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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL QUARTER ENDED MAY 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-26772
COLDWATER CREEK INC.
(Exact name of registrant as specified in its charter)
DELAWARE 82-0419266
(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
ONE COLDWATER CREEK DRIVE, SANDPOINT, IDAHO 83864
(Address of principal executive offices)
(208) 263-2266
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Class Shares outstanding as of May 30, 1998
----------------------------- -------------------------------------
Common Stock ($.01 par value) 10,137,768
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<PAGE>
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
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<S> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets at May 30, 1998 and February 28, 1998......... 4
Consolidated Statements of Operations for the three month periods ended
May 30, 1998 and May 31, 1997........................................... 5
Consolidated Statements of Cash Flows for the three month periods ended
May 30, 1998 and May 31, 1997........................................... 6
Notes to Consolidated Financial Statements................................ 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................... 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk....... 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................ 16
Item 2. Changes in Securities and Use of Proceeds........................ 16
Item 3. Defaults Upon Senior Securities.................................. 16
Item 4. Submission of Matters to a Vote of Security Holders.............. 16
Item 5. Other Information................................................ 17
Item 6. Exhibits and Reports on Form 8-K................................. 17
</TABLE>
The following discussion may contain forward-looking statements that involve
risks and uncertainties. When used in this discussion, the words "anticipate,"
"believe," "estimate," "expect," and similar expressions as they relate to the
Company or its management are intended to identify such forward-looking
statements. The Company's actual results, performance or achievements could
differ materially from the results expressed in, or implied by, these forward-
looking statements. Factors that could cause or contribute to such differences
include, among others, the following: general economic and business conditions;
competition; success of operating initiatives; development and operating costs;
advertising and promotional efforts; brand awareness; the existence or absence
of adverse publicity; catalog response rates, merchandise return rates;
availability, locations and terms of sites for store development; changes in
business strategy or development plans; quality of management; availability,
terms and deployment of capital; business abilities and judgment of personnel;
availability of qualified personnel; labor and employee benefit costs; and risks
inherent in the construction and financing of new facilities; as well as those
factors discussed elsewhere in this Form 10-Q and the Company's latest Annual
Report on Form 10-K.
2
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PART I. FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
3
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COLDWATER CREEK INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
May 30, February 28,
1998 1998
-------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 372 $ 331
Receivables 5,104 4,019
Inventories 55,736 53,051
Prepaid expenses 2,100 2,729
Prepaid catalog costs 2,498 2,794
-------- -------
Total current assets 65,810 62,924
Deferred catalog costs 5,449 7,020
Property and equipment, net of accumulated depreciation 29,051 26,661
Executive loans 1,620 1,620
-------- -------
Total assets $101,930 $98,225
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving line of credit $ 18,147 $10,264
Accounts payable 20,712 27,275
Accrued liabilities 12,222 10,517
Deferred income taxes 725 919
-------- -------
Total current liabilities 51,806 48,975
Deferred income taxes 415 375
-------- -------
Total liabilities 52,221 49,350
-------- -------
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 1,000,000 shares
authorized, none issued and outstanding - -
Common stock, $.01 par value, 15,000,000 shares
authorized, 10,137,768 and 10,120,118 issued and
outstanding, respectively 101 101
Additional paid-in capital 38,879 38,748
Retained earnings 10,729 10,026
-------- -------
Total stockholders' equity 49,709 48,875
-------- -------
Total liabilities and stockholders' equity $101,930 $98,225
======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
COLDWATER CREEK INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
-------------------
May 30, May 31,
1998 1997
------- -------
<S> <C> <C>
Net sales $79,937 $51,002
Cost of sales 38,125 24,337
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Gross profit 41,812 26,665
Selling, general and administrative expenses 40,390 23,374
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Income from operations 1,422 3,291
Interest, net, and other 247 (136)
------- -------
Income before provision for income taxes 1,175 3,427
Provision for income taxes 472 1,354
------- -------
Net income 703 2,073
======= =======
Net income per share - Basic $ 0.07 $ 0.20
======= =======
Net income per share - Diluted $ 0.07 $ 0.20
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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COLDWATER CREEK INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
-------------------
May 30, May 31,
1998 1997
------- -------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 703 $ 2,073
Noncash items:
Depreciation 1,249 849
Deferred income tax provision (154) 201
Net change in current assets and liabilities:
Receivables (1,085) 619
Inventories (2,685) (274)
Prepaid expenses 629 (783)
Prepaid catalog costs 296 719
Accounts payable (6,563) (3,556)
Accrued liabilities 1,705 2,521
Income taxes payable - 564
Decrease in deferred catalog costs 1,571 469
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Net cash (used in) provided by operating activities $(4,334) $ 3,402
------- -------
INVESTING ACTIVITIES:
Purchase of short-term investments $ - $(4,903)
Purchase of property and equipment (3,639) (2,709)
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Net cash used in investing activities $(3,639) $(7,612)
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FINANCING ACTIVITIES:
Payments on capital leases $ - $ (42)
Net advances under revolving line of credit 7,883 -
Proceeds from exercises of stock options 131 -
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Net cash provided by (used in) financing activities $ 8,014 $ (42)
------- -------
Net increase (decrease) in cash and
cash equivalents 41 (4,252)
Cash and cash equivalents, beginning 331 9,095
------- -------
Cash and cash equivalents, ending $ 372 $ 4,843
======= =======
SUPPLEMENTAL CASH FLOW DATA:
Cash paid for interest $ 194 $ -
Cash paid for income taxes - -
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
COLDWATER CREEK INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated financial statements included herein have been
prepared by Coldwater Creek Inc. (the "Company"), without audit, pursuant to the
rules and regulations of the United States Securities and Exchange Commission,
and in the opinion of management, contain all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly the Company's
financial position, results of operations and cash flows for the periods
presented. Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. The results of operations for the
interim periods disclosed within this report are not necessarily indicative of
future financial results. These consolidated financial statements are condensed
and should be read in conjunction with the consolidated financial statements and
the notes thereto included in the Company's latest Annual Report on Form 10-K,
which includes consolidated financial statements for the fiscal year ended
February 28, 1998.
References to a fiscal year refer to the calendar year in which such fiscal
year commenced. The Company's fiscal year ends on the Saturday closest to
February 28. References to three month periods refer to the thirteen weeks ended
on the date indicated.
2. RECLASSIFICATIONS
Certain amounts in the prior period consolidated financial statements have
been reclassified to be consistent with the current period presentation.
3. RECENTLY ISSUED ACCOUNTING STANDARDS NOT YET ADOPTED
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use ("SOP 98-1"). Under the
provisions of SOP 98-1, software development is divided into three phases: the
preliminary project stage, which includes conceptual formulation and selection
of alternatives; the application development stage, which includes design of
chosen path, coding, installation of hardware and testing; and the post-
implementation/operation stage, which includes training and application
maintenance. Generally, only internal and external costs incurred during the
second phase, application development stage, are capitalizable with the
exception of data conversion and training costs, which, when incurred during
this phase, are to be expensed. SOP 98-1 is effective for the Company's fiscal
1999 financial statements. Management does not expect this standard to have a
significant impact on the Company's consolidated financial statements.
In April 1998, the AICPA issued Statement of Position 98-5, "Reporting on
the Costs of Start-up Activities" ("SOP 98-5"). SOP 98-5 requires that the
costs of start-up activities, including organizational costs, be expensed as
incurred and is effective for the Company's fiscal 1999 financial statements.
Management does not expect this standard to have a significant impact on the
Company's consolidated financial statements.
7
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COLDWATER CREEK INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. EXECUTIVE LOAN PROGRAM
Effective June 30, 1997, the Company established an Executive Loan Program
under which the Company may make, at its sole discretion and with prior
approvals from the Chief Executive Officer and the Board of Directors'
Compensation Committee, secured long-term loans to key executives. Each loan is
secured by the executive's personal net assets, inclusive of all vested stock
options in the Company, bears interest at three percent per annum, and becomes
due and payable on the earlier of (i) the date ten days before the date on which
the vested stock options serving as partial security expire or (ii) ninety days
from the date on which the executive's employment with the Company terminates
for any reason. If material, compensation expense is recognized by the Company
for the difference between the stated interest rate and the prevailing prime
rate.
5. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 128, "Earnings Per Share". The statement
supersedes Accounting Principles Board Opinion No. 15, "Earnings Per Share," and
revises the computation and presentation of earnings per share. Basic earnings
per share, which replaces primary earnings per share, excludes dilution and is
computed by dividing net income by the weighted average number of common shares
outstanding for the period. Diluted earnings per share, which replaces fully
diluted earnings per share, reflects the potential dilution that could occur if
securities or other contracts to issue common stock (e.g., stock options) were
exercised or converted into common stock. As required by the new standard, all
previously reported amounts have been restated.
The following is a reconciliation of net income and the number of common
shares used in the computations of net income per basic and diluted share (in
thousands):
<TABLE>
<CAPTION>
Fiscal Quarters Ended
--------------------------
May 30, May 31,
1998 1997
------------ --------
<S> <C> <C>
Net income $ 703 $ 2,073
======= =======
Average shares outstanding used to determine net income
per basic common share 10,132 10,120
Net effect of dilutive stock options based on the treasury
stock method using average market price (1) 500 281
------- -------
Average shares used to determine net income per diluted
common share 10,632 10,401
======= =======
</TABLE>
(1) Anti-dilutive stock options excluded from the above computations were
241,692 and 17,900 for the fiscal 1998 and 1997 quarters, respectively.
8
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COLDWATER CREEK INC. AND SUBSIDIARY
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
6. SUBSEQUENT EVENTS
On June 12, 1998, the Company executed a definitive operating lease
agreement with the Wood County Development Authority to establish a second
distribution facility to be located in Parkersburg, West Virginia. The Company
will recognize annual lease expense of approximately $2.3 million over the
twenty year lease term. The lease allows the Company, at its option, to (i)
purchase the underlying land and facility at a then determined fair market value
or (ii) exercise up to four successive five-year extensions.
In connection with the execution of the above operating lease, First
Security Bank, N.A. issued a $2.6 million irrevocable standby letter of credit
on the Company's behalf to the Wood County Development Authority. This letter of
credit, which is over and beyond the letter of credit sub-facility described
below, reduces by $500,000 per annum and automatically terminates on June 29,
2003.
On June 29, 1998, the Company executed a credit agreement with First
Security Bank, N.A., a major Northwest commercial bank. The agreement provides
for an unsecured revolving line of credit allowing the Company to borrow up to
$47.4 million, less letter of credit amounts outstanding or unreimbursed under a
$7.0 million sub-facility, at an interest rate, at the option of the Company,
which is the bank's Prime Rate or Adjusted LIBOR [i.e., rate per annum equal to
the quotient of the London Interbank Offered Rate divided by one (1) minus the
Eurocurrency Reserve Requirement for the applicable Interest Period, rounded
upward, if necessary, to the nearest one-sixteenth of one percent], increased or
decreased by a margin based upon the Company's then EBITDA Coverage Ratio, as
defined. The agreement provides that the Company must maintain certain specified
minimum EBITDA, leverage and current ratios and places restrictions on asset
sales, mergers, debt, dividends, investments, guarantees and other items. The
new credit facility, which replaced the Company's $35.0 million credit facility
with US Bank, has a maturity date of July 31, 2001.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This Form 10-Q contains certain forward-looking statements within the
meaning of the federal securities laws. Actual results and the timing of certain
events could differ materially from those projected in the forward-looking
statements due to a number of factors. See Index to Form 10-Q for a more
detailed description.
GENERAL
Coldwater Creek Inc. is a specialty direct mail retailer of apparel, gifts,
jewelry and home furnishings. The Company markets its merchandise primarily
through four distinct catalogs. NORTHCOUNTRY, which was introduced in 1985, is
the Company's core catalog and features casual, comfortable apparel, hard-to-
find jewelry, distinctive artwork, gifts and items for the home. The Company's
premium catalog for women, SPIRIT OF THE WEST, was introduced in the Fall of
1993 and features fashionable, upscale apparel and hard-to-find jewelry and
accessories. Created in the Spring of 1996, MILEPOST FOUR features upscale, yet
relaxed, natural-fiber men's clothing. In response to customer demand for
selected, upscale bed and bath products periodically featured in Northcountry
and Spirit of the West, the Company introduced its BED & BATH catalog in August
of 1997.
Also, as part of the Company's brand building strategy, the Company
operates a unique complex of catalog-themed retail stores in Sandpoint, Idaho.
As a continuation of this strategy, the Company opened a similar complex in
Jackson Hole, Wyoming during June of 1997.
In analyzing the Company's financial position, results of operations, and
cash flows, it should be noted that the Company has experienced, and will
continue to experience, seasonal fluctuations in its sales and operating results
as is typical for many specialty retailers. In past fiscal years, the Company's
net sales and profits have been heavily reliant on the November and December
holiday season. Management believes that this seasonality will continue in the
future although to a lesser degree as a result of the increased representation
of apparel within the Company's overall merchandise mix.
In anticipation of the increased sales activity expected during November
and December, the Company incurs certain significant additional expenses,
including the hiring of a substantial number of temporary employees to
supplement its permanent, full time staff. In addition, due to the larger
percentage of gifts and accessories offered in the second half of the fiscal
year related to holiday gift giving, the Company expects higher gross margins in
the second half of the fiscal year than in the first half. If, for any reason,
the Company's net sales were to fall below its expectations during November and
December, the Company's financial condition, results of operations and cash
flows would be adversely affected.
It should be further noted that the Company's revenues and results of
operations have fluctuated, and are likely to continue to fluctuate, on a
quarterly basis as a result of a number of other factors including, among other
things, the timing of new merchandise and catalog offerings, recognition of
costs or net sales contributed by new merchandise and catalog offerings,
fluctuations in response rates, fluctuations in paper, production and postage
costs and expenses, merchandise returns, adverse weather conditions that affect
distribution or shipping, shifts in the timing of holidays and changes in the
Company's merchandise mix.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
RESULTS OF OPERATIONS
The following table sets forth certain information regarding the Company's
costs and expenses expressed as a percentage of net sales:
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
May 30, May 31,
(as a percentage of net sales) 1998 1997
-------- -------
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales 47.7 47.7
------ -----
Gross profit 52.3 52.3
Selling, general and administrative expenses 50.5 45.8
------ -----
Income from operations 1.8 6.5
Interest, net, and other 0.3 (0.2)
------ -----
Income before provision for income taxes 1.5 6.7
Provision for income taxes 0.6 2.6
------ -----
Net income 0.9% 4.1%
====== =====
</TABLE>
Net sales increased by $28.9 million, or 56.7%, to $79.9 million for the
fiscal quarter ended May 30, 1998 ("the fiscal 1998 quarter") from $51.0 million
during the fiscal quarter ended May 31, 1997 ("the fiscal 1997 quarter"). The
increase primarily is attributable to continuing increases in the circulation of
and resulting order volume from the Company's Northcountry and Spirit of the
West catalogs, and to a lesser extent, the Company's Milepost Four and Bed &
Bath catalogs. Customer response to catalogs mailed achieved management's
expectations, which incorporated downward volume revisions for Spirit of the
West. The revised estimates established for Spirit of the West reflected
modified response rate projections and increased circulation designed to clear
excess stocks created by the previously reported softness in Sprit of the West
response rates. Total catalog mailings were 50.2 million during the three
months ended May 30, 1998 reflecting an increase of approximately 101.6% from
the 24.9 million catalogs mailed during the comparable period in fiscal 1997.
The investment made by the Company in increased catalog mailings resulted
in the active customer file, comprised of customers who have made a purchase in
the preceding twelve months, increasing to 1.7 million at May 30, 1998 from 1.6
million at February 28, 1998 and 1.3 million at May 31, 1997. The Company's
proprietary mailing list increased to 5.9 million names at May 30, 1998 from 5.4
million names at February 28, 1998 and 3.7 million names at May 31, 1997.
Gross profit increased $15.1 million, or 56.8%, to $41.8 million during the
fiscal 1998 quarter from $26.7 million during the fiscal 1997 quarter.
Expressed as a percentage of net sales, the Company's gross profit was 52.3% for
the first quarters of fiscal 1998 and 1997.
Selling, general and administrative expenses primarily consist of
marketing, distribution and general and administrative expenses. Marketing
expenses primarily consist of catalog production and postage costs. Production
costs primarily consist of paper, printing, computer services and list rental
costs (net of list rental revenue). Selling, general and administrative
expenses increased by $17.0 million, or 72.8%, to $40.4 million during the
fiscal 1998 quarter from $23.4 million in the fiscal 1997 quarter. Selling,
general and administrative expenses increased as a percentage of net sales to
50.5% for the fiscal 1998 quarter compared to 45.8% for the fiscal 1997 quarter.
The increase in selling, general and administrative expenses primarily is
attributable to circulation costs incurred in connection with increased catalog
mailings, particularly the additional Spirit of the West mailings referenced
above. To a lesser extent, continuing infrastructure investments made to
support the Company's anticipated growth also
11
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
contributed to the increase in selling, general and administrative expenses.
The growth in selling, general and administrative expenses as a percentage of
net sales primarily reflects the increase in catalog circulation associated with
the overall Spirit of the West performance, partially offset by the continued
overall leveraging of infrastructure costs.
As a result of the foregoing, operating income decreased by $1.9 million,
or 56.8%, to $1.4 million for the fiscal 1998 quarter from $3.3 million for the
fiscal 1997 quarter. Expressed as a percentage of net sales, operating income
was 1.8% for the fiscal 1998 quarter, versus 6.5% in the fiscal 1997 quarter.
The Company realized net income of $0.7 million for the fiscal 1998 quarter
versus net income of $2.1 million for the fiscal 1997 quarter. After restating
the fiscal 1997 quarter for the required implementation of Statement of
Financial Accounting Standard No. 128 "Earnings Per Share", this equates to net
income per basic and diluted share of $0.07 for the fiscal 1998 quarter, versus
net income per basic and diluted share of $0.20 for the fiscal 1997 quarter.
LIQUIDITY AND CAPITAL RESOURCES
Coldwater Creek has historically funded its growth through a combination of
funds generated from operations and short-term bank credit facilities. Working
capital requirements generally precede the realization of sales. The Company
draws on its working capital lines to produce catalogs and increase inventory
levels in anticipation of future sales realization. In addition, the Company
regularly relies on standard trade credit arrangements in purchasing inventory
and services. These arrangements typically require the net amount due to be
paid within sixty days of receipt.
During the three months ended May 30, 1998, operating activities consumed
$4.3 million while financing activities provided $8.0 million. In contrast,
during the three months ended May 31, 1997, operating activities provided $3.4
million while financing activities consumed a nominal amount. The current
period primarily reflects the Company's lower net income and its partial
financing of accounts payable, and to a lesser extent, receivables and inventory
with advances from its revolving line of credit. As a consequence, the Company
had $18.1 million outstanding under its revolving lines of credit at May 30,
1998 compared to $10.3 million outstanding at February 28, 1998. No amounts
were outstanding at May 31, 1997 as the Company continued to have net proceeds
from its January 1997 initial public offering of common stock available to fund
working capital needs.
On June 29, 1998, the Company executed a credit agreement with First
Security Bank, N.A., a major Northwest commercial bank. The agreement provides
for an unsecured revolving line of credit allowing the Company to borrow up to
$47.4 million, less letter of credit amounts outstanding or unreimbursed under a
$7.0 million sub-facility, at an interest rate, at the option of the Company,
which is the bank's Prime Rate or Adjusted LIBOR [i.e., rate per annum equal to
the quotient of the London Interbank Offered Rate divided by one (1) minus the
Eurocurrency Reserve Requirement for the applicable Interest Period, rounded
upward, if necessary, to the nearest one-sixteenth of one percent], increased or
decreased by a margin based upon the Company's then EBITDA Coverage Ratio, as
defined. The agreement provides that the Company must maintain certain specified
minimum EBITDA, leverage and current ratios and places restrictions on asset
sales, mergers, debt, dividends, investments, guarantees and other items. The
new credit facility, which replaced the Company's $35.0 million credit facility
with US Bank, has a maturity date of July 31, 2001.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
In connection with the execution of the Parkersburg Distribution Center
operating lease discussed below, First Security Bank, N.A. issued a $2.6 million
irrevocable standby letter of credit on the Company's behalf to the Wood County
Development Authority. This letter of credit, which is over and beyond the
letter of credit sub-facility described above, reduces by $500,000 per annum and
automatically terminates on June 29, 2003.
Investing activities used $3.6 million during the three months ended May
30, 1998, versus $7.6 million during the three months ended May 31, 1997. The
above amounts include purchases of property and equipment totaling $3.6 million
and $2.7 million during the respective fiscal 1998 and 1997 quarters. The
current period primarily reflects material handling and information systems for
the second distribution center discussed below, and to a lesser degree, hardware
and software upgrades to the Company's corporate systems and leasehold
improvements to outlet stores. The Company also invested $4.9 million of the net
initial public offering proceeds in short-term investments during the fiscal
1997 quarter.
The Company's fulfillment center in Sandpoint, Idaho is currently operating
near capacity. Additionally, a majority of the Company's net revenues are
generated from customers residing in the eastern United States. As a result,
the Company currently realizes certain operating inefficiencies and incremental
shipping costs in fulfilling the majority of its customer orders. Therefore,
the Company executed a definitive operating lease agreement on June 12, 1998
with the Wood County Development Authority to establish its planned second
distribution facility in Parkersburg, West Virginia. The new distribution center
will approximate 590,000 square feet and be situated on approximately 60 acres.
It is anticipated that the new fulfillment center will commence operations in
the Summer of 1999. The Company will recognize annual lease expense of
approximately $2.3 million over the twenty year lease term. The lease allows
the Company, at its option, to (i) purchase the underlying land and facility at
a then determined fair market value or (ii) exercise up to four successive five-
year extensions. The nature, cost and manner of financing the required
machinery and equipment components are continuing to be evaluated by management.
In exchange for the Company's willingness to explore the possibility of
establishing a long-term presence, the State of West Virginia agreed to provide
the Company with, at a nominal annual lease cost, a temporary 120,000 square
foot facility in the Parkersburg area from which the Company can conduct
fulfillment operations until the long-term facility is constructed and
available. Construction of the temporary facility recently has been completed
and the Company is actively proceeding with the installation of the related
material handling and information systems, the substantial majority of which
will be subsequently transferred to the long-term distribution center when
completed. Fulfillment operations in the temporary facility are scheduled to
begin in July, 1998.
The Company is proceeding with the establishment of a planned third
customer service call center in Parkersburg, West Virginia by the Fall of 1998.
The Company recently executed an operating lease for approximately 20,000 square
feet of existing office space in Parkersburg for two years at an estimated
initial annual lease cost of $300,000. The cost of the required
telecommunications equipment and furnishings are not expected to be material.
The Company will consider building a long-term facility for its customer service
call center on the same site as the fulfillment center. The completion and
availability of any long-term facility would be planned to coincide with the
expiration of the above office space lease.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Management's long-term brand building strategy includes the selective
opening of highly visible retail stores in high traffic areas, including
"destination locations" such as locations near major national parks or other
resort areas. Consistent with such strategy, the Company opened a retail store
complex in Jackson Hole, Wyoming in June of 1997. Management will continue to
consider the opening of similarly situated retail stores in the future as prime
locations become available. It is contemplated that each such retail store
would be leased with the initial cash investment per store being limited to
leasehold improvements and inventory in the approximate range of $2 million to
$4 million.
As an integral part of management's planned strategy for efficiently
liquidating merchandise overstocks, the Company's wholly-owned subsidiary,
Coldwater Creek Outlet Stores Inc., opened an outlet store in Seaside, Oregon in
April of 1997. As a continuation of this strategy, the Company's subsidiary
subsequently opened additional outlet stores in Lee, Massachusetts; Kittery,
Maine; Birch Run, Michigan; Bend, Oregon; and Pasco, Washington. The
subsidiary's management currently plans to open approximately four additional
outlet stores throughout the United States during the remainder of fiscal 1998.
It is contemplated that each such store would be leased with the initial cash
investment per store being limited to approximately $50,000 to $100,000 in
leasehold improvements.
The Company believes that cash flow from operations and borrowing capacity
under its credit facilities will be sufficient to support operations and future
growth for the foreseeable future. Thereafter, the Company may be required to
seek additional sources of funds for continued or accelerated growth and there
can be no assurance that such funds will be available on satisfactory terms.
Failure to obtain such financing could delay or prevent the Company's planned
growth, which could adversely affect the Company's business, financial position,
results of operations and cash flows.
OTHER MATTERS
Year 2000 Compliance
Coldwater Creek remains engaged in an enterprise-wide Year 2000 project.
The project leader coordinates a team that includes representatives from every
department. A comprehensive project plan that defines each objective and task
in detail currently is being finalized and prospectively will guide the team in
its efforts.
The Company does not sell any products that must be brought into Year 2000
compliance. However, the Company does rely upon many vendors and suppliers for
their products and services. The Company will evaluate key vendor preparedness,
as well as its own, by conducting interviews, obtaining compliance
representation letters, and when deemed necessary, conducting comprehensive
tests. Such vendors will include, in addition to significant merchandise
vendors, providers of hardware and software computing products,
telecommunication systems and components, facilities and related systems, and
office equipment. Although most of the Company's major systems are supplied by
third-party vendors who bear the financial burden of bringing such systems into
compliance, the Company's project team will maintain an active dialog with these
vendors to ensure the adequacy and timeliness of required modifications.
14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
OTHER MATTERS (CONTINUED)
The Company expects to complete the project and related evaluations,
including development of contingency plans to manage areas of high identified
risk, by April 1999. The Company currently is in the process of finalizing its
estimate of the total project cost but expects such amount to be immaterial to
the Company's financial position, results of operations and cash flows.
Recently Issued Accounting Standards Not Yet Adopted
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use ("SOP 98-1"). Under
the provisions of SOP 98-1, software development is divided into three phases:
the preliminary project stage, which includes conceptual formulation and
selection of alternatives; the application development stage, which includes
design of chosen path, coding, installation of hardware and testing; and the
post-implementation/operation stage, which includes training and application
maintenance. Generally, only internal and external costs incurred during the
second phase, application development stage, are capitalizable with the
exception of data conversion and training costs, which, when incurred during
this phases, are to be expensed. SOP 98-1 is effective for financial statements
of fiscal years beginning after December 15, 1998. Management does not expect
this standard to have a significant impact on the Company'' consolidated
financial statements.
In April 1998, the AICPA issued Statement of Position 98-5, "Reporting on
the Costs of Start-up Activities" ("SOP 98-5"). SOP 98-5 requires that the
costs of start-up activities, including organizational costs, be expensed as
incurred and is effective for financial statements of fiscal years beginning
after December 15, 1998. Management does not expect this standard to have a
significant impact on the Company'' consolidated financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
15
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
There are no material legal proceedings presently pending to which Coldwater
Creek Inc. or its subsidiary is a party or of which any of their properties are
the subject.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On January 27, 1997, a Registration Statement on Form S-1 (No. 333-16651 ) was
declared effective by the United States Securities and Exchange Commission,
pursuant to which 2,875,000 shares of the Company's common stock were offered
and sold for the account of the Company at a price of $15.00 per share,
generating gross offering proceeds of $43,125,000. The managing underwriters
were Montgomery Securities and William Blair & Company.
In connection with the offering, the Company incurred $3,019,000 in underwriting
discounts and commissions, and $1,330,000 in other related expenses. The net
proceeds of the offering, after deducting the foregoing expenses, were
$38,776,000.
The net proceeds from the offering were used as follows: (i) $18,429,000 in
earning distributions to the S-corporation shareholders, (ii) $7,645,000 to
repay outstanding indebtedness, $5,067,000 in short-term money market
investments and (iv) $7,645,000 as general working capital.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of Coldwater Creek Inc. (the Company) was
held on July 11, 1998. At such meeting, the following proposals were voted upon
and approved:
1. Proposal No.1: To elect to the Board one director.
For Withhold
--- --------
Michelle Collins 7,602,668 0
2. Proposal No.2: Approve a series of amendments to the Company's 1996
Stock Option/Stock Issuance Plan ("1996 Plan"), including a 350,000-share
increase in the number of Common Stock authorized for issuance under the
1996 Plan.
For Against Abstain
--- ------- -------
7,345,847 256,621 200
3. Proposal No.3: Ratify the selection of Arthur Andersen LLP as
independent public accountants for the Company for the fiscal year ending
February 27, 1999.
For Against Abstain
--- ------- -------
7,602,688 0 0
16
<PAGE>
PART II (CONTINUED)
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
NUMBER DESCRIPTION OF DOCUMENT
- ------------------------------
3.1 * Amended and Restate Certificate of Incorporation
3.2 * Bylaws
4.1 * Specimen of Stock Certificate
10.1.1 * Form of Indemnity Agreement between the Registrant and each of its
Directors
10.1.2 * Form of Agreement for Distribution of Retained Earnings and Tax
Indemnification between the Company and Dennis and Ann Pence
10.1.3 * Lease to Coeur d'Alene Call Facility
10.1.4 * Lease to Cedar Street Bridge Store
10.1.5 * Lease to Jackson Hole Retail Store
10.1.6 * Loan Agreement dated September 9, 1996 between the Company and U.S.
Bank of Idaho, formerly West One Bank, Idaho
10.1.7 * Credit Agreement with MBNA America
10.1.8 * Seaside Lease Agreement
10.2 * 1996 Stock Option/Stock Issuance Plan
10.2.1 * Form of Stock Option Agreement under 1996 Stock Option/Stock Issuance
Plan
10.2.2 * 1997 Employee Stock Purchase Plan
10.2.3 * Form of Executive Loan Agreement
10.3 Parkersburg Distribution Center Operating Lease
10.4 Credit Agreement with First Security Bank, N.A.
24.1 * Power of Attorney (included on the signature page to S-1)
27.1 Financial Data Schedule
* Previously filed
There were no reports filed on Form 8-K during the three months ended May 30,
1998.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Sandpoint, State of
Idaho, on this 14th day of July 1998.
COLDWATER CREEK INC.
By: * Dennis Pence
-------------------------------------------
Dennis Pence
President, Chief Executive Officer
and Vice Chairman of the Board of Directors
Pursuant to the requirements of the Securities Act of 1934, this report has been
signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Dennis Pence President, Chief Executive Officer, Vice July 14, 1998
- -------------------------------------- Chairman of the Board of Directors, and
Dennis Pence Director
* Ann Pence Chairman of the Board of Directors, Creative July 14, 1998
- -------------------------------------- Director and Director
Ann Pence
* Donald Robson Chief Financial Officer, Vice President of July 14, 1998
- -------------------------------------- Finance and Administration, Treasurer and
Donald Robson Secretary (Principal Financial and
Accounting Officer)
* Robert H. McCall Director July 14, 1998
- --------------------------------------
Robert H. McCall
* Curt Hecker Director July 14, 1998
- --------------------------------------
Curt Hecker
* Michelle Collins Director July 14, 1998
- --------------------------------------
Michelle Collins
*By: /s/ Donald Robson Director July 14, 1998
---------------------------------
Donald Robson
(Attorney-in-fact)
</TABLE>
18
<PAGE>
EXHIBIT INDEX
3.1 * Amended and Restate Certificate of Incorporation
3.2 * Bylaws
4.1 * Specimen of Stock Certificate
10.1.1 * Form of Indemnity Agreement between the Registrant and each of its
Directors
10.1.2 * Form of Agreement for Distribution of Retained Earnings and Tax
Indemnification between the Company and Dennis and Ann Pence
10.1.3 * Lease to Coeur d'Alene Call Facility
10.1.4 * Lease to Cedar Street Bridge Store
10.1.5 * Lease to Jackson Hole Retail Store
10.1.6 * Loan Agreement dated September 9, 1996 between the Company and U.S.
Bank of Idaho, formerly West One Bank, Idaho
10.1.7 * Credit Agreement with MBNA America
10.1.8 * Seaside Lease Agreement
10.2 * 1996 Stock Option/Stock Issuance Plan
10.2.1 * Form of Stock Option Agreement under 1996 Stock Option/Stock Issuance
Plan
10.2.2 * 1997 Employee Stock Purchase Plan
10.2.3 * Form of Executive Loan Agreement
10.3 Parkersburg Distribution Center Operating Lease
10.4 Credit Agreement with First Security Bank, N.A.
24.1 * Power of Attorney (included on the signature page to S-1)
27.1 Financial Data Schedule
* Previously filed
<PAGE>
EXHIBIT 10.3
PARKERSBURG-WOOD COUNTY AREA DEVELOPMENT CORPORATION
and
COLDWATER CREEK, INC.
LEASE AGREEMENT
Dated as of June 12, 1998
(Distribution Center)
<PAGE>
THIS LEASE AGREEMENT dated as of June 12, 1998, is between the
Parkersburg-Wood County Area Development Corporation, a not for profit
corporation duly organized and validly existing under the laws of the State of
West Virginia, having its office at 408 Juliana Street, Parkersburg, West
Virginia 26102 (the "Lessor"), and Coldwater Creek, Inc., a for profit
corporation duly organized and validly existing under the laws of the State of
Delaware and authorized to do business in the State of West Virginia, having its
principal office at One Coldwater Creek Drive, Sandpoint, Idaho 83864 (the
"Lessee"):
RECITALS
WHEREAS, Lessor is a not-for-profit corporation organized for the
purpose of and operating exclusively for the promotion of social welfare,
including the promotion, encouragement and development of commercial enterprises
in Wood County, West Virginia;
WHEREAS, Lessee operates an international mail-order catalog business
and desires to locate a merchandise distribution facility and a call center in
Wood County, West Virginia;
WHEREAS, the Lessor, in accordance with its purpose of promoting the
social welfare of the citizens of Wood County, West Virginia, presently desires
to build a merchandise distribution facility to lease to Lessee, with the option
to expand the facility during the lease term with the addition of a call center;
WHEREAS, Lessor holds title to certain real property of approximately
60 acres located in the Parkersburg Business Park (hereinafter, the "Park"),
Parkersburg, Wood County, West Virginia (hereinafter, the "Site"), which is well
suited for the construction of the merchandise distribution facility;
WHEREAS, at the commencement of the lease term, the leased premises
shall consist of the Site, the buildings and improvements, and the Fixtures to
be attached thereto, (the "Distribution Center") to be constructed to
accommodate the merchandise distribution operation of the Lessee in accordance
with the Plans and Specifications prepared by or at the direction of the Lessee
(the "Campus");
WHEREAS, the Lessor proposes to lease the Campus to the Lessee, and
the Lessee desires to rent the Campus from the Lessor, upon the terms and
conditions set forth in this Lease Agreement.
<PAGE>
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants of the parties herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Lessor hereby demises and lets to Lessee, and Lessee hereby takes from Lessor,
those certain premises herein defined and described as the "Campus" for the term
and upon the covenants, terms and conditions herein contained, the parties
hereto do hereby mutually agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1. Definitions. The following words and terms shall have
-----------
the following meanings unless the context otherwise requires:
"Alterations" shall mean alterations, modifications, additions,
improvements and betterments of any kind to the Campus other than the normal
day-to-day maintenance and repairs, including without limitation all additions
to the Campus after the Delivery Date made to attain completion.
"Campus" shall mean the Site, the Distribution Center constructed on
the Site by the Lessor and, when affixed to or incorporated into the
Distribution Center, the Fixtures, and leased to the Lessee as contemplated by
this Lease Agreement.
"Commencement Date" shall mean the date of this Lease Agreement.
"Construction Period" shall mean that period of time commencing as of
the Commencement Date and continuing to the Delivery Date during which the
Lessor constructs and equips the Campus.
"Cost of the Project" shall mean the total aggregate cost of the Site
and the construction and equipping of the Campus based upon the Plans and
Specifications as of the Commencement Date.
"County" shall mean Wood County, West Virginia.
"Delivery Date" shall mean the date on which the Campus is ready for
occupancy and the Lessee takes possession of the Campus and the Lessee delivers
the Certificate of Acceptance for the Campus to the Lessor substantially in the
form of Exhibit A attached hereto and made a part hereof.
"Expiration Date" shall mean the twentieth (20th) anniversary of the
Delivery Date.
"Fixtures" shall mean (i) all appliances, parts, instruments,
appurtenances, accessories and other miscellaneous equipment of whatever nature
which may from time to time be affixed to or incorporated in the Campus
including without limitation the equipment described in Schedule I hereto, as
the same may be amended from time to time by the parties hereto as circumstances
may require, and (ii) Replacement Parts.
"Hazardous Materials and Hazardous Substances" shall mean any
hazardous material or hazardous substances as defined by any federal or state
environmental law.
<PAGE>
"Lease Documents" shall mean this Lease Agreement and any other
instruments, agreements, certificates and documents necessary to consummate the
transactions contemplated in this Lease Agreement.
"Lease Term" shall mean the period beginning on the Delivery Date and
ending on the Expiration Date, unless the Lease shall have been terminated
earlier pursuant to the terms hereof.
"Lender" shall mean the entity or, collectively, the entities, who are
specified as parties to whom amounts are payable under the Notes.
"Lessor" shall mean the Parkersburg-Wood County Area Development
Corporation and its successors and assigns.
"Notes" shall mean the promissory notes which the Lessor will execute
and deliver for the financing of the Campus.
"Net Proceeds" shall mean the gross proceeds from any insurance
recovery or condemnation award remaining after payment of attorneys' fees, the
costs of reparations to the Site as may be required of Lessor by law, and all
other expenses incurred in the collection of such gross proceeds.
"Park" shall mean the Parkersburg Business Park, Parkersburg, West
Virginia.
"Parts" shall mean all appliances, parts, instruments, appurtenances,
accessories and other miscellaneous equipment of whatever nature, which may from
time to time be incorporated or installed in or attached to the Campus or the
Fixtures.
"Person" shall mean any individual, association, unincorporated
organization, corporation, partnership, joint venture, business trust or a
government, or an agent or a political subdivision thereof, or any other entity.
"Permitted Encumbrances" shall mean (i) this Lease Agreement, (ii)
liens granted to the Lender under the Notes, (iii) liens for taxes either not
yet delinquent or being contested by the Lessee in good faith with due diligence
and by appropriate proceedings (and for the payment of which adequate reserves
or appropriate bonding has been provided), but only if the nonpayment of any
such tax or the contest of any such payment in such proceedings does not
adversely affect the title, property or rights of Lessor or the Lender, (iv) any
contractors, materialmen, mechanics, workmen, repairmen, employees or other like
liens arising in the ordinary course of business of the Lessee and not
delinquent (and for the payment of which adequate reserves or appropriate
bonding has been provided), (v) those items set forth in Schedule B to the title
insurance commitment relating to the Site, (vi) liens, exclusive of any listed
in clauses (i) through (v) hereof, incurred in the ordinary course of business
including without limitation tangible personal property, office equipment or
furniture leases and security interests, liens and encumbrances relating to
procurement of utilities, cable television, other
<PAGE>
telecommunication equipment or component parts and supplies for the use in the
operations of the Lessee at the Site, and (vii) liens otherwise permitted, i.e.,
not expressly prohibited, under the terms of this Lease Agreement.
"Plans and Specifications" shall mean the plans and specifications for
construction of the Campus which the Lessee has provided to Lessor pursuant to
Section 4.1 hereof, and any changes thereto as provided for pursuant to Section
4.4 hereof.
"Replacement Parts" shall have the meaning set forth in Section 6.4
hereof
"Rent" shall mean the rent payable pursuant to Article V hereof.
"Rent Factor" shall mean that percentage which shall be agreed to by
the Lessor and the Lessee on the Commencement Date.
"Site" shall mean that certain parcel of real property of
approximately 60 total acres located in the Parkersburg Business Park,
Parkersburg, West Virginia, currently owned by the Lessor, as more completely
described in the Legal Description attached hereto as Exhibit B, and all
buildings and improvements now or hereafter situated thereon.
"State" shall mean the State of West Virginia.
"Supplement" shall mean any Lease Agreement supplemental to, and
authorized and executed pursuant to the terms of, this Lease Agreement.
"Total Project Cost" shall mean the total aggregate cost of real
property and the acquisition, construction and installation of the improvements
thereon in accordance with the Plans and Specifications for the Campus.
Section 1.2. Rules of Construction. The following rules shall apply
---------------------
to the construction of this Lease Agreement unless the context otherwise
requires:
(a) Singular words shall connote the plural number as well as the
singular and vice versa.
(b) Words importing the masculine, feminine or neutral gender shall
include any other gender.
(c) All references herein to particular articles or sections are
references to articles or sections of this Lease Agreement unless otherwise
indicated.
(d) The headings and table of contents herein are solely for
convenience of reference and shall not constitute a part of this Lease Agreement
nor shall they affect its meaning, construction or effect.
<PAGE>
ARTICLE II
REPRESENTATIONS AND COVENANTS
Section 2.1. Representations and Covenants of Lessor. The Lessor
---------------------------------------
makes the following representations and covenants as the basis for the
undertakings on its part herein contained:
(a) The Lessor is a not for profit corporation duly organized and
validly existing under the laws of the State of West Virginia, authorized to do
business in the State of West Virginia, in good standing under the laws of the
State of West Virginia and has the corporate power and authority to execute,
deliver and perform each of the Lease Documents to which it is a party. Each of
the Lease Documents to which Lessor is a party has been duly authorized,
executed and delivered by the Lessor, when appropriate.
(b) The Parkersburg-Wood County Area Development Corporation is an
organization which is exempt from federal income taxation under 26 U.S.C. (S)
501(c)(4) of the Internal Revenue Code of 1986, as amended, and annually
receives more than one half of its support from a combination of gifts, grants,
direct or indirect charitable contributions or membership fees.
(c) The Lessor holds good and marketable title to the Site and, upon
the Delivery Date, the Lessor under this Lease Agreement will hold good and
marketable title to the Campus including without limitation the Fixtures, all
pursuant to the Plans and Specifications, and will lease the Campus to the
Lessee pursuant to this Lease Agreement, all for the promotion of the social and
economic welfare of the County and the surrounding area.
(d) Neither the execution and delivery of any of the Lease Documents
to which Lessor is a party or the consummation of the transactions contemplated
thereby nor the fulfillment of or compliance with the provisions of any of the
Lease Documents to which Lessor is a party will conflict with or result in a
breach of the Lessor's Articles of Incorporation or By-laws, as amended, or of
any corporate restriction or any agreement or instrument to which the Lessor is
a party or by which it is bound, or result in the creation or imposition of any
lien of any nature upon any property of the Lessor under the terms of any such
Articles of Incorporation, By-laws, restriction, agreement or instrument, except
for Permitted Encumbrances.
(e) No litigation, inquiry or investigation of any kind in or by any
judicial or administrative court or agency is pending or, to its knowledge,
threatened against the Lessor with respect to (i) the existence of the Lessor,
(ii) its authority to execute or deliver this Lease Agreement or the Lease
Documents, (iii) the validity or enforceability of the Lease Documents or the
transactions contemplated hereby or thereby, or (iv) the title of any officer of
the Lessor who executed the Lease Documents. No such authority
<PAGE>
or proceedings have been repealed, revoked, rescinded or amended and all are in
full force and effect.
(f) Each of the Lease Documents executed and delivered by Lessor
constitutes a legal, valid and binding obligation of the Lessor enforceable
against the Lessor in accordance with its terms.
(g) The Parkersburg-Wood County Area Development Corporation shall not
realize any profit or income from the transactions contemplated under this Lease
Agreement, except to the extent allowable under the laws and regulations of the
Internal Revenue Service necessary to maintain the Parkersburg-Wood County Area
Development Corporation's exemption from federal income taxation under the 26
U.S.C. (S) 501(c)(4) of the Internal Revenue Code of 1986, as amended, and only
to the extent that such profit or income shall not be considered unrelated
business income as such term is defined under the laws and regulation of the
Internal Revenue Service.
(h) The Lessor shall exercise its best efforts to utilize grant
dollars from the City of Parkersburg for Site acquisition during the
Construction Period as such grant dollars become available during the
Construction Period.
Section 2.2. Representations and Covenants of Lessee. The Lessee
---------------------------------------
makes the following representations and covenants as the basis for the
undertakings on its part herein contained:
(a) The Lessee is a for-profit business corporation duly organized and
validly existing under the laws of the State of Delaware, authorized to do
business in the State of West Virginia, in good standing under the laws of the
State of West Virginia and has the corporate power and authority to execute,
deliver and perform each of the Lease Documents to which it is a party. Each of
the Lease Documents to which Lessee is a party has been duly authorized,
executed and delivered by the Lessee, when appropriate.
(b) Neither the execution and delivery of any of the Lease Documents
to which Lessee is a party or the consummation of the transactions contemplated
thereby nor the fulfillment of or compliance with the provisions of any of the
Lease Documents to which Lessee is a party will conflict with or result in a
breach of or constitute a default under any of the terms, conditions or
provisions of the Lessee's Articles of Incorporation, By-laws, as amended, or
any corporate restriction or any agreement or instrument to which the Lessee is
a party or by which it is bound, or result in the creation or imposition of any
lien of any nature upon any of the property of the Lessee under the terms of any
such Articles of Incorporation, By-laws, restriction, agreement or instrument,
except for Permitted Encumbrances.
(c) No litigation, inquiry or investigation of any kind in or by any
judicial or administrative court or agency is pending or, to its knowledge,
threatened against the Lessee with respect to (i) the existence of the Lessee,
(ii) its authority to execute or deliver this Lease Agreement or the Lease
Documents, (iii) the validity or enforceability of the Lease Documents or the
transactions contemplated hereby or thereby, or (iv) the title of any officer of
the Lessee who executed the Lease Documents. No such authority or proceedings
have been repealed, revoked, rescinded or amended and all are in full force and
effect.
(d) Each of the Lease Documents to which Lessee is a party constitutes
a legal, valid and binding obligation of the Lessee enforceable against the
Lessee in accordance with its terms.
(e) Lessee shall provide to Lender representations and warranties and
comply with all covenants and conditions necessary for the provision of the line
of credit by the Lender evidenced by the Notes for the construction financing to
be used to construct and equip the Campus.
(f) Lessee is engaged in an enterprise-wide Year 2000 project to bring
Lessee's infomration systems and, to the extent necessary, confirm Lessee's
vendors and suppliers systems progress towards Year 2000 compliance.
(g) Upon written request of Lessor, Lessee, as directed by Lessor,
shall provide Lessor with a certificate executed by its Chief Financial Officer
or other officer or person acceptable to Lessor, certifying that the
representations, warranties and covenants of Lessee set forth in this Lease
Agreement are true and correct as of the date of the certificate and further
certifying that, as of the date of the certificate, no event of default exists
under this Lease Agreement.
<PAGE>
ARTICLE III
TITLE INSURANCE
Section 3.1. Title. The Lessor holds good and marketable title to the
-----
Site.
Section 3.2. Title Insurance. The Lessor has obtained or will obtain
---------------
title insurance for the benefit of the Lessor in an amount equal to the amount,
if any, required by Lender, insuring title to the Site and the improvements
thereon.
<PAGE>
ARTICLE IV
CONSTRUCTION AND EQUIPPING OF
DISTRIBUTION CENTER
Section 4.1. Plans and Specifications for Distribution Center.
------------------------------------------------
Lessee has provided Lessor with, and Lessor has agreed to, specific Plans and
Specifications relating to Lessor's construction and equipping of the
Distribution Center, a summary of which is attached hereto as Exhibit C and made
a part hereof (the "Plans and Specifications").
Section 4.2. Construction and Equipping of Distribution Center by
----------------------------------------------------
Lessor. Lessor shall enter into such contracts and agreements as may be
- ------
necessary, at the request of the Lessee, to enable the Distribution Center to be
constructed and equipped in accordance with the Plans and Specifications,
including any Change Orders which the Lessee may request during the course of
the construction and equipping of the Distribution Center pursuant to Section
4.4 of this Lease Agreement.
Section 4.3. Purchases of Building Materials, Supplies and Fixtures.
------------------------------------------------------
The Lessor shall purchase all building materials, supplies and Fixtures to be
used in the construction of, or installed in, the Distribution Center pursuant
to the Plans and Specifications. In accordance with this Section, Lessor shall
comply with the following requirements for all purchases of building materials,
supplies and equipment, in order that the purchases thereof may be exempt from
the sales tax and the use tax of the State:
(a) Lessor shall contract with a procurement specialist, who shall be
acceptable to Lessee, to be available to assure the quality and conformity of
all materials, supplies and equipment purchased;
(b) Lessor shall receive and process all invoices for such building
materials, supplies and equipment;
(c) Lessor shall pay for all such building materials, supplies and
equipment from a bank account designated for such purpose, and all such payments
shall be made by draft of the Lessor, provided wire transfer from the designated
bank account may be approved on a case by case basis; and
(d) Lessor shall be the named beneficiary of all warranties and
guarantees upon such building materials, supplies and equipment.
Section 4.4. Change Orders. If during the course of the construction
-------------
of the Distribution Center the Lessee desires to make any change in the Plans
and Specifications, such change shall be submitted in writing to the Lessor,
which shall constitute approval of such change as a change order for purposes of
the relevant construction contract(s), unless Lessor gives Notice to Lessee of
its objection to the change order in writing within seven (7) calendar days of
actual receipt of the change
<PAGE>
order by Lessor. To the extent that any change order during the Construction
Period, after allowances and adjustments, shall cause the costs of construction
to exceed the Cost of the Project such excess costs shall be treated in all
respects as an additional expense under Section 8.2(b) herein, and shall grant
Lessor termination rights of this Lease under said provisions. Any change
orders under this Section shall be deemed incorporated into and made a part of
the Plans and Specifications for purposes of this Lease Agreement.
Section 4.5. Inspections During Construction Period. Throughout the
--------------------------------------
Construction Period, Lessee shall have the right to inspect the construction
site at any time.
Section 4.6. Insurance During Construction Period. During the
------------------------------------
Construction Period, Lessor shall maintain or cause to be maintained "all-risk"
and "extended risk" property insurance and builder's risk and fire insurance, in
each case with respect to the Campus (covering physical loss or damage to the
Campus).
<PAGE>
ARTICLE V
DEMISING CLAUSES AND RENTAL PROVISIONS
Section 5.1. Demise of Campus. The Lessor hereby leases the Campus
-----------------
to the Lessee and the Lessee hereby takes the Campus from the Lessor upon the
terms and conditions of this Lease Agreement.
Section 5.2. Duration of Lease Term; Quiet Enjoyment.
---------------------------------------
(a) The Lessor shall deliver to the Lessee sole and exclusive
possession of the Campus (subject to Sections 8.3 and 10.2 hereof), and the
leasehold estate created hereby shall commence on the Delivery Date, and the
Lessee shall accept possession of the Campus on the Delivery Date.
(b) Except as provided in Section 10.2 and Section 10.3 hereof, the
leasehold estate created hereby shall terminate at 11:59 p.m. on to the
Expiration Date or on such earlier date as may be permitted by Section 5.3, 11.1
and 11.3 hereof.
(c) Except as provided in Sections 8.3 and 10.2 hereof, the Lessor
shall neither take nor suffer or permit any action to prevent the Lessee during
the Lease Term from having quiet and peaceable possession and enjoyment of the
Campus and will cooperate with the Lessee in order that the Lessee may have
quiet and peaceful possession and enjoyment of the Campus, as hereinabove
provided. Accordingly, the Lessor shall not grant, pledge, mortgage,
hypothecate or otherwise convey any mortgage, security interest or pledge or
permit any encumbrance, except Permitted Encumbrances, to be placed on the
Campus or the Fixtures without the express written consent of the Lessee.
Section 5.3. Basic Rent.
----------
(a) The Lessee shall not be required to pay any rent during the
Construction Period.
(b) The Lessee shall make, in advance, equal monthly payments to
Lessor commencing on the Delivery Date and thereafter payable on the 1st day of
each consecutive month over the Lease Term. The projected Basic Rent payment
schedule over the Term of this Lease Agreement is attached hereto as Exhibit D
and is incorporated herein by reference.
(c) The Lessee, under the provisions of this Section 5.3, agrees to
make the above-mentioned payments in immediately available funds and without any
further notice in lawful money of the United States of America. In the event
the Lessee shall fail to timely make any payment required in this Section 5.3,
the Lessee shall pay the same together with any charges from Lender incurred by
the Lessor.
<PAGE>
Section 5.4. Additional Rent. The Lessee shall pay the following
---------------
amounts as Additional Rent:
(a) On demand of the Lessor other amounts payable by the Lessee under
this Lease Agreement; and
(b) On demand of the Lessor from time to time all tax amounts,
together with any interest, penalties and expenses related thereto, not paid by
the Lessee pursuant to Section 6.5 and paid by the Lessor or Lender to the
appropriate taxing authority,
Section 5.5. Prepaid Rent. The Lessee may pay certain amounts, as
------------
agreed and determined by Lessor and Lessee, as Prepaid Rent. Any such Prepaid
Rent may be allocated over the Lease Term, if appropriate, as determined by
Lessee.
Section 5.6. Payments by Lessee to Lessor. All rent payments to be
----------------------------
made by the Lessee under the terms of this Article shall be made payable to the
Lessor and shall be delivered to the Lessor by wire transfer to the credit of
the Lessor's account as approved by Lender.
Section 5.7. Security. The Lessee shall provide the following
--------
security:
(a) Prior to the commencement of the Construction Period, the Lessee
shall provide an irrevocable standby letter of credit to the Lessor in an amount
equal to twenty percent (20%) of the Cost of the Project, substantially in the
form attached hereto as Exhibit E draws upon which shall be conditioned upon
default by the Lessee in its obligations under this Lease Agreement; provided,
however, that any draw made on the letter of credit shall not exceed 89% of the
outstanding principal balance on the Notes as of the date of the draw. This
letter of credit shall remain in place until the Delivery Date. To the extent
any draws are made against this letter of credit such draw amounts shall be
considered part of the Total Project Cost.
(b) On the Delivery Date, the Lessee shall provide a standby letter of
credit to the Lessor, substantially in the form attached hereto as Exhibit F,
draws upon which shall be conditioned upon default by the Lessee in its
obligations under this Lease Agreement. The letter of credit shall remain in
place for five (5) years, commencing on the Delivery Date and expiring on the
fifth anniversary of the Delivery Date. As of the Delivery Date, the principal
balance of this letter of credit shall be in an amount equal to 10% of the
aggregate Cost of the Project which balance shall decline in equal increments
beginning at the conclusion of the fist year, and thereafter at the conclusion
of each subsequent year until extinguished.
(c) Lessee shall not be required to pay any additional security
deposit under this Lease Agreement.
<PAGE>
Section 5.8. Market Rental. The Lessor and the Lessee believe that
-------------
the Rent payable hereunder constitutes a fair market rental for the lease of the
Campus pursuant to the terms hereof.
<PAGE>
ARTICLE VI
MAINTENANCE, SERVICES, MODIFICATIONS AND ALTERATIONS,
TAXES AND INSURANCE
Section 6.1. Maintenance and Modifications by the Lessee. The Lessee
-------------------------------------------
shall not abandon, or permit any waste to, the Campus. During the Lease Term,
the Lessee shall not remove any part of the Campus outside of Wood County and
shall (i) keep the Campus in a reasonably safe condition; (ii) make all
necessary repairs and replacements to the Campus (whether ordinary or
extraordinary, structural or nonstructural, foreseen or unforeseen); and (iii)
operate the Campus in a sound and economic manner.
Section 6.2. Maintenance of Common Areas. The Lessor shall maintain
---------------------------
in good order, condition and repair all of the common areas of the Park in
accordance with the terms and conditions of the Common Grounds Agreement to be
executed simultaneously with this Lease Agreement.
Section 6.3. Installation of Additional Fixtures. Lessee or any
-----------------------------------
permitted sublessee of the Lessee from time to time may install additional
machinery, equipment or other personal property in the Campus and such
machinery, equipment or other personal property shall not become, or be deemed
to become, a part of the Campus. The Lessee from time to time may create or
permit to be created any lien on such machinery, equipment or other personal
property. Further, the Lessee from time to time may remove or permit the
removal of such machinery, equipment and other personal property from the
Campus, provided that any such removal of such machinery, equipment or other
personal property shall not occur if any such removal shall adversely affect the
structural integrity of the Campus and provided further, that if any damage is
occasioned to the Campus by such removal, the Lessee agrees to promptly repair
such damage at its own expense.
Section 6.4. Replacement Parts. Except upon an Event of Total Loss,
-----------------
the Lessee, at its own cost and expense, will promptly replace all Parts which
may from time to time become worn out or damaged beyond repair or permanently
rendered obsolete or unfit for use for any reason whatsoever to the extent
necessary to enable the Lessee to meet its rent payment obligations under this
Lease Agreement (such substituted parts hereinafter being called "Replacement
Parts"). In addition, in the ordinary course of maintenance, service, repair,
overhaul or testing, the Lessee may, at its own cost and expense, remove any
Parts, whether or not worn out or damaged beyond repair or permanently rendered
obsolete or unfit for use, provided that the Lessee shall, at its own cost and
expense, replace such Parts as promptly as practicable to the extent necessary
to enable the Lessee to meet its rent payment obligations under this Lease
Agreement. All Replacement Parts shall be free and clear of all liens (except
Permitted Encumbrances) and shall be in as good operating condition as, and
shall have a value or utility at least equal to, the Parts replaced assuming
each replaced Part was of the value or utility and in the condition and repair
required to be maintained by the terms hereof. All Parts at any time removed
from the Campus shall remain the property of the Lessor, no matter where
located, until such
<PAGE>
Parts shall be replaced by Parts which have been incorporated or installed in or
attached to the Campus and which meet the requirements for Replacement Parts
specified above. Immediately upon any Replacement Part meeting such requirements
become becoming incorporated or installed in or attached to the Campus as above
provided, without further act, (i) title to the removed Part shall thereupon
vest in the Lessee, free and clear of all rights of the Lessor, and shall no
longer be deemed a party hereunder, (ii) title to such Replacement Part shall
thereupon vest in the Lessor, and (iii) such Replacement Part shall become
subject to this Lease Agreement and be deemed part of the Campus for all
purposes hereof to the same extent as the Parts originally incorporated or
installed in or attached to the Campus. The Lessee agrees to execute and file
such documents as may be reasonably required to create, perfect and maintain the
security interests of the Lender in any such Replacement Part and the Lessor's
interests in any such Replacement Part.
Section 6.5. Taxes, Assessments and Utility Charges.
--------------------------------------
(a) The Lessee shall be solely liable for all taxes with respect to
the Campus during the Lease Term. The Lessee agrees to pay, as the same become
due and before any fine, penalty, interest (except interest which is payable in
connection with legally permissible installment payments) or other cost which
may be added thereto or become due to, or be imposed by operation of law for the
non-payment thereof, all taxes, payments in lieu of taxes and governmental
charges of any kind whatsoever which may at any time be lawfully assessed or
levied against or with respect to the Campus and any machinery, equipment or
other property installed or bought by the Lessee therein or thereon, including,
without limiting the generality of the foregoing, any sales or use taxes imposed
with respect to the Campus or any part or component thereof, or the rental or
sale of the Campus or any part thereof and any taxes levied upon or with respect
to the income or revenues of the Lessor from the Campus. Provided, that any
sales or use taxes imposed with respect to the Campus or any part or component
thereof, shall be considered part of the Total Project Cost.
(b) The Lessee shall pay or cause to be paid all charges for gas,
water, sewage, disposal, garbage and refuse collection, electricity, light, heat
or power, telephone or other communication service used, rendered or supplied
upon or in connection with the Campus during the Lease Term and shall indemnify
the Lessor against any liability or damages on such account.
(c) Notwithstanding the terms of paragraph (a) above, the Lessee may,
at its option, withhold payments of franchise tax and payments of sales and use
taxes while a contest of such tax is pending, however, while any such contest is
pending the Lessee shall pay all such other taxes, assessments and other charges
when due, under protest, subject to the Lessee's contest.
(d) Within thirty (30) calendar days of receipt of written request
therefor, the Lessee shall deliver to the Lessor official receipts of the
appropriate taxing authorities or other proof satisfactory to the Lessor
evidencing payment of any tax or payment in lieu thereof.
<PAGE>
Section 6.6. Insurance Required. At all times throughout the Lease
------------------
Term, the Lessee shall, at its sole cost and expense, maintain or cause to be
maintained insurance against such risks and for such amounts as are customarily
insured against by businesses of like size and type and shall pay, as the same
become due and payable, all premiums with respect thereto, including, but not
necessarily limited to:
(a) Insurance against loss or damage by fire, lightning and other
casualties customarily insured against, with a uniform standard extended
coverage endorsement, such insurance to be in an amount not less than the full
100% replacement value of the completed buildings and improvements, exclusive of
footings and foundations, as determined by a recognized appraiser or insurer
selected by the Lessee, but in no event less than $20,000,000. With the Lessor's
express advance written approval, the insurance described in this paragraph, or
any portion thereof, can be self-insurance by the Lessee, with such self-
insurance not to exceed $5,000,000, with an excess policy for any amount
exceeding the amount of self-insurance, but less than the amount of insurance
required by this paragraph. In addition, the Lessee shall at all times maintain
such other insurance with recognized underwriters against such other risks as
are normally insured against and in amounts normally considered prudent by
companies carrying on a similar business or another business in a similar
location. The Lessee shall upon request of the Lessor from time to time furnish
to the Lessor true and complete copies of all such insurance policies or
contracts, together with evidence of payment of premiums. In the event Lessee
requests approval to be self-insured as hereinabove provided self-insurance
shall not relieve Lessee from its obligation to fully insure Lessor from
liability.
(b) Workers' compensation insurance, disability benefits insurance and
each other form of insurance which the Lessee or any permitted sublessee is
required by law to provide, covering loss resulting from injury, sickness,
disability or death of employees of the Lessee or any permitted sublessee who
are located at or assigned to the Campus. This coverage shall be in effect from
and after the Delivery Date or on such earlier date as any employees of the
Lessee, or any permitted sublessee, contractor or subcontractor of Lessee, first
occupy the Campus.
(c) Insurance protecting the Lessor and the Lessee against loss or
losses from liability imposed by law or assumed in any written contract and
arising from personal injury, including bodily injury or death of an employee or
non-employee, or damage to the property of others, caused by an accident or
occurrence with a limit of liability of not less than $1,000,000 (combined
single limit for personal injury, including bodily injury or death and property
damage) and with a blanket excess liability coverage in an amount not less than
$5,000,000 combined single limit or equivalent protecting the lessor and the
Lessee against any loss or liability or damage for personal injury, including
bodily injury or death, or property damage.
Section 6.7. Additional Provisions Respecting Insurance. All
------------------------------------------
insurance required by Section 6.6 hereof or under any other provision of this
Lease Agreement shall be procured and maintained in financially sound and
generally recognized responsible insurance companies selected by the entity
required to procure the same and authorized to
<PAGE>
write such insurance in the State, except when such insurance is self-insurance
as permitted under this Lease Agreement. Such insurance may be written with
deductible amounts comparable to those on similar policies carried by other
companies engaged in businesses similar in size, character and other respects to
those in which the procuring entity is engaged. All policies evidencing the
insurance required by Sections 6.6 or under any other provision of this Lease
Agreement shall provide for at least sixty (60) calendar days' prior written
notice of the restriction, cancellation or modification thereof to the Lessor
and Lender. The policies under Section 6.6(a) shall contain appropriate waivers
of subrogation.
Section 6.8. Application of Net Proceeds of Insurance. The Net
----------------------------------------
Proceeds of the insurance carried pursuant to the provisions of this Lease
Agreement shall be applied as follows: (i) the Net Proceeds of the insurance
required by Section 4.6 hereof shall be applied as provided in Section 7.1
hereof, and (ii) the Net Proceeds of the insurance required by any other
provision of this Lease Agreement shall be applied toward extinguishment or
satisfaction of the liability with respect to which such insurance proceeds may
be paid.
Section 6.9. Right of Lessor to Pay Taxes, Insurance Premiums and
----------------------------------------------------
Other Charges. If the Lessee fails (i) to pay any tax, together with any fine,
- -------------
penalty, interest or cost which may have been added thereto or become due or
been imposed by operation of law for nonpayment thereof, or assessment or other
governmental charge required to be paid by Section 6.5 hereof, (ii) to maintain
any insurance required to be maintained by Section 6.6 hereof, (iii) to pay any
amount required to be paid by any law or ordinance relating to the use which is
due and payable by reason of any conveyance of the leasehold estate in and to
the Campus, or (iv) to pay any other amount or perform any act hereunder
required to be paid or performed by the Lessee hereunder, the Lessor may pay or
cause to be paid such tax, assessment or other governmental charge or the
premium for such insurance or any such other payment or may perform any such
act. No such payment shall be made or act performed by the Lessor until at
least ten (10) calendar days shall have elapsed since notice shall have been
given by the Lessor to the Lessee, and in the case of any tax, assessment or
governmental charge or the amounts specified in paragraphs (iii) and (iv)
hereof, no such payment shall be made in any event if the Lessee is contesting
the same in good faith in the manner described in this Lease Agreement and no
Event of Default hereunder shall have occurred and be continuing. No such
payment by the Lessor shall affect or impair any rights of the Lessor hereunder
arising in consequence of such failure by the Lessee. The Lessee, shall, on
demand, reimburse the Lessor for any reasonable amount so paid or for reasonable
expenses or costs incurred in the performance of any such act by the Lessor
pursuant to this Section (which shall include all reasonable legal fees and
disbursements), together with interest thereon from the date of payment of such
amount, expense or cost by the Lessor.
Section 6.10. Alterations. Throughout the Lease Term, the Lessee, at
-----------
the Lessee's own expense (except for Alterations required after the Delivery
Date to attain completion, the cost of which shall be considered part of the
Cost of the Project), may from time to time make such Alterations to the Campus
as the Lessee may deem, in its
<PAGE>
sole discretion, desirable for the proper operation, use and maintenance of the
Campus provided, however, that no such Alteration shall be made by the Lessee if
such Alteration, or removal thereof from the Campus would materially diminish
the value or utility of the Campus (or any part thereof) or impair the condition
of the Campus (or any part thereof); provided further, that all Alterations
shall be in compliance with all applicable zoning, planning, building and
environmental laws, ordinances, rules and regulations of governmental
authorities having jurisdiction over the Campus. During the Lease Term, title to
any Alteration made pursuant hereto shall without further act vest in the Lessor
and shall, without further act, immediately become the property of the Lessor,
be deemed to constitute a part of the Campus and be subject to this Lease
Agreement. Notwithstanding the foregoing, the Lessor and the Lessee hereby agree
to execute, deliver and file or record all such documents as may be necessary or
appropriate to confirm the status of title to each such Part or Alteration.
<PAGE>
ARTICLE VII
DAMAGE, DESTRUCTION AND CONDEMNATION
Section 7.1. Damage or Destruction of the Campus.
-----------------------------------
(a) If the Campus or any part or component shall be damaged or
destroyed (in whole or in part) at any time during the Construction Period or if
the Campus or any part or component shall be damaged or destroyed (in whole or
in part) at any time during the Lease Term:
(i) upon the occurrence of such damage or destruction, the Net
Proceeds derived from insurance shall be paid to the Lessor; and
(ii) the Lessee shall have the option to terminate this Lease
Agreement pursuant to Section 11.1 hereof or to require that the Lessor promptly
replace, repair, rebuild or restore the Campus or the damaged part or component
thereof to substantially the same condition and value as the operating entity
which existed prior to such damage or destruction, with such changes,
alterations and modifications as may be desired by the Lessee, and under the
same general terms for construction of the Campus as provided under this Lease
Agreement. Provided, however, that the Lessor's obligation under this Section
7.1(a)(ii) shall not require any financial expenditure on the part of the Lessor
in excess of the Net Proceeds received under Section 7.1(a)(i).
(b) All such repair, replacement, rebuilding, restoration or
relocation of the Campus shall be effected with due diligence in a good and
workmanlike manner in compliance with all applicable legal requirements, shall
be promptly and fully paid for by the Lessor in accordance with the terms of the
applicable contracts, and shall automatically become a part of the Campus as if
the same were specifically described herein. Any balance of such Net Proceeds
remaining after payment of all costs of replacement, repair, rebuilding,
restoration or relocation shall be retained by the Lessor.
(c) If the Lessee shall exercise its option to terminate this Lease
Agreement pursuant to Section 11.1 hereof, the Net Proceeds derived from such
insurance shall be applied to the payment of the amounts required to be paid by
Section 11.2 hereof and any balance remaining thereafter shall be retained by
the Lessor.
Section 7.2. Condemnation.
------------
(a) Complete Taking by Eminent Domain. If during the term of this
---------------------------------
Lease Agreement the entire Site including Campus shall be taken by an exercise
of the power of eminent domain (the "Proceedings"), this Lease Agreement shall
terminate as of the date of the vesting of title in the taking authority
pursuant to such Proceedings.
<PAGE>
(b) Partial Taking by Eminent Domain. If during the Lease Term less
--------------------------------
than the entire Site shall be taken in any such Proceeding, this Lease Agreement
shall terminate as to the portion of the Site so taken upon the vesting of title
in the Proceeding; and as to the remainder of the Site, the Rent shall be
decreased in proportion to the Net Proceeds of any condemnation award for the
portion of the Site so taken, and the Lessee shall be responsible for any
necessary restoration of the improvements, including parking spaces, driveways,
or of the building, on the remainder of the Site as required for Lessee's use
thereof. Provided that any portion of the condemnation award or compensation
intended to compensate the Lessor or the Lessee for such necessary restoration
costs shall be paid to the Lessee whether such award be made in the name of the
Lessee or the Lessor.
(c) Temporary Taking by Eminent Domain. If all or any portion of the
----------------------------------
Campus is taken by the exercise of the right of eminent domain for governmental
occupancy for a limited period, this Lease Agreement shall not terminate, and
the Lessee shall continue to perform its obligations hereunder as though such
taking had not occurred except to the extent that it may be prevented from so
doing pursuant to the terms of the order of the authority which made the taking.
In the event of such temporary taking, the Lessee shall be entitled to the
entire award made for such taking (whether paid by way of damages, rent or
otherwise) unless the period of governmental occupancy extends beyond the
termination of the Lease Term, in which case the award shall be apportioned
between the Lessor and the Lessee as of the date of such termination.
(d) If the Lessee shall exercise its option to terminate this Lease
Agreement pursuant to Section 11.1 hereof, the Net Proceeds from such
Condemnation shall be applied to the payment of the amounts required to be paid
by Section 11.2 hereof and any balance remaining thereafter shall be retained by
the Lessor.
Section 7.3. Condemnation of Lessee-Owned Property. The Lessee shall
-------------------------------------
be entitled to the proceeds of any Condemnation award or portion thereof made
for damage to or taking of any Property which, at the time of such damage or
taking, is not part of the Campus.
<PAGE>
ARTICLE VIII
SPECIAL COVENANTS
Section 8.1. No Warranty of Condition or Suitability of Purpose. THE
--------------------------------------------------
LESSOR MAKES NO WARRANTY, EITHER EXPRESS OR IMPLIED, THAT THE CAMPUS IS OR WILL
BE SUITABLE FOR THE LESSEE'S PURPOSES OR NEEDS.
WITHOUT PREJUDICE TO ANY RIGHTS THE LESSEE MAY HAVE AGAINST ANY
ARCHITECT, ENGINEER, SUPPLIER OR MANUFACTURER, THE LESSEE ACKNOWLEDGES AND
AGREES THAT AS BETWEEN THE LESSEE AND THE LESSOR, AND AT ALL TIMES (BOTH BEFORE
COMPLETION AND THEREAFTER), (i) THE SIZE, DESIGN, CAPACITY AND MANUFACTURE OF
THE CAMPUS AND THE FIXTURES ARE OF THE SIZE, DESIGN, CAPACITY AND MANUFACTURE
SELECTED BY THE LESSEE AND (ii) THE LESSEE IS SATISFIED THAT THE CAMPUS AND
FIXTURES, WILL BE SUITABLE FOR ITS PURPOSES. THE LESSOR REPRESENTS AND
WARRANTS, AND THE LESSEE CONFIRMS THAT IT IS AWARE AND AGREES, THAT THE LESSOR
IS NOT A MANUFACTURER OR DEALER IN PROPERTY OF SUCH KIND AND THE CAMPUS AND THE
FIXTURES ARE LEASED HEREUNDER SUBJECT TO ALL APPLICABLE GOVERNMENTAL LAWS,
ORDINANCES, RULES, REGULATIONS, ORDERS AND REQUIREMENTS NOW IN EFFECT OR
HEREAFTER ADOPTED IN THE STATE, LOCALITY AND CONDITION OF EVERY PARTY THEREOF
WHEN THE SAME FIRST BECAME OR BECOMES SUBJECT TO THIS LEASE, WITHOUT
REPRESENTATION OR WARRANTY OF ANY KIND BY THE LESSOR, EXPRESS OR IMPLIED, AS TO
THE TITLE (EXCEPT AS PROVIDED IN SECTIONS 2.1 AND 3. 1), MERCHANTABILITY,
COMPLIANCE WITH SPECIFICATIONS, CONDITION, DESIGN, OPERATION, FREEDOM FROM
PATENT OR TRADEMARK INFRINGEMENT, ABSENCE OF LATENT DEFECTS OR FITNESS FOR USE
OF THE CAMPUS OR FIXTURES (OR ANY PART THEREOF), OR ANY OTHER REPRESENTATION OR
WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE CAMPUS (OR ANY PART
THEREOF). Except as expressly provided herein, all risks incident to the
matters discussed in the preceding sentence, as between the Lessor, on the one
hand, and the Lessee, on the other, are to be borne by the Lessee. The Lessor
assigns to the Lessee all claims and rights which the Lessor may now or
hereafter have against third parties in respect of any defect of or damage to
the Campus or breach of representation or warranty by such third party, or any
other claim or right against any third party as a result of circumstances
arising out of this Lease Agreement, and shall cooperate with and comply with
all reasonable requests of the Lessee in the preservation, prosecution or
enforcement by the Lessee of such claims or rights at the Lessee's sole cost and
expense. The provisions of this paragraph have been negotiated, and, except to
the extent otherwise expressly stated, the foregoing provisions are intended to
be a complete exclusion and negation of any representations or warranties by the
Lessor, express or implied, with
<PAGE>
respect to the Campus whether arising pursuant to the Uniform Commercial Code or
any similar law now or hereafter in effect, or otherwise.
Section 8.2. Hold Harmless Provisions.
------------------------
(a) During the Lease Term, Lessee shall, at its sole cost and expense,
indemnify, defend and hold harmless the Lessor, its officials, board members,
officers, employees and agents, against and from: (i) any loss, damage, or
expense incurred or sustained by the Lessor, its officials, board members,
officers, employees or agents by reason of the operation or leasing of the
Campus; (ii) any and all claims, losses, damages or expenses by or on behalf of
any person, firm or corporation, which result from any occurrence or
circumstance on the Campus or any portion thereof and not resulting from a
breach or default in the performance of any covenant or agreement to be
performed by the Lessor under the provisions of this Lease Agreement; and (iii)
all claims, losses, liabilities, damages, costs and expenses which arise from
any breach or default in the performance of any covenant or agreement on the
part of the Lessee to be performed pursuant to the provisions of this Lease
Agreement. The indemnity herein provided shall include all reasonable costs,
counsel fees, expenses and liabilities incurred in connection with any such
claim, action or proceeding brought in connection with any of the foregoing, and
in case any action or proceeding shall be brought against the Lessor by reason
of any such claim, Lessee upon written notice from the Lessor, shall defend such
action or proceeding. Any amounts paid by the Lessee pursuant to this Section
8.2(a) shall, at the Lessee's sole discretion, be considered part of the Total
Project Cost. Notwithstanding any provision herein to the contrary, the Lessee
shall have no obligation to indemnify the Lessor to the extent the underlying
claim, loss, damage or expense arises from or in connection with the Lessor's
gross negligence or intentional acts or willful misconduct.
(b) During the Construction Period, Lessee shall, at its sole cost and
expense, indemnify, defend and hold harmless the Lessor against any costs
incurred by Lessor as a result of any loss, damage or expense incurred or
sustained by the Lessor, its officials, board members, officers, employees or
agents resulting from any action or inaction of Lessee with regard to the
financing, construction and equipping of the Campus. Provided, however, that to
the extent any such costs shall be considered part of the Total Project Costs,
to the extent that any such costs exceed the Cost of the Project, Lessor and
Lessee agree that the Lessee shall pay up to a maximum of eighty-nine percent
(89%) of such costs, and at its option and without regard to any such payment by
Lessee, Lessor shall have the independent right to terminate this Lease, at its
sole discretion and option. Any such payments made by Lessee pursuant to this
Section 8.2(b) may be considered Additional Rent or Prepaid Rent, as
appropriate, and may be allocated over the Lease Term as determined by the
Lessee.
(c) Notwithstanding any other provisions of this Lease Agreement, the
obligations of the Lessee and Lessor pursuant to this Section 8.2 shall remain
in full force and effect after the termination of this Lease Agreement until the
expiration of the period stated in the applicable statute of limitations during
which a claim, cause of action or
<PAGE>
prosecution relating to the matters herein described may be brought and payment
in full or the satisfaction of such claim, cause of action or prosecution
relating to the matters herein described and the payment of all expenses and
charges incurred by the Lessor or the Lessee, or their respective members,
directors, officers, agents and employees relating to the enforcement of the
provisions herein specified. In the event of any claim against the Lessor or the
Lessee or their respective members, directors, officers, agents or employees by
any employee or contractor of the other party or anyone directly or indirectly
employed by any of them or anyone for whose acts any of them may be liable, the
obligations of the Lessor and Lessee hereunder shall not be limited in any way
by any limitation on the amount or type of damages, compensation, disability
benefits or other employee benefit acts.
Section 8.3. Right to Inspect Campus. The Lessor and its duly
-----------------------
authorized agents shall have the right at all reasonable times to inspect the
Campus. In the case of an emergency, the Lessor shall be provided access by the
Lessee on reasonable notice. Otherwise, inspections shall be scheduled with
Lessee representatives upon the written request of the Lessor, and the Lessor
shall execute a confidentiality agreement before entering the Campus in form and
substance reasonably satisfactory to the Lessee to protect against the
disclosure by the Lessor of the Lessee's confidential or proprietary information
relating to its operations at the Campus if so required by Lessee.
Notwithstanding the foregoing, the Lessor shall not be constrained thereby from
disclosing any information required to be disclosed by it under applicable law.
The Lessor shall make a reasonable effort to timely notify the Lessee of any
proposed disclosure of information, giving the Lessee as much time as is
reasonably possible to permit the Lessee to seek judicial or administrative
order, at the Lessee's sole cost and expense, to prevent or to restrict the
proposed disclosure of such information.
Section 8.4. Lessee to Maintain Its Existence. The Lessee agrees
--------------------------------
that during the Lease Term it will maintain its existence and will not dissolve,
liquidate or otherwise dispose of substantially all of its assets; provided,
however, subject to restrictions which may arise as a result of Section 9.3
below, that it is expressly understood and agreed that the Lessee may
consolidate with or merge into another entity or permit one or more entities to
consolidate with or merge into it, in the Lessee's sole discretion, provided
Lessee shall give prior written notice of any proposed consolidation or merger
as soon as practicable under the law.
Section 8.5. Qualification in State. The Lessor and the Lessee
----------------------
throughout the Lease Term shall each continue to be each respectfully duly
authorized to do business in the State.
<PAGE>
Section 8.6. Compliance With Orders, Ordinances. Etc.
---------------------------------------
(a) The Lessee, throughout the Lease Term, agrees that it will
promptly comply, and cause any sublessee or occupant of the Campus to comply, in
all material respects, with all statutes, codes, laws, acts, ordinances, orders,
judgements, decrees, injunctions, rules, regulations, permits, licenses and
authorizations, ordinary or extraordinary, which now or at any time hereafter
may be applicable to the Campus or to any use, manner of use or condition of the
Campus of all federal, state, county, municipal and other governments,
departments, commissions, boards, courts, authorities, officials and officers
and companies or associations insuring the premises having jurisdiction of the
Campus or to any use, manner of use or condition of the Campus. Provided,
however, that any amounts paid by Lessee pursuant to this Section 8.6(a) may, at
Lessee's sole discretion, be considered part of the Total Project Cost.
(b) The Lessee shall not cause or permit the Campus to be used to
generate, manufacture, refine, transport, treat, store, handle, dispose,
transfer, produce or process Hazardous Materials and Hazardous Substances,
except in material compliance with all applicable federal, state and local laws
or regulations.
(c) Notwithstanding the provisions of subsections (a) and (b) hereof,
the Lessee may in good faith contest the validity or the applicability of any
requirement of the nature referred to in such subsections (a) and (b) by
appropriate legal proceedings conducted in good faith and with due diligence.
(d) Unless the Lessee purchases the Lessor's right, title and interest
in the Campus upon the expiration or termination of this Lease Agreement, the
Lessee shall, at its own risk and expense, redeliver to the Lessor possession
and control of the Campus in its then condition and state of repair free and
clear of all liens, except Permitted Encumbrances, and in compliance with all
applicable environmental laws.
<PAGE>
ARTICLE IX
RELEASE OF CERTAIN LAND; ASSIGNMENTS AND SUBLEASING
Section 9.1. Restriction on Sale; Release of Certain Land.
--------------------------------------------
(a) Except for Permitted Encumbrances and as otherwise specifically
provided in this Article IX and in Article X hereof, the Lessor shall not sell,
convey, transfer, encumber or otherwise dispose of the Campus or any part
thereof or any of its rights under this Lease Agreement, without the prior
written consent of the Lessee, which shall not be unreasonably withheld.
(b) The Lessor and the Lessee from time to time may release from the
provisions of this Lease Agreement and the leasehold estate created hereby any
part of, or interest in, the real property which is not necessary, desirable or
useful for the Campus; provided, however, that the Lessor shall not release any
part or interest in the Site without the prior written consent of the Lessee,
which shall not be unreasonably withheld. In such event, the Lessor shall
execute and deliver any and all instruments necessary or appropriate to so
release such part of, or interest in, the real property and convey such title
thereto or interest therein, to the Lessee or such other Person as the Lessee
may designate.
(c) Upon conveyance of any part of, or interest in the real property
effected under the provisions of this Section 9.1, Lessee shall not be entitled
to an abatement or diminution of the rents payable by it under this Lease
Agreement
Section 9.2. Assignment by Lessor. The parties hereby agree that,
--------------------
upon the conclusion of the Construction Period and effective on the Delivery
Date, title to the Campus and this Lease Agreement shall be assigned or
otherwise conveyed to the Wood County Development Authority, a public
corporation and political subdivision of the State, which shall expressly
assume, in writing, all rights, covenants and obligations set forth in this
Lease Agreement. Such conveyance shall be accomplished so as to limit the
realization of income by the Lessor for Federal Tax purposes as contemplated by
Section 2.1(g).
Section 9.3. Assignment and Subleasing by Lessee.
-----------------------------------
(a) Except for Permitted Encumbrances and as otherwise provided in
this Article IX hereof, the Lessee shall not assign, sublease, mortgage or
encumber this Lease Agreement or the Campus or any part thereof, without the
prior consent of the Lessor in each instance. Notwithstanding the foregoing,
the Lessee shall have the right, without the Lessor's consent, to enter into an
assignment of this Lease Agreement or sublease of the Campus to any wholly owned
subsidiary entity of the Lessee, any entity succeeding to substantially all of
the assets of the Lessee as a result of a consolidation or merger, or an entity
to which all or substantially all of the assets of the Lessee have been sold;
<PAGE>
provided, however, that the other entity shall assume in writing all of the
Lessee's obligations hereunder, and, except for a wholly owned subsidiary entity
of the Lessee, shall have a net worth immediately prior to the assignment or
sublease equal to or greater than the Lessee's net worth. Notwithstanding any
such assignment or sublease, the Lessee shall not be released from any, and
shall perform all, obligations imposed upon it hereunder. The consent of the
Lessor to an assignment or subletting shall not be unreasonably withheld and
shall not be construed to release the Lessee from obtaining the consent in
writing of the Lessor to any further assignment or subletting.
<PAGE>
ARTICLE X
EVENTS OF DEFAULT AND REMEDIES
Section 10.1. Events of Default Defined.
-------------------------
The following shall be "Events of Default" under this Lease Agreement:
(i) the failure by the Lessee to pay or cause to be paid on the date
due, any amount specified to be paid pursuant to Article V hereof, which default
remains continuing and uncured;
(ii) any representation or warranty of the Lessor or Lessee herein or
in any of the Lease Documents shall prove to have been false or misleading in
any material respect;
(iii) the failure by the Lessor or the Lessee to observe and perform
any covenant, condition or agreement hereunder on its part to be observed or
performed (except obligations of the Lessee referred to in 10.1 (a)(i)) for a
period of thirty (30) calendar days after written notice, specifying such
failure and requesting that it be remedied, given to the noncompliant party by
the other party; provided, however, that if such failure is nonmonetary in
nature and is curable but is incapable of being cured within thirty (30)
calendar days, so long as the noncompliant party shall commence the cure within
such thirty (30) day period and diligently proceeds to prosecute the cure to
completion or if such failure is being contested to or against the appropriate
governmental authority or other third party diligently and in good faith by the
noncompliant party, for such period of contest, so long as the party continues
such contest, the noncompliant party shall not be in default hereunder; and
(iv) the dissolution or liquidation of the Lessee; or the failure by
the Lessee to release, stay, discharge, lift or bond within thirty (30) calendar
days any execution, garnishment, judgment or attachment of such consequence as
may impair its ability to carry on its operations; or the failure by the Lessee
generally to pay its debts as they become due; or an assignment by the Lessee
for the benefit of creditors; the commencement by the Lessee (as the debtor) of
a case in bankruptcy or any proceeding under any other insolvency law; or the
commencement of a case in bankruptcy or any proceeding under any other
insolvency law against the Lessee (as the debtor) and a court having
jurisdiction in the premises enters a decree or order for relief against the
Lessee as the debtor in such case or proceeding, or such case or proceeding is
consented to by the Lessee or remains undismissed for sixty (60) calendar days,
or the Lessee consents to or admits the material allegations against it in any
such case or proceeding; or a trustee, receiver or agent (however named) is
appointed or authorized to take charge of substantially all of the property of
the Lessee for the purpose of enforcing a lien against such property or for the
purpose of general administration of such property for the benefit of creditors.
<PAGE>
Section 10.2. Lessor's Remedies on Default by Lessee.
--------------------------------------
(a) Whenever any Event of Default for payment due pursuant to Article
V on the part of the Lessee shall have occurred, the Lessor, five (5) days after
written notice of such default and providing that such default remains uncured,
to the extent permitted by law, by written notice to the Lessee, may declare to
be immediately due and payable, whereupon the same shall become immediately due
and payable, all remaining Rent accelerated to the Expiration Date.
(b) Whenever any Event of Default on the part of the Lessee shall have
occurred, the Lessor may take, to the extent permitted by law, any one or more
of the following remedial steps:
(i) declare, by written notice to the Lessee, to be immediately
due and payable, whereupon the same shall become immediately due and payable:
(A) all unpaid installments of rent payable pursuant to Sections 5.3 and 5.4
hereof, and (B) all other payments due and payable under this Lease Agreement;
(ii) take any other action as it shall deem necessary to cure any
such Event of Default, provided that the taking of any such actions shall not be
deemed to constitute a waiver of such Event of Default;
(iii) upon at least sixty (60) days written notice, terminate this
Lease Agreement; and
(iv) take any other action at, law or in equity which may appear
necessary or desirable to collect the payments then due or thereafter to become
due and to enforce the obligations, agreements or covenants of the Lessee under
this Lease Agreement
Section 10.3. Lessee's Remedies on Default by Lessor.
--------------------------------------
(a) Whenever any Event of Default on the part of the Lessor shall have
occurred, the Lessee may, to the extent permitted by law, after notice to the
Lessor, but shall not be obligated to, remedy such default, and in connection
therewith may pay reasonable expenses and employ counsel, provided that the
Lessee shall have the right to remedy such default without notice in the event
of an emergency. All sums expended or obligations incurred by the Lessee in
connection therewith shall be paid by the Lessor to the Lessee upon demand, and
if the Lessor fails to reimburse the Lessee within ten (10) business day to
which no written notice of objection has been made by the Lessor to the Lessee,
the Lessee may, in addition to any other right or remedy that the Lessee may
have, deduct such amount from subsequent installments of rent which from time to
time thereafter become due to the Lessor.
<PAGE>
Section 10.4. Remedies Cumulative. No remedy herein conferred upon
-------------------
or reserved to the parties is intended to be exclusive of any other available
remedy, but each and every such remedy shall be cumulative and in addition to
every other remedy given under this Lease Agreement or now or hereafter existing
at law or in equity. No delay or omission to exercise any right or power
accruing upon any default shall impair any such right or power or shall be
construed to be a waiver thereof, but any such right and power may be exercised
from time to time and as often as may be deemed expedient. In order to entitle
a party to exercise any remedy reserved to it in this Article X, it shall not be
necessary to give any notice, other than such notice as may be herein expressly
required in this Lease Agreement.
Section 10.5. No Additional Waiver Implied by One Waiver. In the
------------------------------------------
event any agreement contained herein should be breached by any party and
thereafter waived by any other party, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder.
Section 10.6 Liquidated Damages. If payment of Rent shall have been
------------------
accelerated in accordance with the terms of this Lease Agreement, the Lessor
shall demand, by notice to the Lessee, that the Lessee pay to the Lessor, and
the Lessee shall pay to the Lessor, on such date, as specified in such Note, as
liquidated damages for loss of a bargain and not as a penalty (in lieu of Rent
for the balance of the Lease Term remaining after the payment date specified in
such notice), an amount equal to the aggregate principal and interest due under
the Notes through, and including such date (together with interest on such
amount from the payment date specified in such notice to the date of actual
payment).
<PAGE>
ARTICLE XI
EARLY TERMINATION OF LEASE AGREEMENT;
OPTION TO PURCHASE IN FAVOR OF LESSEE
Section 11.1. Early Termination of Lease Agreement. The Lessee shall
------------------------------------
have the option to terminate this Lease Agreement, as to all or a portion of the
Campus at any time during the Lease Term (i) upon filing with the Lessor a
certificate signed by an authorized representative of the Lessee stating the
Lessee's intention to do so pursuant to this Section and the date upon which
such payments pursuant to Section 11.2 hereof shall be made (which date shall
not be less than 45 nor more than 90 days from the date such certificate is
filed) and (ii) upon compliance with the requirements set forth in Section 11.2
hereof.
Section 11.2. Conditions to Early Termination of Lease Agreement. In
--------------------------------------------------
the event the Lessee exercises its option to terminate this Lease Agreement in
accordance with the provisions of Section 11.1 hereof, the Lessee shall make the
following payments (in the event the Lessee terminates the Lease Agreement as to
only a portion of the Campus such payments shall be prorated):
(a) To the Lessor, an amount equal to the outstanding principal and
accrued interest on the Notes and any penalties, fees or costs incurred by the
Lessor in connection with the termination of this Lease Agreement; and
(b) All other payments due and owing as of the date of conveyance
described in Section 11. 3 hereof, under this Lease Agreement for which the
Lessee is responsible under the terms of this Lease Agreement.
Section 11.3. Option to Purchase. Upon termination or expiration of
------------------
the Lease Term in accordance with Sections 5.2(b) or 11.1 hereof, the Lessee
shall have the option to purchase all of the Campus from the Lessor under the
following terms:
(a) The purchase price for the Campus shall be the greater of (i) the
fair market value (as determined below) of the Campus as of the date of
termination of the Lease Agreement or the Expiration Date, whichever the case
may be; or (ii) the outstanding principal and accrued interest on the Notes as
of the date of termination (in the event Lessee elects to purchase only a
portion of the Campus payment of the outstanding principal and accrued interest
on the Notes shall be prorated to reflect the portion of the Campus being
purchased).
(b) The Lessee shall give written notice to the Lessor (which may be
contained in the certificate referred to in Section 11.1. hereof):
(i) declaring the Lessee's election to purchase the Campus; and
<PAGE>
(ii) fixing the date of closing such purchase (the "Date of
Conveyance"), which shall be the date on which this Lease Agreement is to be
terminated.
(c) To determine the fair market value, each party shall engage and
appoint an appraiser, with a an MAI, or comparable professional designation, to
conduct an appraisal of the fair market value of the Campus. These appraisals
shall be exchanged simultaneously. For purposes of the appraisal, the Campus
shall be valued as though the Campus was not encumbered by this Lease Agreement.
If the difference between the two appraisals is 10% or less of the lesser of the
two amounts so determined, then the arithmetic average of the two amounts shall
be the price determined by appraisal. If the difference exceeds the 10%, then
the two appraisers shall obtain a third appraisal (the cost thereof to be shared
equally by the Lessor and the Lessee), utilizing the same methodology and this
appraisal shall be completed within thirty (30) calendar days of its engagement.
The two valuations which are closest together shall be arithmetically averaged
and this amount will be the fair market value of the Campus.
Section 11.4. Conveyance on Purchase. At the closing of any purchase
----------------------
of the Campus pursuant to Section 11.3 hereof, the Lessor shall, upon receipt
of the purchase price, deliver to the Lessee all necessary documents (i) to
convey to the Lessee good and marketable fee simple title to the Campus free and
clear of all tenancies, liens, encumbrances, restrictions and easements except
those set forth in the title insurance policy issued at the request of the
Lessor on the Delivery Date, and such others as the Lessee may accept; and (ii)
to release and convey to the Lessee all of the Lessor's rights and interest in
and any rights of action or any future Net Proceeds of insurance or condemnation
awards with respect to the Campus. The deed to be delivered by Lessor shall be
of the same type which the Lessor received upon the purchase of the Campus and
in the usual form, suitable for recording. The Lessee shall pay all state and
local documentary taxes imposed upon the transfer of the real estate and the
cost of the preparation of the deed. The Lessee shall also pay for any
examination of title, the costs of any loan obtained in connection with its
purchase of the Campus and all its reasonable fees and costs incurred in
connection with the closing, including (except as provided in Section 11.3(c))
those of the Lessor in connection with the conveyance of the Campus pursuant to
this Section 11.4.
<PAGE>
ARTICLE XII
ARBITRATION
Section 12.1. General Provision. In any dispute arising out of the
-----------------
terms and covenants of this Lease Agreement or any other Lease Document, such
matter shall be determined by arbitration, such arbitration to be the sole and
exclusive remedy for settlement of such dispute (except for proceedings to
enforce the arbiters' determination), and such arbitration shall be conducted in
the manner specified in this Article and under prevailing arbitration law.
Section 12.2. Selection. The party desiring such arbitration shall
---------
give written notice to that effect to the other party stating in reasonable
detail the issue(s) to be arbitrated, and shall in such notice appoint a
disinterested person of recognized competence in the field involved as arbiter
on its behalf. Within ten (10) calendar days thereafter, the other party shall
by written notice to the first party appoint a second disinterested person of
recognized competence in such field as arbiter on its behalf. The arbiters thus
appointed shall appoint a third disinterested person of recognized competence in
such field, and such three arbiters shall as promptly as possible determine such
matter; provided, however, that:
(a) if the second arbiter shall not have been appointed as aforesaid,
the first arbiter shall proceed to determine such matter; and
(b) if within five (5) business days after the appointment of the
second arbiter the two arbiters appointed by the parties shall be unable to
agree upon the appointment of a third arbiter, they shall give written notice of
such failure to the parties, and, if the parties fail to agree upon the
selection of such third arbiter within five (5) business days after the arbiters
appointed by the parties have notified the parties of their failure to agree,
either of the parties, upon written notice to the other party hereto, may
request such appointment by the then President of the West Virginia State Bar
(or any successor organization), or in his absence, refusal, failure or
inability to act, may apply for such appointment to the chief justice of the
West Virginia Supreme Court of Appeals.
Lessor and Lessee shall each be entitled to present evidence and
argument to the arbiters, which shall be done at a presentation before the
arbiters to take place within a reasonable time (but not more than thirty (30)
calendar days) after the arbiters have been selected. For purposes of this
Section 12.2, an arbiter shall conclusively be deemed "disinterested" if such
arbiter is not then, and was not at any prior time, an officer, director,
trustee, employee, partner, shareholder or immediate relative of the party
appointing him, nor any immediate relative of any such officer, director,
trustee, employee, partner, or shareholder. Any third arbiter appointed by
agreement between the two appointed arbiters or by agreement between the parties
shall be conclusively presumed to be "disinterested".
<PAGE>
Section 12.3. Rulings. The determination of the majority of the
-------
arbiters, or of the sole arbiter, as the case may be, shall be conclusive upon
the parties, and judgment upon the same may be entered in any court having
jurisdiction thereof. Such ruling shall be declaratory of the respective rights
of the affected parties under this Lease and shall not in itself be a
determination of any default. The arbiters, or the sole arbiter, as the case
may be, shall give written notice to the parties stating their or his
determination, and shall furnish to each party a signed copy of such
determination. If a majority of the arbiters shall fail to determine any dispute
within thirty (30) calendar days after the presentation of argument and evidence
of the parties, then, instead of such arbitration, either party shall be
entitled to seek a judicial determination of the manner in issue in a court of
competent jurisdiction.
Section 12.4. Fees. Each party shall pay the fees and expenses of
----
the arbiter appointed by such party and one-half of the fees and expenses of the
third arbiter, if any. Each party shall be responsible for its own legal fees
and expenses incurred for any dispute which is subject to arbitration.
Section 12.5. Extension of Time Pending Arbitration. Anything in
-------------------------------------
this Lease Agreement to the contrary notwithstanding, whenever under the
provisions of this Lease Agreement Lessee is required to make any payment with
the express exception of rent payable under Sections 5.3 and 5.4, or to perform
any act or thing at a specified time or within a specified time limit, and any
such payment or performance is subject to arbitration under this Article, such
time or time limit, as the case may be, shall be and be deemed to be extended by
the period consumed by the institution, conduct, and prosecution to final
conclusion of any arbitration concerning or relating to such payment or
performance. Provided, however, that any payment by Sections 5.3 and 5.4 that is
not a scheduled monthly payment due and payable specified under Sections 5.3 and
5.4, may be placed in escrow until final conclusion of the arbitration.
<PAGE>
ARTICLE XIII
COVENANTS, CONDITIONS AND RESTRICTIONS; PARK MASTER PLAN
Section l3.l. Park Covenants, Conditions and Restrictions/Master
--------------------------------------------------
Plan. The Lessor and the Lessee shall, as soon as possible, but in any event
not later than the Delivery Date, jointly approve the Covenants, Conditions and
Restrictions on the Site and on the Park, and shall also jointly approve the
Park Master Plan. The Lessor and the Lessee agree that the Covenants,
Conditions and Restrictions and the Park Master Plan must include the following
provisions, as appropriate:
(a) Any modification, amendment or change in the Covenants, Conditions
and Restrictions applicable to either the Site, or the balance of the Park must
have the written approval of Lessee.
(b) Prior to any further development of the Park other than that
portion leased to the Lessee, the Lessor must obtain from the Lessee written
approval of the Park Master Plan.
(c) Due to the Lessee's occupancy of a majority of the net usable
acres of the Park, the Lessee shall have a voting position on the architectural
control committee for the Park, or similar entity serving the same purpose, that
shall not be less than 51 %.
(d) The Covenants, Conditions and Restrictions and the Park Master
Plan shall provide for "best practices" with regard to all developments, and
best environmental practices for storm sewers, landscaping buffering and all
green space, recreational space and wetlands.
(e) All buildings and landscaping in the balance of the Park shall
utilize a "campus-like" setting that is in compliance with the Park Master Plan.
(f) The Park Master Plan and Covenants, Conditions and Restrictions
shall be jointly prepared by the Lessor and the Lessee, and in all respects
shall be consistent with the common goal of the State, the Lessor and the Lessee
that the Park shall be the best designed and most attractive
commercial/industrial park in the State.
Section 13.2. Signage. In addition to the signs shown on the Plans
-------
and Specifications, the Lessee may erect additional signs at the Site, provided
that such sign or signs are in compliance with the Covenants, Conditions and
Restrictions.
<PAGE>
ARTICLE XIV
SUBORDINATION/ESTOPPEL
Section 14.1. Lease Subordinate. Provided Lessee receives a non-
-----------------
disturbance agreement substantially in the form attached hereto as Exhibit G,
this Lease Agreement shall be subject and subordinate to the current credit line
deed of trust in the amount of $40,000,000 in favor of United National Bank, and
any future mortgages, deeds of trust or ground leases and any, amendments,
replacements, renewals and extensions thereof. The Lessee agrees at any time
hereafter, within fifteen (15) calendar days following demand, to execute and
deliver any instruments, releases or other documents that may be reasonably
required for the purpose of subjecting and subordinating the Lease Agreement, as
above provided, to the lien of any such mortgage, deed of trust or ground lease,
provided such documents shall be reasonably acceptable to the Lessee in form and
substance. The Lessor shall provide written notice of the existence of this
Lease Agreement to any prospective mortgagee or other secured party of the
Campus prior to encumbering the Campus.
Section 14.2. Attornment. Subject to the terms of this Article XIV,
----------
in the event the holder of any mortgage, deed of trust or ground lease shall at
any time elect to have this Lease Agreement constitute a prior and superior lien
to its mortgage, deed of trust or ground Lease, then, and in such event, upon
any such holder or landlord notifying the Lessee to that effect in writing, this
Lease Agreement shall be deemed prior and superior in lien to such mortgage,
deed of trust, or ground lease, whether this Lease Agreement is dated prior or
subsequent to the date of such mortgage, deed of trust or ground lease and the
Lessee shall execute such attornment agreement as may be reasonably requested by
said holder or landlord, provided that the form and content thereof are
reasonably acceptable to the Lessee and contain recognition and non-disturbance
covenants satisfactory to the Lessee.
Section 14.3. Lessee's Notice of Default. The Lessee agrees that,
--------------------------
provided the mortgagee, ground landlord or trust deed holder under any mortgage,
ground lease, deed of trust or other security instrument ("Mortgagee") shall
have notified the Lessee in writing (by the way of a notice of assignment of
Lease or otherwise) of its address, the Lessee shall give such Mortgagee,
simultaneously with delivery of notice to the Lessor, by registered or certified
mail, a copy of any such notice of default served upon the Lessor. The Lessee
further agrees that said Mortgagee shall have the right to cure any alleged
default during the same period that the Lessor has to cure such default.
Section 14.4. Estoppel Certificates. The Lessor and the Lessee
---------------------
shall, each without charge at any time and from time to time, within fifteen
(15) calendar days after written request by the other party, certify, to the
extent true, by written instrument, duly executed, acknowledged and delivered to
any mortgagee, assignee of a mortgagee, proposed mortgagee, or to any purchaser
or proposed purchaser, or to any other person transacting business with the
Lessor or the Lessee and relating to the Campus as follows:
<PAGE>
(a) That this Lease Agreement is unmodified and in full force and
effect or, if there have been modifications, that the same is in full force and
effect, as modified, and stating the modifications;
(b) The dates to which Rent has been paid in advance;
(c) Whether or not there are then existing any breaches or defaults by
such party or the other party known by such party under any of the covenants,
conditions, provisions, terms or agreements of this Lease Agreement, and
specifying such breach of default, if any, or any setoffs or defenses against
the enforcement of any covenant, condition, provision, term or agreement of this
Lease Agreement (or of any guaranties) upon the part of Lessor or Lessee (or any
guarantor), as the case may be, to be performed or complied with (and, if so,
specifying the same and the steps being taken to remedy the same); and
(d) Such other statements or certificates as the Lessor, the Lessee or
any mortgagee may reasonably request.
It is the intention of the parties hereto that any statement delivered
pursuant to this Section 14.4 may be relied upon by any such parties transacting
business with the Lessor or the Lessee and relating to the Campus. If the Lessor
or the Lessee does not deliver such statement to the requesting party within
such fifteen (15) day period, and such failure continues for five (5) calendar
days following receipt of a second notice stipulating that such continuing
failure shall have the consequences set forth herein, the requesting party, and
any applicable party transacting business relative to the Campus with the
requesting party, may conclusively presume and rely upon the following facts:
(i) that the terms and provision of this Lease Agreement have not been changed
except as otherwise represented by the requesting party; (ii) that the Lease
Agreement has not been canceled or terminated and is in full force and effect,
except as otherwise represented by the requesting party; (iii) that the current
amount of the Rent is as represented by the requesting party; (iv) that there
have been no subleases or assignments of the Lease Agreement; (v) that not more
than one month's rent or other charges have been paid in advance; and (vi) that
the requesting party is not in default under the Lease Agreement. In such
event, the non-requesting party shall be estopped from denying truth of such
facts, but shall be entitled to recover damages from the requesting party to the
extent such facts are not true and the non-requesting party incurs actual
damages as a result of such untrue facts.
<PAGE>
ARTICLE XV
MISCELLANEOUS
Section 15.1. Notice. All notices, certificates and other
------
communications hereunder shall be in writing and shall be deemed given if
delivered personally, by confirmed facsimile transmission (with follow-up hard
copy) or one (1) day after sent by guaranteed overnight delivery, or five (5)
calendar days after mailed by registered or certified mail, postage prepaid,
return receipt requested, addressed as follows or to such other address as any
party may specify by like notice (provided, however, that notices of a change of
address or person to whom notice shall be given shall be made in accordance with
this paragraph and shall be effective only upon receipt thereof):
To the Lessor:
Parkersburg - Wood County Area Development Corporation
P.O. Box 1683
408 Juliana Street
Parkersburg, West Virginia 26102
Attention: President and Chief Executive Officer
Fax No.: (304) 485-5219
To the Lessee:
Coldwater Creek, Inc.
One Coldwater Creek Drive
Sandpoint, Idaho 83864
Attention: Vice President and Chief Financial Officer
Fax No.: (208)265-7108
Section 15.2. Binding Effect. This Lease Agreement shall inure to
--------------
the benefit of and shall be binding upon the parties and their respective
successors and assigns.
Section 15.3. Renewal Options. The Lessee shall have the right to
---------------
renew and extend the term of this Lease Agreement for the Renewal Terms as
hereinafter provided, subject to the following terms and conditions:
The Lessee may extend this Lease Agreement for four (4) Renewal Terms
of five (5) years each by the Lessee giving the Lessor notice, in writing, of
its intent to exercise such renewal option (a "Renewal Notice"), no less than
six (6) months prior to the expiration of the Lease Term or the immediately
preceding Renewal Term, as applicable. Such Renewal Term(s) shall commence
immediately upon the expiration of the Lease Term or the preceding Renewal Term,
and upon exercise of each renewal option the expiration date of the term shall
automatically become the last day of the applicable Renewal Term.
<PAGE>
The exercise by the Lessee of the renewal option(s) set forth herein
must be made, if at all, by delivery of a Renewal Notice to the Lessor on or
before the dates set forth-above. Once the Lessee has exercised any such renewal
option, the Lessee may not thereafter revoke the exercise of such option. At
the Lessor's election, the Lessee's rights to Renewal Terms as provided under
this Section shall terminate and be of no further force or effect if (i) an
Event of Default exists under the Lease Agreement at the time the Lessee
attempts to exercise its renewal option, or (ii) the Lessee defaults under any
provision of the Lease Agreement after exercising its renewal option and such
default continues beyond any applicable period provided in this Lease Agreement.
Rent for each year under the Renewal Terms shall be at the per square
foot rate equal to 90% of the "Fair Market Rate." The Fair Market Rate shall be
agreed upon by Lessor and the Lessee within fifteen (15) calendar days of the
date on which the Lessee exercised its renewal option. In the event the parties
are unable to timely agree on the Fair Market Rate, the dispute shall be
resolved by arbitration pursuant to Article XII.
Except as set forth herein, the leasing of the Campus for the Renewal
Term(s) shall be upon the same terms and conditions as are applicable for the
initial term and any subsequent Renewal Term(s), and shall be upon and subject
to all of the provisions of this Lease Agreement.
Section 15.4. Severability. In the event any provision of this Lease
------------
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof.
Section 15.5. Amendments, Changes and Modifications. This Lease
-------------------------------------
Agreement may not be amended, changed, modified, altered or terminated except in
a writing executed by the parties hereto.
Section 15.6. Execution of Counterparts. This Lease Agreement may be
-------------------------
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
Section 15.7. Broker. Lessor and Lessee represent to each other that
------
each has not entered into any agreement or otherwise dealt with any brokers or
finders in connection with this Lease other than Cushman Realty Corporation, Los
Angeles, California, who represents it is representing Lessee and whose
commission shall be paid by Lessee. Lessee shall protect, defend, indemnify and
hold Lessor harmless against any claims for brokerage or other commission
arising by reason of a breach of the aforesaid representation and warranty, for
any action or inaction on the part of the Lessee.
Section 15.8. Applicable Law. This Lease Agreement shall be governed
--------------
exclusive by the applicable laws of the State without regard or reference to its
conflict of laws principles.
<PAGE>
Section 15.9. Legal Costs. The parties hereto agree that each
-----------
respective party shall be responsible for any legal fees and/or expenses
incurred by said party in any way or manner arising out of this Lease Agreement,
except for fees and/or expenses incurred which are reimbursable pursuant to
Article 8.2 of this Lease Agreement.
Section 15.10. Recordation. The parties hereto, on the request of
-----------
either of them, shall enter into a memorandum of this Lease Agreement, in
recordable form, setting forth the identities of the Lessor and the Lessee, the
date of the expiration of the Lease Term, and such other information upon which
the Lessor and the Lessee shall agree. Upon any extensions hereof, an amendment
to such agreement shall be executed and recorded reflecting such renewal and
expiration date thereof.
Section 15.11. Survival of Obligations. This Lease Agreement shall
-----------------------
survive the performance of the obligations of the Lessee to make payments
required by Sections 5.3 and 5.4 and all indemnities shall survive the foregoing
and any termination or expiration of this Lease Agreement.
Section 15.12. Table of Contents and Section Headings Not
------------------------------------------
Controlling. The Table of Contents and the headings of the several Sections in
this Lease Agreement have been prepared for convenience of reference only and
shall not control or affect the meaning of or be taken as an interpretation of
any provision of this Lease Agreement.
Section 15.13. Disclaimer of Relationship. Nothing contained in this
--------------------------
Lease Agreement, nor any act of Lessor or Lessee, shall be deemed or construed
by any person to create any relationship of limited or general partnership or
joint venture between the Lessor and the Lessee, nor any third party beneficiary
in favor of any person.
Section 15.14. Further Assurances. During the Construction Period,
------------------
the Lessee shall cooperate with Lessor in providing such information and other
assistance as Lessor shall request and which, in Lessee's sole discretion, shall
be necessary to implement the permanent financing of the Campus.
<PAGE>
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this Lease
Agreement to be executed in their respective names by their duly authorized
officers, all as of the date hereof.
PARKERSBURG - WOOD COUNTY AREA
DEVELOPMENT CORPORATION
By: /s/ James R. Kinnett, II
---------------------------------------
Name: James R. Kinnett, II
Title: President and CEO
COLDWATER CREEK, INC.
By: /s/ Donald A. Robson
---------------------------------------
Name: Donald A. Robson
Title: Chief Financial Officer
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1. Definitions 3
-----------
Section 1.2. Rules of Construction 5
---------------------
ARTICLE II
REPRESENTATIONS AND COVENANTS
Section 2.1. Representations and Covenants of Lessor 7
---------------------------------------
Section 2.2. Representations and Covenants of Lessee 8
---------------------------------------
ARTICLE III
TITLE INSURANCE
Section 3.1. Title 10
-----
Section 3.2. Title Insurance 10
---------------
ARTICLE IV
CONSTRUCTION AND EQUIPPING OF
DISTRIBUTION CENTER
Section 4.1. Plans and Specifications for Distribution Center 11
------------------------------------------------
Section 4.2. Construction and Equipping of Distribution Center by Lessor 11
-----------------------------------------------------------
Section 4.3. Purchases of Building Materials, Supplies and Fixtures 11
------------------------------------------------------
Section 4.4. Change Orders 11
-------------
Section 4.5. Inspections During Construction Period 12
--------------------------------------
Section 4.6. Insurance During Construction Period 12
------------------------------------
ARTICLE V
DISMISING CLAUSES AND RENTAL PROVISIONS
Section 5.1. Demise of Campus 13
-----------------
Section 5.2. Duration of Lease Term; Quiet Enjoyment 13
---------------------------------------
Section 5.3. Basic Rent 13
----------
Section 5.4. Additional Rent 14
---------------
Section 5.5. Prepaid Rent 14
------------
Section 5.6. Payments by Lessee to Lessor 14
----------------------------
Section 5.7. Security 14
--------
Section 5.8. Market Rental 15
-------------
ARTICLE IV
</TABLE>
<PAGE>
<TABLE>
<S> <C>
MAINTENANCE, SERVICES, MODIFICATIONS AND ALTERATIONS,
TAXES AND INSURANCE
Section 6.1. Maintenance and Modifications by the Lessee 16
-------------------------------------------
Section 6.2. Maintenance of Common Areas 16
---------------------------
Section 6.3. Installation of Additional Fixtures 16
-----------------------------------
Section 6.4. Replacement Parts 16
-----------------
Section 6.5. Taxes, Assessments and Utility Charges 17
--------------------------------------
Section 6.6. Insurance Required 18
------------------
Section 6.7. Additional Provisions Respecting Insurance 19
------------------------------------------
Section 6.8. Application of Net Proceeds of Insurance 19
----------------------------------------
Section 6.9. Right of Lessor to Pay Taxes, Insurance Premiums and Other
----------------------------------------------------------
Charges 19
-------
Section 6.10. Alterations 20
-----------
ARTICLE VII
DAMAGE, DESTRUCTION AND CONDEMNATION
Section 7.1. Damage or Destruction of the Campus 21
-----------------------------------
Section 7.2. Condemnation 21
------------
Section 7.3. Condemnation of Lessee-Owned Property 22
-------------------------------------
ARTICLE VIII
SPECIAL COVENANTS
Section 8.1. No Warranty of Condition or Suitability of Purpose 23
--------------------------------------------------
Section 8.2. Hold Harmless Provisions 24
------------------------
Section 8.3. Right to Inspect Campus 25
-----------------------
Section 8.4. Lessee to Maintain Its Existence 25
--------------------------------
Section 8.5. Qualification in State 25
----------------------
Section 8.6. Compliance With Orders, Ordinances. Etc 25
---------------------------------------
ARTICLE IX
RELEASE OF CERTAIN LAND; ASSIGNMENTS AND SUBLEASING
Section 9.1. Restriction on Sale; Release of Certain Land 27
--------------------------------------------
Section 9.2. Assignment by Lessor 27
--------------------
Section 9.3. Assignment and Subleasing by Lessee 27
-----------------------------------
ARTICLE X
EVENTS OF DEFAULT AND REMEDIES
Section 10.1. Events of Default Defined 29
-------------------------
Section 10.2. Lessor's Remedies on Default by Lessee 30
--------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 10.3. Lessee's Remedies on Default by Lessor 30
--------------------------------------
Section 10.4. Remedies Cumulative 31
-------------------
Section 10.5. No Additional Waiver Implied by One Waiver 31
------------------------------------------
Section 10.6. Liquidated Damages 31
------------------
ARTICLE XI
EARLY TERMINATION OF LEASE AGREEMENT;
OPTION TO PURCHASE IN FAVOR OF LESSEE
Section 11.1. Early Termination of Lease Agreement 32
------------------------------------
Section 11.2. Conditions to Early Termination of Lease Agreement 32
--------------------------------------------------
Section 11.3. Option to Purchase 32
------------------
Section 11.4. Conveyance on Purchase 33
----------------------
ARTICLE XII
ARTIBRATION
Section 12.1. General Provision 34
-----------------
Section 12.2. Selection 34
---------
Section 12.3. Rulings 35
-------
Section 12.4. Fees 35
----
Section 12.5. Extension of Time Pending Arbitration 35
-------------------------------------
ARTICLE XIII
COVENANTS, CONDITIONS AND RESTRICTIONS; PARK MASTER PLAN
Section l3.l. Park Covenants, Conditions and Restrictions/Master Plan 36
-------------------------------------------------------
Section 13.2. Signage 36
-------
ARTICLE XIV
SUBORDINATION/ESTOPPEL
Section 14.1. Lease Subordinate 37
-----------------
Section 14.2. Attornment 37
----------
Section 14.3. Lessee's Notice of Default 37
--------------------------
Section 14.4. Estoppel Certificates 37
---------------------
ARTICLE XV
MISCELLANEOUS
Section 15.1. Notice 39
------
Section 15.2. Binding Effect 39
--------------
Section 15.3. Renewal Options 39
---------------
Section 15.4. Severability 40
------------
Section 15.5. Amendments, Changes and Modifications 40
-------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 15.6. Execution of Counterparts 40
-------------------------
Section 15.7. Broker 40
------
Section 15.8. Applicable Law 41
--------------
Section 15.9. Legal Costs 41
-----------
Section 15.10. Recordation 41
-----------
Section 15.11. Survival of Obligations 41
-----------------------
Section 15.12. Table of Contents and Section Headings Not Controlling 41
------------------------------------------------------
Section 15.13. Disclaimer of Relationship 41
--------------------------
Section 15.14. Further Assurances 41
------------------
</TABLE>
<PAGE>
[FORM OF CERTIFICATE OF ACCEPTANCE]
Pursuant to and as required by the LEASE AGREEMENT dated as of June
12, 1998 (the "Lease Agreement") between PARKERSBURG-WOOD COUNTY AREA
DEVELOPMENT CORPORATION, as Lessor (the "Lessor"), and COLDWATER CREEK, INC., as
Lessee (the "Lessee"). The Lessee hereby certifies that the status of work on
the Campus is as described in the Plans and Specifications and the Certificate
of Substantial Compliance tendered by the contractor for the work, and that it
hereby accepts the Campus. Terms used herein shall have the meanings ascribed
to them in the Lease Agreement.
The Lessee hereby represents and warrants to the Lessor that on the
date hereof:
(a) No Default or Event of Default under the Lease
Agreement has occurred and is continuing.
(b) All conditions to the Delivery Closing and for leasing
of the Campus under the Lease Agreement have been satisfied.
(c) The Lessee has obtained, and there are in full force
and effect, such insurance policies with respect to the Campus as
are required to be maintained on the date hereof under the terms
of the Lease Agreement.
(d) The Lessee hereby reconfirms its obligations and
representations set forth in the Lease as if made on the date
hereof, including without limitation, its obligation to pay all
Rent under the Lease without any Abatements for any reason
whatever, including any defect in the Campus, or in the Lessor's
title thereto, and its representations set forth in Section 2
thereof as to the lack of any representations or warranties by
Lessor with respect to the Campus.
IN WITNESS WHEREOF, the Lessee has caused this Certificate of
Acceptance to be duly executed by its officers thereunto duly authorized this
____ day of __________, 1999.
COLDWATER CREEK, INC.
By:
-------------------------------
Its:
-------------------------------
<PAGE>
CHS/164640
EXHIBIT A
<PAGE>
EXHIBIT B
LEGAL DESCRIPTION
OF 60 ACRE SITE
---------------
<PAGE>
DEMISED PREMISES-DISTRIBUTION CENTER
------------------------------------
PARCEL ONE 58.714 AC. (DISTRIBUTION CENTER):
- ----------
BEGINNING N 54 (degrees) 26' 40" E 77.32' FROM THE NORTHWESTERLY CORNER OF
PWCADC 1.334 AC. R/2 TRACT AND THE END OF WV 14/25, THENCE N 33 (degrees) 03'
35" W 845.77', THENCE N 35 (degrees) 19' 02" E 1,315.44', THENCE N 88 (degrees)
27' 35" E 898.18' TO THE C/A R/W LINE OF I-77, THENCE WITH THE C/A R/W LINE OF
I-77 THE FOLLOWING S 24 (degrees) 52' 04" E 609.76', THENCE S 14 (degrees) 30'
22" E 567.52', THENCE S 04 (degrees) 11' 18" W 95.00', THENCE LEAVING THE C/A
R/W OF I-77 AND WITH THE LINES OF PWCADC 21.055 AC. TRACT S 70 (degrees) 00' 00"
W 565.00', THENCE N 20 (degrees) 00' 00" W 220.00', THENCE S 70 (degrees) 00'
00" W 130.00', THENCE S 35 (degrees) 19' 02" W 275.00', THENCE S 54 (degrees)
40' 58" E 80.0', THENCE S 20 (degrees) E 245.0', THENCE S 35 (degrees) 19' 02" W
357.64' TO THE NORTHERLY R/W LINE OF THE 1.334 AC. R/W, THENCE LEAVING THE
PWCADC 21.055 AC. TRACT LINES AND WITH THE NORTHERLY R/W LINE OF THE 1.334 AC
R/W N 69 (degrees) 21' 26" W 204.82', THENCE N 52 (degrees) 03' 35" W 287.00',
THENCE S 81 (degrees) 26' 25" W 228.11', TO THE PLACE OF BEGINNING, CONTAINING
58.714 AC.
PARCEL TWO 1.334 AC. (INGRESS AND EGRESS RIGHT OF WAY):
- ----------
BEGINNING IN THE LINE OF STILES AND THE PWCADC, SAID POINT BEING N-35 33'
20" W 859.09' FROM THE SOUTHWESTERLY CORNER OF THE PWCADC 83.13 ACRE TRACT,
THENCE N-35 33' 20" W 98.81'; THENCE N-54 26' 40" 77.32'; THENCE N-81 26' 25" E
228.11; THENCE S-52 03' 35" E 287': THENCE S-69 21' 26" E TO A POINT IN THE LINE
OF A 21.055 ACRE TRACT; THENCE WITH SAID TRACT THE FOLLOWING COURSES, S-36 19'
02" W 72.56', N-69 21' 26" W 197.14', N-52 03' 35" W 240', S-81 26' 25" W 176'
AND S-54 26' 40" W 73.01' TO THE PLACE OF BEGINNING, CONTAINING 1.334 ACRES.
THIS R/W IS FOR INGRESS AND EGRESS TO THE 21.055 ACRE TRACT FROM W. VA. RT.
14/25. LESSEE IS HEREBY GRANTED USE OF THIS RIGHT OF WAY FOR INGRESS AND EGRESS
TO PARCEL ONE, DESCRIBED ABOVE. LESSOR RETAINS THE RIGHT TO USE THIS RIGHT OF
WAY FOR INGRESS AND EGRESS TO THE 21.055 ACRE TRACT.
<PAGE>
EXHIBIT C
SUMMARY OF PLANS AND SPECIFICATIONS
-----------------------------------
<PAGE>
EXHIBIT D
BASIC RENT
----------
<TABLE>
<CAPTION>
Total Rent Annual Monthly
Project Cost Factor Rent Rent
------------ ------- ------------- -----------
<S> <C> <C> <C> <C>
Years 1-15 $24,650,000 10.20% $2,513,210.00 $209,434.17
Years 16-20 24,650,000 6.55% 1,614,430.00 134,535.83
</TABLE>
This rent payment schedule is subject to change and shall be agreed to by the
Lessor and the Lessee on the Closing Date. Adjustments shall be required due to
the following factors:
(1) Revisions to Total Project Cost.
(2) Adjustment to the Rent Factor due to interest rate changes until Delivery
Date.
<PAGE>
EXHIBIT E
CONSTRUCTION PERIOD
LETTER OF CREDIT
----------------
<PAGE>
FORM OF IRREVOCABLE STANDBY LETTER OF CREDIT
CONSTRUCTION PHASE
IRREVOCABLE STANDBY LETTER OF CREDIT NO. _______
ISSUED IN: Boise, Idaho
BENEFICIARY: APPLICANT:
Parkersburg-Wood County Area Coldwater Creek, Inc.
Development Corporation One Coldwater Creek Drive
408 Juliana Street Sandpoint, Idaho 83864
Parkersburg, WV 26102
Attn: James R. Kinnett, II
AMOUNT: USD _________________________ DATE AND PLACE OF EXPIRY:
________________________________ THOUSAND _____________
AND 00/100 UNITED STATES DOLLARS Our counters.
CREDIT AVAILABLE WITH:
First Security Bank, N.A.
International Department
999 Main Street, 3rd Floor
Boise, Idaho 83702
BY: PAYMENT
AVAILABLE BY DRAFTS AT SIGHT DRAWN ON:
First Security Bank, N.A.
Boise, Idaho
By order of our client: Coldwater Creek, Inc., One Coldwater Creek Drive,
Sandpoint, Idaho 83864, we hereby issue in favor of Parkersburg-Wood County Area
Development Corporation, our Irrevocable Standby Letter of Credit No. S-XXXXXXX-
XXXX in the maximum amount of USD ________________ ($__________), effective
_____________.
Expiring ____________, at our counters: First Security Bank, N.A., 999 Main
Street, 3rd Floor, Boise, Idaho 83702.
Partial drawings and Multiple drawings are acceptable and demand for
payment hereunder shall not exceed an aggregate amount up to USD _______________
maximum and each drawing honored by the bank hereunder shall reduce the maximum
amount that may be drawn.
<PAGE>
The amount of this Standby Letter of Credit is available to you against
presentation of your draft(s) drawn on us at sight bearing on the face thereof
the clause:
"DRAWN UNDER FIRST SECURITY BANK, N.A.,
IRREVOCABLE LETTER OF CREDIT NO. XXXX"
accompanied by the original of this Letter of Credit and the following
documents:
1. Beneficiary's written statement signed by a person purportedly
authorized by the beneficiary, stating that Coldwater Creek, Inc. is in default
under the lease agreement entered into on June 12, 1998 between Coldwater
Creek, Inc., the lessee, and Parkersburg-Wood County Area Development
Corporation, the lessor.
2. Signed statement from Parkersburg-Wood County Area Development
Corporation of the amount due by Lessee under the Lease and that demand for
payment of such amount has been made by Parkersburg-Wood Area Development
Corporation of Coldwater Creek, Inc. and that such payment was not paid in full
within five (5) days of the demand.
This Letter of Credit is transferable and assignable upon presentation of
Beneficiary's Transfer Demand in the format of attached "Annex A". Transfers
and assignments are to be effected without charge to either the beneficiary, or
the transferee/assignee of this Letter of Credit or the proceeds. First
Security Bank, N.A., its successors and assigns, shall have no right of
reimbursement or right of recourse against Parkersburg-Wood County Area
Development Corporation for any amount(s) drawn under strict compliance of this
Letter of Credit.
In case of partial drawings, First Security Bank, N.A. will endorse the
back of this original Standby Letter of Credit for the amount drawn and return
same to beneficiary for presentation under possible additional drawings up to
the maximum aggregate amount indicated in this Standby Letter of Credit.
This Letter of Credit is subject to the Uniform Customs and Practices for
Documentary Credits (1993 Revision), International Chamber of Commerce,
Publication No. 500 (the "UCP"). This Letter of Credit shall be deemed to be
issued under the laws of the State of West Virginia and shall, as to matters not
governed by the UCP, be governed by and construed in accordance with the laws of
the State of West Virginia.
REIMBURSEMENT INSTRUCTIONS:
PAYMENT TO BE EFFECTED PER YOUR
INSTRUCTION AGAINST CONFORMING
DOCUMENTS PRESENTED AT OUR
COUNTERS.
___________________________________________
Authorized Signature(s)
<PAGE>
CHS/165992
<PAGE>
ANNEX A (TRANSFER DEMAND)
FORM OF IRREVOCABLE STANDBY LETTER OF CREDIT
CONSTRUCTION PHASE
IRREVOCABLE STANDBY LETTER OF CREDIT NO. _______________
TO: First Security Bank, N.A.
International Department
999 Main Street, Third Floor
Boise, Idaho 83702
RE: Instruction to Transfer Letter of Credit No. _________
Ladies and Gentlemen:
For value received, the undersigned beneficiary hereby irrevocably
transfers to:
[NAME OF TRANSFEREE AND ADDRESS]
all rights of the undersigned beneficiary to payment under the above-referenced
letter of credit in the amount of the full unutilized balance hereof. Said
transferee or assigns have succeeded the undersigned as beneficiary of this
letter of credit.
By transfer, all rights of the undersigned beneficiary in such letter of
credit transfer to the transferee and the transferee shall have sole rights as
beneficiary thereof, including sole rights relating to any amendments existing,
or hereafter made.
By its signature the undersigned transferee acknowledges that it has duly
succeeded to __________ ____________________ as beneficiary of this letter of
credit and agrees to be bound by the terms of the letter of credit as if it were
the beneficiary originally appointed hereunder.
The letter of credit is returned herewith, and we ask you to endorse the
transfer on the reverse hereof, and forward directly to the transferee with your
customary notice of transfer. Also please find enclosed our payment of your
applicable transfer fee.
Very truly yours,
_____________________________________________
(Authorized Signature)
<PAGE>
Signature of the above party, duly authorized on behalf of (insert name of
beneficiary),
Authenticated By:
_________________________________________
(Name and Title)
Acknowledged by (Insert Name of Transferee)
as Successor Beneficiary
By:______________________________________
[Insert Name and Title of Authorized Officer)
CHS/165992
<PAGE>
EXHIBIT F
LEASE TERM
LETTER OF CREDIT
----------------
<PAGE>
FORM OF STANDBY LETTER OF CREDIT FOR THE LEASE TERM
COMMENCING AS OF THE DELIVERY DATE
IRREVOCABLE STANDBY LETTER OF CREDIT NO. ______
ISSUED IN: Boise, Idaho
BENEFICIARY: APPLICANT:
Wood County Development Authority Coldwater Creek, Inc.
408 Juliana Street One Coldwater Creek Drive
Parkersburg, WV 26102 Sandpoint, Idaho 83864
Attn: James R. Kinnett, II
AMOUNT: USD _____________ DATE AND PLACE OF EXPIRY:
and 01/100 United States Dollars _______________
Our counters.
CREDIT AVAILABLE WITH:
First Security Bank, N.A.
International Department
999 Main Street, 3rd Floor
Boise, Idaho 83702
BY: PAYMENT
AVAILABLE BY DRAFTS AT SIGHT DRAWN ON:
First Security Bank, N.A.
Boise, Idaho
By order of our client: Coldwater Creek, Inc., One Coldwater Creek Drive,
Sandpoint, Idaho 83864, we hereby issue in favor of Wood County Development
Authority (hereby referred to as the "Development Authority") our Irrevocable
Standby Letter of Credit No. XXXX in the maximum amount of USD
_______________________ ($_________), effective _____________.
Expiring _____________, at our counters: First Security Bank, N.A., 999
Main Street, 3rd Floor, Boise, Idaho 83702, provided, however, that it is a
condition of this Letter of Credit that it shall be automatically extended for
one year from the present or each future date of expiration, unless at least
thirty (30) days prior to any such date of expiration we send you notice in
writing by courier that we elect not to renew this Letter of Credit for such
additional period. This Letter of Credit shall expire full and finally [insert
date to indicate five (5) years from date of issue].
Partial drawings and Multiple drawings are acceptable and demand for
payment hereunder shall not exceed an aggregate amount up to USD _______________
maximum
<PAGE>
and each drawing honored by the bank hereunder shall reduce the maximum amount
that may be drawn.
The amount of this Standby Letter of Credit is available to you against
presentation of your draft(s) drawn on us at sight bearing on the face thereof
the clause:
"DRAWN UNDER FIRST SECURITY BANK, N.A.,
IRREVOCABLE LETTER OF CREDIT NO. XXXX."
accompanied by the original of this Letter of Credit and the following
documents:
1. Beneficiary's written statement signed by a person purportedly
authorized by the beneficiary, stating that Coldwater Creek, Inc. is in default
under the lease agreement entered into on June 12, 1998, between Coldwater
Creek, Inc., the lessee, and Wood County Development Authority, the lessor and
that the default under the Lease is continuing.
2. Signed statement from Wood County Development Authority of the amount
due by Lessee under the Lease and that demand for payment of such amount has
been made by Wood County Development Authority of Coldwater Creek, Inc. and that
such payment was not paid in full within five (5) days of the demand.
This Letter of Credit is transferable and assignable upon presentation of
Beneficiary's Transfer Demand in the format of attached "Annex A". Transfers
and assignments are to be effected without charge to either the beneficiary, or
the transferee/assignee of this Letter of Credit or the proceeds. First
Security Bank, N.A., its successors and assigns, shall have no right of
reimbursement or right of recourse against Wood County Development Authority for
any amount(s) drawn under strict compliance of this Letter of Credit.
In case of partial drawings, First Security Bank, N.A. will endorse the
back of this original Standby Letter of Credit for the amount drawn and return
same to beneficiary for presentation under possible additional drawings up to
the maximum aggregate amount indicated in this Standby Letter of Credit.
This Letter of Credit is subject to the Uniform Customs and Practices for
Documentary Credits (1993 Revision), International Chamber of Commerce,
Publication No. 500 (the "UCP"). This Letter of Credit shall be deemed to be
issued under the laws of the State of West Virginia and shall, as to matters not
governed by the UCP, be governed by and construed in accordance with the laws of
the State of West Virginia.
REIMBURSEMENT INSTRUCTIONS:
PAYMENT TO BE EFFECTED PER YOUR
INSTRUCTIONS AGAINST CONFORMING
DOCUMENTS PRESENTED AT OUR
COUNTERS.
<PAGE>
____________________________________________
Authorized Signature(s)
<PAGE>
ANNEX A (TRANSFER DEMAND)
IRREVOCABLE STANDBY LETTER OF CREDIT NO. _______
TO: First Security Bank, N.A.
International Department
999 Main Street, Third Floor
Boise, Idaho 83702
RE: Instruction to Transfer Letter of Credit No. ________
Ladies and Gentlemen:
For value received, the undersigned beneficiary hereby irrevocably
transfers to:
[NAME OF TRANSFEREE AND ADDRESS]
all rights of the undersigned beneficiary to payment under the above-referenced
Letter of Credit in the amount of the full unutilized balance hereof. Said
transferee or assigns have succeeded the undersigned as beneficiary of this
Letter of Credit.
By transfer, all rights of the undersigned beneficiary in such Letter of
Credit transfer to the transferee, and the transferee shall have sole rights as
beneficiary thereof, including sole rights relating to any amendments existing,
or hereafter made.
By its signature the undersigned transferee acknowledges that it has duly
succeeded to _________ _________________________________ the terms of this
Letter of Credit and agrees to be bound by the terms of the Letter of Credit as
if it were the beneficiary originally appointed hereunder.
The Letter of Credit is returned herewith, and we ask you to endorse the
transfer on the reverse hereof, and forward directly to the transferee with your
customary notice of transfer. Also please find enclosed our payment of your
applicable transfer fee.
Very truly yours,
_____________________________________________
(Authorized Signature)
Signature of the above Party, Duly Authorized
To Act on Behalf of (Insert Name of Beneficiary),
Authenticated By:
_______________________________________
(Name and Title)
<PAGE>
Acknowledged by (Insert Name of Transferee)
As Successor Beneficiary
By:___________________________________
(Insert Name and Title of Authorized Officer)
<PAGE>
EXHIBIT G
NON-DISTURBANCE AGREEMENT
-------------------------
<PAGE>
NON-DISTURBANCE AND
-------------------
ATTORNMENT AGREEMENT
--------------------
THIS AGREEMENT is made and entered into as of this ___ day of ____,
____ by and between ______________________, ("Mortgagee") and Coldwater Creek,
Inc. ("Lessee").
WHEREAS, the Lessee has entered into that certain Lease Agreement
dated June 12, 1998 with the Parkersburg-Wood County Area Development
Corporation (the "Lessor") covering the Campus as defined in the Lease
Agreement. Capitalized terms not otherwise defined herein shall have the same
meaning as ascribed to them in the Lease Agreement; and
WHEREAS, Mortgagee has agreed that the Lease Agreement is now and
shall remain subject and subordinate to the operation and effect of that certain
Deed of Trust which has heretofore been or will be recorded in the land records
of Wood County, West Virginia; and
W I T N E S S E T H:
-------------------
NOW, THEREFORE, for and in consideration of the mutual covenants
hereinafter set forth, Mortgagee and Lessee hereby covenant and agree as
follows:
I. Non-disturbance and Attornment. The Lease Agreement shall
------------------------------
not be terminated, nor shall Lessee's use, possession or enjoyment of the Campus
be interfered with, nor shall the Lease Agreement hold estate granted by the
Lease Agreement be affected in any other manner, in any foreclosure or other
action or proceeding instituted under or in connection with the Security
Documents or in Mortgagee's possession of the Campus; provided, however, that
if, at the time of, or at any time subsequent to, any such foreclosure action, a
default exists and such a default has continued to exist for such period of time
(after such applicable notice and grace period, if any, as required by the Lease
Agreement) that would entitle Lessor under the Lease Agreement to terminate the
Lease Agreement or would entitle such Lessor to dispossess Lessee thereunder, a
purchaser of the Campus upon or after such foreclosure may exercise the rights
of Lessor, by reason of such default or event, to terminate the Lease Agreement
or to dispossess thereunder; and further provided that, if such rights are not
exercised, the Lease Agreement shall continue in full force and effect in
accordance with its terms and Lessee, in such event, agrees to recognize and
attorn to the new owner pursuant to such foreclosure sale. Notwithstanding the
foregoing, no failure or delay on the part of Mortgagee or purchaser in
exercising any right, power or privilege under the Lease Agreement shall operate
as a waiver thereof, nor shall any single or partial exercise of any right,
power or privilege under the Lease Agreement preclude any other or further
exercise thereof.
I. Lessee's Obligations. If the interests of Lessor under the
--------------------
Lease Agreement shall be transferred to and owned by Mortgagee by reason of
<PAGE>
foreclosure or other proceedings brought by it, or by any other manner, and
Mortgagee succeeds to the interests of Lessor under the Lease Agreement, Lessee
shall be bound to Mortgagee under all of the terms, covenants and conditions of
the Lease Agreement for the balance of the term thereof remaining and any
extensions or renewals thereof which may be affected in accordance with any
option therefor in the Lease Agreement, with the same force and effect as if
Mortgagee were the lessor under the Lease Agreement, and Lessee does hereby
attorn to Mortgagee as its landlord, the said attornment to be effective and
self-operative without the execution of any further instruments on the part of
any of the parties hereto immediately upon Mortgagee succeeding to the interest
of Lessor under the Lease Agreement. The respective rights and obligations of
Lessee and Mortgagee under such attornment, to the extent of the then remaining
balance of the term of the Lease Agreement and any extensions or renewals, shall
be and are the same as now set forth therein, except as herein otherwise
expressly provided.
I. Mortgagee's Obligations. If Mortgagee shall succeed to the
-----------------------
interests of Lessor under the Lease Agreement, Mortgagee shall be bound to
Lessee under all of the terms, covenants and conditions of the Lease Agreement
and, from and after Mortgagee's succession to the interest of Lessor under the
Lease Agreement, Lessee shall have the same rights and remedies against
Mortgagee for the enforcement of its rights thereunder and the breach of any
agreement contained in the Lease Agreement that Lessee might have had under the
Lease Agreement against Lessor thereunder if Mortgagee had not succeeded to the
interests of such Lessor; provided, however, that Mortgagee shall not be:
(a) liable for any act or omission of any prior or subsequent
lessor except for non-monetary defaults of a continuing
nature of Lessor under the Lease Agreement of which prior
written notice has been given to Mortgagee stating with
particularity the default and a demand to cure the default,
provided, however, that notwithstanding the date of any such
written notice, Mortgagee shall be afforded the full period
stated in the Lease Agreement to cure the expressed default
commencing from the date of Mortgagee's succession to the
interest of Lessor under the Lease Agreement; or
(b) subject to any off-sets or defenses which Lessee might have
against any prior Lessor; or
(c) bound by any rent or additional rent which Lessee might have
paid for more than 31 days in advance to any prior Lessor,
except as expressly required under the Lease Agreement; or
(d) bound by any amendment or modification of the Lease
Agreement of which Mortgagee was not provided with
<PAGE>
prior written notice by Lessee, such notice may be satisfied
by forwarding a form of the amendment or modification of the
Lease Agreement prior to its effective date from which the
executed original shall not substantially deviate.
I. Insurance Proceeds. Mortgagee agrees that in the event of
------------------
damage or destruction of the Campus, Lessee or Lessor shall be entitled to all
insurance proceeds to which either of them would be entitled under the Lease
Agreement regardless of any provision of the Security Documents to the contrary,
provided that Lessee or Lessor, whichever the case may be, shall repair or
restore the Campus following any casualty in accordance with the terms of the
Lease Agreement.
I. Title of Paragraphs. The titles of the paragraphs of this
-------------------
Agreement are for convenience and reference only, and the words contained
therein shall in no way be held to explain, modify, amplify or aid in the
interpretation, construction or meaning of the provisions of this Agreement.
I. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of West Virginia.
I. Provisions Binding. The terms and provisions hereof shall
------------------
be binding upon and shall inure to the benefit of the heirs, executors,
administrators, successors and permitted assigns, respectively, of Mortgagee and
Lessee. The reference contained to successors and assigns of Lessee is not
intended to constitute and does not constitute as consent by Mortgagee to an
assignment by Lessee, but has reference only to those instances in which Lessor
under the Lease Agreement and Mortgagee, to the extent required herein, shall
have given written consent to a particular assignment by Lessee thereunder but
nothing herein shall be construed to give Mortgagee such consent rights except
as otherwise expressly set forth in the Lease Agreement.
I. Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties have hereunto set their respective
hand and seals as of the day, month and year first above written.
Mortgagee:
---------
By:
--------------------------------
Its:
-------------------------------
Lessee:
------
By:
--------------------------------
Its:
-------------------------------
<PAGE>
EXHIBIT 10.4
CREDIT AGREEMENT
AMONG
COLDWATER CREEK INC.
AND
THE BANKS NAMED HEREIN
AND
FIRST SECURITY BANK, N.A.,
AS AGENT
JUNE 29, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 - DEFINITIONS 1
ARTICLE 2 - LOANS AND TERMS OF PAYMENT 7
2.1 REVOLVING LINE OF CREDIT 7
2.1.1 MANNER OF BORROWING 8
2.1.2 INTEREST ON THE REVOLVING LINE OF CREDIT 9
2.1.3 REVOLVING NOTES 10
2.1.4 REPAYMENT OF REVOLVING LINE OF CREDIT 10
2.1.5 USE OF PROCEEDS OF REVOLVING LINE OF CREDIT 12
2.1.6 ADDITIONAL INTEREST RATE PROVISIONS 12
2.1.7 LIBOR LOAN 13
2.1.8 FUNDING LOSS INDEMNIFICATION 13
2.1.9 REDUCTION OF COMMITMENT AMOUNT 14
2.1.10 COMMITMENT FEE 14
2.1.11 NON-RECEIPT OF FUNDS BY AGENT 14
2.2 LETTERS OF CREDIT. 15
2.2.1 APPLICATIONS 15
2.2.2 FACILITY TERMINATION. 15
2.2.3 FEES 16
2.2.4 FORM 16
2.2.5 REIMBURSEMENT 16
2.2.6 REIMBURSEMENT OBLIGATIONS ABSOLUTE 17
2.2.7 PARTICIPATIONS 17
2.3 TERM STANDBY LETTER OF CREDIT. 17
2.3.1 FACILITY TERMINATION. 17
2.3.2 FEES 18
2.3.3 INTEREST ON DRAWS 18
2.3.4 REIMBURSEMENT 18
2.3.5 REIMBURSEMENT OBLIGATIONS ABSOLUTE 19
2.3.6 PARTICIPATIONS 19
2.4 TAXES ON PAYMENTS. 19
ARTICLE 3 - CONDITIONS PRECEDENT 20
3.1 INITIAL ADVANCE. 20
3.1.1 REVOLVING NOTE 20
3.1.2 GUARANTY 20
3.1.3 EVIDENCE OF INSURANCE 20
3.1.4 OPINION OF COUNSEL FOR BORROWER AND GUARANTOR 20
3.1.5 EVIDENCE OF ALL CORPORATE ACTION BY BORROWER 20
3.1.6 CERTIFICATES OF EXISTENCE FOR BORROWER 20
3.1.7 CERTIFIED ARTICLES OF INCORPORATION
AND BYLAWS OF BORROWER 21
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<PAGE>
3.1.8 EVIDENCE OF ALL CORPORATE ACTION BY GUARANTOR 21
3.1.9 CERTIFICATES OF EXISTENCE FOR GUARANTOR 21
3.1.10 CERTIFIED ARTICLES OF INCORPORATION AND
BYLAWS OF GUARANTOR 21
3.1.11 CERTIFICATES OF ASSUMED BUSINESS NAME 21
3.1.12 LETTER TO ACCOUNTANTS 21
3.1.13 PUBLIC RECORD SEARCHES 21
3.1.14 ADDITIONAL DOCUMENTS 22
3.2 ALL ADVANCES. 22
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES 22
4.1 INCORPORATION, GOOD STANDING, AND DUE QUALIFICATION 22
4.2 CORPORATE POWER AND AUTHORITY 23
4.3 LEGALLY ENFORCEABLE AGREEMENT 23
4.4 OTHER AGREEMENTS 23
4.5 NO LITIGATION 23
4.6 NO DEFAULTS ON OUTSTANDING JUDGMENTS OR ORDERS 24
4.7 FINANCIAL STATEMENTS 24
4.8 EMPLOYEE BENEFITS 24
4.9 LABOR DISPUTES AND CASUALTIES 25
4.10 OPERATION OF BUSINESS 25
4.11 ENVIRONMENTAL MATTERS 25
4.12 OWNERSHIP AND LIENS 26
4.13 TAXES 26
4.14 INVESTMENT COMPANY ACT 26
4.15 SUBSIDIARIES 26
4.16 ACCURACY OF REPRESENTATIONS 26
4.17 CONTINUING WARRANTIES, REPRESENTATIONS AND COVENANTS 27
ARTICLE 5 - AFFIRMATIVE COVENANTS 27
5.1 MAINTENANCE OF EXISTENCE 27
5.2 MAINTENANCE OF RECORDS 27
5.3 MAINTENANCE OF PROPERTIES 27
5.4 CONDUCT OF BUSINESS 27
5.5 MAINTENANCE OF INSURANCE 28
5.6 COMPLIANCE WITH LAWS 28
5.7 RIGHT OF INSPECTION 28
5.8 ACCOUNTING 28
5.9 REIMBURSEMENT OF BANK EXPENSES 29
5.10 LOCATION OF CHIEF EXECUTIVE OFFICE 29
5.11 REPORTING REQUIREMENTS 29
5.11.1 QUARTERLY FINANCIAL STATEMENTS 29
5.11.2 ANNUAL FINANCIAL STATEMENTS 29
5.11.3 GUARANTOR ANNUAL FINANCIAL STATEMENTS 29
5.11.4 MANAGEMENT LETTERS 30
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<PAGE>
5.11.5 NOTICE OF LITIGATION 30
5.11.6 NOTICE OF DEFAULTS AND EVENTS OF DEFAULT 30
5.11.7 ERISA REPORTS. 30
5.11.8 SEC FILINGS 30
5.11.9 GENERAL INFORMATION 31
5.12 ENVIRONMENT 31
5.13 YEAR 2000 COMPLIANCE 31
5.14 BANK'S YEAR 2000 COMPLIANCE 32
ARTICLE 6 - NEGATIVE COVENANTS 32
6.1 CHANGE OF NAME 32
6.2 MERGERS 32
6.3 DEBT 32
6.4 DIVIDENDS 33
6.5 SALE OF ASSETS 33
6.6 INVESTMENTS 33
6.7 GUARANTIES 33
6.8 SUSPENSION OF BUSINESS 34
6.9 LIENS 34
6.10 PENSION PLANS 34
6.11 CHANGE IN MANAGEMENT 34
ARTICLE 7 - FINANCIAL COVENANTS 34
7.1 EBITDA COVERAGE RATIO 34
7.2 LEVERAGE RATIO 35
7.3 CURRENT RATIO 35
ARTICLE 8 - EVENTS OF DEFAULT 35
ARTICLE 9 - BANK'S RIGHTS AND REMEDIES 37
9.1 SPECIFIC REMEDIES 37
9.2 SET OFF 38
9.3 NO LIMITATION ON REMEDIES 38
9.4 BANK EXPENSES 38
ARTICLE 10 - WAIVERS 38
10.1 APPLICATION OF PAYMENTS 38
10.2 DEMAND AND NOTICES 39
ARTICLE 11 - AGENCY PROVISIONS 39
11.1 AUTHORIZATION AND ACTION 39
11.2 LIABILITY OF AGENT 39
11.3 RIGHTS OF AGENT AS A BANK 40
11.4 INDEPENDENT CREDIT DECISIONS 40
11.5 INDEMNIFICATION 40
-iii-
<PAGE>
11.6 SUCCESSOR AGENT 41
11.7 SHARING OF PAYMENTS, ETC. 41
ARTICLE 12 - NOTICES 42
ARTICLE 13 - DESTRUCTION OF BORROWER'S DOCUMENTS 43
ARTICLE 14 - CHOICE OF LAW AND VENUE 43
ARTICLE 15 - GENERAL PROVISIONS 43
15.1 EFFECTIVE DATE 43
15.2 AMENDMENTS 43
15.3 NO WAIVER 44
15.4 SUCCESSORS AND ASSIGNS 44
15.5 PARTICIPATIONS AND ASSIGNMENTS 44
15.6 HEADINGS 46
15.7 CONSTRUCTION 46
15.8 SEVERABILITY 46
15.9 INTEGRATION 47
15.10 INDEMNITY 47
15.11 NONLIABILITY OF AGENT AND BANKS 47
15.12 COUNTERPARTS 47
SCHEDULES TO LOAN AGREEMENT
SCHEDULE NO. SCHEDULE DESCRIPTION
1.6 BANKS
1.35 PERMITTED LIENS
2.1.1.1 AUTHORIZED PERSONS
4.15 SUBSIDIARIES
6.5 SALE OF ASSETS
6.10 EMPLOYEE BENEFIT PLANS
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<PAGE>
EXHIBITS TO LOAN AGREEMENT
EXHIBIT NO. EXHIBIT DESCRIPTION
1.44 FORM OF REVOLVING NOTE
1.47 FORM OF TERM STANDBY LETTER OF CREDIT
2.1.1.2 LIBOR LOAN REQUEST FORM
3.1.2 FORM OF CONTINUING AND UNCONDITIONAL GUARANTY
3.1.4 FORM OF OPINION OF COUNSEL FOR BORROWER AND GUARANTORS
3.1.12 FORM OF LETTER TO ACCOUNTANTS
15.5.2 FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
-v-
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is entered into as of the 29th day of June, 1998,
among COLDWATER CREEK INC., a Delaware corporation ("Borrower"), each of the
financial institutions from time to time listed in Schedule 1.6 hereto, as
amended from time to time (collectively, the "Banks"), and FIRST SECURITY BANK,
N.A. ("Agent") as agent for the Banks.
The parties agree as follows:
AGREEMENT
ARTICLE 1 - DEFINITIONS
As used in this Agreement, the following terms shall have the following
definitions:
1.1 "ADJUSTED LIBOR INTEREST RATE" means the rate per annum equal to the
quotient of (i) the London Interbank Offered Rate divided by (ii) one (1) minus
the Eurocurrency Reserve Requirement for the applicable Interest Period, rounded
upward, if necessary, to the nearest one-sixteenth of one percent.
"Eurocurrency Reserve Requirement" means, for any LIBOR Loan for any Interest
Period therefor, the daily average of the stated maximum rate (expressed as a
decimal) at which reserves (including any marginal, supplemental, or emergency
reserves) are required to be maintained by Banks during such Interest Period
under Regulation D of the Board of Governors of the Federal Reserve System, as
amended or supplemented from time to time, against "Eurocurrency Liabilities"
(as such term is used in Regulation D) but without benefit or credit of
proration, exemptions, or offsets that might otherwise be available to Banks
from time to time under Regulation D. Without limiting the effect of the
foregoing, the Eurocurrency Reserve Requirement shall reflect any other reserves
required to be maintained by Bank against (1) any category of liabilities that
includes deposits by reference to which the Adjusted LIBOR Interest Rate for
LIBOR Loans is to be determined; or (2) any category of extension of credit or
other assets that include LIBOR Loans.
1.2 "AGENT" means First Security Bank, N.A., its successors and assigns,
in its capacity as agent for the Banks.
1.3 "AGREEMENT" means this Credit Agreement, as amended, supplemented,
or modified from time to time.
1.4 "BANK EXPENSES" means all costs and expenses incurred by Agent in
connection with the preparation, negotiation, execution, delivery, filing, and
administration of the Loan Documents, and of any amendment, modification,
extension,
1
<PAGE>
renewal or supplement to the Loan Documents, including, without limitation, the
fees and out-of-pocket expenses of counsel for Agent, incurred in connection
with advising Agent as to its rights and responsibilities hereunder and
structuring, drafting, reviewing, amending, or otherwise involving the Loan
Documents, and all costs and expenses, including court costs, incurred by Agent,
Banks, or Issuing Bank in connection with enforcement of the Loan Documents, or
any amendment, modification, or supplement thereto, whether by negotiation,
legal proceedings, or otherwise.
1.5 "BANK'S COMMITMENT" means, with respect to any Bank at any time,
such Bank's Proportionate Share at such time of the Commitment Amount.
1.6 "BANKS" means the financial institutions from time to time listed in
SCHEDULE 1.6 hereto, as amended by Banks from time to time (referred to
individually as a "Bank").
1.7 "BORROWER" means Coldwater Creek Inc., a Delaware corporation.
1.8 "BUSINESS DAY" means a day other than Saturday or Sunday and a day
on which commercial banks are required to be open for business in Boise, Idaho,
under the laws of the state of Idaho.
1.9 "CODE" means the Internal Revenue Code of 1986, as amended from time
to time, and the regulations and published interpretations thereof.
1.10 "COMMITMENT AMOUNT" means at any time Forty-seven Million Four
Hundred Thousand Dollars ($47,400,000), less (i) the aggregate stated amount of
all Letters of Credit then outstanding and available for drawing and (ii) the
aggregate amount of unreimbursed drawings on Letters of Credit. If the
Commitment Amount is reduced pursuant to Subsection 2.1.9, the Commitment Amount
shall be the amount to which the Commitment Amount is reduced, less (i) the
aggregate stated amount of all Letters of Credit then outstanding and available
for drawing and (ii) the aggregate amount of unreimbursed drawings on Letters of
Credit.
1.11 "COMMONLY CONTROLLED ENTITY" means an entity, whether or not
incorporated, that is under common control with a Borrower within the meaning
of Section 414(b) or 414(c) of the Code.
1.12 "DOLLAR" and the symbol "$" means lawful money of the United States
of America.
1.13 "ENVIRONMENTAL LAWS" shall include, but shall not be limited to the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
42 U.S.C. sections 9601, et seq.; the Resource Conservation and Recovery Act
("RCRA"), 42 U.S.C. sections 6901, et seq.; the Hazardous Materials
Transportation Act, 49
2
<PAGE>
U.S.C. sections 1801, et seq.; the Federal Water Pollution Control Act, 33
U.S.C. sections 1251, et seq.; and all rules and regulations thereunder, and any
other local, state and/or federal laws, rules, regulations and ordinances,
whether currently in existence or hereafter enacted, that govern, to the extent
applicable to Borrower's and its Subsidiaries' businesses, properties and
assets: (a) the existence, cleanup and/or remedy of contamination on property;
(b) the protection of the environment from soil, air or water pollution, or from
spilled, deposited or otherwise emplaced contamination; (c) the emission or
discharge of Hazardous Substances into the environment; (d) the control of
Hazardous Substances; or (e) the use, generation, transport, treatment, removal
or recovery of Hazardous Substances.
1.14 "ERISA" means the Employment Retirement Income Security Act of 1974,
as the same may be amended or supplemented from time to time, including any
regulations issued in connection therewith.
1.15 "EVENT OF DEFAULT" means the occurrence of any of the events set
forth in Article 8 of this Agreement.
1.16 "GAAP" means the generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and the statements and
pronouncements of the Financial Accounting Standards Board that are applicable
to the circumstances as of the date of determination consistently applied. All
accounting terms not specifically defined herein shall be construed in
accordance with GAAP and all financial data submitted pursuant to this Agreement
shall be prepared in accordance with GAAP.
1.17 "GUARANTOR" means, jointly and severally, Coldwater Creek Outlet
Stores Inc. and any other Subsidiary now or hereafter existing.
1.18 "GUARANTY" means any guaranty of the Obligations executed by a
Guarantor.
1.19 "HAZARDOUS SUBSTANCE" means (a) any oil, petroleum products,
flammable substance, explosives, radioactive materials, hazardous wastes or
substances, toxic wastes or substances or any other wastes, materials or
pollutants that (i) pose a hazard to Borrower's or a Subsidiary's owned or
leased real property or to persons on or about such real property or (ii) cause
Borrower's or a Subsidiary's owned or leased real property to be in violation of
any Environmental Laws; (b) asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated biphenyls, or
radon gas; (c) any chemical, material or substance defined as or included in the
definition of "waste," "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous waste," "restricted hazardous waste," or "toxic
substances" or
3
<PAGE>
words of similar import under any Environmental Laws; (d) any other chemical,
material or substance, exposure to which is prohibited, limited or regulated by
any governmental authority or agency or may or could pose a hazard to the health
and safety of the occupants of Borrower's or a Subsidiary's owned or leased real
property or the owners and/or occupants of property adjacent to or surrounding
such real property or any other person coming upon such real property or
adjacent property; and (e) any other chemical, materials or substance that may
or could pose a hazard to the environment and are or become subject to
regulation by any Environmental Laws.
1.20 "INTEREST PERIOD" means with respect to any LIBOR Loan, the period
commencing on the date such loan is made and ending, as the Borrower may select,
pursuant to this Agreement, one or two weeks thereafter or on the numerically
corresponding day in the first, second, third, sixth, or twelfth calendar month
thereafter, except that each such Interest Period that commences on the last
Business Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar month;
provided that if an Interest Period would end on a day that is not a Business
Day, such Interest Period shall be extended to the next Business Day unless such
Business Day would fall in the next calendar month, in which event such Interest
Period shall end on the immediately preceding Business Day.
1.21 "ISSUING BANK" means First Security Bank, N.A., its successors and
assigns, in its capacity as the issuer of Letters of Credit and the Term Standby
Letter of Credit.
1.22 "LETTER OF CREDIT" has the meaning set forth in Section 2.2, but
specifically excludes the Term Standby Letter of Credit.
1.23 "LETTER OF CREDIT COMMITMENT" means Agent's commitment to issue
letters of credit from time to time in accordance with Section 2.2 of this
Agreement.
1.24 "LETTER OF CREDIT COMMITMENT AMOUNT" means Seven Million Dollars
($7,000,000), less the amount of the outstanding principal balance of the
Revolving Line of Credit in excess of Forty Million Four Hundred Thousand
Dollars ($40,400,000).
1.25 "LIBOR LOAN" means any loan under this Agreement bearing interest at
a rate based upon Adjusted LIBOR Interest Rate.
1.26 "LIEN" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement or preferential
arrangement, charge, or encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any
4
<PAGE>
financing statement under the Uniform Commercial Code or comparable law of any
jurisdiction to evidence any of the foregoing).
1.27 "LOAN" has the meaning set forth in Section 2.1.
1.28 "LOAN DOCUMENTS" means collectively this Agreement, any note
executed by Borrower to the order of a Bank and any other agreements or
documents, whether now or hereafter existing, executed or delivered in
connection with this Agreement or any amendment thereto, and any amendments,
supplements, modifications, renewals, extensions, or refundings of any of the
foregoing documents.
1.29 "LONDON INTERBANK OFFERED RATE" means for any Interest Period for a
LIBOR Loan the lowest rate per annum quoted by Barclays, Tokyo/Mitsubishi,
Banker's Trust, and National Westminster (or such other banks as may be agreed
upon by Agent and Borrower in writing from time to time) at approximately 11:00
a.m. London time appearing on the Reuters LIBOR page screen two Business Days
prior to the first day of such Interest Period for the offering to leading banks
in the London interbank market of dollar deposits for a period and an amount
comparable to the Interest Period and principal amount of the LIBOR Loan that
shall be made by Banks and outstanding during the Interest Period.
1.30 "MAJORITY BANKS" means at any time the Banks holding at least sixty-
six percent (66%) of the then aggregate unpaid principal amount of the Revolving
Notes held by the Banks, or, if no such principal amount is then outstanding,
Banks having an aggregate Bank's Commitment of at least sixty-six percent (66%)
of the Commitment Amount.
1.31 "MATURITY DATE" means June 30, 2001, or such other date as Banks and
Borrower may agree upon in writing from time to time.
1.32 "MULTIEMPLOYER PLAN" means a Plan described in Section 4001(a)(3) of
ERISA.
1.33 "OBLIGATIONS" means (i) any and all loans, lines of credit,
advances, debts, overdrafts, liabilities, indebtedness, lease payments,
guaranties, covenants, and duties owing by Borrower to Banks of any kind and
description under the Loan Documents, (ii) any and all overdrafts (whether
advanced pursuant to or evidenced by the Loan Documents or any other instrument
or agreement between Banks and Borrower), (iii) any interest on the foregoing
not paid when due, (iv) all Bank Expenses, and (v) all renewals, extensions, and
modifications of the foregoing, or any part thereof, whether any of the
foregoing is direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising.
5
<PAGE>
1.34 "PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
1.35 "PERMITTED LIENS" means: (i) Liens (if any) granted to Banks to
secure the Obligations, (ii) Liens described on SCHEDULE 1.35 attached hereto,
(iii) pledges or deposits made to secure payment of worker's compensation
insurance (or to participate in any fund in connection with worker's
compensation insurance), unemployment insurance, pensions, or social security
programs, (iv) Liens imposed by mandatory provisions of law such as for
materialmen, mechanics, warehousemen, and other like Liens arising in the
ordinary course of business, securing indebtedness whose payment is not yet due,
or that is being contested by Borrower in good faith and for which adequate
reserves have been provided, (v) Liens for taxes, assessments, and governmental
charges or levies imposed upon a person or upon such person's income or profits
or property, if the same are not yet due and payable or if the same are being
contested in good faith and as to which adequate cash reserves have been
provided, (vi) Liens arising from good faith deposits in connection with
tenders, leases, real estate bids, or contracts (other than contracts involving
the borrowing of money), pledges or deposits to secure public or statutory
obligations and deposits to secure (or in lieu of) surety, stay, appeal, or
customs bonds and deposits to secure the payment of taxes, assessments, customs
duties, or other similar charges, (vii) encumbrances consisting of zoning
restrictions, easements, or other restrictions on the use of real property,
provided that such items do not impair the use of such property for the purposes
intended, and none of which is violated by existing or proposed structures or
land use, or (viii) purchase-money Liens on any property hereafter acquired or
the assumption of any Lien on property existing at the time of such acquisition
or a Lien incurred in connection with any conditional sale or other title
retention agreement or a capital lease, provided that (a) any property subject
to any of the foregoing is acquired by the Borrower in the ordinary course of
its business and the Lien on any such property attaches to such asset
concurrently or within ninety (90) days after the acquisition thereof; (b) the
obligation secured by any Lien so created, assumed, or existing shall not exceed
the lesser of the cost or the fair market value as of the time of acquisition of
the property covered thereby to the Borrower, (c) each such Lien shall attach
only to the property so acquired, (d) the debt secured by all such Liens shall
not exceed Ten Million Dollars ($10,000,000) at any time outstanding in the
aggregate, and (e) the debt secured by such Lien will not cause a breach of
Section 6.3, and the related expenditure will not cause a breach of Section 7.2.
1.36 "PERSON" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
governmental authority, or other entity of whatever nature.
1.37 "PLAN" means any pension plan that is covered by Title IV of ERISA
and in respect of which any Borrower or a Commonly Controlled Entity is an
"employer" as defined in Section 3(5) of ERISA.
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1.38 "PRIME LOAN" means any loan under this Agreement bearing interest at
a rate based upon the Prime Rate.
1.39 "PRIME RATE" means the Agent's announced rate of interest referred
to as its prime rate used as a reference point from which the cost of credit to
customers may be calculated. The Prime Rate is subject to change from time to
time. Agent may make loans to other Persons bearing interest at, above, or below
the Prime Rate.
1.40 "PROHIBITED TRANSACTION" means any transaction set forth in Section
406 of ERISA or Section 4975 of the Code.
1.41 "PROPORTIONATE SHARE" means, with respect to each Bank, the
percentage set forth under the caption "Proportionate Share" opposite such
Bank's name on Schedule 1.6.
1.42 "REPORTABLE EVENT" means any of the events set forth in Section 4043
of ERISA.
1.43 "REVOLVING LINE OF CREDIT" means the Banks' commitment to make loans
to Borrower from time to time in accordance with Section 2.1 of this Agreement.
1.44 "REVOLVING NOTE" means a promissory note evidencing the Loans made
by a Bank in the stated principal amount of the Bank's Commitment executed by
Borrower substantially in the form attached as EXHIBIT 1.44 (referred to
collectively as the "Revolving Notes").
1.45 "SUBORDINATED DEBT" means indebtedness and liabilities of Borrower
that have been subordinated to the Obligations by written agreement in form and
substance acceptable to Agent.
1.46 "SUBSIDIARY" means, as to the Borrower, a corporation of which
shares of stock having ordinary voting power (other than stock having such power
only by reason of the happening of a contingency) to elect a majority of the
board of directors or other managers of such corporation are at the time owned,
or the management of which is otherwise controlled, directly, or indirectly
through one or more intermediaries, or both, by the Borrower.
1.47 "TERM STANDBY LETTER OF CREDIT" means the Irrevocable Standby Letter
of Credit to be issued by Issuing Bank pursuant to Section 2.3 for the account
of Borrower in the stated face amount of Two Million Six Hundred Thousand
Dollars ($2,600,000) for the benefit of Wood County Development Authority or its
assigns substantially in the form attached as EXHIBIT 1.47, and amendments and
renewals thereof.
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ARTICLE 2 - LOANS AND TERMS OF PAYMENT
2.1 REVOLVING LINE OF CREDIT.
Upon the request of Borrower, made at any time and from time to time from
the date hereof until the Maturity Date, and so long as no Event of Default has
occurred, each Bank shall make loans to Borrower (individually, a "Loan",
collectively, the "Loans") in an aggregate principal amount not to exceed at any
time outstanding such Bank's Commitment, and the aggregate principal amount of
all Loans made by all Banks shall not exceed at any time outstanding, the
Commitment Amount. All Loans shall be made on a pro rata basis by the Banks in
accordance with their respective Proportionate Shares with each borrowing to be
comprised of a Loan by each Bank equal to such Bank's Proportionate Share of
such borrowing. Subject to the terms of this Agreement, loans made by Banks may
be repaid and reborrowed, up to and including the Maturity Date. If at any time
and for any reason the amount of advances made pursuant to this Section 2.1
exceed the Commitment Amount, then Borrower, upon Agent's election and demand,
shall immediately pay to Agent in cash the amount of such excess. The failure
of any Bank to make any Loan to be made by it on the date specified for such
Loan shall not relieve any other Bank of its obligation, if any, to make its
Loan on such date, but no Bank shall be responsible for the failure of any other
Bank to make such Loans to be made by such other Bank.
2.1.1 MANNER OF BORROWING.
2.1.1.1 PRIME LOANS.
Except for Sweep Loans described below, Banks are authorized to make
Prime Loans upon written or, at the discretion of Agent, facsimile notice
requesting a Loan received by Agent no later than 11:00 a.m. (Boise, Idaho time)
at least one (1) Business Day prior to the requested date of the loan from any
person purporting to be a person identified on SCHEDULE 2.1.1.1 attached hereto
or such other persons as Borrower may from time to time designate in writing to
Agent. The Agent shall promptly notify each Bank of the notice. Not later than
12:00 noon (Boise, Idaho time) on the date of the Prime Loan, each Bank shall
wire transfer to the Agent the Bank's Proportionate Share of the Loan in
immediately available funds. After the Agent receives such funds, and if no
Event of Default has occurred and is continuing, Agent shall make the Prime
Loans to Borrower by crediting the amount thereof to the Borrower's account with
Agent.
2.1.1.2 LIBOR LOANS.
For any Loan that is to be a LIBOR Loan, the Borrower shall request
such a Loan by delivering a LIBOR Loan Request to Agent no later than 11:00 a.m.
(Boise, Idaho time) at least two (2) Business days prior to the requested date
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of the Loan. A LIBOR Loan Request shall specify (a) the date of the requested
Loan, (b) the amount of such Loan, and (c) the requested duration of the
Interest Period for the Loan, and shall be in substantially the form of the
attached EXHIBIT 2.1.1.2 executed by any person purporting to be a person
identified in Schedule 2.1.1.1 or such other persons as Borrower may from time
to time designate in writing to Agent. If Agent determines that the requested
Loan is available and will comply with this Agreement, Agent shall promptly
notify each Bank of the LIBOR Loan Request. Not later than 12:00 noon (Boise,
Idaho time) on the date of the LIBOR Loan, each Bank shall wire transfer to the
Agent the Bank's Proportionate Share of the Loan in immediately available funds.
After the Agent receives such funds, and if no Event of Default has occurred and
is continuing, Agent shall make the LIBOR Loan to Borrower by crediting the
amount thereof to the Borrower's account with Agent.
2.1.1.3 SWEEP LOANS.
Agent, at its sole and absolute discretion, and subject to the terms
hereof, may make Prime Loans to Borrower in an amount equal to the amount by
which the amount of checks clearing any designated disbursement bank account
that Borrower may now or hereafter have with Agent exceeds the amount of
collected funds in the disbursement account's related depository bank account
that Borrower may now or hereafter have with Agent ("Sweep Loans"). The
existence of such an excess of clearing checks shall be deemed to be a request
by Borrower for any such Loan. Agent shall provide Banks, on the last Business
Day of each calendar week, a summary statement of the Sweep Loans. If a Bank's
Proportionate Share of the principal balance of the Sweep Loans, as shown on the
summary statement, is more than the Bank's Proportionate Share of the principal
balance of the Sweep Loans as of the last summary statement, the Bank shall
forthwith remit to Agent the amount of the increase. On the other hand, if
Bank's Proportionate Share of the principal balance of the Sweep Loans, as shown
on the summary statement, is less than the Bank's Proportionate Share of the
principal balance of the Sweep Loans as of the last summary statement, Agent
shall forthwith remit to the Bank the amount of the decrease. Bank shall remit
any excess within one (1) Business Day following receipt of the summary
statement from Agent, and Agent shall remit any decrease contemporaneously with
the delivery of the summary statement to the Bank. All remittances shall be made
by wire transfer of immediately available funds.
2.1.1.4 MINIMUM LIBOR LOAN REQUIREMENTS.
Each LIBOR Loan shall be in a minimum amount of Five Hundred
Thousand Dollars ($500,000). No part of the Revolving Line of Credit shall be
made as, extended as, or converted into, a LIBOR Loan with an Interest Period
that ends after the Maturity Date. No more than twelve (12) LIBOR Loans from a
single Bank shall be outstanding at one time.
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2.1.2 INTEREST ON THE REVOLVING LINE OF CREDIT.
Each Loan shall be a Prime Loan or a LIBOR Loan, as selected by Borrower in
accordance with the terms of this Agreement.
2.1.2.1 That portion of the Revolving Line of Credit that is a
Prime Loan shall bear interest at a fluctuating per annum rate equal to the
Prime Rate increased by the applicable Prime Margin set forth below. Agent's
Prime Rate may change from time to time, and the interest payable will continue
to fluctuate at the rate as stated herein. Any changes to the Prime Rate shall
become effective without prior notice to Borrower on the date on which the Prime
Rate changes.
2.1.2.2 That portion of the Revolving Line of Credit that is a
LIBOR Loan shall bear interest at a fluctuating per annum rate equal to the
Adjusted LIBOR Interest Rate for the applicable Interest Period, as quotes are
available, increased by the applicable LIBOR Margin set forth below. Any changes
to the LIBOR Margin shall not apply to LIBOR Loans outstanding or requested on
the date the LIBOR Margin is adjusted .
2.1.2.3 The actual interest to be charged on the Revolving Line of
Credit shall be calculated daily on the outstanding balance for the actual
number of days elapsed on the basis of a year consisting of 360 days for LIBOR
Loans and 365/366 days for Prime Loans. Should the rate of interest exceed that
allowed by law, the applicable rate of interest will be the maximum rate of
interest lawfully allowed. The principal amount outstanding on which the
interest rate(s) shall be charged shall be determined from the Bank's records,
which shall at all times be conclusive, absent manifest error.
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2.1.2.4 The Prime Margins, the LIBOR Margins, and the
Commitment Margins are as follows:
<TABLE>
<CAPTION>
Commitment
EBITDA Coverage Ratio Prime Margin LIBOR Margin Margin
<S> <C> <C> <C>
greater than or equal to
3.25:1.00 -0.750% 1.000% .15%
greater than or equal to
3.00:1.00 but less than
3.25:1.00 -0.750% 1.250% .15%
greater than or equal to
2.75:1.00 but less than
3.00:1.00 -0.500% 1.500% .20%
greater than or equal to
2.50:1.00 but less than
2.75:1.00 -0.250% 1.750% 0.30%
less than 2.50:1.00 0.000% 2.000% 0.35%
</TABLE>
2.1.2.5 The Prime Margin and LIBOR Margin shall be based upon the
Borrower's EBITDA Coverage Ratio (as defined in Section 7.1) determined
quarterly on a rolling four quarters basis from the Borrower's quarterly
financial statements delivered to Agent in accordance with Subsection 5.11.1 and
adjusted, if necessary, on the first day of the month after Bank's receipt of
quarterly financial statements that show an adjustment is necessary.
2.1.3 REVOLVING NOTES.
The Borrower's obligation to repay the Revolving Line of Credit shall be
evidenced by the Revolving Notes in the aggregate stated principal amount of the
Commitment Amount executed by the Borrower and dated the date of this Agreement.
2.1.4 REPAYMENT OF REVOLVING LINE OF CREDIT.
Interest accrued on that portion of the outstanding principal balance of
the Revolving Line of Credit that is a Prime Loan shall be paid on or before
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the tenth day of each calendar quarter in an amount equal to the interest
accrued as of the last day of the immediately preceding calendar quarter.
Interest accrued on that portion of the outstanding principal balance of the
Revolving Line of Credit that is a LIBOR Loan shall be paid on the last day of
the Interest Period with respect thereto and, in the case of an Interest Period
greater than three months, at three month intervals after the first day of such
Interest Period. All outstanding principal and accrued interest of the
Revolving Line of Credit shall be paid in full on the Maturity Date.
2.1.4.1 PREPAYMENTS.
The Borrower may prepay any or all of the Revolving Line of Credit
that is a Prime Loan without penalty or premium. LIBOR Loans may not prepaid in
whole or in part, unless Borrower pays to Agent the prepayment funding loss
indemnification pursuant to subsection 2.1.8.
2.1.4.2 METHOD OF PAYMENT.
All payments on the Revolving Line of Credit shall be made to Agent
at its Idaho Corporate Banking office in Boise, Idaho in Dollars and in
immediately available funds. No checks, drafts, or other instruments received by
Agent purportedly in satisfaction of any of the Obligations shall constitute
payment thereof unless and until such instruments have actually been collected.
All payments received after 11:00 a.m. Boise, Idaho time shall be considered to
have been received the next Business Day. In case the due date of any payment
falls on a day that is not a Business Day, such payment shall instead be due the
next succeeding Business Day, and interest shall continue to accrue. Agent may
note the date, amount and interest rate (and Interest Period with respect to
LIBOR Loans) of each Loan and each payment of principal and interest with
respect hereto in Agent's books and records (either manually or by electronic
entry), which notation shall be conclusive evidence of the information noted,
absent manifest error. Upon receipt of any payment, the Agent will promptly
thereafter cause to be distributed such payments to the Banks pro rata according
to each Bank's Proportionate Share from the date upon which the Bank became a
Bank hereunder.
2.1.4.3 LATE CHARGES AND DEFAULT INTEREST.
If Agent has not received the full amount of any payment by the end
of twenty (20) calendar days after the date due, including the balance due at
maturity, Borrower shall pay a late charge to Agent in the amount of five
percent (5%) of the overdue payment of principal and interest. Borrower shall
pay the late charge promptly, but only once on each late payment. Upon receipt
of any late charge payments, the Agent will promptly thereafter cause to be
distributed such payments to the Banks pro rata according to each Bank's
Proportionate Share from the date upon which the Bank became a Bank hereunder.
In addition to any late charges that may be assessed as herein provided, the
outstanding balance of the Revolving Line of Credit after the occurrence of
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an Event of Default shall accrue interest from the date of the Event of
Default at the rate equal to four (4) percentage points per annum in excess of
the interest rate that would otherwise be charged if no Event of Default
existed. If Banks shall waive in writing or Borrower shall cure such Event of
Default, the interest rate shall revert to the non-default rate from and after
such waiver or completion of such cure, until another such Event of Default.
2.1.5 USE OF PROCEEDS OF REVOLVING LINE OF CREDIT.
The proceeds of the Revolving Line of Credit shall be used by the Borrower
for working capital, capital expenditures, and general corporate purposes. The
Borrower shall not, directly or indirectly, use any part of such proceeds for
the purpose of purchasing or carrying any margin stock within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System or to
extend credit to any person for the purpose of purchasing or carrying any such
margin stock, or for any purpose that violates, or is inconsistent with,
Regulation X of such Board of Governors.
2.1.6 ADDITIONAL INTEREST RATE PROVISIONS.
2.1.6.1 If Agent shall have determined (which determination shall
be conclusive and binding) that for any reason adequate and reasonable means do
not exist for ascertaining the Adjusted LIBOR Interest Rate for any or all
Interest Periods, Agent shall give notice of such determination to the Borrower.
If such notice is given, and until such notice has been withdrawn by Agent, no
additional LIBOR Loans for such Interest Periods shall be made and no additional
conversions of Loans to LIBOR Loans for such Interest Periods shall be
permitted, and at the end of the Interest Period relating to any outstanding
LIBOR Loans for such interest period such Loans shall become Prime Loans.
2.1.6.2 Notwithstanding any other provisions herein, if any law,
treaty, rule or regulation, or determination of a court or other governmental
authority, or any change therein or in the interpretation or application
thereof, shall make it unlawful for Banks to make or maintain LIBOR Loans as
contemplated by this Agreement, the obligation of Banks hereunder to make LIBOR
Loans shall forthwith be canceled, and, if required, each LIBOR Loan then
outstanding shall immediately become a Prime Loan.
2.1.6.3 In the event that any adoption or modification of any
law, treaty, rule, or regulation, or determination of a court or other
governmental authority, or that any change in the interpretation or application
thereof, which adoption, modification or change becomes effective after the date
hereof, or in the event that
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compliance by Banks with and request or directive issued after the date hereof
(whether or not having the force of law) from any governmental authority:
(A) does or shall subject any Bank or any of its foreign offices to
any tax of any kind whatsoever with respect to the Loan Documents, or changes
the basis of taxation of payments to the Bank of principal, interest, fees, or
any other amount payable hereunder (except for changes in the rate of tax on the
overall net income of the Bank); or
(B) does or shall impose, modify, or hold applicable any reserve,
special deposit, compulsory loan, FDIC insurance, or similar requirement against
assets held by, deposits or other liabilities in or for the account of, advances
or loans by, other credit extended by or any other acquisition of funds by any
office of the Bank (other than to the extent previously taken into account in
determining the Prime Rate or statutory reserves); or
(C) does or shall impose on the Bank any other condition; and the
result of any of the foregoing is to increase the cost to the Bank of making,
renewing, or maintaining the loans hereunder, or to reduce any amount receivable
thereunder or under any of the Loan Documents; then, in any such case, the
Borrower shall promptly pay to the Bank, upon demand, such amount or amounts as
may be necessary to compensate the Bank for any additional cost or reduced
amount received. Each Bank shall deliver to the Borrower a written statement of
the losses or expenses sustained or incurred, and any reasonable allocation made
by the Bank of such losses and expenses shall be conclusive, absent manifest
error. Each Bank shall promptly notify the Borrower of any event of which it
has knowledge, occurring after the Closing Date, which event will entitle the
Bank to compensation under this Section.
2.1.7 LIBOR LOAN EXTENSIONS AND CONVERSIONS.
So long as no Event of Default has occurred and is continuing and subject
to the terms and conditions hereof, the Borrower may extend a LIBOR Loan beyond
its current Interest Period by giving Agent a LIBOR Loan Request for the
extension. The Borrower may also convert any Prime Loan into a LIBOR Loan by
giving Agent a LIBOR Loan Request for the conversion. Unless Agent receives
notice of a proposed extension or conversion as and when required hereunder,
then at the end of an Interest Period for a LIBOR Loan such Loan shall
automatically convert to a Prime Loan. Agent shall promptly notify each Bank of
each extension or conversion LIBOR Loan Request received by Agent.
2.1.8 FUNDING LOSS INDEMNIFICATION.
The Borrower shall indemnify and hold each Bank free and harmless from any
loss or expense (including without limitation any loss or expense
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incurred by reason of the liquidation or redeployment of deposits or other
funds acquired by the Bank to fund or maintain any LIBOR Loan) that the Bank may
incur as a result of (i) the Borrower's failure to make a borrowing, conversion,
or extension with respect to a LIBOR Loan after making a request therefor; (ii)
a prepayment (whether optional or mandatory) of a LIBOR Loan prior to the
expiration of a related Interest Period, and (iii) the conversion of a LIBOR
Loan as a result of any of the events indicated in paragraph 2.1.6.2. At the
election of the Bank such losses shall be conclusively deemed to consist of an
amount equal to:
(i) The interest that would have been received from the Borrower on
the amounts during the Interest Period (or remaining portion thereof in
question) had the Borrower not prepaid, repaid, or failed to borrow, convert, or
extend, such funds, as the case may be, minus
(ii) The return that the Bank could have obtained had it placed such
funds on deposit in the interbank dollar market selected by Bank in its sole
discretion on the date of such prepayment, repayment or failure to borrow,
convert, or extend as the case may be, and such funds had remained on deposit
until the end of the applicable Interest period.
2.1.9 REDUCTION OF COMMITMENT AMOUNT.
The Borrower shall have the right, upon at least ten (10) Business Days'
notice to the Agent, to terminate in whole or reduce in part the unused portion
of the Commitment Amount, provided that each partial reduction shall be in the
amount of at least One Million Dollars ($1,000,000), and provided further that
no reduction shall be permitted if, after giving effect thereto, and to any
prepayment made therewith, the outstanding and unpaid principal amount of the
Loans shall exceed the Commitment Amount. Any reduction in part of the unused
portion of each Bank's Commitment shall be made pro rata according to each
Bank's Proportionate Share. The Commitment Amount, once reduced or terminated,
may not be reinstated.
2.1.10 COMMITMENT FEE.
The Borrower shall pay to the Agent for the account of each Bank a
commitment fee on the average daily unused portion of such Bank's Commitment
(the Bank's Proportionate Share of the Commitment Amount less the outstanding
principal balance of the Loans) from the date of this Agreement until the
Maturity Date at the per annum rate of the Commitment Margin (as set forth in
paragraph 2.1.2.4 hereof), payable in arrears on the tenth day of each calendar
quarter during the term of such Bank's Commitment, commencing October 10, 1998,
and ending on the Maturity Date. Upon receipt of any commitment fees, the Agent
will promptly thereafter cause to be distributed such payments to the Banks pro
rata according to each Bank's Proportionate Share from the date upon which the
Bank became a Bank hereunder.
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2.1.11 NON-RECEIPT OF FUNDS BY AGENT.
2.1.11.1 Unless the Agent shall have received notice from a Bank
prior to the date on which such Bank is to provide funds to the Agent for a Loan
to be made by such Bank that such Bank will not make available to the Agent such
funds, the Agent may assume that such Bank has made such funds available to the
Agent on the date of such Loan and the Agent in its sole discretion may, but
shall not be obligated to, in reliance upon such assumption, make available to
the Borrower on such date a corresponding amount. If and to the extent such
Bank shall not have so made such funds available to the Agent, such Bank shall
repay to the Agent on demand such corresponding amount together with interest
thereon, for each day from the date such amount is made available to the
Borrower until the date such amount is repaid to the Agent, at the customary
rate set by the Agent for the correction of errors among banks for three
Business Days and thereafter at the Prime Rate. If such Bank shall repay to the
Agent such corresponding amount, such amount so repaid shall constitute such
Bank's Loan for purposes of this Agreement. If such Bank does not pay such
corresponding amount upon the Agent's demand therefor, the Agent shall promptly
notify the Borrower, and the Borrower shall immediately pay such corresponding
amount to the Agent with interest thereon, for each day from the date such
amount is made available to the Borrower until the date such amount is repaid to
the Agent, at the rate of interest applicable at the time to such Loan.
2.1.11.2 Unless the Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Banks hereunder
that the Borrower will not make such payment in full, the Agent may assume that
the Borrower has made such payment in full to the Agent on such date and the
Agent in its sole discretion may, but shall not be obligated to, in reliance
upon such assumption, cause to be distributed to each Bank on such due date an
amount equal to the amount then due such Bank. If and to the extent the
Borrower shall not have so made such payment in full to the Agent, each Bank
shall repay to the Agent forthwith on demand such amount distributed to such
Bank together with interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such amount to the
Agent, at the customary rate set by the Agent for the correction of errors among
banks for three Business Days and thereafter at the Prime Rate.
2.2 LETTERS OF CREDIT.
Subject to the terms and conditions of this Agreement, as a subfeature
under the Revolving Line of Credit, Issuing Bank shall issue for the account of
Borrower from time to time until the Maturity Date such standby or commercial
letters of credit to be used by Borrower for general corporate purposes
(individually a "Letter of Credit" and collectively the "Letters of Credit") as
Borrower may request under this Section. Subject to the terms of this
Agreement, Letters of Credit may be drawn, reimbursed, or returned undrawn, as
applicable, up to and including the Maturity Date. At no time, however,
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shall the total face amount of the Letters of Credit outstanding, less any
partial draws under the Letters of Credit exceed the Letter of Credit Commitment
Amount.
2.2.1 APPLICATIONS.
Prior to issuance of each Letter of Credit, and in all events prior to
any daily cutoff time Issuing Bank may have established for purposes thereof,
Borrower shall deliver to Issuing Bank an executed standard form of application
for issuance of a letter of credit with such other documents, instruments and
agreements as Issuing Bank may reasonably require.
2.2.2 FACILITY TERMINATION.
The commitment by Issuing Bank to issue Letters of Credit shall, unless
earlier terminated in accordance with the terms of this Agreement, automatically
terminate on the Maturity Date. No Letter of Credit shall expire on a date that
is after the Maturity Date without Issuing Bank's prior written approval.
2.2.3 FEES.
Borrower shall pay Issuing Bank, on demand, Issuing Bank's standard fees
for issuing or administering a commercial Letter of Credit. With respect to each
standby Letter of Credit, Borrower shall pay Issuing Bank a fee equal to the
LIBOR Margin per annum of the face amount of the Letter of Credit, payable
quarterly in advance. The Issuing Bank shall distribute the standby Letter of
Credit fees in excess of twenty-five (25) basis points per annum to the Banks,
including the Issuing Bank, ratably in accordance with each Bank's Proportionate
Share.
2.2.4 FORM.
Each Letter of Credit shall be subject to the terms and conditions of the
application and agreement submitted to Issuing Bank by Borrower and otherwise in
form and substance reasonably satisfactory to Issuing Bank and in favor of
beneficiaries reasonably satisfactory to Issuing Bank. Issuing Bank may, in its
reasonable discretion, refuse to issue a Letter of Credit due to the nature of
the transaction or its terms or in connection with any transaction where Issuing
Bank, due to the beneficiary or the nationality or residence of the beneficiary,
would be prohibited by any applicable law, regulation or order from issuing such
Letter of Credit. In all cases, however, the Issuing Bank shall use its best
efforts to issue a Letter of Credit reasonably acceptable to Issuing Bank and
Borrower. Borrower may obtain commercial letters of credit from other banks as
long as any such letter of credit will not cause a breach of Sections 6.3 and
6.9.
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2.2.5 REIMBURSEMENT.
Immediately after the payment by Issuing Bank of any drawing under any
Letter of Credit (a "Drawing Payment") and not later than 12:00 noon (Boise,
Idaho time) on the date of such Drawing Payment, Borrower shall make or cause to
be made a payment in the amount of such Drawing Payment (a "Reimbursement
Payment") to Agent for the benefit of Issuing Bank, or for the benefit of the
Banks, if, prior to the time such Reimbursement Payment is made, the Banks
pursuant to Subsection 2.2.7 have paid to Issuing Bank their respective
Proportionate Shares of the Drawing Payment made by Issuing Bank. Upon the
receipt by Agent of any Reimbursement Payment, Agent promptly shall pay to each
Bank that has paid its Proportionate Share of the applicable Drawing Payment,
such Bank's Proportionate Share of the Reimbursement Payment and shall promptly
pay to Issuing Bank the balance of such Reimbursement Payment. Borrower may, to
the extent Revolving Line of Credit Loans then are available under this
Agreement, make any Reimbursement Payment with the proceeds of a Loan. Agent
may, if it so elects (but shall have no obligation to), treat any Drawing
Payment as a Prime Loan. The right of Agent to treat a Drawing Payment as a
Prime Loan shall not be affected by the occurrence or existence of any Event of
Default, the failure of Borrower to satisfy any conditions precedent to a Loan,
or any other circumstance or condition.
2.2.6 REIMBURSEMENT OBLIGATIONS ABSOLUTE.
The obligation of Borrower to reimburse Issuing Bank or the Banks, as the
case may be, for Drawing Payments (such obligation referred to as a
"Reimbursement Obligation") shall be absolute, unconditional and irrevocable,
and shall be performed strictly in accordance with the terms of this Agreement
and any Letter of Credit agreement.
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2.2.7 PARTICIPATIONS.
Each Bank shall participate in the extension of credit arising from the
issuance of each standby Letter of Credit in an amount equal to the Bank's
Proportionate Share of the stated amount of such Letter of Credit from time to
time, and the issuance of each standby Letter of Credit shall be deemed an
agreement by Issuing Bank and the Banks of such participation in such amount.
Issuing Bank may request the Banks to pay to Issuing Bank all or any portion of
any Drawing Payment made or to be made by Issuing Bank under any Letter of
Credit by delivering to Agent, at any time after the drawing has been made upon
Issuing Bank, a written request for such payment that specifies the amount of
such Drawing Payment and the date on which such Drawing Payment is to be made or
was made, provided, however, Issuing Bank shall not request the Banks to make
any payment under this Subsection in connection with any portion of a Drawing
Payment for which Issuing Bank has been reimbursed from a Reimbursement Payment
by Borrower unless such Reimbursement Payment has been thereafter recovered by
Borrower. Upon receipt of any such request for payment from Issuing Bank, each
Bank shall pay to Issuing Bank such Bank's Proportionate Share of the applicable
portion of such Drawing Payment, together with interest thereon at a per annum
rate equal to the Federal Funds Rate, as in effect from time to time, from the
date of such Drawing Payment to the date on which such Bank makes payment. Each
Bank's obligation to make each such payment to Issuing Bank shall be absolute,
unconditional and irrevocable and shall not be affected by any circumstance
whatsoever, including the occurrence or continuance of any Event of Default, or
the failure of any other Bank to make any payment under this Subsection, and
each such payment shall be made without any offset, abatement, withholding or
reduction whatsoever.
2.3 TERM STANDBY LETTER OF CREDIT.
Issuing Bank shall issue the Term Standby Letter of Credit for the account
of Borrower to support Borrower's operating lease for Borrower's distribution
center in Parkersburg, West Virginia. Issuing Bank shall annually renew the Term
Standby Letter of Credit as long as no Event of Default has occurred and is
continuing at the date of renewal.
2.3.1 FACILITY TERMINATION.
The commitment by Issuing Bank to issue the Term Standby Letter of Credit
shall automatically terminate if it is not issued on or before June 30, 2000.
The commitment by Issuing Bank to renew the Term Standby Letter of Credit shall,
unless earlier terminated in accordance with the terms of this Agreement,
automatically terminate on the fifth anniversary of the initial issuance of the
Term Standby Letter of Credit.
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2.3.2 FEES.
Borrower shall pay Issuing Bank a fee equal to the LIBOR Margin per annum
of the face amount of the Term Standby Letter of Credit, payable quarterly in
advance. The Issuing Bank shall distribute the fees in excess of twenty-five
(25) basis points per annum to the Banks, including the Issuing Bank, ratably in
accordance with each Bank's Proportionate Share.
2.3.3 INTEREST ON DRAWS.
Term Drawing Payments (defined below) shall bear interest at a fluctuating
per annum rate equal to the Prime Rate plus two percent (2.00%). Agent's Prime
Rate may change from time to time, and the interest payable will continue to
fluctuate at the rate as stated herein. Any changes to the Prime Rate shall
become effective without prior notice to Borrower on the date on which the Prime
Rate changes. The actual interest to be charged shall be calculated daily on the
outstanding balance for the actual number of days elapsed on the basis of a year
consisting of 360 days. Should the rate of interest exceed that allowed by law,
the applicable rate of interest will be the maximum rate of interest lawfully
allowed. The principal amount outstanding on which the interest rate shall be
charged shall be determined from the Bank's records, which shall at all times be
conclusive, absent manifest error.
2.3.4 REIMBURSEMENT.
Immediately after the payment by Issuing Bank of any drawing under the Term
Standby Letter of Credit (a "Term Drawing Payment") and not later than 12:00
noon (Boise, Idaho time) on the date of such Term Drawing Payment, Borrower
shall make or cause to be made a payment in the amount of such Term Drawing
Payment (a "Term Reimbursement Payment") to Agent for the benefit of Issuing
Bank, or for the benefit of the Banks, if, prior to the time such Term
Reimbursement Payment is made, the Banks pursuant to Subsection 2.3.6 have paid
to Issuing Bank their respective Proportionate Shares of the Term Drawing
Payment made by Issuing Bank. Upon the receipt by Agent of any Term
Reimbursement Payment, Agent promptly shall pay to each Bank that has paid its
Proportionate Share of the applicable Term Drawing Payment, such Bank's
Proportionate Share of the Term Reimbursement Payment and shall promptly pay to
Issuing Bank the balance of such Term Reimbursement Payment. Borrower, to may,
to the extent Revolving Line of Credit Loans then are available under this
Agreement, make any Term Reimbursement Payment with the proceeds of a Loan.
Agent may, if it so elects (but shall have no obligation to), treat any Term
Drawing Payment as a Prime Loan. The right of Agent to treat a Term Drawing
Payment as a Prime Loan shall not be affected by the occurrence or existence of
any Event of Default, the failure of Borrower to satisfy any conditions
precedent to a Loan, or any other circumstance or condition.
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2.3.5 REIMBURSEMENT OBLIGATIONS ABSOLUTE.
The obligation of Borrower to reimburse Issuing Bank or the Banks, as
the case may be, for Term Drawing Payments (such obligation referred to as a
"Term Reimbursement Obligation") shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement and any Term Standby Letter of Credit agreement.
2.3.6 PARTICIPATIONS.
Each Bank shall participate in the extension of credit arising from
the issuance of the Term Standby Letter of Credit in an amount equal to the
Bank's Proportionate Share of the stated amount of the Term Standby Letter of
Credit. Issuing Bank may request the Banks to pay to Issuing Bank all or any
portion of any Term Drawing Payment made or to be made by Issuing Bank under the
Term Standby Letter of Credit by delivering to Agent, at any time after the
drawing has been made upon Issuing Bank, a written request for such payment that
specifies the amount of such Term Drawing Payment and the date on which such
Term Drawing Payment is to be made or was made, provided, however, Issuing Bank
shall not request the Banks to make any payment under this Subsection in
connection with any portion of a Term Drawing Payment for which Issuing Bank has
been reimbursed from a Term Reimbursement Payment by Borrower unless such Term
Reimbursement Payment has been thereafter recovered by Borrower. Upon receipt
of any such request for payment from Issuing Bank, each Bank shall pay to
Issuing Bank such Bank's Proportionate Share of the applicable portion of such
Term Drawing Payment, together with interest thereon at a per annum rate equal
to the Federal Funds Rate, as in effect from time to time, from the date of such
Term Drawing Payment to the date on which such Bank makes payment. Each Bank's
obligation to make each such payment to Issuing Bank shall be absolute,
unconditional and irrevocable and shall not be affected by any circumstance
whatsoever, including the occurrence or continuance of any Event of Default, or
the failure of any other Bank to make any payment under this Subsection, and
each such payment shall be made without any offset, abatement, withholding or
reduction whatsoever.
2.4 TAXES ON PAYMENTS.
All payments made by Borrower under this Agreement and the other Loan
Documents shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings ("Taxes"),
now or hereafter imposed, levied, collected, withheld or assessed by any
governmental authority (except net income taxes and franchise taxes in lieu of
net income taxes imposed on Agent or Bank as a result of a present or former
connection between the jurisdiction of the governmental authority imposing such
tax on Agent or such Bank, excluding a connection arising solely from Agent or
such Bank having executed, delivered, or performed its obligations or received a
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payment under, or enforced, this Agreement or the other Loan Documents). If any
Taxes are required to be withheld from any amounts payable to Agent or any Bank
or Issuing Bank under any Loan Document, the amounts so payable to Agent or such
Bank shall be increased to the extent necessary to yield to Agent or such Bank
(after payment of all Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement and the
other Loan Documents.
ARTICLE 3 - CONDITIONS PRECEDENT
3.1 INITIAL ADVANCE.
The obligation of Banks to make the initial Loans to the Borrower and the
obligation of Issuing Bank to issue the initial Letter of Credit under this
Agreement is subject to the conditions precedent that Agent shall have received
on or before the day of such loan each of the following, in form and substance
satisfactory to Agent and its legal counsel:
3.1.1 REVOLVING NOTE.
The Revolving Note for each Bank executed by the Borrower.
3.1.2 GUARANTY.
A guaranty of the Obligations in substantially the form of EXHIBIT 3.1.2
executed by Guarantor.
3.1.3 EVIDENCE OF INSURANCE.
Evidence of the insurance Borrower must maintain in accordance with the
Loan Documents.
3.1.4 OPINION OF COUNSEL FOR BORROWER AND GUARANTOR.
A favorable opinion of counsel for Borrower and Guarantor, in substantially
the form of EXHIBIT 3.1.4 and as to such other matters as Agent may reasonably
request.
3.1.5 EVIDENCE OF ALL CORPORATE ACTION BY BORROWER.
Certified copies of all corporate action taken by Borrower authorizing its
execution and delivery of the Loan Documents and each other document to be
delivered pursuant to this Agreement and its performance of its agreements
thereunder.
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3.1.6 CERTIFICATES OF EXISTENCE FOR BORROWER.
Certificates of existence or good standing dated a reasonable date before
the effective date of this Agreement showing that the Borrower and each
Subsidiary is in good standing under the laws of the state of its incorporation
and all other states in which it is doing business.
3.1.7 CERTIFIED ARTICLES OF INCORPORATION AND BYLAWS OF BORROWER.
Copies of the articles of incorporation and bylaws of Borrower and each
Subsidiary certified by an officer of Borrower to be true and correct.
3.1.8 EVIDENCE OF ALL CORPORATE ACTION BY GUARANTOR.
Certified copies of all corporate action taken by each Guarantor
authorizing its execution and delivery of the Guaranty and its performance of
its agreements thereunder.
3.1.9 CERTIFICATES OF EXISTENCE FOR GUARANTOR.
Certificates of existence or good standing dated a reasonable date before
the effective date of this Agreement showing that each Guarantor is in good
standing under the laws of the state of its incorporation and all other states
in which it is doing business.
3.1.10 CERTIFIED ARTICLES OF INCORPORATION AND BYLAWS OF GUARANTOR.
Copies of the articles of incorporation and bylaws of each Guarantor
certified by an officer of Guarantor to be true and correct.
3.1.11 CERTIFICATES OF ASSUMED BUSINESS NAME.
Copies of all certificates of assumed business name, if any, filed by
Borrower or a Subsidiary.
3.1.12 LETTER TO ACCOUNTANTS.
A letter in the form of EXHIBIT 3.1.12 to Borrower's outside auditors
(which letter Borrower shall also deliver to any subsequent outside auditors
hired by Borrower, all of which shall be independent certified public
accountants acceptable to Majority Banks (each of the so-called Big-5 accounting
firms are acceptable to the Majority Banks)) advising such auditors that one of
the principal purposes of the audited financial statements which they may be
asked to prepare is to provide each Bank with
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information regarding Borrower's financial condition. Borrower shall deliver
such a letter for each Person that becomes a Bank hereunder.
3.1.13 PUBLIC RECORD SEARCHES.
Uniform Commercial Code financing statement searches, federal and state
income tax lien searches, judgment searches, or other similar searches on
Borrower and its Subsidiaries that Agent may require and in such form as Agent
may require.
3.1.14 ADDITIONAL DOCUMENTS.
Such additional approvals, opinions, or documents as Agent may reasonably
request.
3.2 ALL ADVANCES.
The obligation of Banks to make each Loan and the obligation of Issuing
Bank to issue a Letter of Credit or the Term Standby Letter of Credit under this
Agreement shall be subject to the following conditions precedent:
3.2.1 The following statements shall be true on the date of each loan,
and, if requested by a Bank or Issuing Bank, Borrower shall have delivered to
the Bank or Issuing Bank a certificate signed by a duly authorized officer of
the Borrower, certifying to the Bank or the Issuing Bank the truth of the
following statements:
(a) The representations and warranties of Borrower contained in this
Agreement and in the Loan Documents are correct on and as of the date of such
loan as though made on and as of such date.
(b) No default or Event of Default has occurred and is continuing,
or would result from such loan.
3.2.2 Each Bank shall have received such other approvals, opinions, or
documents as such Bank may reasonably request.
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES
In order to induce the Agent and Banks to enter into this Agreement and to
make the loans as provided in this Agreement, the Borrower makes the following
representations and warranties to the Agent and Banks, which shall survive
execution of this Agreement:
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4.1 INCORPORATION, GOOD STANDING, AND DUE QUALIFICATION.
Borrower was incorporated under the General Corporation Law of the State of
Delaware and exists in good standing under the laws of the jurisdiction of its
incorporation with power under the General Corporation Law of the State of
Delaware to own or lease its assets and to transact the business in which it is
now engaged or proposed to be engaged. Each Subsidiary was incorporated under
the general corporation law of the state of its incorporation and exists in good
standing under the laws of such state with power under the general corporation
law of such state to own or lease its assets and to transact the business in
which it is now engaged or proposed to be engaged. Borrower and each Subsidiary
is qualified to transact business as a foreign corporation in good standing
under the laws of each other jurisdiction in which such qualification is
required.
4.2 CORPORATE POWER AND AUTHORITY.
Borrower has authorized the execution and delivery of the Loan Documents
and the performance of its agreements thereunder by all necessary corporate
action under the General Corporation Law of the State of Delaware. Each
Guarantor has authorized the execution and delivery of its Guaranty and the
performance of its agreements thereunder by all necessary corporate action under
the general corporation law of the state of its incorporation. The execution and
delivery of the Loan Documents by Borrower and the performance of its
obligations thereunder will not (1) require any consent or approval of the
shareholders of Borrower that has not been obtained; (2) contravene Borrower's
articles of incorporation or bylaws; (3) violate any provision of any law, rule,
regulation, order, writ, judgment, injunction, decree, determination, or award
presently in effect having applicability to Borrower; (4) result in a breach of
or constitute a default under any indenture or loan or credit agreement or any
other agreement, lease, or instrument to which Borrower is a party or by which
it or its properties may be bound or affected (except for Borrower's agreements
with U.S. Bank that will be terminated upon the advance of the first Loan
hereunder); or (5) cause Borrower to violate any such law, rule, regulation,
order, writ, judgment, injunction, decree, determination, or award or be in
default under any such indenture, agreement, lease, or instrument.
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4.3 LEGALLY ENFORCEABLE AGREEMENT.
This Agreement is, and each of the other Loan Documents when delivered
under this Agreement will be, legal, valid, and binding obligations of the
Borrower, enforceable against the Borrower, in accordance with their respective
terms, except to the extent that such enforcement may be limited by applicable
bankruptcy, insolvency, and other similar laws affecting creditors' rights
generally. Each Guaranty, when delivered, will be, legal, valid, and binding
obligations of the Guarantor, enforceable against the Guarantor, in accordance
with its terms, except to the extent that such enforcement may be limited by
applicable bankruptcy, insolvency, and other similar laws affecting creditors'
rights generally.
4.4 OTHER AGREEMENTS.
No event has occurred and is continuing that constitutes or that, with the
giving of notice or the lapse of time or both, could constitute, an event of
default or a default under any agreement or guaranty to which the Borrower or a
Subsidiary is a party, and no such event will occur upon the making of the loans
hereunder.
4.5 NO LITIGATION.
There is no pending or threatened action or proceeding against or affecting
Borrower or any Subsidiary before any court, governmental agency, or arbitrator,
that may, in any one case or in the aggregate, materially adversely affect the
financial condition, operations, properties, or business of the Borrower or the
ability of the Borrower to perform its obligations under the Loan Documents.
4.6 NO DEFAULTS ON OUTSTANDING JUDGMENTS OR ORDERS.
The Borrower and each Subsidiary has satisfied all judgments against it,
and neither the Borrower nor any Subsidiary is in violation of any judgment,
writ, injunction, decree, rule, or regulation of any court, arbitrator, or
federal, state, municipal, or other governmental authority, commission, board,
bureau, agency, or instrumentality, domestic or foreign, the violation of which
may, in any one case or in the aggregate, materially adversely affect the
financial condition, operations, properties, or business of the Borrower or the
ability of the Borrower to perform its obligations under the Loan Documents.
4.7 FINANCIAL STATEMENTS.
All financial statements and information relating to Borrower and the
Subsidiaries that have been delivered by Borrower to Agent or any Bank or
Issuing Bank are complete and correct and fairly present the financial condition
of the Borrower and its Subsidiaries as of the date of such statements and
information and the results of the
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operations of the Borrower and its Subsidiaries for the periods covered by such
statements, all in accordance with GAAP consistently applied (subject to year-
end adjustments in the case of the interim financial statements). There has been
no material adverse change in the financial condition of Borrower or its
Subsidiaries since the date of the most recent of such financial statements
submitted to Agent. There are no liabilities of Borrower or any Subsidiary,
fixed or contingent, that are material but are not reflected in the financial
statements or in the notes thereto, other than liabilities arising in the
ordinary course of business since the date of the most recent of such financial
statements submitted to Agent.
4.8 EMPLOYEE BENEFITS.
The Borrower and each Subsidiary is in compliance in all material respects
with all applicable provisions of ERISA. Neither a Reportable Event nor a
Prohibited Transaction has occurred and is continuing with respect to any Plan;
no notice of intent to terminate a Plan has been filed nor has any Plan been
terminated; no circumstances exist that constitute grounds entitling the PBGC to
institute proceedings to terminate, or appoint a trustee to administer, a Plan,
nor has the PBGC instituted any such proceedings; neither Borrower nor any
Commonly Controlled Entity has completely or partially withdrawn from a
Multiemployer Plan; the Borrower and each Commonly Controlled Entity have met
their minimum funding requirements under ERISA with respect to all of their
Plans and the present value of all vested benefits under each Plan does not
exceed the fair market value of all Plan assets allocable to such benefits, as
determined on the most recent valuation date of the Plan and in accordance with
the provisions of ERISA; and neither the Borrower nor any Commonly Controlled
Entity has incurred any liability to the PBGC under ERISA.
4.9 LABOR DISPUTES AND CASUALTIES.
Neither the businesses nor the properties of the Borrower or any Subsidiary
are affected by any fire, explosion, accident, strike, lockout, or other labor
dispute, drought, storm, hail, earthquake, embargo, act of God, or other
casualty (whether or not covered by insurance), materially and adversely
affecting such businesses or properties or the operation of the Borrower and its
Subsidiaries.
4.10 OPERATION OF BUSINESS.
Borrower and each Subsidiary possesses all material licenses, permits,
franchises, patents, copyrights, trademarks, and trade names, or rights thereto,
to conduct its businesses substantially as now conducted and as presently
proposed to be conducted, and neither the Borrower nor a Subsidiary to the best
of its knowledge is in violation of any valid rights of others with respect to
any of the foregoing. Borrower and each Subsidiary has filed, and will file in
the future, with the appropriate governmental entities all assumed business name
certificates necessary or required to conduct its businesses.
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4.11 ENVIRONMENTAL MATTERS.
To the best of its knowledge, the Borrower and each Subsidiary has complied
with, and its businesses, operations, assets, equipment, property, leaseholds or
other facilities are in compliance with, the provisions of the Environmental
Laws and all other federal, state, and local environmental, health and safety
laws, codes and ordinances, and all rules and regulations promulgated
thereunder. The Borrower and each Subsidiary has been issued and will maintain
all required federal, state, and local permits, licenses, certificates, and
approvals relating to (1) air emissions; (2) discharges to surface water or
groundwater; (3) noise emissions; (4) solid or liquid waste disposal; (5) the
use, generation, storage, transportation, or disposal of Hazardous Substances;
or (6) other environmental, health, or safety matters. Neither Borrower nor any
Subsidiary has received notice of, nor knows of, nor suspects facts that might
constitute any violations of an Environmental Law or any other federal, state,
or local environmental, health, or safety laws, codes, or ordinances and any
rules or regulations promulgated thereunder with respect to its businesses,
operations, assets, equipment, property, leaseholds, or other facilities. To the
best of Borrower's knowledge, except in accordance with a valid governmental
permit, license, certificate, or approval, there has been no emission, spill,
release, or discharge into or upon (1) the air; (2) soils, or any improvements
located thereon; (3) surface water or groundwater; or (4) the sewer, septic
system or waste treatment, storage, or disposal system servicing the premises of
any Hazardous Substances or from the premises; and accordingly, except for
inventory of raw materials, supplies, work in progress, and finished goods that
are to be used or sold in the ordinary course of business, the premises of
Borrower and each subsidiary is free of all such Hazardous Substances. To the
best of Borrower's knowledge, there has been no complaint, order, directive,
claim, citation, or notice by any governmental authority or any person or entity
with respect to (1) air emissions; (2) spills, releases, or discharges to soils
or improvements located thereon, surface water, groundwater or the sewer, septic
system, or waste treatment, storage or disposal systems servicing the premises;
(3) noise emissions; (4) solid or liquid waste disposal; (5) the use,
generation, storage, transportation, or disposal of Hazardous Substances; or (6)
other environmental, health, or safety matters affecting the businesses,
operations, assets, equipment, property, leaseholds, or other facilities of
Borrower or any Subsidiary. Neither Borrower nor any Subsidiary has
indebtedness, obligation, or liability, absolute or contingent, matured or not
matured, with respect to the storage, treatment, cleanup, or disposal of any
Hazardous Substances.
4.12 OWNERSHIP AND LIENS.
The Borrower and each Subsidiary has title to, or valid leasehold interests
in, all of its properties and assets, real and personal, and none of such
properties and assets owned by the Borrower or any Subsidiary and none of its
leasehold interests are subject to any Lien, except Permitted Liens.
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4.13 TAXES.
The Borrower and each Subsidiary has filed all tax returns (federal, state,
and local) required to be filed and has paid all taxes, assessments, and
governmental charges and levies thereon to be due, including interest and
penalties, except those presently being or to be contested by Borrower or a
Subsidiary in good faith in the ordinary course of business and for which
adequate reserves have been provided.
4.14 INVESTMENT COMPANY ACT.
Neither Borrower nor any Subsidiary is an "investment company" or a company
"controlled" by an "investment company", within the meaning of the Investment
Company Act of 1940, as amended.
4.15 SUBSIDIARIES.
Set forth in SCHEDULE 4.15 is a complete and accurate list of the
Subsidiaries of the Borrower, showing the jurisdiction of incorporation of each
and showing the percentage of the Borrower's ownership of the outstanding stock
of each Subsidiary. All of the outstanding capital stock of each Subsidiary has
been validly issued, is fully paid and nonassessable, and is owned by the
Borrower free and clear of all Liens.
4.16 ACCURACY OF REPRESENTATIONS.
No information, document, exhibit, or report furnished by Borrower or any
Subsidiary to Agent, any Bank, or Issuing Bank in connection with the
negotiation and execution of this Agreement or any Loan Document contains any
material misstatement of fact, or fails to state a material fact or any fact
necessary to make the statement contained therein not materially misleading.
4.17 CONTINUING WARRANTIES, REPRESENTATIONS AND COVENANTS.
Each warranty, representation, and covenant contained in this Agreement
shall continue until the Agreement is terminated and all Obligations have been
paid or satisfied in full and shall be conclusively presumed to have been relied
upon by Agent and Banks regardless of any investigation made or information
possessed by Agent or Banks. The warranties, representations, and covenants set
forth herein shall be cumulative and in addition to any and all other
warranties, representations, and covenants that Borrower or any Subsidiary shall
give or cause to be given to Agent and Banks, either now or hereafter.
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ARTICLE 5 - AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that so long as any Obligation is
outstanding it shall comply with the following provisions:
5.1 MAINTENANCE OF EXISTENCE.
Borrower shall preserve and maintain, and cause each Subsidiary to preserve
and maintain, its corporate existence and good standing in the jurisdiction of
its incorporation, and qualify and remain qualified, as a foreign corporation in
each jurisdiction in which such qualification is required.
5.2 MAINTENANCE OF RECORDS.
Borrower shall keep, and cause each Subsidiary to keep, adequate records
and books of account, in which complete entries will be made in accordance with
GAAP consistently applied, reflecting all financial transactions of the Borrower
and each Subsidiary.
5.3 MAINTENANCE OF PROPERTIES.
Borrower shall maintain, keep, and preserve, and cause each Subsidiary to
maintain, keep, and preserve, all of its properties (tangible and intangible)
necessary or useful in the proper conduct of its business in good working order
and condition, ordinary wear and tear excepted.
5.4 CONDUCT OF BUSINESS.
Borrower shall continue, and cause each Subsidiary to continue, to engage
in an efficient and economical manner in businesses of the same general type as
conducted by it on the date of this Agreement.
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5.5 MAINTENANCE OF INSURANCE.
Borrower shall, at its expense, maintain, and cause each Subsidiary to
maintain, insurance with financially sound and reputable insurance companies or
associations in such amounts, covering such risks, and in such form as shall be
consistent with the industry practices. Borrower, upon request of Agent, shall
deliver to Agent from time to time the policies or certificates of insurance in
form satisfactory to Agent, including stipulations that coverages will not be
canceled or diminished without at least thirty (30) days' prior written notice
to Agent and not including any disclaimer of the insurer's liability for failure
to give such a notice. If Borrower at any time fails to obtain or maintain, or
cause each Subsidiary to obtain or maintain, any insurance required under the
Loan Documents, Agent may, but shall not be obligated to, upon written notice to
Borrower, obtain such insurance as Agent deems appropriate, including if it so
chooses, "single interest insurance" that will cover only Banks' interest.
5.6 COMPLIANCE WITH LAWS.
Borrower shall comply, and cause each Subsidiary to comply, in all material
respects with all applicable laws, rules, regulations, and orders, such
compliance to include, without limitation, paying before the same become
delinquent all taxes, assessments, and governmental charges imposed upon it or
upon its property, except for such taxes, assessments or charges that are
contested by Borrower or a Subsidiary in good faith in the ordinary course of
business and for which adequate reserves have been provided.
5.7 RIGHT OF INSPECTION.
Borrower shall, at any reasonable time and from time to time, permit the
Agent or any Bank or Issuing Bank or any agent or representative thereof to
examine and make copies of and abstracts from the records and books of account
of, and visit the properties of, the Borrower and each Subsidiary, and to
discuss the affairs, finances, and accounts of the Borrower and each Subsidiary
with any of its employees, officers, and directors and the Borrower's
independent accountants. Borrower shall reimburse the Agent or the Bank for all
expenses incurred by the Bank in connection with such inspection if as a result
of the inspection the Agent, Bank, or Issuing Bank discovers a breach of Section
4.16.
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5.8 ACCOUNTING.
Borrower at all times hereafter shall maintain, and cause each Subsidiary
to maintain, a standard and modern system of accounting in accordance with GAAP.
Borrower shall not, and shall not permit any Subsidiary to, (i) modify or change
its method of accounting without advising Agent of such change, or (ii) enter
into, modify, or terminate any agreement presently existing or at any time
hereafter entered into with any third party accounting firm and/or service
bureau for the preparation and/or storage of Borrower's or a subsidiary's
accounting records without Borrower or the Subsidiary instructing said
accounting firm and/or service bureau to provide to Agent information regarding
the Borrower's assets and financial condition as otherwise required under the
Loan Documents.
5.9 REIMBURSEMENT OF BANK EXPENSES.
Borrower shall promptly on demand reimburse Bank for sums expended by Bank
that constitute Bank Expenses, and Borrower authorizes and approves all advances
and payments by Bank for items constituting Bank Expenses. This provision shall
survive termination of this Agreement.
5.10 LOCATION OF CHIEF EXECUTIVE OFFICE.
The chief executive office of Borrower is located at One Coldwater Creek
Drive, Sandpoint, Idaho, and Borrower shall not relocate such chief executive
office without thirty (30) days prior written notice to Bank.
5.11 REPORTING REQUIREMENTS.
5.11.1 QUARTERLY FINANCIAL STATEMENTS. Borrower shall furnish to Agent as
soon as available and in any event within forty-five (45) days after the end of
each fiscal quarter, consolidated balance sheets of the Borrower and its
Subsidiaries as of the end of such quarter, consolidated statements of income
and retained earnings of the Borrower and its Subsidiaries for the period
commencing at the end of the previous fiscal year and ending with the end of
such quarter, consolidated statements of cash flows of the Borrower and its
Subsidiaries for the portion of the fiscal year ended with the last day of such
quarter, all in reasonable detail and stating in comparative form the respective
figures for the corresponding date and period in the previous fiscal year and
all prepared in accordance with GAAP consistently applied and certified by an
authorized financial officer of the Borrower (subject to year-end adjustments).
5.11.2 ANNUAL FINANCIAL STATEMENTS. Borrower shall furnish to Agent within
one hundred twenty (120) days after the end of each fiscal year of the Borrower,
consolidated balance sheets of the Borrower and its Subsidiaries as of the end
of such fiscal year, consolidated statements of income and retained earnings of
the
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Borrower and its Subsidiaries for such fiscal year, and consolidated statements
of cash flows of the Borrower and its Subsidiaries for such fiscal year, all in
reasonable detail and stating in comparative form the respective figures for the
corresponding date and period in the prior fiscal year and all prepared in
accordance with GAAP consistently applied and audited by independent certified
public accountants selected by the Borrower and acceptable to the Majority Banks
(each of the so-called Big-5 accounting firms are acceptable to Majority Banks).
5.11.3 GUARANTOR ANNUAL FINANCIAL STATEMENTS. If not provided pursuant to
Subsection 5.11.2, Borrower shall furnish to Agent within one hundred twenty
(120) days after the end of each fiscal year of each Guarantor, balance sheets
of the Guarantor as of the end of such fiscal year, statements of income and
retained earnings of the Guarantor for such fiscal year, and statements of cash
flows of the Guarantor for such fiscal year, all in reasonable detail and
stating in comparative form the respective figures for the corresponding date
and period in the prior fiscal year and all prepared in accordance with GAAP
consistently applied and audited by independent certified public accountants
selected by the Guarantor and acceptable to the Majority Banks (each of the so-
called Big-5 accounting firms are acceptable to Majority Banks).
5.11.4 MANAGEMENT LETTERS. Borrower shall furnish to Agent promptly upon
receipt thereof, copies of any reports submitted to the Borrower or any
Subsidiary by independent certified public accountants in connection with
examination of the financial statements of the Borrower or any Subsidiary made
by such accountants.
5.11.5 NOTICE OF LITIGATION. Borrower shall furnish to Agent promptly
after the commencement thereof, notice of all actions, suits, and proceedings
before any court or governmental department, commission, board, bureau, agency,
or instrumentality, domestic or foreign, affecting the Borrower or any
Subsidiary that, if determined adversely to the Borrower or the Subsidiary,
could have a material adverse effect on the financial condition, properties, or
operations of the Borrower or the Subsidiary.
5.11.6 NOTICE OF DEFAULTS AND EVENTS OF DEFAULT. Borrower shall furnish to
Agent as soon as possible and in any event within five (5) Business Days after
the occurrence of each Event of Default is known or should have been known to
Borrower, a written notice setting forth the details of such Event of Default
and the action that is proposed to be taken by the Borrower with respect
thereto.
5.11.7 ERISA REPORTS. Borrower shall furnish to Agent as soon as possible,
and in any event within thirty (30) days after the Borrower knows or has reason
to know that any circumstances exist that constitute grounds entitling the PBGC
to institute proceedings to terminate a Plan subject to ERISA with respect to
the Borrower or any Commonly Controlled Entity, and promptly but in any event
within ten (10) Business Days of receipt by the Borrower or any Commonly
Controlled Entity of notice
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that the PBGC intends to terminate a Plan or appoint a trustee to administer the
same, and promptly but in any event within ten (10) Business Days of the receipt
of notice concerning the imposition of withdrawal liability with respect to the
Borrower or any Commonly Controlled Entity, a certificate of an authorized
officer of the Borrower setting forth all relevant details and the action that
the Borrower proposes to take with respect thereto.
5.11.8 SEC FILINGS. Borrower shall furnish to Agent promptly after the
sending or filing thereof, copies of all proxy statements, financial statements,
and reports that the Borrower or any Subsidiary sends to its stock holders, and
copies of all regular, periodic, and special reports, and all registration
statements that the Borrower or any Subsidiary files with the Securities and
Exchange Commission or any governmental authority that may be substituted
therefor, or with any national securities exchange.
5.11.9 GENERAL INFORMATION. Borrower shall furnish to Agent such other
information respecting the condition or operations, financial or otherwise, of
the Borrower or any Subsidiary as the Agent may from time to time reasonably
request.
5.12 ENVIRONMENT.
Borrower shall, and shall cause each Subsidiary to, (i) be and remain in
compliance with Environmental Laws and with the provisions of all other federal,
state, and local environmental, health, and safety laws, codes, and ordinances,
and all rules and regulations issued thereunder; (ii) notify the Agent
immediately of any notice of a hazardous discharge or environmental complaint
received from any governmental agency or other party; (iii) notify the Agent
immediately of any hazardous discharge from or affecting its premises; (iv)
immediately contain and remove the same, in compliance with all applicable laws;
(v) promptly pay any fine or penalty assessed in connection therewith; (vi)
permit the Agent to inspect the premises, to conduct tests thereon, and to
inspect all books, correspondence, and records pertaining thereto; and (vii) at
the Agent's request, and at the Borrower's expense, provide a report of a
qualified environmental engineer, satisfactory in scope, form, and content to
the Agent, and such other and further assurances reasonably satisfactory to the
Agent that the condition has been corrected.
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5.13 YEAR 2000 COMPLIANCE.
Borrower shall take all action, and shall cause each Subsidiary to take all
action, that may be necessary or desirable, or that Agent may reasonably
request, in order to ensure that the Borrower and its Subsidiaries, their
affiliates, and all customers, suppliers and vendors that are material to the
Borrower's or a Subsidiary's business, become Year 2000 Compliant on or before
October 1, 1999. Such acts shall include, without limitation, (i) performing a
comprehensive inventory, review and assessment of all of the Borrower's and each
Subsidiary's systems and adopting a detailed plan, with itemized budget and
timetable, for the remediation, monitoring and testing of such systems, and (ii)
making a detailed inquiry of all material customers, suppliers and vendors to
ascertain whether such entities are aware of the need to be Year 2000 Compliant
and are taking all appropriate steps to become Year 2000 Compliant on a timely
basis. As used in this section, "Year 2000 Compliant" shall mean, in regard to
any entity, that all software, hardware, firmware, equipment, goods or systems
used by or material to the business operations or financial condition of such
entity, will properly perform date sensitive functions before, during and after
January 1, 2000. Such date sensitive functions shall include, without
limitation, (a) interpretation of years greater than 1999, (b) process date data
from, into, and between dates before January 1, 2000, and dates on or after
January 1, 2000, (c) recognizing numbers such as "99" as an actual date rather
than indefinite or unknown information, (d) recognizing that the year 2000 is a
leap year, and (e) transferring data between systems that used different methods
to make the system Year 2000 Compliant. Borrower shall, promptly upon request,
provide to Agent such certifications or other evidence of Borrower's and each
Subsidiary's compliance with the terms of this section as Agent may from time to
time reasonably require.
5.14 BANK'S YEAR 2000 COMPLIANCE.
Each Bank shall take all action that may be necessary in order to ensure
that the Bank becomes Year 2000 Compliant on or before January 1, 2000.
ARTICLE 6 - NEGATIVE COVENANTS
The Borrower covenants and agrees that so long as any Obligation is
outstanding it will comply with the following provisions:
6.1 CHANGE OF NAME.
Borrower shall not, and shall not permit any Subsidiary to, without
Majority Banks' prior written consent, change the Borrower's or a Subsidiary's
name, business structure, or identity, or add any new assumed business name.
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6.2 MERGERS.
Borrower shall not, and shall not permit any Subsidiary to, without
Majority Banks' prior written consent, which consent shall not be unreasonably
withheld, wind up, liquidate or dissolve itself, reorganize, merge or
consolidate with or into, or convey, sell, assign, transfer, lease, or otherwise
dispose of (whether in one transactions or in a series of transactions) all or
substantially all of its assets (whether now owned or hereafter acquired) to any
Person, or acquire all or substantially all of the assets or the business of any
Person other than in the ordinary course of business, except that (i) any
Subsidiary may merge into or transfer assets to the Borrower, and (ii) any
Subsidiary may merge into or consolidate with or transfer assets to any other
Subsidiary.
6.3 DEBT.
Without Majority Banks' prior written consent, Borrower shall not, and
shall not permit any Subsidiary to, incur, assume, or suffer to exist, any debt
other than (i) the Obligations; (ii) accounts payable to trade creditors for
goods or services that are not aged more than sixty (60) days from the due date
and current operating liabilities (other than for borrowed money) that are not
more than sixty (60) days past due, in each case incurred in the ordinary course
of business, as presently conducted, and paid within the specified time, unless
contested in good faith and by appropriate proceedings; (iii) debt of the
Borrower or a Subsidiary secured by purchase-money liens that are Permitted
Liens; and (iv) additional debt of the Borrower or a Subsidiary on an unsecured
basis not exceeding at any time outstanding in the aggregate the sum of Ten
Million Dollars ($10,000,000) less the aggregate amount of debt secured by
purchase-money liens that are Permitted Liens.
6.4 DIVIDENDS.
Without Majority Banks' prior written consent, Borrower shall not, and
shall not permit any Subsidiary to, declare or pay any dividends; or purchase,
redeem, retire, or otherwise acquire for value any of its capital stock now or
hereafter outstanding; or make any distribution of assets to its stockholders as
such whether in cash, assets, or in obligations of the Borrower or Subsidiary;
or allocate or otherwise set apart any sum for the payment of any dividend or
distribution on, or for the purchase, redemption, or retirement of any shares of
its capital stock; or make any other distribution by reduction of capital or
otherwise in respect of any shares of its capital stock, except that the
Borrower or a Subsidiary (1) may declare and deliver dividends and make
distributions payable solely in its common stock; and (2) may purchase or
otherwise acquire shares of its capital stock by exchange for or out of the
proceeds received from a substantially concurrent issue of new shares of its
capital stock.
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6.5 SALE OF ASSETS.
Without Majority Banks' prior written consent, Borrower shall not, and
shall not permit any Subsidiary to, sell, lease, assign, transfer, or otherwise
dispose of any of its now owned or hereafter acquired assets (including, without
limitation, receivables and leasehold interests), except: (1) inventory disposed
of in the ordinary course of business; and (2) the sale or other disposition of
assets no longer used or useful in the conduct of its business, or (3) as
permitted in schedule 6.5 attached hereto.
6.6 INVESTMENTS.
Borrower shall not, and shall not permit any Subsidiary to, make any loan
or advance to any Person (other than a Subsidiary that is a Guarantor), or
purchase or otherwise acquire any capital stock, assets, obligations, or other
securities of, make any capital contribution to, or otherwise invest in or
acquire any interest in any Person, or participate as a partner or joint
venturer with any other Person without Majority Banks' prior written consent,
which shall not be unreasonably withheld, except: (1) direct obligations of the
United States or any agency thereof with maturities of one year or less from the
date of acquisition; (2) commercial paper of a domestic issuer rated at least
"A-1" by Standard & Poor's Corporation or "P-1" by Moody's Investors Service,
Inc.; (3) certificates of deposit with maturities of one year or less from the
date of acquisition; (4) stock, obligations, or securities received in
settlement of debts (created in the ordinary course of business) owing to the
Borrower; (5) investments made through Bank or one of its affiliates; and (6)
loans to officers, shareholders, directors, or employees of Borrower in an
aggregate amount not exceeding Two Million Dollars ($2,000,000) at any time.
6.7 GUARANTIES.
Without Majority Banks' prior written consent, Borrower shall not, and
shall not permit any Subsidiary to, assume, guarantee, endorse, or otherwise be
or become directly or contingently responsible or liable (including, but not
limited to, an agreement to purchase any obligation, stock, assets, goods, or
services, or to supply or advance any funds, assets, goods, or services, or an
agreement to maintain or cause such Person to maintain a minimum working capital
or net worth, or to otherwise assure the creditors of any Person against loss)
for obligations of any Person, except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business.
6.8 SUSPENSION OF BUSINESS.
Borrower shall not, and shall not permit any Subsidiary to, without
Majority Banks' prior written consent, suspend or go out of business.
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6.9 LIENS.
Without Majority Banks' prior written consent, Borrower shall not,
and shall not permit any Subsidiary to, create, incur, assume, or suffer to
exist any Lien upon any of its property or assets, now owned or hereafter
acquired, except for Permitted Liens.
6.10 PENSION PLANS.
Borrower shall not, and shall not permit any Subsidiary to, without
Majority Banks' prior written consent, enter into, contribute to, or become a
party to any Plan, other than those Plans listed in SCHEDULE 6.10.
6.11 CHANGE IN MANAGEMENT.
Borrower shall not materially and adversely alter its senior management
(vice president and above) without giving Bank prior written notice.
ARTICLE 7 - FINANCIAL COVENANTS
So long as any Obligation is outstanding or any Bank shall have any
commitment under this Agreement, Borrower shall maintain the following financial
covenants:
7.1 EBITDA COVERAGE RATIO.
Borrower shall maintain on the last day of each fiscal quarter year a ratio
of (i) Borrower's earnings before interest expense, taxes, dividends,
depreciation and amortization to (ii) Borrower's interest expense, dividends,
taxes, and current maturities of long term debt of not less than 2.00 to 1.00.
7.2 LEVERAGE RATIO.
Borrower shall maintain on the last day of each fiscal quarter a ratio of
Borrower's total liabilities to net worth of not greater than 1.60 to 1.00
through November 30, 1998, and 1.40 to 1.00 thereafter.
7.3 CURRENT RATIO.
Borrower shall maintain on the last day of each fiscal quarter a ratio of
current assets to current liabilities of at least 1.0 to 1.0. Only sixty-six
percent (66%) of the outstanding balance of the Revolving Line of Credit shall
be considered a current liability for purposes of computing this ratio through
November 30, 1998. Thereafter, all
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of the outstanding balance of the Revolving Line of Credit shall be considered a
current liability.
ARTICLE 8 - EVENTS OF DEFAULT
If any of the following events shall occur (each an "Event of Default"),
Agent and Majority Banks may exercise any of the rights and remedies under
Article 9:
8.1 The Borrower shall fail to pay the principal of, or interest on,
the Revolving Note, or any Obligation within fifteen (15) days of when due and
payable.
8.2 Any representation or warranty made or deemed made by Borrower in
this Agreement or other Loan Document or that is contained in any certificate,
document, opinion, or financial or other statement furnished at any time under
or in connection with any Loan Document shall prove to have been incorrect,
incomplete, or misleading in any material respect on or as of the date made or
deemed made.
8.3 Borrower shall fail to perform or observe any term, covenant, or
agreement contained in this Agreement or other Loan Document, or Borrower shall
be in default under any other agreement with any Bank or the Issuing Bank.
8.4 Borrower or any of its Subsidiaries shall (a) fail to pay any
indebtedness for borrowed money in excess of Five Hundred Thousand Dollars
($500,000) in the aggregate at any time (other than the Revolving Notes) of the
Borrower or such Subsidiary, or any interest or premium thereon, when due
(whether by scheduled maturity, required prepayment, acceleration, demand, or
otherwise); or (b) fail to perform or observe any term, covenant, or condition
on its part to be performed or observed under any agreement or instrument
relating to any such indebtedness, when required to be performed or observed, if
the effect of such failure to perform or observe is to accelerate, or to permit
the acceleration of after the giving of notice or passage of time, or both, the
maturity of such indebtedness in excess of Five Hundred Thousand Dollars
($500,000), whether or not such failure to perform or observe shall be waived by
the holder of such indebtedness, or any such indebtedness shall be declared to
be due and payable, or required to be prepaid (other than by a regularly
scheduled required prepayment), prior to the stated maturity thereof.
8.5 Borrower or any Subsidiary (a) shall generally not pay, or shall be
unable to pay, or shall admit in writing its inability to pay its debts as such
debts become due; or (b) shall make an assignment for the benefit of creditors,
or petition or apply to any tribunal for the appointment of a custodian,
receiver, or trustee for it or a substantial part of its assets; or (c) shall
commence any proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution, or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect; or (d) shall have had any such
petition or application filed or any such proceeding commenced against it in
which
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an order for relief is entered or an adjudication or appointment is made, and
that remains undismissed for a period of sixty (60) days or more; or (e) shall
take any corporate action indicating its consent to, approval of, or
acquiescence in any such petition, application, proceeding, or order for relief
or the appointment of a custodian, receiver, or trustee for all or any
substantial part of its properties; or (f) shall suffer any such custodianship,
receivership, or trusteeship to continue undischarged for a period of sixty (60)
days or more.
8.6 One or more judgments, decrees, or orders for the payment of money
in excess of Five Hundred Thousand Dollars ($500,000) in the aggregate shall be
rendered against the Borrower or any of its Subsidiaries, and such judgments,
decrees, or orders shall continue unsatisfied and in effect for a period of
sixty (60) consecutive days without being vacated, discharged, satisfied, or
stayed or bonded pending appeal.
8.7 Any Guaranty shall at any time after its execution and delivery and
for any reason cease to be in full force and effect or shall be declared null
and void, or the validity or enforceability thereof shall be contested by the
Guarantor, or the Guarantor shall deny he has any further liability under, or
shall fail to perform its obligations under, the Guaranty, or the Guarantor, if
a natural person, shall die.
8.9 Any of the following events shall occur or exist with respect to
Borrower and any Commonly Controlled Entity under ERISA: any Reportable Event
shall occur; complete or partial withdrawal from any Multiemployer Plan shall
take place; any Prohibited transaction shall occur; a notice of intent to
terminate a Plan shall be filed, or a Plan shall be terminated; or circumstances
shall exist that constitute grounds entitling the PBGC to institute proceedings
to terminate a Plan, or the PBGC shall institute such proceedings; and in each
case above, such event or condition, together with all other events or
conditions, if any, could subject the Borrower to any tax, penalty, or other
liability that in the aggregate may exceed Five Hundred Thousand Dollars
($500,000).
8.10 If any federal, state, or local agency asserts or creates a Lien
upon any or all of the assets, equipment, property, leaseholds, or other
facilities of Borrower or any Subsidiary by reason of the occurrence of a
hazardous discharge or an environmental complaint; or if any federal, state, or
local agency asserts a claim against the Borrower or any Subsidiary and/or its
assets, equipment, property, leaseholds or other facilities for damages or
cleanup costs relating to a hazardous discharge or an environmental complaint;
provided, however, that such claim shall not constitute a default if, within ten
(10) Business Days of the occurrence giving rise to the claim, (a) the Borrower
or Subsidiary can prove to the Agent's satisfaction that the Borrower or
Subsidiary has commenced and is diligently pursuing an investigation of the
claim to be followed promptly by either: (i) a cure or correction of the event
that constitutes the basis for the claim, and continues diligently to pursue
such cure or correction to completion, or (ii) proceedings for an injunction, a
restraining order, or other appropriate emergent relief preventing such agency
or agencies from asserting such claim, that relief is granted
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within ten (10) Business Days of the occurrence giving rise to the claim and the
injunction, order, or emergent relief is not thereafter resolved or reversed on
appeal; and (b) in either of the foregoing events, the Borrower or Subsidiary
has posted a bond, letter of credit, or other security satisfactory in form,
substance and amount to both the Agent and the agency or entity asserting the
claim to secure the proper and complete cure or correction of the event that
constitutes the basis for the claim.
8.11 Any material misrepresentation exists now or hereafter in any
warranty or representation made to Agent or Banks by any officer or director of
Borrower or any Subsidiary, or if any such warranty or representation is
withdrawn by any such officer or director.
8.12 This Agreement shall at any time after its execution and delivery
and for any reason cease to be in full force and effect or shall be declared
null and void, or the validity or enforceability thereof shall be contested by
Borrower, or Borrower shall deny it has any further liability or obligation
under this Agreement.
If any foregoing default, other than a payment default, is curable and if
Borrower has not been given a notice of a similar default within the preceding
twelve (12) months, it may be cured (and no Event of Default will have occurred)
if Borrower, after receiving written notice from Agent or a Bank demanding cure
of such default: (a) cures the default within fifteen (15) days; or (b) if the
cure requires more than fifteen (15) days, immediately initiates steps that
Banks deems in Banks' sole discretion to be sufficient to cure the default and
thereafter continues and completes all reasonable and necessary steps sufficient
to produce compliance as soon as reasonably practical.
ARTICLE 9 - BANK'S RIGHTS AND REMEDIES
9.1 SPECIFIC REMEDIES.
Upon the occurrence of an Event of Default under this Agreement, Agent
shall at the request of, or may, with the consent of, the Majority Banks,
without notice of its election and without demand, do any one or more of the
following, all of which are authorized by Borrower:
9.1.1 Declare all Obligations, whether evidenced by this Agreement or the
Loan Documents, due and payable immediately.
9.1.2 Terminate this Agreement and any of the other Loan Documents as to
any future liability or obligation of Banks, but without affecting Banks rights
and without affecting the Obligations.
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9.2 SET OFF.
Upon the occurrence and during the continuance of any Event of Default,
each Bank is authorized at any time and from time to time, without notice to the
Borrower (any such notice being expressly waived by the Borrower), to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by the Bank
to or for the credit or the account of Borrower against any and all of the
obligations of the Borrower now or hereafter existing under this Agreement or
the Bank's Revolving Note or any other Loan Document, irrespective of whether or
not the Bank shall have made any demand under this Agreement or its Revolving
Note or such other Loan Document and although such obligations may be unmatured.
Each Bank shall promptly notify the Borrower (with a copy to the Agent) after
any such setoff and application, provided that the failure to give such notice
shall not affect the validity of such setoff and application. The rights of each
Bank under this Section are in addition to other rights and remedies (including,
without limitation, other rights of setoff) that each such Bank may have.
9.3 NO LIMITATION ON REMEDIES.
Each Bank's rights and remedies under this Agreement and the Loan Documents
shall be cumulative. Each Bank shall have all other rights and remedies not
inconsistent herewith as provided by law or in equity. No exercise by any Bank
of one right or remedy shall be deemed an election, and no waiver by any Bank of
any default on Borrower's part shall be deemed a continuing waiver. No delay by
any Bank shall constitute a waiver, election, or acquiescence by it.
9.4 BANK EXPENSES.
Borrower shall pay all Bank Expenses incurred in connection with each
Bank's enforcement and exercise of any of its rights and remedies as herein
provided, whether or not suit is commenced by such Bank.
ARTICLE 10 - WAIVERS
10.1 APPLICATION OF PAYMENTS.
Borrower waives the right to direct the application of any and all payments
at any time or times hereafter received by any Bank on account of the
Obligations, and Borrower agrees that each Bank shall have the continuing
exclusive right to apply and reapply such payments to the Obligations in any
manner as the Bank may deem advisable, notwithstanding any entry by the Bank
upon its books.
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10.2 DEMAND AND NOTICES.
Borrower waives demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment, notice of any default, nonpayment at
maturity, release, compromise, settlement, extension or renewal of any or all
commercial paper, accounts, documents, instruments, chattel paper, and
guarantees at any time held by a Bank for which Borrower may in any way be
liable.
ARTICLE 11 - AGENCY PROVISIONS
11.1 AUTHORIZATION AND ACTION.
Each Bank hereby irrevocably appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
as are delegated to the Agent by the terms hereof, together with such powers as
are reasonably incidental thereto. The duties of the Agent shall be mechanical
and administrative in nature and the Agent shall not by reason of this Agreement
be a trustee or fiduciary for any Bank. The Agent shall have no duties or
responsibilities except those expressly set forth herein. As to any matters not
expressly provided for by this Agreement (including, without limitation,
enforcement or collection of the Revolving Notes), the Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or so
refraining from acting) upon the instructions of the Majority Banks, and such
instructions shall be binding upon all Banks and all holders of the Revolving
Notes; provided, however, that the Agent shall not be required to take any
action which exposes the Agent to personal liability or which is contrary to
this Agreement or applicable law.
11.2 LIABILITY OF AGENT.
Neither the Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with this Agreement in the absence of its or their own gross
negligence or willful misconduct. Without limitation to the generality of the
foregoing, the Agent (1) may treat the payee of any Revolving Note as the holder
thereof until the Agent receives written notice of the assignment or transfer
thereof signed by such payee and in form satisfactory to the Agent; (2) may
consult with legal counsel (including counsel for the Borrower), independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken in good faith by it in accordance with
the advice of such counsel, accountants, or experts; (3) makes no warranty or
representation to any Bank and shall not be responsible to any Bank for any
statements, warranties, or representations made in or in connection with this
Agreement; (4) shall not have any duty to ascertain or to inquire as to the
performance or observation of any of the terms, covenants, or conditions of this
Agreement on the part of the Borrower, or to inspect the property (including the
books and records) of the Borrower; (5) shall not be
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responsible to any Bank for the due execution, legality, validity,
enforceability, genuineness, perfection, sufficiency, or value of this Agreement
or any other instrument or document furnished pursuant thereto; and (6) shall
incur no liability under or in respect of this Agreement by acting upon any
notice, consent, certificate, or other instrument or writing (which may be sent
by telegram, telex, or facsimile transmission) believed by it to be genuine and
signed or sent by the proper party or parties.
11.3 RIGHTS OF AGENT AS A BANK.
With respect to its Bank's Commitment, the Loans made by it and the
Revolving Note issued to it, the Agent shall have the same rights and powers
under this Agreement as any other Bank and may exercise the same as though it
were not the Agent; and the term "Bank" or "Banks" shall, unless otherwise
expressly indicated, include the Agent in its individual capacity. The Agent and
its affiliates may accept deposits from, lend money to, act as trustee under
indentures of, and generally engage in any kind of business with, the Borrower,
any of its Subsidiaries and any Person who may do business with or own
securities of the Borrower or any Subsidiary, all as if the Agent were not the
Agent and without any duty to account therefor to the Banks.
11.4 INDEPENDENT CREDIT DECISIONS.
Each Bank acknowledges that it has, independently and without reliance upon
the Agent or any other Bank and based on such documents and information as it
has deemed appropriate, made its own credit analysis and decision to enter into
this Agreement. Each Bank also acknowledges that it will, independently and
without reliance upon the Agent or any other Bank and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement. Except
for notices, reports and other documents and information expressly required to
be furnished to the Banks by the Agent hereunder, the Agent shall have no duty
or responsibility to provide any Bank with any credit or other information
concerning the affairs, financial condition or business of the Borrower or any
of its Subsidiaries (or any of their affiliates) which may come into the
possession of the Agent or any of its affiliates.
11.5 INDEMNIFICATION.
The Banks agree to indemnify the Agent (to the extent not reimbursed by the
Borrower), ratably according to the respective amounts of their Commitments,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by, or asserted
against the Agent in any way relating to or arising out of this Agreement or any
action taken or omitted by the Agent under this Agreement, provided that no Bank
shall be liable for any portion of any of the foregoing resulting from the
Agent's gross negligence or willful misconduct. Without limitation of
44
<PAGE>
the foregoing, each Bank agrees to reimburse the Agent (to the extent not
reimbursed by the Borrower) promptly upon demand for its ratable share of any
out-of-pocket expenses (including counsel fees) incurred by the Agent in
connection with the preparation, administration, or enforcement of, or legal
advice in respect of rights or responsibilities under, this Agreement.
11.6 SUCCESSOR AGENT.
The Agent may resign at any time by giving at least 60 days' prior written
notice thereof to the Banks and the Borrower and may be removed at any time with
cause by the Majority Banks with written approval of Borrower. Upon any such
resignation or removal, the Majority Banks shall have the right to appoint a
successor Agent with Borrower's written approval. If no successor Agent shall
have been so appointed by the Majority Banks, approved by Borrower, and shall
have accepted such appointment, within 30 days after the retiring Agents' giving
of notice of resignation or the Majority Banks' removal of the retiring Agent,
then the retiring Agent may, on behalf of the Banks, appoint a successor Agent,
which shall be a commercial bank organized under the laws of the United States
of America or of any State thereof and having a combined capital and surplus of
at least Seven Hundred Fifty Million Dollars ($750,000). Upon the acceptance of
any appointment as 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 under this Agreement. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions of
this Article 11 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement.
45
<PAGE>
11.7 SHARING OF PAYMENTS, ETC.
If any Bank shall obtain any payment (whether voluntary, involuntary,
through the exercise of any right of setoff, or otherwise) on account of the
Revolving Note or other Obligations held by it in excess of its ratable share of
payments on account of the Revolving Notes or other Obligations obtained by all
the Banks, such Bank shall purchase from the other Banks such participations in
the Revolving Notes held by them as shall be necessary to cause such purchasing
Bank to share the excess payment ratably with each of the other Banks, provided,
however, that if all or any portion of such excess payment is thereafter
recovered from such purchasing Bank, such purchase from each Bank shall be
rescinded and each Bank shall repay to the purchasing Bank the purchase price to
the extent of such recovery together with an amount equal to such Bank's ratable
share (according to the proportion of (1) the amount of such Bank's required
payment to (2) the total amount so recovered from the purchasing Bank) of any
interest or other amount paid or payable by the purchasing Bank in respect of
the total amount so recovered. The Borrower agrees that any Bank so purchasing a
participation from another Bank pursuant to this Section 11.7 may, to the
fullest extent permitted by law, exercise all its rights of payment (including
the right of setoff) with respect to such participation as fully as if such Bank
were the direct creditor of the Borrower in the amount of such participation.
ARTICLE 12 - NOTICES
Unless otherwise provided in this Agreement, all notices or demands by
either party relating to the Loan Documents shall be in writing and either
personally served or sent by facsimile transmission, overnight delivery service,
or regular United States mail, postage prepaid, to any Bank at the address
specified beneath the heading "Address for Notices" under the name of such Bank
in Schedule 1.6, or to Borrower or to Agent, as the case may be, at the
addresses set forth below:
If to Borrower: Coldwater Creek Inc.
One Coldwater Creek Drive
Sandpoint, Idaho 83864
Attention: Don Robson, Vice President &
Chief Financial Officer
Fax: (208) 265-7108
With a copy to: Elsaesser, Jarzabeck, Anderson & Marks
Post Office Box 1049
Sandpoint, Idaho 83864
Attention: Ford Elsaesser
Fax: (208) 263-0759
46
<PAGE>
If to Agent: First Security Bank, N.A.
Post Office Box 7069
Boise, Idaho 83730
Attention: Corporate Banking
Fax: 208/393-2472
With a copy to: Moffatt, Thomas, Barrett, Rock &
Fields, Chartered
101 S. Capitol Blvd., 10th Floor
P.O. Box 829
Boise, Idaho 83701-0829
Attention: David S. Jensen
Fax: 208/385-5384
The parties may change the address at which they are to receive notices
hereunder by notice in writing in the foregoing manner given to the other. All
notices or demands sent in accordance with this Section shall be deemed received
on the earlier of the date of confirmed actual receipt or three (3) Business
Days after the deposit thereof in the mail.
ARTICLE 13 - DESTRUCTION OF BORROWER'S DOCUMENTS
After notice to Borrower, any documents, schedules, invoices, or other
papers delivered to any Bank may be destroyed or otherwise disposed of by the
Bank at any time six (6) months after they are delivered to or received by the
Bank, unless Borrower requests in writing the return of the said documents,
schedules, invoices, or other papers and makes arrangements at Borrower's
expense for their return.
47
<PAGE>
ARTICLE 14 - CHOICE OF LAW AND VENUE
This Agreement is made in the state of Idaho, which state the parties agree
has a substantial relationship to the parties and to the underlying transaction
embodied hereby. Accordingly, in all respects, this Agreement and the Loan
Documents and the obligations arising hereunder and thereunder shall be governed
by, and construed in accordance with, the laws of the state of Idaho applicable
to contracts made and performed in such state and any applicable law of the
United States of America. Each party hereby unconditionally and irrevocably
waives, to the fullest extent permitted by law, any claim to assert that the law
of any jurisdiction other than the state of Idaho governs this Agreement. All
disputes, controversies, or claims arising out of, or in connection with, this
Agreement or any Loan Document shall be litigated in any court of competent
jurisdiction within the state of Idaho. Each party hereby accepts jurisdiction
of such state and agrees to accept service of process as if it were personally
served within such state. Each party irrevocably waives, to the fullest extent
permitted by law, any objection that the party may now or hereafter have to the
jurisdiction of the courts of such state and any claim that any such litigation
brought in any such court has been brought in an inconvenient forum.
ARTICLE 15 - GENERAL PROVISIONS
15.1 EFFECTIVE DATE.
This Agreement shall be binding and deemed effective as of the date first
written above when executed by Borrower and accepted and executed by Agent and
the Banks.
48
<PAGE>
15.2 AMENDMENTS.
No amendment, modification, termination, or waiver of any provision of any
Loan Document, nor consent to any departure by the Borrower from any Loan
Document, shall in any event be effective unless the same shall be in writing
and signed by Majority Banks, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given. No
amendment, waiver, or consent shall do any of the following, however, unless in
writing and signed by all the Banks: (i) waive any of the conditions precedent
specified in Article 3, (ii) increase the Commitment Amount, the Letter of
Credit Commitment Amount, or the amount of the Term Standby Letter of Credit, or
subject the Banks to any additional obligations, (iii) reduce the principal of,
or interest on, the Revolving Notes or any fees hereunder, (iv) postpone any
date fixed for any payment of principal of, or interest on, the Notes or any
fees hereunder, (v) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Revolving Notes or the number of Banks that shall
be required for the Banks or any of them to take action hereunder, or (vi)
amend, modify, or waive any provision of this Section. No amendment, waiver, or
consent shall, unless in writing and signed by Agent in addition to the Banks
required to take such action, affect the rights or duties of the Agent under any
of the Loan Documents.
15.3 NO WAIVER.
No failure or delay on the part of Agent or any Bank in exercising any
right, power, or remedy hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right, power, or remedy preclude any
other or further exercise thereof or the exercise of any other right, power, or
remedy hereunder. The rights and remedies provided herein are cumulative and are
not exclusive of any other rights, powers, privileges or remedies, now or
hereafter existing, at law or in equity or otherwise.
15.4 SUCCESSORS AND ASSIGNS.
This Agreement and the other Loan Documents shall be binding upon and inure
to the benefit of the Borrower the Agent, the Issuing Bank, and Banks and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of its rights or obligations under any Loan Document without the
prior written consent of Agent, Issuing Bank, and each Bank.
15.5 PARTICIPATIONS AND ASSIGNMENTS.
15.5.1 Participations.
Any Bank may at any time, in the ordinary course of its commercial banking
business and in accordance with applicable law, sell to one or more
49
<PAGE>
banks or other financial institutions ("Participants") participating interests
in any Loan or Reimbursement Obligation or Term Reimbursement Obligation owing
to such Bank, any Revolving Note held by such Bank, or any other interest of
such Bank under this Agreement and the other Loan Documents, provided, however,
that no Bank may sell such a participating interest without the prior written
consent of Agent and Borrower. In the event of any such sale of a participating
interest to a Participant, the selling Bank's obligations under the Loan
Documents to the other parties to this Agreement shall remain unchanged, such
Bank shall remain solely responsible for the performance thereof, and Borrower
and Agent shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this Agreement, unless
otherwise agreed upon by Agent and Borrower. No agreement pursuant to which any
Bank sells a participating interest to a Participant other than a Bank may
permit the Participant to transfer, pledge, assign, sell participations in, or
otherwise encumber its participating interest.
15.5.2 ASSIGNMENTS.
Any Bank may at any time with the written consent of Agent and Borrower, in
the ordinary course of its commercial banking business and in accordance with
applicable law, sell and assign to any Bank, any affiliate of a Bank or any
other bank or financial institution (individually, an "Assignee Bank") all, or a
portion of all, its rights and obligations under this Agreement and the other
Loan Documents (such a sale and assignment to be referred to as an "Assignment")
pursuant to an assignment and assumption agreement in the form of EXHIBIT 15.5.2
(an "Assignment and Assumption Agreement"), executed by each Assignee Bank and
such transferor Bank (an "Assignor Bank") and delivered to Agent and Borrower
for their acceptance and approval. Upon such execution, delivery, acceptance,
and recording of each Assignment and Assumption Agreement, from and after the
Assignment Effective Date determined pursuant to such Assignment and Assumption
Agreement, (i) each Assignee Bank thereunder shall be a Bank hereunder with a
Proportionate Share as set forth on Schedule 1 to such Assignment and Assumption
Agreement and shall have the rights, duties, and obligations of such a Bank
under this Agreement and the other Loan Documents, and (ii) the Assignor Bank
thereunder shall be a Bank with a Proportionate Shares as set forth on Schedule
1 to such Assignment and Assumption Agreement, or, if the Proportionate Share of
the Assignor Bank has been reduced to 0%, the Assignor Bank shall cease to be a
Bank, provided, however, that each Assignor Bank shall nevertheless be entitled
to the indemnification rights contained in Section 15.10 for any events, acts or
omissions occurring before the Assignment Effective Date. Each Assignment and
Assumption Agreement shall be deemed to amend Schedule 1.6 hereof to the extent,
and only to the extent, necessary to reflect the addition of each Assignee Bank,
the deletion of each Assignor Bank that reduces its Proportionate Share to 0%
and the resulting adjustment of Proportionate Shares arising from the purchase
by each Assignee Bank of all, or a portion of all, the rights and obligations of
an Assignor Bank under this Agreement and the other Loan Documents. On or prior
to the Assignment Effective Date determined pursuant to
50
<PAGE>
each Assignment and Assumption Agreement, Borrower, at Assignee Bank's expense,
shall execute and deliver to Agent, in exchange for the surrendered Revolving
Loan Note of the Assignor Bank thereunder, a new Revolving Loan Note to the
order of each Assignee Bank thereunder and Assignor Bank, if applicable, (with
each new Revolving Loan Note to be in an amount equal to the Bank's Commitment
assumed by such Assignee Bank or retained by Assignor Bank, if any). The
Revolving Note surrendered by the Assignor Bank shall be returned by Agent to
Borrower marked "canceled."
15.5.2.1 Agent shall maintain a copy of each Assignment and
Assumption Agreement delivered to it and a register for the recordation of the
names and addresses of the Banks and the Proportionate Shares of each Bank from
time to time. The entries in the register shall be conclusive in the absence of
manifest error, and Borrower, Agent, and the Banks, may treat each Person whose
name is recorded in the register as the owner of the Loans recorded therein for
all purposes of this Agreement. The register shall be available for inspection
by Borrower or any Bank at any reasonable time and from time to time upon
reasonable prior notice.
15.5.2.2 Upon its receipt of an Assignment and Assumption Agreement
executed by an Assignor Bank and an Assignee Bank (and, in the case of an
Assignee Bank that is not then a Bank, by Borrower and Agent) together with
payment to Agent by Assignor Bank of a registration and processing fee of
$2,000, Agent shall (i) promptly accept such Assignment and Assumption
Agreement, (ii) on the Assignment Effective Date determined pursuant thereto,
record the information contained therein in the register referred to above and
give notice of such acceptance and recordation to the Banks and Borrower, and
(iii) prepare and deliver to the Banks and Borrower a revised Schedule 1.6
reflecting the names, addresses and respective Proportionate Shares of all Banks
then parties to this Agreement.
15.5.2.3 If one or more Banks reorganizes, merges, or consolidates
with or into another Bank, Borrower may require all but one of such Banks to
assign all of their rights and obligations under this Agreement and the other
Loan Documents if Borrower finds one or more Assignee Banks to purchase such
interest and such Assignee Banks otherwise satisfy the requirements of this
Section 15.5.
15.6 HEADINGS.
Article and Section headings in the Loan Documents are included in such
Loan Documents for the convenience of reference only and shall not constitute a
part of the applicable Loan Documents for any other purpose.
51
<PAGE>
15.7 CONSTRUCTION.
Neither this Agreement nor any uncertainty or ambiguity herein shall be
construed or resolved against Agent, Banks or Borrower, whether under any rule
of construction or otherwise. On the contrary, this Agreement has been reviewed
by all parties and shall be construed and interpreted according to the ordinary
meaning of the words used so as to fairly accomplish the purposes and intentions
of all parties hereto.
15.8 SEVERABILITY.
Any provision of any Loan Document that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition of unenforceability without invalidating the remaining
provisions of such Loan Document or affecting the validity or enforceability of
such provision in any other jurisdiction.
15.9 INTEGRATION.
This Agreement and the Loan Documents contain the entire agreement between
the parties relating to the subject matter hereof and supersede all oral
statements and prior writings with respect thereto.
15.10 INDEMNITY.
To the fullest extent permitted by law, Borrower shall protect, indemnify,
defend, and hold harmless Agent, Banks, Issuing Banks, and their respective
directors, officers, employees, agents and any affiliate thereof ("Indemnitees")
from and against any liabilities, losses, damages, or expenses of any kind or
nature and from any suits, claims, or demands arising on account of or in
connection with any matter or thing or action or failure to act by Indemnitees,
or any of them, arising out of or relating to the Loan Documents, arising
directly or indirectly from the activities of the Borrower, their predecessors
in interest, or third parties with whom they have a contractual relationship,
arising out of or relating to the Loan Documents, or arising directly or
indirectly from the violation of any Environmental Law, whether such claims are
asserted by any governmental agency or any other Person. This indemnity shall
survive payment and performance of the Obligations and termination of this
Agreement.
15.11 NONLIABILITY OF AGENT AND BANKS.
Agent, each Bank, and Issuing Bank shall not be liable for any claims,
demands, losses or damages made, claimed or suffered by Borrower, except such as
may arise through or could be caused by such Agent's, Bank's, or Issuing Bank's
gross negligence or willful misconduct.
52
<PAGE>
15.12 COUNTERPARTS.
This Agreement may be executed in any number of counterparts and delivered
by facsimile transmission. Each counterpart when so executed shall be deemed to
be an original and all of which taken together shall constitute one and the same
Agreement.
IN WITNESS WHEREOF, Borrower has executed this Agreement.
Borrower: COLDWATER CREEK INC.
By /s/ Donald A. Robson
---------------------------------------
Its Chief Financial Officer
--------------------------------------
ACCEPTED AND EFFECTIVE as of the _____ day of June, 1998, in the state of
Idaho.
Agent: FIRST SECURITY BANK, N.A.
By /s/ Vicki V. Riga
---------------------------------------
Vicki V. Riga, Vice President
Bank: FIRST SECURITY BANK, N.A.
By /s/ Vicki V. Riga
---------------------------------------
Vicki V. Riga, Vice President
53
<PAGE>
SCHEDULE 1.6
BANKS
BANK PROPORTIONATE SHARE
A. First Security Bank, N.A. 100%
Address for Notices:
119 North 9th Street (83702)
Post Office Box 7069
Boise, Idaho 83730
Attention: Corporate Banking
Fax: (208) 393-2472
<PAGE>
SCHEDULE 1.35
PERMITTED LIENS
None.
<PAGE>
SCHEDULE 2.1.1.1
AUTHORIZED PERSONS
Bank shall make the advances provided under the Revolving Line of Credit upon
written or, at the discretion of Agent, telephonic notice received from the
following:
Dennis Pence
E. Ann Pence
Donald Robson
John Morrison
<PAGE>
SCHEDULE 4.15
SUBSIDIARIES
Coldwater Creek Outlet Stores, Inc.
A Delaware corporation
Borrower owns 100% of the outstanding stock
<PAGE>
SCHEDULE 6.10
EMPLOYEE BENEFIT PLANS
None.
<PAGE>
EXHIBIT 1.44
FORM OF REVOLVING NOTE
See attached.
<PAGE>
REVOLVING NOTE
BORROWER: COLDWATER CREEK INC. JUNE 29TH, 1998
BOISE, IDAHO
ADDRESS: ONE COLDWATER CREEK DRIVE
SANDPOINT, IDAHO 83864
PRINCIPAL AMOUNT: FORTY SEVEN MILLION FOUR HUNDRED THOUSAND DOLLARS
($47,400,000.00)
FOR VALUE RECEIVED, COLDWATER CREEK INC., a Delaware corporation
("Borrower"), promises to pay to the order of FIRST SECURITY BANK, N.A. ("Bank")
the total principal amount outstanding on this note (the "Note") together with
interest thereon as stated below, in lawful money of the United States of
America.
This Note is executed pursuant to that certain Credit Agreement, dated
June 29, 1998, between Borrower and Bank (the "Credit Agreement"). Capitalized
terms used but not defined in this Note shall have the same definitions as are
ascribed to such terms in the Credit Agreement. This Note is governed by the
provisions of the Credit Agreement.
This Note is a revolving promissory note and evidences a revolving
line of credit not to exceed the maximum principal amount stated above plus
accrued interest at any one time. The amount outstanding on this Note at any
specific time shall be the total amount advanced by Bank less the amount of
principal payments made from time to time, plus any interest due and payable.
Advances may be made at the request of those persons so identified in
the Credit Agreement and such persons are hereby authorized to request advances
and to direct the disposition of any such advances in the manner provided in the
Credit Agreement until written notice of revocation of this authority is
received by Bank from Borrower. Borrower agrees that any and all advances made
hereunder in accordance with the Credit Agreement shall be for Borrower's
benefit, whether or not said advances are deposited to Borrower's account.
The outstanding unpaid balance of this Note shall bear interest at a
fluctuating per annum rate as set forth in the Credit Agreement. This Note shall
be repaid in the manner set forth in the Credit Agreement.
This Note is made in the state of Idaho, which state the parties agree
has a substantial relationship to the parties and to the underlying transaction
embodied hereby. Accordingly, in all respects, this Note and the obligations
arising hereunder shall be governed by, and construed in accordance with, the
laws of the state of Idaho applicable
<PAGE>
to contracts made and performed in such state and any applicable law of the
United States of America. Each party hereby unconditionally and irrevocably
waives, to the fullest extent permitted by law, any claim to assert that the law
of any jurisdiction other than the state of Idaho governs this Note. All
disputes, controversies, or claims arising out of, or in connection with, this
Note shall be litigated in any court of competent jurisdiction within the state
of Idaho. Each party hereby accepts jurisdiction of such state and agrees to
accept service of process as if it were personally served within such state.
Each party irrevocably waives, to the fullest extent permitted by law, any
objection that the party may now or hereafter have to the jurisdiction of the
courts of such state and any claim that any such litigation brought in any such
court has been brought in an inconvenient forum.
Except as expressly provided in the Credit Agreement, the makers,
sureties, guarantors and endorsers of this Note jointly and severally waive
presentment for payment, protest, notice of protest and notice of nonpayment of
this Note, and consent that this Note or any payment due under this Note may be
extended or renewed without demand or notice, and further consent to the release
of any collateral or part thereof, with or without substitution.
COLDWATER CREEK INC.
By /s/ Donald A. Robson
-----------------------------------------------
Its Chief Financial Officer
--------------------------------------------
<PAGE>
EXHIBIT 1.47
FORM OF TERM STANDBY LETTER OF CREDIT
See attached.
<PAGE>
IRREVOCABLE STANDBY LETTER OF CREDIT
ISSUED IN Boise, Idaho
BENEFICIARY: APPLICANT:
Wood County Development Authority Coldwater Creek Inc.
408 Juliana Street One Coldwater Creek Drive
Parkersburg, WV 26102 Sandpoint, Idaho 83864
ATTN: James R. Kinnett, II
AMOUNT: USD ***2,600,000.00 DATE AND PLACE OF EXPIRY:
TWO MILLION SIX HUNDRED THOUSAND XXXXXXXXXXXXXXX
AND 00/100 UNITED STATES DOLLARS Our counters.
CREDIT AVAILABLE WITH
First Security Bank, N.A.
International Department
999 Main Street, 3rd Floor
Boise, Idaho 83702
By: PAYMENT
AVAILABLE BY DRAFTS AT SIGHT DRAWN ON:
First Security Bank, N.A.
Boise, Idaho
By order of our client: Coldwater Creek Inc., One Coldwater Creek Drive,
Sandpoint, Idaho 83864, we hereby issue in favor of Wood County Development
Authority (hereby referred to as the Development Authority") our Irrevocable
Standby Letter of Credit No. S-XXXXXXX-XXXX in the maximum amount of
USD2,600,000.00 (Two Million Six Hundred Thousand U.S. Dollars), effective
(insert date of issue).
Expiring XX-XX-99, at our counters: First Security Bank, N.A., 999 Main
Street, 3rd floor, Boise, Idaho 83702, provided, however, that it is a condition
of this Letter of Credit that it shall be automatically extended for one year
from the present or each future date of expiration, unless at least thirty (30)
days prior to each such date of expiration we send you notice in writing by
courier that we elect not to renew this Letter of Credit for such additional
period. This Letter of Credit shall expire full and finally (insert date to
indicate five (5) years from date of issue).
Partial drawings and Multiple drawings are acceptable and demand for
payment hereunder shall not exceed an aggregate amount up to USDX,XXX,XXX.XX
maximum and each drawing honored by the bank hereunder shall reduce the maximum
amount that may be drawn.
<PAGE>
The amount of this Standby Letter of Credit is available to you against
presentation of your draft(s) drawn on us at sight bearing on the face thereof
the clause:
"DRAWN UNDER FIRST SECURITY BANK, N.A., IRREVOCABLE LETTER OF CREDIT
NO. S-XXXXXXX-XXXX"
accompanied by the original of this Letter of Credit and the following
documents:
1. Beneficiary's written statement signed by a person purportedly
authorized by the beneficiary, stating that Coldwater Creek Inc. is in default
under the lease agreement entered into on (insert date) between Coldwater Creek
Inc., the lessee, and Wood County Development Authority, the lessor and that the
default under the Lease is continuing.
2. Signed statement from Wood County Development Authority of the amount
due by Lessee under the Lease and that demand for payment of such amount has
been made by Wood County Development Authority of Coldwater Creek Inc. and that
such payment was not paid in full within five (5) days of the demand.
This Letter of Credit is transferable and assignable upon presentation of
Beneficiary's Transfer Demand in the format of attached "Annex A." Transfers
and assignments are to be effected without charge to either the beneficiary, or
the transferee/assignee of this Letter of Credit or the proceeds. First
Security Bank, N.A., its successors and assigns, shall have no right of
reimbursement or right of recourse against Wood County Development Authority for
any amount(s) drawn under strict compliance of this Letter of Credit.
In case of partial drawings, First Security Bank, N.A. will endorse the
back of this original Standby Letter of Credit for the amount drawn and return
same to beneficiary for presentation under possible additional drawings up to
the maximum aggregate amount indicted in this Standby Letter of Credit.
This Letter of Credit is subject to the Uniform Customs and Practices for
Documentary Credits (1993 Revision), International Chamber of Commerce,
Publication No. 500 (the "UCP"). This Letter of Credit shall be deemed to be
issued under the laws of the State of West Virginia and shall, as to matters not
governed by the UCP, be governed by and construed in accordance with the laws of
the State of West Virginia.
<PAGE>
REIMBURSEMENT INSTRUCTIONS:
PAYMENT TO BE EFFECTED PER YOUR
INSTRUCTIONS AGAINST CONFORMING
DOCUMENTS PRESENTED AT OUR
COUNTERS.
-------------------------------
AUTHORIZED SIGNATURE(S)
<PAGE>
EXHIBIT 2.1.1.2
LIBOR LOAN REQUEST FORM
[DATE]
First Security Bank, N.A.
P.O. Box 7069
Boise, ID 83830
Attention: Commercial Banking Division
Ladies & Gentlemen:
We refer to the Credit Agreement (the "Agreement"), dated June ___, 1998, among
First Security Bank, N.A., as agent ("Agent"), the Banks Named Therein
("Banks"), and Coldwater Creek Inc. ("Borrower"). Pursuant to Section 2.1.1.2
of the Agreement, Borrower requests that Banks make LIBOR Loans pursuant to the
Agreement and specifies as follows:
1. The date of the requested Loans is to be __________________________.
2. The aggregate amount of the requested Loans is to be
$______________________.
3. The requested Interest Period for the Loans is ___________________.
Borrower certifies to Agent and Banks, as of the date of this letter, that the
warranties and representations set forth in the Agreement and the other Loan
Documents are true and correct, and that no Event of Default, as defined in the
Agreement, has occurred and is continuing or would result from the requested
Loan.
Very truly yours,
COLDWATER CREEK INC.
Title__________________________________
<PAGE>
EXHIBIT 3.1.2
FORM OF CONTINUING AND UNCONDITIONAL GUARANTY
See attached.
<PAGE>
CONTINUING AND UNCONDITIONAL GUARANTY
For good and valuable consideration, COLDWATER CREEK OUTLET STORES
INC., a Delaware corporation ("Guarantor"), absolutely and unconditionally
guarantees and promises to pay to FIRST SECURITY BANK, N.A. ("Agent") or its
order, as agent for the Banks (as that term is defined below), in legal tender
of the United States of America, the Indebtedness (as that term is defined
below) of COLDWATER CREEK INC., a Delaware corporation ("Borrower"), to Banks on
the terms and conditions set forth in this Guaranty. Under this Guaranty, the
liability of Guarantor is unlimited and the obligations of Guarantor are
continuing.
1. AMOUNT OF GUARANTY. The amount of this Guaranty is Unlimited.
2. DEFINITIONS. The following words shall have the following
meanings when used in this Guaranty:
AGENT. The word "Agent" means First Security Bank, N.A., its
successors and assigns, in its capacity as agent for the Banks.
BANKS. The word "Banks" means the Banks and the Issuing Bank, as
those terms are defined in the Credit Agreement (referred to individually as a
"Bank").
BORROWER. The word "Borrower" means Coldwater Creek Inc., a Delaware
corporation.
CREDIT AGREEMENT. The words "Credit Agreement" mean the Credit
Agreement among Borrower, Agent, and Banks, dated June 29, 1998, as amended,
supplemented, or modified from time to time.
GUARANTOR. The word "Guarantor" means Coldwater Creek Outlet Stores
Inc., a Delaware corporation.
GUARANTY. The word "Guaranty" means this Guaranty made by Guarantor
for the benefit of Bank.
INDEBTEDNESS. The word "Indebtedness" means the Obligations as such
term is defined in the Credit Agreement; whether recovery on the Indebtedness
may be or may become barred or unenforceable against Borrower for any reason
whatsoever; and whether the Indebtedness arises from transactions that may be
voidable on account of infancy, insanity, ultra vires, or otherwise.
RELATED DOCUMENTS. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan agreements,
<PAGE>
environmental agreements, guaranties, security agreements, mortgages, deeds of
trust, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.
3. NATURE OF GUARANTY. Guarantor's liability under this Guaranty
shall be open and continuous for so long as this Guaranty remains in force.
Guarantor intends to guarantee at all times the performance and prompt payment
when due, whether at maturity or earlier by reason of acceleration or otherwise,
of all Indebtedness. Accordingly, no payments made upon the Indebtedness will
discharge or diminish the continuing liability of Guarantor in connection with
any remaining portions of the Indebtedness or any of the Indebtedness that
subsequently arises or is thereafter incurred or contracted.
4. DURATION OF GUARANTY. This Guaranty will take effect when
received by Agent without the necessity of any acceptance by Agent or Banks, or
any notice to Guarantor or to Borrower, and will continue in full force until
all Indebtedness incurred or contracted before receipt by Agent of any notice of
revocation shall have been fully and finally paid and satisfied and all other
obligations of Guarantor under this Guaranty shall have been performed in full.
If Guarantor elects to revoke this Guaranty, Guarantor may only do so in
writing. Written revocation of this Guaranty will apply only to advances or new
Indebtedness created after actual receipt by Agent of Guarantor's written
revocation. For this purpose and without limitation, the term "new Indebtedness"
does not include Indebtedness that at the time of notice of revocation is
contingent, unliquidated, undetermined or not due and that later becomes
absolute, liquidated, determined or due. This Guaranty will continue to bind
Guarantor for all Indebtedness incurred by Borrower or committed by Banks prior
to receipt of Guarantor's written notice of revocation, including any
extensions, renewals, substitutions or modifications of the Indebtedness. All
renewals, extensions, substitutions, and modifications of the Indebtedness
granted after Guarantor's revocation, are contemplated under this Guaranty and,
specifically will not be considered to be new Indebtedness. Release of any other
guarantor or termination of any other guaranty of the Indebtedness shall not
affect the liability of Guarantor under this Guaranty. A revocation received by
Agents from any one or more Guarantors shall not affect the liability of any
remaining Guarantors under this Guaranty. It is anticipated that fluctuations
may occur in the aggregate amount of Indebtedness covered by this Guaranty, and
it is specifically acknowledged and agreed by Guarantor that reductions in the
amount of Indebtedness, even to zero dollars ($0.00), prior to written
revocation of this Guaranty by Guarantor shall not constitute a termination of
this Guaranty. This Guaranty is binding upon Guarantor and Guarantor's
successors and assigns so long as any of the guaranteed Indebtedness remains
unpaid and even though the Indebtedness guaranteed may from time to time be zero
dollars ($0.00).
5. GUARANTOR'S AUTHORIZATION TO BANK. Guarantor authorizes
Banks, either before or after any revocation hereof, without notice or demand
<PAGE>
and without lessening Guarantor's liability under this Guaranty, from time to
time: (a) prior to revocation as set forth above, to make one or more additional
secured or unsecured loans to Borrower, to lease equipment or other goods to
Borrower, or otherwise to extend additional credit to Borrower; (b) to alter,
compromise, renew, extend, accelerate, or otherwise change one or more times the
time for payment or other terms of the Indebtedness or any part of the
Indebtedness, including increases and decreases of the rate of interest on the
Indebtedness; extensions may be repeated and may be for longer than the original
loan term; (c) to take and hold security for the payment of this Guaranty or the
Indebtedness, and exchange, enforce, waive, subordinate, fail or decide not to
perfect, and release any such security, with or without the substitution of new
collateral; (d) to release, substitute, agree not to sue, or deal with any one
or more of Borrower's sureties, endorsers, or other guarantors on any terms or
in any manner Banks may choose; (e) to determine how, when and what application
of payments and credits shall be made on the Indebtedness; (f) to apply such
security and direct the order or manner of sale thereof, including without
limitation, any nonjudicial sale permitted by the terms of the controlling
security agreement or deed of trust, as Banks in their discretion may determine;
(g) to sell, transfer, assign, or grant participations in all or any part of the
Indebtedness; and (h) to assign or transfer this Guaranty in whole or in part.
6. GUARANTY ABSOLUTE. Guarantor guarantees that the payment of
Indebtedness shall be paid strictly in accordance with the terms of the Related
Documents regardless of any law, regulation, or order now or hereafter in effect
in any jurisdiction affecting any of such terms or the rights of the Banks with
respect thereto. The liability of the Guarantor under this Guaranty is absolute
and unconditional irrespective of: (a) any release or amendment or waiver of, or
consent to departure from, any other guaranty or support document, or any
exchange, release or nonperfection of any collateral, for all or any of the
Related Documents or Indebtedness; (b) any present or future law, regulation or
order of any jurisdiction (whether of right or in fact) or of any agency thereof
purporting to reduce, amend, restructure or otherwise affect any term of any
Related Document or Indebtedness; (c) without being limited by the foregoing,
any lack of validity or enforceability of any Related Document or Indebtedness
or any failure to receive any governmental approval relating thereto; or (d) any
other defense whatsoever that might constitute a defense available to, or
discharge of, the Guarantor (including without limitation, the bankruptcy or
reorganization of the Guarantor).
7. GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and
warrants to Agent and Banks that (a) no representations or agreements of any
kind have been made to Guarantor that would limit or qualify in any way the
terms of this Guaranty; (b) this Guaranty is executed at Borrower's request and
not at the request of Agent or Banks; (c) Guarantor has full power, right and
authority to enter into this Guaranty; (d) the provisions of this Guaranty do
not conflict with or result in a default under any agreement or other instrument
binding upon Guarantor and do not result in a violation of any law, regulation,
court decree or order applicable to Guarantor; (e) Guarantor has not and will
not, without the prior
<PAGE>
written consent of Banks, sell, lease, assign, encumber, hypothecate, transfer,
or otherwise dispose of all or substantially all of Guarantor's assets, or any
interest therein; (f) upon a Bank's request, Guarantor will provide to the Bank
financial and credit information in form acceptable to the Bank, and all such
financial information that currently has been, and all future financial
information that will be provided to Bank is and will be true and correct in all
material respects and present fairly the financial condition of Guarantor as of
the dates the financial information is provided; (g) no material adverse change
has occurred in Guarantor's financial condition since the date of the most
recent financial statements provided to a Bank and no event has occurred that
may materially adversely affect Guarantor's financial condition; (h) no
litigation, claim, investigation, administrative proceeding or similar action
(including those for unpaid taxes) against Guarantor is pending or threatened;
(i) no Bank has made any representation to Guarantor as to the creditworthiness
of Borrower; and (j) Guarantor has established adequate means of obtaining from
Borrower on a continuing basis information regarding Borrower's financial
condition. Guarantor agrees to keep adequately informed from such means of any
facts, events, or circumstances that might in any way affect Guarantor's risks
under this Guaranty, and Guarantor further agrees that, absent a request for
information, Agent and each Bank shall have no obligation to disclose to
Guarantor any information or documents acquired by Agent or any Bank in the
course of its relationship with Borrower.
8. GUARANTOR'S WAIVERS.
8.1 Except as prohibited by applicable law, Guarantor waives any
right to require any Bank (a) to continue lending money or to extend other
credit to Borrower; (b) to make any presentment, protest, demand, or notice of
any kind, including notice of any nonpayment of the Indebtedness or of any
nonpayment related to any collateral, or notice of any action or nonaction on
the part of Borrower, a Bank, any surety, endorser, or other guarantor in
connection with the Indebtedness or in connection with the creation of new or
additional loans or obligations; (c) to resort for payment or to proceed
directly or at once against any person, including Borrower or any other
guarantor; (d) to proceed directly against or exhaust any collateral held by the
Bank from Borrower, any other guarantor, or any other person; (e) to give notice
of the terms, time, and place of any public or private sale of personal property
security held by the Bank from Borrower or to comply with any other applicable
provisions of the Uniform Commercial Code; (f) to pursue any other remedy within
the Bank's power; or (g) to commit any act or omission of any kind, or at any
time, with respect to any matter whatsoever.
8.2 Guarantor also waives any and all rights or defenses arising by
reason of (a) any "one action" or "anti-deficiency" law or any other law that
may prevent Agent or a Bank from bringing any action, including a claim for
deficiency, against Guarantor, before or after Agent's or the Bank's
commencement or completion of any foreclosure action, either judicially or by
exercise of a power of sale; (b) any election
<PAGE>
of remedies by a Bank that destroys or otherwise adversely affects Guarantor's
subrogation rights or Guarantor's rights to proceed against Borrower for
reimbursement, including without limitation, any loss of rights Guarantor may
suffer by reason of any law limiting, qualifying, or discharging the
Indebtedness; (c) any disability or other defense of Borrower, of any other
guarantor, or of any other person, or by reason of the cessation of Borrower's
liability from any cause whatsoever, other than payment in full in legal tender,
of the Indebtedness; (d) any right to claim discharge of the Indebtedness on the
basis of unjustified impairment of any collateral for the Indebtedness; (e) any
statute of limitations, if at any time any action or suit brought by Agent or a
Bank against Guarantor is commenced there is outstanding Indebtedness of
Borrower to any Bank that is not barred by any applicable statute of
limitations; or (f) any defenses given to Guarantor at law or in equity other
than actual payment and performance of the Indebtedness. If payment is made by
Borrower, whether voluntarily or otherwise, or by any third party, on the
Indebtedness and thereafter any Bank is forced to remit the amount of that
payment to Borrower's trustee in bankruptcy or to any similar person under any
federal or state bankruptcy law or law for the relief of debtors, the
Indebtedness shall be considered unpaid for the purpose of enforcement of this
Guaranty.
8.3 Guarantor further waives and agrees not to assert or
claim at any time any deductions to the amount guaranteed under this Guaranty
for any claim of setoff, counterclaim, counter demand, recoupment or similar
right, whether such claim, demand or right may be asserted by the Borrower, the
Guarantor, or both.
9. GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants
and agrees that each of the waivers set forth above is made with Guarantor's
full knowledge of its significance and consequences and that, under the
circumstances, the waivers are reasonable and not contrary to public policy or
law. If any such waiver is determined to be contrary to any applicable law or
public policy, such waiver shall be effective only to the extent permitted by
law or public policy.
10. BANK'S RIGHT OF SETOFF. In addition to all liens upon and
rights of setoff against the moneys, securities or other property of Guarantor
given to Banks by law, each Bank shall have, with respect to Guarantor's
obligations to the Bank under this Guaranty and to the extent permitted by law,
a contractual security interest in and a right of setoff against, and Guarantor
hereby assigns, conveys, delivers, pledges, and transfers to each Bank all of
Guarantor's right, title and interest in and to, all deposits, moneys,
securities and other property of Guarantor now or hereafter in the possession of
or on deposit with the Bank, whether held in a general or special account or
deposit, whether held jointly with someone else, or whether held for safekeeping
or otherwise, excluding however all IRA, Keogh, and trust accounts. Every such
security interest and right of setoff may be exercised without demand upon or
notice to Guarantor. No security interest or right of setoff shall be deemed to
have been waived by any act or conduct on the part of a Bank or by any neglect
to exercise such right of setoff or to enforce such security interest or by any
delay in so doing. Every right of setoff and
<PAGE>
security interest shall continue in full force and effect until such right of
setoff or security interest is specifically waived or released by an instrument
in writing executed by the applicable Bank.
11. SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that
the Indebtedness of Borrower to the Banks, whether now existing or hereafter
created, shall be prior to any claim that Guarantor may now have or hereafter
acquire against Borrower, whether or not Borrower becomes insolvent. Guarantor
hereby expressly subordinates any claim Guarantor may have against Borrower,
upon any account whatsoever, to any claim that the Banks may now or hereafter
have against Borrower. In the event of insolvency and consequent liquidation of
the assets of Borrower, through bankruptcy, by an assignment for the benefit of
creditors, by voluntary liquidation, or otherwise, the assets of Borrower
applicable to the payment of the claims of both Banks and Guarantor shall be
paid to Banks and shall be first applied by Banks to the Indebtedness of
Borrower to Banks. Guarantor assigns to Agent as agent for the Banks all claims
that it may have or acquire against Borrower or against any assignee or trustee
in bankruptcy of Borrower; provided however, that such assignment shall be
effective only for the purpose of assuring to the Banks full payment in legal
tender of the Indebtedness. If the Agent so requests, any notes or credit
agreements now or hereafter evidencing any debts or obligations of Borrower to
Guarantor shall be marked with a legend that the same are subject to this
Guaranty and shall be delivered to Agent. Guarantor agrees, and Agent is
authorized, in the name of Guarantor, from time to time to execute and file
financing statements and continuation statements and to execute such other
documents and to take such other actions as Agent deems necessary or appropriate
to perfect, preserve and enforce its rights under this Guaranty.
12. REINSTATEMENT. This Guaranty shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the
Indebtedness is rescinded or must otherwise be returned by a Bank on the
insolvency, bankruptcy or reorganization of the Borrower, all as though the
payment had not been made.
13. COVENANTS. For so long as this Guaranty remains in effect, Guarantor
shall furnish to each Bank, or cause Borrower to furnish to each Bank, within
one hundred twenty (120) days after the end of each fiscal year of the
Guarantor, balance sheets of the Guarantor as of the end of such fiscal year,
statements of income and retained earnings of the Guarantor for such fiscal
year, and statements of cash flows of the Guarantor for such fiscal year, all in
reasonable detail and stating in comparative form the respective figures for the
corresponding date and period in the prior fiscal year and all prepared in
accordance with GAAP consistently applied and audited by independent certified
public accountants selected by the Guarantor and reasonably acceptable to the
Bank. The foregoing financial statements need not be furnished if the
information is included in the financial statements of the Borrower furnished to
each Bank.
<PAGE>
14. MISCELLANEOUS PROVISIONS.
14.1 AMENDMENTS. This Guaranty, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Guaranty. No alteration of or amendment to this
Guaranty shall be effective unless given in writing and signed by the party or
parties sought to be charged or bound by the alteration or amendment.
14.2 APPLICABLE LAW. This Guaranty is made in the state of Idaho,
which state the parties agree has a substantial relationship to the parties and
to the underlying transaction embodied hereby. Accordingly, in all respects,
this Guaranty and the obligations arising hereunder and thereunder shall be
governed by, and construed in accordance with, the laws of the state of Idaho
applicable to contracts made and performed in such state and any applicable law
of the United States of America. Each party unconditionally and irrevocably
waives, to the fullest extent permitted by law, any claim to assert that the law
of any jurisdiction other than the state of Idaho governs this Guaranty. All
disputes, controversies, or claims arising out of, or in connection with this
Guaranty shall be litigated in any court of competent jurisdiction within the
state of Idaho. Each party accepts jurisdiction of such state and agrees to
accept service of process as if it were personally served within such state.
Each party irrevocably waives, to the fullest extent permitted by law, any
objection that the party may now or hereafter have to the jurisdiction of the
courts of such state and any claim that any such litigation brought in any such
court has been brought in an inconvenient forum.
14.3 ATTORNEYS' FEES; EXPENSES. Guarantor shall pay upon demand all
of each Bank's costs and expenses, including reasonable attorneys' fees and the
Bank's legal expenses, incurred in connection with the enforcement of this
Guaranty. The Bank may pay someone else to help enforce this Guaranty, and
Guarantor shall pay the costs and expenses of such enforcement. Costs and
expenses include the Bank's reasonable attorneys' fees and legal expenses
whether or not there is a lawsuit, including reasonable attorneys' fees and
legal expenses for bankruptcy proceedings (and including efforts to modify or
vacate any automatic stay or injunction), appeals, and any anticipated post-
judgment collection services. Guarantor also shall pay all court costs and such
additional fees as may be directed by the court.
14.4 NOTICES. Unless otherwise provided in this Guaranty, all notices
or demands by any party relating to this Guaranty shall be in writing and either
personally served or sent by facsimile transmission, recognized overnight
delivery service, or regular United States mail, postage prepaid, to Borrower or
to Agent as the case may be at the addresses set forth below:
<PAGE>
If to Guarantor: Coldwater Creek Outlet Stores Inc.
One Coldwater Creek Drive
Sandpoint, Idaho 83864
Attention: Don Robson, Vice President &
Chief Financial Officer
Fax: (208) 265-7108
With a copy to: Elsaesser, Jarzabeck, Anderson & Marks
Post Office Box 1049
Sandpoint, Idaho 83864
Attention: Ford Elsaesser
Fax: (208) 263-0759
If to Bank: First Security Bank, N.A.
119 North 9th Street (83702)
Post Office Box 7069
Boise, Idaho 83730
Attention: Corporate Banking
Fax: (208) 393-2472
With a copy to: Moffatt, Thomas, Barrett, Rock &
Fields, Chartered
101 S. Capitol Blvd., 10th Floor (83702)
Post Office Box 829
Boise, Idaho 83701-0829
Attention: David S. Jensen
Fax: (208) 385-5384
The parties may change the address at which they are to receive notices
hereunder by notice in writing in the foregoing manner given to the other. All
notices or demands sent in accordance with this Section shall be deemed given on
the earlier of the date of confirmed actual receipt or if sent by personal
delivery, on delivery, if sent by facsimile, on transmission, if sent by
overnight delivery service, on the next business day, otherwise three (3)
business days after the deposit thereof in the mail. All revocation notices by
Guarantor shall be in writing and shall be effective only upon delivery to Bank
as provided above in the section titled "Duration of Guaranty."
14.5 INTERPRETATION. In all cases where there is more than one
Borrower or Guarantor, then all words used in this Guaranty in the singular
shall be deemed to have been used in the plural where the context and
construction so require; and where there is more than one Borrower named in this
Guaranty or when this Guaranty is executed by more than one Guarantor, the words
"Borrower" and "Guarantor" respectively shall mean all and any one or more of
them. The words "Guarantor," "Borrower," "Agent," "Bank," and "Banks" include
the successors, assigns, and
<PAGE>
transferees of each of them. Caption headings in this Guaranty are for
convenience purposes only and are not to be used to interpret or define the
provisions of this Guaranty. If a court of competent jurisdiction finds any
provision of this Guaranty to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances, and all provisions of
this Guaranty in all other respects shall remain valid and enforceable. If any
one or more of Borrower or Guarantor are corporations or partnerships, it is not
necessary for Agent or any Bank to inquire into the powers of Borrower or
Guarantor or of the officers, directors, partners, or agents acting or
purporting to act on their behalf, and any Indebtedness made or created in
reliance upon the professed exercise of such powers shall be guaranteed under
this Guaranty.
14.6 WAIVER. Neither Agent nor any Bank shall be deemed to have
waived any rights under this Guaranty unless such waiver is given in writing and
signed by Agent or the Bank, as applicable. No delay or omission on the part of
Agent or any Bank in exercising any right shall operate as a waiver of such
right or any other right. A waiver by Agent or a Bank of a provision of this
Guaranty shall not prejudice or constitute a waiver of Agent's or the Bank's or
any other Bank's right otherwise to demand strict compliance with that provision
or any other provision of this Guaranty. No prior waiver by Agent or any Bank,
nor any course of dealing between Agent or any Bank and Guarantor, shall
constitute a waiver of any of Agent's or such Bank's rights or of any of
Guarantor's obligations as to any future transactions. Whenever the consent of
Agent or a Bank is required under this Guaranty, the granting of such consent by
Agent or a Bank in any instance shall not constitute continuing consent to
subsequent instances where such consent is required and in all cases such
consent may be granted or withheld in the sole discretion of Agent or the Bank,
as applicable.
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS
OF THIS GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR
UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND
DELIVERY OF THIS GUARANTY TO AGENT AND THAT THE GUARANTY WILL CONTINUE UNTIL
TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY."
NO FORMAL ACCEPTANCE BY AGENT OR ANY BANK IS NECESSARY TO MAKE THIS GUARANTY
EFFECTIVE.
<PAGE>
THIS GUARANTY IS DATED June 29, 1998.
GUARANTOR:
COLDWATER CREEK OUTLET STORES INC.
By: /s/ Donald A. Robson
--------------------------------------
Its: Chief Financial Officer
----------------------------------
STATE OF IDAHO )
) ss.
County of Bonner )
On this 29th day of June, 1998, before me Jennie Stickney, personally
appeared Donald Robson known or identified to me (or proved to me on the oath of
______________________________) to be the president, or vice-president, or
secretary or assistant secretary, of Coldwater Creek Outlet Stores Inc., the
corporation that executed the instrument or the person who executed the
instrument on behalf of said corporation, and acknowledged to me that such
corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Jennie Stickney
-----------------------------------------
NOTARY PUBLIC FOR IDAHO
Residing at Sandpoint
My Commission Expires 11/12/03
<PAGE>
EXHIBIT 3.1.4
FORM OF OPINION OF COUNSEL FOR BORROWER AND GUARANTORS
_________________, 1998
First Security Bank, N.A.
Post Office Box 7069
Boise, Idaho 83730
RE: LOAN BY FIRST SECURITY BANK, N.A. TO COLDWATER CREEK INC.
Ladies and Gentlemen:
We are counsel to Coldwater Creek Inc., a Delaware corporation, (the
"Borrower"), and ____________________________, a _______________ corporation
(the "Corporate Guarantor"). The opinion expressed below is furnished to you in
connection with the Credit Agreement (the "Credit Agreement") dated as of June
___, 1998, between the Borrower and First Security Bank, N.A. ("Bank"). This
opinion is being delivered pursuant to Section ____ of the Credit Agreement.
Unless otherwise defined herein, capitalized terms used herein shall have the
respective meanings set forth in the Credit Agreement.
In rendering the opinions set forth below, we have examined and relied upon such
documents and instruments as we have deemed appropriate, including the following
documents and instruments (the "Loan Documents"):
1. The Credit Agreement; and
2. The Revolving Notes.
We have also reviewed the Continuing and Unconditional Guaranty of the Corporate
Guarantor (the "Corporate Guaranty").
Based on the foregoing, I am of the opinion that:
1. The Borrower was incorporated under the General Corporation Law of the
State of Delaware and exists in good standing under the laws of the State of
Delaware.
<PAGE>
2. The Borrower is authorized or qualified to do business in Idaho, West
Virginia, and all other jurisdictions in which the nature of the business
conducted by it makes such qualification necessary.
3. The Borrower has power and authority under the General Corporation Law
of the State of Delaware and all necessary material licenses, permits, and
authorizations to own its properties and to conduct its business in the manner
and at the locations as represented to Bank by Borrower.
4. The Borrower has power and authority under the General Corporation Law
of the State of Delaware to execute and deliver the Loan Documents and the
Financing Statements and perform its obligations thereunder.
5. The Borrower has authorized the execution and delivery of the Loan
Documents and the Financing Statements and the performance of its obligations
thereunder by all requisite action under the General Corporation Law of the
State of Delaware.
6. The Corporate Guarantor was incorporated under the
_____________________ [Idaho Business Corporation Act] and exists in good
standing under the laws of the State of __________.
7. The Corporate Guarantor has power and authority under the
_____________________ [Idaho Business Corporation Act] to execute and deliver
the Corporate Guaranty and perform its obligations thereunder.
8. The Corporate Guarantor has authorized the execution and delivery of
the Corporate Guaranty and the performance of its obligations thereunder by all
requisite action under the ________________________[Idaho Business Corporation
Act].
9. Each Loan Document constitutes a valid and legally binding obligation
of the Borrower enforceable against Borrower in accordance with its terms. The
Corporate Guaranty constitutes a valid and legally binding obligation of
Corporate Guarantor enforceable against Corporate Guarantor in accordance with
its terms.
10. Neither the execution and delivery of the Loan Documents by the
Borrower nor the performance of its obligations thereunder (i) violates the
Borrower's articles of incorporation or bylaws or any applicable provisions of
statutory law or regulation, or (ii) results in the material breach of or
constitutes a material default under any existing indenture or loan, credit, or
other agreement or instrument to which the Borrower is a party or by which it or
its property is bound or affected.
<PAGE>
11. The execution and delivery of the Corporate Guaranty by the Corporate
Guarantor and the performance of its obligations thereunder do not (i) violate
the Corporate Guarantor's articles of incorporation or bylaws or any applicable
provisions of statutory law or regulation, or (ii) result in the material breach
of or constitute a material default under any existing indenture or loan,
credit, or other agreement or instrument to which the Corporate Guarantor is a
party or by which it or its property is bound or affected.
I confirm that there are no legal or arbitral proceedings or any proceedings by
or before any governmental or regulatory authority or agency, now pending or
threatened against the Borrower or against any of its properties or revenues
that, if adversely determined, could be reasonably expected to have a material
adverse effect on the business operations, property, or financial condition of
the Borrower taken as a whole.
This opinion may be relied upon by any Assignee Bank under the Credit Agreement.
Very truly yours,
<PAGE>
EXHIBIT 3.1.12
FORM OF LETTER TO ACCOUNTANTS
[LETTERHEAD OF BORROWER]
[name and address of accountants]
Ladies and Gentlemen:
We will send to First Security Bank, N.A. ("Bank") all final financial
statements and all reports that are prepared by you as a result of any audit or
other review of our operations, finances or internal controls, specifically
including any reports dealing with improper accounting practices, defalcations,
financial reporting errors or misstatements or fraud perpetrated on us or by any
of our employees or agents. Additionally, please be advised that one of the
principal purposes of the audited financial statements that you may be asked to
prepare is to provide Bank with information regarding our financial condition.
Thank you.
COLDWATER CREEK INC.
By
Its
<PAGE>
EXHIBIT 15.5.2
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
See attached.
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Agreement") is made as of
________________, 1998 between _______________________ ("Assignor") and
______________________ ("Assignee").
R E C I T A L S
A. Assignor is a Bank under that certain Credit Agreement dated as of
June ___, 1998 (as amended, supplemented or restated from time to time, the
"Credit Agreement) among COLDWATER CREEK INC., a Delaware corporation
("Borrower"), the financial institutions from time to time parties thereto
(collectively, the "Banks"), and FIRST SECURITY BANK, N.A., as agent for the
Banks (in such capacity, "Agent").
B. Assignor desires to assign to Assignee [all] [a portion] of its rights
and obligations under the Credit Agreement and the other Loan Documents, and be
released from such assigned obligations.
C. Assignee desires to assume such assigned obligations.
NOW, THEREFORE, in consideration of the above recitals and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS.
Capitalized terms used but not defined in this Agreement shall have the
meaning set forth in the Credit Agreement.
2. ASSIGNMENT.
Effective on the Assignment Effective Date (as defined in Section 4 below),
Assignor, without recourse and without representation or warranty (except as
expressly provided in Section 7 below), assigns to Assignee the Assigned Rights
and Obligations (as defined below).
[2.1 The "Assigned Rights and Obligations" means all of Assignor's
rights and obligations under the Credit Agreement on the Assignment Effective
Date, including without limitation those relating to its Bank's Commitment, its
commitment to purchase participations in the Term Standby Letter of Credit and
standby Letters of Credit, any outstanding Loans, and participations in the Term
Standby Letter of Credit and any outstanding standby Letters of Credit.]
<PAGE>
[2.2 The "Assigned Rights and Obligations" means (a) [$_____]
[_____%] of Assignor's $_____ Bank's Commitment on the Assignment Effective
Date, (b) the portion of Loans by Assignor outstanding on the Assignment
Effective Date that is attributable to the above portion of Assignor's Bank's
Commitment, and (c) all of Assignor's other rights and obligations under the
Credit Agreement that are attributable to the above portion of Assignor's Bank's
Commitment, including without limitation participations in the Term Standby
Letter of Credit and any outstanding standby Letters of Credit and commitments
to purchase participations in the Term Standby Letter of Credit and standby
Letters of Credit.]
2.3 After the Assignment Effective Date, the Proportionate Share of
Assignee shall be ______________% and the Proportionate Share of Assignor shall
be _____%.
3. ASSUMPTION.
Effective on the Assignment Effective Date, Assignee accepts the foregoing
assignments of, and assumes from Assignor, the Assigned Rights and Obligations.
4. EFFECTIVENESS.
The Agreement shall become effective on a date (the "Assignment Effective
Date") selected by Assignor, which shall be on or as soon as practicable after
the execution and delivery of counterparts of this Agreement by Assignor,
Assignee, Agent, Issuing Bank and Borrower. Assignor shall promptly notify
Assignee, Agent, Issuing Bank and Borrower in writing of the Assignment
Effective Date.
5. PAYMENTS ON ASSIGNMENT EFFECTIVE DATE.
On the Assignment Effective Date, Assignee shall pay to Assignor (a) the
principal amount of all Loans made by Assignor pursuant to the Credit Agreement
that are attributable to the Assigned Rights and Obligations and outstanding on
the Assignment Effective Date, (b) the amount of all Drawing Payments for which
Assignor has reimbursed Issuing Bank that are attributable to the Assigned
Rights and Obligations and outstanding on the Assignment Effective Date, and (c)
the amount of all Term Drawing Payments for which Assignor has reimbursed
Issuing Bank that are attributable to the Assigned Rights and Obligations and
outstanding on the Assignment Effective Date. Each of Assignor and Assignee
shall pay to the other such amounts (if any) as are specified in any written
agreement or exchange of letters between them. Assignee (or Assignor if so
agreed in writing by Assignor) shall pay to Agent an assignment registration and
processing fee of $2,000.
<PAGE>
6. ALLOCATION AND PAYMENT OF INTEREST AND FEES.
6.1 Agent shall pay to Assignee all interest, commitment fees and
other amounts not constituting principal that are paid by or on behalf of
Borrower pursuant to the Loan Documents and are attributable to the Assigned
Rights and Obligations ("Borrower Amounts"), that accrue on and after the
Assignment Effective Date. If Assignor receives or collects any such Borrower
Amounts, Assignor shall promptly pay them to Assignee.
6.2 Agent shall pay to Assignor all Borrower Amounts that accrue
before the Assignment Effective Date. If Assignee receives or collects any such
Borrower Amounts, Assignee shall promptly pay them to Assignor.
7. REPRESENTATION AND WARRANTIES.
7.1 Each of Assignor and Assignee represents and warrants to the
other as follows:
(i) It has full power and authority, and has taken all action
necessary, to execute and deliver this Agreement and to
fulfill its obligations under, and to consummate the
transactions contemplated by, this Agreement.
(ii) The making and performance of this Agreement and all
documents required to be executed and delivered by it
hereunder do not and will not violate any law or regulation
applicable to it.
(iii) This Agreement has been duly executed and delivered by it
and constitutes its legal, valid and binding obligation,
enforceable in accordance with its terms.
(iv) All approvals, authorizations or other actions by, or
filings with, any governmental authority necessary for the
validity or enforceability of its obligations under this
Agreement have been made or obtained.
7.2 Assignor represents and warrants to Assignee that Assignor owns
the Assigned Rights and Obligations, free and clear of any Lien or other
encumbrance.
<PAGE>
7.3 Assignee represents and warrants to Assignor as follows:
(i) Assignee has made and shall continue to make its own
independent investigation of the financial condition,
affairs and creditworthiness of Borrower and any other
Person obligated under the Loan Documents (collectively,
"Credit Parties"), and the value of any collateral now or
hereafter securing any of the obligations, indebtedness,
liabilities or undertakings under the Loan Documents
("Collateral"), in connection with its assumption of the
Assigned Rights and Obligations.
(ii) Assignee has received a copy of the Loan Documents and such
other documents, financial statements and information as it
has deemed appropriate to make its own credit analysis and
decision to enter into this Agreement.
8. NO ASSIGNOR RESPONSIBILITY.
8.1 Assignor makes no representations or warranty and assumes no
responsibility to Assignee for any or all of the following:
(a) the execution (by any party other than Assignor),
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of the Loan Documents or for any representations, warranties,
recitals or statements made in the Loan Documents or in any financial or other
written or oral statement, instrument, report, certificate or any other document
made or furnished or made available by Assignor or Assignee or by or on behalf
of any Credit Party to Assignor or Assignee in connection with the Loan
Documents and the transaction contemplated thereby ;
(b) the performance or observance of any of the terms,
conditions, provisions, covenants or agreements contained in any of the Loan
Documents or as to the existence or possible existence of any Event of Default
under the Loan Documents; or
(c) the accuracy or completeness of any information provided to
Assignee, whether by Assignor or by or on behalf of any Credit Party.
8.2 Assignor shall have no initial or continuing duty or
responsibility to make any investigation of the financial condition, affairs or
creditworthiness of any of the Credit Parties, or the value of any Collateral,
in connection with the assignment of the Assigned Rights and Obligations or to
provide Assignee with
<PAGE>
any credit or other information with respect thereto, whether coming into its
possession before the date hereof or at any time or times thereafter.
9. ASSIGNEE BOUND BY CREDIT AGREEMENT.
Effective on the Assignment Effective Date, Assignee (a) shall be deemed to
be a party to the Credit Agreement, (b) agrees to be bound by the Credit
Agreement as it would have been if it had been an original Bank party thereto,
and agrees to perform in accordance with their terms all of the obligations that
are required under the Loan Documents to be performed by it as a Bank. Assignee
appoints and authorizes Agent to take such actions as agent on its behalf and to
exercise such powers under the Loan Documents as are delegated to Agent by the
terms thereof, together with such powers as are reasonably incidental thereto.
10. ASSIGNEE RELEASED FROM CREDIT AGREEMENT.
Effective on the Assignment Effective Date, Assignor shall be released from
the Assigned Rights and Obligations; provided, however, that Assignor shall
retain all of its rights to indemnification under Section 15.10 of the Credit
Agreement and the other Loan Documents for any events, acts or omissions
occurring before the Assignment Effective Date.
11. GENERAL.
11.1 This Agreement constitutes the entire understanding of the
parties with respect to the subject matter hereof and supersedes all prior and
current understandings and agreements, whether written or oral (other than with
respect to any fees payable as provided in Section 5 hereof).
11.2 No term or provision of this Agreement may be amended, waived or
terminated orally, but only by an instrument signed by the parties hereto.
11.3 This Agreement may be executed in one or more counterparts. Each
set of executed counterparts shall be an original. Executed counterparts may be
delivered by facsimile transmission.
11.4 Assignor may at any time and from time to time grant to others
pursuant to and as permitted by the Loan Documents assignments of or
participations in all or part of Assignor's Bank's Commitment, but not with
respect to the Assigned Rights and Obligations.
11.5 This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. Neither Assignor
nor Assignee may assign or transfer any of its rights or obligations under this
Agreement without the prior written consent of the other. The preceding sentence
shall not limit the
<PAGE>
right of Assignee to grant to others assignments of or participations in all or
part of the Assigned Rights and Obligations to the extent permitted by the terms
of the Loan Documents.
11.6 All payments to Assignor or Assignee hereunder shall, unless
otherwise specified by the party entitled thereto, be made in United States
Dollars, in immediately available funds, and to the address or account specified
on the signature pages of this Agreement. The address of Assignee for notice
purposes under the Credit Agreement shall be as specified on the signature pages
of this Agreement.
11.7 If any provision of this Agreement is held invalid, illegal or
unenforceable, the remaining provisions hereof will not be affected or impaired
in any way.
11.8 Each party shall bear its own expenses in connection with the
preparation and execution of this Agreement.
11.9 This Agreement shall be governed by and construed in accordance
with the laws of the state of Idaho.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
ASSIGNOR:
----------------------------------
By:
-------------------------------
Printed Name:
---------------------
Title:
----------------------------
Assignor's Notice Instructions:
------------------------------
----------------------------------
----------------------------------
----------------------------------
Attention:
------------------------
------------------------
Reference:
------------------------
Telephone: ( )
------------------------
Facsimile: ( )
------------------------
ASSIGNEE:
----------------------------------
By:
-------------------------------
Printed Name:
---------------------
Title:
----------------------------
Assignor's Notice Instructions:
------------------------------
----------------------------------
----------------------------------
----------------------------------
Attention:
------------------------
------------------------
Reference:
------------------------
Telephone: ( )
------------------------
Facsimile: ( )
------------------------
<PAGE>
*ACKNOWLEDGED AND AGREED:
-----------------------
BORROWER: COLDWATER CREEK, INC.
By:
----------------------------------------------------
Printed Name:
------------------------------------------
Title:
-------------------------------------------------
AGENT: FIRST SECURITY BANK, N.A., as Agent
By:
----------------------------------------------------
Printed Name:
------------------------------------------
Title:
-------------------------------------------------
ISSUING BANK: FIRST SECURITY BANK, N.A., as Issuing Bank
By:
----------------------------------------------------
Printed Name:
------------------------------------------
Title:
-------------------------------------------------
<PAGE>
SCHEDULE 6.5
ASSET SALES
Borrower shall be permitted to sell or return property up to the value of
$5,000,000 acquired in anticipation of the Parkersburg, West Virginia facility,
for the purpose of a lease or leaseback facility.
Other sales of Assets shall be permitted with prior consent of majority banks
which consent shall not be unreasonably withheld.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> FEB-27-1999 FEB-28-1998
<PERIOD-START> MAR-01-1998 MAR-02-1997
<PERIOD-END> MAY-30-1998 MAY-31-1997
<CASH> 372 0
<SECURITIES> 0 0
<RECEIVABLES> 5,104 0
<ALLOWANCES> 0 0
<INVENTORY> 55,736 0
<CURRENT-ASSETS> 65,810 0
<PP&E> 38,375 0
<DEPRECIATION> 9,324 0
<TOTAL-ASSETS> 101,930 0
<CURRENT-LIABILITIES> 51,806 0
<BONDS> 0 0
0 0
0 0
<COMMON> 101 0
<OTHER-SE> 49,608 0
<TOTAL-LIABILITY-AND-EQUITY> 101,930 0
<SALES> 79,937 51,002
<TOTAL-REVENUES> 79,937 51,002
<CGS> 38,125 24,337
<TOTAL-COSTS> 38,125 24,337
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 247 (136)
<INCOME-PRETAX> 1,175 3,427
<INCOME-TAX> 472 1,354
<INCOME-CONTINUING> 703 2,073
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 703 2,073
<EPS-PRIMARY> 0.07 0.20
<EPS-DILUTED> 0.07 0.20
</TABLE>
