Options. The exercise price per
share of each Chadwick's option issued under this Section 4.5.1 shall
bear the same ratio to the fair market value of Chadwick's Common Stock
as the exercise price per share of the corresponding TJX Option bears
to the value of TJX Common Stock.
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<PAGE> 15
4.5.2. Certain Valuations. For purposes of Section 4.5.1, the
fair market value of Chadwick's Common Stock shall be deemed to be the
price to the public as set forth in the final Prospectus and the fair
market value of the TJX Common Stock shall be deemed to be the closing
price of the TJX Common Stock on the New York Stock Exchange on the
date of such final Prospectus.
4.5.3. Miscellaneous. All such Chadwick's options will be
issued under Chadwick's's 1996 Equity Incentive Plan, and will be
subject to substantially the same terms (including proportionate
vesting) as the corresponding surrendered TJX stock options.
4.5.4. General Deferred Compensation Plan. Pursuant to Section
4.1 hereof, Chadwick's will establish a General Deferred Compensation
Plan, effective as of the Closing, with terms and provisions
substantially similar to those under the TJX General Deferred
Compensation Plan. Liabilities in respect of Chadwick's Employees under
the TJX General Deferred Compensation Plan shall continue to be
liabilities of TJX and shall not be assumed by Chadwick's under the
Chadwick's General Deferred Compensation Plan.
4.5.5. SERP. Pursuant to Section 4.1 hereof, Chadwick's will
establish a Supplemental Executive Retirement Plan (the "Chadwick's
SERP"), effective as of the Closing, with terms and provisions
substantially similar to those under the TJX Supplemental Executive
Retirement Plan (the "TJX SERP"). Liabilities in respect of benefits of
Chadwick's Employees under the TJX SERP, whether or not vested, shall
be assumed by Chadwick's as of the Closing under the Chadwick's SERP,
which shall make provision therefor by appropriately crediting
pre-Closing service and compensation with TJX and its Subsidiaries.
4.5.6. Retiree Medical. Chadwick's shall not be obligated to
establish a plan providing post-retirement medical benefits to
Chadwick's Employees. Chadwick's Employees who as of the date of the
Closing satisfied the age and service requirements for eligibility
under the retiree medical plan maintained by TJX ("TJX Retiree Medical
Plan") shall be entitled, upon their retirement from Chadwick's (such
"retirement" to be defined with reference to the term in the TJX
Retiree Medical Plan), to receive retiree medical benefits under the
TJX Retiree Medical Plan, as from time to time in effect.
4.6. No Employment Obligation. Nothing contained here shall be deemed
to require Chadwick's to retain any Chadwick's Employee in its employ for any
period following the Closing, and Chadwick's shall be free to retain or
terminate any Chadwick's Employee in its sole discretion. TJX shall have no
liability for any severance or other obligation which may be owing to a
Chadwick's Employee by reason of a termination following the Closing.
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<PAGE> 16
5. INSURED CLAIMS.
5.1. Workers' Compensation, General Liability and Vehicle Liability
Insured Claims.
(a) TJX hereby agrees to retain or assume, subject to the
future adjustments as described in paragraphs (b) and (c) of this
Section, all Liabilities of Chadwick's consisting of Insured Claims
pertaining to Chadwick's (i) for periods prior to the Closing and (ii)
under those Policies listed on Part I of Schedule 1.
(b) Within 60 days following each annual anniversary of the
Closing Date until and including the tenth annual anniversary thereof,
TJX shall provide to Chadwick's a statement in the form of Schedule
5.1(b), accompanied by reasonable detail with respect to the
calculation and components thereof, of the aggregate cumulative amount
of Insured Claims referred to in Section 5.1(a) actually incurred by
Chadwick's for the period with respect to each Policy listed on Section
A of Part I of Schedule 1, beginning on the commencement date of such
Policy indicated thereon and ending on such anniversary date (the
"Actual Liability"). If the Actual Liability calculated annually as of
the fifth through the tenth anniversary dates, as the case may be,
exceeds the liability "As Charged" per Schedule 5.1(b), then Chadwick's
shall pay to TJX the amount of such excess within 30 days of receipt of
statement. If such Actual Liability is less than the liability "As
Charged", then TJX will reimburse the difference to Chadwick's within
30 days of acceptance by Chadwick's of the Actual Liability shown on
the statement. The liability "As Charged" will be updated annually to
reflect any and all payments between TJX and Chadwick's.
(c) Within 60 days following the tenth anniversary of the
Closing Date, Chadwick's and TJX shall agree upon the final aggregate
Actual Liability with respect to the Insured Claims, determined as
provided in Section 5.1(d). If that final aggregate Actual Liability is
greater than the amount As Charged to date, then Chadwick's shall pay
TJX the difference. If that final aggregate Actual Liability is less
than the amount As Charged to date, then TJX shall pay Chadwick's the
difference. If TJX and Chadwick's shall fail to agree with respect to
such amount within such 60-day period, the matter shall be submitted to
binding arbitration in the Commonwealth of Massachusetts under the
commercial arbitration rules of the American Arbitration Association
before a panel of three arbitrators, one selected by each party and the
third selected by the other two arbitrators or, if they are unable to
agree, by the American Arbitration Association. Any award made in any
such arbitration may be enforced in any court of competent
jurisdiction.
(d) For the purposes of this Section 5.1 the amount of such
Insured Claims referred to in this Section 5.1 that shall be deemed to
have been actually incurred by Chadwick's with respect to calculations
of the Actual Liability as of any anniversary of
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<PAGE> 17
the Closing Date shall be the sum of (i) the aggregate payments made by
the respective insurance companies to the respective claimants in
respect of such Insured Claims under such Policies listed on Section A
of Part I of Schedule 1, plus (ii) the estimated remaining liabilities
as determined by the insurance company or an actuary in respect of such
Insured Claims, plus (iii) Variable Expenses which will consist of
claims administrative charges, premium taxes, residual market loads and
other state or local insurance taxes assessed in respect of the amounts
described in this clause or the preceding clauses (i) and (ii). The
Variable Expenses shall be the percentage factor that the insurance
carrier uses to charge for the variable expenses and as shown on
Schedule 5.1(b). The percentage factor for the policy period July 1,
1996 through the Closing Date shall be either the percentage factor
used by the insurance company to charge for the variable expenses or if
no percentage factor is used by the insurance company, 12.7%. If TJX
makes any payments following the Closing Date which are the
responsibility of the insurance companies issuing Policies listed on
Part 1 but not paid by such insurance companies or any relevant state
guarantee funds; the payment, less any recoveries or other compensating
payments in respect of such Insured Claims actually received by TJX or
Chadwick's, shall be added to the Actual Liability on Schedule 5.1(b).
5.2. Property and Similar Insurance. TJX hereby agrees to keep in place
each of the Policies listed on Part II of Schedule 1 through the Closing Date
and to maintain Chadwick's and the Chadwick's Subsidiaries as named insureds
under such Policies through such date. With respect to any Insured Claims
pertaining to Chadwick's arising under such Policies that have not been settled
as of the Closing Date (or that arise following the Closing), Chadwick's shall
be entitled to any proceeds (net of deductible) under such Policies pertaining
to such Insured Claims.
5.3. Surety Bonds, etc. Part III of Schedule 1 lists the surety bonds
and similar obligations maintained by TJX (the "Bonds") that relate to
Chadwick's and are expected to remain in force following the Closing Date. TJX
hereby agrees to take reasonable efforts to transfer such Bonds (or Chadwick's's
interest in any Bonds jointly maintained by TJX and Old Chadwick's) to
Chadwick's after the Closing Date. If any of such Bonds are not transferable,
TJX and Chadwick's shall cooperate, in good faith, to allocate to Chadwick's the
benefits and obligations arising under such Bonds, and Chadwick's shall pay to
TJX its allocable portion of the costs in respect thereof.
5.4. Fiduciary Policies. TJX hereby agrees to keep in place each of the
Policies listed on Part IV of Schedule 1 through the Closing Date.
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<PAGE> 18
5.5. Claims Administration.
(a) Chadwick's and TJX shall cooperate with respect to all
aspects of administering the Insured Claims retained by TJX pursuant to
Section 5.1 hereof, including, without limitation (i) the processing of
claims made under the Policies, including the reporting of claims to
the insurance carrier, management and defense of claims and providing
for appropriate releases upon settlement of claims, (ii) the reporting
to excess insurance carriers of any losses or claims which may cause
the per- occurrence or aggregate limits of any Policy to be exceeded
and (iii) the collection of insurance proceeds. Subject to the
contractual rights of the insurance companies under the Policies to
manage and settle Insured Claims, Chadwick's shall be entitled to make
all substantive decisions with respect to the management, defense and
settlement of Insured Claims (including, without limitation, through
the issuance from time to time of appropriate standing instructions).
TJX shall be entitled to all insurance proceeds under any of the
Policies except as provided in Section 5.2 and any recoveries or other
compensating payments in respect of such insured claims.
(b) Chadwick's shall be entitled, upon request and at
reasonable times and places, to audit the books and records of TJX that
relate to the Policies and any Insured Claims arising thereunder. TJX
shall be entitled, upon request and at reasonable times and places, to
audit the books and records of Chadwick's, Old Chadwick's or their
insurance company that relate to any Insured Claim. Chadwick's shall
pay for any such audit unless material discrepancies (overcharges to
Chadwick's of more than 5%) are disclosed. If such audit discloses
material discrepancies, TJX shall pay Chadwick's the charges (fees and
expenses) associated with the audit.
5.6. Miscellaneous. Except as indicated on Schedule 1, on or about the
Closing Date, existing Policies shall be replaced with corresponding policies
insuring Chadwick's. Both Chadwick's and TJX agree that they shall, in good
faith, amend Section 5 of this Agreement with respect to Policies which are
intended to be but which are not actually separated on or about the Closing Date
and such amendment shall carry out the intent of the parties as contemplated
herein.
6. INDEMNIFICATION.
6.1. Indemnification by TJX. Except as set forth in the Tax Allocation
Agreement, TJX shall indemnify, defend and hold harmless Chadwick's, each of
Chadwick's Affiliates (including Old Chadwick's) and each of their respective,
directors, officers, employees and agents and each of the heirs, executors,
successors and assigns of any of the foregoing (the "Chadwick's Indemnitees")
from and against (i) those Liabilities of Chadwick's which TJX has agreed to
retain or assume pursuant to Sections 4 or 5 hereof, (ii) any breach of any
representation, warranty, covenant or agreement by TJX contained in this
Agreement or in the Transaction Documents and (iii) any loss, liability, claim,
damage or expense (including
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<PAGE> 19
reasonable legal fees and expenses and including all amounts paid in
investigation or defense of the foregoing) (collectively, "Indemnifiable
Losses") of the Chadwick's Indemnitees arising out of or due to the failure or
alleged failure of TJX or any of its Affiliates to pay, perform or otherwise
discharge in due course any such Liabilities.
6.2. Indemnification by Chadwick's. Except as set forth in the Tax
Allocation Agreement, Chadwick's shall indemnify, defend and hold harmless TJX
and each of its Affiliates, each of their respective directors, officers,
employees and agents and each of the heirs, executors, successors and assigns of
any of the foregoing (the "TJX Indemnitees") from and against (i) those
Liabilities of TJX which Chadwick's or Old Chadwick's has agreed to retain or
assume pursuant to Sections 4 or 5 hereof, (ii) any breach of any
representation, warranty, covenant or agreement by Chadwick's or Old Chadwick's
contained in this Agreement or in the Transaction Documents and (iii) any and
all Indemnifiable Losses of the TJX Indemnities arising out of or due to the
failure or alleged failure of Chadwick's or Old Chadwick's or any of their
Affiliates to pay, perform or otherwise discharge in due course any such
Liabilities.
6.3. Limitations on Indemnification Obligations. (a) The amount which
any party (an "Indemnifying Party") is or may be required to pay to any other
party (an "Indemnitee") pursuant to Sections 6.1 or 6.2 hereof shall be reduced
(including, without limitation, retroactively) by any insurance proceeds or
other amounts actually recovered by or on behalf of such Indemnitee in reduction
of the related Indemnifiable Loss. If an Indemnitee shall have received the
payment required by this Agreement from an Indemnifying Party in respect of an
Indemnifiable Loss and shall subsequently actually receive insurance proceeds or
other amounts in respect of such Indemnifiable Loss, then such Indemnitee shall
pay to such Indemnifying Party a sum equal to the amount of such insurance
proceeds or other amounts actually received (net of any expenses in obtaining
the same).
(b) If any Indemnifiable Loss gives rise to a deduction or deductions
from the taxable income of the Indemnitee, any claim for indemnification shall
be reduced by the amount of permanent tax benefit actually received and not
payable pursuant to the Tax Allocation Agreement on a present value basis by the
Indemnitee or the Indemnitee's consolidated tax group (if the Indemnitee is part
of a consolidated tax group). Any future tax benefits shall be discounted to
present value at the LIBOR rate published in The Wall Street Journal at the time
of the indemnification payment plus 1.5%. Any indemnification payment shall be
grossed up so as to be in an amount sufficient to cover any taxes imposed on the
indemnification so that the net amount received is equal to the amount which
should have been paid had no taxes been imposed on the indemnification.
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<PAGE> 20
6.4. Procedure for Indemnification.
6.4.1. Third Party Claims; Notice. If an Indemnitee shall
receive notice or otherwise learn of the assertion by any other Person
of any claim or of the commencement by any such Person of any Action (a
"Third Party Claim") with respect to which an Indemnifying Party may be
obligated to provide indemnification pursuant to this Section 6, such
Indemnitee shall give such Indemnifying Party written notice thereof
within 10 business days after becoming aware of such Third Party Claim;
provided, however, that the failure of any Indemnitee to give notice as
provided in this Section 6.4.1 shall not relieve the related
Indemnifying Party of its obligations under this Section 6, except to
the extent that such Indemnifying Party actually is prejudiced by such
failure to give notice. Such notice shall describe the Third Party
Claim in reasonable detail, and shall indicate the amount (estimated if
necessary) of the Indemnifiable Loss that has been or may be sustained
by such Indemnitee. Thereafter, such Indemnitee shall deliver to such
Indemnifying party, within 5 business days after the Indemnitee's
receipt thereof, copies of all notices and documents received by the
Indemnitee relating to the Third Party Claim (including court papers).
6.4.2. Defense of Third Party Claims. In case any Third Party
Claim is brought against the Indemnitee, the Indemnifying Party will be
entitled to participate in and to assume the defense thereof to the
extent that it may wish, with counsel reasonably satisfactory to such
Indemnitee, and after notice from an Indemnifying Party to such
Indemnitee of its election so to assume the defense thereof, such
Indemnifying Party will not be liable to such Indemnitee for any legal
or other expenses subsequently incurred by such Indemnitee in
connection with the defense thereof; provided, however, that, if the
defendants in any such claim include both the Indemnifying Party and
one or more Indemnitee and in any Indemnitee's reasonable judgment a
conflict of interest between one or more of such Indemnitees and such
Indemnifying Party exists in respect of such claim, such Indemnitees
shall have the right to employ separate counsel (but not more than one
separate counsel reasonably satisfactory to the Indemnifying Party for
all Indemnitees with respect to any single Third Party Claim or group
of consolidated related Third Party Claims) shall be paid by such
Indemnifying Party.
6.4.3. Cooperation by Indemnitee. If an Indemnifying Party
chooses to defend or to seek to compromise or settle any Third Party
Claim, each related Indemnitee shall make available to such
Indemnifying Party any personnel or any books, records or other
documents within its control or which it otherwise has the ability to
make available that are necessary or appropriate for such defense,
settlement or compromise, and shall otherwise cooperate in the defense,
settlement or compromise of such Third Party Claim.
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<PAGE> 21
6.4.4. Limitation on Authority to Settle Claim.
Notwithstanding anything else in this Section 6.4 to the contrary,
neither an Indemnifying Party nor an Indemnitee shall settle or
compromise any Third Party Claim unless such settlement or compromise
contemplates as an unconditional term thereof the giving by such
claimant or plaintiff to each related Indemnitee or the Indemnifying
Party and each other related Indemnitee, as the case may be, of a
written release from all Liability with respect to such Third Party
Claim.
6.4.5. Other Claims. Any claim on account of an Indemnifiable
Loss which does not result from a Third Party Claim shall be asserted
by written notice given by the Indemnitee to the related Indemnifying
party. Such Indemnifying Party shall have a period of 30 days after the
receipt of such notice within which to respond thereto. If such
Indemnifying Party does not respond within such 30-day period, such
Indemnifying Party shall be deemed to have accepted responsibility to
make payment and shall have no further right to contest the validity of
such claim. If such Indemnifying Party does respond within such 30-day
period and rejects such claim in whole or in part, such Indemnitee
shall be free to pursue such remedies as may be available to such
Indemnitee under applicable law.
6.4.6. Subrogation to Rights of Indemnitee. In the event of
payment by an Indemnifying Party to any Indemnitee in connection with
any Third Party Claim of the full amount payable under this Section 6
in respect thereof, such Indemnifying Party shall be subrogated to and
shall stand in the place of such Indemnitee as to any events or
circumstances in respect of which such Indemnitee may have any right or
claim relating to such Third Party Claim against any claimant or
plaintiff asserting such Third Party Claim or as against any other
Person. In such event, such Indemnitee shall cooperate with such
Indemnifying Party in a reasonable manner, and at the cost and expense
of such Indemnifying Party, in prosecuting any subrogated right or
claim.
6.5. Remedies Cumulative. The remedies provided in this Section 6 shall
be cumulative and shall not preclude assertion by any Indemnitee of any other
rights or the seeking of any and all other remedies against any Indemnifying
Party; provided, however, that all remedies sought or asserted by an Indemnitee
against an Indemnifying Party with respect to an Indemnifiable Loss shall be
limited by and be subject to the provisions of this Section 6.
6.6. Limitation on Indemnification and Remedies. Notwithstanding the
foregoing, in no event will the parties hereto or any of their respective
Subsidiaries or any of their respective directors, officers, employees, agents
or Affiliates be liable to any Person, for lost profits, lost savings, or other
indirect, special, incidental or consequential damages whether such damages are
based on tort, contract, or any other legal theory, and even if such party or
any of its Subsidiaries or any of their respective directors, officers,
employees, agents or Affiliates has been advised of the possibility of such
damages. In addition, in no event shall
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<PAGE> 22
an Indemnified Party be liable for any Third Party Claim settled or compromised
by an Indemnitee without the written consent of the Indemnifying Party.
7. ACCESS TO INFORMATION AND SERVICES.
7.1. Provision of Corporate Records. Except as otherwise provided by
the Services Agreement, TJX shall arrange as soon as practicable following the
Closing Date for the transportation at Chadwick's cost to Chadwick's of existing
corporate records in TJX's possession relating to Old Chadwick's, including
original corporate minute books, stock ledgers and certificates and corporate
seals of each of Old Chadwick's and CDM, and all active agreements, active
litigation files and records of filings. TJX shall also provide to Chadwick's,
unless already in the possession of Chadwick's or a Chadwick's Subsidiary and
only to the extent that TJX maintains them, lists of trademarks, tradenames and
copyrights of Old Chadwick's and CDM.
7.2. Access to Information; Cooperation. (a) From and after the Closing
Date, TJX shall afford to Chadwick's and its authorized accountants, counsel and
other designated representatives reasonable access (including using reasonable
efforts to give access to third parties possessing information) and duplicating
rights during normal business hours to all records, books, contracts,
instruments, computer data and other data and information (collectively, the
"Information") within TJX's possession relating to Old Chadwick's and CDM,
insofar as such access is reasonably required by Chadwick's. Chadwick's likewise
shall afford to TJX and its authorized accountants, counsel and other designated
representatives reasonable access (including using reasonable efforts to give
access to third parties possessing information) and duplicating rights during
normal business hours to Information relating to Old Chadwick's and CDM within
Chadwick's possession, insofar as such access is reasonably required by TJX.
Information may be requested under this Section 7.2 for, without limitation,
audit, accounting, claims, litigation, insurance and tax purposes, as well as
for purposes of fulfilling disclosure and reporting obligations and for
performing this Agreement and the transactions contemplated hereby.
(b) From and after the Closing Date, Chadwick's shall prepare and
provide TJX with copies of its unaudited monthly and quarterly consolidated
financial statements and audited annual consolidated financial statements, all
prepared in accordance with generally accepted accounting principles (including
quarterly and annual closing dates), and such other information that TJX may
request from Chadwick's or its Subsidiaries in order to prepare and make timely
filings with the Securities and Exchange Commission in compliance with the
Securities Act and to make timely public releases of financial information in
accordance with TJX's past practices. TJX and Chadwick's shall use reasonable
efforts to coordinate with each other the timing of any filing with the
Securities and Exchange Commission in which TJX or Chadwick's will include
information with respect to the other; provided, however, that neither TJX or
Chadwick's shall be required to delay the making of any filing beyond the date
such is required to be made with the Securities and Exchange Commission.
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7.3. Production of Witnesses. At all times from and after the Closing
Date, each of Chadwick's and TJX shall use reasonable efforts to make available
to the other upon written request its and its Subsidiaries' officers, directors,
employees and agents as witnesses to the extent that such persons may reasonably
be required in connection with any legal, administrative or other proceedings in
which the requesting party may from time to time be involved.
7.4. Reimbursement. Except to the extent otherwise contemplated by the
Services Agreement or any other Transaction Document, a party providing
Information or Services as defined in the Services Agreement or personnel to the
other party under this Section 7 shall be entitled to receive from the
recipient, upon the presentation of invoices therefor, payments for such
amounts, relating to supplies, disbursements and other out-of-pocket expenses,
as may be reasonably incurred in providing such Information or Services;
provided, however, that no such reimbursements shall be required for the salary
or cost of fringe benefits or similar expenses pertaining to personnel of the
providing party.
7.5. Retention of Records. Except as otherwise required by law or
agreed to in writing, each of TJX, Chadwick's and Old Chadwick's shall retain,
and shall cause its Subsidiaries to retain, for a period of at least ten years
following the Closing Date, all Information within such parties' possession
relating to the other and the other's Subsidiaries that exists as of the Closing
Date; provided, however, that after the expiration of such ten-year period, such
Information shall not be destroyed or otherwise disposed of at any time, unless,
prior to such destruction or disposal, (i) the party proposing to destroy or
otherwise dispose of such Information, shall provide no less than 90 days prior
written notice to the other, specifying in reasonable detail the Information
proposed to be destroyed or disposed of, and (ii) if the recipient of such
notice shall request in writing prior to the scheduled date for such destruction
or disposal that any of the Information proposed to be destroyed or disposed of
be delivered to such requesting party, the party proposing the destruction or
disposal shall promptly arrange for the delivery of such of the Information as
was requested at the expense of the party requesting such Information.
Without limiting the generality of the foregoing provisions of this
Section 7.5 or of Section 7.2 hereof, the Information to be retained by
Chadwick's and made available to TJX hereunder shall include such benefits
information and data with respect to Chadwick's Employees for the period prior
to the Closing Date as was delivered to Chadwick's by TJX pursuant to this
Agreement.
7.6. Confidentiality. Each of TJX on the one hand, and Chadwick's on
the other hand, shall hold, and shall cause its Subsidiaries, Affiliates,
consultants and advisors to hold, in strict confidence, all Information
concerning the other in its possession or furnished by the other or the other's
representatives pursuant to this Agreement (except to the extent that such
Information is or has been (a) in the public domain through no fault of such
party; or (b) later lawfully acquired from other sources by such party, and each
party shall not release or
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<PAGE> 24
disclose such Information to any other Person, except its auditors, attorneys,
financial advisors, bankers and other consultants and advisors, unless compelled
to disclose by judicial or administrative process or, as advised by its counsel,
by other requirements of law.
7.7. Customer Lists. (a) TJX acknowledges and agrees that all current
customer lists and other current customer-related information concerning the
customers of Old Chadwick's are the sole property of Old Chadwick's and shall
not be used by TJX or its Subsidiaries or disclosed by TJX or its Subsidiaries,
except as provided in subsection (b) or as otherwise agreed to in writing by
Chadwick's. Chadwick's acknowledges and agrees that all current customer lists
and other current customer-related information concerning the customers of TJX
and its Subsidiaries are the sole property of TJX and its Subsidiaries and shall
not be used by Chadwick's or its Subsidiaries or disclosed by Chadwick's or its
Subsidiaries, except as otherwise provided in subsection (b) or as otherwise
agreed to in writing by TJX.
(b) Nothing herein shall restrict TJX or any of its
subsidiaries from using any customer list and customer-related information of
Old Chadwick's previously provided to TJX by Old Chadwick's, except that the
customer list and related customer-related information of Old Chadwick's that
Old Chadwick's most recently provided to TJX may be used by TJX and its
subsidiaries solely for credit related purposes. Furthermore, nothing herein
shall restrict Old Chadwick's from using any customer list and customer-related
information of TJX previously provided to Old Chadwick's by TJX, except that Old
Chadwick's may only use the large size customer list previously provided to Old
Chadwick's by TJX for the purpose of allowing Old Chadwick's to mail Old
Chadwick's catalogs to the customers listed therein.
8. REPRESENTATIONS AND WARRANTIES OF CHADWICK'S.
Chadwick's hereby represents and warrants as follows:
8.1. Organization, Standing and Power. Chadwick's is a corporation,
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Chadwick's has all requisite corporate power and authority to
own, lease and operate its properties and assets and to carry on its business as
now conducted and as proposed to be conducted prior to or on the Closing Date
and to execute, deliver and perform this Agreement and the Transaction Documents
and to consummate the transactions hereby and thereby contemplated.
8.2. Authority. The execution, delivery and performance by Chadwick's
of this Agreement and the Transaction Documents and the consummation by
Chadwick's of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action on the part of
Chadwick's (including without limitation the approval by its Board of Directors
and any approval or consent of stockholders required by law or by its
Certificate of Incorporation or By-laws). This Agreement and the Transaction
Documents are the legal, valid and binding obligations of Chadwick's,
enforceable in
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<PAGE> 25
accordance with their respective terms, except to the extent that such
enforceability may be limited by bankruptcy, insolvency or other similar laws
relating to creditors' rights generally, and is subject to general principles of
equity.
8.3. No Conflicts. Neither the execution and delivery of this Agreement
or any of the Transaction Documents nor the consummation of the transactions
contemplated hereby or thereby nor compliance by Chadwick's with any of the
provisions hereof or thereof; will:
(a) conflict with or result in a breach of any provisions of
Chadwick's Certificate of Incorporation or By-laws; or
(b) constitute or result in the breach of any term, condition
or provision of, or constitute a default under, or give rise to any
right of termination, cancellation or acceleration with respect to, or
result in the creation of any lien, charge or encumbrance upon any
property or asset of Chadwick's pursuant to, any note, bond, mortgage,
indenture, license, agreement or other instrument or obligation to
which Chadwick's is a party or by which Chadwick's or any of its
properties or assets may be bound and which is material to the
operations of Chadwick's except for such conflicts, breaches or
defaults as to which written waivers or consents shall have been
obtained by Chadwick's on or prior to the Closing Date; or
(c) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to Chadwick's or any of its properties or
assets.
8.4. Capital Structure.
(a) Upon the Closing of the Offering contemplated hereby, the
authorized capital stock of Chadwick's will consist of:
(i) 35,000,000 shares of Common Stock, par value $0.01
per share, of which 15,178,847 shares will be validly
issued and outstanding; and
(ii) 5,000,000 shares of preferred stock, par value $0.01
per share, of which no shares will be validly issued
and outstanding.
(b) All outstanding shares of Chadwick's capital stock will
have been duly authorized and validly issued, will be fully paid and
non-assessable, and will not have been issued in violation of any
pre-emptive rights.
(c) Except as set forth on Schedule 8.4, there is outstanding
no security, option, warrant, right, call, subscription, agreement,
commitment or understanding of any nature whatsoever, fixed or
contingent, that directly or indirectly:
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(i) calls for the issuance, sale, pledge or other
disposition of any shares or of any other capital
stock of Chadwick's or any securities convertible
into, or other rights to acquire, any such shares or
other capital stock of Chadwick's; or
(ii) obligates Chadwick's to grant, offer or enter into
any of the foregoing; or
(iii) relates to the voting or control of such shares,
capital stock, securities or rights.
8.5. Title to Shares. Upon issuance and delivery to TJX of the
Chadwick's Common Stock, and subject to the terms of the Underwriting Agreement,
Chadwick's will convey to TJX legal and valid title to the Common Stock free and
clear of all liens, encumbrances and claims whatsoever.
8.6. Consents and Approvals. Except as set forth on Schedule 8.6, no
authorization, consent, order or approval of or notice to or filing with, any
federal, state or local governmental authority is required in connection with
the execution, delivery and performance by Chadwick's or Old Chadwick's of the
transactions contemplated hereby and by the Transaction Documents.
8.7. Formation. Chadwick's has been formed prior to the Closing solely
to permit registration of its common stock with the Securities and Exchange
Commission and to enable it to acquire all of the Old Chadwick's stock at the
Closing. Except for activities incident to these actions, prior to Closing,
Chadwick's will have engaged in no activities and will have carried on no
business.
8.8. Underwriting Agreement. To Chadwick's knowledge, the
representations and warranties of Chadwick's set forth in Section 1(a) of the
Underwriting Agreement are true and correct, provided, however, that as to any
matter covered both by the foregoing provisions of this Section 8 and such
representations and warranties, the applicable foregoing provisions of this
Section 8 shall govern.
9. REPRESENTATIONS AND WARRANTIES OF TJX.
TJX hereby represents and warrants as follows:
9.1. Organization, Standing and Power of TJX. TJX is a corporation,
duly organized, validly existing and in good standing under the laws of the
State of Delaware. TJX has all requisite corporate power and authority to own,
lease and operate its properties and assets and to carry on its business as now
conducted and as proposed to be conducted prior to
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<PAGE> 27
the Closing Date and to execute, deliver and perform this Agreement and the
Transaction Documents and to consummate the transactions hereby and thereby
contemplated.
9.2. Organization of Old Chadwick's. Old Chadwick's is a corporation,
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts.
9.3. Authority. The execution, delivery and performance by TJX of this
Agreement and the Transaction Documents and the consummation by TJX of the
transactions contemplated hereby has been duly and validly authorized by all
necessary corporate action on the part of TJX (including without limitation the
approval of its Board of Directors). This Agreement and the Transaction
Documents are the legal, valid and binding obligations of TJX, enforceable in
accordance with their respective terms, except to the extent that such
enforceability may be limited by bankruptcy, insolvency or other similar laws
relating to creditors' rights generally, and is subject to general principles of
equity.
9.4. No Conflicts. Neither the execution and delivery of this Agreement
or any of the Transaction Documents nor the consummation of the transactions
contemplated hereby or thereby nor compliance by TJX with any of the provisions
hereof or thereof; will:
(a) conflict with or result in a breach of any provision of
TJX's Certificate of Incorporation or By-laws; or
(b) constitute or result in the breach of any term, condition
or provision of, or constitute a default under, or give rise to any
right of termination, cancellation or acceleration with respect to, or
result in the creation of any lien, charge or encumbrance upon any
property or asset of TJX pursuant to, any note, bond, mortgage,
indenture, license, agreement or other instrument or obligation to
which TJX is a party or by which TJX or any of its respective
properties or assets may be bound and which is material to the
operations of TJX except for such conflicts, breaches or defaults as to
which written waivers or consents shall have been obtained by TJX on or
prior to the Closing Date; or
(c) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to TJX or any of its properties or assets.
9.5. Capital Structure of Old Chadwick's.
(a) The authorized capital structure of Old Chadwick's
consists of 250,000 shares of Common Stock, par value $1.00 per share,
of which 1,000 shares are validly issued and outstanding; and
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(b) All outstanding shares of Old Chadwick's capital stock
have been duly authorized and validly issued, are fully paid and
non-assessable, and have not been issued in violation of any
pre-emptive rights.
(c) Except for this Agreement and the transactions
contemplated hereby, there is outstanding no security, option, warrant,
right, call, subscription, agreement, commitment or understanding of
any nature whatsoever, fixed or contingent, that directly or
indirectly:
(i) calls for the issuance, sale, pledge or other
disposition of any shares or any other capital stock
of Old Chadwick's or any securities convertible into,
or other rights to acquire, any such shares or other
capital stock of Old Chadwick's; or
(ii) obligates Old Chadwick's to grant, offer or enter
into any of the foregoing; or
(iii) relates to the voting or control of such shares,
capital stock, securities or rights.
9.6. Title to Shares. Upon the sale and delivery to Chadwick's of the
Old Chadwick's Stock, TJX will convey to Chadwick's legal and valid title to the
Old Chadwick's Stock free and clear of all liens, encumbrances and claims
whatsoever.
9.7. Consents and Approvals. No authorization, consent, order or
approval of or notice to or filing with, any federal, state or local
governmental authority is required in connection with the execution, delivery
and performance by TJX of the transactions contemplated hereby and by the
Transaction Documents.
9.8. Old Chadwick's Subsidiaries.
(a) The only Subsidiary of Old Chadwick's is CDM. Old
Chadwick's owns, of record and beneficially, all of the issued and
outstanding shares of capital stock of CDM and has legal and valid
title thereto free and clear of all liens, encumbrances and claims
whatsoever.
(b) The authorized capital structure of CDM consists of 1,000
shares of Common Stock, par value $1.00 per share, of which 1,000
shares are validly issued and outstanding; and
(c) All outstanding shares of CDM's capital stock have been
duly authorized and validly issued, are fully paid and non-assessable,
and have not been issued in violation of any pre-emptive rights.
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(d) Except for this Agreement and the transactions
contemplated hereby, there is outstanding no security, option, warrant,
right, call, subscription, agreement, commitment or understanding of
any nature whatsoever, fixed or contingent, that directly or
indirectly:
(i) calls for the issuance, sale, pledge or other
disposition of any shares or any other capital stock
of CDM's or any securities convertible into, or other
rights to acquire, any such shares or other capital
stock of CDM's; or
(ii) obligates CDM's to grant, offer or enter into any of
the foregoing; or
(iii) relates to the voting or control of such shares,
capital stock, securities or rights.
9.9. Underwriting Agreement. To TJX's knowledge, the representations
and warranties of TJX set forth in Section 1(a) of the Underwriting Agreement
are true and correct, provided, however, that as to any matter covered both by
the foregoing provisions of this Section 9 and such representations and
warranties the applicable foregoing provisions of this Section 9 shall govern.
10. CERTAIN COVENANTS OF THE PARTIES.
Chadwick's and TJX hereby covenant to and agree with one another as
follows:
10.1. Conduct of Business. Chadwick's and Old Chadwick's will take such
action that is necessary to effect the offering and sale of Common Stock
pursuant to the Underwriting Agreement.
10.2. Fees and Expenses. TJX shall be solely responsible for, and shall
promptly discharge or reimburse Chadwick's for all legal and accounting fees
relating to the transactions contemplated hereby and all costs and expenses of
Chadwick's and Old Chadwick's of the Offering, including filing fees, amounts
due the underwriters of the Offering, printing costs and expenses, legal and
accounting fees and expenses, mailing and delivery charges and expenses incurred
in connection with presentations to prospective investors by officers of
Chadwick's, but excluding any liability incurred by Chadwick's pursuant to
Section 8 of the Underwriting Agreement or otherwise incurred by Chadwick's
under applicable securities laws or other laws in connection with the Offering.
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10.3. Tax Covenants.
(a) Chadwick's agrees that for at least a two (2) year period
following the closing, each of Chadwick's and Old Chadwick's shall
remain in existence as a separate corporation; provided, however, that
Chadwick's or Old Chadwick's may merge or consolidate with another
corporation or corporations to the extent that such merger or
consolidation will not affect adversely the tax consequences of the
Exchange under Section 338(h)(10) of the Code.
(b) No later than two (2) business days after the Closing, TJX
will sell 61% of the Common Stock to the Underwriters, as such term is
defined in the Prospectus, pursuant to the Underwriting Agreement.
10.4. Sale of Shares. TJX acknowledges that the Common Stock may be
resold only upon registration under the Securities Act of 1933 or pursuant to an
exemption from registration thereunder.
10.5. Certain Payments by the Parties.
(a) To the extent that TJX, on the one hand, or Chadwick's or
Old Chadwick's, on the other hand, receive any payment after the
Closing which belongs to the other party, it shall promptly pay over
such payment to the other party.
(b) Chadwick's shall promptly reimburse TJX for any
post-Closing drawdowns or demand made upon TJX or any of its
Subsidiaries under letters of credit or under any other guarantees
issued or given by TJX for the benefit of Old Chadwick's.
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF CHADWICK'S.
The obligations of Chadwick's to consummate the transactions
contemplated hereby shall be subject to the satisfaction on or prior to the
Closing Date of all of the following conditions, except such conditions as
Chadwick's may waive (other than the condition contained in Section 11.3, which
condition Chadwick's shall not be entitled to waive);
11.1. Representations, Warranties and Covenants of TJX. TJX shall have
complied in all material respects with all of its agreements and covenants
contained herein required to be complied with at or prior to the Closing Date,
and all the representations and warranties of TJX contained herein shall be true
in all material respects on and as of the Closing Date with the same effect as
though made on and as of the Closing Date, except to the extent that such
representations and warranties expressly make reference to a specified date and
as to such representations and warranties the same shall continue on the Closing
Date to have been true in all material respects of the specified date.
Chadwick's shall have received a certificate
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executed by or on behalf of TJX, and dated as of the Closing Date, (a)
certifying as to the fulfillment of the conditions set forth in this Section
11.1 and (b) attaching thereto a certified copy of the resolutions of TJX's
Board of Directors or an authorized committee thereof approving this Agreement.
11.2. No Governmental or Other Proceeding. No order of any court or
governmental or regulatory authority or body which restrains or prohibits the
transactions contemplated hereby shall be in effect on the Closing Date and no
suit or investigation by any government agency to enjoin the transactions
contemplated hereby or seek damages or other relief as a result hereof shall be
pending or threatened as of the Closing Date.
11.3. Other Agreements. TJX, Chadwick's and Old Chadwick's shall have
executed and delivered the Underwriting Agreement and each other Transaction
Document.
11.4. Credit Agreement. Chadwick's shall have entered into
contemporaneously with the Closing a credit facility or facilities that, in the
reasonable judgment of TJX and Chadwick's, shall be sufficient to meet
Chadwick's financing needs after the Closing and shall otherwise be on terms and
conditions reasonably satisfactory to Chadwick's and TJX.
12. CONDITIONS PRECEDENT TO OBLIGATIONS OF TJX.
The obligations of TJX to consummate the transactions contemplated
hereby shall be subject to the satisfaction on or prior to the Closing Date of
all of the following conditions, except such conditions as TJX may waive (other
than the conditions set forth in Section 12.3, which condition may not be
waived):
12.1. Warranties, Representations and Covenants of Chadwick's.
Chadwick's shall have complied in all material respects with all of its
agreements and covenants contained herein required to be complied with at or
prior to the Closing Date, and all the representations and warranties of
Chadwick's contained herein shall be true in all material respects on and as of
the Closing Date with the same effect as though made on and as of the Closing
Date, except to the extent that such representations and warranties expressly
make reference to a specified date and as to such representations and warranties
the same shall continue on the Closing Date to have been true in all material
respects as of the specified date. TJX shall have received a certificate
executed by or on behalf of Chadwick's, and dated as of the Closing Date, (a)
certifying as to the fulfillment of the conditions set forth in this Section
12.1 and (b) attaching thereto a certified copy of the resolutions of Chadwick's
Board of Directors approving this Agreement.
12.2. No Governmental or Other Proceeding. No order of any court or
governmental or regulatory authority or body which restrains or prohibits the
transactions contemplated hereby shall be in effect on the Closing Date and no
suit or investigation by any government
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<PAGE> 32
agency to enjoin the transactions contemplated hereby or seek damages or other
relief as a result thereof shall be pending or threatened as of the Closing
Date.
12.3. Other Agreements. Chadwick's, Old Chadwick's and TJX shall have
executed and delivered the Underwriting Agreement and each other Transaction
Document.
13. CERTAIN INTERCOMPANY RELATIONSHIPS.
13.1. Services Agreement. TJX and its subsidiaries currently provide
various services to Old Chadwick's. Effective upon the Closing, TJX and its
subsidiaries will only provide certain services as provided in and pursuant to a
services agreement (the "Services Agreement") to be entered into effective as of
the Closing between TJX and Chadwick's.
13.2. Payment Guarantee. TJX currently provides a guarantee of payment
to Old Chadwick's vendors through a Dun & Bradstreet notification. Chadwick's
and Old Chadwick's acknowledge that TJX intends to terminate such guarantee as
to liabilities incurred after the Closing, at the earliest date such termination
may become effective.
13.3. New York City Office. The parties hereto agree to negotiate in
good faith a separate agreement with respect to Old Chadwick's use of certain
office space located in New York City that will provide for proportionate
historical cost sharing of the facilities, whether or not the parties are
permitted to continue occupancy thereof.
13.4. Other Agreements. With respect to any contract to which TJX or
any of its subsidiaries is a party under which Old Chadwick's currently benefits
or participates, Chadwick's agrees to reimburse TJX for its proportionate costs
thereunder. TJX may decide unilaterally to terminate any such contract without
notice to or agreement by Chadwick's. Unless it otherwise agrees in writing,
Chadwick's shall not be obligated with respect to any extension or renewal of
any such contract by TJX or any subsidiary of TJX party thereto.
14. DELIVERIES AT CLOSING.
14.1. Deliveries by Chadwick's. At the Closing, Chadwick's shall
deliver, or cause to be delivered, to TJX the following:
(a) one or more stock certificates representing an aggregate
of 15,187,847 shares of Chadwick's Common Stock, duly executed and
indicating TJX as holder thereof;
(b) the certificate referred to in Section 12.1; and
(c) the Estimated Payment.
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<PAGE> 33
14.2. Deliveries by TJX. At the Closing, TJX shall deliver, or cause to
be delivered, to Chadwick's the following:
(a) stock certificates representing all of the shares of Old
Chadwick's Stock, duly endorsed in blank or accompanied by appropriate
stock transfer powers executed by TJX;
(b) the certificate referred to in Section 11.1.
15. TERMINATION PRIOR TO CLOSING. This Agreement may be terminated prior to
the Closing (a) by TJX in writing or (b) by termination of the Underwriting
Agreement.
16. MISCELLANEOUS.
16.1. Severability. A determination that any provision of this
Agreement is unenforceable or invalid shall not affect the enforceability or
validity of any other provision and a determination that the application of any
provision of this Agreement to any person or circumstance is illegal or
unenforceable shall not affect the enforceability or validity of such provisions
as it may apply to other persons or circumstances.
16.2. Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors of the parties hereto; provided, however, that this Agreement may not
be assigned by any party without the prior written consent of the other party
hereto (which consent shall not be unreasonably withheld), except that TJX may,
at its election and without the prior written consent of Chadwick's, assign this
Agreement to any direct or indirect wholly-owned subsidiary or any other
Affiliate of TJX so long as the representations and warranties of TJX made
herein are equally true of such assignee. If this Agreement is assigned with
such consent or pursuant to such exception, the terms and conditions hereof
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective assigns; provided, however, that no assignment of this
Agreement or any of the rights and obligations hereof shall relieve any party of
its obligations under this Agreement. With the exception of the parties to this
Agreement, there shall exist no right of any person to claim a beneficial
interest in this Agreement or any and any Indemnitee rights occurring by virtue
of this Agreement.
16.3. Survival. The representations, warranties, covenants and
agreements contained herein to be performed or complied with after the Closing
shall survive without limitation as to time, unless the covenant or agreement
specifies a term, in which case such covenant or agreement shall survive until
the expiration of such specified term.
16.4. Notices. Any notice, request, instruction or other document
(each, a "notice") to be given hereunder by any party hereto to any other party
hereto shall be in writing and shall be deemed to have been duly given if
delivered personally, sent by facsimile
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<PAGE> 34
transmission, or registered or certified mail, postage prepaid, to the parties
hereto at the following addresses or to such other address as any party hereto
shall hereafter specify by notice to the other party or parties hereto:
(a) if to Chadwick's or Old Chadwick's to:
35 United Drive
West Bridgewater, MA 02379
Attention: Chief Executive Officer
with a copy to:
Constantine Alexander, Esq.
Nutter, McClennen & Fish, LLP
One International Place
Boston, MA 02110
(b) if to TJX to:
770 Cochituate Road
Framingham, MA
Attention: Donald G. Campbell, Chief Financial Officer
with a copy to:
Arthur G. Siler, Esq.
Ropes & Gray
One International Place
Boston, MA 02110
Any such notice, request, instruction or document shall be deemed to
have been received on the date of delivery thereof.
16.5. Governing Law. The validity, performance and enforcement of this
Agreement and any agreement entered into pursuant hereto, unless expressly
provided to the contrary, will be governed by the laws of the Commonwealth of
Massachusetts, without giving effect to the principles of conflicts of law
thereof.
16.6. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of,
or to affect the meaning or interpretation of any provision of, this Agreement.
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16.7. Word Usage. Whenever required by the context and as used in this
Agreement, the singular shall include the plural and pronouns and any variation
thereof shall be deemed to refer to the masculine, feminine, neuter, singular or
plural, as the identification of the party in question may require.
16.8. Counterparts; Modification. This Agreement (a) may be executed in
two or more counterparts, each which shall be deemed to be an original, but all
of which shall constitute one and the same agreement and (b) may be amended only
by an instrument in writing intended for that purpose executed jointly by an
authorized representative of each party hereto.
16.9. Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof, and
supersedes any and all other prior agreements and understandings among the
parties hereto with respect to this subject matter.
16.10. Further Assurances. From and after the Closing Date, each party,
at the request of the other party and at the requesting party's expense, will
each take all such action and deliver all such documents as shall be reasonably
necessary or appropriate to confirm and vest title to the Common Stock in TJX
and otherwise enable Chadwick's and TJX to enjoy the respective benefits
contemplated by this Agreement.
16.11. Public Announcements. Chadwick's and TJX shall consult with each
other before issuing any press releases or otherwise making any public
statements with respect to this Agreement except as required by law or any other
provision of this Agreement, and the transactions contemplated hereby and shall
not issue any such press release or make any public statement prior to such
consultation.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunder duly authorized, all as of the
day and year first above mentioned.
THE TJX COMPANIES, INC.
By:
---------------------------
Donald G. Campbell
Executive Vice President
CHADWICK'S OF BOSTON, LTD.
By:
---------------------------
Title:
CHADWICK'S INC.
By:
---------------------------
Title:
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<PAGE> 1
EXHIBIT 10.9
SERVICES AGREEMENT
between
THE TJX COMPANIES, INC.
and
CHADWICK'S OF BOSTON, LTD.
Dated as of August __, 1996
<PAGE> 2
SERVICES AGREEMENT
THIS SERVICES AGREEMENT (the "Agreement"), made as of this ____ day of
August 1996, is entered into by Chadwick's of Boston, Ltd., a Delaware
corporation with its principal office at 35 United Drive, West Bridgewater,
Massachusetts 02379 (the "Company" or "Chadwick's" ), and The TJX Companies,
Inc., a Delaware corporation with its principal office at 770 Cochituate Road,
Framingham, Massachusetts 01701 ("TJX").
WITNESSETH:
WHEREAS, the Company filed a Registration Statement on Form S-1 with
the Securities and Exchange Commission on May 24, 1996, in connection with the
initial public offering of the Company's common stock (the "Offering");
WHEREAS, immediately after the Offering the Company will hold all of
the outstanding shares of stock of Chadwick's, Inc., a Massachusetts corporation
("Old Chadwick's"), which shares prior to the Offering were held by TJX;
WHEREAS, TJX and the Company wish to provide for an orderly and
efficient separation of Old Chadwick's and TJX's respective businesses; and
WHEREAS, the successful operation of the Company's business after the
Offering will continue to require the performance of certain of the
administrative services which TJX has previously provided to Old Chadwick's, and
TJX is willing to continue to provide certain of such services to the Company
upon the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereby agree as follows:
1. SERVICES.
1.1. Services to be Made Available. In accordance with the terms and
provisions of this Agreement, TJX agrees to perform (or cause its subsidiaries
to perform) for the Company and its subsidiaries the services described in the
Annexes hereto (collectively, the "Services") in the amounts and to the extent
specified with respect to each such Service in the applicable Annex hereto and
the Company agrees to perform any of its obligations hereunder and as set forth
in the following Annexes:
<PAGE> 3
Services Applicable Annex
-------- ----------------
Data Processing A
Voice Network Services B
Investor Relations C
Treasury Management D
Banking/Factor Relations E
Legal Services F
Human Resource Services G
Corporate Payroll Services H
Tax Services I
Risk Management Services J
Internal Audit Services K
Audio/Visual Services L
Corporate Accounting M
& Financial Reporting Services
1.2. Fees. The Company agrees to pay to TJX a fee for each of the
Services as specified in the applicable Annex hereto.
Not more often than once per fiscal month, TJX shall forward to the
Company invoices for the Services listing the Services provided hereunder and
listing the fees for such Services, together with such additional documentation
evidencing the provision thereof as the Company shall reasonably request.
Invoices for Services provided for partial fiscal months and relating to
Services for which the fees are to be calculated on a monthly basis shall be
based upon the number of days in such fiscal month. Within 30 days of receiving
an invoice and such additional documentation (if any) reasonably requested by
the Company, the Company shall pay to TJX the amount invoiced. Chadwick's agrees
to pay to TJX interest on any such invoice amount that is not paid within 30
days after receipt by the Company at a rate per annum equal to the rate
announced by The First National Bank of Boston as its Base Rate, calculated
daily, for each day that such invoice amount remains overdue.
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<PAGE> 4
1.3. Term of Agreement. This Agreement shall become effective as of the
closing of the Offering and shall terminate with respect to each Service on the
date specified for such Service or as determined in accordance with the
applicable Annex hereto.
1.4. Timely Performance and Cooperation. TJX shall use commercially
reasonable efforts to perform the Services in a timely manner that will be at
least consistent with its past practices and the Company shall use commercially
reasonable efforts to cooperate with TJX in connection with the provision of the
Services.
2. REPRESENTATIONS AND WARRANTIES.
As an inducement to enter into this Agreement, each party represents to
and agrees with the other that:
(a) it is a corporation duly organized, validly existing and
in good standing under the law of the State of Delaware and has all
requisite corporate power to carry out the transactions contemplated by
this Agreement;
(b) it has duly and validly taken all corporate action
necessary to authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby;
(c) this Agreement has been duly executed and delivered by it
and constitutes its legal, valid and binding obligation enforceable
against it in accordance with its terms; and
(d) none of the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby or the compliance
with any of the provisions of this Agreement will (i) conflict with or
result in a breach of any provision of its corporate charter or
by-laws, (ii) breach, violate or result in a material default under any
of the terms of any material agreement or other instrument or
obligation to which it is a party or by which it or any of its
properties or assets may be bound, or (iii) violate any material order,
writ, injunction, decree, statute, rule or regulation applicable to it
or affecting any of its properties or assets.
3. OTHER TERMS AND PROVISIONS.
3.1. Independent Contractor Status. TJX shall perform all services
under this Agreement as an "independent contractor" and not as an agent of the
Company. TJX is not authorized to, and shall not, assume or create any
obligation or responsibility, express or implied, on behalf of, or in the name
of, the Company or bind the Company in any manner. TJX shall be solely
responsible for the payment of all salaries and benefits and all employment
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<PAGE> 5
taxes with respect to its employees and the employees of its subsidiaries
providing the Services.
3.2. Indemnification. The Company hereby agrees to indemnify and hold
harmless TJX, its subsidiaries, each of their respective directors, officers,
employees, agents and affiliates (a "TJX Indemnitee") from and against all costs
and damages incurred by such TJX Indemnitee to third parties as a result of the
provision by TJX pursuant to this Agreement of the Services, other than costs or
damages incurred by such TJX Indemnitee as a result of its willful misconduct or
gross negligence. TJX hereby agrees to indemnify and hold harmless the Company,
its subsidiaries, each of their respective directors, officers, employees,
agents and affiliates (a "Chadwick's Indemnitee") from and against all costs and
damages incurred by such Chadwick's Indemnitee to third parties as a result of
the willful misconduct or gross negligence of TJX in the provision by it of the
Services pursuant to this Agreement. Procedures relating to indemnification
claims and obligations shall follow and be handled in accordance with Section
6.3 and 6.4 of the Transfer Agreement, dated as of July __, among TJX, the
Company and Old Chadwick's. In addition, in no event shall an indemnifying party
be liable for any claim by a third party that is settled or compromised by an an
indemnified party without the written consent of the indemnifying party. This
section shall survive the termination of this Agreement.
3.3. Limitation of Liability and Reimbursement. Neither TJX nor any of
its subsidiaries or any of their respective directors, officers, employees,
agents or affiliates shall in any event be liable for any damages or expenses of
any kind or nature whatsoever that may arise out of TJX's (or any such
subsidiary's or any such directors', officers', employees', agents' or
affiliates') performance or failure to perform any of its obligations under this
Agreement, other than those damages caused by TJX's (or any such subsidiary's or
such persons') willful misconduct or gross negligence. In addition,
notwithstanding anything in this Agreement to the contrary, in no event will the
parties hereto or any of their respective subsidiaries or any of their
respective directors, officers, employees, agents or affiliates be liable to any
person, for lost profits, lost savings, or other indirect, special, incidental
or consequential damages whether such damages are based on tort, contract, or
any other legal theory, and even if such party or any of its subsidiaries or any
of their respective directors, officers, employees, agents or affiliates has
been advised of the possibility of such damages. This section shall survive the
termination of this Agreement.
3.4. Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
3.5. Assignment. Except by operation of law or in connection with the
sale of all or substantially all the assets of a party hereto, this Agreement
shall not be assignable, in whole or in part, directly or indirectly, by either
party hereto without the prior written consent of the
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<PAGE> 6
other, and any attempt to assign any rights or obligations arising under this
Agreement without such consent shall be void. Subject to the foregoing, this
Agreement shall be binding in all events upon any successor to all or
substantially all the assets of a party hereto.
3.6. Further Assurances. Subject to the provisions hereof, each of TJX
and the Company shall make, execute, acknowledge and deliver such other
agreements, documents or instruments and take or cause to be taken such other
actions as may be reasonably required in order to effectuate the purposes of
this Agreement and to consummate the transactions contemplated hereby. Subject
to the provisions hereof, each of TJX and the Company shall, in connection with
entering into this Agreement, performing its obligations hereunder and taking
any and all actions relating hereto, comply with all applicable laws,
regulations, orders and decrees, obtain all required consents and approvals and
make all required filings with any governmental agency, or other regulatory or
administrative agency, commission or similar authority and promptly provide the
other with all such information as the other may reasonably request in order to
be able to comply with the provisions of this sentence.
3.7. Parties in Interest. Nothing in this Agreement expressed or
implied is intended or shall be construed to confer any right or benefit upon
any person or entity other than TJX and the Company and their respective
successors and permitted assigns.
3.8. Waivers, Etc.; Amendments. No failure or delay on the part of TJX
or the Company in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. No amendment, modification or waiver of any provision of
this Agreement nor consent to any departure by TJX or the Company therefrom
shall in any event be effective unless the same shall be in writing, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given.
3.9. Confidentiality. Subject to any contrary requirement of law and
the right of each party to enforce its rights hereunder in any legal action,
each party shall keep strictly confidential and shall cause its employees and
agents to keep strictly confidential any information that it or any of its
agents or employees may acquire pursuant to, or in the course of performing its
obligations under, any provision of this Agreement; provided, however, that such
obligation to maintain confidentiality shall not apply to information that has
been made or becomes public other than as a result of acts by the receiving
party.
3.10. Force Majeure. TJX shall not be liable for failure to perform or
any delay in performing any of its obligations under this Agreement if such
failure or delay due to fire, flood or other natural disasters or acts of God,
war, embargo, riot, strike or the intervention of any government authority or
other causes beyond its reasonable control ("Force Majeure").
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<PAGE> 7
TJX agrees to notify the Company promptly of any Force Majeure and to use
commercially reasonable efforts to resume performance as soon as is reasonably
practicable.
3.11. Entire Agreement. This Agreement contains the entire
understanding of the parties with respect to the provisions of Services from TJX
to the Company.
3.12. Headings. Descriptive headings are for convenience only and shall
not control or affect the meaning or construction of any provision of this
Agreement.
3.13. Counterparts. This Agreement may be executed by the parties
hereto on separate counterparts and in any number of counterparts, and each such
executed counterpart shall be, and shall be deemed to be, an original
instrument.
3.14. Notices. Any notice or other communication in connection with
this Agreement shall be deemed to be delivered if in writing (or in the form of
a telecopy) addressed or transmitted as provided below and if either (i)
actually delivered at said address, (ii) in the case of a letter, three business
days shall have elapsed after the same shall have been deposited in the United
States mails, postage prepaid and registered or certified, or (iii) if in the
form of a telecopy, when the receiving party gives telephonic notice of complete
and legible receipt, to:
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<PAGE> 8
If to the Company, to: Chadwick's of Boston, Ltd.
35 United Drive
West Bridgewater, Massachusetts 02379
Telecopy Number: (508) 583-2071
Attention: President
With a copy to: Constantine Alexander, Esq.
Nutter, McClennen & Fish, LLP
One International Place
Boston, Massachusetts 02110
Telecopier: (617) 973-9748
If to TJX, to: The TJX Companies, Inc.
770 Cochituate Road
Framingham, Massachusetts 01701
Telecopier: (508) 390-2457
with copies to each: President and General Counsel
With a copy to: Arthur G. Siler, Esq.
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Telecopier: (617) 951-7050
3.15. Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic substantive law of The Commonwealth of
Massachusetts without giving effect to any choice or conflict of law provision
or rule that would cause the application of the domestic substantive law of any
other jurisdiction.
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<PAGE> 9
IN WITNESS WHEREOF, TJX and the Company have caused this Services
Agreement to be duly executed by their respective officers, each of whom is
fully authorized, all as of the day and year first above written.
THE TJX COMPANIES, INC.
By
----------------------------
Title:
CHADWICK'S OF BOSTON, LTD.
By
----------------------------
Title:
<PAGE> 1
EXHIBIT 10.10
TAX SHARING AND SEPARATION AGREEMENT
BETWEEN
CHADWICK'S OF BOSTON, LTD.,
THE TJX COMPANIES, INC.
AND
CHADWICK'S, INC.
<PAGE> 2
TAX SHARING AND SEPARATION AGREEMENT
Between
CHADWICK'S OF BOSTON, LTD.,
THE TJX COMPANIES, INC.
and
CHADWICK'S, INC.
<TABLE>
<S> <C> <C>
1. Definitions........................................................................ 2
1.1. "Buyer"................................................................. 2
1.2. "Change of Control"..................................................... 2
1.3. "Closing"............................................................... 4
1.4. "Closing Date".......................................................... 4
1.5. "Code" ................................................................. 4
1.6. "Current Amount"........................................................ 4
1.7. "Election".............................................................. 4
1.8. "Estimated Tax Payment Date"............................................ 4
1.9. "Operating"............................................................. 4
1.10. "Returns"............................................................... 4
1.11. "Tax Authority"......................................................... 4
1.12. "Tax Benefit Base Amount"............................................... 4
1.13. "Tax Benefit Issue"..................................................... 5
1.14. "Tax Benefits".......................................................... 5
1.15. "Taxable Period"........................................................ 6
1.16. "Taxes"................................................................. 6
1.17. "TJX"................................................................... 6
1.18. "Underpayment Rate"..................................................... 6
2. Tax Returns........................................................................ 6
3. Obligation for Payment of Taxes.................................................... 7
4. Election Under Section 338(h)(10).................................................. 8
5. Valuation and Allocation of Consideration.......................................... 8
6. Tax Reporting...................................................................... 9
7. Liability for Assessments or Refunds............................................... 9
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
8. Tax Benefit Sharing Payment to TJX................................................. 10
8.1. Estimated Tax Payments.................................................. 10
8.2. Current Amount Adjustment............................................... 10
8.3. Tax Allocation Assumptions.............................................. 11
8.4. Subsequent Transactions by Buyer........................................ 11
8.5. Benefit Estimates....................................................... 11
8.6. Termination Payment..................................................... 11
9. Tax Issues Arising After the Closing Date.......................................... 12
9.1. Mutual Cooperation...................................................... 12
9.2. Buyer's and Operating's Discretion to Contest, Negotiate and Settle..... 13
9.3. Contesting Disputed Tax Benefits........................................ 13
9.3.1. Control of Proceedings........................................ 13
9.3.2. Adverse Outcome and Repayment................................. 15
9.3.3. Resolution of Computational Disputes.......................... 15
9.3.4. Expenses...................................................... 16
9.4. Attorney's Fees.......................................................... 17
10. Notice of Change of Control........................................................ 17
11. Construction....................................................................... 17
12. Notices............................................................................ 17
13. Governing Law...................................................................... 18
14. Binding Effect; Successors......................................................... 18
15. Severability....................................................................... 18
16. Headings........................................................................... 19
</TABLE>
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<PAGE> 4
TAX SHARING AND SEPARATION AGREEMENT
This TAX SHARING AND SEPARATION AGREEMENT (the "Agreement"), dated
____________, 1996, is by and among Chadwick's of Boston, Ltd. (the "Buyer"), a
Delaware corporation having its principal office at 35 United Drive, West
Bridgewater, MA 02379; The TJX Companies, Inc. ("TJX"), a Delaware corporation
having its principal office at 770 Cochituate Road, Framingham, MA 01701; and
Chadwick's, Inc. ("Operating"), a Massachusetts corporation having its principal
office at 35 United Drive, West Bridgewater, MA 02379.
WITNESSETH:
WHEREAS, Operating and its wholly-owned subsidiary CDM Corp. have been
members of an affiliated group of corporations filing consolidated federal
income tax returns of which TJX is the common parent (the "TJX Group") and
filing certain state and local income tax returns on a consolidated or combined
basis;
WHEREAS, Buyer is acquiring all of the outstanding stock of Operating
from TJX (the "Transfer") pursuant to a Transfer Agreement dated the date hereof
among TJX, Buyer and Operating (the "Transfer Agreement");
WHEREAS, upon consummation of the Closing (defined below), Operating,
its subsidiary and Buyer will become members of an affiliated group of
corporations of which Buyer is the common parent (the "Buyer Group") and
Operating and its subsidiary will cease to be members of the TJX Group; and
<PAGE> 5
WHEREAS, the parties wish to assign responsibility for the preparation
and filing of tax returns; to set forth the methodology for determining their
respective liabilities for Taxes (defined below) and for allocating such
liabilities among themselves for all Taxes that may be owed to or assessed by
the Internal Revenue Service or any other comparable state or local governmental
authority attributable to the periods before, after and including the Closing
Date (defined below); to establish procedures for reimbursing one party for
Taxes allocated to the other under this Agreement; and to provide for certain
tax elections and for the division of any tax benefits which may arise as a
result of such elections;
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall be defined as follows:
1.1. "Buyer" means Chadwick's of Boston, Ltd., a Delaware
corporation, and any successors thereto.
1.2. "Change of Control" means the occurrence of any one or
more of the following events: (i) the acquisition by an individual,
entity or group within the meaning of Section 13(d)(3) and 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 50 percent or more of either (A)
the outstanding shares of common stock of the Buyer (the "Outstanding
Buyer Company Stock") or (B) the combined voting power of the then
outstanding voting securities of the Buyer entitled to vote generally
in the election of directors (the
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<PAGE> 6
"Outstanding Buyer Company Voting Securities"); (ii) the acquisition by
any Person, other than Buyer, of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 50 percent
or more of either (a) the then outstanding shares of common stock of
Operating (the "Outstanding Operating Common Stock") or (b) the
combined voting securities of Operating entitled to vote generally in
the election of directors (the "Outstanding Operating Company Voting
Securities"); (iii) any acquisition, reorganization, merger, share
exchange, consolidation or other transaction involving Buyer or
Operating in which Operating becomes a member of an affiliated group of
corporations filing consolidated federal income tax returns of which
Buyer is not the common parent; (iv) any reorganization (including, but
not limited to, transactions described in Section 368(a) of the Code),
merger, share exchange, or consolidation involving Buyer or any
subsidiary of Buyer (each, a "Buyer Merger"), unless, immediately
following any such Buyer Merger more than 50 percent of the then
Outstanding Buyer Company Stock and 50 percent of the then Outstanding
Buyer Company Voting Securities is then beneficially owned, directly or
indirectly, by Persons who were the beneficial owners, respectively, of
the Outstanding Buyer Company Stock and the Outstanding Buyer Company
Voting Securities immediately prior to such Buyer Merger; or (v) any
reorganization (including, but not limited to, transactions described
in section 368(a) of the Code), merger, share exchange, or
consolidation of Operating (each an "Operating Merger"), unless
immediately following any such Operating Merger, Buyer beneficially
owns,
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<PAGE> 7
directly or indirectly, at least 80 percent of the Outstanding
Operating Company Stock and 80 percent of the Outstanding Operating
Company Voting Securities.
1.3. "Closing" means the closing of the Transfer and the sale
by TJX of more than 50 percent of the stock of Buyer to underwriters
for public sale.
1.4. "Closing Date" means the date on which the Closing
occurs.
1.5. "Code" means the Internal Revenue Code of 1986, as
amended.
1.6. "Current Amount" has the meaning specified in Section 8
hereof.
1.7. "Election" has the meaning specified in Section 4 hereof.
1.8. "Estimated Tax Payment Date" means any of the dates
specified in Section 6655 of the Code for the payment of the Buyer
Group's estimated federal income tax.
1.9. "Operating" means Chadwick's, Inc., a Massachusetts
corporation, and any successors thereto.
1.10. "Returns" means all returns, declarations, reports,
statements and other documents required to be filed in respect of
Taxes, and the term "Return" means any one of the foregoing Returns.
1.11. "Tax Authority" means the Internal Revenue Service or
any other comparable state or local governmental authority.
1.12. "Tax Benefit Base Amount" for any Taxable Period means
(i) any net increase in amortization, depreciation or loss deductions
in such Taxable Period or any decrease in an item of income or gain in
such Taxable Period arising as a result of the increase in basis
occurring as a result of the Election, including any increase in basis
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<PAGE> 8
arising from payments made pursuant to this Agreement, (ii) any portion
of payments made pursuant to this Agreement characterized as interest
or original issue discount for federal income tax purposes, or (iii)
any increase in any net operating or capital loss carryover or
carryback or tax credit which is carried to such Taxable Period and
which arose or arises in a prior or subsequent Taxable Period as a
result of any such net increase in deductions or any such decrease in
income or gain in such prior or subsequent Taxable Period.
1.13. "Tax Benefit Issue" has the meaning specified in Section
9.3.1 hereof.
1.14. "Tax Benefits" means, for any Taxable Period, the
excess, if any, of (a) the total amount of federal, state and local
Taxes, respectively, that would be payable by the Buyer Group in
respect of such Taxable Period if the Tax Benefit Base Amount for such
Taxable Period were not taken into account ("Notional Tax Liability"),
over (b) the total amount of federal, state and local Taxes,
respectively, payable by the Buyer Group in respect of such Taxable
Period after taking into account the Tax Benefit Base Amount for such
Taxable Period. Any Tax Benefits hereunder shall be determined using
consolidated or combined Returns to the extent legally available to
members of the Buyer Group. In any Taxable Period ending subsequent to
a Change of Control, the Tax Benefits shall be calculated without
giving effect to any items of income, expense, loss, deduction or
credit of, or attributable to, businesses other than historic
businesses conducted by the Buyer Group prior to the Change of Control
but only if such calculation would produce a greater Tax Benefit.
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<PAGE> 9
1.15. "Taxable Period" means any taxable year (including any
"short" taxable year) ending after the Closing Date.
1.16. "Taxes" means all U.S. federal, state and local taxes,
including interest and penalties, on, substantially based on, or
substantially measured by or with respect to income, and the term "Tax"
means any one of the foregoing Taxes.
1.17. "TJX" means The TJX Companies, Inc., a Delaware
corporation, and any successors thereto.
1.18. "Underpayment Rate" has the meaning specified in Section
9.3.2 hereof. 2. Tax Returns. TJX agrees to prepare and file or cause
to be prepared and filed timely all appropriate Returns in respect of
Operating and its subsidiary that (i) are required to be filed on or
before Closing; or (ii) are required to be filed after Closing that (A)
include, on a consolidated or combined basis, the operations of
Operating and its subsidiary for any tax period ending on or before
Closing; or (B) are required to be filed by Operating or its subsidiary
on a separate return basis for any tax period ending on or before
Closing. To the extent requested by TJX, Operating and its subsidiary
shall participate in the filing of and shall file any required Returns
with respect to any tax period that ends on or before Closing. The
Buyer shall prepare or cause to be prepared the schedules in respect of
Operating and its subsidiary containing the information available to
Buyer necessary for TJX to prepare any consolidated or combined
returns. The Buyer shall also prepare or cause to be prepared, in
consultation with TJX, and shall file or cause to be filed all other
Returns required of Operating and its subsidiary, or in respect of its
activities, for any Taxable Period ending after Closing that includes
the operations of Operating prior to Closing.
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<PAGE> 10
3. Obligation for Payment of Taxes. TJX agrees to pay timely all Taxes
in respect of Operating and its subsidiary that are (i) due with respect to
Returns that TJX is required to prepare and timely file pursuant to Section 2
hereof (including, but not limited to, Returns prepared by TJX but filed by
Operating or its subsidiary), or (ii) due on or before Closing for which no
Return is required to be filed. In addition, TJX agrees to pay all other Taxes
that may be due after the Closing Date that are allocable to the period prior to
and including the Closing Date, including, without limitation, any Taxes
attributable to the application of Treasury Regulation Sections 1.1502-13 and
1.1502-19. The parties hereto will, to the extent permitted by applicable law,
elect with the relevant Tax Authority to treat for all purposes the Closing Date
as the last day of a taxable period of Operating and its subsidiary, and such
period shall be treated as a "Short Period" for purposes of this Agreement. In
any case where applicable law does not permit Operating to treat the Closing
Date as the last day of a Short Period, then for purposes of this Agreement, the
portion of such Taxes that is attributable to the operations of Operating and
its subsidiary for such Interim Period (as defined below) shall be the Taxes
that would be due with respect to the Interim Period, if such Interim Period
were a Short Period. "Interim Period" means with respect to any Taxes imposed on
Operating or its subsidiary on a periodic basis for which the Closing Date is
not the last day of a Short Period, the period of time beginning on the first
day of the actual taxable period that includes (but does not end on) the Closing
Date and ending on and including the Closing Date. All sales taxes, use taxes,
payroll taxes, withholding taxes, property taxes and all other taxes, fees,
charges or impositions of governmental authorities of any nature not included
within the definition of
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<PAGE> 11
Taxes relating to the business, assets, activities or existence of Buyer,
Operating or its subsidiary shall be borne by Buyer, Operating or its subsidiary
as the case may be.
4. Election Under Section 338(h)(10). The Buyer and TJX shall timely
make or cause to be made a valid joint election under Section 338(h)(10) of the
Code and under any comparable provisions of state law in respect of the Transfer
so as to have the deemed asset sale gain of Operating and its subsidiary
recognized in TJX's consolidated federal income tax return and any relevant
state income or excise tax returns that include the short taxable year of
Operating and its subsidiary immediately prior to the Closing Date
(collectively, the "Election"). TJX shall pay all Taxes attributable to the
making and filing of the Election and shall reimburse the Buyer promptly for any
Taxes for which the Buyer may become liable as a result of the Election.
5. Valuation and Allocation of Consideration. The parties agree that
the "aggregate deemed sale price" and "adjusted grossed-up basis" (as such terms
are defined in the regulations under Section 338 of the Code) with respect to
the Transfer and Election shall be determined by TJX in accordance with such
regulations, such determination to be made, in part, based on the sales price
per share of the common stock of Buyer in the initial public offering of such
stock. The value of the consideration shall be allocated among the assets of
Operating and its subsidiary as indicated on a schedule (the "Tax Allocation
Schedule") to be prepared by TJX in accordance with the regulations under
Section 338 of the Code and attached hereto as Schedule A on or before Closing,
subject to adjustment by TJX to the extent necessary to make such allocations
consistent with the final balance sheet of Operating and its subsidiary as of
the Closing Date and thereafter any post-Closing adjustments. Any inventory
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owned by Operating at the time of the Closing shall be recorded at its book
value which the parties agree represents fair market value for purposes of such
allocation. Operating shall utilize the "first-in, first-out" method of
accounting to determine taxable gain or loss on the sale or other disposition of
inventory, such method to be used for no less than two taxable years following
the Closing. The parties (i) shall be bound by such allocation for purposes of
determining any Taxes and (ii) shall prepare and file all Returns in a manner
consistent with such allocation. In the event that such allocation is disputed
by any Tax Authority, the party receiving notice of such dispute shall promptly
notify and consult with the other party hereto concerning resolution of such
dispute.
6. Tax Reporting. The Buyer and TJX shall file their federal income tax
Returns treating the Transfer as a purchase of the assets of Operating and its
subsidiary pursuant to Sections 338(a) and 338(h)(10) of the Code. The Buyer and
TJX shall file on a similar basis all state and local tax Returns to the extent
that such treatment is consistent with such state and local tax law.
7. Liability for Assessments or Refunds. TJX shall pay any Taxes and be
entitled to receive all refunds of Taxes (i) with respect to all periods ending
on or prior to the Closing Date; and (ii) with respect to any period beginning
before the Closing Date and ending after the Closing Date, but only with respect
to the portion of such period up to and including the Closing Date allocated in
accordance with Section 3 above. TJX shall have sole and exclusive discretion to
contest or not to contest, negotiate and settle proposed adjustments relating to
the inclusion in any Return of the income, deductions, credits, allowances or
other tax items of Operating for any period ending prior to or including the
Closing Date.
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8. Tax Benefit Sharing Payment to TJX.
8.1. Estimated Tax Payments. Operating shall pay (and Buyer
hereby guarantees the obligation of Operating to pay) TJX, on the first
Estimated Tax Payment Date following the Closing Date and thereafter
(subject to Section 8.6) on each subsequent Estimated Tax Payment Date,
an amount equal to the relevant portion of the aggregate estimated Tax
Benefits for the applicable Taxable Period. For this purpose, the
relevant portion of the Estimated Tax Benefits shall be 25 percent (or,
in the case of Taxable Periods of less than one full year, one divided
by the number of Estimated Tax Payment Dates in such Period) of Tax
Benefits as then estimated for the applicable Taxable Period. In the
event of an adjustment in the aggregate estimated Tax Benefits for the
applicable Taxable Period as of any Estimated Tax Payment Date, the
payment due to TJX shall be adjusted such that TJX shall have received
on a cumulative basis the total relevant portions thereof set forth in
the preceding sentence accrued through each Estimated Tax Payment Date.
In the event a tax payment is made by a member of the Buyer Group in
connection with a request or application for an extension of time
within which to file any Tax Return, an appropriate further adjustment
of the previous quarterly payments shall also be paid to TJX. For the
avoidance of doubt, estimated Tax Benefits shall be calculated
utilizing the notional/actual method set forth in Section 1.14 above
and using consistent methods and assumptions between periods and
notional/actual comparisons.
8.2. Current Amount Adjustment. At the time Buyer files its
federal income tax Return for each Taxable Period, to the extent that
the amounts paid to TJX pursuant
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to Section 8.1 hereof for such Taxable Period exceeded the Tax Benefits
for the applicable Taxable Period (the "Current Amount"), such excess
amounts paid shall be refunded by TJX to Operating within thirty (30)
days after Buyer furnishes to TJX a copy of its relevant Returns, as
filed, together with such supporting data as TJX may reasonably
request. To the extent that the amounts paid to TJX pursuant to Section
8.1 hereof for such Taxable Period were less than the Current Amount,
such deficit in amounts paid shall be paid to TJX by Operating within
thirty (30) days following the filing of Buyer's federal Returns (or,
if earlier, the date such Returns were due, taking into account
extensions of time for filing such Returns).
8.3. Tax Allocation Assumptions. When allocation factors are
required for any tax computation, the factors used in Operating's or
the affected member of the Buyer Group's most recently filed Returns in
the relevant jurisdictions shall be used.
8.4. Subsequent Transactions by Buyer. Buyer agrees that it
shall not enter into any transactions a significant purpose of which is
to reduce the amount of the Tax Benefits otherwise payable to TJX under
this Agreement.
8.5. Benefit Estimates. Operating shall prepare and deliver to
TJX no less than 60 days prior to the end of each calendar year, an
estimate of the amount of the Tax Benefits that will be payable to TJX
during the immediately following year and shall revise and update each
such estimate in connection with the quarterly payments required under
Section 8.1.
8.6. Termination Payment. As promptly as practicable following
the commencement of the Taxable Period which includes the fifteenth
anniversary of the
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<PAGE> 15
Closing Date, TJX and Buyer shall negotiate in good faith to attempt to
reach an agreement which requires Operating to pay to TJX an amount
equal to the then present value (based on the then applicable prime
rate prevailing at major money center banks) of the aggregate Tax
Benefits which Operating could reasonably be expected to realize in
future Taxable Periods as a result of the Election, in consideration of
Buyer's and Operating's being relieved thereafter of their future
obligations under this Agreement. In the event the parties are unable
to reach an agreement, this Agreement shall remain in full force and
effect.
9. Tax Issues Arising After the Closing Date.
9.1. Mutual Cooperation. The parties agree to consult in good
faith and to provide each other with such assistance as reasonably may
be requested in writing by any of them in connection with (i) the
preparation and execution of any Return, (ii) the negotiation and
settlement of any audit or other examination of any Return by any Tax
Authority, or (iii) the handling of any judicial or administrative
proceeding relating to any liability for periods of Operating and its
subsidiary prior to and including the Closing Date. The parties'
general obligation to cooperate shall require, but not be limited to
requiring, each party (i) to notify the other of any Tax Authority's
initiating an audit, requesting information or proposing an adjustment,
or any extension of statutes of limitation and of final determinations
of proposed adjustments, (ii) to preserve records, documents and other
information relevant to liabilities for Taxes until the expiration of
the applicable statute of limitations or extensions thereof and to
provide, upon written request, copies of such records and/or reasonable
access thereto,
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<PAGE> 16
(iii) to make available without charge at a location determined by
Buyer or Operating during normal working hours, upon written request,
personnel responsible for preparing, maintaining, or explaining
information, records and documents in connection with matters relating
to Taxes, and (iv) to execute and deliver such powers of attorney,
consents, and other documents as are necessary to carry out the intent
of this Agreement. Prior to disposing of any records, documents and
other information relevant to liabilities for Taxes relating to periods
prior to the Closing Date, Buyer and Operating shall advise TJX in
writing of its intention to dispose of such material and afford TJX the
reasonable opportunity to remove and store such material at TJX's
expense.
9.2. Buyer's and Operating's Discretion to Contest, Negotiate
and Settle. Buyer and Operating shall have sole and exclusive
discretion to contest or not to contest, negotiate and settle proposed
adjustments relating to the inclusion in any Return of the income,
deductions, credits, allowances or other tax items of Operating for any
period after the Closing Date, subject to Sections 7 and 9.3 hereof.
9.3. Contesting Disputed Tax Benefits.
9.3.1. Control of Proceedings. In the event that the
Internal Revenue Service or a state Tax Authority disputes the
existence or amount of the Tax Benefits (a "Tax Benefit
Issue"), Buyer or Operating shall contest the matter on audit,
through Internal Revenue Service or state appellate
proceedings and through judicial proceedings in accordance
with the request of TJX. Representatives of TJX shall be
allowed to participate in such proceedings in so
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far as they relate to the Tax Benefit Issue and such
participation shall be reflected by the grant of appropriate
powers of attorney. Decisions regarding the conduct of a
contest relating solely to a Tax Benefit Issue, including
control over procedural matters that necessarily relate to all
issues being contested (including, without limitation, choice
of forum), shall be made exclusively by TJX and its
representatives, taking into account, in good faith, the views
of Buyer and its representatives; and Buyer and Operating
shall take any action as is necessary to effectuate the
decisions of TJX. Decisions regarding the conduct of a contest
relating solely to tax issues unrelated to the Tax Benefit
Issue shall be made exclusively by Buyer and its
representatives. Decisions regarding the conduct of a contest
that involves both the Tax Benefit Issue and other issues
unrelated to the Tax Benefit Issue shall be made jointly in
good faith by TJX and the Buyer or, if the parties are unable
to agree, by independent accountants selected in accordance
with the procedures set forth in Section 9.3.3. Decisions
regarding the settlement of a contest of the Tax Benefit Issue
shall be made jointly by TJX and Buyer and their respective
representatives, provided, however, that if TJX or Buyer
declines a settlement proposal involving the Tax Benefit Issue
that the other wishes to accept, the contest will continue and
the declining party will (i) bear all further contest costs
relating to the Tax Benefit Issue and (ii) indemnify the party
wishing to accept the settlement against any outcome relating
to the Tax Benefit Issue more adverse than that of the
proposed settlement.
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<PAGE> 18
9.3.2. Adverse Outcome and Repayment. If, as the
result of a contest or the filing of an amended Return, Tax
Benefits are less than those taken into account in computing
any payments made under Section 8 hereof, such payments will
be recomputed on the basis of such revised Tax Benefits, and
any excess payments shall be refunded by TJX to Operating
promptly following such recomputation, together with any
related penalties imposed by a Tax Authority. If, as the
result of a contest or the filing of an amended Return, Tax
Benefits are greater than those taken into account in
computing any payments made under Section 8 hereof, such
payment will be recomputed on the basis of such revised Tax
Benefits; and any further payment due to TJX shall be made
promptly following such recomputation. Interest shall be
payable to the party entitled to payment under this Section
9.3.2 at the rates prescribed for underpayments in Section
6621(a) of the Code (the "Underpayment Rate") with respect to
Tax Benefits or at the corresponding state underpayment rate
in connection with revisions relating to state tax contests.
9.3.3. Resolution of Computational Disputes. If the
parties hereto are unable to agree on the amount of Tax
Benefits or any amount payable with respect to such Tax
Benefits as determined under Sections 1.12, 1.14, 8.1, 8.2,
8.3 and 9.3.2 hereof (the "Disputed Amount"), the
determination of such Disputed Amount shall be made by an
independent firm of certified public accountants jointly
selected by TJX and Buyer. If TJX and Buyer cannot agree on
the selection of an independent firm of certified public
accountants, such
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<PAGE> 19
firm will be jointly selected by the firms of certified public
accountants that certify (or selected by the firm of certified
public accountants that certifies) the financial statements of
TJX and Buyer and that is other than the selecting firm(s).
Such accountants shall be given access by TJX, Buyer and their
respective subsidiaries to all information necessary to
determine the Disputed Amount, subject to the agreement of
such accountants that such information shall be kept
confidential and shall not be released without the written
consent of TJX or Buyer, as appropriate, except as compelled
by legal process. Any amount otherwise due under this
Agreement that is a Disputed Amount shall be paid, together
with interest at the Underpayment Rate from the date on which
such payment was originally due, within 10 days of the
determination of such Disputed Amount. Judgment upon the
Disputed Amount as determined by the accountants may be
entered in any court having jurisdiction over the matter.
9.3.4. Expenses. In the case of any good faith
controversy between the parties relating to the Tax Benefits,
the reasonable fees and expenses paid to third-party service
providers in connection with the resolution of the Disputed
Amount incurred by the party predominantly prevailing in such
controversy, as determined by the accountants, shall be paid
or reimbursed by the other party. Each party shall bear its
own fees and expenses incurred in the resolution of any
dispute with any Tax Authority regarding a Tax Benefit Issue,
except that TJX shall reimburse Buyer and Operating for
reasonable fees and expenses incurred at the request of TJX or
with the written consent of TJX.
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<PAGE> 20
9.4. Attorney's Fees. Upon a breach of this Agreement by any
member of the Buyer Group, in addition to other penalties, damages or
liabilities that may be due to TJX, Buyer and Operating shall be
responsible for and shall pay to TJX an amount equal to reasonable
attorney's fees actually incurred by TJX in its efforts to enforce its
rights under this Agreement. Upon a breach of this Agreement by TJX (or
any affiliate), in addition to other penalties, damages or liabilities
that may be due to Buyer and Operating, TJX shall be responsible for
and shall pay to Buyer and Operating an amount equal to reasonable
attorneys' fees actually incurred by Buyer and Operating in their
efforts to enforce their rights under this Agreement.
10. Notice of Change of Control. Buyer shall notify TJX in writing of
any Change of Control within 30 days of the occurrence of such Change of Control
and promptly shall provide TJX with all material information in Buyer's
possession relating to the effect of such Change of Control on this Agreement as
TJX may reasonably request.
11. Construction. Each of the parties hereto agrees that (i) the normal
rule of construction to the effect that any ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation or
construction of this Agreement, and (ii) except as specifically provided in this
Agreement, no usage of trade, course of dealing, course of performance or
enforcement or surrounding circumstances shall be used in interpreting or
construing this Agreement.
12. Notices. Any notice required under any provision of this Agreement
shall be made in the manner provided in the section entitled "Notices" in the
Transfer Agreement.
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<PAGE> 21
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the Commonwealth of Massachusetts applicable to
contracts made and to be performed therein, without effect to its choice of law.
14. Binding Effect; Successors. This Agreement shall be binding upon
and inure to the benefit of any successor, by merger, acquisition of assets or
otherwise, to any of the parties hereto (including, but not limited to, any
successor of TJX, Operating or Buyer succeeding to the tax attributes of TJX,
Operating or Buyer under Section 381 of the Code), to the same extent as if such
successor had been an original party to the Agreement. In addition, in the event
of any acquisition of the assets of Operating in which gain or loss is not
recognized, in whole or in part, for federal income tax purposes, Operating and
Buyer shall ensure that any purchaser of such assets shall assume the
obligations set forth in this Agreement. Any tax sharing agreement or similar
arrangement between TJX and Operating or its subsidiary which predates the
Closing Date shall be terminated on the Closing Date and shall have no force or
effect subsequent to the Closing Date.
15. Severability. In the event that any term or provision of this
Agreement shall for any reason be held invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other term or provision; and this Agreement shall be interpreted and construed
as if such term or provision, to the extent the same shall have been held to be
invalid, illegal or unenforceable, had never been contained herein.
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<PAGE> 22
16. Headings. The headings in the sections of this Agreement are
inserted for convenience of reference only and shall not constitute a part
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
THE TJX COMPANIES, INC.
By:
-----------------------------
Title: Executive Vice President
CHADWICK'S OF BOSTON, LTD.
By:
-----------------------------
Title:
CHADWICK'S INC.
By:
-----------------------------
Title:
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<PAGE> 1
EXHIBIT 10.11
REGISTRATION RIGHTS AGREEMENT
Effective , 1996, Chadwick's of Boston, Ltd., a Delaware
corporation ("Chadwick's), and The TJX Companies, Inc., a Delaware corporation
("TJX"), hereby act and agree as follows:
1. Definitions. As used herein:
(a) The terms "register", "registered" and "registration" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the 1933 Act and the automatic effectiveness
or the declaration or ordering of effectiveness of such registration statement
or document.
(b) The term "Registrable Securities" means the ___________
shares of Common Stock of Chadwick's beneficially owned by TJX as of the date
hereof and any additional shares of Common Stock of Chadwick's issued in respect
thereof as a result of any stock split, stock dividend, combination or
recapitalization but shall not include any shares of capital stock which (i)
have been effectively registered under the 1933 Act and disposed of in
accordance with a registration statement covering such securities, (ii) have
been distributed to the public pursuant to Rule 144 or (iii) have been
transferred or disposed of in a transaction as to which the registration rights
granted hereunder have not or may not be transferred.
(c) The term "Holder" means TJX and any transferee of Registrable
Securities from a Holder provided such transfer complies with Section 9 of this
Agreement.
(d) The term "Initiating Holders" shall have the meaning given in
Section 2(b).
(e) The terms "Form S-1", "Form S-2", "Form S-3", "Form S-4 and
"Form S-8" mean such respective forms under the 1933 Act as in effect on the
date hereof or any successor registration forms thereto under the 1933 Act
subsequently adopted by the SEC.
(f) The term "1933 Act" shall mean the Securities Act of 1933, as
amended.
(g) The term "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
(h) The term "SEC" shall mean the Securities and Exchange
Commission.
(i) The term "Notice" shall have the meaning given in Section
2(a).
(j) The term "Violation" shall have the meaning given in Section
7(a).
<PAGE> 2
(k) The term "Non-Qualifying Registration" shall mean a
registration on Form S-1, Form S-2 or Form S-3 relating solely to the offer and
sale by Chadwick's of non-convertible investment grade securities or investment
grade asset-backed securities or securities issuable pursuant to a dividend or
interest reinvestment plan; a registration on Form S-8; or a registration on
Form S-4.
(l) The term "Rule 144" shall mean Rule 144 promulgated by the
SEC under the 1933 Act or any subsequent rule pertaining to the disposition of
securities without registration.
(m) The term "Underwriters' Maximum Number" shall have the
meanings given in Sections 2(b) and 3(b).
2. REQUEST FOR REGISTRATION. (a) If Chadwick's shall receive at any
time after six months from the date hereof a written request from the Holders of
a majority of the Registrable Securities then outstanding that Chadwick's file a
registration statement under the 1933 Act covering the registration of at least
ten percent (10%) of the Registrable Securities then outstanding (or a lesser
percent if the anticipated aggregate offering price, including underwriting
discounts and commissions, would exceed $25,000,000), then Chadwick's shall,
within ten (10) days of the receipt thereof, give written notice ("Notice") of
such request to all Holders and shall, subject to the limitations of this
Section 2, effect the registration of all such Registrable Securities, and all
other Registrable Securities the registration of which has been requested by
Holders in writing within twenty (20) days of the Notice, in accordance with
Section 4.
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise Chadwick's as
a part of their request made pursuant to subsection (a) and Chadwick's shall
include such information in the Notice. In such event, the right of any Holder
to include his Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent provided
herein. All Holders proposing to distribute their securities through such
underwriting shall (together with Chadwick's) enter into an underwriting
agreement in customary form with the underwriter or underwriters selected for
such underwriting by a majority in interest of the Initiating Holders and
reasonably satisfactory to Chadwick's. If the managing underwriters shall give
written advice to Chadwick's and the Holders of Registrable Securities to be
included in such registration that, in the reasonable opinion of such managing
underwriters, marketing factors (including, without limitation, price to public
and underwriting discounts and commissions) require a limitation on the total
number of securities to be underwritten (in this subsection called the
"Underwriters' Maximum Number"), then: (i) Chadwick's will be obligated and
required to include in such registration that
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<PAGE> 3
number of Registrable Securities requested by the Holders thereof to be included
in such registration which does not exceed the Underwriters' Maximum Number, and
such number of Registrable Securities shall be allocated pro rata among the
Holders of such Registrable Securities on the basis of the number of Registrable
Securities requested to be included therein by each such Holder and (ii) if the
Underwriters' Maximum Number exceeds the number of Registrable Securities
requested by the Holders thereof to be included in such registration, then
Chadwick's will be entitled to include in such registration that number of
securities which shall have been requested by Chadwick's to be included in such
registration for the account of Chadwick's and which shall not be greater than
such excess. During the term of this Agreement, Chadwick's shall not grant to
any holder of its securities the right to participate in any registration
effected pursuant to this Section 2(b) without the consent of the Holders of a
majority of the Registrable Securities then outstanding.
(c) Notwithstanding the foregoing provisions of this Section 2,
Chadwick's shall not be obligated to file a registration statement to effect any
registration, qualification or compliance pursuant to this Section 2 at any time
within sixty (60) days prior to Chadwick's good faith estimated date of filing
of any registration statement pertaining to securities of Chadwick's (other than
a Non- Qualifying Registration) and pursuant to which a majority of the
securities covered thereby are to be sold for the account of Chadwick's.
Chadwick's shall use its best efforts in good faith to cause any such
registration statement to be filed and to become effective as expeditiously as
shall be reasonably possible. Chadwick's may not exercise its rights under this
subsection (c) more than once in any period of twelve consecutive months or if
it shall have exercised its rights pursuant to subsection (d) following within
the prior twelve months.
(d) Notwithstanding the foregoing provisions of this Section 2,
if Chadwick's shall furnish to Holders a certificate signed by the President of
Chadwick's stating that in Chadwick's reasonable judgment and good faith the
filing of a registration statement requested pursuant to subsection (a) and the
distribution of Registrable Securities pursuant thereto would interfere with any
announced or imminent material financing, acquisition, disposition, corporate
reorganization or other material transaction involving Chadwick's, Chadwick's
shall have the right to defer such filing for a period of not more than 60 days
after receipt of the request of the Initiating Holders. Chadwick's may not
exercise its rights under this subsection (d) more than once in any period of
twelve consecutive months or if it shall have exercised its rights pursuant to
preceding subsection (c) within the prior twelve months.
(e) Chadwick's shall be obligated to effect only two
registrations pursuant to this Section 2. In the event a registration is
postponed pursuant to subsections (c) or (d), the Initial Holders shall have the
right to withdraw their request for registration by giving written notice to
Chadwick's within 20 days of receipt of the
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<PAGE> 4
notice of postponement, and in the event of such withdrawal, such request shall
not be counted for purposes of determining the number of registrations to which
the Holders are entitled pursuant to this Section 2. Similarly, in the event a
registration is duly requested pursuant to this Section 2, if at the time of
such request the Initial Holders request in writing that Chadwick's and its
officers and directors enter into a "market stand-off" agreement to the same
general effect as described in Section 10 and within 15 days after receipt of
such request Chadwick's does not advise the Initial Holders in writing that
Chadwick's and its officers are prepared to enter into such an agreement, the
Initial Holders shall have the right to withdraw their request for registration
by giving written notice to Chadwick's within 20 days thereafter, and in the
event of such withdrawal, such request shall not be counted for purposes of
determining the number of registrations to which the Holders are entitled
pursuant to this Section 2.
3. PIGGYBACK REGISTRATION RIGHTS. (a) If Chadwick's proposes to
register any of its securities under the 1933 Act at any time after six months
from the date hereof (other than a Non-Qualifying Registration and excluding a
registration requested pursuant to Section 2) in connection with a public
offering of such securities solely for cash, Chadwick's shall, at each such
time, promptly give written notice of such registration to each Holder. Upon the
written request of any Holder given within 30 days after mailing of such notice
by Chadwick's, Chadwick's shall, subject to the provisions of this Section 3,
use its best efforts to include in such registration all of the Registrable
Securities that each such Holder has requested to be registered. Chadwick's
shall be under no obligation to complete any offering of its securities it
proposes to make under this Section 3 and shall incur no liability to any Holder
for its failure to do so. Holders shall be permitted to withdraw all or any part
of the Registrable Securities of such Holders from any registration under this
Section 3 at any time prior to the effective date of such registration.
(b) In connection with any registration covered by Section 3
involving any underwriting of securities, Chadwick's shall not be required to
include any Holder's Registrable Securities in such registration unless such
Holder accepts the terms of the underwriting as agreed upon between Chadwick's
(or other persons who have the right to agree upon the underwriting terms
relating to such offering) and the underwriters selected by Chadwick's (or other
persons who have the right to select such underwriter). If the managing
underwriters shall give written advice to Chadwick's, the other persons
participating in the registration underwriting and the Holders of Registrable
Securities to be included in such registration that, in the reasonable opinion
of such managing underwriters, marketing factors require a limitation on the
total number of securities to be underwritten (in this subsection called the
"Underwriters' Maximum Number"), then: (i) Chadwick's shall include in such
registration the securities proposed to be offered and sold for the account of
Chadwick's up to the Underwriters' Maximum Number; (ii) if the Underwriters'
Maximum Number exceeds the number of securities proposed to be offered and sold
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<PAGE> 5
for the account of Chadwick's in such registration, then Holders of Registrable
Securities will be entitled to include in such registration that number of
Registrable Securities which shall have been requested by such Holders to be
included in such registration which shall not be greater than such excess (and
if greater, the number of Registrable Securities which may be included in such
registration shall be allocated pro rata among the Holders of such Registrable
Securities on the basis of the number of Registrable Securities requested to be
included therein by each such Holder); and (iii) if the Underwriters' Maximum
Number exceeds the sum of the number of securities which Chadwick's proposes to
offer and sell for its own account and the Holders of Registrable Securities
propose to offer and sell in such registration, then Chadwick's may include in
such registration that number of other securities which persons (other than the
Holders as such) shall have requested be included in such registration and which
shall not be greater than such excess.
(c) No Holder shall be entitled to exercise any right provided
for in this Section 3 after the first to occur of five (5) years from the date
hereof and such date on which the Registrable Securities represent less than
five percent (5%) of the issued and outstanding shares of Chadwick's Common
Stock.
4. REGISTRATION MECHANICS. (a) Whenever required under this
Agreement to effect the registration of any Registrable Securities, Chadwick's
shall, as expeditiously as reasonably possible:
(i) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best
efforts to cause such registration statement to become effective,
and, upon the request of the Holders of a majority of the
Registrable Securities registered thereunder, keep such
registration statement effective for up to one hundred twenty
(120) days. If Chadwick's elects to file such registration
statement on other than Form S-1, such registration statement
shall contain substantially the same information as would be
required to be included in a registration statement on Form S-1
except to the extent that the managing underwriters, if the shares
covered by such registration statement are to be offered by means
of an underwriting, advise that marketing factors (including,
without limitation, price to public and underwriting discounts and
commissions) do not require the inclusion of such information.
(ii) Furnish to counsel selected by the Holders of a
majority of the Registrable Securities covered by such
registration statement copies of all such documents proposal to be
filed at a reasonable time prior to the filing of such
registration statement, the prospectus used in connection with
such registration statement, or any amendment or supplement
thereto.
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<PAGE> 6
(iii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used
in connection with such registration statement as may be necessary
to comply with the provisions of the 1933 Act with respect to the
disposition of all securities covered by such registration
statement.
(iv) Furnish to the Holders whose Registrable Securities
are covered by such registration such numbers of copies of the
prospectus, conformed copies of the registration statement
(including amendments or supplements thereto and, in each case,
all exhibits and all documents incorporated by reference), and
such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by
them.
(v) Use its best efforts to register and qualify the
securities covered by such registration statement under such blue
sky or other state securities laws as shall be reasonably
requested by the Holders whose Registrable Securities are covered
by such registration statement, provided that Chadwick's shall not
be required in connection therewith or as a condition thereto to
qualify to do business or subject itself to taxation or to file a
general consent to service of process in any such states.
(vi) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing
underwriters of such offering.
(vii) Notify each Holder of Registrable Securities covered
by such registration statement any time when a prospectus relating
thereto is required to be delivered under the 1933 Act upon
discovery that, or upon the happening of any event as a result of
which, the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the
light of the circumstances then existing.
(ix) Use its best efforts to cooperate with the Holders
whose Registrable Securities are covered by such registration
statement in the disposition of the Common Stock covered by such
registration statement, including without limitation in the case
of an underwritten offering participating under the direction of
the managing underwriter in a "road show" scheduled by such
managing underwriter in such locations and of such duration as in
the judgment of such managing underwriter are appropriate for such
underwritten offering.
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<PAGE> 7
(x) Furnish to the Holders whose Registrable Securities
are covered by such registration statement and each underwriter,
if any, a signed counterpart, addressed to such underwriter, of an
appropriate opinion of counsel for Chadwick's covering
substantially the same matters with respect to such registration
statement (and the prospectus included therein) as are customarily
covered in opinions of issuer's counsel delivered to underwriters
in underwritten public offerings of securities.
(xi) Give the Holders whose Registrable Securities are
covered by such registration statement and each underwriter, if
any, and their respective counsel, the opportunity to participate
in the preparation of such registration statement, each prospectus
included therein or filed with the SEC, and each amendment thereof
or supplement thereto and give each of them such access to its
books and records and such opportunities to discuss the business
of Chadwick's with its officers and the independent public
accountants who have certified its financial statements as shall
be necessary, in the opinion of the Holders whose Registrable
Securities are covered by such registration statement and such
underwriters of their respective counsel, to conduct a reasonable
investigation within the meaning of the 1933 Act.
(xii) Make available to its securities holders, as soon as
reasonably practicable, an earnings statement covering a period of
at least twelve months, but not more than eighteen months,
beginning with the first day of the first fiscal quarter after the
effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(1) of the
1933 Act and Rule 158 thereunder.
(xiii) Otherwise use its best efforts to comply with the
1933 Act, the 1934 Act, and all applicable rules and regulations
of the SEC.
(b) In connection with any offering of Registrable Securities to be
registered pursuant to Section 2 or 3, each Holder of Registrable Securities
included or to be included in such registration shall:
(i) Enter into and perform its obligations under any
underwriting agreement to which it is a party.
(ii) Upon receipt of any notice from Chadwick's of the
happening of any event of the kind described in subdivision (vii)
of this subsection (a) above, forthwith discontinue its
disposition of Registrable Securities pursuant to the registration
statement relating thereto until its receipt of the copies of the
supplemented or amended prospectus and, if so directed by
Chadwick's, deliver to Chadwick's all copies then in its
possession of
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<PAGE> 8
the prospectus relating to such Registrable Securities current at
the time of receipt of such notice.
(iii) At the end of any period during which Chadwick's is
obligated to keep any registration statement current and
effective, discontinue sales of shares pursuant to such
registration statement upon receipt of notice from Chadwick's of
its intention to remove from registration the shares covered by
such registration statement which remain unsold, and notify
Chadwick's of the number of shares registered which remain unsold
promptly after receipt of such notice from Chadwick's.
5. COOPERATION. (a) It shall be a condition precedent to the
obligations of Chadwick's to take any action pursuant to this Agreement with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to Chadwick's all such information and materials and shall take
all such action as may be reasonably required in order to permit Chadwick's to
comply with the applicable requests of the 1933 Act and the SEC and to obtain
any desired acceleration of the effective date of such registration statement.
The failure of any prospective selling Holder of Registrable Securities to
furnish any information or materials or to take any action in accordance with
this subsection (a) shall not affect the obligations of Chadwick's under this
Agreement to any remaining selling Holders who furnish such information and
materials and who take such action unless, in the reasonable opinion of counsel
to Chadwick's or the underwriters, such failure impairs or may impair the
viability of the offering or the legality of the registration statement or the
underlying offering.
(b) Chadwick's shall have no obligation with respect to any
registration requested pursuant to Section 2 if, due to the operation of
subsection (a) above, the number of shares or the anticipated aggregate offering
price of the Registrable Securities to be included in the registration does not
equal or exceed the number of shares or the anticipated aggregate offering price
required to originally trigger Chadwick's obligation to initiate such
registration as specified in Section 2.
6. EXPENSES. All expenses incurred in connection with each of the
registrations, filings or qualifications pursuant hereto, including, without
limitation, all registration, filing, printing and accounting fees, all fees and
expenses of complying with state securities or blue sky laws, and fees and
disbursements of counsel of Chadwick's, shall be borne by Chadwick's, except
that underwriting discounts and commissions relating to the Registrable
Securities and the fees and disbursements of counsel and accountants for the
selling Holders shall be borne and paid by the selling Holders of such
Registrable Securities and provided that Chadwick's shall not be required to pay
for any expenses of any registration proceedings begun pursuant to Section 2 if
the registration request is subsequently withdrawn at the request of a
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<PAGE> 9
majority of the Registrable Securities to be registered (in which case all
participating Holders shall bear such expenses).
7. INDEMNIFICATION.
In the event any Registrable Securities are included in a registration
statement under this Agreement:
(a) To the fullest extent permitted by law, Chadwick's will and
hereby does indemnify and hold harmless each selling Holder, the officers,
directors, shareholders, employees and partners of such Holder and each person,
if any, who controls such Holder within the meaning of the 1933 Act or the 1934
Act against any losses, claims, damages or liabilities (joint or several)
(including legal fees and other expenses) to which they may become subject under
the 1933 Act, the 1934 Act or other federal or state law or common law, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations (each a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading
(including in any prospectus or preliminary prospectus included therein), or
(ii) any other violation by Chadwick's of the 1933 Act or any other securities
law or any rule or regulation promulgated thereunder. Chadwick's will reimburse
each such selling Holder, officer, director, partner, agent, employee,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action. The indemnity agreement contained in this
Section 7(a) shall not apply to amounts paid in settlement of any loss, claim,
damage, liability or action if such settlement is effected without the consent
of Chadwick's, nor shall Chadwick's be liable to a Holder in any such case for
any such loss, claim, damage, liability or action to the extent that it arises
out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for inclusion in such
registration by or on behalf of such Holder or controlling person.
(b) To the fullest extent permitted by law, each selling Holder
will and hereby does indemnify and hold harmless Chadwick's, each of its
directors, each of its officers who sign the registration statement, each
person, if any, who controls Chadwick's within the meaning of the 1933 Act, each
agent and any other selling Holder selling securities in such registration
statement and any of its directors, officers or partners or any person who
controls such selling Holder, against any losses, claims, damages or liabilities
(joint or several) to which they may become subject under the 1933 Act, the 1934
Act or other federal or state or common law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any Violation, in each case to the extent (and only to the extent) that
such
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<PAGE> 10
Violation occurs in reliance upon and in conformity with written information
furnished by or on behalf of such Holder expressly for inclusion in such
registration statement; and each such selling Holder will reimburse any legal or
other expenses reasonably incurred by (i) Chadwick's or any such director,
officer, agent, controlling person of Chadwick's, or (ii) other selling Holder,
officer, director, partner or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action.
The indemnity agreement contained in this Section 7(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the selling Holder nor, in
the case of a sale directly by Chadwick's of its securities (including a sale of
such securities through any underwriter retained by Chadwick's to engage in a
distribution solely on behalf of Chadwick's) shall the selling Holder be liable
to Chadwick's in any case in which such untrue statement or alleged untrue
statement or omission or alleged omission was contained in a preliminary
prospectus and corrected in a final or amended prospectus, and Chadwick's failed
to deliver a copy of the final or amended prospectus at or prior to the
confirmation of the sale of the securities to the person asserting any such
loss, claim, damage or liability in any case where such delivery is required by
the 1993 Act. Notwithstanding the foregoing, no selling Holder shall be required
to pay pursuant hereto an amount in excess of the amount by which the total
price at which the securities of such Holder were offered to the public (less
underwriters' discounts and commissions) exceeds the amount of any damages which
such Holder has otherwise been required to pay pursuant to this paragraph (b).
(c) Each indemnified party or parties shall give reasonably
prompt notice to each indemnifying party or parties of any action or proceeding
commenced against it in respect of which indemnity may be sought hereunder, but
failure so to notify an indemnifying party or parties shall not relieve it or
them from any liability which it or they may have under this Section 7, except
to the extent that the indemnifying party is materially prejudiced by such
failure to give notice. If the indemnifying party or parties so elects within a
reasonable time after receipt of such notice, the indemnifying party or parties
may assume the defense of such action or proceeding at such indemnifying party's
or parties' expense with counsel chosen by the indemnifying party or parties and
approved by the indemnified party defendant in such action or proceeding, which
approval shall not be unreasonably withheld; provided, however, that if such
indemnified party or parties determine in good faith that a conflict of interest
exists and that therefore it is advisable for such indemnified party or parties
to be represented by separate counsel or that, upon advice of counsel, there may
be legal defenses available to it or them which are different from or in
addition to those available to the indemnifying party, then the indemnifying
party or parties shall not be entitled to assume such defense and the
indemnified party or parties shall be entitled to separate counsel at the
indemnifying party's or parties' expense. If an indemnifying party or parties is
not so entitled to assume the defense of such action or does not assume such
defense, after having received the notice
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<PAGE> 11
referred to in the first sentence of this subsection, the indemnifying party or
parties will pay the reasonable fees and expenses of counsel for the indemnified
party or parties. Notwithstanding the foregoing, the indemnifying party shall
not be obligated to pay the reasonable fees and expenses of more than one
counsel for the indemnified parties with respect to any claim, unless in the
reasonable judgment of counsel to any indemnified party, expressed in a writing
delivered to the indemnifying party, a conflict of interest may exist between
such indemnified party and any other indemnified party with respect to such
claim, in which event the indemnifying party shall be obligated to pay the
reasonable fees and expenses of such additional counsel or counsels (which shall
be limited to one counsel per indemnified party). If an indemnifying party is
entitled to assume, and assumes, the defense of such action or proceeding in
accordance with this paragraph, such indemnifying party or parties shall not,
except as otherwise provided in this subsection (c), be liable for any fees and
expenses of counsel for the indemnified parties incurred thereafter in
connection with such action or proceeding.
(d) If the indemnification provided for in this Section 7 is
unavailable to a party that would have been an indemnified party under this
Section 7 in respect of any claims referred to herein, then each party that
would have been an indemnifying party hereunder shall, in lieu of indemnifying
such indemnified party, contribute to the amount paid or payable by such
indemnified party as a result of such claims in such proportion as is
appropriate to reflect the relative fault of the indemnifying party or parties
on the one hand and such indemnified party on the other in connection with the
action, statement or omission which resulted in such claims, as well as any
other relevant equitable considerations. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged omission to
state a material fact relates to information supplied by the indemnifying party
or such indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
Chadwick's and each selling Holder of registered securities agrees that it would
not be just and equitable if contribution pursuant to this subsection were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to above in this
subsection. The amount paid or payable by an indemnified party as a result of
the claims referred to above in this subsection shall include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigation or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
fraudulent misrepresentation within the meaning of such Section 11(f).
(e) Without the prior written consent of the indemnified party,
no indemnifying party shall consent to entry or judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant
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<PAGE> 12
or plaintiff to such indemnified party of a release of all liability in respect
of such claim.
8. AVAILABILITY OF RULE 144. With a view to making available to the
Holders the benefits of Rule 144 promulgated under the 1933 act and any other
rule or regulation of the SEC that may at any time permit a Holder to sell
securities of Chadwick's to the public without registration, Chadwick's agrees
to use its best efforts:
(a) to make and keep public information available, as those terms
are understood and defined in Rule 144, at all times after ninety (90) days from
the date hereof;
(b) to file with the SEC in a timely manner all reports and other
documents required of Chadwick's under the 1933 Act and (at any time after it
has become subject to the reporting requirements thereof) the 1934 Act; and
(c) to furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by
Chadwick's as to its compliance with the reporting requirements of Rule 144 (at
any time after ninety days from the date hereof), the 1933 Act and the 1934 Act
(at any time after it has become subject to such reporting requirements) or as
to its qualification as a registrant whose securities may be resold pursuant to
Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent
annual or quarterly report of Chadwick's and such other reports and documents so
filed by Chadwick's, and (iii) such other information as may be reasonably
requested in availing the Holder of any rule or regulation of the SEC which
permits the selling of any such securities without registration or pursuant to
such form.
9. TRANSFER OF REGISTRATION RIGHTS. The registration rights of a
Holder under this Agreement may be transferred to any transferee who acquires
500,000 shares or more of Common Stock of Chadwick's (adjusted for any stock
splits, stock dividends, contributions or receipt obligations), provided that
(i) Chadwick's is given written notice by the transferor at the time of such
transfer stating the name and address of the transferee and identifying the
securities with respect to which the rights under this Agreement are being
assigned and (ii) the transferee agrees in writing to acquire and hold such
securities subject to the provisions of this Agreement.
10. "MARKET STAND-OFF" AGREEMENT. Each holder of Registrable
Securities hereby agrees, effective after January 31, 1998 in the case of TJX
only, that, during the period of duration (not to extend more than 7 days prior
to, and beyond 90 days after, the effectiveness of the registration statement
described below) specified by a managing underwriter of Common Stock or other
securities of Chadwick's, following the filing date of a registration statement
of Chadwick's filed under the 1933 Act, it
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<PAGE> 13
shall not, to the extent requested by such underwriter, sell or otherwise
transfer or dispose of (other than to donees who agree to be similarly bound)
any Common Stock of Chadwick's held by it at any time during such period except
Common Stock included in such registration, provided that all officers and
directors of Chadwick's and all other persons exercising registration rights
with respect to such registration (whether or not pursuant to this Agreement)
enter into similar agreements.
11. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of Chadwick's and the holders of a majority of the Registrable
Securities then outstanding. Any amendment or waiver effected in accordance with
this Section shall be binding upon each holder of Registrable Securities then
outstanding, each future holder of all such securities and Chadwick's.
12. MISCELLANEOUS. (a) All notices, requests, demands and other
communications which are required to be or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given when delivered
in person or upon receipt when transmitted by telecopy or telex or after
dispatch by certified or registered first class mail, postage prepaid, return
receipt requested, or Federal Express, to the party to whom the same is so given
or made:
If to Chadwick's, to: Chadwick's of Boston, Ltd.
35 United Drive
West Bridgewater, MA 02379
Attn: President
With a copy to: Constantine Alexander, Esq.
Nutter, McClennen & Fish, LLP
One International Place
Boston, MA 02110-2699
Telecopy: (617) 973-9748
If to TJX, to: The TJX Companies, Inc.
770 Cochituate Road
Framingham, MA 01701
Attn:
With a copy to: Arthur G. Siler, Esq.
Ropes & Gray
One International Place
Boston, MA 02110
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<PAGE> 14
or to such other person at such other place as either shall designate to the
other in writing.
(b) This Agreement constitutes the entire agreement between the
parties hereto and supersedes all prior agreements, representations, warranties,
statements, promises and understandings, whether written or oral, with respect
to the subject matter thereof, and cannot be changed or terminated orally. No
party hereto shall be bound by or charged with any written or oral agreements,
representations, warranties, statements, promises, or understandings not
specifically set forth in this Agreement.
(c) The section and other headings contained in this Agreement
are for reference purposes only and shall not be deemed to be part of this
Agreement or to affect the meaning or interpretation of this Agreement.
(d) No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the result
of any controversy that might arise with respect to the interpretation or
implementation of this Agreement.
(e) All questions concerning the construction, validity and
interpretation of this Agreement and the schedule hereto will be governed by the
laws of the Commonwealth of Massachusetts without regard to conflicts of laws
principles.
(f) If any term or provision of this Agreement shall to any
extent be invalid or unenforceable, the remainder of this Agreement shall not be
affected thereby, and each term and provision of this Agreement shall be valid
and enforceable to the fullest extent permitted by law.
(g) This Agreement may be executed in any number of counterparts,
each of which, when executed, shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
(h) This Agreement shall be binding on and shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed and signed as of the day and year first
above written.
CHADWICK'S OF BOSTON, LTD.
By_______________________________
Its
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<PAGE> 15
THE TJX COMPANIES, INC.
By________________________________
Its
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<PAGE> 1
EXHIBIT 10.13
ASSIGNMENT AND LICENSE OF TRADEMARKS
THIS ASSIGNMENT AND LICENSE OF TRADEMARKS is made as of this 2nd day of
August, 1997, by and between The TJX Companies, Inc., a Delaware corporation
(the "Assignor") and Chadwick's, Inc., a Massachusetts corporation (the
"Assignee").
WHEREAS, the Assignor is the owner of all right, title and interest in
and to the trademark applications and registrations set forth on Exhibit A
hereto, subject to the non-exclusive license of Hit or Miss Inc. pursuant to the
HOM Trademark License Agreement (defined below), and to the unregistered
trademark David Hollis (the "Trademarks"); and
WHEREAS, the Assignee desires to obtain all of the Assignor's right,
title and interest in, to and under such Trademarks, including the goodwill of
the Assignor's business symbolized by such Trademarks;
WHEREAS, the Assignor and the Subsidiaries may have remaining inventory
of products marked with or sold under the Trademarks;
WHEREAS, pursuant to this Assignment and License, the Assignee shall
grant, and the Assignor and Subsidiaries shall obtain, a limited, non-exclusive,
non-sublicenseable and non- assignable license to sell-off products marked with
or sold, promoted, advertised or distributed under any of the Trademarks;
NOW, THEREFORE, the Assignor and Assignee hereby agree as follows:
1. Assignment. For good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged by the Assignor, the Assignor hereby sells,
conveys, assigns, transfers and delivers to the Assignee, its successors and
assigns, all of the Assignor's right, title and interest in, to and under the
Trademarks, together with the goodwill of the Assignor's business symbolized by
the Trademarks, all applications, registrations and recordings in the United
States Patent and Trademark Office (or, in the case of state registrations or
recordings, in the equivalent state trademark filing office), if any, relating
to the Trademarks and all reissues, extensions or renewals thereof, and together
with the right to sue and recover damages for all past or future infringements
thereof and to stand in the place of the Assignor in all matters related
thereto. The Trademarks are being assigned "as is" without any representation or
warranty whatsoever.
<PAGE> 2
2. Limited License. Assignee hereby grants Assignor and Assignor's Subsidiaries,
the royalty-free, non-exclusive, non-assignable and non-sublicensable right,
license and privilege (the "License") during the 24-month period following the
date hereof to sell-off any of their products ordered or in their possession
prior to the date hereof that are marked with or sold, promoted, advertised or
distributed under, any of the Trademarks. For the purposes hereof,
"Subsidiaries" means all Persons of which Assignor owns directly or indirectly
at least a majority of the outstanding capital stock (or other shares of
beneficial interest) entitled to vote generally or at least a majority of the
partnership, joint venture or similar interests, and "Person" means any
individual, partnership, corporation, association, trust, joint venture,
unincorporated organization or other entity, and any government, governmental
department or agency or political subdivision thereof.
3. Assignment and Assumption of the HOM Trademark License Agreement. Assignor
hereby assigns to Assignee all of its rights and obligations under that certain
Trademark License Agreement dated September 30, 1995 by and between TJX and Hit
or Miss Inc. (the "HOM Trademark License Agreement") attached as Exhibit B
hereto and Assignee hereby agrees to assume, perform and observe all
obligations, covenants and agreements to be performed by Assignor under the HOM
Trademark License Agreement and to be bound in all respects by the terms and
conditions thereof as if Assignee was the original party thereto; provided,
however, that the assignment and assumption of the HOM Trademark License
Agreement hereunder shall exclude any and all obligations, covenants, agreements
and terms relating to those trademarks under the HOM Trademark License Agreement
that are not Trademarks listed on Exhibit A hereto.
4. Quality Control by Assignor. Assignor hereby acknowledges the
distinctiveness, prestige, high reputation and goodwill associated with the
Trademarks. Assignor agrees that, in order to preserve such distinctiveness,
prestige, high reputation and goodwill associated with the Trademarks as of the
date hereof, Assignor at all times will (i) comply with all reasonable quality
control policies and procedures communicated by Assignee to Assignor in writing
from time to time hereunder, provided that such policies and procedures are
consistent with Assignee's quality control policies and procedures as of the
date hereof, and (ii) take all other measures reasonably necessary to maintain
such distinctiveness, prestige, high reputation and goodwill. Assignor agrees
that in the event Assignor or any of its Subsidiaries fails to comply with the
provisions of this Section 4 and such failure is not cured within sixty (60)
days of Assignor's receipt of written notice from Assignee with respect thereto,
the License shall immediately terminate and Assignor and its Subsidiaries shall
be required immediately to cease and desist from using the Trademarks.
5. Covenant of Assignor. Assignor acknowledges and agrees that the License is
granted to it and its Subsidiaries hereunder solely for the purpose of
selling-off inventory generated in the ordinary course of business by Assignor
or its Subsidiaries. If prior to the date hereof Assignor or any of its
Subsidiaries produced or made available for distribution products
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<PAGE> 3
identified with any of the Trademarks in quantities substantially greater than
Assignor or such Subsidiaries generally produce or make available for
distribution in the ordinary course of business, the License shall immediately
terminate and Assignor and its Subsidiaries shall be required immediately to
cease and desist from using the Trademarks.
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<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
License of Trademarks to be executed as of the day and year first written above.
THE TJX COMPANIES, INC.
By _____________________________
Title
CHADWICK'S, INC.
By _____________________________
Title
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<PAGE> 5
STATE OF )
) ss.
COUNTY OF )
On __________________, 1997, before me, the undersigned, a Notary
Public in and for said State, personally appeared _____________________________,
personally known to me or proved to me on the basis of satisfactory evidence to
be the person who executed the within instrument as the
___________________________________ of The TJX Companies, Inc. and acknowledged
to me that such corporation executed the within instrument pursuant to its
bylaws or a resolution of its Board of Directors.
WITNESS my hand and official seal.
_______________________________
[SEAL]
THE TJX COMPANIES, INC.
By: ______________________________
Name:
Title:
STATE OF )
) ss.
COUNTY OF )
On _________________, 1997, before me, the undersigned, a Notary Public
in and for said State, personally appeared _____________________________,
personally known to me or proved to me on the basis of satisfactory evidence to
be the person who executed the within instrument as the
___________________________________ of Chadwick's of Boston, Ltd. and
acknowledged to me that such corporation executed the within instrument pursuant
to its bylaws or a resolution of its Board of Directors.
WITNESS my hand and official seal.
_______________________________
[SEAL]
CHADWICK'S, INC.
By: ______________________________
Name:
Title:
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<PAGE> 6
Exhibit A
MARKS
<TABLE>
<CAPTION>
MARK CLASSIFICATION & GOODS
- ---- ----------------------
<S> <C>
AVERROE Class 25 - clothing, namely pants, skirts, shorts,
Registration No. 1,377,383 sweaters, shirts and jackets
Registration Date: 01/07/86
8&15 Accepted: 11/13/91
Expires: 01/07/06
Owner: The TJX Companies, Inc.
COLLECTION 7 Class 25 - clothing, namely suits, jackets, blazers
and design and pants
Registration No. 1,220,988
Registration Date: 12/21/82
8&15 Accepted: 09/11/89
Expires: 12/21/01
Owner: The TJX Companies, Inc.
COLLECTION 7 Class 14 - Jewelry
Registration No. 1,706,616
Registration Date: 08/11/92
8&15 Due: 08/11/97-98
Owner: The TJX Companies, Inc.
COLLECTION 7 Class 26 - Hair Accessories, namely bows,
Registration No. 1,708,364 hairbands and barrettes
Registration Date: 08/18/92
8&15 Due: 08/11/97-98
Owner: The TJX Companies, Inc.
DAVID HOLLIS COLLECTION Class 25 - sweaters, shirts, blouses, pants, shorts,
Registration No. 1,277,124 skirts, blazers, swimwear, dresses, jackets, long
Registration Date: 05/08/84 coats, slickers and suits
8&15 Accepted: 09/05/90
Expires: 05/08/04
Owner: The TJX Companies, Inc.
</TABLE>
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<PAGE> 7
<TABLE>
<S> <C>
DAVID HOLLIS COLLECTION Class 25 - suits, tops, pants and skirts
Registration No. 1,215,954
Registration Date: 11/09/82
8&15 Accepted: 11/27/89
Expires: 11/09/02
Owner: The TJX Companies, Inc.
GALLAGHER Class 25 - clothing, namely blouses, skirts,
(Supplemental Register) dresses, pants, leather pants and skirts and
Registration No. 1,744,104 outerwear
Registration Date: 12/29/02
8&15 Due: 12/29/98-98
Expires: 12/29/02
Owner: The TJX Companies, Inc.
GALLAGHER Class 18 - leather goods, handbags and eelskin
(Supplemental Register) wallets
Registration No. 1,739,273
Registration Date: 12/08/92
8&15 Due: 12/08/97-98
Expires: 12/08/02
Owner: The TJX Companies, Inc.
H M ABERNATHY Class 25 - t-shirts, sweaters, shirts, pants, shorts,
Registration No. 1,278,117 slickers and socks
Registration Date: 05/15/84
8&15 Accepted: 05/16/90
Expires: 05/15/04
Owner: The TJX Companies, Inc.
H M ABERNATHY DESIGN Class 25 - outerwear, namely raincoats & rain
Registration No. 1,232,011 jackets
Registration Date: 03/22/83
8&15 Accepted: 10/16/89
Expires: 03/22/03
Owner: The TJX Companies, Inc.
</TABLE>
-7-
<PAGE> 8
<TABLE>
<S> <C>
JL PLUM DESIGN Class 25 - clothing, namely sweaters and t-shirts
Registration No. 1,214,946
Registration Date: 11/02/82
8&15 Accepted: 11/27/89
Expires: 11/02/02
Owner: The TJX Companies, Inc.
JL PLUM Class 42 - retail store services
Application No. 74/686,582
Application Date: 06/12/95
KATELYN COURT Class 25 - clothing, namely blouses, shirts, pants,
Registration No. 1,255,402 skirts, coats, jackets and dresses
Registration Date: 10/25/83
8&15 Accepted: 10/16/89
Expires: 10/25/03
Owner: The TJX Companies, Inc.
KATHY GALLAGHER Class 25 - clothing namely blouses, skirts, and
Registration No. 1,294,496 dresses
Registration Date: 09/11/84
8&15 Accepted: 01/17/91
Expires: 09/11/04
Owner: The TJX Companies, Inc.
SAIL GEAR Class 25 - clothing, namely slickers, shorts, pants,
Registration No. 1,244,576 skirts and t-shirts
Registration Date: 07/05/83
8&15 Accepted: 08/15/89
Expires: 07/05/03
Owner: The TJX Companies, Inc.
SUNPOINT Class 25 - clothing, namely swimsuits
Registration No. 1,409,570
Registration Date: 09/16/86
8&15 Accepted: 11/24/92
Expires: 09/16/06
Owner: The TJX Companies, Inc.
</TABLE>
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<PAGE> 1
EXHIBIT 10.14
TRADEMARK LICENSE AGREEMENT
This Trademark License Agreement (the "Agreement") is entered into as
of August 2, 1996 (the "Effective Date") by and among The TJX Companies, Inc., a
Delaware corporation ("TJX"), and Chadwick's, Inc., a Massachusetts corporation
(the "Company"), TJX and the Company each being hereinafter referred to singly
as a "Party" and collectively as the "Parties."
WITNESSETH:
WHEREAS, TJX is the owner of the Marks (as hereinafter defined)
including all of the goodwill of the products and services associated therewith;
WHEREAS, TJX desires to grant to the Company a royalty-free,
non-exclusive, non- assignable (except to the limited extent provided herein),
non-sublicensable (except as otherwise provided herein) right and license to use
the Marks to identify certain Products and Services (as such terms are
hereinafter defined) in accordance with the terms and provisions of this
Agreement;
WHEREAS, the Company desires to obtain from TJX such a royalty-free,
non-exclusive, non-assignable (except to the limited extent provided herein),
non-sublicensable (except as otherwise provided herein) right and license to so
use the Marks in accordance herewith;
WHEREAS, TJX shall retain its rights in, and continue to use, the Marks
throughout the world to identify its products and services;
NOW, THEREFORE, for and in consideration of the mutual covenants herein
contained, the Parties hereby agree as follows:
1. Definitions.
1.1 "Marks" shall mean all trademarks, service marks, trade names,
symbols, names and logos listed on Exhibit A hereto, and
including any and all United States applications,
registrations and recordings, pending registrations, reissues,
extensions or renewals thereof.
1.2 "Person" shall mean any individual, partnership, corporation,
association, trust, joint venture, unincorporated organization
or other entity, and any government, governmental department
or agency or political subdivision thereof.
<PAGE> 2
1.3 "Products" shall mean, with respect to each Mark, all products
currently or hereafter made, sold, promoted, advertised or
distributed by the Company that fall under any international
product class(es) in which such Mark is federally registered
as of the Effective Date hereof.
1.4 "Services" shall mean, with respect to each Mark, all services
currently or hereafter developed, sold, promoted, advertised
or distributed by the Company that fall under any
international service class(es) in which such Mark is
federally registered as of the Effective Date hereof.
1.5 "Term" shall mean, with respect to each Mark, the Term as set
forth opposite such Mark on Exhibit A hereto.
1.6 "Territory" shall mean the universe.
2. Grant of License.
2.1 Grant to the Company with respect to the Marks. For good and
valuable consideration the receipt of which is hereby
acknowledged, TJX hereby grants to the Company, during the
applicable Term for each Mark, the royalty-free,
non-exclusive, non-assignable (except to the limited extent
herein provided) and non-sublicensable (except as otherwise
provided herein) right, license and privilege, (collectively,
the "License"): (i) to use such Mark to identify the Services
throughout the Territory; and (ii) to mark the Products with
such Mark, and to develop, make, sell, promote, advertise and
distribute the Products so marked anywhere in the Territory.
2.2 Use of Subcontractors and Sublicensees. The Company hereby
agrees that it shall not sublicense or subcontract any of the
rights included in the License (or any of the Company's
obligations hereunder) to any Person (other than a Person that
is a subcontractor engaged by the Company primarily to
manufacture Products) without first obtaining TJX's written
consent thereto, which consent TJX may withhold in its sole
discretion.
2.3 Discontinuation of Use of Marks. Notwithstanding any other
provision of this Agreement, if, during the applicable Term
for any Mark, the Company decides to cease using such Mark to
identify the Products and Services hereunder, the Company
shall provide TJX prompt notice thereof and the License (and
all rights granted to the Company thereunder) with respect to
that Mark shall immediately and automatically revert to TJX.
-2-
<PAGE> 3
3. Quality Control.
3.1 Acknowledgment of Prestige of the Marks. The Company hereby
acknowledges the distinctiveness, prestige, high reputation
and goodwill associated with the Marks. The Company agrees
that, in order to preserve such distinctiveness, prestige,
reputation and goodwill associated with the Marks as of the
Effective Date hereof, the Company will at all times (i)
comply with all reasonable quality control policies and
procedures communicated by TJX to the Company in writing from
time to time hereunder, provided that such policies and
procedures are consistent with TJX's quality control policies
and procedures as of the Effective Date hereof; and (ii) take
all other measures reasonably necessary to maintain such
distinctiveness, prestige, reputation and goodwill.
4. Ownership of the Marks
4.1 Acknowledgment of Ownership of Marks. The Company hereby
acknowledges and agrees that, as between TJX and the Company,
TJX is and shall be the sole and exclusive owner of the Marks
and all of the goodwill associated therewith, and that the
Marks, and such goodwill, shall remain at all times the sole
and exclusive property of TJX. TJX reserves all of its rights
with respect to the Marks not granted to the Company hereunder
and the Company acknowledges and agrees that TJX in its sole
discretion may continue to use such rights and license them to
third parties other than the Company; provided, however, that
TJX shall not license the Savannah Mark (more completely
identified in Exhibit A hereto) to any person other than the
Company and Subsidiaries of TJX.
4.2 No Conflicting Filings. At no time shall the Company apply for
any registration of any of the Marks or of any other mark or
designation which is reasonably likely to be confused with any
of the Marks nor shall the Company file any document with
respect to any of the Marks with any governmental authority to
take any action which would unreasonably and adversely affect
the validity and/or enforceability of any of the Marks.
4.3 Further Assurances. The Company shall take all such actions
and execute all such documents and instruments (at TJX's
expense) that are reasonably requested by TJX to carry out the
intent of the Parties under this Agreement and, in particular,
to effect and maintain the enforceability of any and all
registrations for the Marks.
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<PAGE> 4
5. Term and Termination.
5.1 Term. The term of this Agreement shall commence on the
Effective Date hereof and, unless terminated pursuant to the
terms hereof, continue for a period of sixty (60) months
thereafter, subject to the provisions of Section 5.2 and
subject to the earlier termination of Licenses hereunder as
provided in Section 2.1.
5.2 Termination.
5.2.1 Termination for Material Default. This Agreement may be
terminated by either Party upon failure of the other Party to
cure any material breach within ninety (90) days of its
receipt from the other Party of a written notice setting forth
the exact nature of such alleged breach.
5.2.2 Effect of Termination; Sell Off. Upon the expiration of
the applicable Term for a Mark, all of the rights in and to
such Mark granted by TJX to the Company hereunder shall
immediately revert to TJX and, upon the termination of this
Agreement for any reason, all of the rights in and to all of
the Marks granted by TJX to the Company hereunder shall
immediately revert to TJX; provided, however, that the Company
shall be permitted to sell off any Products marked with such
Mark or Marks, as the case may be, ordered or in its
possession prior to such expiration or termination hereof and
to render any Services necessary to be rendered by the Company
in connection with the sell- off of such Products, and the
License with respect to such Mark or Marks, as the case may
be, shall be extended during such sell-off period (which
period shall in no event exceed 24 months following such
expiration or termination) solely to the extent necessary for
the Company to complete such sell-off. The Company covenants
that it shall use the Marks only in the ordinary course of
business and the Company understands and agrees that (i) its
right of sell-off under this Section 5.2.2 is hereby expressly
conditioned on its compliance with such covenant; and (ii) if,
prior to such expiration or termination, the Company makes,
sells or orders Products marked with such Mark or Marks, as
the case may be, in substantially greater quantities than the
Company generally makes, sells or orders in the ordinary
course of business, such sell-off right shall immediately
terminate and the Company shall be required immediately to
cease and desist from using such Mark or Marks, as the case
maybe, in connection with the Products or Services or with any
other products or services.
-4-
<PAGE> 5
6. Enforcement of Trademark Rights; Registration.
6.1 Filing and Maintenance. TJX shall be responsible for the
preparation, filing, prosecution and maintenance of each Mark
during the applicable Term for such Mark and shall bear all
costs associated therewith.
6.2 Enforcement of Rights. The Company agrees that it will notify
TJX promptly in writing of any act or alleged act of any
person or entity of unfair competition, infringement,
imitation or any other unauthorized use of any of the Marks to
identify any article or service similar to any Product or
Service or otherwise, that becomes known to the Company. TJX
has the right, but shall not be obligated, to prosecute at its
own expense any such infringements. In the event that TJX
should choose not to exercise such right, the Company shall
have the right, but shall not be obligated, to prosecute at
its own expense such infringements. The total cost of any such
infringement action shall be borne by the Parties
independently, each Party being liable solely for the fees and
expenses it incurred in connection with the action. Any
recovery or damages for past infringement derived from such an
action shall first be used to reimburse the Parties, as the
case may be, for all expenses and legal fees connected with
such action. Any remaining damages after payment of such fees
and expenses shall be allocated between TJX and the Company
equally if the Parties have jointly conducted the infringement
action or, if one Party conducted the proceeding, to that
Party.
6.3 Cooperation. Each Party agrees to provide reasonable
cooperation to the Party who initiates an action or proceeding
to abate and obtain compensation for the infringement of any
of the Marks. In this connection, however, it is agreed that
the initiating Party shall pay, or reimburse the cooperating
Party for, all reasonable out-of-pocket expenses, such as,
without limitation, travel and long distance telephone charges
incurred in connection with providing such cooperation but
excluding the non-initiating Party's attorneys fees.
7. Representations and Warranties.
7.1 Representations and Warranties of TJX. TJX represents,
warrants and covenants to the Company as follows: (a) TJX has
the full and unrestricted right, power and authority to enter
into and perform the terms, covenants and conditions of this
Agreement; and (b) to TJX's knowledge, the use of the Marks by
the Company to the extent permitted hereunder will not
infringe the proprietary rights of any Person under any law,
rule, regulation or order of the United States of America or
any state thereof (including rights arising under the laws of
trademark, trade secrets, rights of publicity, unfair
competition, or any other similar laws).
-5-
<PAGE> 6
7.2 Indemnification of The Company. TJX shall defend, indemnify
and hold the Company harmless from and against any and all
demands, claims, actions, suits and proceedings, that may at
any time be brought against the Company and any and all
liabilities, losses, damages, costs and expenses (including
but not limited to reasonable attorneys' fees and other legal
costs and expenses) that may at any time be suffered or
incurred by the Company, as a result of, or in connection
with, any breach by TJX of any of the representations or
warranties made by TJX to the Company pursuant to Section 7.1
above or of any other covenants made by TJX to the Company
hereunder or any product or service provided by TJX that is
marked with or promoted under any of the Marks.
Notwithstanding the foregoing, if TJX prevails in any actions,
suits or proceedings defended by it pursuant hereto, any and
all fees and expenses incurred by or chargeable to it in
connection therewith (including, without limitation, any
reasonable attorneys' fees and other legal costs and expenses)
shall be reimbursed to it using the proceeds, if any, received
from the losing party in such action, suit or proceeding.
7.3 Representations and Warranties of The Company. The Company
hereby represents, warrants and covenants to TJX as follows:
(a) the Company has the full and unrestricted right, power and
authority to enter into and perform the terms, covenants and
conditions of this Agreement; and (b) any Products made, sold
or distributed by the Company and any Services developed, sold
or provided by the Company shall comply with all applicable
laws, rules and regulations of any jurisdiction in the
Territory having authority over such Products or Services.
7.4 Indemnification of TJX. The Company shall defend, indemnify
and hold TJX harmless from and against any and all demands,
claims, actions, suits and proceedings, that may at any time
be brought against TJX and any and all liabilities, losses,
damages, costs and expenses (including but not limited to
reasonable attorneys' fees and other legal costs and expenses)
that may at any time be suffered or incurred by TJX, as a
result of, or in connection with, any breach by the Company of
any of the representations or warranties made by the Company
to TJX pursuant to Section 7.3 above or of any of the other
covenants made by the Company to TJX hereunder or any Product
or Service provided by the Company. Notwithstanding the
foregoing, if the Company prevails in any actions, suits or
proceedings defended by it pursuant hereto, any and all fees
and expenses incurred by or chargeable to it in connection
therewith (including, without limitation, any attorneys' fees
and other legal costs and expenses) shall be reimbursed to it
using the proceeds, if any, received from the losing party in
such action, suit or proceeding.
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<PAGE> 7
8. General.
8.1 Entire Agreement; Waivers. This Agreement constitutes the
entire agreement among the Parties hereto pertaining to the
subject matter hereof and supersedes all prior and
contemporaneous agreements, understandings, negotiations and
discussions, whether oral or written, of the Parties with
respect to such subject matter. No waiver of any provision of
this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or not similar), shall
constitute a continuing waiver unless otherwise expressly
provided nor shall be effective unless in writing and executed
(i) in the case of a waiver by TJX, by TJX and (ii) in the
case of a waiver by the Company, by the Company.
8.2 Amendment or Modification. The Parties hereto may not amend or
modify this Agreement except in such manner as may be agreed
upon by a written instrument executed by TJX and the Company.
8.3 Survival, etc. All representations, warranties, covenants and
agreements made by or on behalf of either Party hereto in this
Agreement (including, without limitation, the Exhibits
hereto), shall be deemed to have been relied upon by the other
Party hereto and shall survive the execution and delivery of
this Agreement and continue in full force and effect forever
thereafter (subject to any applicable statutes of
limitations).
8.4 Severability. In the event that any provision hereof would,
under applicable law, be invalid or unenforceable in any
respect, such provision shall (to the extent permitted under
applicable law) be construed by modifying or limiting it so as
to be valid and enforceable to the maximum extent compatible
with, and possible under, applicable law. The provisions
hereof are severable, and in the event any provision hereof
should be held invalid or unenforceable in any respect, it
shall not invalidate, render unenforceable or otherwise affect
any other provision hereof.
8.5 Assignment. The Company may not assign any of its rights,
interests, duties or obligations under this Agreement without
obtaining TJX's prior written consent thereto, except to a
successor to all or substantially all of the assets of the
Company and its subsidiaries. All assignments in violation of
this Section shall be void and without any effect.
8.6 Successors and Assigns. All of the terms and provisions of
this Agreement shall be binding upon and shall inure to the
benefit of the Parties hereto and their respective
transferees, successors and assigns (each of which such
transferees, successors and assigns shall be deemed to be a
Party hereto for all purposes hereof).
-7-
<PAGE> 8
8.7 Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if delivered personally or
sent by telex, telecopier, nationally recognized overnight delivery
service or registered, certified or first class mail, postage
prepaid, addressed as follows or to such other address of which the
parties may have given notice:
If to TJX, to: The TJX Companies, Inc.
770 Cochituate Road
Framingham, Massachusetts 01701
Telecopier: (508) 390-2457
With copies to each: Attention: President and General Counsel
With a copy to: Arthur G. Siler, Esq.
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Telecopier: (617) 951-7050
If to the Company, to: Chadwick's, Inc.
35 United Drive
West Bridgewater, Massachusetts 02379
Attention: President
Telecopier: (508) 583-2071
With a copy to: Constantine Alexander, Esq.
Nutter, McClennen & Fish, LLP
One International Place
Boston, Massachusetts 02116
Telecopier: (617) 973-9748
Unless otherwise specified herein, such notices or other
communications shall be deemed received (a) on the date delivered,
if delivered personally; (b) when the answer back is received if
sent by telex; (c) when confirmation of receipt is received if sent
by telecopier; (d) one business day after being sent, if sent by
nationally recognized overnight delivery service; (e) three business
days after being sent, if sent by registered or certified mail; or
(f) five business days after being sent, if sent by first class
mail.
8.8 Headings, etc. Section and subsection headings are not to be
considered part of this Agreement, are included solely for
convenience, are not intended to be full or accurate descriptions of
the content thereof and shall not affect the construction hereof.
This Agreement shall be deemed to express the mutual
-8-
<PAGE> 9
intent of the Parties, and no rule of strict construction
shall be applied against either Party.
8.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but
all of which together shall constitute but one and the same
instrument.
8.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of
Massachusetts applicable to contracts executed in and to be
performed in that state, without giving effect to any choice
or conflict of law provision or rule that would cause the
application of the laws of any other jurisdiction.
IN WITNESS WHEREOF, the Parties hereto, intending to be legally bound
hereby, have caused this Agreement to be executed, as of the Effective Date by
their respective officers thereunto duly authorized.
THE TJX COMPANIES, INC.
By _____________________________
Title
CHADWICK'S, INC.
By _____________________________
Title
-9-
<PAGE> 10
EXHIBIT A
MARKS
<TABLE>
<CAPTION>
MARK CLASSIFICATION & GOODS TERM COMMENCING ON
- ---- ---------------------- ------------------
THE EFFECTIVE DATE
------------------
<S> <C> <C>
Rosanna Class 25 - Clothing; namely 12 months
Reg. No. 965621 sweaters, dresses, knit suits,
Reg. Date: 08/07/73 knit shirts, pants and jackets.
Renewed: 1993
Expires: 08/07/03
Owner: The TJX
Companies, Inc.
Heather & Tweed Class 25 - Men's clothing; 12 months
Reg. No. 1,677,693 namely sweaters, knit shirts,
Reg. Date: 03/03/92 shirts, slacks and sport coats.
8 & 15 Due: 03/03/97-98
Expires: 03/03/02
Owner: The TJX
Companies, Inc.
Savannah Class 25 - Ladies clothing; 60 months
Reg. No. 1,139,984 namely jackets, pants, dresses,
Reg. Date: 09/30/80 skirts, blouses and scarves.
Expires: 09/30/00
Owner: The TJX
Companies, Inc.
</TABLE>
-10-
<PAGE> 11
TRADEMARK LICENSE AGREEMENT
This Trademark License Agreement (the "Agreement") is entered into as
of August 1, 1996 (the "Effective Date") by and among The TJX Companies, Inc., a
Delaware corporation with its principal offices located at 770 Cochituate Road,
Framingham, MA 01701 ("TJX"), and Chadwick's, Inc., a Massachusetts corporation,
with its principal offices located at 35 United Drive, West Bridgewater,
Massachusetts 02379 (the "Company"), TJX and the Company each being hereinafter
referred to singly as a "Party" and collectively as the "Parties."
WITNESSETH:
WHEREAS, TJX is the owner of the Marks (as hereinafter defined)
including all of the goodwill of the products and services associated therewith;
WHEREAS, TJX desires to grant to the Company a royalty-free,
non-exclusive, non- assignable (except to the limited extent provided herein),
non-sublicensable (except as otherwise provided herein) right and license to use
the Marks to identify certain Products and Services (as such terms are
hereinafter defined) in accordance with the terms and provisions of this
Agreement;
WHEREAS, the Company desires to obtain from TJX such a royalty-free,
non-exclusive, non-assignable (except to the limited extent provided herein),
non-sublicensable (except as otherwise provided herein) right and license to so
use the Marks in accordance herewith;
WHEREAS, TJX shall retain its rights in, and continue to use, the Marks
throughout the world to identify its products and services;
NOW, THEREFORE, for and in consideration of the mutual covenants herein
contained, the Parties hereby agree as follows:
1. Definitions.
1.1 "HOM Trademark License and Assignment Agreement" shall mean
that certain Trademark License and Assignment Agreement dated
September 30, 1995 by and between TJX and Hit or Miss Inc.
that relates to the Marks identified in Exhibit A hereto.
1.2 "Marks" shall mean all trademarks, service marks, trade names,
symbols, names and logos listed on Exhibit A hereto, and
including any and all United
-11-
<PAGE> 12
States applications, registrations and recordings, pending
registrations, reissues, extensions or renewals thereof.
1.3 "Person" shall mean any individual, partnership, corporation,
association, trust, joint venture, unincorporated organization
or other entity, and any government, governmental department
or agency or political subdivision thereof.
1.4 "Products" shall mean, with respect to each Mark, all products
currently or hereafter made, sold, promoted, advertised or
distributed [by the Company] that fall under any international
product class(es) in which such Mark is federally registered
as of the Effective Date hereof.
1.5 "Services" shall mean, with respect to each Mark, all services
currently or hereafter developed, sold, promoted, advertised
or distributed by the Company that fall under any
international service class(es) in which such Mark is
federally registered as of the Effective Date hereof.
1.6 "Territory" shall mean the universe.
2. Grant of License.
2.1 Grant to the Company with respect to the Marks. For good and
valuable consideration the receipt of which is hereby
acknowledged, TJX hereby grants to the Company during the Term
(as hereinafter defined) hereof, the royalty-free,
non-exclusive, non-assignable (except to the limited extent
herein provided) and non-sublicensable (except as otherwise
provided herein) right, license and privilege, (collectively,
the "License"): (i) to use the Marks to identify the Services
throughout the Territory; and (ii) to mark the Products with
any of the Marks, and to develop, make, sell, promote,
advertise and distribute the Products so marked anywhere in
the Territory.
2.2 Use of Subcontractors and Sublicensees. The Company hereby
agrees that it shall not sublicense or subcontract any of the
rights included in the License (or any of the Company's
obligations hereunder) to any Person (other than a Person that
is a subcontractor engaged by the Company primarily to
manufacture Products) without first obtaining TJX's written
consent thereto, which consent TJX may withhold in its sole
discretion.
2.3 Discontinuation of Use of Marks. Notwithstanding any other
provision of this Agreement, if at any time during the Term
hereof, the Company decides to cease using any Mark to
identify the Products and Services hereunder, the Company
shall provide TJX prompt notice thereof and the License (and
all
-12-
<PAGE> 13
rights granted to the Company thereunder) with respect to that
Mark shall immediately and automatically revert to TJX.
3. Quality Control.
3.1 Acknowledgment of Prestige of the Marks. The Company hereby
acknowledges the distinctiveness, prestige, high reputation
and goodwill associated with the Marks. The Company agrees
that, in order to preserve such distinctiveness, prestige,
reputation and goodwill associated with the Marks as of the
Effective Date hereof, the Company will at all times (i)
comply with all reasonable quality control policies and
procedures communicated by TJX to the Company in writing from
time to time hereunder, provided that such policies and
procedures are consistent with TJX's quality control policies
and procedures as of the Effective Date hereof; and (ii) take
all other measures reasonably necessary to maintain such
distinctiveness, prestige, reputation and goodwill.
4. Ownership of the Marks
4.1 Acknowledgment of Ownership of Marks. The Company hereby
acknowledges and agrees that, as between TJX and the Company,
TJX is and shall be the sole and exclusive owner of the Marks
and all of the goodwill associated therewith, and that the
Marks, and such goodwill, shall remain at all times the sole
and exclusive property of TJX. TJX reserves all of its rights
with respect to the Marks not granted to the Company hereunder
and the Company acknowledges and agrees that TJX in its sole
discretion may continue to use such rights and license them to
third parties other than the Company, except to the extent
provided in the HOM Trademark License and Assignment
Agreement.
4.2 No Conflicting Filings. At no time shall the Company apply for
any registration of any of the Marks or of any other mark or
designation which is reasonably likely to be confused with any
of the Marks nor shall the Company file any document with
respect to any of the Marks with any governmental authority to
take any action which would unreasonably and adversely affect
the validity and/or enforceability of any of the Marks.
4.3 Further Assurances. The Company shall take all such actions
and execute all such documents and instruments (at TJX's
expense) that are reasonably requested by TJX to carry out the
intent of the Parties under this Agreement and, in particular,
to effect and maintain the enforceability of any and all
registrations for the Marks.
-13-
<PAGE> 14
5. Term and Termination.
5.1 Term. The term of this Agreement (the "Term") shall commence
on the Effective Date hereof and, unless terminated pursuant
to the terms hereof, continue up to and including September
30, 1997, subject to the provisions of Section 5.2.
5.2 Termination.
5.2.1 Termination for Material Default. This Agreement may be
terminated by either Party upon failure of the other Party to
cure any material breach within ninety (90) days of its
receipt from the other Party of a written notice setting forth
the exact nature of such alleged breach.
5.2.2 Effect of Termination; Sell Off. Upon the expiration or
termination of this Agreement for any reason, all of the
rights in and to the Marks granted by TJX to the Company
hereunder shall immediately revert to TJX; provided, however,
that the Company shall be permitted to sell off any Products
ordered or in its possession prior to such expiration or
termination hereof and to render any Services necessary to be
rendered by the Company in connection with the sell-off of
such Products, and the License shall be extended during such
sell-off period (which period shall in no event exceed 24
months following the expiration or termination hereof) solely
to the extent necessary for the Company to complete such
sell-off.
6. Enforcement of Trademark Rights; Registration.
6.1 Filing and Maintenance. TJX shall be responsible for the
preparation, filing, prosecution and maintenance of the Marks
and shall bear all costs associated therewith.
6.2 Enforcement of Rights. The Company agrees that it will notify
TJX promptly in writing of any act or alleged act of any
person or entity of unfair competition, infringement,
imitation or any other unauthorized use of any of the Marks to
identify any article or service similar to any Product or
Service or otherwise, that becomes known to the Company. TJX
has the right, but shall not be obligated, to prosecute at its
own expense any such infringements. In the event that TJX
should choose not to exercise such right, the Company shall
have the right, but shall not be obligated, to prosecute at
its own expense such infringements. The total cost of any such
infringement action shall be borne by the Parties
independently, each Party being liable solely for the fees and
expenses it incurred in connection with the action. Any
recovery or damages
-14-
<PAGE> 15
for past infringement derived from such an action shall first
be used to reimburse the Parties, as the case may be, for all
expenses and legal fees connected with such action. Any
remaining damages after payment of such fees and expenses
shall be allocated between TJX and the Company equally if the
Parties have jointly conducted the infringement action or, if
one Party conducted the proceeding, to that Party.
6.3 Cooperation. Each Party agrees to provide reasonable
cooperation to the Party who initiates an action or proceeding
to abate and obtain compensation for the infringement of any
of the Marks. In this connection, however, it is agreed that
the initiating Party shall pay, or reimburse the cooperating
Party for, all reasonable out-of-pocket expenses, such as,
without limitation, travel and long distance telephone charges
incurred in connection with providing such cooperation but
excluding the non-initiating Party's attorneys fees.
7. Representations and Warranties.
7.1 Representations and Warranties of TJX. TJX represents,
warrants and covenants to the Company as follows: (a) TJX has
the full and unrestricted right, power and authority to enter
into and perform the terms, covenants and conditions of this
Agreement; and (b) to TJX's knowledge, the use of the Marks by
the Company to the extent permitted hereunder will not
infringe the proprietary rights of any Person under any law,
rule, regulation or order of the United States of America or
any state thereof (including rights arising under the laws of
trademark, trade secrets, rights of publicity, unfair
competition, or any other similar laws).
7.2 Indemnification of the Company. TJX shall defend, indemnify
and hold the Company harmless from and against any and all
demands, claims, actions, suits and proceedings, that may at
any time be brought against the Company and any and all
liabilities, losses, damages, costs and expenses (including
but not limited to reasonable attorneys' fees and other legal
costs and expenses) that may at any time be suffered or
incurred by the Company, as a result of, or in connection
with, any breach by TJX of any of the representations or
warranties made by TJX to the Company pursuant to Section 7.1
above or of any other covenants made by TJX to the Company
hereunder or any product or service provided by TJX that is
marked with or promoted under any of the Marks.
Notwithstanding the foregoing, if TJX prevails in any actions,
suits or proceedings defended by it pursuant hereto, any and
all fees and expenses incurred by or chargeable to it in
connection therewith (including, without limitation, any
reasonable attorneys' fees and other legal costs and expenses)
shall be reimbursed to it using the proceeds, if any, received
from the losing party in such action, suit or proceeding.
-15-
<PAGE> 16
7.3 Representations and Warranties of the Company. The Company
hereby represents, warrants and covenants to TJX as follows:
(a) the Company has the full and unrestricted right, power and
authority to enter into and perform the terms, covenants and
conditions of this Agreement; and (b) any Products made, sold
or distributed by the Company and any Services developed, sold
or provided by the Company shall comply with all applicable
laws, rules and regulations of any jurisdiction in the
Territory having authority over such Products or Services.
7.4 Indemnification of TJX. The Company shall defend, indemnify
and hold TJX harmless from and against any and all demands,
claims, actions, suits and proceedings, that may at any time
be brought against TJX and any and all liabilities, losses,
damages, costs and expenses (including but not limited to
reasonable attorneys' fees and other legal costs and expenses)
that may at any time be suffered or incurred by TJX, as a
result of, or in connection with, any breach by the Company of
any of the representations or warranties made by the Company
to TJX pursuant to Section 7.3 above or of any of the other
covenants made by the Company to TJX hereunder or any Product
or Service provided by the Company. Notwithstanding the
foregoing, if the Company prevails in any actions, suits or
proceedings defended by it pursuant hereto, any and all fees
and expenses incurred by or chargeable to it in connection
therewith (including, without limitation, any attorneys' fees
and other legal costs and expenses) shall be reimbursed to it
using the proceeds, if any, received from the losing party in
such action, suit or proceeding.
8. General.
8.1 Entire Agreement; Waivers. This Agreement constitutes the
entire agreement among the Parties hereto pertaining to the
subject matter hereof and supersedes all prior and
contemporaneous agreements, understandings, negotiations and
discussions, whether oral or written, of the Parties with
respect to such subject matter. No waiver of any provision of
this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or not similar), shall
constitute a continuing waiver unless otherwise expressly
provided nor shall be effective unless in writing and executed
(i) in the case of a waiver by TJX, by TJX and (ii) in the
case of a waiver by the Company, by the Company.
8.2 Amendment or Modification. The Parties hereto may not amend or
modify this Agreement except in such manner as may be agreed
upon by a written instrument executed by TJX and the Company.
8.3 Survival, etc. All representations, warranties, covenants and
agreements made by or on behalf of either Party hereto in this
Agreement (including, without
-16-
<PAGE> 17
limitation, the Exhibits hereto), shall be deemed to have been
relied upon by the other Party hereto and shall survive the
execution and delivery of this Agreement and continue in full force
and effect forever thereafter (subject to any applicable statutes
of limitations).
8.4 Severability. In the event that any provision hereof would, under
applicable law, be invalid or unenforceable in any respect, such
provision shall (to the extent permitted under applicable law) be
construed by modifying or limiting it so as to be valid and
enforceable to the maximum extent compatible with, and possible
under, applicable law. The provisions hereof are severable, and in
the event any provision hereof should be held invalid or
unenforceable in any respect, it shall not invalidate, render
unenforceable or otherwise affect any other provision hereof.
8.5 Assignment. The Company may not assign any of its rights,
interests, duties or obligations under this Agreement without
obtaining TJX's prior written consent thereto. All assignments in
violation of this Section shall be void and without any effect.
8.6 Successors and Assigns. All of the terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of
the Parties hereto and their respective transferees, successors and
assigns (each of which such transferees, successors and assigns
shall be deemed to be a Party hereto for all purposes hereof).
8.7 Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if delivered personally or
sent by telex, telecopier, nationally recognized overnight delivery
service or registered, certified or first class mail, postage
prepaid, addressed as follows or to such other address of which the
parties may have given notice:
If to TJX, to: The TJX Companies, Inc.
770 Cochituate Road
Framingham, Massachusetts 01701
Telecopier: (508) 390-2457
With copies to each: Attention: President and General Counsel
With a copy to: Arthur G. Siler, Esq.
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Telecopier: (617) 951-7050
-17-
<PAGE> 18
If to the Company, to: Chadwick's, Inc.
35 United Drive
West Bridgewater, Massachusetts 02379
Attn: President
Telecopier: (508) 583-2071
With a copy to: Constantine Alexander, Esq.
Nutter, McClellen & Fish, LLP
One International Place
Boston, Massachusetts 02110
Telecopier: (617) 973-9748
Unless otherwise specified herein, such notices or other
communications shall be deemed received (a) on the date delivered,
if delivered personally; (b) when the answer back is received if
sent by telex; (c) when confirmation of receipt is received if sent
by telecopier; (d) one business day after being sent, if sent by
nationally recognized overnight delivery service; (e) three
business days after being sent, if sent by registered or certified
mail; or (f) five business days after being sent, if sent by first
class mail.
8.8 Headings, etc. Section and subsection headings are not to be
considered part of this Agreement, are included solely for
convenience, are not intended to be full or accurate descriptions
of the content thereof and shall not affect the construction
hereof. This Agreement shall be deemed to express the mutual intent
of the Parties, and no rule of strict construction shall be applied
against either Party.
8.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of
which together shall constitute but one and the same instrument.
8.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts
applicable to contracts executed in and to be performed in that
state, without giving effect to any choice or conflict of law
provision or rule that would cause the application of the laws of
any other jurisdiction.
-18-
<PAGE> 19
IN WITNESS WHEREOF, the Parties hereto, intending to be legally bound
hereby, have caused this Agreement to be executed, as of the Effective Date by
their respective officers thereunto duly authorized.
THE TJX COMPANIES, INC.
By _____________________________
Title
CHADWICK'S, INC.
By _____________________________
Title
-19-
<PAGE> 20
EXHIBIT A
<TABLE>
<CAPTION>
MARK CLASSIFICATION & GOODS
- ---- ----------------------
<S> <C>
ABERNATHY SPORT Class 25 - clothing, namely short sets, rompers
Registration No. 1,228,562 and active wear, such as pants and shirts
Registration Date: 02/22/83
8&15 Accepted: 07/24/89
Expires: 02/22/03
Owner: The TJX Companies, Inc.
ELLEN ASHLEY Class 25 - blouses, shirts, pants, skirts,
Registration No. 1,241,257 jackets, sweaters and t-shirts
Registration Date: 06/07/83
8&15 Accepted: 08/07/89
Expires: 06/07/03
Owner: The TJX Companies, Inc.
ELLEN ASHLEY Class 25 - tops, shorts, blazers, dresses, long
Registration No. 1,902,813 coats, slickers, suits, socks, hosiery & panties
Registration Date: 07/04/95
8&15 Due: 07/04/00-01
Expires: 07/04/05
Owner: The TJX Companies, Inc.
REED HUNTER Class 25 - clothing, namely shirts, belts, socks
Registration No. 1,210,625 and sweaters
Registration Date: 09/28/82
8&15 Accepted: 05/01/90
Expires: 09/28/02
Owner: The TJX Companies, Inc.
</TABLE>
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<PAGE> 1
Exhibit 10.15
REVOLVING CREDIT
AND
TERM LOAN AGREEMENT
Dated as of July __, 1996
among
CHADWICK'S OF BOSTON, LTD.,
CHADWICK'S, INC.
THE FIRST NATIONAL BANK OF BOSTON,
THE FIRST NATIONAL BANK OF CHICAGO
and the other lending institutions set forth on Schedule 1 hereto,
THE FIRST NATIONAL BANK OF BOSTON as Administrative Agent
THE FIRST NATIONAL BANK OF CHICAGO as Documentation Agent,
THE FIRST NATIONAL BANK OF BOSTON and
THE FIRST NATIONAL BANK OF CHICAGO,
as Issuing Banks with respect to Letters of Credit
and
THE FIRST NATIONAL BANK OF BOSTON and FIRST CHICAGO
CAPITAL MARKETS INC., as Co-Syndication Agents
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS AND RULES OF INTERPRETATION........................................................ 1
1.1. Definitions......................................................................... 1
1.2. Rules of Interpretation............................................................. 15
2. THE REVOLVING CREDIT FACILITY.................................................................. 16
2.1. Commitment to Lend.................................................................. 16
2.2. Commitment Fee...................................................................... 17
2.3. Reduction of Total Commitment....................................................... 17
2.4. The Revolving Credit Notes.......................................................... 17
2.5. Interest on Revolving Credit Loans.................................................. 18
2.6. Requests for Revolving Credit Loans................................................. 18
2.7. Conversion Options.................................................................. 18
2.7.1. Conversion to Different Type of Revolving Credit Loan.................... 18
2.7.2. Continuation of Type of Revolving Credit Loan............................ 19
2.7.3. LIBOR Rate Loans......................................................... 19
2.8. Funds for Revolving Credit Loan..................................................... 19
2.8.1. Funding Procedures....................................................... 19
2.8.2. Advances by Administrative Agent......................................... 20
3. REPAYMENT OF THE REVOLVING CREDIT LOANS........................................................ 20
3.1. Maturity............................................................................ 20
3.2. Mandatory Repayments of Revolving Credit Loans...................................... 21
3.2.1. Outstandings Exceeding Commitments....................................... 21
3.2.2. Clean-Down Provisions.................................................... 21
3.3. Optional Repayments of Revolving Credit Loans....................................... 21
4. THE TERM LOAN.................................................................................. 22
4.1. Commitment to Lend.................................................................. 22
4.2. The Term Notes...................................................................... 22
4.3. Mandatory Payment of Principal...................................................... 22
4.3.1. Amortization of Term Loan................................................ 22
4.3.2. Proceeds................................................................. 23
4.4. Optional Prepayment of Term Loan.................................................... 23
4.5. Interest on Term Loans.............................................................. 24
4.5.1. Interest Rates........................................................... 24
4.5.2. Notification by Borrowers................................................ 24
4.5.3. Amounts, Etc............................................................. 24
5. LETTERS OF CREDIT.............................................................................. 25
5.1. Letter of Credit Commitments........................................................ 25
5.1.1. Commitment to Issue Letters of Credit.................................... 25
5.1.2. Letter of Credit Applications............................................ 25
5.1.3. Terms of Letters of Credit............................................... 25
5.1.4. Reimbursement Obligations of Banks....................................... 25
5.1.5. Participations of Banks.................................................. 26
5.2. Reimbursement Obligation of the Borrowers........................................... 26
5.3. Letter of Credit Payments........................................................... 27
5.4. Obligations Absolute................................................................ 28
5.5. Reliance by Issuer.................................................................. 28
5.6. Letter of Credit Fee................................................................ 28
</TABLE>
<PAGE> 3
-ii-
<TABLE>
<S> <C>
6. CERTAIN GENERAL PROVISIONS..................................................... 29
6.1. Closing Fee......................................................... 29
6.2. Agent's Fee......................................................... 29
6.3. Funds for Payments.................................................. 29
6.3.1. Payments to Administrative Agent......................... 29
6.3.2. No Offset, etc........................................... 29
6.4. Computations........................................................ 30
6.5. Inability to Determine LIBOR Rate................................... 30
6.6. Illegality.......................................................... 30
6.7. Additional Costs, etc............................................... 31
6.8. Capital Adequacy.................................................... 32
6.9. Certificate......................................................... 33
6.10. Indemnity.......................................................... 33
6.11. Interest After Default............................................. 33
6.12. Replacement Banks.................................................. 33
6.13. Concerning Joint and Several Liability of the Borrowers............ 34
7. REPRESENTATIONS AND WARRANTIES................................................. 37
7.1. Corporate Authority................................................. 38
7.1.1. Incorporation; Good Standing............................. 38
7.1.2. Authorization............................................ 38
7.1.3. Enforceability........................................... 38
7.2. Governmental Approvals.............................................. 38
7.3. Title to Properties; Leases......................................... 38
7.4. Financial Statements and Projections................................ 39
7.4.1. Financial Statements..................................... 39
7.4.2. Projections.............................................. 39
7.5. No Material Changes, etc............................................ 39
7.5.1. No Changes............................................... 39
7.5.2. Solvency................................................. 40
7.6. Franchises, Patents, Copyrights, etc................................ 40
7.7. Litigation.......................................................... 40
7.8. No Materially Adverse Contracts, etc................................ 40
7.9. Compliance with Other Instruments, Laws, etc........................ 40
7.10. Tax Status......................................................... 41
7.11. No Event of Default................................................ 41
7.12. Holding Company and Investment Company Acts........................ 41
7.13. Absence of Financing Statements, etc............................... 41
7.14. Insurance.......................................................... 41
7.15. Certain Transactions............................................... 41
7.16. Employee Benefit Plans............................................. 42
7.16.1. In General.............................................. 42
7.16.2. Terminability of Welfare Plans.......................... 42
7.16.3. Guaranteed Pension Plans................................ 42
7.16.4. Multiemployer Plans..................................... 43
7.17. Regulations U and X................................................ 43
7.18. Environmental Compliance........................................... 43
7.19. Subsidiaries....................................................... 44
7.20. Fiscal Year........................................................ 45
7.21. Disclosure......................................................... 45
</TABLE>
<PAGE> 4
-iii-
<TABLE>
<S> <C>
8. AFFIRMATIVE COVENANTS OF THE BORROWERS......................................... 45
8.1. Punctual Payment.................................................... 45
8.2. Maintenance of Office............................................... 45
8.3. Records and Accounts................................................ 45
8.4. Financial Statements, Certificates and Information.................. 45
8.5. Notices............................................................. 47
8.5.1. Defaults................................................. 47
8.5.2. Environmental Events..................................... 47
8.5.3. Notice of Litigation and Judgments....................... 47
8.6. Corporate Existence; Maintenance of Properties...................... 48
8.7. Insurance........................................................... 48
8.8. Taxes............................................................... 48
8.9. Inspection of Properties and Books, etc............................. 49
8.10. Compliance with Laws, Contracts, Licenses, and Permits............. 49
8.11. Employee Benefit Plans............................................. 49
8.12. Use of Proceeds.................................................... 49
8.13. Further Assurances................................................. 49
8.14. Securitization Arrangements........................................ 50
9. CERTAIN NEGATIVE COVENANTS OF THE BORROWERS.................................... 50
9.1. Restrictions on Indebtedness........................................ 50
9.2. Restrictions on Liens............................................... 52
9.3. Restrictions on Investments......................................... 53
9.4. Distributions....................................................... 54
9.5. Merger, Consolidation and Disposition of Assets..................... 54
9.5.1. Mergers and Acquisitions................................. 54
9.5.2. Disposition of Assets.................................... 54
9.6. Sale and Leaseback.................................................. 54
9.7. Compliance with Environmental Laws.................................. 55
9.8. Employee Benefit Plans.............................................. 55
9.9. Fiscal Year......................................................... 55
9.10. Modification of Documents.......................................... 55
9.11. Negative Pledges................................................... 56
9.12. Transactions with Affiliates....................................... 56
9.13. Upstream Limitations............................................... 56
9.14. Rental Obligations................................................. 56
10. FINANCIAL COVENANTS OF THE BORROWERS.......................................... 56
10.1. Fixed Charge Coverage Ratio........................................ 57
10.2. Capital Expenditures............................................... 57
10.3. Total Funded Indebtedness to EBITDA................................ 57
10.4. Minimum Net Worth.................................................. 58
10.5. EBIT to Interest Ratio............................................. 58
11. CLOSING CONDITIONS............................................................ 58
11.1. Loan Documents..................................................... 58
11.2. Certified Copies of Charter Documents.............................. 58
11.3. Corporate Action................................................... 58
11.4. Incumbency Certificate............................................. 59
11.5. UCC Search Results................................................. 59
11.6. Certificates of Insurance.......................................... 59
11.7. Solvency Certificate............................................... 59
</TABLE>
<PAGE> 5
-iv-
<TABLE>
<S> <C>
11.8. Opinion of Counsel................................................. 59
11.9. Payment of Fees.................................................... 59
11.10. Disbursement Instructions......................................... 59
11.11. Completion of IPO................................................. 59
11.12. TJX Documents..................................................... 60
11.13. Capitalization; Repayment of Indebtedness......................... 60
11.14. Securitization Arrangements....................................... 60
11.15. Environmental Due Diligence....................................... 60
11.16. Consents and Approvals............................................ 60
12. CONDITIONS TO ALL BORROWINGS.................................................. 60
12.1. Representations True; No Event of Default.......................... 60
12.2. No Legal Impediment................................................ 61
12.3. Governmental Regulation............................................ 61
12.4. Proceedings and Documents.......................................... 61
13. EVENTS OF DEFAULT; ACCELERATION; ETC.......................................... 61
13.1. Events of Default and Acceleration................................. 61
13.2. Termination of Commitments......................................... 65
13.3. Remedies........................................................... 65
13.4. Distribution of Proceeds........................................... 65
14. SETOFF........................................................................ 66
15. THE AGENTS.................................................................... 67
15.1. Authorization...................................................... 67
15.2. Employees and Agents............................................... 67
15.3. No Liability....................................................... 68
15.4. No Representations................................................. 68
15.5. Payments........................................................... 68
15.5.1. Payments to Administrative Agent........................ 68
15.5.2. Distribution by Administrative Agent.................... 68
15.5.3. Delinquent Banks........................................ 69
15.6. Holders of Notes................................................... 69
15.7. Indemnity.......................................................... 70
15.8. Agents as Bank..................................................... 70
15.9. Resignation........................................................ 70
15.10. Notification of Defaults and Events of Default.................... 70
16. EXPENSES...................................................................... 70
17. INDEMNIFICATION............................................................... 71
18. SURVIVAL OF COVENANTS, ETC.................................................... 72
19. ASSIGNMENT AND PARTICIPATION.................................................. 72
19.1. Conditions to Assignment by Banks.................................. 72
19.2. Certain Representations and Warranties; Limitations; Covenants..... 73
19.3. Register........................................................... 74
19.4. New Notes.......................................................... 74
19.5. Participations..................................................... 75
19.6. Disclosure......................................................... 75
19.7. Assignee or Participant Affiliated with the Borrowers.............. 76
19.8. Miscellaneous Assignment Provisions................................ 77
19.9. Assignment by Borrowers............................................ 77
20. NOTICES, ETC.................................................................. 77
21. GOVERNING LAW................................................................. 78
</TABLE>
<PAGE> 6
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<TABLE>
<S> <C>
22. HEADINGS...................................................................... 78
23. COUNTERPARTS.................................................................. 78
24. ENTIRE AGREEMENT, ETC......................................................... 79
25. WAIVER OF JURY TRIAL.......................................................... 79
26. CONSENTS, AMENDMENTS, WAIVERS, ETC............................................ 79
27. SEVERABILITY.................................................................. 80
</TABLE>
EXHIBITS AND SCHEDULES
Exhibit A Form of Revolving Credit Note
Exhibit B Form of Loan Request
Exhibit C Form of Term Note
Exhibit D Form of Compliance Certificate
Exhibit E Form of Assignment and Acceptance
Exhibit F Form of Guaranty
Schedule 1 Banks; Commitments
Schedule 7.3 Title to Properties
Schedule 7.7 Litigation
Schedule 7.14 Insurance
Schedule 9.1 Existing Indebtedness
Schedule 9.2 Existing Liens
Schedule 9.3 Existing Investments
<PAGE> 7
REVOLVING CREDIT
AND
TERM LOAN AGREEMENT
This REVOLVING CREDIT AND TERM LOAN AGREEMENT is made as of July __,
1996, by and among (a) (i) CHADWICK'S OF BOSTON, LTD. ("Chadwick's of Boston"),
a Delaware corporation having its principal place of business at 35 United
Drive, West Bridgewater, Massachusetts 02379 and (ii) CHADWICK'S, INC., a
Massachusetts corporation having a principal place of business at 35 United
Drive, West Bridgewater, Massachusetts 02379 ("Chadwick's", and together with
Chadwick's of Boston, the "Borrowers", each individually a "Borrower"), (b) THE
FIRST NATIONAL BANK OF BOSTON ("FNBB"), a national banking association, THE
FIRST NATIONAL BANK OF CHICAGO ("FNBC"), a national banking association, and the
other lending institutions listed on Schedule 1, (c) THE FIRST NATIONAL BANK OF
BOSTON as administrative agent and co-syndication agent for itself and such
other lending institutions, (d) THE FIRST NATIONAL BANK OF CHICAGO as
documentation agent for itself and such other lending institutions, (e) THE
FIRST NATIONAL BANK OF BOSTON and THE FIRST NATIONAL BANK OF CHICAGO as issuing
banks with respect to letters of credit, and (f) FIRST CHICAGO CAPITAL MARKETS,
INC., as co-syndication agent for the lending institutions.
1. DEFINITIONS AND RULES OF INTERPRETATION.
1.1. DEFINITIONS.
The following terms shall have the meanings set forth in this Section 1
or elsewhere in the provisions of this Credit Agreement referred to below:
Adjustment Date. The fifth day following the date on which a Compliance
Certificate is to be delivered by the Borrowers to the Administrative Agent
pursuant to Section 8.4(c) hereof.
Administrative Agent. FNBB in its capacity as administrative agent for
the Banks or any successor thereto appointed pursuant to Section 15.9 hereof.
Administrative Agent's Head Office. The Administrative Agent's head
office located at 100 Federal Street, Boston, Massachusetts 02110, or at such
other location as the Administrative Agent may designate from time to time.
Affected Bank. See Section 6.12.
Affiliate. With respect to any Person, any other Person directly or
indirectly controlling, controlled by or under common control with such Person.
A Person shall be deemed to control another person if the controlling Person
owns 10% or more of any class of voting securities (or other ownership
interests) of the controlled Person or possesses, directly or indirectly, the
power to direct or cause the direction of the management or policies of the
controlled Person whether through ownership of stock, by contract or otherwise.
<PAGE> 8
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Agents. The collective reference to the Administrative Agent, the
Documentation Agent and the Co-Syndication Agents.
Agents' Special Counsel. Bingham, Dana & Gould LLP or such other
counsel as may be approved by the Agents.
Applicable Margin. For each period commencing on an Adjustment Date
through the date immediately preceding the next Adjustment Date (each a "Rate
Adjustment Period"), the Applicable Margin shall be the applicable margin set
forth below with respect to the Borrowers' EBIT to Interest Ratio as determined
for the period (determined in the manner required by Section 10.5 for
determining compliance with the EBIT to Interest Ratio) ending with the fiscal
quarter ended immediately preceding the applicable Rate Adjustment Period.
<TABLE>
<CAPTION>
Stand-By
Letter of
Base Rate LIBOR Credit Commit-
EBIT to Interest Loans Rate Fees ment Documentary
Level Ratio ----- Loans ---- Fee L/C Fees
- ----- ----- ----- --- --------
<S> <C> <C> <C> <C> <C> <C>
1 Less than or equal to .25% 2.25% 2.25% 0.50% 1.50%
3.00:1.00
- ----------------------------------------------------------------------------------------------------------------
Less than or equal to
2 4.00:1.00 but greater than 0% 1.75% 1.75% 0.375% 1.25%
3.00:1.00
- ----------------------------------------------------------------------------------------------------------------
Less than or equal to
3 5.00:1.00 but greater than 0% 1.50% 1.50% 0.375% 1.00%
4.00:1.00
- ----------------------------------------------------------------------------------------------------------------
Less than or equal to
4 6.00:1.00 but greater than 0 1.25% 1.25% 0.25% .875%
5.00:1.00
- ----------------------------------------------------------------------------------------------------------------
5 Greater than 6.00 to 1.00 0% 1.00% 1.00% 0.25% .750%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Notwithstanding the foregoing, (a) for Loans outstanding, the Letter of
Credit Fees and the Commitment Fees payable during the period commencing on the
Closing Date through the first Adjustment Date to occur following the Closing
Date, the Applicable Margin shall be the Applicable Margin set forth in Level 3
above, and thereafter, through the date immediately preceding the first
Adjustment Date to occur after April 30, 1997, the Applicable Margin shall be at
a minimum the Applicable Margin set forth in level 3 above, and thereafter the
Applicable Margin shall adjust downward by no more than one level per Rate
Adjustment Period, and (b) if the Borrowers fail to deliver any Compliance
Certificate pursuant to Section 8.4(c) hereof then, for the period commencing on
the next Adjustment Date to occur subsequent to such failure through the date
immediately following the date on which such Compliance Certificate is
delivered, the Applicable Margin shall be the highest Applicable Margin set
forth above.
Assignment and Acceptance. See Section 19.1.
<PAGE> 9
-3-
Balance Sheet Date. January 27, 1996.
Banks. FNBB, FNBC and the other lending institutions listed on Schedule
1 hereto and any other Person who becomes an assignee of any rights and
obligations of a Bank pursuant to Section 19.
Base Rate. The higher of (a) the annual rate of interest announced from
time to time by FNBB at its head office in Boston, Massachusetts, as its "base
rate" and (b) one-half of one percent (1/2%) above the Federal Funds Effective
Rate. For the purposes of this definition, "Federal Funds Effective Rate" shall
mean for any day, the rate per annum 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, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day that
is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three funds brokers of
recognized standing selected by the Administrative Agent.
Base Rate Loans. Revolving Credit Loans and all or any portion of the
Term Loan bearing interest calculated by reference to the Base Rate.
Borrowers. As defined in the preamble hereto.
Business Day. Any day on which banking institutions in Boston,
Massachusetts, and Chicago, Illinois, are generally open for the transaction of
banking business, other than a Saturday or Sunday, and, in the case of LIBOR
Rate Loans, also a day which is a LIBOR Business Day.
Capital Assets. Fixed assets, both tangible (such as land, buildings,
fixtures, machinery and equipment) and intangible (such as patents, copyrights,
trademarks, franchises and good will); provided that Capital Assets shall not
include any item customarily charged directly to expense or depreciated over a
useful life of twelve (12) months or less in accordance with generally accepted
accounting principles.
Capital Expenditures. Amounts paid or indebtedness incurred by the
Borrowers or any of their Subsidiaries in connection with the purchase or lease
by the Borrowers or any of their Subsidiaries of Capital Assets that would be
required to be capitalized and shown on the balance sheet of such Person in
accordance with generally accepted accounting principles.
Capitalized Leases. Leases under which the Borrowers or any of their
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are required to be capitalized on the balance sheet of
the lessee or obligor in accordance with generally accepted accounting
principles.
CDM. CDM Corp., a Nevada corporation and subsidiary of Chadwick's.
CERCLA. See Section 7.18.
<PAGE> 10
-4-
Chadwick's. See preamble.
Chadwick's Receivable Funding Corporation. The special purpose
wholly-owned subsidiary of Chadwick's which may be formed after the date hereof
for the purpose of effecting the Securitization Arrangements.
Chadwick's of Boston. See preamble.
Closing Date. The first date on which the conditions set forth in
Section 11 have been satisfied and any Revolving Credit Loans and the Term Loan
are to be made or any Letter of Credit is to be issued hereunder.
Code. The Internal Revenue Code of 1986.
Commitment. With respect to each Bank, the amount set forth on Schedule
1 hereto as the amount of such Bank's commitment to make Revolving Credit Loans
to, and to participate in the issuance, extension and renewal of Letters of
Credit for the account of, the Borrowers, as the same may be reduced from time
to time; or if such commitment is terminated pursuant to the provisions hereof,
zero.
Commitment Fee Rate. The rate per annum set forth in the chart
contained in the definition of Applicable Margin under the heading "Commitment
Fee."
Commitment Percentage. With respect to each Bank, the percentage set
forth on Schedule 1 hereto as such Bank's percentage of the aggregate
Commitments of all of the Banks, and with respect to the Term Loan, the
percentage amount set forth on Schedule 1 of such Bank's commitment to make the
Term Loan.
Compliance Certificate. See Section 8.4(c).
Confidential Information. See Section 19.6
Consolidated or consolidated. With reference to any term defined
herein, shall mean that term as applied to the accounts of the Borrowers and
their Subsidiaries, consolidated in accordance with generally accepted
accounting principles.
Consolidated EBIT. For any period, an amount equal to the sum of (a)
Consolidated Net Income for such period, plus (b) Consolidated Total Interest
Expense deducted in arriving at Consolidated Net Income for such period, plus
(c) consolidated income tax expense for such period.
Consolidated EBITDA. For any period, an amount equal to (a) the sum of
Consolidated Net Income for such period, plus (b) Consolidated Total Interest
Expense deducted in arriving at Consolidated Net Income for such period, plus
(c) consolidated income tax expense for such period, plus (d) depreciation and
amortization for such period.
Consolidated Net Income. The consolidated net income (or deficit) of
the Borrowers and their Subsidiaries, after deduction of all expenses, taxes,
and other proper charges, determined in accordance with generally accepted
accounting principles after eliminating therefrom all extraordinary nonrecurring
items of income or expense.
<PAGE> 11
-5-
Consolidated Net Worth. The excess of Consolidated Total Assets over
Consolidated Total Liabilities, less, to the extent otherwise includable in the
computation of Consolidated Net Worth, any subscriptions receivable.
Consolidated Total Assets. All assets of the Borrowers and their
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles.
Consolidated Total Debt Service. For any period of four consecutive
fiscal quarters (or such shorter period as has elapsed from the beginning of the
Borrowers' 1997 fiscal year), an amount equal to the sum of (i) Consolidated
Total Interest Expense for such period, plus (ii) mandatory scheduled repayments
of principal on Total Funded Indebtedness due and payable in the
four-fiscal-quarter period commencing at the end of such period.
Consolidated Total Interest Expense. For any period, the aggregate
amount of interest required to be paid or accrued by the Borrowers and their
Subsidiaries during such period, all determined in accordance with generally
accepted accounting principles.
Consolidated Total Liabilities. All liabilities of the Borrowers and
their Subsidiaries determined on a consolidated basis in accordance with
generally accepted accounting principles.
Conversion Request. A notice given by the Borrowers to the
Administrative Agent of the Borrowers' election to convert or continue a Loan in
accordance with Section 2.7.
Co-Syndication Agents. Collectively, FNBB and FCCM, in their capacity
as Co-Syndication Agents, and individually, either of them.
Credit Agreement. This Revolving Credit and Term Loan Agreement,
including the Schedules and Exhibits hereto.
CRFC. Chadwick's Receivable Funding Corporation.
Default. See Section 13.1.
Distribution. The declaration or payment of any dividend on or in
respect of any shares of any class of capital stock of a Person, other than
dividends payable solely in shares of common stock of such Person; the purchase,
redemption, or other retirement of any shares of any class of capital stock of
such Person, directly or indirectly through a Subsidiary or otherwise; the
return of capital by a Person to its shareholders as such; or any other
distribution on or in respect of any shares of any class of capital stock of a
Person.
Documentation Agent. FNBC, in its capacity as documentation agent for
the Banks.
Dollars or $. Dollars in lawful currency of the United States of
America.
Domestic Lending Office. Initially, the office of each Bank designated
as such in Schedule 1 hereto; thereafter, such other office of such Bank, if
any, located within the United States that will be making or maintaining Base
Rate Loans.
<PAGE> 12
-6-
Drawdown Date. The date on which any Revolving Credit Loan or the Term
Loan is made or is to be made, and the date on which any Revolving Credit Loan
is converted or continued in accordance with Section 2.7 or all or any portion
of the Term Loan is converted or continued in accordance with Section 4.5.2.
EBIT to Interest Ratio. The ratio of Consolidated EBIT to Consolidated
Total Interest Expense.
Eligible Assignee. Any of (a) a commercial bank or finance company
organized under the laws of the United States, or any State thereof or the
District of Columbia, and having total assets in excess of $1,000,000,000; (b) a
savings and loan association or savings bank organized under the laws of the
United States, or any State thereof or the District of Columbia, and having a
net worth of at least $100,000,000, calculated in accordance with generally
accepted accounting principles; (c) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having total assets in excess of $1,000,000,000, provided that such
bank is acting through a branch or agency located in or which is managed or
controlled from the country in which it is organized or another country which is
also a member of the OECD; (d) the central bank of any country which is a member
of the OECD; (e) any entity which at the relevant time of reference is already a
Bank hereunder, and (f) if, but only if, any Event of Default has occurred and
is continuing, any other bank, insurance company, commercial finance company or
other financial institution or other Person approved by the Agents, such
approval not to be unreasonably withheld.
Employee Benefit Plan. Any employee benefit plan within the meaning of
Section 3(3) of ERISA maintained or contributed to by either of the Borrowers or
any ERISA Affiliate, other than a Multiemployer Plan.
Environmental Laws. See Section 7.18(a).
ERISA. The Employee Retirement Income Security Act of 1974.
ERISA Affiliate. Any Person which is treated as a single employer with
either of the Borrowers under Section 414 of the Code.
ERISA Reportable Event. A reportable event with respect to a Guaranteed
Pension Plan or an Employee Benefit Plan within the meaning of Section 4043 of
ERISA and the regulations promulgated thereunder as to which the requirement of
notice has not been waived.
Eurocurrency Reserve Rate. For any day with respect to a LIBOR Rate
Loan, the maximum rate (expressed as a decimal) at which any lender subject
thereto would be required to maintain reserves under Regulation D of the Board
of Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D), if such liabilities were
outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on
and as of the effective date of any change in the Eurocurrency Reserve Rate.
<PAGE> 13
-7-
Event of Default. See Section 13.1.
FCCM. First Chicago Capital Markets, Inc., a Delaware corporation.
Fixed Charge Coverage Ratio. The ratio of Consolidated EBITDA to
Consolidated Total Debt Service.
FNBB. The First National Bank of Boston, a national banking
association, in its individual capacity.
FNBC. The First National Bank of Chicago, a national banking
association, in its individual capacity.
generally accepted accounting principles. (a) When used in Section 10,
whether directly or indirectly through reference to a capitalized term used
therein, means (i) principles that are consistent with the principles
promulgated or adopted by the Financial Accounting Standards Board and its
predecessors, in effect for the fiscal year ended on the Balance Sheet Date, and
(ii) to the extent consistent with such principles, the accounting practice of
the Borrowers reflected in their financial statements for the year ended on the
Balance Sheet Date, and (b) when used in general, other than as provided above,
means principles that are (i) consistent with the principles promulgated or
adopted by the Financial Accounting Standards Board and its predecessors, as in
effect from time to time, and (ii) consistently applied with past financial
statements of the Borrowers adopting the same principles, provided that in each
case referred to in this definition of "generally accepted accounting
principles" a certified public accountant would, insofar as the use of such
accounting principles is pertinent, be in a position to deliver an unqualified
opinion (other than a qualification regarding changes in generally accepted
accounting principles) as to financial statements in which such principles have
been properly applied.
Guaranteed Pension Plan. Any employee pension benefit plan within the
meaning of Section 3(2) of ERISA maintained or contributed to by the Borrowers
or any ERISA Affiliate the benefits of which are guaranteed on termination in
full or in part by the PBGC pursuant to Title IV of ERISA, other than a
Multiemployer Plan.
Guaranty. The guaranty pursuant to which CDM guarantees the
Obligations, in substantially the form of Exhibit F hereto.
Hazardous Substances. See Section 7.18(b).
Indebtedness. All obligations, contingent and otherwise, that in
accordance with generally accepted accounting principles should be classified
upon the Borrowers' consolidated balance sheets as liabilities, including in any
event and whether or not so classified: (a) all debt and similar monetary
obligations, whether direct or indirect; (b) all liabilities secured by any
mortgage, pledge, security interest, lien, charge or other encumbrance existing
on property owned or acquired subject thereto, whether or not the liability
secured thereby shall have been assumed; (c) all obligations of the Borrowers or
their Subsidiaries in connection with the Securitization Arrangements whether or
not the Securitization Arrangements would otherwise constitute Indebtedness
under this definition; (d) the maximum fixed repurchase price of any Redeemable
Stock (payable upon the
<PAGE> 14
-8-
occurrence of any contingency or otherwise); (e) Off Balance Sheet Liabilities;
and (f) all guarantees, endorsements and other contingent obligations whether
direct or indirect in respect of indebtedness of others, including any
obligation to supply funds to or in any manner to invest in, directly or
indirectly, the debtor, to purchase indebtedness, or to assure the owner of
indebtedness against loss, through an agreement to purchase goods, supplies, or
services for the purpose of enabling the debtor to make payment of the
indebtedness held by such owner or otherwise, and the obligations to reimburse
the issuer in respect of any letters of credit.
Intercompany Indebtedness. All Indebtedness whether now existing or
hereafter arising from: (i) a Subsidiary of the Borrowers to either Borrower;
(ii) a Borrower to a Subsidiary of the Borrowers or (iii) a Borrower to a
Borrower.
Interest Payment Date. (a) As to any Base Rate Loan, the last day of
the calendar month which includes the Drawdown Date thereof; and (b) as to any
LIBOR Rate Loan in respect of which the Interest Period is (i) three (3) months
or less, the last day of such Interest Period and (ii) more than three (3)
months, the date that is three (3) months from the first day of such Interest
Period and, in addition, the last day of such Interest Period.
Interest Period. With respect to each Revolving Credit Loan or all or
any relevant portion of the Term Loan, (a) initially, the period commencing on
the Drawdown Date of such Loan and ending on the last day of one of the periods
set forth below, as selected by the Borrowers in a Loan Request (i) for any Base
Rate Loan, the last day of the calendar month and (ii) for any LIBOR Rate Loan,
1, 2, 3, 4, 5, or 6 months; and (b) thereafter, each period commencing on the
last day of the next preceding Interest Period applicable to such Revolving
Credit Loan or all or such portion of the Term Loan and ending on the last day
of one of the periods set forth above, as selected by the Borrowers in a
Conversion Request; provided that all of the foregoing provisions relating to
Interest Periods are subject to the following:
(a) if any Interest Period with respect to a LIBOR Rate Loan
would otherwise end on a day that is not a LIBOR Business Day, that
Interest Period shall be extended to the next succeeding LIBOR Business
Day unless the result of such extension would be to carry such Interest
Period into another calendar month, in which event such Interest Period
shall end on the immediately preceding LIBOR Business Day;
(b) if any Interest Period with respect to a Base Rate Loan would
end on a day that is not a Business Day, that Interest Period shall end
on the next succeeding Business Day;
(c) if the Borrowers shall fail to give notice as provided in
Section 2.7, the Borrowers shall be deemed to have requested a
conversion of the affected or LIBOR Rate Loan to a Base Rate Loan and
the continuance of all Base Rate Loans as Base Rate Loans on the last
day of the then current Interest Period with respect thereto;
(d) any Interest Period relating to any LIBOR Rate Loan that
begins on the last LIBOR Business Day of a calendar month (or on a day
for which there is no
<PAGE> 15
-9-
numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last LIBOR Business Day of a calendar
month; and
(e) any Interest Period relating to any LIBOR Rate Loan that
would otherwise extend beyond the Revolving Credit Loan Maturity Date
(if comprising a Revolving Credit Loan) or the Term Loan Maturity Date
(if comprising the Term Loan or a portion thereof) shall end on the
Revolving Credit Loan Maturity Date or (as the case may be) the Term
Loan Maturity Date.
Inventory Purchase Agreement. The Inventory Purchase Agreement dated or
to be dated on or prior to the Closing Date between Chadwick's and TJX, which
agreement shall be in form and substance satisfactory to the Banks.
Investments. All expenditures made and all liabilities incurred
(contingently or otherwise) for the acquisition of stock or Indebtedness of, or
for loans, advances, capital contributions or transfers of property to, or in
respect of any guaranties (or other commitments as described under
Indebtedness), or obligations of, any Person. In determining the aggregate
amount of Investments outstanding at any particular time: (a) the amount of any
Investment represented by a guaranty shall be taken at not less than the amount
of the obligations guaranteed and still outstanding; (b) there shall be included
as an Investment all interest accrued with respect to Indebtedness constituting
an Investment unless and until such interest is paid; (c) there shall be
deducted in respect of each such Investment any amount received as a return of
capital (but only by repurchase, redemption, retirement, repayment, liquidating
dividend or liquidating distribution); (d) there shall not be deducted in
respect of any Investment any amounts received as earnings on such Investment,
whether as dividends, interest or otherwise, except that accrued interest
included as provided in the foregoing clause (b) may be deducted when paid; and
(e) there shall not be deducted from the aggregate amount of Investments any
decrease in the value thereof.
Issuing Bank. Each of FNBB and FNBC, acting in its capacity as Letter
of Credit issuer.
Letter of Credit. See Section 5.1.1.
Letter of Credit Fee. See Section 5.6.
Letter of Credit Application. See Section 5.1.1.
Letter of Credit Participation. See Section 5.1.4.
LIBOR Business Day. Any day on which commercial banks are open for
international business (including dealings in Dollar deposits) in London.
LIBOR Lending Office. Initially, the office of each Bank designated as
such in Schedule 1 hereto; thereafter, such other office of such Bank, if any,
that shall be making or maintaining LIBOR Rate Loans.
<PAGE> 16
-10-
LIBOR Rate. For any Interest Period with respect to a LIBOR Rate Loan,
the rate of interest equal to (a) the rate determined by the Administrative
Agent at which Dollar deposits for such Interest Period are offered based on
information presented on Telerate Page 3750 as of 11:00 a.m. London time on the
second LIBOR Business Day prior to the first day of such Interest Period,
divided by (b) a number equal to 1.00 minus the Eurocurrency Reserve Rate, if
applicable.
LIBOR Rate Loans. Revolving Credit Loans and all or any portion of the
Term Loan bearing interest calculated by reference to the LIBOR Rate.
Loan Documents. This Credit Agreement, the Notes, the Letter of Credit
Applications, the Letters of Credit, the Guaranty and any and all other
documents, instruments or agreements executed and/or delivered in connection
therewith.
Loan Request. See Section 2.6.
Loans. The Revolving Credit Loans and the Term Loan.
Majority Banks. As of any date, the Banks holding at least fifty-one
percent (51%) of the outstanding principal amount of the Notes on such date; and
if no such principal is outstanding, the Banks whose aggregate Commitments
constitute at least fifty-one percent (51%) of the Total Commitment.
Maximum Drawing Amount. The maximum aggregate amount that the
beneficiaries may at any time draw under outstanding Letters of Credit, as such
aggregate amount may be reduced from time to time pursuant to the terms of the
Letters of Credit.
Multiemployer Plan. Any multiemployer plan within the meaning of
Section 3(37) of ERISA maintained or contributed to by the Borrowers or any
ERISA Affiliate.
Notes. The Term Notes and the Revolving Credit Notes.
Obligations. All indebtedness, obligations and liabilities of either of
the Borrowers and any of their Subsidiaries to any of the Banks, the Issuing
Banks and the Agents, individually or collectively, existing on the date of this
Credit Agreement or arising thereafter, direct or indirect, joint or several,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
secured or unsecured, arising by contract, operation of law or otherwise,
arising or incurred under this Credit Agreement or any of the other Loan
Documents or in respect of any of the Loans made or Reimbursement Obligations
incurred or any of the Notes, Letter of Credit Applications, Letters of Credit
or other instruments at any time evidencing any thereof.
Off Balance Sheet Liabilities. All indebtedness, obligations and
liabilities of either of the Borrowers and their Subsidiaries with respect to
any of: (a) any repurchase obligation or liability with respect to accounts or
notes receivable sold by either of the Borrowers and their Subsidiaries other
than with respect to the Securitization Arrangements; (b) any repurchase
obligation or liability of either of the Borrowers and their Subsidiaries with
respect to leased property; (c) obligations arising with respect to any other
transaction which is the functional equivalent of or takes the place of
borrowing but which does not
<PAGE> 17
-11-
constitute a liability on the consolidated balance sheets of the Borrowers
excluding therefrom (i) operating leases which do not require payment by or due
from the Borrowers or their Subsidiaries: (x) at the scheduled termination of
such operating lease, (y) pursuant to a required purchase by the Borrowers or
their Subsidiaries of the leased property, or (z) under any guaranty by the
Borrowers or their Subsidiaries of the value of the leased property and (ii)
bankers acceptances which, in accordance with generally accepted accounting
principles, are classified as accounts payable; or (d) Rate Hedging Obligations.
Outstanding. With respect to the Loans, the aggregate unpaid principal
thereof as of any date of determination.
PBGC. The Pension Benefit Guaranty Corporation created by Section 4002
of ERISA and any successor entity or entities having similar responsibilities.
Permitted Distributions. See Section 4.3.2.
Permitted Liens. Liens, security interests and other encumbrances
permitted by Section 9.2.
Permitted Sales. See Section 4.3.2.
Person. Any individual, corporation, partnership, trust, unincorporated
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.
Rate Hedging Obligations. Any and all net obligations of the Borrowers
and their Subsidiaries, whether absolute or contingent and howsoever and
whensoever created, arising, evidenced or acquired (including all renewals,
extensions and modifications thereof and substitutions therefor), under (i) any
and all agreements, devices or arrangements designed to protect at least one of
the parties thereto from the fluctuations of interest rates, exchange rates or
forward rates applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, dollar-denominated or
cross-currency interest rate exchange agreements, forward rate currency or
interest rate options, puts and warrants, or any similar derivative transactions
and (ii) any and all cancellations, buy backs, reversals, terminations or
assignments of any of the foregoing.
Real Estate. All real property at any time owned or leased (as lessee
or sublessee) by either of the Borrowers or any of their Subsidiaries.
Record. The grid attached to a Note, or the continuation of such grid,
or any other similar record, including computer records, maintained by any Bank
with respect to any Loan referred to in such Note.
Redeemable Stock. Any capital stock of the Borrowers or any of their
Subsidiaries which by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, in whole or in part, prior to the
maturity of the Obligations (including any extensions thereof contemplated by
this Credit Agreement), or is, by its terms or upon the happening of any event,
redeemable at the option of the holder thereof, in whole or in part,
<PAGE> 18
-12-
prior to the maturity of the Obligations (including any extensions thereof
contemplated by this Credit Agreement).
Registration Rights Agreement. The Registration Rights Agreement dated
or to be dated on or prior to the Closing Date between Chadwick's of Boston and
TJX, which agreement shall be in form and substance satisfactory to the Banks.
Registration Statement. The registration statement on Form S-1
substantially in the form filed by Chadwick's of Boston with the Securities and
Exchange Commission on May 24, 1996.
Reimbursement Obligation. The Borrowers' obligation to reimburse the
applicable Issuing Bank and the Banks on account of any drawing under any Letter
of Credit as provided in Section 5.2.
Rental Obligations. All present or future obligations of either of the
Borrowers or any of their Subsidiaries under any rental agreements or leases of
real property, other than (i) obligations that can be terminated by the giving
of notice without liability to such Borrower or such Subsidiary in excess of the
liability for rent due as of the date on which such notice is given and under
which no penalty or premium is paid as a result of any such termination, and
(ii) obligations in respect of Capitalized Leases.
Revolving Credit Loan Maturity Date. July __, 1999.
Revolving Credit Loans. Revolving credit loans made or to be made by
the Banks to the Borrowers pursuant to Section 2.
Revolving Credit Note Record. A Record with respect to a Revolving
Credit Note.
Revolving Credit Notes. See Section 2.4.
Securitization Arrangements. The deferred billing receivables
securitization arrangement among Chadwick's, CRFC, Market Street Funding
Corporation and PNC Bank, National Association providing up to $90,000,000 of
financing related to such deferred billing receivables.
Securitization Documents. The Receivables Purchase Agreement, the
Purchase and Contribution Agreement and the Liquidity Asset Purchase Agreement,
in each case in substantially the form approved by the Majority Banks prior to
the effectiveness of the Securitization Arrangements.
Services Agreement. The Services Agreement dated or to be dated on or
prior to the Closing Date between Chadwick's of Boston and TJX, which agreement
shall be in form and substance satisfactory to the Banks.
Stock Option Plan. Any plan of Chadwick's of Boston or any of its
Subsidiaries whether now or hereafter adopted providing for the issuance of
shares of the capital stock of Chadwick's of Boston upon the exercise of options
or any other right to purchase such capital stock.
<PAGE> 19
-13-
Stock Sales. See Section 4.3.2.
Subsidiary. Any corporation, association, trust, or other business
entity of which the designated parent shall at any time own directly or
indirectly through a Subsidiary or Subsidiaries at least a majority (by number
of votes) of the outstanding Voting Stock.
Tax Sharing Agreement. The Tax Sharing and Separation Agreement dated
or to be dated on or prior to the Closing Date among the Borrowers and TJX,
which agreement shall be in form and substance satisfactory to the Banks.
Term Loan. The term loan made or to be made by the Banks to the
Borrowers on the Closing Date in the aggregate principal amount of
$30,000,000.00 pursuant to Section 4.1.
Term Loan Maturity Date. July __, 1999.
Term Notes. See Section 4.2.
Term Note Record. A Record with respect to a Term Note.
TJX. The TJX Companies, Inc., a Delaware corporation.
TJX Documents. Collectively, the Registration Rights Agreement, the
Services Agreement, the Inventory Purchase Agreement, the Tax Sharing Agreement,
the Trademark Licenses Agreement and the
Transfer Agreement.
Total Commitment. The sum of the Commitments of the Banks, as in effect
from time to time.
Total Funded Indebtedness. As at any date of determination, without
duplication, the sum of all outstanding Indebtedness in respect of borrowed
money, the deferred purchase price of assets, Capitalized Leases, contingent
liabilities in respect of Letters of Credit and guaranties, but excluding
nonrecourse Indebtedness in respect of the Securitization Arrangements.
Trademark Licenses Agreement. The Trademark License Agreements and
Trademark License and Assignment Agreement dated or to be dated on or prior to
the Closing Date each between Chadwick's of Boston and TJX, which agreements
shall be in form and substance satisfactory to the Banks.
Transfer Agreement. The Transfer Agreement dated or to be dated on or
prior to the Closing Date among the Borrowers and TJX, which agreement shall be
in form and substance satisfactory to the Banks.
Type. As to any Revolving Credit Loan or all or any portion of the Term
Loan, its nature as a Base Rate Loan or a LIBOR Rate Loan.
Uniform Customs. With respect to any Letter of Credit, the Uniform
Customs and Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500 or any successor version thereto adopted
by the Administrative Agent
<PAGE> 20
-14-
in the ordinary course of its business as a letter of credit issuer and in
effect at the time of issuance of such Letter of Credit.
Unpaid Reimbursement Obligation. Any Reimbursement Obligation for which
the Borrowers do not reimburse the applicable Issuing Bank and the Banks on the
date specified in, and in accordance with, Section 5.2(a)(i), Section 5.2(b) or,
as the case may be, Section 5.2(c).
Voting Stock. Stock or similar interests, of any class or classes
(however designated), the holders of which are at the time entitled, as such
holders, to vote for the election of a majority of the directors (or persons
performing similar functions) of the corporation, association, trust or other
business entity involved, whether or not the right so to vote exists by reason
of the happening of a contingency.
1.2 RULES OF INTERPRETATION.
(a) A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented from time to
time in accordance with its terms and the terms of this Credit
Agreement.
(b) The singular includes the plural and the plural includes the
singular.
(c) A reference to any law includes any rules and regulations
issued or promulgated in connection therewith and any amendment or
modification to such law.
(d) A reference to any Person includes its permitted successors
and permitted assigns.
(e) Accounting terms not otherwise defined herein have the
meanings assigned to them by generally accepted accounting principles
applied on a consistent basis by the accounting entity to which they
refer.
(f) The words "include", "includes" and "including" are not
limiting.
(g) All terms not specifically defined herein or by generally
accepted accounting principles, which terms are defined in the Uniform
Commercial Code as in effect in the Commonwealth of Massachusetts, have
the meanings assigned to them therein, with the term "instrument" being
that defined under Article 9 of the Uniform Commercial Code.
(h) Reference to a particular "Section " refers to that Section
of this Credit Agreement unless otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of like
import shall refer to this Credit Agreement as a whole and not to any
particular Section or subdivision of this Credit Agreement.
<PAGE> 21
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2. THE REVOLVING CREDIT FACILITY.
2.1. COMMITMENT TO LEND. Subject to the terms and conditions set forth
in this Credit Agreement, each of the Banks severally agrees to lend to the
Borrowers and the Borrowers may borrow, repay, and reborrow from time to time
between the Closing Date and the Revolving Credit Loan Maturity Date upon notice
by the Borrowers to the Administrative Agent given in accordance with
Section 2.6, such sums as are requested by the Borrowers up to a maximum
aggregate amount Outstanding (after giving effect to all amounts requested) at
any one time equal to such Bank's Commitment minus such Bank's Commitment
Percentage of the sum of the Maximum Drawing Amount and all Unpaid Reimbursement
Obligations, provided that the sum of the Outstanding amount of the Revolving
Credit Loans (after giving effect to all amounts requested) plus the Maximum
Drawing Amount and all Unpaid Reimbursement Obligations shall not at any time
exceed the Total Commitment. The Revolving Credit Loans shall be made pro rata
in accordance with each Bank's Commitment Percentage. Each request for a
Revolving Credit Loan hereunder shall constitute a representation and warranty
by the Borrowers that the conditions set forth in Section 11 and Section 12, in
the case of the initial Revolving Credit Loans to be made on the Closing Date,
and Section 12, in the case of all other Revolving Credit Loans, have been
satisfied on the date of such request.
2.2. COMMITMENT FEE. The Borrowers jointly and severally agree to pay
to the Administrative Agent for the accounts of the Banks in accordance with
their respective Commitment Percentages a commitment fee calculated at the rate
of the Commitment Fee Rate per annum on the average daily amount during each
calendar quarter or portion thereof from the Closing Date to the Revolving
Credit Loan Maturity Date by which the Total Commitment minus the sum of the
Maximum Drawing Amount and all Unpaid Reimbursement Obligations exceeds the
Outstanding amount of Revolving Credit Loans during such calendar quarter and
minus any portion of such fee paid during such quarter in connection with a
commitment reduction pursuant to Section 2.3 hereof. The commitment fee shall be
payable quarterly in arrears on the first day of each calendar quarter for the
immediately preceding calendar quarter commencing on the first such date
following the date hereof, with a final payment on the Revolving Credit Maturity
Date or any earlier date on which the Commitments shall terminate.
2.3. REDUCTION OF TOTAL COMMITMENT. The Borrowers shall have the right
at any time and from time to time upon five (5) Business Days prior written
notice to the Administrative Agent to reduce by integral multiples of $5,000,000
or terminate entirely the Total Commitment, whereupon the Commitments of the
Banks shall be reduced pro rata in accordance with their respective Commitment
Percentages of the amount specified in such notice or, as the case may be,
terminated. Promptly after receiving any notice of the Borrowers delivered
pursuant to this Section 2.3, the Administrative Agent will notify the Banks of
the substance thereof. Upon the effective date of any such reduction or
termination, the Borrowers shall pay to the Administrative Agent for the
respective accounts of the Banks the full amount of any commitment fee then
accrued on the amount of the reduction. No reduction or termination of the
Commitments may be reinstated.
2.4. THE REVOLVING CREDIT NOTES. The Revolving Credit Loans shall be
evidenced by separate promissory notes of the Borrowers in substantially the
form of Exhibit A hereto (each a "Revolving Credit Note"), dated as of the
Closing Date and completed with
<PAGE> 22
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appropriate insertions. One Revolving Credit Note shall be payable to the order
of each Bank in a principal amount equal to such Bank's Commitment or, if less,
the Outstanding amount of all Revolving Credit Loans made by such Bank, plus
interest accrued thereon, as set forth below. The Borrowers irrevocably
authorize each Bank to make or cause to be made, at or about the time of the
Drawdown Date of any Revolving Credit Loan or at the time of receipt of any
payment of principal on such Bank's Revolving Credit Note, an appropriate
notation on such Bank's Revolving Credit Note Record reflecting the making of
such Revolving Credit Loan or (as the case may be) the receipt of such payment.
The Outstanding amount of the Revolving Credit Loans set forth on such Bank's
Revolving Credit Note Record shall be prima facie evidence of the principal
amount thereof owing and unpaid to such Bank, but the failure to record, or any
error in so recording, any such amount on such Bank's Revolving Credit Note
Record shall not limit or otherwise affect the joint and several obligations of
the Borrowers hereunder or under any Revolving Credit Note to make payments of
principal of or interest on any Revolving Credit Note when due.
2.5. INTEREST ON REVOLVING CREDIT LOANS. Except as otherwise provided
in Section 6.11,
(a) Each Base Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of
the Interest Period with respect thereto at the rate per annum equal to
the Base Rate plus the Applicable Margin.
(b) Each LIBOR Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of
the Interest Period with respect thereto at the rate per annum equal to
the LIBOR Rate determined for such Interest Period plus the Applicable
Margin.
(c) The Borrowers jointly and severally promise to pay interest
on each Revolving Credit Loan in arrears on each Interest Payment Date
with respect thereto.
2.6. REQUESTS FOR REVOLVING CREDIT LOANS. The Borrowers shall give to
the Administrative Agent written notice in the form of Exhibit B hereto (or
telephonic notice confirmed in a writing in the form of Exhibit B hereto) of
each Revolving Credit Loan requested hereunder (a "Loan Request") no less than
(a) one (1) Business Day prior to the proposed Drawdown Date of any Base Rate
Loan and (b) three (3) LIBOR Business Days prior to the proposed Drawdown Date
of any LIBOR Rate Loan. Each such notice shall specify (a) the principal amount
of the Revolving Credit Loan requested, (b) the proposed Drawdown Date of such
Revolving Credit Loan, (c) the Interest Period for such Revolving Credit Loan
and (d) the Type of such Revolving Credit Loan. Promptly upon receipt of any
such notice, the Administrative Agent shall notify each of the Banks thereof.
Each Loan Request shall be irrevocable and binding on the Borrowers and shall
obligate the Borrowers to accept the Revolving Credit Loan requested from the
Banks on the proposed Drawdown Date. Each Loan Request shall be in a minimum
aggregate amount of $1,000,000 or an integral multiple thereof.
2.7. CONVERSION OPTIONS.
<PAGE> 23
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2.7.1. CONVERSION TO DIFFERENT TYPE OF REVOLVING CREDIT LOAN. The
Borrowers may elect from time to time to convert any Outstanding
Revolving Credit Loan to a Revolving Credit Loan of another Type,
provided that (a) with respect to any such conversion of a Revolving
Credit Loan to a Base Rate Loan, the Borrowers shall give the
Administrative Agent at least one (1) Business Day's prior written
notice of such election; (b) with respect to any such conversion of a
Base Rate Loan to a LIBOR Rate Loan, the Borrowers shall give the
Administrative Agent at least three (3) LIBOR Business Days prior
written notice of such election; (c) with respect to any such
conversion of a LIBOR Rate Loan into a Revolving Credit Loan of another
Type, such conversion shall be made only on the last day of the
Interest Period with respect thereto and (d) no Loan may be converted
into a LIBOR Rate Loan when any Default or Event of Default has
occurred and is continuing. Promptly upon receipt of any such notice,
the Administrative Agent shall notify each of the Banks thereof. On the
date on which such conversion is being made each Bank shall take such
action as is necessary to transfer its Commitment Percentage of such
Revolving Credit Loans to its Domestic Lending Office or its LIBOR
Lending Office, as the case may be. All or any part of Outstanding
Revolving Credit Loans of any Type may be converted into a Revolving
Credit Loan of another Type as provided herein, provided that any
partial conversion shall be in an aggregate principal amount of
$1,000,000 or a whole multiple thereof. Each Conversion Request
relating to the conversion of a Revolving Credit Loan to a LIBOR Rate
Loan shall be irrevocable by the Borrowers.
2.7.2. CONTINUATION OF TYPE OF REVOLVING CREDIT LOAN. Any
Revolving Credit Loan of any Type may be continued as a Revolving
Credit Loan of the same Type upon the expiration of an Interest Period
with respect thereto by compliance by the Borrowers with the notice
provisions contained in Section 2.7.1; provided that no LIBOR Rate Loan
may be continued as such when any Default or Event of Default has
occurred and is continuing, but shall be converted automatically to a
Base Rate Loan on the last day of the first Interest Period relating
thereto ending during the continuance of any Default or Event of
Default of which officers of the Administrative Agent active upon the
Borrowers' account have actual knowledge. In the event that the
Borrowers fail to provide any such notice with respect to the
continuation of any LIBOR Rate Loan as such, then such LIBOR Rate Loan
shall be automatically converted to a Base Rate Loan on the last day of
the first Interest Period relating thereto. The Administrative Agent
shall notify the Banks promptly when any such automatic conversion
contemplated by this Section 2.7 is scheduled to occur.
2.7.3. LIBOR RATE LOANS. Any conversion to or from LIBOR Rate
Loans shall be in such amounts and be made pursuant to such elections
so that, after giving effect thereto, the aggregate principal amount of
all LIBOR Rate Loans having the same Interest Period shall not be less
than $1,000,000 or a whole multiple thereof.
2.8. FUNDS FOR REVOLVING CREDIT LOAN.
2.8.1. FUNDING PROCEDURES. Not later than 11:00 a.m. (Boston
time) on the proposed Drawdown Date of any Revolving Credit Loans, each
of the Banks will make available to the Administrative Agent, at the
Administrative Agent's Head
<PAGE> 24
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Office, in immediately available funds, the amount of such Bank's
Commitment Percentage of the amount of the requested Revolving Credit
Loans. Upon receipt from each Bank of such amount, and upon receipt of
the documents required by Section Section 11 and 12 and the
satisfaction of the other conditions set forth therein, to the extent
applicable, the Administrative Agent will make available to the
Borrowers the aggregate amount of such Revolving Credit Loans made
available to the Administrative Agent by the Banks. The failure or
refusal of any Bank to make available to the Administrative Agent at
the aforesaid time and place on any Drawdown Date the amount of its
Commitment Percentage of the requested Revolving Credit Loans shall not
relieve any other Bank from its several obligation hereunder to make
available to the Administrative Agent the amount of such other Bank's
Commitment Percentage of any requested Revolving Credit Loans.
2.8.2. ADVANCES BY ADMINISTRATIVE AGENT. The Administrative Agent
may, unless notified to the contrary by any Bank prior to a Drawdown
Date, assume that such Bank has made available to the Administrative
Agent on such Drawdown Date the amount of such Bank's Commitment
Percentage of the Revolving Credit Loans to be made on such Drawdown
Date, and the Administrative Agent may (but it shall not be required
to), in reliance upon such assumption, make available to the Borrowers
a corresponding amount. If any Bank makes available to the
Administrative Agent such amount on a date after such Drawdown Date,
such Bank shall pay to the Administrative Agent on demand an amount
equal to the product of (a) the average computed for the period
referred to in clause (c) below, of the weighted average interest rate
paid by the Administrative Agent for federal funds acquired by the
Administrative Agent during each day included in such period, times (b)
the amount of such Bank's Commitment Percentage of such Revolving
Credit Loans, times (c) a fraction, the numerator of which is the
number of days that elapse from and including such Drawdown Date to the
date on which the amount of such Bank's Commitment Percentage of such
Revolving Credit Loans shall become immediately available to the
Administrative Agent, and the denominator of which is 365. A statement
of the Administrative Agent submitted to such Bank with respect to any
amounts owing under this paragraph shall be prima facie evidence of the
amount due and owing to the Administrative Agent by such Bank. If the
amount of such Bank's Commitment Percentage of such Revolving Credit
Loans is not made available to the Administrative Agent by such Bank
within three (3) Business Days following such Drawdown Date, the
Administrative Agent shall be entitled to recover such amount from the
Borrowers on demand, with interest thereon at the rate per annum
applicable to the Revolving Credit Loans made on such Drawdown Date.
3. REPAYMENT OF THE REVOLVING CREDIT LOANS.
3.1. MATURITY. The Borrowers jointly and severally promise to pay on
the Revolving Credit Loan Maturity Date, and there shall become absolutely due
and payable on the Revolving Credit Loan Maturity Date, all of the Revolving
Credit Loans Outstanding on such date, together with any and all accrued and
unpaid interest thereon.
3.2. MANDATORY REPAYMENTS OF REVOLVING CREDIT LOANS.
<PAGE> 25
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3.2.1. OUTSTANDINGS EXCEEDING COMMITMENTS. If at any time the sum
of the Outstanding amount of the Revolving Credit Loans, the Maximum
Drawing Amount and all Unpaid Reimbursement Obligations exceeds the
Total Commitment, then the Borrowers shall immediately pay the amount
of such excess to the Administrative Agent for the respective accounts
of the Banks for application: first, to any Unpaid Reimbursement
Obligations payable under Section 5.2(a)(i) or other amounts payable
under Section 5.2(a); second, to the Revolving Credit Loans; and third,
to provide to the Administrative Agent cash collateral for
Reimbursement Obligations as contemplated by Section 5.2(b) and (c).
Each payment of any Unpaid Reimbursement Obligations payable under
Section 5.2(a)(i) or other amounts payable under Section 5.2(a) or
prepayment of Revolving Credit Loans shall be allocated among the
Banks, in proportion, as nearly as practicable, to each Reimbursement
Obligation or (as the case may be) the respective unpaid principal
amount of each Bank's Revolving Credit Note, with adjustments to the
extent practicable to equalize any prior payments or repayments not
exactly in proportion. In the event the Borrowers receive any cash
proceeds from Permitted Sales which would be required to be applied
against the Outstanding Term Loans pursuant to Section 4.3.2 and, at
the time of such Permitted Sales the Term Loan is no longer
Outstanding, the amount which would otherwise be required to be paid
pursuant to Section 4.3.2 shall be paid to the Administrative Agent for
the pro rata accounts of the Banks to be applied against the
Outstanding amount of the Revolving Credit Loans and the Total
Commitment shall be permanently reduced by such amount.
3.2.2. CLEAN-DOWN PROVISIONS. The Borrowers shall maintain,
during a period of thirty (30) consecutive days in each period of
twelve (12) consecutive months, the sum of the Outstanding amount of
Revolving Credit Loans at an amount not in excess of $20,000,000.
3.3. OPTIONAL REPAYMENTS OF REVOLVING CREDIT LOANS. The Borrowers shall
have the right, at their election, to repay the Outstanding amount of the
Revolving Credit Loans, as a whole or in part, at any time without penalty or
premium, provided that any full or partial prepayment of the Outstanding amount
of any LIBOR Rate Loans pursuant to this Section 3.3 may be made only on the
last day of the Interest Period relating thereto. The Borrowers shall give the
Administrative Agent, no later than 10:00 a.m. (Boston time), at least one (1)
Business Day's prior written notice of any proposed prepayment pursuant to this
Section 3.3 of Base Rate Loans, and three (3) LIBOR Business Days' notice of any
proposed prepayment pursuant to this Section 3.3 of LIBOR Rate Loans, in each
case specifying the proposed date of prepayment of Revolving Credit Loans and
the principal amount to be prepaid. Each such partial prepayment of the
Revolving Credit Loans shall be in an integral multiple of $1,000,000, shall be
accompanied by the payment of accrued interest on the principal prepaid to the
date of prepayment and shall be applied, in the absence of instruction by the
Borrowers, first to the principal of Base Rate Loans and then to the principal
of LIBOR Rate Loans. Each partial prepayment shall be allocated among the Banks,
in proportion, as nearly as practicable, to the respective unpaid principal
amount of each Bank's Revolving Credit Note, with adjustments to the extent
practicable to equalize any prior repayments not exactly in proportion.
<PAGE> 26
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4. THE TERM LOAN.
4.1. COMMITMENT TO LEND. Subject to the terms and conditions set forth
in this Credit Agreement, each Bank severally agrees to lend to the Borrowers on
the Closing Date the amount of its Commitment Percentage of the principal amount
of $30,000,000.00.
4.2. THE TERM NOTES. The Term Loan shall be evidenced by separate
promissory notes of the Borrowers in substantially the form of Exhibit C hereto
(each a "Term Note"), dated the Closing Date and completed with appropriate
insertions. One Term Note shall be payable to the order of each Bank in a
principal amount equal to such Bank's Commitment Percentage of the Term Loan and
representing the joint and several obligation of the Borrowers to pay to such
Bank such principal amount or, if less, the Outstanding amount of such Bank's
Commitment Percentage of the Term Loan, plus interest accrued thereon, as set
forth below. The Borrowers irrevocably authorize each Bank to make or cause to
be made a notation on such Bank's Term Note Record reflecting the original
principal amount of such Bank's Commitment Percentage of the Term Loan and, at
or about the time of such Bank's receipt of any principal payment on such Bank's
Term Note, an appropriate notation on such Bank's Term Note Record reflecting
such payment. The aggregate unpaid amount set forth on such Bank's Term Note
Record shall be prima facie evidence of the principal amount thereof owing and
unpaid to such Bank, but the failure to record, or any error in so recording,
any such amount on such Bank's Term Note Record shall not affect the joint and
several obligations of the Borrowers hereunder or under any Term Note to make
payments of principal of and interest on any Term Note when due.
4.3. MANDATORY PAYMENT OF PRINCIPAL.
4.3.1. AMORTIZATION OF TERM LOAN. The Borrowers jointly and
severally promise to pay to the Administrative Agent for the account of
the Banks the principal amount of the Term Loan in quarterly
installments as set forth in the table below, such installments to be
due and payable on the last day of each quarter of each year set forth
in such table below, commencing on April 30, 1997, with a final payment
on the Term Loan Maturity Date in an amount equal to the unpaid balance
of the Term Loan.
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
April 30, 1997 $2,500,000
July 31, 1997 $2,500,000
October 31, 1997 $3,500,000
January 31, 1998 $2,500,000
April 30, 1998 $2,500,000
July 31, 1998 $2,500,000
October 31, 1998 $3,500,000
January 31, 1999 $2,500,000
April 30, 1999 $2,500,000
July __, 1999 $5,500,000
</TABLE>
4.3.2. PROCEEDS. Concurrently with the receipt by the Borrowers
of cash proceeds from sales or other disposition of assets permitted
pursuant to Section 9.5.2 (ii)
<PAGE> 27
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hereof or such other sales or dispositions of assets not permitted
under Section 9.5.2 to which the Banks may from time to time in their
discretion agree (the "Permitted Dispositions"), and sales of stock of
the Borrowers or any of their Subsidiaries, pursuant to any public
offering of the capital stock of such Persons or any equity issuance by
the Borrowers or any of their Subsidiaries (the "Stock Sales") or any
issuance or incurrence of Indebtedness by the Borrowers or any of their
Subsidiaries other than expressly permitted under the provisions of
Section 9.1 hereof (the "Additional Indebtedness"), other than cash
proceeds from the sales or issuances of capital stock or equity
pursuant to Stock Option Plans covering in the aggregate less than 5%
of the total outstanding capital stock of Chadwick's of Boston, the
Borrowers shall pay to the Administrative Agent for the respective
accounts of the Banks, an amount equal to 100% of the net proceeds of
all Permitted Dispositions, Stock Sales and Additional Indebtedness, to
be applied against the remaining scheduled installments of principal
due on the Term Loan on a pro-rata basis.
4.4. OPTIONAL PREPAYMENT OF TERM LOAN. The Borrowers shall have the
right at any time to prepay the Term Notes on or before the Term Loan Maturity
Date, as a whole, or in part, upon not less than five (5) Business Days prior
written notice to the Administrative Agent, without premium or penalty, provided
that (a) each partial prepayment shall be in the principal amount of $2,000,000
or an integral multiple of $1,000,000 in excess thereof, (b) no portion of the
Term Loan bearing interest at the LIBOR Rate may be prepaid pursuant to this
Section 4.4 except on the last day of the Interest Period relating thereto, and
(c) each partial prepayment shall be allocated among the Banks, in proportion,
as nearly as practicable, to the respective Outstanding amount of each Bank's
Term Note, with adjustments to the extent practicable to equalize any prior
prepayments not exactly in proportion. Any prepayment of principal of the Term
Loan shall include all interest accrued to the date of prepayment and shall be
applied pro rata against the remaining scheduled installments of principal due
on the Term Loan. No amount repaid with respect to the Term Loan may be
reborrowed.
4.5. INTEREST ON TERM LOANS.
4.5.1. INTEREST RATES. Except as otherwise provided inSection
6.11, the Term Loan shall bear interest during each Interest Period
relating to all or any portion of the Term Loan at the following rates:
(a) To the extent that all or any portion of the Term Loan
bears interest during such Interest Period at the Base Rate, the
Term Loan or such portion shall bear interest during such
Interest Period at the rate per annum equal to the Base Rate plus
the Applicable Margin.
(b) To the extent that all or any portion of the Term Loan
bears interest during such Interest Period at the LIBOR Rate, the
Term Loan or such portion shall bear interest during such
Interest Period at the rate per annum equal to the LIBOR Rate
plus the Applicable Margin.
The Borrowers jointly and severally promise to pay interest on
the Term Loan or any portion thereof Outstanding during each Interest
Period in arrears on each Interest Payment Date applicable to such
Interest Period.
<PAGE> 28
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4.5.2. NOTIFICATION BY BORROWERS. The Borrowers shall notify the
Administrative Agent, such notice to be irrevocable, at least three (3)
LIBOR Business Days prior to the Drawdown Date of the Term Loan if all
or any portion of the Term Loan is to bear interest at the LIBOR Rate.
After the Term Loan has been made, the provisions of Section 2.7 shall
apply mutatis mutandis with respect to all or any portion of the Term
Loan so that the Borrowers may have the same interest rate options with
respect to all or any portion of the Term Loan as it would be entitled
to with respect to the Revolving Credit Loans.
4.5.3. AMOUNTS, ETC.. Any portion of the Term Loan bearing
interest at the LIBOR Rate relating to any Interest Period shall be in
the amount of $1,000,000 or an integral multiple thereof. No Interest
Period relating to the Term Loan or any portion thereof bearing
interest at the LIBOR Rate shall extend beyond the date on which a
regularly scheduled installment payment of the principal of the Term
Loan is to be made unless a portion of the Term Loan at least equal to
such installment payment has an Interest Period ending on such date or
is then bearing interest at the Base Rate.
5. LETTERS OF CREDIT.
5.1. LETTER OF CREDIT COMMITMENTS.
5.1.1. COMMITMENT TO ISSUE LETTERS OF CREDIT. Subject to the
terms and conditions hereof and the execution and delivery by the
Borrowers to the applicable Issuing Bank of a letter of credit
application on such applicable Issuing Bank's customary form (a "Letter
of Credit Application"), each of the Issuing Banks on behalf of the
Banks and in reliance upon the agreement of the Banks set forth in
Section 5.1.4 and upon the representations and warranties of each of
the Borrowers contained herein, agrees, in its individual capacity, to
issue, extend and renew for the account of the Borrowers one or more
standby or documentary letters of credit (individually, a "Letter of
Credit"), in such form as may be requested from time to time by the
Borrowers and agreed to by the applicable Issuing Bank; provided,
however, that, after giving effect to such request, (a) the sum of the
aggregate Maximum Drawing Amount and all Unpaid Reimbursement
Obligations shall not exceed $50,000,000.00 at any one time and (b) the
sum of (i) the Maximum Drawing Amount on all Letters of Credit, (ii)
all Unpaid Reimbursement Obligations, and (iii) the amount of all
Revolving Credit Loans Outstanding shall not exceed the Total
Commitment.
5.1.2. LETTER OF CREDIT APPLICATIONS. Each Letter of Credit
Application shall be completed to the satisfaction of the applicable
Issuing Bank. Each Letter of Credit Application shall constitute a
representation and warranty by the Borrowers that the conditions set
forth in Section 11 and Section 12, in the case of the initial Letters
of Credit, if any, to be made on the Closing Date, and Section 12, in
the case of all other Letters of Credit, have been satisfied on the
date of such request. In the event that any provision of any Letter of
Credit Application shall be inconsistent with any provision of this
Credit Agreement, then the provisions of this Credit Agreement shall,
to the extent of any such inconsistency, govern.
<PAGE> 29
-23-
5.1.3. TERMS OF LETTERS OF CREDIT. Each Letter of Credit issued,
extended or renewed hereunder shall, among other things, (a) provide
for the payment of sight drafts for honor thereunder when presented in
accordance with the terms thereof and when accompanied by the documents
described therein, and (b) have an expiry date (i) no later than one
year after the date of issuance thereof, and (ii) no later than the
date which is fourteen (14) days (or, if the Letter of Credit is
confirmed by a confirmer or otherwise provides for one or more
nominated persons, forty-five (45) days) prior to the Revolving Credit
Loan Maturity Date. Each Letter of Credit so issued, extended or
renewed shall be subject to the Uniform Customs.
5.1.4. REIMBURSEMENT OBLIGATIONS OF BANKS. Each Bank severally
agrees that it shall be absolutely liable, without regard to the
occurrence of any Default or Event of Default or any other condition
precedent whatsoever, to the extent of such Bank's Commitment
Percentage, to reimburse the applicable Issuing Bank on demand for the
amount of each draft paid by such Issuing Bank in accordance with the
terms of each Letter of Credit to the extent that such amount is not
reimbursed by the Borrowers pursuant to Section 5.2 (such agreement for
a Bank being called herein the "Letter of Credit Participation" of such
Bank).
5.1.5. PARTICIPATIONS OF BANKS. Each such payment made by a Bank
shall be treated as the purchase by such Bank of a participating
interest in the Borrowers' Reimbursement Obligation under Section
5.2(a) in an amount equal to such payment. Each Bank shall share in
accordance with their participating interest in any interest which
accrues pursuant to Section 5.2.
5.2. REIMBURSEMENT OBLIGATION OF THE BORROWERS. In order to induce the
Issuing Banks to issue, extend and renew each Letter of Credit and the Banks to
participate therein, the Borrowers hereby jointly and severally agree to
reimburse or pay to the Administrative Agent, for the account of the applicable
Issuing Bank or (as the case may be) the Banks, with respect to each Letter of
Credit issued, extended or renewed by the Issuing Banks hereunder,
(a) except as otherwise expressly provided in Section 5.2(b) and
(c), on each date that any draft presented under such Letter of Credit
is honored by either of the Issuing Banks, or either of the Issuing
Banks otherwise makes a payment with respect thereto, (i) the amount
paid by such Issuing Bank under or with respect to such Letter of
Credit, and (ii) the amount of any taxes, fees, charges or other costs
and expenses whatsoever incurred by such Issuing Bank or any Bank in
connection with any payment made by such Issuing Bank or any Bank
under, or with respect to, such Letter of Credit,
(b) upon the reduction (but not termination) of the Total
Commitment to an amount less than the Maximum Drawing Amount, an amount
equal to such difference, which amount shall be held by the
Administrative Agent for the benefit of the Banks, the Issuing Banks
and the Agents as cash collateral for all Reimbursement Obligations,
unless the Borrowers shall have delivered to the Administrative Agent
for the benefit of the Agents, the Issuing Banks and the Banks, a
letter of credit in amount, form and substance satisfactory to the
Banks and issued by a bank satisfactory to the Banks covering such
difference, and
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(c) upon the termination of the Total Commitment, or the
acceleration of the Reimbursement Obligations with respect to all
Letters of Credit in accordance with Section 13, an amount equal to the
then Maximum Drawing Amount on all Letters of Credit, which amount
shall be held by the Administrative Agent for the benefit of the Banks,
the Issuing Banks and the Agents as cash collateral for all
Reimbursement Obligations, unless the Borrowers shall have delivered to
the Administrative Agent for the benefit of the Agents, the Issuing
Banks and the Banks a letter of credit in amount, form and substance
satisfactory to the Banks and issued by a bank satisfactory to the
Banks covering such Maximum Drawing Amount.
Each such payment shall be made to the Administrative Agent at the
Administrative Agent's Head Office, for the account of the applicable Issuing
Bank or (as the case may be) the Banks, in immediately available funds. Interest
on any and all amounts remaining unpaid by the Borrowers under this Section 5.2
at any time from the date such amounts become due and payable (whether as stated
in this Section 5.2, by acceleration or otherwise) until payment in full
(whether before or after judgment) shall be payable to the Administrative Agent
on demand at the rate specified in Section 6.11 for overdue principal on the
Revolving Credit Loans.
5.3. LETTER OF CREDIT PAYMENTS. If any draft shall be presented or
other demand for payment shall be made under any Letter of Credit, the
applicable Issuing Bank shall notify the Borrowers of the date and amount of the
draft presented or demand for payment and of the date and time when it expects
to pay such draft or honor such demand for payment. If the Borrowers fail to
reimburse the applicable Issuing Bank as provided in Section 5.2(a) on or before
the date that such draft is paid or other payment is made by such Issuing Bank,
such Issuing Bank may at any time thereafter notify the Banks of the amount of
any such Unpaid Reimbursement Obligation payable under Section 5.2(a)(i) or
other amounts payable under Section 5.2(a). No later than 3:00 p.m. (Boston
time) on the Business Day next following the receipt of such notice, each Bank
shall make available to the applicable Issuing Bank, at the Administrative
Agent's Head Office, for the account of the applicable Issuing Bank, in
immediately available funds, such Bank's Commitment Percentage of such Unpaid
Reimbursement Obligation payable under Section 5.2(a)(i) or other amounts
payable under Section 5.2(a), together with an amount equal to the product of
(a) the average, computed for the period referred to in clause (c) below, of the
weighted average interest rate paid by the applicable Issuing Bank for federal
funds acquired by such Issuing Bank during each day included in such period,
times (b) the amount equal to such Bank's Commitment Percentage of such Unpaid
Reimbursement Obligation payable under Section 5.2(a)(i) or other amounts
payable under Section 5.2(a), times (c) a fraction, the numerator of which is
the number of days that elapse from and including the date the applicable
Issuing Bank paid the draft presented for honor or otherwise made payment to the
date on which such Bank's Commitment Percentage of such Unpaid Reimbursement
Obligation payable under Section 5.2(a)(i) or other amounts payable under
Section 5.2(a) shall become immediately available to the applicable Issuing
Bank, and the denominator of which is 360. The responsibility of the Issuing
Banks to the Borrowers and the Banks shall be only to determine that the
documents (including each draft) delivered under each Letter of Credit in
connection with such presentment shall be in conformity in all material respects
with such Letter of Credit.
5.4. OBLIGATIONS ABSOLUTE. The Borrowers' obligations under this
Section 5 shall be joint and several and absolute and unconditional under any
and all circumstances and irrespective of the occurrence of any Default or Event
of Default or any condition precedent whatsoever
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or any setoff, counterclaim or defense to payment which the Borrowers may have
or have had against any Agent, either of the Issuing Banks, any Bank or any
beneficiary of a Letter of Credit. The Borrowers further agree with the Agents,
the Issuing Banks and the Banks that the Agents, the Issuing Banks and the Banks
shall not be responsible for, and the Borrowers' Reimbursement Obligations under
Section 5.2 shall not be affected by, among other things, the validity or
genuineness of documents or of any endorsements thereon, even if such documents
should in fact prove to be in any or all respects invalid, fraudulent or forged,
or any dispute between or among the Borrowers, the beneficiary of any Letter of
Credit or any financing institution or other party to which any Letter of Credit
may be transferred or any claims or defenses whatsoever of the Borrowers or
either of them against the beneficiary of any Letter of Credit or any such
transferee. The Agents, the Issuing Banks and the Banks shall not be liable for
any error, omission, interruption or delay in transmission, dispatch or delivery
of any message or advice, however transmitted, in connection with any Letter of
Credit. The Borrowers agree that any action taken or omitted by the Agents,
either of the Issuing Banks or any Bank under or in connection with each Letter
of Credit and the related drafts and documents, if done in good faith, shall be
binding upon the Borrowers and shall not result in any liability on the part of
the Agents, either of the Issuing Banks or any Bank to the Borrowers.
5.5. RELIANCE BY ISSUER. To the extent not inconsistent with Section
5.4, each of the Issuing Banks shall be entitled to rely, and shall be fully
protected in relying upon, any Letter of Credit, draft, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy,
telex or teletype message, statement, order or other document believed by it to
be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel, independent
accountants and other experts selected by such Issuing Bank. Each of the Issuing
Banks shall be fully justified in failing or refusing to take any action under
this Credit Agreement unless it shall first have received such advice or
concurrence of the Majority Banks as it reasonably deems appropriate or it shall
first be indemnified to its reasonable satisfaction by the Banks against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. Each of the Issuing Banks shall in all cases
be fully protected in acting, or in refraining from acting, under this Credit
Agreement in accordance with a request of the Majority Banks, and such request
and any action taken or failure to act pursuant thereto shall be binding upon
the Banks and all future holders of the Revolving Credit Notes or of a Letter of
Credit Participation.
5.6. LETTER OF CREDIT FEE. The Borrowers shall, quarterly in arrears,
and at such other time or times as such charges are customarily made by the
Issuing Banks, pay a fee (in each case, a "Letter of Credit Fee") (a) in respect
of each standby Letter of Credit equal to (i) the Applicable Margin per annum of
the face amount of such standby Letter of Credit, such fee to be payable to the
Administrative Agent for the accounts of the Banks in accordance with their
respective Commitment Percentages, plus (ii) the applicable Issuing Bank's
customary issuance fee, such issuance fee to be payable to, and for the account
of, the applicable Issuing Bank, and (b) in respect of each documentary Letter
of Credit equal to (i) the applicable Issuing Bank's customary issuance fee or
amendment fee, as the case may be, such issuance fee or amendment fee to be
payable to, and for the account of, the applicable Issuing Bank, plus (ii) the
applicable Issuing Bank's customary time negotiation fee per document
examination, such negotiation fee to be payable to, and for the account of, the
applicable Issuing Bank, plus (iii) an amount which is equal to the Applicable
Margin
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per annum on the face amount of such documentary Letter of Credit, such fee to
be payable to the Administrative Agent for the accounts of the Banks in
accordance with their respective Commitment Percentages.
6. CERTAIN GENERAL PROVISIONS.
6.1. CLOSING FEE. The Borrowers jointly and severally agree to pay to
the Administrative Agent on the Closing Date a closing fee as set forth in the
fee letter agreement among the Borrowers and the Agents.
6.2. AGENT'S FEE. The Borrowers shall pay to the Administrative Agent
annually in advance, for the Administrative Agent's own account, on the Closing
Date and on each anniversary of the Closing Date, an Administrative Agent's fee
in the amount set forth in the fee letter agreement among the Borrowers and the
Agents.
6.3. FUNDS FOR PAYMENTS.
6.3.1. PAYMENTS TO ADMINISTRATIVE AGENT. All payments of
principal, interest, Reimbursement Obligations, commitment fees, Letter
of Credit Fees and any other amounts due hereunder or under any of the
other Loan Documents shall be made to the Administrative Agent (except
with respect to those Letter of Credit Fees which are payable directly
to the applicable Issuing Bank as specifically provided for in Section
5.6), for the respective accounts of the Banks, the Issuing Banks and
the Agents, at the Administrative Agent's Head Office or at such other
location in the Boston, Massachusetts area that the Administrative
Agent may from time to time designate, in each case in immediately
available funds.
6.3.2. NO OFFSET, ETC. All payments by the Borrowers hereunder
and under any of the other Loan Documents shall be made without setoff
or counterclaim and free and clear of and without deduction for any
taxes, levies, imposts, duties, charges, fees, deductions,
withholdings, compulsory loans, restrictions or conditions of any
nature now or hereafter imposed or levied by any jurisdiction or any
political subdivision thereof or taxing or other authority therein
unless the Borrowers or either of them are compelled by law to make
such deduction or withholding. If any such obligation is imposed upon
the Borrowers or either of them with respect to any amount payable by
it hereunder or under any of the other Loan Documents, the Borrowers
will pay to the Administrative Agent, for the account of the Banks, the
Issuing Banks or (as the case may be) the Administrative Agent, on the
date on which such amount is due and payable hereunder or under such
other Loan Document, such additional amount in Dollars as shall be
necessary to enable the Banks, the Issuing Banks or the Administrative
Agent to receive the same net amount which the Banks, the Issuing Banks
or the Administrative Agent would have received on such due date had no
such obligation been imposed upon the Borrowers or either of them. The
Borrowers will deliver promptly to the Administrative Agent
certificates or other valid vouchers for all taxes or other charges
deducted from or paid with respect to payments made by the Borrowers
hereunder or under such other Loan Document.
<PAGE> 33
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6.4. COMPUTATIONS. All computations of interest on the Base Rate Loans
and of commitment fees and Letter of Credit Fees shall be based on a 365-day
year and paid for the actual number of days elapsed. All computations of
interest on LIBOR Rate Loans shall be based on a 360-day year and paid for the
actual number of days elapsed. Except as otherwise provided in the definition of
the term "Interest Period" with respect to LIBOR Rate Loans, whenever a payment
hereunder or under any of the other Loan Documents becomes due on a day that is
not a Business Day, the due date for such payment shall be extended to the next
succeeding Business Day, and interest shall accrue during such extension. The
Outstanding amount of the Loans as reflected on the Revolving Credit Note
Records and the Term Note Records from time to time shall be considered correct
and binding on the Borrowers unless within five (5) Business Days after receipt
of any notice by the Borrowers of such Outstanding amount, the Borrowers shall
notify the Administrative Agent to the contrary.
6.5. INABILITY TO DETERMINE LIBOR RATE. In the event, prior to the
commencement of any Interest Period relating to any LIBOR Rate Loan, the
Administrative Agent shall determine or be notified by the Majority Banks that
adequate and reasonable methods do not exist for ascertaining the LIBOR Rate
that would otherwise determine the rate of interest to be applicable to any
LIBOR Rate Loan during any Interest Period, the Administrative Agent shall
forthwith give notice of such determination (which shall be conclusive and
binding on the Borrowers and the Banks) to the Borrowers and the Banks. In such
event (a) any Loan Request or Conversion Request with respect to LIBOR Rate
Loans shall be automatically withdrawn and shall be deemed a request for Base
Rate Loans, (b) each LIBOR Rate Loan will automatically, on the last day of the
then current Interest Period relating thereto, become a Base Rate Loan, and (c)
the obligations of the Banks to make LIBOR Rate Loans shall be suspended until
the Administrative Agent or the Majority Banks determine that the circumstances
giving rise to such suspension no longer exist, whereupon the Administrative
Agent or, as the case may be, the Administrative Agent upon the instruction of
the Majority Banks, shall so notify the Borrowers and the Banks.
6.6. ILLEGALITY. Notwithstanding any other provisions herein, if any
present or future law, regulation, treaty or directive or the interpretation or
application thereof shall make it unlawful for any Bank to make or maintain
LIBOR Rate Loans, such Bank shall forthwith give notice of such circumstances to
the Borrowers and the other Banks and thereupon (a) the commitment of such Bank
to make LIBOR Rate Loans or convert Loans of another Type to LIBOR Rate Loans
shall forthwith be suspended and (b) such Bank's Revolving Credit Loans then
Outstanding as LIBOR Rate Loans, if any, shall be converted automatically to
Base Rate Loans on the last day of each Interest Period applicable to such LIBOR
Rate Loans or within such earlier period as may be required by law. The
Borrowers hereby jointly and severally agree promptly to pay the Administrative
Agent for the account of such Bank, upon demand by such Bank, any additional
amounts necessary to compensate such Bank for any costs incurred by such Bank in
making any conversion in accordance with this Section 6.6, including any
interest or fees payable by such Bank to lenders of funds obtained by it in
order to make or maintain its LIBOR Rate Loans hereunder.
6.7. ADDITIONAL COSTS, ETC. If any present or future applicable law,
which expression, as used herein, includes statutes, rules and regulations
thereunder and interpretations thereof by any competent court or by any
governmental or other regulatory body or official charged with the
administration or the interpretation thereof and requests,
<PAGE> 34
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directives, instructions and notices at any time or from time to time hereafter
made upon or otherwise issued to any Bank or any Agent by any central bank or
other fiscal, monetary or other authority (whether or not having the force of
law), shall:
(a) subject any Bank, Issuing Bank or any Agent to any tax, levy,
impost, duty, charge, fee, deduction or withholding of any nature with
respect to this Credit Agreement, the other Loan Documents, any Letters
of Credit, Letter of Credit Participations, such Bank's Commitment or
the Loans (other than taxes based upon or measured by the income or
profits of such Bank, Issuing Bank or such Agent), or
(b) materially change the basis of taxation (except for changes
in taxes on income or profits) of payments to any Bank of the principal
of or the interest on any Loans or any other amounts payable to any
Bank, either Issuing Bank or any Agent under this Credit Agreement or
any of the other Loan Documents, or
(c) impose or increase or render applicable (other than to the
extent specifically provided for elsewhere in this Credit Agreement)
any special deposit, reserve, assessment, liquidity, capital adequacy
or other similar requirements (whether or not having the force of law)
against assets held by, or deposits in or for the account of, or loans
by, or letters of credit issued by or participated in, or commitments
of an office of any Bank, or
(d) impose on any Bank, either Issuing Bank or any Agent any
other conditions or requirements with respect to this Credit Agreement,
the other Loan Documents, any Letters of Credit, Letter of Credit
Participations, the Loans, such Bank's Commitment, or any class of
loans, letters of credit or commitments of which any of the Loans or
such Bank's Commitment forms a part, and the result of any of the
foregoing is
(i) to increase the cost to any Bank or Issuing Bank of
making, funding, issuing, renewing, extending or maintaining any
of the Loans or such Bank's Commitment or any Letter of Credit or
Letter of Credit Participation, or
(ii) to reduce the amount of principal, interest,
Reimbursement Obligation or other amount payable to such Bank,
Issuing Bank or Agent hereunder on account of such Bank's or
Issuing Bank's Commitment, any Letter of Credit or Letter of
Credit Participation or any of the Loans, or
(iii) to require such Bank, Issuing Bank or Agent to make
any payment or to forego any interest or Reimbursement Obligation
or other sum payable hereunder, the amount of which payment or
foregone interest or Reimbursement Obligation or other sum is
calculated by reference to the gross amount of any sum receivable
or deemed received by such Bank, Issuing Bank or Agent from the
Borrowers hereunder,
then, and in each such case, the Borrowers will, upon demand made by such Bank,
Issuing Bank or (as the case may be) Agent at any time and from time to time and
as often as the occasion therefor may arise, pay to such Bank, Issuing Bank or
Agent such additional
<PAGE> 35
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amounts as will be sufficient to compensate such Bank, Issuing Bank or Agent for
such additional cost, reduction, payment or foregone interest or Reimbursement
Obligation or other sum.
6.8. CAPITAL ADEQUACY. If after the date hereof any Bank, Issuing Bank
or Agent determines that (a) the adoption of or change in any law, governmental
rule, regulation, policy, guideline or directive (whether or not having the
force of law) regarding capital requirements for banks or bank holding companies
or any change in the interpretation or application thereof by a court or
governmental authority with appropriate jurisdiction, or (b) compliance by such
Bank, Issuing Bank or Agent or any corporation controlling such Bank, Issuing
Bank or Agent with any law, governmental rule, regulation, policy, guideline or
directive (whether or not having the force of law) of any such entity regarding
capital adequacy, has the effect of reducing the return on such Bank's, Issuing
Bank's or Agent's commitment with respect to any Loans to a level below that
which such Bank, Issuing Bank or Agent could have achieved but for such
adoption, change or compliance (taking into consideration such Bank's, Issuing
Bank's or Agent's then existing policies with respect to capital adequacy and
assuming full utilization of such entity's capital) by any amount deemed by such
Bank, Issuing Bank or (as the case may be) Agent to be material, then such Bank,
Issuing Bank or Agent may notify the Borrowers of such fact. To the extent that
the amount of such reduction in the return on capital is not reflected in the
Base Rate, the Borrowers and such Bank, Issuing Bank or Agent shall thereafter
attempt to negotiate in good faith, within thirty (30) days of the day on which
the Borrowers receive such notice, an adjustment payable hereunder that will
adequately compensate such Bank, Issuing Bank or Agent in light of these
circumstances. If the Borrowers and such Bank, Issuing Bank or Agent are unable
to agree to such adjustment within thirty (30) days of the date on which the
Borrowers receive such notice, then commencing on the date of such notice (but
not earlier than the effective date of any such increased capital requirement),
the fees payable hereunder shall increase by an amount that will, in such
Bank's, Issuing Bank's or Agent's reasonable determination, provide adequate
compensation. Each Bank shall allocate such cost increases among its customers
in good faith and on an equitable basis.
6.9. CERTIFICATE. A certificate setting forth any additional amounts
payable pursuant to Sections 6.7 or 6.8 and a brief explanation of such amounts
which are due, submitted by any Bank, Issuing Bank or Agent to the Borrowers,
shall be conclusive, absent manifest error, that such amounts are due and owing.
6.10. INDEMNITY. The Borrowers jointly and severally agree to indemnify
each Bank and to hold each Bank harmless from and against any loss, cost or
expense (including loss of anticipated profits) that such Bank may sustain or
incur as a consequence of (a) default by the Borrowers in payment of the
principal amount of or any interest on any LIBOR Rate Loans as and when due and
payable, including any such loss or expense arising from interest or fees
payable by such Bank to lenders of funds obtained by it in order to maintain its
LIBOR Rate Loans, (b) default by the Borrowers in making a borrowing or
conversion after the Borrowers have given (or are deemed to have given) a Loan
Request, notice (in the case of all or any portion of the Term Loans pursuant to
Section 4.5.2) or a Conversion Request relating thereto in accordance with
Section 2.6 or Section 2.7 or Section 4.5 or (c) the making of any payment of a
LIBOR Rate Loan or the making of any conversion of any such Loan to a Base Rate
Loan on a day that is not the last day of the applicable Interest Period
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with respect thereto, including interest or fees payable by such Bank to lenders
of funds obtained by it in order to maintain any such Loans.
6.11. INTEREST AFTER DEFAULT. Overdue principal and (to the extent
permitted by applicable law) interest on the Loans and all other overdue amounts
payable hereunder or under any of the other Loan Documents shall bear interest
compounded monthly and payable on demand at a rate per annum equal to two
percent (2%) above the otherwise applicable to Base Rate Loans until such amount
shall be paid in full (after as well as before judgment).
6.12. REPLACEMENT BANKS Within thirty (30) days after (a) any Bank has
demanded compensation from the Borrowers pursuant to Section Section 6.7 or 6.8
hereof, or (b) any Bank shall have become a Delinquent Bank, as described in
Section 15.5.3 (any such Bank described in the foregoing clauses (a) or (b) is
hereinafter referred to as an "Affected Bank"), the Borrowers may request that
the Non-Affected Banks acquire all, but not less than all, of the Affected
Bank's Outstanding Loans and assume all, but not less than all, of the Affected
Bank's Commitment. If the Borrowers so request, any of the Non-Affected Banks in
its sole discretion may elect to acquire all or any portion of the Affected
Bank's Outstanding Loans and to assume all or any portion of the Affected Bank's
Commitment. If the Non-Affected Banks do not elect to acquire and assume all of
the Affected Bank's Outstanding Loans and Commitment, the Borrower may designate
a replacement bank or banks fulfilling the requirements of an Eligible Assignee,
which must be satisfactory to the Administrative Agent, to acquire and assume
that portion of the Outstanding Loans and Commitment of the Affected Bank not
being acquired and assumed by the Non-Affected Banks. The provisions of Section
19 hereof (including, without limitation, the requirements of Section 19.1(c))
shall apply to all reallocations pursuant to this Section 6.12, and the
Borrowers, the Affected Bank and any Non-Affected Banks and/or replacement banks
which are to acquire the Loans and Commitment of the Affected Bank shall execute
and deliver to the Administrative Agent, in accordance with the provisions of
Section 19 hereof, such Assignments and Acceptances and other instruments,
including, without limitation, Notes, as are required pursuant to Section 19
hereof to give effect to such reallocations. Any Non-Affected Banks which are to
acquire the Loans and Commitment of the Affected Bank shall be deemed to be
Eligible Assignees for all purposes of Section 19 hereof. On the effective date
of the applicable Assignments and Acceptances, the Borrower shall pay to the
Affected Bank all interest accrued on its Loans up to but excluding such date,
along with any fees payable to such Affected Bank hereunder up to but excluding
such date.
6.13. CONCERNING JOINT AND SEVERAL LIABILITY OF THE BORROWERS. (a) Each
of the Borrowers is accepting joint and several liability hereunder and under
the other Loan Documents in consideration of the financial accommodations to be
provided by the Banks, the Issuing Banks and the Agents under this Credit
Agreement, for the mutual benefit, directly and indirectly, of each of the
Borrowers and in consideration of the undertakings of the other Borrower to
accept joint and several liability for the Obligations.
(b) Each of the Borrowers, jointly and severally, hereby irrevocably
and unconditionally accepts, not merely as a surety but also as a co-debtor,
joint and several liability with the other Borrower, with respect to the payment
and performance of all of the Obligations (including, without limitation, any
Obligations arising under this Section 6.13), it
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being the intention of the parties hereto that all the Obligations shall be the
joint and several obligations of each of the Borrowers without preferences or
distinction among them.
(c) If and to the extent that either of the Borrowers shall fail to
make any payment with respect to any of the Obligations as and when due or to
perform any of the Obligations in accordance with the terms thereof, then in
each such event the other Borrower will make such payment with respect to, or
perform, such Obligation.
(d) The Obligations of each of the Borrowers under the provisions of
this Section 6.12 constitute the full recourse Obligations of each of the
Borrowers enforceable against each such corporation to the full extent of its
properties and assets, irrespective of the validity, regularity or
enforceability of this Credit Agreement or the other Loan Documents or any other
circumstance whatsoever as to the other Borrower.
(e) Except as otherwise expressly provided herein, each Borrower hereby
waives promptness, diligence, presentment, demand, protest, notice of acceptance
of its joint and several liability, notice of any and all issuances of Letters
of Credit and any and all advances of the Loans made under this Credit Agreement
and the Notes, notice of occurrence of any Default or Event of Default (except
to the extent notice is expressly required to be given pursuant to the terms of
this Credit Agreement or any of the other Loan Documents), or of any demand for
any payment under this Credit Agreement, notice of any action at any time taken
or omitted by any Agent, either of the Issuing Banks or any of the Banks under
or in respect of any of the Obligations hereunder, any requirement of diligence
and, generally, all demands, notices and other formalities of every kind in
connection with this Credit Agreement and the other Loan Documents. Each
Borrower hereby waives all defenses which may be available by virtue of any
valuation, stay, moratorium law or other similar law now or hereafter in effect,
any right to require the marshaling of assets of the Borrowers and any other
entity or Person primarily or secondarily liable with respect to any of the
Obligations, and all suretyship defenses generally. Each Borrower hereby assents
to, and waives notice of, any extension or postponement of the time for the
payment, or place or manner for payment, compromise, refinancing, consolidation
or renewals of any of the Obligations hereunder, the acceptance of any partial
payment thereon, any waiver, consent or other action or acquiescence by the
Agents, the Issuing Banks and the Banks at any time or times in respect of any
default by any Borrower in the performance or satisfaction of any term,
covenant, condition or provision of this Credit Agreement and the other Loan
Documents, any and all other indulgences whatsoever by the Agents, the Issuing
Banks and the Banks in respect of any of the Obligations hereunder, and the
taking, addition, substitution or release, in whole or in part, at any time or
times, of any security for any of such Obligations or the addition, substitution
or release, in whole or in part, of any Borrower or any other entity or Person
primarily or secondarily liable for any Obligation. Such Borrower further agrees
that its Obligations shall not be released or discharged, in whole or in part,
or otherwise affected by the adequacy of any rights which any Agent, any Issuing
Bank or any Bank may have against any collateral security or other means of
obtaining repayment of any of the Obligations, the impairment of any collateral
security securing the Obligations, including, without limitation, the failure to
protect or preserve any rights which any Agent, any Issuing Bank or any Bank may
have in such collateral security or the substitution, exchange, surrender,
release, loss or destruction of any such collateral security, any other act or
omission which might in any manner or to any extent vary the risk of such
Borrower, or otherwise operate as a release or discharge of such Borrower, all
of
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which may be done without notice to such Borrower; provided, however, that the
foregoing shall in no way be deemed to create commercially unreasonable
standards as to the Agents' duties under the Loan Documents (as such rights and
duties are set forth therein). If for any reason the other Borrower has no legal
existence or is under no legal obligation to discharge any of the Obligations,
or if any of the Obligations have become irrecoverable from the other Borrower
by reason of such other Borrower's insolvency, bankruptcy or reorganization or
by other operation of law or for any reason, this Credit Agreement and the other
Loan Documents to which it is a party shall nevertheless be binding on such
Borrower to the same extent as if such Borrower at all times had been the sole
obligor on such Obligations. Without limiting the generality of the foregoing,
each Borrower assents to any other action or delay in acting or failure to act
on the part of the Agents, the Issuing Banks and the Banks, including, without
limitation, any failure strictly or diligently to assert any right or to pursue
any remedy or to comply fully with applicable laws or regulations thereunder
which might, but for the provisions of this Section 6.13, afford grounds for
terminating, discharging or relieving such Borrower, in whole or in part, from
any of its obligations under this Section 6.13, it being the intention of each
Borrower that, so long as any of the Obligations hereunder remain unsatisfied,
the obligations of such Borrower under this Section 6.13 shall not be discharged
except by performance and then only to the extent of such performance. The
Obligations of each Borrower under this Section 6.13 shall not be diminished or
rendered unenforceable by any winding up, reorganization, arrangement,
liquidation, reconstruction or similar proceeding with respect to any
reconstruction or similar proceeding with respect to any Borrower, or any of the
Banks. The joint and several liability of the Borrowers hereunder shall continue
in full force and effect notwithstanding any absorption, merger, amalgamation or
any other change whatsoever in the name, ownership, membership, constitution or
place of formation of either Borrower or the Banks. Each of the Borrowers
acknowledges and confirms that it has itself established its own adequate means
of obtaining from the other Borrower on a continuing basis all information
desired by such Borrower concerning the financial condition of the other
Borrower and that each Borrower will look to the other Borrower and not to any
Agent or any Bank in order for such Borrower to keep adequately informed of
changes in the other Borrower's financial condition.
(f) The provisions of this Section 6.13 are made for the benefit of the
Banks, the Issuing Banks and the Agents and their respective successors and
assigns, and may be enforced by them from time to time against any or all of the
Borrowers as often as occasion therefor may arise and without requirement on the
part of any of the Banks, the Issuing Banks or the Agents or such successor or
assign first to marshall any of its or their claims or to exercise any of its or
their rights against the other Borrower or to exhaust any remedies available to
it or them against the other Borrower or to resort to any other source or means
of obtaining payment of any of the Obligations hereunder or to elect any other
remedy. The provisions of this Section 6.13 shall remain in effect until all of
the Obligations shall have been paid in full in cash or otherwise fully
satisfied. If at any time, any payment, or any part thereof, made in respect of
any of the Obligations, is rescinded or must otherwise be restored or returned
by any Bank, any Issuing Bank or any Agent upon the insolvency, bankruptcy or
reorganization of any of the Borrowers, or otherwise, the provisions of this
Section 6.13 will forthwith be reinstated in effect, as though such payment had
not been made.
(g) Each of the Borrowers hereby agrees that it will not enforce any of
its rights of reimbursement, contribution, subrogation or the like against the
other Borrower with respect
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to any liability incurred by it hereunder or under any of the other Loan
Documents, any payments made by it to any of the Banks, the Issuing Banks or the
Agents with respect to any of the Obligations or any collateral security
therefor until such time as all of the Obligations have been irrevocably paid in
full in cash. Any claim which any Borrower may have against the other Borrower
with respect to any payments to the Banks, the Issuing Banks or the Agents
hereunder or under any other Loan Documents are hereby expressly made
subordinate and junior in right of payment, without limitation as to any
increases in the Obligations arising hereunder or thereunder, to the prior
payment in full of the Obligations and, in the event of any insolvency,
bankruptcy, receivership, liquidation, reorganization or other similar
proceeding under the laws of any jurisdiction relating to any Borrower, its
debts or its assets, whether voluntary or involuntary, all such Obligations
shall be paid in full before any payment or distribution of any character,
whether in cash, securities or other property, shall be made to the other
Borrower therefor.
(h) Each of the Borrowers hereby agrees that the payment of any amounts
due with respect to the indebtedness owing by any Borrower to any other Borrower
is hereby subordinated to the prior payment in full in cash of the Obligations.
Each Borrower hereby agrees that after the occurrence and during the continuance
of any Default or Event of Default, such Borrower will not demand, sue for or
otherwise attempt to collect any indebtedness of any other Borrower owing to
such Borrower until the Obligations shall have been paid in full in cash. If,
notwithstanding the foregoing sentence, such Borrower shall collect, enforce or
receive any amounts in respect of such indebtedness, such amounts shall be
collected, enforced and received by such Borrower as trustee for the
Administrative Agent and be paid over to the Administrative Agent for the pro
rata accounts of the Banks and the Issuing Banks to be applied to repay the
Obligations.
7. REPRESENTATIONS AND WARRANTIES.
Each of the Borrowers represents and warrants as to itself to the
Banks, the Issuing Banks and the Agents as follows:
7.1. CORPORATE AUTHORITY.
7.1.1. INCORPORATION; GOOD STANDING. Each of the Borrowers and
their Subsidiaries (a) is a corporation duly organized, validly
existing and in good standing under the laws of their state of
incorporation, (b) has all requisite corporate power to own its
property and conduct its business as now conducted and as presently
contemplated, and (c) is in good standing as a foreign corporation and
is duly authorized to do business in each jurisdiction where such
qualification is necessary except where a failure to be so qualified
would not have a materially adverse effect on the business, assets or
financial condition of the Borrowers and their Subsidiaries, on a
consolidated basis.
7.1.2. AUTHORIZATION. The execution, delivery and performance of
this Credit Agreement and the other Loan Documents to which either of
the Borrowers or any of their Subsidiaries is or is to become a party
and the transactions contemplated hereby and thereby (a) are within the
corporate authority of such
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Person, (b) have been duly authorized by all necessary corporate
proceedings, (c) do not conflict with or result in any breach or
contravention of any provision of law, statute, rule or regulation to
which either of the Borrowers or any of their Subsidiaries is subject
or any judgment, order, writ, injunction, license or permit applicable
to either of the Borrowers or any of their Subsidiaries and (d) do not
conflict with any provision of the corporate charter or bylaws of, or
any agreement or other instrument binding upon, either of the Borrowers
or any of their Subsidiaries.
7.1.3. ENFORCEABILITY. The execution and delivery of this Credit
Agreement and the other Loan Documents to which the Borrowers or any of
their Subsidiaries is or is to become a party will result in valid and
legally binding obligations of such Person enforceable against it in
accordance with the respective terms and provisions hereof and thereof,
except as enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting
generally the enforcement of creditors' rights and except to the extent
that availability of the remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any
proceeding therefor may be brought.
7.2. GOVERNMENTAL APPROVALS. The execution, delivery and performance by
the Borrowers and their Subsidiaries of this Credit Agreement and the other Loan
Documents to which either of the Borrowers or any of their Subsidiaries is or is
to become a party and the transactions contemplated hereby and thereby do not
require the approval or consent of, or filing with, any governmental agency or
authority other than those already obtained.
7.3. TITLE TO PROPERTIES; LEASES. Except as indicated on Schedule 7.3
hereto, the Borrowers and their Subsidiaries own all of the assets reflected in
the consolidated balance sheet of the Borrowers as at the Balance Sheet Date or
acquired since that date (except property and assets sold or otherwise disposed
of in the ordinary course of business since that date), subject to no rights of
others, including any mortgages, leases, conditional sales agreements, title
retention agreements, liens or other encumbrances except Permitted Liens.
7.4. FINANCIAL STATEMENTS AND PROJECTIONS.
7.4.1. FINANCIAL STATEMENTS. There has been furnished to the
Agents a consolidated balance sheet of Chadwick's of Boston and its
Subsidiaries as at the Balance Sheet Date, and a consolidated statement
of income of Chadwick's and its Subsidiaries for the fiscal year then
ended, certified by Coopers & Lybrand L.L.P. Such balance sheet and
statement of income have been prepared in accordance with generally
accepted accounting principles and fairly present the financial
condition of the Borrowers as at the close of business on the date
thereof and the results of operations for the fiscal year then ended.
There are no contingent liabilities of the Borrowers or any of their
Subsidiaries as of such date involving material amounts, known to the
officers of the Borrowers, which were not disclosed in such balance
sheet and the notes related thereto.
7.4.2. PROJECTIONS. The projections of the annual operating
budgets of the Borrowers and their Subsidiaries on a consolidated
basis, balance sheets and cash flow statements for the 1997 to 2001
fiscal years, copies of which have been
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delivered to the Agents, disclose the assumptions made in formulating
such projections. To the knowledge of the Borrowers or any of their
Subsidiaries, no facts exist that (individually or in the aggregate)
would result in any material change in any of such projections. The
projections are based upon reasonable estimates and assumptions, have
been prepared on the basis of the assumptions stated therein and
reflect the reasonable estimates of the Borrowers and their
Subsidiaries of the results of operations and other information
projected therein.
7.5. NO MATERIAL CHANGES, ETC.
7.5.1. NO CHANGES. Since the Balance Sheet Date there has
occurred no materially adverse change in the financial condition or
business of the Borrowers and their Subsidiaries as shown on or
reflected in the consolidated balance sheet of the Borrowers and their
Subsidiaries as at the Balance Sheet Date, or the consolidated
statement of income for the fiscal year then ended, other than changes
in the ordinary course of business that have not had any materially
adverse effect either individually or in the aggregate on the business
or financial condition of the Borrowers or any of their Subsidiaries.
Since the Balance Sheet Date, neither of the Borrowers has made any
Distribution except to the extent permitted by Section 9.4.
7.5.2. SOLVENCY. Each of the Borrowers and each of their
Subsidiaries (both before and after giving effect to the transactions
contemplated by this Credit Agreement) (a) is solvent, (b) has assets
having a fair value in excess of its liabilities, (c) has assets having
a fair value in excess of the amount required to pay its liabilities on
existing debts as such debts become absolute and matured, and (d) has,
and expects to continue to have, access to adequate capital for the
conduct of its business and the ability to pay its debts from time to
time incurred in connection with the operation of its business as such
debts mature.
7.6. FRANCHISES, PATENTS, COPYRIGHTS, ETC. Each of the Borrowers and
their Subsidiaries possess all franchises, patents, copyrights, trademarks,
trade names, licenses and permits, and rights in respect of the foregoing,
adequate for the conduct of its business substantially as now conducted without
known conflict with any rights of others, with only such exceptions as would not
have any material adverse effect on the properties, business, assets or
financial condition of the Borrowers and their subsidiaries taken as a whole.
7.7. LITIGATION. Except as set forth in Schedule 7.7 hereto, there are
no actions, suits, proceedings or investigations of any kind pending or
threatened against either of the Borrowers or any of their Subsidiaries before
any court, tribunal or administrative agency or board that, if adversely
determined, might, either in any case or in the aggregate, materially adversely
affect the properties, assets, financial condition or business of the Borrowers
and their Subsidiaries or materially impair the right of the Borrowers and their
Subsidiaries, considered as a whole, to carry on business substantially as now
conducted by them, or result in any substantial liability not adequately covered
by insurance, or for which adequate reserves are not maintained on the
consolidated balance sheet of Chadwick's of Boston and its Subsidiaries, or
which question the validity of this Credit Agreement or any of the other Loan
Documents, or any action taken or to be taken pursuant hereto or thereto.
<PAGE> 42
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7.8. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither of the Borrowers nor
any of their Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation that has or is
expected in the future to have a materially adverse effect on the business,
assets or financial condition of the Borrowers and their Subsidiaries, taken as
a whole. Neither of the Borrowers nor any of their Subsidiaries is a party to
any contract or agreement that has or is expected, in the judgment of the
Borrowers' officers, to have any materially adverse effect on the business of
the Borrowers and their Subsidiaries, taken as a whole.
7.9. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. Neither of the
Borrowers nor any of their Subsidiaries is in violation of any provision of its
charter documents, bylaws, or any agreement or instrument to which it may be
subject or by which it or any of its properties may be bound or any decree,
order, judgment, statute, license, rule or regulation, in any of the foregoing
cases in a manner that could result in the imposition of substantial penalties
or materially and adversely affect the financial condition, properties or
business of the Borrowers and their Subsidiaries, taken as a whole.
7.10. TAX STATUS. The Borrowers and their Subsidiaries (a) have made or
filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which any of them is subject, (b)
have paid all taxes and other governmental assessments and charges shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and by appropriate proceedings and (c) have set
aside on their books provisions reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount claimed to
be due by the taxing authority of any jurisdiction, and the officers of the
Borrowers know of no basis for any such claim.
7.11. NO EVENT OF DEFAULT. No Default or Event of Default has occurred
and is continuing.
7.12. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. Neither of the
Borrowers nor any of their Subsidiaries is a "holding company", or a "subsidiary
company" of a "holding company", or an affiliate" of a "holding company", as
such terms are defined in the Public Utility Holding Company Act of 1935; nor is
it an "investment company", or an "affiliated company" or a "principal
underwriter" of an "investment company", as such terms are defined in the
Investment Company Act of 1940.
7.13. ABSENCE OF FINANCING STATEMENTS, ETC. Except with respect to
Permitted Liens, there is no financing statement, security agreement, chattel
mortgage, real estate mortgage or other document filed or recorded with any
filing records, registry or other public office, that purports to cover, affect
or give notice of any present or possible future lien on, or security interest
in, any assets or property of either of the Borrowers or any of their
Subsidiaries or any rights relating thereto.
7.14. INSURANCE. Each of the Borrowers and each of their Subsidiaries
maintains with financially sound and reputable insurers insurance with respect
to its properties and businesses against such casualties and contingencies as
are in accordance with sound business practices with the details of such
coverage being more fully described on Schedule 7.14 hereto.
<PAGE> 43
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7.15. CERTAIN TRANSACTIONS. Except for the TJX Documents as in effect
on the Closing Date and except for arm's-length transactions pursuant to which
the Borrowers or any of their Subsidiaries makes payments in the ordinary course
of business upon terms no less favorable than the Borrowers or such Subsidiary
could obtain from third parties, none of the officers, directors, or employees
of either of the Borrowers or any of their Subsidiaries is presently a party to
any transaction with either of the Borrowers or any of their Subsidiaries (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Borrowers, any corporation, partnership, trust or other entity
in which any officer, director, or any such employee has a substantial interest
or is an officer, director, trustee or partner.
7.16. EMPLOYEE BENEFIT PLANS
7.16.1. IN GENERAL. Each Employee Benefit Plan has been
maintained and operated in compliance in all material respects with the
provisions of ERISA and, to the extent applicable, the Code, including
but not limited to the provisions thereunder respecting prohibited
transactions. The Borrowers have heretofore delivered to the
Administrative Agent the most recently completed annual report, Form
5500, with all required attachments, and actuarial statement required
to be submitted under Section 103(d) of ERISA, with respect to each
Guaranteed Pension Plan.
7.16.2. TERMINABILITY OF WELFARE PLANS. Under each Employee
Benefit Plan which is an employee welfare benefit plan within the
meaning of Section 3(1) or Section 3(2)(B) of ERISA, no benefits are
due unless the event giving rise to the benefit entitlement occurs
prior to plan termination (except as required by Title I, Part 6 of
ERISA) . The Borrowers or an ERISA Affiliate, as appropriate, may
terminate each such Plan at any time (or at any time subsequent to the
expiration of any applicable bargaining agreement) in the discretion of
the Borrowers or such ERISA Affiliate without liability to any Person.
7.16.3. GUARANTEED PENSION PLANS. Each contribution required to
be made to a Guaranteed Pension Plan, whether required to be made to
avoid the incurrence of an accumulated funding deficiency, the notice
or lien provisions of Section 302(f) of ERISA, or otherwise, has been
timely made. No waiver of an accumulated funding deficiency or
extension of amortization periods has been received with respect to any
Guaranteed Pension Plan. No liability to the PBGC (other than required
insurance premiums, all of which have been paid) has been incurred by
the Borrowers or any ERISA Affiliate with respect to any Guaranteed
Pension Plan and there has not been any ERISA Reportable Event, or any
other event or condition which presents a material risk of termination
of any Guaranteed Pension Plan by the PBGC. Based on the latest
valuation of each Guaranteed Pension Plan (which in each case occurred
within twelve months of the date of this representation), and on the
actuarial methods and assumptions employed for that valuation, the
aggregate benefit liabilities of all such Guaranteed Pension Plans
within the meaning of Section 4001 of ERISA did not exceed the
aggregate value of the assets of all such Guaranteed Pension Plans,
disregarding for this purpose the benefit liabilities and assets of any
Guaranteed Pension Plan with assets in excess of benefit liabilities.
<PAGE> 44
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7.16.4. MULTIEMPLOYER PLANS. Neither of the Borrowers nor any
ERISA Affiliate has incurred any material liability (including
secondary liability) to any Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan under
Section 4201 of ERISA or as a result of a sale of assets described in
Section 4204 of ERISA. Neither of the Borrowers nor any ERISA Affiliate
has been notified that any Multiemployer Plan is in reorganization or
insolvent under and within the meaning of Section 4241 or Section 4245
of ERISA or that any Multiemployer Plan intends to terminate or has
been terminated under Section 4041A of ERISA.
7.17. REGULATIONS U AND X. The proceeds of the Loans shall be used for
working capital and general corporate purposes. The Borrowers will obtain
Letters of Credit solely for general corporate purposes. No portion of any Loan
is to be used, and no portion of any Letter of Credit is to be obtained, for the
purpose of purchasing or carrying any "margin security" or "margin stock" as
such terms are used in Regulations U and X of the Board of Governors of the
Federal Reserve System, 12 C.F.R. Parts 221 and 224.
7.18. ENVIRONMENTAL COMPLIANCE. The Borrowers have taken all necessary
steps to investigate the past and present condition and usage of the Real Estate
and the operations conducted thereon and, based upon such diligent
investigation, has determined that:
(a) none of the Borrowers, their Subsidiaries or any operator of
the Real Estate or any operations thereon is in violation, or alleged
violation, of any judgment, decree, order, law, license, rule or
regulation pertaining to environmental matters, including without
limitation, those arising under the Resource Conservation and Recovery
Act ("RCRA"), the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 as amended ("CERCLA"), the Superfund
Amendments and Reauthorization Act of 1986 ("SARA"), the Federal Clean
Water Act, the Federal Clean Air Act, the Toxic Substances Control Act,
or any state or local statute, regulation, ordinance, order or decree
relating to health, safety or the environment (hereinafter
"Environmental Laws"), which violation would have a material adverse
effect on the environment or the business, assets or financial
condition of the Borrowers and their Subsidiaries, taken as a whole;
(b) neither of the Borrowers nor any of their Subsidiaries has
received notice from any third party including, without limitation, any
federal, state or local governmental authority, (i) that any one of
them has been identified by the United States Environmental Protection
Agency ("EPA") as a potentially responsible party under CERCLA with
respect to a site listed on the National Priorities List, 40 C.F.R.
Part 300 Appendix B; (ii) that any hazardous waste, as defined by 42
U.S.C. Section 6903(5), any hazardous substances as defined by 42
U.S.C. Section 9601(14), any pollutant or contaminant as defined by 42
U.S.C. Section 9601(33) and any toxic substances, oil or hazardous
materials or other chemicals or substances regulated by any
Environmental Laws ("Hazardous Substances") which any one of them has
generated, transported or disposed of has been found at any site at
which a federal, state or local agency or other third party has
conducted or has ordered that either Borrower or any of its
Subsidiaries conduct a remedial investigation, removal or other
response action pursuant to any Environmental Law; or (iii) that it is
or shall be a named party to any claim, action, cause of action,
complaint, or legal or
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administrative proceeding (in each case, contingent or otherwise)
arising out of any third party's incurrence of costs, expenses, losses
or damages of any kind whatsoever in connection with the release of
Hazardous Substances;
(c) except as set forth on Schedule 7.18 attached hereto: (i) no
portion of the Real Estate has been used for the handling, processing,
storage or disposal of Hazardous Substances except in accordance with
applicable Environmental Laws; and no underground tank or other
underground storage receptacle for Hazardous Substances is located on
any portion of the Real Estate; (ii) in the course of any activities
conducted by the Borrowers, their Subsidiaries or operators of their
properties, no Hazardous Substances have been generated or are being
used on the Real Estate except in accordance with applicable
Environmental Laws; (iii) there have been no releases (i.e. any past or
present releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, disposing or dumping) or
threatened releases of Hazardous Substances on, upon, into or from the
properties of the Borrowers or their Subsidiaries, which releases would
have a material adverse effect on the value of any of the Real Estate
or adjacent properties or the environment; (iv) to the best of the
Borrowers' knowledge, there have been no releases on, upon, from or
into any real property in the vicinity of any of the Real Estate which,
through soil or groundwater contamination, may have come to be located
on, and which would have a material adverse effect on the value of, the
Real Estate; and (v) in addition, any Hazardous Substances that have
been generated on any of the Real Estate have been transported offsite
only by carriers having an identification number issued by the EPA,
treated or disposed of only by treatment or disposal facilities
maintaining valid permits as required under applicable Environmental
Laws, which transporters and facilities have been and are, to the best
of the Borrowers' knowledge, operating in compliance with such permits
and applicable Environmental Laws.
7.19. SUBSIDIARIES. Except as set forth on Schedule 7.19(a), the
Borrowers have no Subsidiaries. Except as set forth on Schedule 7.19(b) hereto,
neither of the Borrowers nor any Subsidiary of the Borrowers is engaged in any
joint venture or partnership with any other person.
7.20. FISCAL YEAR. Each of the Borrowers and each of their Subsidiaries
has a fiscal year which is the twelve (12) months ending on the last Saturday of
January of each year.
7.21. DISCLOSURE. No representation or warranty made by the Borrowers
or any of their Subsidiaries in this Credit Agreement, or any agreement,
instrument, document, certificate, statement or letter furnished to any Agent,
any Issuing Bank or any Bank by or on behalf of the Borrowers or any of such
Subsidiaries in connection with any of the transactions contemplated by any of
the Loan Documents contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
therein not misleading in light of the circumstances in which they are made.
<PAGE> 46
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8. AFFIRMATIVE COVENANTS OF THE BORROWERS.
Each of the Borrowers covenants and agrees as to itself that, so long
as any Loan, Unpaid Reimbursement Obligation (or other amounts payable under
Section 5.2), Letter of Credit or Note is outstanding or any Bank has any
obligation to make any Loans or either of the Issuing Banks has any obligation
to issue, extend or renew any Letters of Credit:
8.1. PUNCTUAL PAYMENT. The Borrowers will duly and punctually pay or
cause to be paid the principal and interest on the Loans, all Reimbursement
Obligations, the Letter of Credit Fees, the commitment fees, the Administrative
Agent's fee and all other amounts provided for in this Credit Agreement and the
other Loan Documents to which either of the Borrowers or any of their
Subsidiaries is a party, all in accordance with the terms of this Credit
Agreement and such other Loan Documents.
8.2. MAINTENANCE OF OFFICE. The Borrowers will maintain their chief
executives office in West Bridgewater, Massachusetts, or at such other place in
the United States of America as the Borrowers shall designate upon written
notice to the Administrative Agent, where notices, presentations and demands to
or upon the Borrowers in respect of the Loan Documents to which the Borrowers
are a party may be given or made.
8.3. RECORDS AND ACCOUNTS. Each of the Borrowers will (a) keep, and
cause each of their Subsidiaries to keep, true and accurate records and books of
account in which full, true and correct entries will be made in accordance with
generally accepted accounting principles and (b) maintain adequate accounts and
reserves for all taxes (including income taxes), depreciation, depletion,
obsolescence and amortization of its properties and the properties of its
Subsidiaries, contingencies, and other reserves.
8.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. The Borrowers
will deliver to the Administrative Agent copies for each of the Banks (and the
Administrative Agent shall thereafter deliver to each of the Banks):
(a) as soon as practicable, but in any event not later than one
hundred and five (105) days after the end of each fiscal year of the
Borrowers, the consolidated balance sheet of Chadwick's of Boston and
its Subsidiaries as at the end of such year, and the related
consolidated statement of income and consolidated statement of cash
flow for such year, each setting forth in comparative form the figures
for the previous fiscal year and all such consolidated statements to be
in reasonable detail, prepared in accordance with generally accepted
accounting principles, and certified (without qualification or
otherwise reasonably acceptable to the Agents; provided that such
certification may set forth qualifications to the extent such
qualifications pertain solely to changes in generally accepted
accounting principles from those applied during earlier accounting
periods, the implementation of which changes is reflected in the
financial statements accompanying such certification) by Coopers &
Lybrand L.L.P. or by other independent certified public accountants
satisfactory to the Agents, together with a written statement from such
accountants to the effect that they have read a copy of this Credit
Agreement, and that, in making the examination necessary to said
certification, they have obtained no knowledge of any Default or Event
of Default, or, if such accountants shall have obtained knowledge of
any then existing Default or Event of Default they shall disclose in
such
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statement any such Default or Event of Default; provided that such
accountants shall not be liable to the Banks for failure to obtain
knowledge of any Default or Event of Default;
(b) as soon as practicable, but in any event not later than sixty
(60) days after the end of each of the first three (3) fiscal quarters
of the Borrowers, copies of the unaudited consolidated balance sheet of
Chadwick's of Boston and its Subsidiaries as at the end of such
quarter, and the related consolidated statement of income and
consolidated statement of cash flow for the portion of the Borrowers'
fiscal year then elapsed, all in reasonable detail and prepared in
accordance with generally accepted accounting principles, together with
a certification by the principal financial or accounting officer of the
Borrowers that the information contained in such financial statements
fairly presents the financial position of the Borrowers and their
Subsidiaries on the date thereof (subject to year-end adjustments);
(c) simultaneously with the delivery of the financial statements
referred to in subSection s (a) and (b) above, a statement certified by
the principal financial or accounting officer of the Borrowers in
substantially the form of Exhibit D hereto (the "Compliance
Certificate") and setting forth in reasonable detail computations
evidencing compliance with the covenants contained in Section 10 and
(if applicable) reconciliations to reflect changes in generally
accepted accounting principles since the Balance Sheet Date;
(d) contemporaneously with the filing or mailing thereof, copies
of all material of a financial nature filed with the Securities and
Exchange Commission or sent to the stockholders of Chadwick's of
Boston;
(e) from time to time upon request of any Agent, projections of
the Borrowers and their Subsidiaries updating those projections
delivered to the Banks and referred to in Section 7.4.2 or, if
applicable, updating any later such projections delivered in response
to a request pursuant to this Section 8.4(f);
(f) as soon as practicable, but in any event no later than the
___ day of each month from and after the closing of the Securitization
Arrangements, the monthly settlement statement prepared in connection
with the Securitization Arrangements, together with such other
information with respect to the Securitization Arrangements as the
Agent may reasonably request; and
(g) from time to time such other financial data and information
as any Agent or any Bank may reasonably request.
8.5. NOTICES.
8.5.1. DEFAULTS. The Borrowers will promptly notify the Agents
and each of the Banks in writing of the occurrence of any Default or
Event of Default. If any Person shall give any notice or take any other
action in respect of a claimed default (whether or not constituting an
Event of Default) under this Credit Agreement or any other note,
evidence of indebtedness, indenture or other obligation to which or
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with respect to which either of the Borrowers or any of their
Subsidiaries is a party or obligor, whether as principal, guarantor,
surety or otherwise, the Borrowers shall forthwith give written notice
thereof to the Agents and each of the Banks, describing the notice or
action and the nature of the claimed default.
8.5.2. ENVIRONMENTAL EVENTS. The Borrowers will promptly give
notice to the Agents and each of the Banks (a) of any violation of any
Environmental Law that either of the Borrowers or any of their
Subsidiaries reports in writing or is reportable by such Person in
writing (or for which any written report supplemental to any oral
report is made) to any federal, state or local environmental agency and
(b) upon becoming aware thereof, of any inquiry, proceeding,
investigation, or other action, including a notice from any agency of
potential environmental liability, of any federal, state or local
environmental agency or board, that has the potential to materially
adversely affect the assets, liabilities, financial conditions or
operations of the Borrowers and their Subsidiaries, taken as a whole.
8.53. NOTICE OF LITIGATION AND JUDGMENTS. The Borrowers will, and
will cause each of their Subsidiaries to, give notice to the Agents and
each of the Banks in writing within fifteen (15) days of becoming aware
of any litigation or proceedings threatened in writing or any pending
litigation and proceedings affecting the Borrowers or any of their
Subsidiaries or to which either of the Borrowers or any of their
Subsidiaries is or becomes a party involving an uninsured claim against
either of the Borrowers or any of their Subsidiaries that could
reasonably be expected to have a materially adverse effect on the
Borrowers and their Subsidiaries and stating the nature and status of
such litigation or proceedings. The Borrowers will, and will cause each
of their Subsidiaries to, give notice to the Agents and each of the
Banks, in writing, in form and detail satisfactory to the Agents,
within ten (10) days of any judgment not covered by insurance, final or
otherwise, against either of the Borrowers or any of their Subsidiaries
in an amount in excess of $1,000,000.
8.6. CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES. Each of the
Borrowers will do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence, rights and franchises and
those of its Subsidiaries and will not, and will not cause or permit any of its
Subsidiaries to, convert to a limited liability company. Each (a) will cause all
of its properties and those of its Subsidiaries used or useful in the conduct of
its business or the business of its Subsidiaries to be maintained and kept in
good condition, repair and working order and supplied with all necessary
equipment, (b) will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Borrowers may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times, and (c)
will, and will cause each of its Subsidiaries to, continue to engage primarily
in the businesses now conducted by them and in related businesses; provided that
nothing in this Section 8.6 shall prevent either of the Borrowers from
discontinuing the operation and maintenance of any of its properties or any of
those of its Subsidiaries if such discontinuance is, in the judgment of the
Borrowers, desirable in the conduct of its or their business and that do not in
the aggregate materially adversely affect the business of the Borrowers and its
Subsidiaries on a consolidated basis.
<PAGE> 49
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8.7. INSURANCE. The Borrowers will, and will cause each of their
Subsidiaries to, maintain with financially sound and reputable insurers
insurance with respect to their properties and business against such casualties
and contingencies as shall be in accordance with the general practices of
businesses engaged in similar activities in similar geographic areas and in
amounts, containing such terms, in such forms and for such periods as may be
reasonable and prudent and in accordance with the Schedule 7.14.
8.8 TAXES. The Borrowers will, and will cause each of their
Subsidiaries to, duly pay and discharge, or cause to be paid and discharged,
before the same shall become overdue, all taxes, assessments and other
governmental charges imposed upon it and its real properties, sales and
activities, or any part thereof, or upon the income or profits therefrom, as
well as all claims for labor, materials, or supplies that if unpaid might by law
become a lien or charge upon any of its property; provided that any such tax,
assessment, charge, levy or claim need not be paid if the validity or amount
thereof shall currently be contested in good faith by appropriate proceedings
and if the applicable Borrower or such Subsidiary shall have set aside on its
books adequate reserves with respect thereto; and provided further that the
Borrowers and each Subsidiary of the Borrowers will pay all such taxes,
assessments, charges, levies or claims forthwith upon the commencement of
proceedings to foreclose any lien that may have attached as security therefor.
8.9. INSPECTION OF PROPERTIES AND BOOKS, ETC. The Borrowers shall
permit the Banks, through the Agents or any of any Bank's other designated
representatives, to visit and inspect any of the properties of the Borrowers or
any of their Subsidiaries, to examine the books of account of the Borrowers and
their Subsidiaries (and to make copies thereof and extracts therefrom), and to
discuss the affairs, finances and accounts of the Borrowers and their
Subsidiaries with, and to be advised as to the same by, their officers, all at
such reasonable times and intervals as any Agent or any Bank may reasonably
request.
8.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS. Each of
the Borrowers will, and will cause each of their Subsidiaries to, comply with
(a) the applicable laws and regulations wherever its business is conducted,
including all Environmental Laws, (b) the provisions of its charter documents
and by-laws, (c) all agreements and instruments by which it or any of its
properties may be bound and (d) all applicable decrees, orders, and judgments.
If any authorization, consent, approval, permit or license from any officer,
agency or instrumentality of any government shall become necessary or required
in order that each of the Borrowers and their Subsidiaries may fulfill any of
its obligations hereunder or any of the other Loan Documents to which such
Borrower or such Subsidiary is a party, the Borrowers will, or (as the case may
be) will cause such Subsidiary to, immediately take or cause to be taken all
reasonable steps within the power of the Borrowers or such Subsidiary to obtain
such authorization, consent, approval, permit or license and furnish the Agents
and the Banks with evidence thereof.
8.11. EMPLOYEE BENEFIT PLANS. The Borrowers will (a) promptly upon
filing the same with the Department of Labor or Internal Revenue Service upon
request of the Administrative Agent, furnish to the Administrative Agent a copy
of the most recent actuarial statement required to be submitted under Section
103(d) of ERISA and Annual Report, Form 5500, with all required attachments, in
respect of each Guaranteed Pension Plan and (b) promptly upon receipt or
dispatch, furnish to the Administrative Agent any notice, report or demand sent
or received in respect of a Guaranteed Pension Plan under Section Section 302,
4041,
<PAGE> 50
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4042, 4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect of a Multiemployer
Plan, under Section Section 4041A, 4202, 4219, 4242, or 4245 of ERISA.
8.12. USE OF PROCEEDS. The Borrowers will use the proceeds of the Loans
solely for working capital and general corporate purposes. The Borrowers will
obtain Letters of Credit solely for general corporate purposes.
8.13. FURTHER ASSURANCES. The Borrowers will, and will cause each of
their Subsidiaries to, cooperate with the Banks, the Issuing Banks and the
Agents and execute such further instruments and documents as the Banks, the
Issuing Banks or any of the Agents shall reasonably request to carry out to
their satisfaction the transactions contemplated by this Credit Agreement and
the other Loan Documents.
8.14. SECURITIZATION ARRANGEMENTS. Within 90 days after the Closing
Date, the Borrowers and CRFC shall have entered into Securitization Arrangements
on terms and conditions acceptable to the Agents and the Majority Banks, in an
amount of at least $30,000,000.00.
9. CERTAIN NEGATIVE COVENANTS OF THE BORROWERS.
The Borrowers covenant and agree that, so long as any Loan, Unpaid
Reimbursement Obligation (or other amounts payable under Section 5.2), Letter of
Credit or Note is outstanding or any Bank has any obligation to make any Loans
or either of the Issuing Banks has any obligations to issue, extend or renew any
Letters of Credit:
9.1. RESTRICTIONS ON INDEBTEDNESS. The Borrowers will not, and will not
permit any of their Subsidiaries to, create, incur, assume, guarantee or be or
remain liable, contingently or otherwise, with respect to any Indebtedness other
than:
(a) Indebtedness to the Banks, the Issuing Banks and the
Agents arising under any of the Loan Documents;
(b) Indebtedness of the Borrowers or their Subsidiaries
consisting of reimbursement obligations in respect of standby letters
of credit provided, however, that the sum of the maximum aggregate
amount available to be drawn under such standby letters of credit and
the aggregate amount of unreimbursed drawings under such standby
letters of credit shall not exceed $5,000,000.
(c) current liabilities of either Borrower or any of their
Subsidiaries incurred in the ordinary course of business not incurred
through (i) the borrowing of money, or (ii) the obtaining of credit
except for credit on an open account basis customarily extended and in
fact extended in connection with normal purchases of goods and
services;
(d) Indebtedness in respect of taxes, assessments,
governmental charges or levies and claims for labor, materials and
supplies to the extent that payment therefor shall not at the time be
required to be made in accordance with the provisions of Section 8.8;
<PAGE> 51
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(e) Indebtedness in respect of judgments or awards that have
been in force for less than the applicable period for taking an appeal
so long as execution is not levied thereunder or in respect of which
the applicable Borrower or such Subsidiary shall at the time in good
faith be prosecuting an appeal or proceedings for review and in respect
of which a stay of execution shall have been obtained pending such
appeal or review;
(f) endorsements for collection, deposit or negotiation and
warranties of products or services, in each case incurred in the
ordinary course of business;
(g) obligations under Capitalized Leases not exceeding
$5,000,000 in aggregate amount at any time outstanding;
(h) Indebtedness incurred in connection with the acquisition
after the date hereof of any real or personal property by either of the
Borrowers or such Subsidiary, provided that the aggregate principal
amount of such Indebtedness of the Borrowers and their Subsidiaries
shall not exceed the aggregate amount of $5,000,000 at any one time;
(i) Indebtedness existing on the date hereof and listed and
described on Schedule 9.1 hereto;
(j) (i) Intercompany Indebtedness of either Borrower owed to
the other Borrower, (ii) Intercompany Indebtedness owing by a Borrower
to a non-Borrower or non-Guarantor Subsidiary provided the same is
subordinated to the Obligations on terms satisfactory to the Agents,
(iii) Intercompany Indebtedness owing by a non-Borrower or
non-Guarantor Subsidiary to a Borrower, and (iv) Intercompany
Indebtedness between the Guarantor and either Borrower; provided that
the aggregate principal amount of such Intercompany Indebtedness
permitted under the foregoing clauses (ii) and (iii) shall not exceed
$1,000,000 at any one time;
(k) Indebtedness incurred under the Securitization Documents
in connection with the Securitization Arrangements;
(l) Indebtedness under a bridge financing entered into in
anticipation of the Indebtedness under the Securitization Documents,
the aggregate principal amount of such bridge financing being
approximately $30,000,000 and the terms and conditions of, and the loan
documentation executed in connection with, such bridge financing, being
in form and substance satisfactory to the Agents;
(m) Indebtedness consisting of mortgage financing on
Chadwick's fulfillment center not exceeding 80% of the fair market
value of such property, provided that no Default or Event of Default
exists at the time such Indebtedness is incurred or would result
therefrom;
(n) Rate Hedging Obligations provided such Rate Hedging
Obligations are incurred in the ordinary course of business and not for
speculative purposes; and.
<PAGE> 52
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(o) Other unsecured Indebtedness not exceeding $5,000,000 in
the aggregate outstanding at any time.
9.2. RESTRICTIONS ON LIENS. The Borrowers will not, and will not permit
any of their Subsidiaries to, (a) create or incur or suffer to be created or
incurred or to exist any lien, encumbrance, mortgage, pledge, charge,
restriction or other security interest of any kind upon any of its property or
assets of any character whether now owned or hereafter acquired, or upon the
income or profits therefrom; (b) transfer any of such property or assets or the
income or profits therefrom for the purpose of subjecting the same to the
payment of Indebtedness or performance of any other obligation in priority to
payment of its general creditors; (c) acquire, or agree or have an option to
acquire, any property or assets upon conditional sale or other title retention
or purchase money security agreement, device or arrangement; (d) suffer to exist
for a period of more than thirty (30) days after the same shall have been
incurred any Indebtedness or claim or demand against it that if unpaid might by
law or upon bankruptcy or insolvency, or otherwise, be given any priority
whatsoever over its general creditors; or (e) sell, assign, pledge or otherwise
transfer any accounts, contract rights, general intangibles, chattel paper or
instruments, with or without recourse; provided that the Borrowers and any
Subsidiary of the Borrowers may create or incur or suffer to be created or
incurred or to exist:
(i) liens to secure taxes, assessments and other government
charges in respect of obligations not overdue or liens to secure claims
for labor, material or supplies in respect of obligations not overdue;
(ii) deposits or pledges made in connection with, or to secure
payment of, workmen's compensation, unemployment insurance, old age
pensions or other social security obligations;
(iii) liens in respect of judgments or awards, the
Indebtedness with respect to which is permitted by Section 9.1(e);
(iv) liens of carriers, warehousemen, mechanics and
materialmen, and other like liens in existence less than 120 days from
the date of creation thereof in respect of obligations not overdue;
(v) encumbrances on Real Estate consisting of easements,
rights of way, zoning restrictions, restrictions on the use of real
property and defects and irregularities in the title thereto,
landlord's or lessor's liens under leases to which either of the
Borrowers or a Subsidiary of the Borrowers is a party, and other minor
liens or encumbrances none of which in the opinion of the Borrowers
interferes materially with the use of the property affected in the
ordinary conduct of the business of the Borrowers and their
Subsidiaries, which defects do not individually or in the aggregate
have a materially adverse effect on the business of the Borrowers
individually or of the Borrowers and their Subsidiaries on a
consolidated basis;
(vi) liens existing on the date hereof and listed on Schedule
9.2 hereto;
(vii) purchase money security interests in or purchase money
mortgages on real or personal property acquired after the date hereof
to secure purchase money
<PAGE> 53
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Indebtedness of the type and amount permitted by Section 9.1(h),
incurred in connection with the acquisition of such property, which
security interests or mortgages cover only the real or personal
property so acquired;
(viii) liens in respect of Capitalized Leases permitted under
Section 9.1(g);
(ix) liens consisting of a mortgage on Chadwick's fulfillment
center securing Indebtedness permitted under Section 9.1(m); and
(x) liens on and/or sales of Chadwick's deferred billing
receivables in accordance with the Securitization Arrangements or the
bridge financing, to the extent the associated Indebtedness secured by
such liens is permitted under Section Section 9.1(k) and (l),
respectively.
9.3. RESTRICTIONS ON INVESTMENTS. The Borrowers will not, and will not
permit any of their Subsidiaries to, make or permit to exist or to remain
outstanding any Investment except Investments in:
(a) marketable direct or guaranteed obligations of the United
States of America that mature within one (1) year from the date of
purchase by a Borrower;
(b) demand deposits, certificates of deposit, bankers
acceptances and time deposits of United States banks having total
assets in excess of $1,000,000,000;
(c) securities commonly known as "commercial paper" issued by
a corporation organized and existing under the laws of the United
States of America or any state thereof that at the time of purchase
have been rated and the ratings for which are not less than "P 1" if
rated by Moody's Investors Services, Inc., and not less than "A 1" if
rated by Standard and Poor's;
(d) Investments existing on the date hereof and listed on
Schedule 9.3 hereto;
(e) Investments with respect to Indebtedness permitted by
Section 9.1(j) so long as such entities remain Subsidiaries of the
Borrowers;
(f) Investments in CRFC consisting of capital contributions
and advances in connection with, and required under, the terms of the
Securitization Documents, for so long as the Securitization
Arrangements remain in effect and have not been terminated;
(g) Investments consisting of promissory notes received as
proceeds of asset dispositions permitted by Section 9.5.2;
(h) Investments consisting of loans and advances to employees
for moving, entertainment, travel and other similar expenses in the
ordinary course of business not to exceed $500,000 in the aggregate at
any time outstanding;
(i) Investments in CDM so long as the Guaranty remains in
effect; and
<PAGE> 54
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(j) Investments in respect of Rate Hedging Obligations
permitted underSection 9.1(n) provided such obligations are incurred in
the ordinary course of business and not for speculative purposes.
9.4. DISTRIBUTIONS. Chadwick's of Boston will not make any
Distributions, provided however, that so long as no Default or Event of Default
shall have occurred and be continuing, and so long as none would result after
giving effect thereto, Chadwick's of Boston may make such Distributions in an
amount not to exceed in any fiscal year, 25% of the Borrowers' Consolidated Net
Income for the preceding fiscal year.
9.5. MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS.
9.5.1 MERGERS AND ACQUISITIONS. The Borrowers will not, and
will not permit any of their Subsidiaries to, become a party to any
merger or consolidation, or agree to or effect any asset acquisition or
stock acquisition (other than the acquisition of assets in the ordinary
course of business consistent with past practices) except the merger or
consolidation of one or more of the Subsidiaries of the Borrowers with
and into a Borrower (so long as a Borrower is the surviving entity), or
the merger or consolidation of two or more Subsidiaries of the
Borrowers.
9.5.2. DISPOSITION OF ASSETS. The Borrowers will not, and will
not permit any of their Subsidiaries to, become a party to or agree to
or convey, sell, lease or otherwise effect any disposition of assets,
other than (i) the disposition of assets in the ordinary course of
business, consistent with past practices; (ii) other sales of assets in
an aggregate amount not to exceed $1,000,000 per fiscal year; and (iii)
sales of deferred billing receivables in connection with the
Securitization Arrangements.
9.6. SALE AND LEASEBACK. The Borrowers will not, and will not permit
any of their Subsidiaries to, enter into any arrangement, directly or
indirectly, whereby the Borrowers or any Subsidiary of the Borrowers shall sell
or transfer any property owned by it in order then or thereafter to lease such
property or lease other property that the Borrowers or any Subsidiary of the
Borrowers intends to use for substantially the same purpose as the property
being sold or transferred.
9.7. COMPLIANCE WITH ENVIRONMENTAL LAWS. The Borrowers will not, and
will not permit any of their Subsidiaries to, (a) use any of the Real Estate or
any portion thereof for the handling, processing, storage or disposal of
Hazardous Substances, (b) cause or permit to be located on any of the Real
Estate any underground tank or other underground storage receptacle for
Hazardous Substances, (c) generate any Hazardous Substances on any of the Real
Estate, (d) conduct any activity at any Real Estate or use any Real Estate in
any manner so as to cause a release (i.e. releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing or dumping) or threatened release of Hazardous Substances on, upon or
into the Real Estate or (e) otherwise conduct any activity at any Real Estate or
use any Real Estate in any manner that would violate any Environmental Law or
bring such Real Estate in violation of any Environmental Law.
9.8. EMPLOYEE BENEFIT PLANS. Neither the Borrowers nor any ERISA
Affiliate will
<PAGE> 55
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(a) engage in any "prohibited transaction" within the meaning
ofSection 406 of ERISA orSection 4975 of the Code which could result in
a material liability for either of the Borrowers or any of their
Subsidiaries; or
(b) permit any Guaranteed Pension Plan to incur an
"accumulated funding deficiency", as such term is defined inSection 302
of ERISA, whether or not such deficiency is or may be waived; or
(c) fail to contribute to any Guaranteed Pension Plan to an
extent which, or terminate any Guaranteed Pension Plan in a manner
which, could result in the imposition of a lien or encumbrance on the
assets of the Borrowers or any of their Subsidiaries pursuant to
Section 302(f) or Section 4068 of ERISA; or
(d) permit or take any action which would result in the
aggregate benefit liabilities (with the meaning of Section 4001 of
ERISA) of all Guaranteed Pension Plans exceeding the value of the
aggregate assets of such Plans, disregarding for this purpose the
benefit liabilities and assets of any such Plan with assets in excess
of benefit liabilities.
9.9. FISCAL YEAR. The Borrowers will not, nor will they permit any of
their Subsidiaries to change the date of the end of their respective fiscal
years from that set forth inSection 7.20 hereof.
9.10. MODIFICATION OF DOCUMENTS. The Borrowers will not consent to or
agree to any amendment, supplement or other modification to any of the TJX
Documents if such amendment, supplement or modification could reasonably be
expected to adversely affect the Agents' or the Banks' rights or interests or
adversely affect the Borrowers' or any of their Subsidiaries' abilities to
fulfill their respective obligations under the Loan Documents.
9.11. NEGATIVE PLEDGES. Neither the Borrowers nor any of their
Subsidiaries will enter into any agreement (excluding this Credit Agreement and
the other Loan Documents) prohibiting the creation or assumption of any lien
upon its properties, revenues or assets or those of any of its Subsidiaries,
whether now owned or hereafter acquired, other than agreements with Persons
prohibiting any such lien on assets in which such Person has a prior security
interest which is permitted by Section 9.2.
9.12. TRANSACTIONS WITH AFFILIATES. Except for the TJX Documents as in
effect on the Closing Date and the Securitization Documents, the Borrowers will
not, nor will they permit any of their Subsidiaries to, enter into, or cause,
suffer or permit to exist (a) any arrangement or contract with any of its
Affiliates of a nature customarily entered into by Persons which are Affiliates
of each other (including management or similar contracts or arrangement relating
to the allocation of revenues, taxes and expenses or otherwise) requiring any
payments to be made by the Borrowers or any of their Subsidiaries to any
Affiliate unless such arrangements is fair and equitable to the Borrowers or
such Subsidiary; or (b) any other transaction, arrangement, contract with any of
the other Affiliates which would not be entered into by a prudent Person in the
position of the Borrowers or such Subsidiary with, or which is on terms which
are less favorable than are obtainable from, any Person which is not one of its
Affiliates.
<PAGE> 56
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9.13. UPSTREAM LIMITATIONS. The Borrowers will not, nor will the
Borrowers permit any of their Subsidiaries to enter into any agreement, contract
or arrangement (other than this Credit Agreement and the other Loan Documents
and the Securitization Documents) restricting the ability of any Subsidiary to
pay or make dividends or distributions in cash or kind, to make loans, advances
or other payments of whatsoever nature or to make transfers or distributions of
all or any part of its assets to the Borrowers or to any Subsidiary of such
Subsidiary.
9.14. RENTAL OBLIGATIONS. The Borrowers will not, and will not permit
their Subsidiaries to incur Rental Obligations in respect of retail stores or
outlets not in operation on the Closing Date in excess of $2,000,000 in the
aggregate during any fiscal year.
10. FINANCIAL COVENANTS OF THE BORROWERS.
The Borrowers covenant and agree that, so long as any Loan, Unpaid
Reimbursement Obligation (or other amounts payable under Section 5.2), Letter of
Credit or Note is outstanding or any Bank has any obligation to make any Loans
or either of the Issuing Banks has any obligation to issue, extend or renew any
Letters of Credit:
10.1. FIXED CHARGE COVERAGE RATIO. Commencing with the period ending in
October 1996, the Borrowers will not permit the Fixed Charge Coverage Ratio for
any period of four consecutive fiscal quarters (or such shorter period as has
elapsed from the beginning of the Borrowers' 1997 fiscal year) of the Borrowers
ending during any of the periods set forth in the table below to be less than
the ratio set forth opposite such period in such table:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Closing Date - July 31, 1997 2.00:1.00
August 1, 1997 - April 30, 1998 2.15:1.00
May 1, 1998 - July 31, 1998 2.00:1.00
August 1, 1998 and thereafter 2.25:1.00
</TABLE>
10.2. CAPITAL EXPENDITURES. The Borrowers will not make, or permit any
Subsidiary of the Borrowers to make, Capital Expenditures in any period of
twelve months ending on the date set forth in the table below that exceed, in
the aggregate, the amount set forth in such table for such period; provided,
however, that, if during such period the amount of Capital Expenditures
permitted for that period is not so utilized, such unutilized amount may be
utilized in the next succeeding period (after first utilizing the amount
initially permitted for such succeeding period) but not in any subsequent
twelve-month period:
<TABLE>
<CAPTION>
Four Fiscal Quarters Ending with Quarter Ending Amount
- ----------------------------------------------- ------
<S> <C>
July 1997 $12,000,000
July 1998 $12,000,000
July 1999 $25,000,000
</TABLE>
<PAGE> 57
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10.3. TOTAL FUNDED INDEBTEDNESS TO EBITDA. As at the end of any fiscal
quarter commencing with the fiscal quarter ending in October 1996, the Borrowers
will not permit the ratio of Total Funded Indebtedness as at the end of such
fiscal quarter to Consolidated EBITDA for the period of four consecutive fiscal
quarters then ended (or such shorter period as has elapsed from the beginning of
the Borrowers' 1997 fiscal year, adjusted as provided below) to exceed the ratio
set forth in the table below opposite the month in which such fiscal quarter end
occurs:
<TABLE>
<CAPTION>
Period Ending Ratio
------------- -----
<S> <C>
October 1996 4.00:1.00
January 1997 2.50:1.00
April 1997 2.75:1.00
July 1997 3.25:1.00
October 1997 3.00:1.00
January 1998 2.50:1.00
April 1998 2.75:1.00
July 1998 3.00:1.00
October 1998 2.75:1.00
January 1999 2.00:1.00
April 1999 2.50:1.00
July 1999 2.50:1.00
October 1999 2.50:1.00
January 2000 2.00:1.00
</TABLE>
10.4. MINIMUM NET WORTH. The Borrowers will not permit Consolidated Net
Worth at any time to be less than the sum of $70,866,200, plus 75% of positive
annual Consolidated Net Income earned after April 27, 1996, with no deduction
for any period in which there is a net loss, plus 100% of the net proceeds to
the Borrowers and their Subsidiaries of any equity issuance.
10.5. EBIT TO INTEREST RATIO. As at the end of any fiscal quarter
commencing with the fiscal quarter ending in October 1996, the Borrowers will
not permit the EBIT to Interest Ratio for any period of four consecutive fiscal
quarters (or such shorter period as has elapsed from the beginning of the
Borrowers' 1997 fiscal year) ending during any period described in the table set
forth below to be less than the ratio set forth opposite such period in such
table:
<TABLE>
<CAPTION>
Period Rate
------ ----
<S> <C>
Closing Date to fiscal year ending January 1997 3.00:1
Fiscal year January 1998 3.25:1
Thereafter 3.50:1
</TABLE>
11. CLOSING CONDITIONS.
The obligations of the Banks to make any of the initial Revolving
Credit Loans and the Term Loan and of the Issuing Banks to issue any initial
Letters of Credit on the Closing Date shall be subject to the satisfaction of
the following conditions precedent:
<PAGE> 58
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11.1. LOAN DOCUMENTS. Each of the Loan Documents shall have been duly
executed and delivered by the respective parties thereto, shall be in full force
and effect and shall be in form and substance satisfactory to each of the Banks.
Each Bank shall have received a fully executed copy of each such document.
11.2. CERTIFIED COPIES OF CHARTER DOCUMENTS. Each of the Banks shall
have received from each of the Borrowers and each of their Subsidiaries a copy,
certified by a duly authorized officer of such Person to be true and complete on
the Closing Date, of each of (a) its charter or other incorporation documents as
in effect on such date of certification, and (b) its by-laws as in effect on
such date.
11.3. CORPORATE ACTION. All corporate action necessary for the valid
execution, delivery and performance by the Borrowers and each of their
Subsidiaries of this Credit Agreement and the other Loan Documents to which it
is or is to become a party shall have been duly and effectively taken, and
evidence thereof satisfactory to the Banks shall have been provided to each of
the Banks.
11.4. INCUMBENCY CERTIFICATE. Each of the Banks shall have received
from each of the Borrowers and each of their Subsidiaries an incumbency
certificate, dated as of the Closing Date, signed by a duly authorized officer
of such Borrower or such Subsidiary, and giving the name and bearing a specimen
signature of each individual who shall be authorized: (a) to sign, in the name
and on behalf of such Borrower or such Subsidiary, each of the Loan Documents to
which such Borrower or such Subsidiary is or is to become a party; (b) in the
case of the Borrowers, to make Loan Requests and Conversion Requests and to
apply for Letters of Credit; and (c) to give notices and to take other action on
its behalf under the Loan Documents.
11.5. UCC SEARCH RESULTS. The Administrative Agent shall have received
from each of the Borrowers and their Subsidiaries the results of UCC searches,
indicating no liens other than Permitted Liens.
11.6. CERTIFICATES OF INSURANCE. The Administrative Agent shall have
received (a) a certificate of insurance from an independent insurance broker
dated as of the Closing Date, identifying insurers, types of insurance,
insurance limits, and policy terms and (b) certified copies of all policies
evidencing such insurance (or certificates therefore signed by the insurer or an
agent authorized to bind the insurer).
11.7. SOLVENCY CERTIFICATE. Each of the Banks shall have received an
officer's certificate of the Borrowers dated as of the Closing Date as to the
solvency of the Borrowers and their Subsidiaries following the consummation of
the transactions contemplated herein and in form and substance satisfactory to
the Banks.
11.8. OPINION OF COUNSEL. Each of the Banks, the Issuing Banks and the
Agents shall have received a favorable legal opinion addressed to the Banks, the
Issuing Banks and the Agents, dated as of the Closing Date, in form and
substance reasonably satisfactory to the Banks, the Issuing Banks and the
Agents, from Nutter, McClennen & Fish, LLP.
11.9. PAYMENT OF FEES. The Borrowers shall have paid to the
Administrative Agent the fees pursuant to Section Section 6.1 and 6.2.
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11.10. DISBURSEMENT INSTRUCTIONS. The Administrative Agent shall have
received disbursement instructions from the Borrowers.
11.11. COMPLETION OF IPO. The Agents shall have received evidence
reasonably satisfactory to the Agents that the initial public offering of at
least a majority of the shares of common stock of Chadwick's of Boston has been
completed in accordance with the Registration Statement.
11.12. TJX DOCUMENTS. The Agents shall have received evidence
reasonably satisfactory to the Agents that the TJX Documents have been duly
executed and delivered by all parties thereto, and such TJX Documents are in
full force and effect.
11.13. CAPITALIZATION; REPAYMENT OF INDEBTEDNESS. The Agents shall have
received evidence satisfactory to the Agents that on the Closing Date TJX shall
have forgiven at least $20,000,000 of intercompany Indebtedness owing TJX from
the Borrowers and all other intercompany Indebtedness owing to TJX by the
Borrowers has been satisfied in full.
11.14. SECURITIZATION ARRANGEMENTS. The Agents shall have received
evidence satisfactory to the Agents that the Borrowers' deferred billing
accounts receivable are capable, in the judgment of the Agents, of being sold in
a securitization arrangement acceptable to the Agents and the Banks, with such
arrangement providing financing of at least an aggregate amount of $30,000,000.
11.15. ENVIRONMENTAL DUE DILIGENCE. The Agents shall have received
hazardous waste site assessments or other reports satisfactory to the Agents
from environmental engineers and in form and substance satisfactory to the
Agents, covering all Real Estate and all other real property in respect of which
the Borrowers or any of their Subsidiaries may have material liability, whether
contingent or otherwise, for dumping or disposal of Hazardous Substances.
11.16. CONSENTS AND APPROVALS. The Agents shall have received evidence
that all consents and approvals necessary to complete the transactions
contemplated by this Credit Agreement and the other Loan Documents have been
obtained.
12. CONDITIONS TO ALL BORROWINGS.
The obligations of the Banks to make any Loan, including the Revolving
Credit Loan and the Term Loan, and of the Issuing Banks to issue, extend or
renew any Letter of Credit, in each case whether on or after the Closing Date,
shall also be subject to the satisfaction of the following conditions precedent:
12.1. REPRESENTATIONS TRUE; NO EVENT OF DEFAULT. Each of the
representations and warranties of any of the Borrowers and their Subsidiaries
contained in this Credit Agreement, the other Loan Documents or in any document
or instrument delivered pursuant to or in connection with this Credit Agreement
shall be true as of the date as of which they were made and shall also be true
at and as of the time of the making of such Loan or the issuance, extension or
renewal of such Letter of Credit, with the same effect as if made at and as of
that time (except to the extent of changes resulting from transactions
contemplated
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or permitted by this Credit Agreement and the other Loan Documents and changes
occurring in the ordinary course of business that singly or in the aggregate are
not materially adverse, and to the extent that such representations and
warranties relate solely and expressly to an earlier date) and no Default or
Event of Default shall have occurred and be continuing.
12.2. NO LEGAL IMPEDIMENT. No change shall have occurred in any law or
regulations thereunder or interpretations thereof that in the reasonable opinion
of any Bank would make it illegal for such Bank to make such Loan or to
participate in the issuance, extension or renewal of such Letter of Credit or in
the reasonable opinion of the applicable Issuing Bank would make it illegal for
such Issuing Bank to issue, extend or renew such Letter of Credit.
12.3. GOVERNMENTAL REGULATION. Each Bank shall have received such
statements in substance and form reasonably satisfactory to such Bank as such
Bank shall require for the purpose of compliance with any applicable regulations
of the Comptroller of the Currency or the Board of Governors of the Federal
Reserve System.
12.4. PROCEEDINGS AND DOCUMENTS. All proceedings in connection with the
transactions contemplated by this Credit Agreement, the other Loan Documents and
all other documents incident thereto shall be satisfactory in substance and in
form to the Banks and to the Agents and the Agents' Special Counsel, and the
Banks, the Agents and such counsel shall have received all information and such
counterpart originals or certified or other copies of such documents as the
Administrative Agent may reasonably request.
13. EVENTS OF DEFAULT; ACCELERATION; ETC.
13.1. EVENTS OF DEFAULT AND ACCELERATION. If any of the following
events ("Events of Default" or, if the giving of notice or the lapse of time or
both is required, then, prior to such notice or lapse of time, "Defaults") shall
occur:
(a) the Borrowers shall fail to pay any principal of the Loans
or any Reimbursement Obligation when the same shall become due and
payable, whether at the stated date of maturity or any accelerated date
of maturity or at any other date fixed for payment;
(b) the Borrowers shall fail to pay any interest on the Loans,
the commitment fee, any Letter of Credit Fee, the Administrative
Agent's fee, or other sums due hereunder or under any of the other Loan
Documents, when the same shall become due and payable, whether at the
stated date of maturity or any accelerated date of maturity or at any
other date fixed for payment;
(c) (i) the Borrowers shall fail to comply with any of their
covenants contained inSection 8, 9 or 10 or (ii) CDM shall fail to
perform any term, covenant or agreement contained in the Guaranty;
(d) the Borrowers shall fail to perform any term, covenant or
agreement contained herein or in any of the other Loan Documents (other
than those specified elsewhere in this Section 13.1) for fifteen (15)
days after written notice of such failure has been given to the
Borrowers by the Administrative Agent;
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(e) any representation or warranty of the Borrowers or any of
their Subsidiaries in this Credit Agreement or any of the other Loan
Documents or in any other document or instrument delivered pursuant to
or in connection with this Credit Agreement shall prove to have been
false in any material respect upon the date when made or deemed to have
been made or repeated;
(f) either of the Borrowers or any of their Subsidiaries shall
fail to pay when due, or within any applicable period of grace, any
obligation for borrowed money or credit received or in respect of any
Capitalized Leases, in each case where the aggregate outstanding amount
of obligations of the Borrower and its Subsidiaries thereunder shall be
in excess of $2,500,000, or fail to observe or perform any material
term, covenant or agreement contained in any such agreement by which it
is bound, evidencing or securing borrowed money or credit received or
in respect of any Capitalized Leases, in each case where the aggregate
outstanding amount of obligations of the Borrower and its Subsidiaries
thereunder shall be in excess of $2,500,000, for such period of time as
would permit (assuming the giving of appropriate notice if required)
the holder or holders thereof or of any obligations issued thereunder
to accelerate the maturity thereof;
(g) either of the Borrowers or any of their Subsidiaries shall
make an assignment for the benefit of creditors, or admit in writing
its inability to pay or generally fail to pay its debts as they mature
or become due, or shall petition or apply for the appointment of a
trustee or other custodian, liquidator or receiver of such Borrower or
any of its Subsidiaries or of any substantial part of the assets of
such Borrower or any of its Subsidiaries or shall commence any case or
other proceeding relating to such Borrower or any of its Subsidiaries
under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law of any
jurisdiction, now or hereafter in effect, or shall take any action to
authorize or in furtherance of any of the foregoing, or if any such
petition or application shall be filed or any such case or other
proceeding shall be commenced against such Borrower or any of its
Subsidiaries and such Borrower or any of its Subsidiaries shall
indicate its approval thereof, consent thereto or acquiescence therein
or such petition or application shall not have been dismissed within
sixty (60) days following the filing thereof;
(h) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating either of the
Borrowers or any of their Subsidiaries bankrupt or insolvent, or
approving a petition in any such case or other proceeding, or a decree
or order for relief is entered in respect of either of the Borrowers or
any Subsidiary of either Borrower in an involuntary case under federal
bankruptcy laws as now or hereafter constituted;
(i) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty days, whether or not consecutive, any
final judgment against either of the Borrowers or any of their
Subsidiaries that, with other outstanding final judgments,
undischarged, against the Borrowers or any of their Subsidiaries
exceeds in the aggregate $1,000,000;
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(j) if any of the Loan Documents shall be canceled,
terminated, revoked or rescinded otherwise than in accordance with the
terms thereof or with the express prior written agreement, consent or
approval of the Banks, or any action at law, suit in equity or other
legal proceeding to cancel, revoke or rescind any of the Loan Documents
shall be commenced by or on behalf of either of the Borrowers or any of
their Subsidiaries party thereto or any of their respective
stockholders, or any court or any other governmental or regulatory
authority or agency of competent jurisdiction shall make a
determination that, or issue a judgment, order, decree or ruling to the
effect that, any one or more of the Loan Documents is illegal, invalid
or unenforceable in accordance with the terms thereof;
(k) with respect to any Guaranteed Pension Plan, an ERISA
Reportable Event shall have occurred and the Majority Banks shall have
determined in their reasonable discretion that such event reasonably
could be expected to result in liability of the Borrowers or any of
their Subsidiaries to the PBGC or such Guaranteed Pension Plan in an
aggregate amount exceeding $1,000,000 and such event in the
circumstances occurring reasonably could constitute grounds for the
termination of such Guaranteed Pension Plan by the PBGC or for the
appointment by the appropriate United States District Court of a
trustee to administer such Guaranteed Pension Plan; or a trustee shall
have been appointed by the United States District Court to administer
such Plan; or the PBGC shall have instituted proceedings to terminate
such Guaranteed Pension Plan;
(l) either of the Borrowers or any of their Subsidiaries shall
be enjoined, restrained or in any way prevented by the order of any
court or any administrative or regulatory agency from conducting any
material part of its business and such order shall continue in effect
for more than thirty (30) days;
(m) any strike, lockout, labor dispute, embargo, condemnation,
act of God or public enemy, or other casualty, which in any such case
causes, for more than fifteen (15) consecutive days, the cessation or
substantial curtailment of revenue-producing activities at any facility
of the Borrowers or any of their Subsidiaries if such event or
circumstance is not covered by business interruption insurance and
would have a material adverse effect on the business or financial
condition of the Borrowers and their Subsidiaries, taken as a whole;
(n) there shall occur the loss, suspension or revocation of,
or failure to renew, any license or permit now held or hereafter
acquired by the Borrowers or any of their Subsidiaries if such loss,
suspension, revocation or failure to renew would have a material
adverse effect on the business or financial condition of the Borrowers
and their Subsidiaries, taken as a whole;
(o) the Borrowers or any of their Subsidiaries shall be
indicted for a state or federal crime, or any civil or criminal action
shall otherwise have been brought or threatened against the Borrowers
or any of their Subsidiaries, a punishment for which in any such case
could include the forfeiture of assets of the Borrowers or such
Subsidiary having a fair market value in excess of $250,000;
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(p) Chadwick's of Boston shall at any time, legally or
beneficially, own less than 100% of the capital stock of Chadwick's,
Inc., as adjusted pursuant to any stock split, stock dividend or
recapitalization or reclassification of the capital of Chadwick's,
Inc.;
(q) any person or group of persons (within the meaning of
Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended), other than TJX or a transferee from TJX of all of its stock
of Chadwick's of Boston, shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 promulgated by the Securities and
Exchange Commission under said Act) of thirty-five percent (35%) or
more of the outstanding shares of the common stock of Chadwick's of
Boston; or during any period of twelve (12) consecutive months,
individuals who were directors of Chadwick's of Boston on the first day
of such period, or whose election or nomination for election was
approved by at least a majority of the directors who were directors on
the first day of the period or whose election or nomination for
election was so approved, shall cease to constitute a majority of the
board of directors of Chadwick's of Boston; or
(r) there shall occur an event which permits the termination
of the Securitization Arrangements under the Securitization Documents,
or the Securitization Arrangements shall have been terminated;
then, and in any such event, so long as the same may be continuing, the
Administrative Agent may, and upon the request of the Majority Banks shall, by
notice in writing to the Borrowers declare all amounts owing with respect to
this Credit Agreement, the Notes and the other Loan Documents and all
Reimbursement Obligations to be, and they shall thereupon forthwith become,
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby expressly waived by the Borrowers; provided
that in the event of any Event of Default specified in Section Section 13.1(g)
or 13.1(h), all such amounts shall become immediately due and payable
automatically and without any requirement of notice from the Agents, either of
the Issuing Banks or any Bank.
13.2. TERMINATION OF COMMITMENTS. If any one or more of the Events of
Default specified in Section 13.1(g) or Section 13.1(h) shall occur, any unused
portion of the credit hereunder shall forthwith terminate and each of the Banks
shall be relieved of all further obligations to make Loans to the Borrowers and
the Issuing Banks shall be relieved of all further obligations to issue, extend
or renew Letters of Credit. If any other Event of Default shall have occurred
and be continuing, the Administrative Agent may and, upon the request of the
Majority Banks, shall, by notice to the Borrowers, terminate the unused portion
of the credit hereunder, and upon such notice being given such unused portion of
the credit hereunder shall terminate immediately and each of the Banks shall be
relieved of all further obligations to make Loans and the Issuing Banks shall be
relieved of all further obligations to issue, extend or renew Letters of Credit.
No termination of the credit hereunder shall relieve the Borrowers or any of
their Subsidiaries of any of the Obligations.
13.3 REMEDIES. In case any one or more of the Events of Default shall
have occurred and be continuing, and whether or not the Banks shall have
accelerated the maturity of the Loans pursuant to Section 13.1 or taken any of
the other actions specified in this Section 13, the Banks may proceed to protect
and enforce their rights by suit in equity, action at
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law or other appropriate proceeding, whether for the specific performance of any
covenant or agreement contained in this Credit Agreement and the other Loan
Documents or any instrument pursuant to which the Obligations to such Banks are
evidenced, including as permitted by applicable law the obtaining of the ex
parte appointment of a receiver, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any other
legal or equitable right of the Banks. No remedy herein conferred upon the Banks
or any Agent or the holder of any Note or purchaser of any Letter of Credit
Participation is intended to be exclusive of any other remedy and each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or any
other provision of law.
13.4. DISTRIBUTION OF PROCEEDS. In the event that following the
occurrence or during the continuance of any Default or Event of Default, any
Agent or any Bank, as the case may be, receives any monies in connection with
the enforcement of any of its rights hereunder, such monies shall be distributed
for application as follows:
(a) First, to the payment of, or (as the case may be) the
reimbursement of the Administrative Agent for or in respect of all
reasonable costs, expenses, disbursements and losses which shall have
been incurred or sustained by the Administrative Agent in connection
with the collection of such monies by the Administrative Agent, for the
exercise, protection or enforcement by the Administrative Agent of all
or any of the rights, remedies, powers and privileges of the
Administrative Agent under this Credit Agreement or any of the other
Loan Documents or in support of any provision of adequate indemnity to
the Administrative Agent against any taxes or liens which by law shall
have, or may have, priority over the rights of the Administrative Agent
to such monies;
(b) Second, to all other Obligations in such order or
preference as the Majority Banks may determine; provided, however, that
distributions in respect of such obligations shall be made (i) pari
passu among Obligations with respect to the Administrative Agent's fee
payable pursuant to Section 6.2 and all other Obligations and (ii)
Obligations owing to the Banks with respect to each type of Obligation
such as interest, principal, fees and expenses, shall be made among the
Banks pro rata; and provided, further, that the Administrative Agent
may in its discretion make proper allowance to take into account any
Obligations not then due and payable; and
(c) Third, the excess, if any, shall be returned to the
Borrowers or to such other Persons as are entitled thereto.
14. SETOFF.
Regardless of the adequacy of any collateral, during the continuance of
any Event of Default, any deposits or other sums credited by or due from any of
the Banks to the Borrowers or either of them and any securities or other
property of the Borrowers or either of them in the possession of such Bank may
be applied to or set off by such Bank against the payment of Obligations and any
and all other liabilities, direct, or indirect, absolute or contingent, due or
to become due, now existing or hereafter arising, of the Borrowers or either of
them to such Bank. Each of the Banks agrees with each other Bank that (a) if an
amount to be set off is to be applied to Indebtedness of the Borrowers or either
of them to
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such Bank, other than Indebtedness evidenced by the Notes held by such Bank or
constituting Reimbursement Obligations owed to such Bank, such amount shall be
applied ratably to such other Indebtedness and to the Indebtedness evidenced by
all such Notes held by such Bank or constituting Reimbursement Obligations owed
to such Bank, and (b) if such Bank shall receive from the Borrowers or either of
them, whether by voluntary payment, exercise of the right of setoff,
counterclaim, cross action, enforcement of the claim evidenced by the Notes held
by, or constituting Reimbursement Obligations owed to, such Bank by proceedings
against the Borrowers or either of them at law or in equity or by proof thereof
in bankruptcy, reorganization, liquidation, receivership or similar proceedings,
or otherwise, and shall retain and apply to the payment of the Note or Notes
held by, or Reimbursement Obligations owed to, such Bank any amount in excess of
its ratable portion of the payments received by all of the Banks with respect to
the Notes held by, and Reimbursement Obligations owed to, all of the Banks, such
Bank will make such disposition and arrangements with the other Banks with
respect to such excess, either by way of distribution, pro tanto assignment of
claims, subrogation or otherwise as shall result in each Bank receiving in
respect of the Notes held by it or Reimbursement obligations owed it, its
proportionate payment as contemplated by this Credit Agreement; provided that if
all or any part of such excess payment is thereafter recovered from such Bank,
such disposition and arrangements shall be rescinded and the amount restored to
the extent of such recovery, but without interest.
15. THE AGENTS.
15.1. AUTHORIZATION.
(a) Each of the Agents is authorized to take such action on
behalf of each of the Banks and to exercise all such powers as are
hereunder and under any of the other Loan Documents and any related
documents delegated to such Agent, together with such powers as are
reasonably incident thereto, provided that no duties or
responsibilities not expressly assumed herein or therein shall be
implied to have been assumed by such Agent.
(b) The relationship between each of the Agents and each of
the Banks is that of an independent contractor. The use of the term
"Agent" is for convenience only and is used to describe, as a form of
convention, the independent contractual relationship between each of
the Agents and each of the Banks. Nothing contained in this Credit
Agreement nor the other Loan Documents shall be construed to create an
agency, trust or other fiduciary relationship between any of the Agents
and any of the Banks.
(c) As an independent contractor empowered by the Banks to
exercise certain rights and perform certain duties and responsibilities
hereunder and under the other Loan Documents, each of the Agents is
nevertheless a "representative" of the Banks, as that term is defined
in Article 1 of the Uniform Commercial Code, for purposes of actions
for the benefit of the Banks and the Agents with respect to guaranties
contemplated by the Loan Documents.
15.2. EMPLOYEES AND AGENTS. Each of the Agents may exercise its powers
and execute its duties by or through employees or agents and shall be entitled
to take, and to rely
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on, advice of counsel concerning all matters pertaining to its rights and duties
under this Credit Agreement and the other Loan Documents. Each of the Agents may
utilize the services of such Persons as such Agent in its sole discretion may
reasonably determine, and all reasonable fees and expenses of any such Persons
shall be paid by the Borrowers.
15.3. NO LIABILITY. None of the Agents nor any of their respective
shareholders, directors, officers or employees nor any other Person assisting
them in their duties nor any agent or employee thereof, shall be liable for any
waiver, consent or approval given or any action taken, or omitted to be taken,
in good faith by it or them hereunder or under any of the other Loan Documents,
or in connection herewith or therewith, or be responsible for the consequences
of any oversight or error of judgment whatsoever, except that such Agent or such
other Person, as the case may be, may be liable for losses due to its willful
misconduct or gross negligence.
15.4. NO REPRESENTATIONS. None of the Agents shall be responsible for
the execution or validity or enforceability of this Credit Agreement, the Notes,
the Letters of Credit, any of the other Loan Documents or any instrument at any
time constituting, or intended to constitute, collateral security for the Notes,
or for the value of any such collateral security or for the validity,
enforceability or collectability of any such amounts owing with respect to the
Notes, or for any recitals or statements, warranties or representations made
herein or in any of the other Loan Documents or in any certificate or instrument
hereafter furnished to it by or on behalf of the Borrowers or any of their
Subsidiaries, or be bound to ascertain or inquire as to the performance or
observance of any of the terms, conditions, covenants or agreements herein or in
any instrument at any time constituting, or intended to constitute, collateral
security for the Notes or to inspect any of the properties, books or records of
the Borrowers or any of their Subsidiaries. None of the Agents shall be bound to
ascertain whether any notice, consent, waiver or request delivered to it by the
Borrowers or any holder of any of the Notes shall have been duly authorized or
is true, accurate and complete. None of the Agents has made nor does it now make
any representations or warranties, express or implied, nor does it assume any
liability to the Banks, with respect to the credit worthiness or financial
conditions of the Borrowers or any of their Subsidiaries. Each Bank acknowledges
that it has, independently and without reliance upon any of the Agents or any
other Bank, and based upon such information and documents as it has deemed
appropriate, made its own credit analysis and decision to enter into this Credit
Agreement.
15.5. PAYMENTS.
15.5.1. PAYMENTS TO ADMINISTRATIVE AGENT. A payment by the
Borrowers to the Administrative Agent hereunder or any of the other
Loan Documents for the account of any Bank or Issuing Bank shall
constitute a payment to such Bank or Issuing Bank. The Administrative
Agent agrees promptly to distribute to each Bank such Bank's pro rata
share of payments received by the Administrative Agent for the account
of the Banks except as otherwise expressly provided herein or in any of
the other Loan Documents.
15.5.2. DISTRIBUTION BY ADMINISTRATIVE AGENT. If in the
opinion of the Administrative Agent the distribution of any amount
received by it in such capacity hereunder, under the Notes or under any
of the other Loan Documents might involve
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it in liability, it may refrain from making distribution until its
right to make distribution shall have been adjudicated by a court of
competent jurisdiction. If a court of competent jurisdiction shall
adjudge that any amount received and distributed by the Administrative
Agent is to be repaid, each Person to whom any such distribution shall
have been made shall either repay to the Administrative Agent its
proportionate share of the amount so adjudged to be repaid or shall pay
over the same in such manner and to such Persons as shall be determined
by such court.
15.5.3. DELINQUENT BANKS. Notwithstanding anything to the
contrary contained in this Credit Agreement or any of the other Loan
Documents, any Bank that fails (a) to make available to the
Administrative Agent its pro rata share of any Loan required to be made
available pursuant to the provisions hereof or to purchase any Letter
of Credit Participation required to be purchased pursuant to the
provisions hereof or (b) to comply with the provisions of Section 15
with respect to making dispositions and arrangements with the other
Banks, where such Bank's share of any payment received, whether by
setoff or otherwise, is in excess of its pro rata share of such
payments due and payable to all of the Banks, in each case as, when and
to the full extent required by the provisions of this Credit Agreement,
shall be deemed delinquent (a "Delinquent Bank") and shall be deemed a
Delinquent Bank until such time as such delinquency is satisfied. A
Delinquent Bank shall be deemed to have assigned any and all payments
due to it from the Borrowers, whether on account of Outstanding Loans,
Unpaid Reimbursement Obligations, interest, fees or otherwise, to the
remaining nondelinquent Banks for application to, and reduction of,
their respective pro rata shares of all Outstanding Loans and Unpaid
Reimbursement Obligations. The Delinquent Bank hereby authorizes the
Administrative Agent to distribute such payments to the nondelinquent
Banks in proportion to their respective pro rata shares of all
Outstanding Loans and Unpaid Reimbursement Obligations. A Delinquent
Bank shall be deemed to have satisfied in full a delinquency when and
if, as a result of application of the assigned payments to all
Outstanding Loans and Unpaid Reimbursement Obligations of the
nondelinquent Banks, the Banks' respective pro rata shares of all
Outstanding Loans and Unpaid Reimbursement Obligations have returned to
those in effect immediately prior to such delinquency and without
giving effect to the nonpayment causing such delinquency.
15.6. HOLDERS OF NOTES. The Agents may deem and treat the payee of any
Note or the purchaser of any Letter of Credit Participation as the absolute
owner or purchaser thereof for all purposes hereof until it shall have been
furnished in writing with a different name by such payee or by a subsequent
holder, assignee or transferee.
15.7. INDEMNITY. The Banks ratably agree hereby to indemnify and hold
harmless each of the Agents from and against any and all claims, actions and
suits (whether groundless or otherwise), losses, damages, costs, expenses
(including any expenses for which such Agent has not been reimbursed by the
Borrowers as required by Section 16), and liabilities of every nature and
character arising out of or related to this Credit Agreement, the Notes, or any
of the other Loan Documents or the transactions contemplated or evidenced hereby
or thereby, or such Agent's actions taken hereunder or thereunder, except to the
extent that any of the same were solely caused by or resulted solely from such
Agent's
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willful misconduct or gross negligence as determined by a final nonappealable
judgment of a court of competent jurisdiction.
15.8. AGENTS AS BANK. In its individual capacity, each of FNBB and FNBC
shall have the same obligations and the same rights, powers and privileges in
respect to its Commitment and the Loans made by it, and as the holder of any of
the Notes and as the purchaser of any Letter of Credit Participations, as it
would have were it not also an Agent.
15.9. RESIGNATION. Any of the Agents may resign at any time by giving
sixty (60) days prior written notice thereof to the Banks, the other Agents and
the Borrowers. Upon any such resignation, the Majority Banks shall appoint a
successor Agent, if the resigning Agent is the Administrative Agent. Unless a
Default or Event of Default shall have occurred and be continuing, such
successor Agent shall be reasonably acceptable to the Borrowers. If no successor
Agent shall have been so appointed by the Majority Banks and shall have accepted
such appointment within thirty (30) days after the retiring Agent's giving of
notice of resignation, then the retiring Agent may, on behalf of the Banks,
appoint a successor Agent, which shall be a financial institution having a
rating of not less than A or its equivalent by Standard & Poor's Corporation.
Upon the acceptance of any appointment as an Agent hereunder by a successor
Agent, such successor Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations hereunder.
After any retiring Agent's resignation, the provisions of this Credit Agreement
and the other Loan Documents shall continue in effect for its benefit in respect
of any actions taken or omitted to be taken by it while it was acting as an
Agent.
15.10. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT. Each Bank hereby
agrees that, upon learning of the existence of a Default or an Event of Default,
it shall promptly notify the Administrative Agent thereof. The Administrative
Agent hereby agrees that upon receipt of any notice under this Section 15.10 it
shall promptly notify the other Banks of the existence of such Default or Event
of Default.
16. EXPENSES.
The Borrowers jointly and severally agree to pay (a) the reasonable
costs of producing and reproducing this Credit Agreement, the other Loan
Documents and the other agreements and instruments mentioned herein, (b) any
taxes (including any interest and penalties in respect thereto) payable by any
of the Agents, either of the Issuing Banks or any of the Banks (other than taxes
based upon any Agent's, any Issuing Bank's or any Bank's net income) on or with
respect to the transactions contemplated by this Credit Agreement (the Borrowers
hereby agreeing to indemnify each Agent, each Issuing Bank and each Bank with
respect thereto), (c) the reasonable fees, expenses and disbursements of the
Agents' Special Counsel or any local counsel to the Agents incurred in
connection with the preparation, administration or interpretation of the Loan
Documents and other instruments mentioned herein, each closing hereunder, and
amendments, modifications, approvals, consents or waivers hereto or hereunder,
(d) the fees, expenses and disbursements of the Agents incurred by any of the
Agents in connection with the preparation, administration or interpretation of
the Loan Documents and other instruments mentioned herein (e) all reasonable
out-of-pocket expenses (including without limitation reasonable attorneys' fees
and costs, which attorneys may be employees of any Bank, any Issuing Bank or any
Agent,
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and reasonable consulting, accounting, appraisal, investment banking and similar
professional fees and charges) incurred by any Bank, any Issuing Bank or any
Agent in connection with (i) the enforcement of or preservation of rights under
any of the Loan Documents against the Borrowers or any of their Subsidiaries or
the administration thereof after the occurrence of a Default or Event of Default
and (ii) any litigation, proceeding or dispute whether arising hereunder or
otherwise, in any way related to any Bank's, any Issuing Bank's or any Agent's
relationship with the Borrowers or any of their Subsidiaries and (f) all
reasonable fees, expenses and disbursements of any Bank or any Agent incurred in
connection with UCC searches. The covenants of this Section 16 shall survive
payment or satisfaction of all other Obligations.
17. INDEMNIFICATION.
The Borrowers jointly and severally agree to indemnify and hold
harmless the Agents, the Issuing Banks and the Banks from and against any and
all claims, actions and suits whether groundless or otherwise, and from and
against any and all liabilities, losses, damages and expenses of every nature
and character arising out of this Credit Agreement or any of the other Loan
Documents or the transactions contemplated hereby including, without limitation,
(a) any actual or proposed use by either of the Borrowers or any of their
Subsidiaries of the proceeds of any of the Loans or Letters of Credit, (b) the
Borrowers or any of their Subsidiaries entering into or performing this Credit
Agreement or any of the other Loan Documents or (c) with respect to the
Borrowers and their Subsidiaries and their respective properties and assets, the
violation of any Environmental Law, the presence, disposal, escape, seepage,
leakage, spillage, discharge, emission, release or threatened release of any
Hazardous Substances or any action, suit, proceeding or investigation brought or
threatened with respect to any Hazardous Substances (including, but not limited
to, claims with respect to wrongful death, personal injury or damage to
property), in each case including, without limitation, the reasonable fees and
disbursements of counsel and allocated costs of internal counsel incurred in
connection with any such investigation, litigation or other proceeding,
provided, however, the Borrowers shall have no obligation to an indemnitee
hereunder with respect to indemnified matters to the extent the same were solely
caused by or resulted solely from the willful misconduct or gross negligence of
such indemnitee as determined by a final nonappealable judgment of a court of
competent jurisdiction. In litigation, or the preparation therefor, the Banks,
the Issuing Banks and the Agents shall be entitled to select their own counsel
and, in addition to the foregoing indemnity, the Borrowers jointly and severally
agree to pay promptly the reasonable fees and expenses of such counsel. If, and
to the extent that the obligations of the Borrowers under this Section 17 are
unenforceable for any reason, the Borrowers hereby jointly and severally agree
to make the maximum contribution to the payment in satisfaction of such
obligations which is permissible under applicable law. The covenants contained
in this Section 17 shall survive payment or satisfaction in full of all other
Obligations.
18. SURVIVAL OF COVENANTS, ETC.
All covenants, agreements, representations and warranties made herein,
in the Notes, in any of the other Loan Documents or in any documents or other
papers delivered by or on behalf of the Borrowers or any of their Subsidiaries
pursuant hereto shall be deemed to have been relied upon by the Banks, the
Issuing Banks and the Agents, notwithstanding any investigation heretofore or
hereafter made by any of them, and shall survive the making
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by the Banks of any of the Loans and the issuance, extension or renewal of any
Letters of Credit, as herein contemplated, and shall continue in full force and
effect so long as any Letter of Credit or any amount due under this Credit
Agreement or the Notes or any of the other Loan Documents remains outstanding or
any Bank has any obligation to make any Loans or either of the Issuing Banks has
any obligation to issue, extend or renew any Letter of Credit, and for such
further time as may be otherwise expressly specified in this Credit Agreement.
All statements contained in any certificate or other paper delivered to any
Bank, any Issuing Bank or any Agent at any time by or on behalf of either of the
Borrowers or any of their Subsidiaries pursuant hereto or in connection with the
transactions contemplated hereby shall constitute representations and warranties
by such Borrower or such Subsidiary hereunder.
19. ASSIGNMENT AND PARTICIPATION.
19.1. CONDITIONS TO ASSIGNMENT BY BANKS. Except as provided herein,
each Bank may assign to one or more Eligible Assignees all or a portion of its
interests, rights and obligations under this Credit Agreement (including all or
a portion of its Commitment Percentage and Commitment and the same portion of
the Loans at the time owing to it, the Notes held by it and its participating
interest in the risk relating to any Letters of Credit); provided that (a) each
of the Administrative Agent and, unless a Default or Event of Default shall have
occurred and be continuing, the Borrowers shall have given its prior written
consent to such assignment, which consent will not be unreasonably withheld, (b)
each such assignment shall be of a constant, and not a varying, percentage of
all the assigning Bank's rights and obligations under this Credit Agreement, (c)
each assignment shall be in an amount of at least $5,000,000 or, if less, the
entire amount of the assigning Bank's Loans and Commitment, and (d) the parties
to such assignment shall execute and deliver to the Administrative Agent, for
recording in the Register (as hereinafter defined), an Assignment and
Acceptance, substantially in the form of Exhibit E hereto (an "Assignment and
Acceptance"), together with any Notes subject to such assignment. Upon such
execution, delivery, acceptance and recording, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall be at
least five (5) Business Days after the execution thereof, (i) the assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Bank hereunder,
and (ii) the assigning Bank shall, to the extent provided in such assignment and
upon payment to the Administrative Agent of the registration fee referred to in
Section 19.3, be released from its obligations under this Credit Agreement.
19.2. CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS; COVENANTS.
By executing and delivering an Assignment and Acceptance, the parties to the
assignment thereunder confirm to and agree with each other and the other parties
hereto as follows:
(a) other than the representation and warranty that it is the
legal and beneficial owner of the interest being assigned thereby free
and clear of any adverse claim, the assigning Bank makes no
representation or warranty, express or implied, and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with this Credit Agreement or
any Loan Document the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Credit Agreement, the other
Loan Documents or any other
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instrument or document furnished pursuant hereto or the attachment,
perfection or priority of any security interest or mortgage,
(b) the assigning Bank makes no representation or warranty and
assumes no responsibility with respect to the financial condition of
the Borrowers and their Subsidiaries or any other Person primarily or
secondarily liable in respect of any of the Obligations, or the
performance or observance by the Borrowers and their Subsidiaries or
any other Person primarily or secondarily liable in respect of any of
the Obligations of any of their obligations under this Credit Agreement
or any of the other Loan Documents or any other instrument or document
furnished pursuant hereto or thereto;
(c) such assignee confirms that it has received a copy of this
Credit Agreement, together with copies of the most recent financial
statements referred to in Section 7.4 and Section 8.4 and such other
documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and
Acceptance;
(d) such assignee will, independently and without reliance
upon the assigning Bank, any 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
action under this Credit Agreement;
(e) such assignee represents and warrants that it is an
Eligible Assignee;
(f) such assignee appoints and authorizes the Agents to take
such action as agent on its behalf and to exercise such powers under
this Credit Agreement and the other Loan Documents as are delegated to
the Agents by the terms hereof or thereof, together with such powers as
are reasonably incidental thereto;
(g) such assignee agrees that it will perform in accordance
with their terms all of the obligations that by the terms of this
Credit Agreement are required to be performed by it as a Bank;
(h) such assignee represents and warrants that it is legally
authorized to enter into such Assignment and Acceptance; and
(i) such assignee acknowledges that it has made arrangements
with the assigning Bank satisfactory to such assignee with respect to
its pro rata share of Letter of Credit Fees in respect of outstanding
Letters of Credit.
19.3. REGISTER. The Administrative Agent shall maintain a copy of each
Assignment and Acceptance delivered to it and a register or similar list (the
"Register") for the recordation of the names and addresses of the Banks and the
Commitment Percentage of, and principal amount of the Revolving Credit Loans
owing to and Letter of Credit Participations purchased by, the Banks from time
to time. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrowers, the Agents and the Banks may treat each
Person whose name is recorded in the Register as a Bank hereunder for all
purposes of this Credit Agreement. The Register shall be available for
inspection by
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the Borrowers and the Banks at any reasonable time and from time to time upon
reasonable prior notice. Upon each such recordation, the assigning Bank agrees
to pay to the Administrative Agent a registration fee in the sum of $3,000.
19.4. NEW NOTES. Upon its receipt of an Assignment and Acceptance
executed by the parties to such assignment, together with each Note subject to
such assignment, the Administrative Agent shall (a) record the information
contained therein in the Register, and (b) give prompt notice thereof to the
Borrowers and the Banks (other than the assigning Bank). Within five (5)
Business Days after receipt of such notice, the Borrowers, at their own expense,
shall execute and deliver to the Administrative Agent, in exchange for each
surrendered Note, a new Note to the order of such Eligible Assignee in an amount
equal to the amount assumed by such Eligible Assignee pursuant to such
Assignment and Acceptance and, if the assigning Bank has retained some portion
of its obligations hereunder, a new Note to the order of the assigning Bank in
an amount equal to the amount retained by it hereunder. Such new Notes shall
provide that they are replacements for the surrendered Notes, shall be in an
aggregate principal amount equal to the aggregate principal amount of the
surrendered Notes, shall be dated the effective date of such in Assignment and
Acceptance and shall otherwise be substantially the form of the assigned Notes.
Within five (5) days of issuance of any new Notes pursuant to this Section 19.4,
the Borrowers shall deliver an opinion of counsel, addressed to the Banks and
the Agents, relating to the due authorization, execution and delivery of such
new Notes and the legality, validity and binding effect thereof, in form and
substance satisfactory to the Banks. The surrendered Notes shall be canceled and
returned to the Borrowers.
19.5. PARTICIPATIONS. Each Bank may sell participations to one or more
banks or other entities in all or a portion of such Bank's rights and
obligations under this Credit Agreement and the other Loan Documents; provided
that (a) each such participation shall be in an amount of not less than
$5,000,000 (b) any such sale or participation shall not affect the rights and
duties of the selling Bank hereunder to the Borrowers and (c) the only rights
granted to the participant pursuant to such participation arrangements with
respect to waivers, amendments or modifications of the Loan Documents shall be
the rights to approve waivers, amendments or modifications that would reduce the
principal of or the interest rate on any Loans, extend the term or increase the
amount of the Commitment of such Bank as it relates to such participant, reduce
the amount of any commitment fees or Letter of Credit Fees to which such
participant is entitled or extend any regularly scheduled payment date for
principal or interest.
19.6. DISCLOSURE. For purposes of this Section 19.6, "Confidential
Information" means information delivered to an Agent or Bank by or on behalf of
a Borrower or any Subsidiary in connection with the transactions contemplated by
or otherwise pursuant to this Credit Agreement that is proprietary in nature and
that was clearly marked or labeled or otherwise adequately identified when
received by the Agent or Bank as being confidential information of a Borrower or
such Subsidiary, provided that such term does not include information that (a)
was publicly known or otherwise known to the Agent or Bank prior to the time of
such disclosure, (b) subsequently becomes publicly known through no act or
omission by the Agent or Bank or any person acting on its behalf, (c) otherwise
becomes known to the Agent or Bank other than through disclosure by a Borrower
or any Subsidiary or (d) constitutes financial statements delivered to the Agent
or Bank under Section 8.4 that are otherwise publicly available. The Agent or
Bank will maintain the confidentiality of
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such Confidential Information in accordance with procedures adopted by it in
good faith to protect its own information or confidential information of third
parties delivered to it, provided, that it may deliver or disclose Confidential
Information to (i) its affiliates and its or their respective directors,
officers, employees, agents and attorneys (to the extent such disclosure
reasonably relates to the administration of the loan represented by its Notes),
(ii) its financial advisors and other professional advisors who agree to hold
confidential the Confidential Information substantially in accordance with the
terms of this Section 19.6, (iii) any other holder of any Note, (iv) any
financial institution to which it sells or assigns or offers to sell or assign
such Note or any part thereof or any participation therein (if such Person has
agreed in writing prior to its receipt of such Confidential Information to be
bound by the provisions of this Section 19.6), (v) any federal or state
regulatory authority having jurisdiction over it, or (vi) any other Person to
which such delivery or disclosure may be necessary or appropriate (w) to effect
compliance with any law, rule, regulation or order applicable to it, (x) in
response to any subpoena or other legal process, (y) in connection with any
litigation to which it is a party or (z) if an Event of Default has occurred and
is continuing, to the extent it may reasonably determine such delivery and
disclosure to be necessary or appropriate in the enforcement or for the
protection of the rights and remedies under its Notes and this Credit Agreement.
Each holder of a Note, by its acceptance of a Note, will be deemed to have
agreed to be bound by and to be entitled to the benefits of this Section 19.6 as
though it were a party to this Credit Agreement. On request by a Borrower or
Subsidiary in connection with the delivery to any holder of a Note of
information required to be delivered to such holder under this Credit Agreement
or requested by such holder (other than a holder that is a party to this Credit
Agreement or its nominee), such holder will enter into an agreement with the
Borrowers embodying the provisions of this Section 19.6.
19.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE BORROWERS. If any
assignee Bank is an Affiliate of either of the Borrowers, then any such assignee
Bank shall have no right to vote as a Bank hereunder or under any of the other
Loan Documents for purposes of granting consents or waivers or for purposes of
agreeing to amendments or other modifications to any of the Loan Documents or
for purposes of making requests to the Administrative Agent pursuant to Section
13.1 or Section 13.2, and the determination of the Majority Banks shall for all
purposes of this Credit Agreement and the other Loan Documents be made without
regard to such assignee Bank's interest in any of the Loans. If any Bank sells a
participating interest in any of the Loans or Reimbursement Obligations to a
participant, and such participant is a Borrower or an Affiliate of a Borrower,
then such transferor Bank shall promptly notify the Administrative Agent of the
sale of such participation. A transferor Bank shall have no right to vote as a
Bank hereunder or under any of the other Loan Documents for purposes of granting
consents or waivers or for purposes of agreeing to amendments or modifications
to any of the Loan Documents or for purposes of making requests to the
Administrative Agent pursuant to Section 15.1 or Section 15.2 to the extent that
such participation is beneficially owned by a Borrower or any Affiliate of a
Borrower, and the determination of the Majority Banks shall for all purposes of
this Credit Agreement and the other Loan Documents be made without regard to the
interest of such transferor Bank in the Loans to the extent of such
participation.
19.8. MISCELLANEOUS ASSIGNMENT PROVISIONS. Any assigning Bank shall
retain its rights to be indemnified pursuant to Section 16 with respect to any
claims or actions arising prior to the date of such assignment. If any assignee
Bank is not incorporated under the laws of
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the United States of America or any state thereof, it shall, prior to the date
on which any interest or fees are payable hereunder or under any of the other
Loan Documents for its account, deliver to the Borrowers and the Administrative
Agent certification as to its exemption from deduction or withholding of any
United States federal income taxes. If any Reference Bank transfers all of its
interest, rights and obligations under this Credit Agreement, the Administrative
Agent shall, in consultation with the Borrowers and with the consent of the
Borrowers and the Majority Banks, appoint another Bank to act as a Reference
Bank hereunder. Anything contained in this Section 19 to the contrary
notwithstanding, any Bank may at any time pledge all or any portion of its
interest and rights under this Credit Agreement (including all or any portion of
its Notes) to any of the twelve Federal Reserve Banks organized under Section 4
of the Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or the
enforcement thereof shall release the pledgor Bank from its obligations
hereunder or under any of the other Loan Documents.
19.9. ASSIGNMENT BY BORROWERS. Neither of the Borrowers shall assign or
transfer any of its rights or obligations under any of the Loan Documents
without the prior written consent of each of the Banks.
20. NOTICES, ETC.
Except as otherwise expressly provided in this Credit Agreement, all
notices and other communications made or required to be given pursuant to this
Credit Agreement or the Notes or any Letter of Credit Applications shall be in
writing and shall be delivered in hand, mailed by United States registered or
certified first class mail, postage prepaid, sent by overnight courier, or sent
by telegraph, telecopy, facsimile or telex and confirmed by delivery via courier
or postal service, addressed as follows:
(a) if to the Borrowers, at 35 United Drive, West Bridgewater,
Massachusetts 02379, Attention: Chief Financial Officer, or at such
other address for notice as the Borrowers shall last have furnished in
writing to the Person giving the notice;
(b) if to any of the Agents or the Issuing Banks, at the
address specified for such Agent or Issuing Bank on Schedule 1 hereto,
or such other address for notice as such Agent or Issuing Bank shall
last have furnished in writing to the Person giving the notice; and
(c) if to any Bank, at such Bank's address set forth on
Schedule 1 hereto, or such other address for notice as such Bank shall
have last furnished in writing to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or
made and to have become effective (a) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, upon
delivery or the sending of such facsimile and (b) if sent by registered or
certified first-class mail, postage prepaid, on the third Business Day following
the mailing thereof.
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21. GOVERNING LAW.
THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED
THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID COMMONWEALTH OF MASSACHUSETTS
(EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE BORROWERS
AGREE THAT ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF
MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT
BEING MADE UPON THE BORROWERS BY MAIL AT THE ADDRESS SPECIFIED IN Section 20.
EACH OF THE BORROWERS HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS
BROUGHT IN AN INCONVENIENT COURT.
22. HEADINGS.
The captions in this Credit Agreement are for convenience of reference
only and shall not define or limit the provisions hereof.
23. COUNTERPARTS.
This Credit Agreement and any amendment hereof may be executed in
several counterparts and by each party on a separate counterpart, each of which
when executed and delivered shall be an original, and all of which together
shall constitute one instrument. In proving this Credit Agreement it shall not
be necessary to produce or account for more than one such counterpart signed by
the party against whom enforcement is sought.
24. ENTIRE AGREEMENT, ETC.
The Loan Documents and any other documents executed in connection
herewith or therewith express the entire understanding of the parties with
respect to the transactions contemplated hereby. Neither this Credit Agreement
nor any term hereof may be changed, waived, discharged or terminated, except as
provided in Section 26.
25. WAIVER OF JURY TRIAL.
Each of the Borrowers hereby waives its right to a jury trial with
respect to any action or claim arising out of any dispute in connection with
this Credit Agreement, the Notes or any of the other Loan Documents, any rights
or obligations hereunder or thereunder or the performance of such rights and
obligations. Except as prohibited by law, each of the Borrowers hereby waives
any right it may have to claim or recover in any litigation referred to in the
preceding sentence any special, exemplary, punitive or consequential damages or
any damages other than, or in addition to, actual damages. Each
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of the Borrowers (a) certifies that no representative, agent or attorney of any
Bank, any Issuing Bank or any Agent has represented, expressly or otherwise,
that such Bank, such Issuing Bank or such Agent would not, in the event of
litigation, seek to enforce the foregoing waivers and (b) acknowledges that the
Agents, the Issuing Banks and the Banks have been induced to enter into this
Credit Agreement, the other Loan Documents to which it is a party by, among
other things, the waivers and certifications contained herein.
26. CONSENTS, AMENDMENTS, WAIVERS, ETC.
Any consent or approval required or permitted by this Credit Agreement
to be given by all of the Banks may be given, and any term of this Credit
Agreement, the other Loan Documents or any other instrument related hereto or
mentioned herein may be amended, and the performance or observance by either of
the Borrowers or any of their Subsidiaries of any terms of this Credit
Agreement, the other Loan Documents or such other instrument or the continuance
of any Default or Event of Default may be waived (either generally or in a
particular instance and either retroactively or prospectively) with, but only
with, the written consent of the Borrowers and the written consent of the
Majority Banks. Notwithstanding the foregoing, the rate of interest on the Notes
(other than interest accruing pursuant to Section 6.11.2 following the effective
date of any waiver by the Majority Banks of the Default or Event of Default
relating thereto) may not be decreased, the term of the Notes may not be
extended, the amount of the Commitment of any Bank may not be increased, the
amount of commitment fee or Letter of Credit Fees hereunder may not be
decreased, no amount of principal, interest or fees may be forgiven nor may the
time for payment of principal, interest or fees be extended without, in each
case, the written consent of each Bank affected thereby; the obligations of CDM
in respect of its guaranty of the Obligations pursuant to the Guaranty may not
be released (in whole or in part) (except solely as a result of a merger or
consolidation of CDM with and into a Borrower to the extent permitted by Section
9.5.1 hereof) without the written consent of each of the Banks; the amount of
the Total Commitment may not be increased, the definition of Majority Banks and
this Section 26 may not be amended without, in each case, the written consent of
each of the Banks; the rights and obligations of the Borrowers under this Credit
Agreement may not be assigned pursuant to Section 19.9 without the written
consent of each of the Banks; the amount of the Administrative Agent's fee and
Section 15 may not be amended without the written consent of the Agents affected
thereby; and the amount of any Letter of Credit Fees payable for either of the
Issuing Bank's account may not be amended without the written consent of the
Issuing Bank affected thereby. No waiver shall extend to or affect any
obligation not expressly waived or impair any right consequent thereon. No
course of dealing or delay or omission on the part of any Agent, any Issuing
Bank or any Bank in exercising any right shall operate as a waiver thereof or
otherwise be prejudicial thereto. No notice to or demand upon the Borrowers
shall entitle the Borrowers to other or further notice or demand in similar or
other circumstances.
27. SEVERABILITY.
The provisions of this Credit Agreement are severable and if any one
clause or provision hereof shall be held invalid or unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall affect
only such clause or provision, or part thereof, in such jurisdiction, and shall
not in any manner affect such clause or provision in any other jurisdiction, or
any other clause or provision of this Credit Agreement in any jurisdiction.
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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned have duly executed this Credit
Agreement as a sealed instrument as of the date first set forth above.
CHADWICK'S OF BOSTON, LTD.
By:_______________________________
Name:
Title:
CHADWICK'S, INC.
By:_______________________________
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON, individually
and as Administrative Agent, Co-Syndication Agent
and Issuing Bank
By:_______________________________
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO, individually
and as Documentation Agent and Issuing Bank
By:_______________________________
Name:
Title:
FIRST CHICAGO CAPITAL MARKETS, INC., as
Co-Syndication Agent
By:_______________________________
Name:
Title:
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THE BANK OF NEW YORK
By:_______________________________
Name:
Title:
DEUTSCHE BANK AG, NEW YORK BRANCH AND/OR CAYMAN
ISLANDS BRANCH
By:_______________________________
Name:
Title:
By:_______________________________
Name:
Title:
FLEET NATIONAL BANK
By:_______________________________
Name:
Title:
MELLON BANK, N.A.
By:_______________________________
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION
By:_______________________________
Name:
Title:
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STATE STREET BANK AND
TRUST COMPANY
By:_______________________________
Name:
Title:
<PAGE> 81
EXHIBIT A
FORM OF REVOLVING CREDIT NOTE
$[ ] July ___, 1996
FOR VALUE RECEIVED, the undersigned CHADWICK'S OF BOSTON, LTD., a
Delaware corporation ("Chadwick's of Boston") and CHADWICK'S, INC., a
Massachusetts corporation ("Chadwick's", and, together with Chadwick's of
Boston, the "Borrowers"), hereby jointly and severally promise to pay to the
order of ____________ (the "Lender") at the head office of The First National
Bank of Boston, as Administrative Agent, at 100 Federal Street, Boston, MA
02110:
(a) prior to or on the Revolving Credit Loan Maturity Date,
the principal amount of ________________ Dollars ($__________) or, if
less, the aggregate unpaid principal amount of Revolving Credit Loans
advanced by the Lender to the Borrowers pursuant to the Revolving
Credit and Term Loan Agreement dated as of July ___, 1996 (as amended
and in effect from time to time, the "Credit Agreement"), among the
Borrowers, the Lender, The First National Bank of Boston and The First
National Bank of Chicago as the Agents, and the other parties thereto;
(b) the principal outstanding hereunder from time to time at
the times provided in the Credit Agreement; and
(c) interest on the principal balance hereof from time to time
outstanding from the Closing Date under the Credit Agreement through
and including the maturity date hereof at the times and at the rates
provided in the Credit Agreement.
This Note evidences borrowings under and has been issued by the
Borrowers in accordance with the terms of the Credit Agreement. The Lender and
any holder hereof is entitled to the benefits of the Credit Agreement and the
other Loan Documents, and may enforce the agreements of the Borrowers contained
therein, and any holder hereof may exercise the respective remedies provided for
thereby or otherwise available in respect thereof, all in accordance with the
respective terms thereof. All capitalized terms used in this Note and not
otherwise defined herein shall have the same meanings herein as in the Credit
Agreement.
The Borrowers irrevocably authorize the Lender to make or cause to be
made, at or about the time of the Drawdown Date of any Revolving Credit Loan or
at the time of receipt of any payment of principal of this Note, an appropriate
notation on the grid attached to this Note, or the continuation of such grid, or
any other similar record, including computer records, reflecting the making of
such Revolving Credit
<PAGE> 82
-2-
Loan or (as the case may be) the receipt of such payment. The amount of the
Revolving Credit Loans outstanding at any time as set forth on the grid attached
to this Note, or the continuation of such grid, or any other similar record,
including computer records, maintained by the Lender with respect to any
Revolving Credit Loans shall be prima facie evidence of the principal amount
thereof owing and unpaid to the Lender, but the failure to record, or any error
in so recording, any such amount on any such grid, continuation or other record
shall not limit or otherwise affect the joint and several obligation of the
Borrowers hereunder or under the Credit Agreement to make payments of principal
of and interest on this Note when due.
The Borrowers have the right in certain circumstances and the
obligation under certain other circumstances to prepay the whole or part of the
principal of this Note on the terms and conditions specified in the Credit
Agreement.
If any one or more of the Events of Default shall occur, the entire
unpaid principal amount of this Note and all of the unpaid interest accrued
thereon may become or be declared due and payable in the manner and with the
effect provided in the Credit Agreement.
No delay or omission on the part of the Lender or any holder hereof in
exercising any right hereunder shall operate as a waiver of such right or of any
other rights of the Lender or such holder, nor shall any delay, omission or
waiver on any one occasion be deemed a bar or waiver of the same or any other
right on any further occasion.
The Borrowers and every endorser and guarantor of this Note or the
obligation represented hereby waive presentment, demand, notice, protest and all
other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note, and assent to any extension or
postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of collateral and to the addition or release
of any other party or person primarily or secondarily liable.
THIS NOTE AND THE JOINT AND SEVERAL OBLIGATIONS OF THE BORROWERS
HEREUNDER SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO
CONFLICTS OR CHOICE OF LAW). EACH OF THE BORROWERS AGREES THAT ANY SUIT FOR THE
ENFORCEMENT OF THIS NOTE MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF
MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH
SUIT BEING MADE UPON THE BORROWERS BY MAIL AT THE ADDRESS SPECIFIED IN SECTION20
OF THE CREDIT AGREEMENT. EACH
<PAGE> 83
-3-
OF THE BORROWERS HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE
TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN
AN INCONVENIENT COURT.
This Note shall be deemed to take effect as a sealed instrument under
the laws of The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, each of the undersigned has caused this Revolving
Credit Note to be signed in its corporate names and its corporate seal to be
impressed thereon by their duly authorized officers as of the day and year first
above written.
[Corporate Seal]
CHADWICK'S OF BOSTON, LTD.
By:
-------------------------------------
Title:
CHADWICK'S, INC.
By:
-------------------------------------
Title:
<PAGE> 84
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Amount of Balance of
Amount Principal Paid Principal Notation
Date of Loan or Prepaid Unpaid Made By:
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ---------------- ------------------ --------------------- ------------------ -------------------
- ---------------- ------------------ --------------------- ------------------ -------------------
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- ---------------- ------------------ --------------------- ------------------ -------------------
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 85
EXHIBIT B
FORM OF
LOAN REQUEST
Date: __________
The First National Bank Of Boston,
as Administrative Agent
100 Federal Street
Boston, MA 02110
Attention:
Ladies and Gentlemen:
Reference is hereby made to that certain Revolving Credit and Term Loan
Agreement, dated as of July ___, 1996 (the "Credit Agreement", the terms defined
therein being used herein as therein defined), among Chadwick's of Boston, Ltd.
("Chadwick's of Boston") and Chadwick's, Inc. ("Chadwick's", and, together with
Chadwick's of Boston, the "Borrowers"), The First National Bank of Boston, The
First National Bank of Chicago and the other lending institutions listed on
Schedule 1 thereto (the "Banks"), The First National Bank of Boston as
Administrative Agent for the Banks, as Co-Syndication Agent for the Banks and as
issuing bank with respect to letters of credit, The First National Bank of
Chicago as Documentation Agent for the Banks and as issuing bank with respect to
letters of credit, and First Chicago Capital Markets, Inc., as Co-Syndication
Agent for the Banks. The Borrowers hereby [give you notice] [confirm the
telephonic notice previously given] pursuant to Section2.6 of the Credit
Agreement that the Borrowers hereby request a Revolving Credit Loan under the
Credit Agreement, and in that connection set forth below the information
relating to such Loan (the "Proposed Loan") as required by Section2.6 of the
Credit Agreement:
(i) The requested Drawdown Date of the Proposed Loan is ________;
(ii) The aggregate amount of the Proposed Loan (not less than
$1,000,000) is $___________;
(iii) The Type of the Proposed Loan is _______; and
(iv) The Interest Period for such Proposed Loan is____________.
We hereby certify that:
<PAGE> 86
-2-
(i) no Default or Event of Default under the Credit Agreement
exists on the date of this Loan Request, or shall occur as a
result of the Proposed Loan to which this Loan Request
relates;
(ii) the representations and warranties contained in the Credit
Agreement were true and correct as of the date on which made
and are true and correct as of the date hereof with the same
effect as if made at and as of such time, except to the extent
that the facts upon which such representations and warranties
are based may have changed in the ordinary course as a result
of transactions permitted or contemplated by the Credit
Agreement and to the extent such representations and
warranties relate solely and expressly to an earlier time;
(iii) the Borrowers have performed all obligations and complied with
all covenants and conditions required by the Credit Agreement
to be performed or complied with by them on or prior to the
date hereof; and
(iv) the matters certified herein shall remain true from and after
the date hereof through the date of the Proposed Loan unless
the Borrowers shall deliver to the Administrative Agent a
certificate as to any change in any such matters, which the
Borrowers hereby agree to give promptly after obtaining
knowledge thereof.
We hereby authorize you to disburse the proceeds of the Proposed Loan
as follows:
[insert applicable disbursement instructions]
Very truly yours,
CHADWICK'S OF BOSTON, LTD.
By:
--------------------------------------------
Title:
CHADWICK'S, INC.
By:
--------------------------------------------
Title:
<PAGE> 87
EXHIBIT C
FORM OF TERM NOTE
$[ ] July ___, 1996
FOR VALUE RECEIVED, the undersigned CHADWICK'S OF BOSTON, LTD., a
Delaware corporation ("Chadwick's of Boston") and CHADWICK'S, INC., a
Massachusetts corporation ("Chadwick's", and together with Chadwick's of Boston,
the "Borrowers"), hereby jointly and severally promise to pay to the order of
_________ (the "Lender") at the head office of The First National Bank of
Boston, as Administrative Agent, at 100 Federal Street, Boston, MA 02110:
(a) prior to or on the Term Loan Maturity Date, the principal
amount of ______________ Dollars ($__________), evidencing the Term
Loan made by the Lender to the Borrowers pursuant to the Revolving
Credit and Term Loan Agreement dated as of July __, 1996 (as amended
and in effect from time to time, the "Credit Agreement"), by and among
the Borrowers, the Lender, The First National Bank of Boston and The
First National Bank of Chicago as the Agents, and the other parties
thereto;
(b) the principal outstanding hereunder from time to time at
the times provided in the Credit Agreement; and
(c) interest from the date hereof on the principal amount from
time to time outstanding to and including the maturity hereof at the
rates and times provided in the Credit Agreement and in all cases in
accordance with the terms of the Credit Agreement.
This Note evidences borrowings under and has been issued by the
Borrowers in accordance with the terms of the Credit Agreement. The Lender and
any holder hereof is entitled to the benefits of the Credit Agreement and the
other Loan Documents, and may enforce the agreements of the Borrowers contained
therein, and any holder hereof may exercise the respective remedies provided for
thereby or otherwise available in respect thereof, all in accordance with the
respective terms thereof. All capitalized terms used in this Note and not
otherwise defined herein shall have the same meanings herein as in the Credit
Agreement.
The Borrowers irrevocably authorize the Lender to make or cause to be
made, at the time of receipt of any payment of principal of this Note, an
appropriate notation on the grid attached to this Note, or the continuation of
such grid, or any other similar record, including computer records, reflecting
the receipt of such payment. The outstanding amount of the Term Loan set forth
on the grid attached to this Note, or the continuation of such grid, or any
other similar record, including
<PAGE> 88
-2-
computer records, maintained by the Lender with respect to the Term Loan shall
be prima facie evidence of the principal amount of the Term Loan owing and
unpaid to the Lender, but the failure to record, or any error in so recording,
any such amount on any such grid, continuation or other record shall not limit
or otherwise affect the joint and several obligations of the Borrowers hereunder
or under the Credit Agreement to make payments of principal of and interest on
this Note when due.
The Borrowers have the right in certain circumstances and the
obligation under certain other circumstances to prepay the whole or part of the
principal of this Note on the terms and conditions specified in the Credit
Agreement.
If any one or more of the Events of Default shall occur, the entire
unpaid principal amount of this Note and all of the unpaid interest accrued
thereon may become or be declared due and payable in the manner and with the
effect provided in the Credit Agreement.
No delay or omission on the part of the Lender or any holder hereof in
exercising any right hereunder shall operate as a waiver of such right or of any
other rights of the Lender or such holder, nor shall any delay, omission or
waiver on any one occasion be deemed a bar or waiver of the same or any other
right on any future occasion.
The Borrowers and every endorser and guarantor of this Note or the
obligation represented hereby waive presentment, demand, notice, protest and all
other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note, and assent to any extension or
postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of collateral and to the addition or release
of any other party or person primarily or secondarily liable.
THIS NOTE AND THE JOINT AND SEVERAL OBLIGATIONS OF THE BORROWERS
HEREUNDER SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO
CONFLICTS OR CHOICE OF LAW). EACH OF THE BORROWERS AGREES THAT ANY SUIT FOR THE
ENFORCEMENT OF THIS NOTE MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF
MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH
SUIT BEING MADE UPON THE BORROWERS BY MAIL AT THE ADDRESS SPECIFIED IN SECTION20
OF THE CREDIT AGREEMENT. EACH OF THE BORROWERS HEREBY WAIVES ANY OBJECTION THAT
IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT
<PAGE> 89
-3-
OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.
This Note shall be deemed to take effect as a sealed instrument under
the laws of The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, each of the undersigned has caused this Note to be
signed in its corporate names and its corporate seal to be impressed thereon by
their duly authorized officers as of the day and year first above written.
[Corporate Seal]
CHADWICK'S OF BOSTON, LTD.
By:
------------------------------------
Title:
CHADWICK'S, INC.
By:
------------------------------------
Title:
<PAGE> 90
-4-
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Amount of Balance of
Amount Principal Paid Principal Notation
Date of Loan or Prepaid Unpaid Made By:
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ---------------- ------------------ --------------------- ------------------ -------------------
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- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 91
EXHIBIT D
FORM OF
COMPLIANCE CERTIFICATE
Pursuant to Section8.4 of the Revolving Credit and Term Loan Agreement
(the "Credit Agreement") dated as of July ___, 1996, among Chadwick's of Boston,
Ltd. ("Chadwick's of Boston"), Chadwick's, Inc. ("Chadwick's", and, together,
with Chadwick's of Boston, the "Borrowers"), The First National Bank of Boston,
The First National Bank of Chicago and the other lending institutions referred
to therein as Banks (collectively, the "Banks"), The First National Bank of
Boston as administrative agent for the Banks, as co-syndication agent for the
Banks and as issuing bank with respect to letters of credit, The First National
Bank of Chicago as documentation agent for the Banks and as issuing bank with
respect to letters of credit, and First Chicago Capital Markets, Inc., as
co-syndication agent for the Banks, the undersigned [INSERT NAMES], the duly
elected and qualified [CHIEF FINANCIAL OFFICERS] [CHIEF ACCOUNTING OFFICERS]
[TREASURERS] of Chadwick's of Boston and Chadwick's, respectively, each hereby
certify as of the date hereof the following:
No Defaults: I have read the Credit Agreement and, to the best of my
knowledge and belief, no Default or Event of Default has occurred under the
Credit Agreement. [IF A DEFAULT OR EVENT OF DEFAULT EXISTS, THE SIGNER OF THIS
CERTIFICATE SHALL SPECIFY ALL SUCH DEFAULTS/EVENTS OF DEFAULT AND THE ACTIONS
PROPOSED TO BE TAKEN TO ADDRESS SUCH DEFAULTS/EVENTS OF DEFAULT.] Attached
hereto is Schedule A, on which are set forth all relevant calculations needed to
determine whether the Borrowers are in compliance with the covenants set forth
in Section10 of the Credit Agreement, which calculations are based on the most
recent financial statements required to be supplied by the Borrowers under the
Credit Agreement. I have no knowledge of the occurrence of any event since the
date of such financial statements which would render this certificate incorrect
as of the date hereof.
Representations and Warranties: The representations and warranties
contained in the Credit Agreement were true and correct as of the date on which
made and are true and correct as of the date hereof with the same effect as if
made at and as of such time, except to the extent that the facts upon which such
representations and warranties are based may have changed in the ordinary course
as a result of transactions permitted or contemplated
<PAGE> 92
by the Credit Agreement and to the extent such representations and warranties
relate expressly to an earlier time.
The undersigned does not assume any personal liability for the accuracy
of this certificate.
CHADWICK'S OF BOSTON, LTD.
-----------------------------------------
Name:
Title:
-----------------------------------------
Date:
___ CHADWICK'S, INC.
-----------------------------------------
Name:
Title:
-----------------------------------------
Date:
<PAGE> 93
SCHEDULE A
TO
COMPLIANCE CERTIFICATE
For the period ended .
----------------------------
The computations which produced the figures set forth on this Schedule
A are set forth on Annex A hereto. Capitalized terms used herein without
definition shall have the meanings assigned to such terms in the Credit
Agreement.
[form of calculations to be provided by FNBB]
<PAGE> 94
EXHIBIT E
ASSIGNMENT AND ACCEPTANCE
Dated as of , 19
------------ --
Reference is made to the Revolving Credit and Term Loan Agreement,
dated as of July ___, 1996 (as from time to time amended and in effect, the
"Credit Agreement"), by and among CHADWICK'S OF BOSTON, LTD. ("Chadwick's of
Boston"), a Delaware corporation, CHADWICK'S, INC., a Massachusetts corporation
("Chadwick's", and, together with Chadwick's of Boston, the "Borrowers"), the
banking institutions referred to therein as Banks (collectively, the "Banks"),
THE FIRST NATIONAL BANK OF BOSTON, a national banking association, as
Administrative Agent for the Banks, as Co-Syndication Agent for the Banks and as
issuing bank with respect to letters of credit, THE FIRST NATIONAL BANK OF
CHICAGO, a national banking association, as Documentation Agent for the Banks
and as issuing bank with respect to letters of credit and FIRST CHICAGO CAPITAL
MARKETS, INC., as Co-Syndication Agent for the Banks. Capitalized terms used
herein and not otherwise defined shall have the meanings assigned to such terms
in the Credit Agreement.
[NAME OF ASSIGNOR] (the "Assignor") and [NAME OF ASSIGNEE] (the
"Assignee") hereby agree as follows:
1. ASSIGNMENT. Subject to the terms and conditions of this Assignment
and Acceptance, the Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes without recourse to the Assignor, a
[amount purchased] interest in and to the rights, benefits, indemnities and
obligations of the Assignor under the Credit Agreement equal to ___% in respect
of the Total Commitment and the Term Loan immediately prior to the Effective
Date (as hereinafter defined).
2. ASSIGNOR'S REPRESENTATIONS. The Assignor (i) represents and warrants
that (A) it is legally authorized to enter into this Assignment and Acceptance,
(B) as of the date hereof, its Commitment is $_________, its Commitment
Percentage is ___%, the aggregate outstanding principal balance of its Revolving
Credit Loans equals $_________, the aggregate amount of its Letter of Credit
Participations equals $_________ and the aggregate outstanding balance of its
Term Loan equals $_________ (in each case after giving effect to the assignment
contemplated hereby but without giving effect to any contemplated assignments
which have not yet become effective), and (C) immediately after giving effect to
all assignments which have not yet become effective, the Assignor's Commitment
Percentage will be sufficient to give effect to this Assignment and Acceptance,
(ii) makes no representation or warranty, express or
<PAGE> 95
-2-
implied, and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Credit Agreement
or any of the other Loan Documents or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit Agreement, the
other Loan Documents or any other instrument or document furnished pursuant
thereto or the attachment, perfection or priority of any security interest or
mortgage, other than that it is the legal and beneficial owner of the interest
being assigned by it hereunder free and clear of any claim or encumbrance; (iii)
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of the Borrowers or any of their Subsidiaries or any
other Person primarily or secondarily liable in respect of any of the
Obligations, or the performance or observance by the Borrowers or any of their
Subsidiaries or any other Person primarily or secondarily liable in respect of
any of the Obligations of any of its obligations under the Credit Agreement or
any of the other Loan Documents or any other instrument or document delivered or
executed pursuant thereto; and (iv) attaches hereto the Revolving Credit Note
and Term Note delivered to it under the Credit Agreement.
The Assignor requests that the Borrowers exchange the Assignor's
Revolving Credit Note and Term Note for new Revolving Credit and Term Notes
payable to the Assignor and the Assignee as follows:
<TABLE>
<CAPTION>
Notes Payable to Amount of Revolving Amount of
the Order of: Credit Note Term Note
- ----------------- ------------------- ---------
<S> <C> <C>
Assignor $ $
------------------ ------------------
Assignee $ $
------------------ ------------------
</TABLE>
3. ASSIGNEE'S REPRESENTATIONS. The Assignee (i) represents and warrants
that (A) it is duly and legally authorized to enter into this Assignment and
Acceptance, (B) the execution, delivery and performance of this Assignment and
Acceptance do not conflict with any provision of law or of the charter or
by-laws of the Assignee, or of any agreement binding on the Assignee, (C) all
acts, conditions and things required to be done and performed and to have
occurred prior to the execution, delivery and performance of this Assignment and
Acceptance, and to render the same the legal, valid and binding obligation of
the Assignee, enforceable against it in accordance with its terms, have been
done and performed and have occurred in due and strict compliance with all
applicable laws; (ii) confirms that it has received a copy of the Credit
Agreement, together with copies of the most recent financial statements
delivered pursuant to Section8.4 thereof and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance; (iii) agrees that it
will, independently and without reliance upon the Assignor, the Administrative
Agent or any other Bank or Agent 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 action under the Credit Agreement; (iv) represents and
warrants that it is an Eligible
<PAGE> 96
-3-
Assignee; (v) appoints and authorizes each of the Agents to take such action as
agent on its behalf and to exercise such powers under the Credit Agreement and
the other Loan Documents as are delegated to the Agents by the terms thereof,
together with such powers as are reasonably incidental thereto; (vi) agrees
specifically to be bound by the provisions of Section19.6 of the Credit
Agreement; and (vii) agrees that it will perform in accordance with their terms
all the obligations which by the terms of the Credit Agreement are required to
be performed by it as a Bank.
4. EFFECTIVE DATE. The effective date for this Assignment and
Acceptance shall be __________ (the "Effective Date"). Following the execution
of this Assignment and Acceptance, each party hereto shall deliver its duly
executed counterpart hereof to the Administrative Agent for acceptance by the
Administrative Agent and recording in the Register by the Administrative Agent.
Schedule 1 to the Credit Agreement shall thereupon be replaced as of the
Effective Date by the Schedule 1 annexed hereto.
5. RIGHTS UNDER CREDIT AGREEMENT. Upon such acceptance and recording,
from and after the Effective Date, (i) the Assignee shall be a party to the
Credit Agreement and, to the extent provided in this Assignment and Acceptance,
have the rights and obligations of a Bank thereunder, and (ii) the Assignor
shall, with respect to that portion of its interest under the Credit Agreement
assigned hereunder, relinquish its rights and be released from its obligations
under the Credit Agreement; provided, however, that the Assignor shall retain
its rights to be indemnified pursuant to Section17 of the Credit Agreement with
respect to any claims or actions arising prior to the Effective Date.
6. PAYMENTS. Upon such acceptance of this Assignment and Acceptance by
the Administrative Agent and such recording, from and after the Effective Date,
the Administrative Agent shall make all payments in respect of the rights and
interests assigned hereby (including payments of principal, interest, fees and
other amounts) to the Assignee. The Assignor and the Assignee shall make any
appropriate adjustments in payments for periods prior to the Effective Date by
the Administrative Agent or with respect to the making of this assignment
directly between themselves.
7. GOVERNING LAW. THIS ASSIGNMENT AND ACCEPTANCE IS INTENDED TO TAKE
EFFECT AS A SEALED INSTRUMENT TO BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT REFERENCE TO
CONFLICT OF LAWS).
8. COUNTERPARTS. This Assignment and Acceptance may be executed in any
number of counterparts which shall together constitute but one and the same
agreement.
<PAGE> 97
-4-
IN WITNESS WHEREOF, intending to be legally bound, each of the
undersigned has caused this Assignment and Acceptance to be executed on its
behalf by its officer thereunto duly authorized, as of the date first above
written.
[NAME OF ASSIGNOR]
By:
--------------------------------
Title:
[NAME OF ASSIGNEE]
By:
--------------------------------
Title:
<PAGE> 98
-5-
CONSENTED TO:
CHADWICK'S OF
BOSTON, LTD.
By:
----------------------------------------------
Title:
CHADWICK'S, INC.
By:
----------------------------------------------
Title:
THE FIRST NATIONAL
BANK OF BOSTON,
As Administrative Agent
By:
----------------------------------------------
Title:
<PAGE> 99
EXHIBIT F
FORM OF GUARANTY
GUARANTY, dated as of July __, 1996, by CDM CORP., a Nevada corporation
(the "Guarantor") in favor of (i) The First National Bank of Boston, a national
banking association, as Administrative Agent for itself and the other banking
institutions (hereinafter, collectively, the "Banks") which are or may become
parties to a Revolving Credit and Term Loan Agreement dated as of July __, 1996
(as amended and in effect from time to time, the "Credit Agreement"), among
Chadwick's of Boston, Ltd. ("Chadwick's of Boston"), Chadwick's, Inc.
("Chadwick's", and, together with Chadwick's of Boston, the "Borrowers"), the
Banks, The First National Bank of Boston, as Administrative Agent for the Banks,
as Co-Syndication Agent for the Banks and as issuing bank with respect to
letters of credit, The First National Bank of Chicago, as Documentation Agent
for the Banks and as issuing bank with respect to letters of credit, and First
Chicago Capital Markets, Inc., as Co-Syndication Agent for the Banks, (ii) each
of the other Agents (as hereinafter defined), (iii) each of the Issuing Banks
(as hereinafter defined), and (iv) each of the Banks.
WHEREAS, the Borrowers and the Guarantor are members of a group of
related corporations, the success of any one of which is dependent in part on
the success of the other members of such group;
WHEREAS, the Guarantor expects to receive substantial direct and
indirect benefits from the extensions of credit to the Borrowers by the Banks
and the Issuing Banks pursuant to the Credit Agreement (which benefits are
hereby acknowledged);
WHEREAS, it is a condition precedent to the Banks' making any loans or
otherwise extending credit to the Borrowers under the Credit Agreement that the
Guarantor executes and delivers to the Administrative Agent, for the benefit of
the Banks, the Issuing Banks and the Agents, a guaranty substantially in the
form hereof; and
WHEREAS, the Guarantor wishes to guarantee the obligations of the
Borrowers to the Banks, the Issuing Banks and the Agents under or in respect of
the Credit Agreement as provided herein;
NOW, THEREFORE, the Guarantor hereby agrees with the Banks, the Issuing
Banks and the Agents as follows:
1. DEFINITIONS. The term "Obligations" and all other capitalized terms
used herein without definition shall have the respective meanings provided
therefor in the Credit Agreement.
2. GUARANTY OF PAYMENT. The Guarantor hereby guarantees to the Banks,
the Issuing Banks and the Agents the full and punctual payment when due (whether
at stated maturity, by required pre-payment, by acceleration or otherwise) of
all of the Obligations including all such which would become due but for the
operation of the automatic stay pursuant toSection362(a) of the Federal
Bankruptcy
<PAGE> 100
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Code and the operation ofSectionSection502(b) and 506(b) of the Federal
Bankruptcy Code. This Guaranty is an absolute, unconditional and continuing
guaranty of the full and punctual payment of all of the Obligations and not of
their collectibility only and is in no way conditioned upon any requirement that
any of the Agents, the Issuing Banks or any Bank first attempt to collect any of
the Obligations from the Borrowers or either of them or resort to any collateral
security or other means of obtaining payment. Upon the occurrence of an Event of
Default, the obligations of the Guarantor hereunder shall, upon demand by the
Administrative Agent, become immediately due and payable to the Administrative
Agent, for the benefit of the Banks, the Issuing Banks and the Agents, without
demand or notice of any nature, all of which are expressly waived by the
Guarantor. Payments by the Guarantor hereunder may be required by the
Administrative Agent on any number of occasions. All payments by the Guarantor
hereunder shall be made to the Administrative Agent, in the manner and at the
place of payment specified therefor in the Credit Agreement, for the account of
the Banks, the Issuing Banks and the Agents. Each Event of Default under the
Credit Agreement shall constitute an Event of Default under this Guaranty.
3. GUARANTOR'S AGREEMENT TO PAY ENFORCEMENT COSTS, ETC. The Guarantor
further agrees, as a principal obligor and not as a guarantor only, to pay to
the Administrative Agent, on demand, all costs and expenses (including court
costs and legal expenses) incurred or expended by any Agent, either of the
Issuing Banks or any Bank in connection with the Obligations, this Guaranty and
the enforcement thereof, together with interest on amounts recoverable under
thisSection3 from the time when such amounts become due until payment, whether
before or after judgment, at the rate of interest for overdue principal set
forth in the Credit Agreement, provided that if such interest exceeds the
maximum amount permitted to be paid under applicable law, then such interest
shall be reduced to such maximum permitted amount.
4. WAIVERS BY GUARANTOR; BANK'S FREEDOM TO ACT. The Guarantor agrees
that the Obligations will be paid strictly in accordance with their respective
terms, regardless of any law, regulation or order now or hereafter in effect in
any jurisdiction affecting any of such terms or the rights of any of the Agents,
either Issuing Bank or any Bank with respect thereto. The Guarantor waives
promptness, diligences, presentment, demand, protest, notice of acceptance,
notice of any Obligations incurred and all other notices of any kind, all
defenses which may be available by virtue of any valuation, stay, moratorium law
or other similar law now or hereafter in effect, any right to require the
marshalling of assets of the Borrowers, the Guarantor, or any other entity or
other person primarily or secondarily liable with respect to any of the
Obligations, and all suretyship defenses generally. Without limiting the
generality of the foregoing, the Guarantor agrees to the provisions of any
instrument evidencing, securing or otherwise executed in connection with any
Obligation and agrees that the obligations of the Guarantor hereunder shall not
be released or discharged, in whole or in part, or otherwise affected by (i) the
failure of the Administrative Agent, either of the Issuing Banks or any Bank or
other Agent to assert any claim or demand or to enforce any right or remedy
against the Borrowers or any other entity or other person primarily or
secondarily liable with respect to any of the Obligations; (ii) any extensions,
compromise, refinancing, consolidation or renewals of any Obligation; (iii) any
change in the time, place or manner of payment of any of the Obligations or any
rescissions, waivers, compromise, refinancing, consolidation or other amendments
or modifications of any of the terms or provisions of the Credit Agreement, the
Notes, the other Loan Documents or any other agreement evidencing, securing or
otherwise executed in connection with any of the Obligations, (iv) the addition,
substitution or release of any entity or other person primarily or secondarily
liable for any Obligation; (v) the adequacy of any rights which the
Administrative Agent, either Issuing Bank or any Bank or other Agent
<PAGE> 101
-3-
may have against any collateral security or other means of obtaining repayment
of any of the Obligations; (vi) the impairment of any collateral securing any of
the Obligations, including without limitation the failure to perfect or preserve
any rights which the Administrative Agent, either Issuing Bank or any Bank or
other Agent might have in such collateral security or the substitution,
exchange, surrender, release, loss or destruction of any such collateral
security; or (vii) any other act or omission which might in any manner or to any
extent vary the risk of the Guarantor or otherwise operate as a release or
discharge of the Guarantor, all of which may be done without notice to the
Guarantor. To the fullest extent permitted by law, the Guarantor hereby
expressly waives any and all rights or defenses arising by reason of (A) any
"one action" or "anti-deficiency" law which would otherwise prevent the
Administrative Agent, either Issuing Bank or any Bank or other Agent from
bringing any action, including any claim for a deficiency, or exercising any
other right or remedy (including any right of set-off), against the Guarantor
before or after the Administrative Agent's, such Issuing Bank's or such Bank's
or other Agent's commencement or completion of any foreclosure action, whether
judicially, by exercise of power of sale or otherwise, or (B) any other law
which in any other way would otherwise require any election of remedies by the
Administrative Agent, either Issuing Bank or any Bank or other Agent.
5. UNENFORCEABILITY OF OBLIGATIONS AGAINST THE BORROWERS. If for any
reason either of the Borrowers has no legal existence or is under no legal
obligation to discharge any of the Obligations, or if any of the Obligations
have become irrecoverable from the Borrowers or either of them by reason of
insolvency, bankruptcy or reorganization or by other operation of law or for any
other reason, this Guaranty shall nevertheless be binding on the Guarantor to
the same extent as if such Guarantor at all times had been the principal obligor
on all such Obligations. In the event that acceleration of the time for payment
of any of the Obligations is stayed upon the insolvency, bankruptcy or
reorganization of the Borrowers or either of them, or for any other reason, all
such amounts otherwise subject to acceleration under the terms of the Credit
Agreement, the Notes, the other Loan Documents or any other agreement
evidencing, securing or otherwise executed in connection with any Obligation
shall be immediately due and payable by the Guarantor.
6. SUBROGATION; SUBORDINATION.
6.1. STANDSTILL OF RIGHTS AGAINST BORROWERS. Until the final
payment and performance in full of all of the Obligations, the
Guarantor shall not exercise any rights against the Borrowers arising
as a result of payment by the Guarantor hereunder, by way of
subrogation, reimbursement, restitution, contribution or otherwise, and
will not prove any claim in competition with any of the Agents, either
Issuing Bank or any Bank in respect of any payment hereunder in any
bankruptcy, insolvency or reorganization case or proceedings of any
nature; the Guarantor will not claim any setoff, recoupment or
counterclaim against the Borrowers in respect of any liability of the
Guarantor to the Borrowers, and the Guarantor waives any benefit of and
any right to participate in any collateral security which may be held
by any of the Agents, either Issuing Bank or any Bank.
6.2. SUBORDINATION. The payment of any amounts due with
respect to any indebtedness of the Borrowers for money borrowed or
credit received now or hereafter owed to the Guarantor is hereby
subordinated to the prior payment in full of all of the Obligations.
The Guarantor agrees that, after the occurrence and during the
continuance of any default in the payment or performance of any of the
Obligations, the
<PAGE> 102
-4-
Guarantor will not demand, sue for or otherwise attempt to collect any
such indebtedness of the Borrowers to the Guarantor until all of the
Obligations shall have been paid in full. If, notwithstanding the
foregoing sentence, the Guarantor shall collect, enforce or receive any
amounts in respect of such indebtedness while any Obligations are still
outstanding, such amounts shall be collected, enforced and received by
the Guarantor as trustee for the Banks, the Issuing Banks and the
Agents and be paid over to the Administrative Agent, for the benefit of
the Banks, the Issuing Banks and the Agents, on account of the
Obligations without affecting in any manner the liability of the
Guarantor under the other provisions of this Guaranty.
6.3. PROVISIONS SUPPLEMENTAL. The provisions of this Section6
shall be supplemental to and not in derogation of any rights and
remedies of the Banks, the Issuing Banks and the Agents under any
separate subordination agreement which the Administrative Agent may at
any time and from time to time enter into with the Guarantor for the
benefit of the Banks, the Issuing Banks and the Agents.
7. FURTHER ASSURANCES. The Guarantor agrees that it will from time to
time, at the request of the Administrative Agent, do all such things and execute
all such documents as the Administrative Agent may consider necessary or
desirable to give full effect to this Guaranty and to perfect and preserve the
rights and powers of the Banks, the Issuing Banks and the Agents hereunder. The
Guarantor acknowledges and confirms that the Guarantor itself has established
its own adequate means of obtaining from the Borrowers on a continuing basis all
information desired by the Guarantor concerning the financial condition of such
and that the Guarantor will look to the Borrowers and not to any Agent, either
Issuing Bank or any Bank in order for the Guarantor to keep adequately informed
of changes in the Borrowers' financial condition.
8. TERMINATION; REINSTATEMENT. This Guaranty shall remain in full force
and effect until all Obligations have been irrevocably paid in full in cash and
all Commitments under the Credit Agreement have been terminated. This Guaranty
shall continue to be effective or be reinstated, if at any time any payment made
or value received with respect to any Obligation is rescinded or must otherwise
be returned by any Agent, either Issuing Bank or any Bank upon the insolvency,
bankruptcy or reorganization of the Borrowers, or otherwise, all as though such
payment had not been made or value received.
9. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon the
Guarantor, its successors and assigns, and shall inure to the benefit of the
Agents, the Issuing Banks and the Banks and their respective successors,
transferees and assigns. Without limiting the generality of the foregoing
sentence, each Bank may assign or otherwise transfer the Credit Agreement, the
Notes, the other Loan Documents or any other agreement or note held by it
evidencing, securing or otherwise executed in connection with the Obligations,
or sell participations in any interest therein, to any other entity or other
person, and such other entity or other person shall thereupon become vested, to
the extent set forth in the agreement evidencing such assignment, transfer or
participation, with all the rights in respect thereof granted to such Bank
herein, all in accordance with Section19 of the Credit Agreement. The Guarantor
may not assign any of its obligations hereunder.
10. AMMENDMENTS AND WAIVERS. No amendment or waiver of any provision of
this Guaranty nor consent to any departure by the Guarantor therefrom shall be
effective unless the same shall be in writing and signed by the Administrative
Agent with the consent of the
<PAGE> 103
-5-
Majority Banks. No failure on the part of any of the Agents, either of the
Issuing Banks or any Bank to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right.
11. NOTICES. All notices and other communications called for hereunder
shall be in writing and shall be delivered in hand, mailed by United States
registered or certified first class mail postage prepaid, sent by overnight
courier, or sent by telegraph, telecopy, facsimile or telex and confirmed by
delivery via courier or postal service, addressed at the addresses for notices
to the Administrative Agent and the Guarantor set forth in Section20 of the
Credit Agreement, or at such address as either party may designate in writing to
the other.
12. GOVERNING LAW; CONSENT TO JURISDICTION. THIS GUARANTY IS INTENDED
TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT
REFERENCE TO CONFLICTS OF LAWS). The Guarantor agrees that any suit for the
enforcement of this Guaranty may be brought in the courts of the Commonwealth of
Massachusetts or any federal court sitting therein and consents to the
nonexclusive jurisdiction of such court and to service of process in any such
suit being made upon the Guarantor by mail at the address specified by reference
inSection11. The Guarantor hereby waives any objecTION that it may now or
hereafter have to the venue of any such suit or any such court or that such suit
was brought in an inconvenient court.
13. WAIVER TO JURY TRIAL. THE GUARANTOR HEREBY WAIVES ITS RIGHT TO A
JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS GUARANTY, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE
PERFORMANCE OF ANY OF SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law,
the Guarantor hereby waives any right which it may have to claim or recover in
any litigation referred to in the preceding sentence any special, exemplary,
punitive or consequential damages or any damages other than, or in addition to,
actual damages. The Guarantor (i) certifies that neither any of the Agents,
either of the Issuing Banks or any Bank nor any representative, agent or
attorney of any of the Agents, either of the Issuing Banks or any Bank has
represented, expressly or otherwise, that any of the Agents, either of the
Issuing Banks or any Bank would not, in the event of litigation, seek to enforce
the foregoing waivers and (ii) acknowledges that, in entering into the Credit
Agreement and the other Loan Documents to which any Agent, either Issuing Bank
or any Bank is a party, each of the Agents, the Issuing Banks and the Banks are
relying upon, among other things, the waivers and certifications contained in
this Section13.
14. MISCELLANEOUS. This Guaranty constitutes the entire agreement of
the Guarantor with respect to the matters set forth herein. The rights and
remedies herein provided are cumulative and not exclusive of any remedies
provided by law or any other agreement, and this Guaranty shall be in addition
to any other guaranty of or collateral security for any of the Obligations. The
invalidity or unenforceability of any one or more sections of this Guaranty
shall not affect the validity or enforceability of its remaining provisions.
Captions are for the ease of reference only and shall not affect the meaning of
the relevant provisions. The meanings of all defined terms used in this Guaranty
shall be equally applicable to the singular and plural forms of the terms
defined.
<PAGE> 104
-6-
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
executed and delivered as of the date first above written.
CDM CORP.
By:
---------------------------------------
Title:
<PAGE> 105
SCHEDULE 1
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<TABLE>
<CAPTION>
DOMESTIC AND LIBOR PORTION OF COMMITMENT
BANK LENDING OFFICES COMMITMENT TERM LOAN PERCENTAGE
---- ------------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
The First National Bank 100 Federal Street $21,600,000 $5,400,000 18.00000%
of Boston Boston, MA 02110
Attn.: Mitchell Feldman
Telephone: 617-434-5760
Telecopier: 617-434-0637
The First National Bank One First National Plaza, $21,600,000 $5,400,000 18.00000%
of Chicago Mail Suite 0086
Chicago, IL 60670-5086
Attn.: John Runger
Telephone: 312-732-7101
Telecopier: 312-732-1117
Deutsche Bank AG, New York 31 West 52nd Street $18,400,000 $4,600,000 15.33333%
Branch and/or Cayman Islands New York, NY 10019
Branch Attn: Otho Kerr
Telephone: 212-469-7039
Telecopier: 212-469-7936
Fleet National Bank One Federal Street $18,400,000 $4,600,000 15.33333%
Third Floor
Boston, MA 02110
Attn: Gerry Sheehan
Telephone: 617-346-0609
Telecopier: 617-346-0580
</TABLE>
<PAGE> 1
EXHIBIT 23.1
------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in amendment number 3 to the Registration Statement
on Form S-1 (File 333-4427) of our reports dated May 14, 1996 (except for Note 1
for which the date is June 25, 1996), on our audits of the combined financial
statements and financial statement schedule of Chadwick's of Boston, Ltd. We
also consent to the reference to our firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
July 29, 1996
